United States District Court, E.D. Pennsylvania
the Court is the Motion to Dismiss the Petition to Vacate
Partial Final Arbitration Award of Respondents, Steven
Pruette and Christopher Pruette, on behalf of InSearch
Partners (“Pruette”). Petitioner, Egan Jones
Ratings Company (“Egan”) has opposed the motion,
and Egan has filed a reply. Having read the parties'
briefing and having held oral argument on the motion, I will
deny Pruette's motion to dismiss.
filed this proceeding under the Federal Arbitration Act, 9
U.S.C. § 1 et. seq. (“FAA”) to
vacate an arbitration award made in a proceeding held by the
American Arbitration Association. The award in question is
titled a “Partial Final Award of Arbitrator.”
(See ECF No. 1, Ex. H.) The Award addresses a
contractual dispute between Egan, a Nationally Recognized
Securities Rating Organization (“NRSRO”)
certified by the Securities and Exchange Commission, and
Pruette, its exclusive distributor of ratings services.
Pursuant to a stipulation of the parties, the arbitration was
bifurcated into liability and damages phases. Accordingly,
the arbitrator's decision in this matter was as to
liability only and did not address damages. A separate
arbitration hearing is to be held on damages.
the entry of the Partial Final Award, Egan petitioned this
Court to vacate the arbitrator's award. (See ECF
No. 1.) In response, Pruette filed the instant motion to
dismiss, alleging that the arbitration award in question is
non-final and therefore, this Court lacks jurisdiction to
review it. For the reasons that follow, I will deny
Pruette's Motion to Dismiss, as I find that the award in
question was a final award and this Court therefore has
jurisdiction to review it.
STANDARD OF REVIEW
party moving to dismiss an arbitration award bears the burden
of proof. Grosso v. Salomon Smith Barney, 2003 WL
22657305, *1 (E.D. Pa Oct. 24, 2003). Under the FAA, a
district court may only vacate an arbitration award 1) where
the award was procured by corruption, fraud, or undue means;
2) where there was evident partiality or corruption in the
arbitrators, or either of them; 3) where the arbitrators were
guilty of misconduct in refusing to postpone the hearing . .
. or in refusing to hear evidence pertinent and material to
the controversy; or of any other misbehavior by which the
rights of any party have been prejudiced; or 4) where 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. 9 U.S.C. § 10(a).
courts may only vacate or confirm arbitration decisions that
involve a final award. See Travelers Ins. Co. v.
Davis, 490 F.2d 536, 541-42 n. 12 (3d Cir. 1974);
Michaels v. Mariform Shipping, S.A., 624 F.2d 411,
414 (2d Cir. 1980) (“Under the Federal Arbitration Act,
9 U.S.C. § 1 et seq., a district court does not have the
power to review an interlocutory ruling by an arbitration
panel. . . it is only after an award has been made by the
arbitrators that a party can seek to attack any of the
arbitrators' determinations in court. . .”).
Therefore, the issue presently before the Court is whether
the Partial Final Award of the arbitrator is a final award as
contemplated by the FAA. Egan argues that the arbitration
award is a final award because it completely resolved the
issue of liability, as agreed to by the parties, and
therefore, this court has jurisdiction over it. Pruette
argues that the Partial Final Award is not a final award
under the FAA as the arbitrator decided only liability and
did not address damages; therefore, this court has no
jurisdiction in this matter. Based on the parties'
arguments, I must analyze what is required for an arbitration
award to be considered “final” under the FAA.
courts cannot confirm or vacate arbitration awards that are
interim, or not yet final. This rule, referred to as the
“complete arbitration rule, ” provides that
“judicial review of incomplete arbitration awards is
inappropriate in all but the ‘most extreme'
situations.” Union Switch & Signal Div. Am.Std.
Inc . v. United Elec., Radio & Mach. Workers of Am.,
900 F.2d 608, 612 (3d Cir. 1990) (quoting Millmen Local
550 v. Wells Exterior Trim, 828 F.2d 1373, 1374
(9th Cir. 1987)). “Some circuits have
recognized exceptions to this finality rule . . . when an
arbitral award ‘finally and definitely disposes of a
separate independent claim, ' or where the parties agree
to bifurcate the issues submitted to arbitration, so that an
award of liability is considered ‘final' even
though damages have not been determined.” Marron v.
Snap-On Tools, Co., LLC, 2006 WL 51193, *2 (D.N.J. Jan.
9, 2006) (quoting Metallgesellschaff A.G. v. M/V Capitan
Constante, 790 F.2d 280, 283 (2d Cir. 1986) and Hart
Surgical, Inc., v. Ultracision, Inc., 244 F.3d 231, 233
(1st Cir. 2001)). Specifically, in Hart
Surgical, the First Circuit held that the district court
could review a partial award of liability in cases where
there is a “formal, agreed-to bifurcation at the
arbitration stage.” 244 F.3d at 236.
undisputed that the Third Circuit has never addressed the
specific issue of whether an arbitration award as to
liability only is final when the parties formally agreed to
bifurcate the matter into liability and damages phases at the
arbitration. In support of its argument that the arbitration
award in question is non-final and therefore non-reviewable,
Pruette relies on Travelers Ins. Co. v. Davis, 490
F.2d 536, 541-42 & n. 12 (3d Cir. 1974). This case held
that the preliminary ruling of a panel of arbitrators'
that uninsured motorists' coverage could be stacked under
an auto insurance policy did not determine both liability and
damages and was therefore, not reviewable by the District
Court. Id. The Court went on to state that in United
States Arbitration Act cases (a precursor to the FAA), a
preliminary ruling of an arbitration panel prior to making
its award is not justiciable. Id. at 541 n. 12.
also relies upon an unreported decision of this district,
HET-JV et al, v. Weston Solutions, Inc., No.
13-mc-100, 2013 WL 2411698 (E.D. Pa. June 4, 2013). In that
case, the Court declined to review an “Interim
Decision” of an arbitration panel in which the
proceedings were bifurcated into liability and damages
phases, stating that it wanted to “avoid the pitfalls
of fragmented litigation that may result from review of an
incomplete arbitration decision.” Id. at
arguing that Pruette's motion should be denied, Egan
first points to the decision of the United States Supreme
Court in Stolt-Nielsen S.A. v. AnimalFeeds Int'l
Corp., 559 U.S. 662 (2010) in support of their position.
In Stolt-Nielsen, the court was asked to review a
preliminary finding of an arbitration panel that an agreement
entered into between the parties permitted class action
arbitration. Id. The Court found that the
arbitrators' decision, in which they found that class
action arbitration was permissible, was ripe for judicial
review, despite the fact that it was a preliminary decision
and did not reach the issues of liability or damages.
Id. In a dissent written by Justice Ginsburg and
joined in by Justices Stevens and Breyer, Justice Ginsburg
stated, after citing two lower court decisions that allowed
review of partial awards:
While lower court opinions are thus divided, this much is
plain: No decision of this Court, until today, has ever
approved immediate judicial review of an arbitrator's
decision as preliminary as the ...