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Leonard L. Tate Orchards v. Rain and Hail

May 1, 2013

LEONARD L. TATE ORCHARDS
PLAINTIFF,
v.
RAIN AND HAIL, LLC, AND ACE PROPERTY AND CASUALTY INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Hon. John E. Jones III

MEMORANDUM

THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:

Pending before the Court is Plaintiff's Motion to Vacate Award of Arbitrator (Doc. 1). For the reasons set forth below, Plaintiff's motion shall be denied.

I. PROCEDURAL HISTORY

On March 15, 2013, Plaintiff Leonard L. Tate Orchards ("Tate") initiated this case with the filing of the instant motion (Doc. 1). Tate filed a brief in support of the motion (Doc. 3) on March 20, 2013. Defendants Rain and Hail, LLC ("R&H") and ACE Property and Casualty Insurance Company ("ACE") filed a brief in opposition to the motion (Doc. 10) on April 12, 2013. On April 19, 2013, Plaintiff filed a reply (Doc. 11) and on April 23, 2013, Defendants filed a sur-reply (Doc. 12). Therefore, the pending motion has been fully briefed and is ripe for disposition.

II. STANDARD OF REVIEW

The Federal Arbitration Act identifies the limited circumstances under which a district court may vacate an arbitration award. An award may only be vacated where (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption by the arbitrators; (3) the arbitrators were guilty of misconduct which prejudiced the rights of a party to the arbitration; or (4) the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. See 9 U.S.C. § 10(a). These four statutory grounds are the only bases upon which a court may vacate an arbitration award. See Hall Street Associates, LLC v. Mattel, Inc., 552 U.S. 576, 584 (2008).

In reviewing arbitration awards, "courts ... have no business weighing the merits of the grievance [or] considering whether there is equity in a particular claim." United Paperworkers International Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 37 (1987). It is not enough to show that the arbitrator committed an error -- or even a serious error. See Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758, 1767 (2010). In the absence of an allegation of dishonesty, "improvident, even silly, factfinding" does not provide a basis to vacate an award. Misco, 484 U.S., at 39. "It is irrelevant whether the courts agree with the arbitrator's application and interpretation of the agreement." Arco-Polymers, Inc. v. Local 8-74, 671 F.2d 752, 755 (3d Cir. 1982). So long as an arbitrator's decision can in any rational way be derived from the language and context of the agreement, that determination shall not be disturbed. See Roberts & Schaefer Co. v. Local 1846, United Mine Workers, 812 F.2d 883, 885 (3d Cir. 1987). "It is only when [an] arbitrator strays from interpretation and application of the agreement and effectively 'dispense[s] his own brand of industrial justice' that his decision may be unenforceable." Major League Baseball Players Assn. v. Garvey, 532 U.S. 504, 509 (2001) (quoting United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960)).

III. FACTUAL BACKGROUND*fn1

Tate is a farm located in Adams County, Pennsylvania that produces apples and other crops. (Doc. 10 at 2). Tate renewed its contract for crop insurance with R&H and ACE for crop year 2011, which was accepted by the issuance of Policy MP-0031521, comprised of a Common Crop Insurance Policy and Apple Crop Insurance Provisions. (Doc. 1 ¶ 1). The Common Crop Insurance Policy and Apple Crop Insurance Provisions are federal regulations published by the Federal Crop Insurance Corporation ("FCIC") at 7 C.F.R. § 457.8 and 7 C.F.R. § 457.158, respectively. The FCIC is a wholly-owned government corporation within the United States Department of Agriculture and administers the federal crop insurance program under the Federal Crop Insurance Act. See 7 U.S.C. §§ 1501-1524. The Risk Management Agency ("RMA"), another agency within the U.S. Department of Agriculture, supervises the FCIC and has authority over the delivery of insurance programs authorized by the Federal Crop Insurance Act. See 7 U.S.C. § 6933(b). The Common Crop Insurance Policy states that "[p]rocedures (handbooks, manuals, memoranda, and bulletins) issued by [the FCIC] and published on the RMA's Web site" will be "used in the administration of this policy, including the adjustment of any loss or claim submitted hereunder." 7 C.F.R. § 457.8.

On August 25, 2010, the FCIC/RMA published a Final Rule, 75 Fed. Reg. 52218, amending the Apple Crop Insurance Provisions for crop year 2011 and successive crop years. (Doc. 1 ¶ 10). The amendments require the insured to meet the definition of "fresh apple production," which requires the grower to provide verifiable records showing that at least fifty percent (50%) of the production from acreage reported as fresh apple acreage from each unit was sold as fresh apples in one or more of the four most recent crop years, in order to establish eligibility for insurance coverage. (Doc. 1 ¶ 11). On December 22, 2010, the FCIC/RMA issued a Memorandum, PM-10-071, adding a requirement that "verifiable records" must reflect that the value received by the grower was consistent with the value of fresh apple production. (Doc. 1 ¶ 15).

Tate sustained damage to its apple crop during crop year 2011 and filed a claim with R&H/ACE. (Doc. 1 ¶ 20). In response, R&H/ACE requested verification that at least 50% of Tate's production from fresh apple acreage from each unit was sold as fresh apples in one or more of the previous four crop years. (Doc. 1 ¶ 23). Tate designated 2010 as the crop year for making this determination (Doc. 1 ¶ 23).

The parties differ in their interpretations of what percentage of Tate's insured fresh apple acreage production was sold as fresh apples. Tate argues in its motion that the correct figure is 58 percent. (Doc. 1 ¶ 25). Defendants argue that the correct figure is the percentage determined by the arbitrator -- 35 percent. (Doc. 10 at 7; Doc. 1 Ex. 1 at 7). Due to the parties' competing interpretations of the contractual provisions at issue, counsel for R&H submitted a request for a Final Agency Determination to the RMA in September of 2012. (Doc. 1 Ex. 2 at 7). On November 13, 2012, the RMA issued a Final Agency Determination, FAD-172, clarifying the meaning of the phrase "sold, or could be sold" as it appears in the definition of "fresh apple production" in the Apple Crop Insurance Provisions. (Doc. 1 Ex. 7). The final paragraph of FAD-172 states that "[i]n accordance with 7 C.F.R. 400.765(c), this constitutes the Final Agency Determination and is binding on all participants in the Federal crop insurance program for crop years the above stated provisions are in effect." (Doc. 1 Ex. 7).

On December 19, 2012, the arbitrator issued an opinion (Doc. 1 Ex. 2) stating that, in light of the meaning of "fresh apple production" as defined in FAD-172, Plaintiff had failed to prove that it sold more ...


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