Coady v. Ashcraft & Gerel

223 F.3d 1, 16 I.E.R. Cas. (BNA) 1025, 25 Employee Benefits Cas. (BNA) 1425, 2000 U.S. App. LEXIS 19001, 2000 WL 1072386
CourtCourt of Appeals for the First Circuit
DecidedAugust 8, 2000
Docket99-2165
StatusPublished
Cited by204 cases

This text of 223 F.3d 1 (Coady v. Ashcraft & Gerel) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Coady v. Ashcraft & Gerel, 223 F.3d 1, 16 I.E.R. Cas. (BNA) 1025, 25 Employee Benefits Cas. (BNA) 1425, 2000 U.S. App. LEXIS 19001, 2000 WL 1072386 (1st Cir. 2000).

Opinion

LYNCH, Circuit Judge.

The parting of ways of attorneys in a law firm is often difficult; in this instance it has been unusually acrimonious. In this dispute between Edward Paul Coady, an attorney, and Ashcraft & Gerel, his former law firm, the firm appeals the district court’s confirmation of an arbitration award. The core of this case concerns the award to Coady of $45,000 in additional bonus compensation, plus fees and expenses for the arbitration. Ashcraft & Gerel argues that the arbitrators exceeded their authority under the limited arbitration clause of Coady’s employment agreement. Ashcraft & Gerel also appeals the district court’s earlier refusal to transfer Coady’s application for arbitration to the federal district court for the District of Columbia, where the law firm had earlier filed a complaint alleging, inter alia, that Coady was in breach of his contract. Coa-dy later counterclaimed in the D.C. court for breach of contract. 1

We hold that the initial order of reference to the arbitrators by the Massachusetts district court referred matters outside the arbitrators’ authority, and that in making determinations as to the bonus owed to Coady, the arbitrators exceeded the scope of their authority under the arbitration clause. The arbitrators did so in at least three ways. First, once the parties stipulated as to the meaning of certain terms in Coady’s employment contract, there was no longer any ambiguity or question of interpretation for the arbitrators to resolve. Next, the panel made factual findings regarding the law firm’s alleged manipulation of its “senior partner draw,” a sum that limited the size of the bonus that Coady could receive. 2 Finally, the panel calculated the amount of the additional bonus owed to Coady. The latter two were issues of the application of the contract terms to the facts, matters that were not within the arbitrators’ limited authority under the contract. We vacate the arbitral award and remand with instructions to transfer any further proceedings related to Coady’s bonus to the U.S. District Court for the District of Columbia. We do not decide whether the Massachusetts district court abused its discretion by initially refusing to transfer the case, but conclude that it was in error as to the primary factor on which it relied.

I.

In 1989, Coady joined the Boston office of Ashcraft & Gerel, a law firm based in Washington, D.C. He later became the managing attorney of the Boston office, and held that position until April 1998. Coady was never an equity partner; he characterized his status in 1996 as a “contract non-equity partner.”

In early 1997, disputes arose between Coady and the firm over Coady’s compen *4 sation and his management of the office. Coady’s employment agreement authorized arbitration of “ambiguities or questions of interpretation of this contract,” if the parties could not resolve their differences. Coady informed Ashcraft & Gerel that he intended to submit the disputed employment issues to arbitration.

After unsuccessful negotiations (including indications that Coady planned to resort to arbitration), Ashcraft & Gerel filed a complaint for damages and a declaratory judgment in the U.S. District Court for the District of Columbia on August 1, 1997. The firm claimed that Coady had violated his duties and obligations to the firm, and sought a declaration that it was entitled under the employment agreement to terminate Coady for cause. The firm had an interest in terminating him for cause because the employment contract called for a payment of $4.00,000 to the innocent party in case of breach. Coady later filed a counterclaim for breach of contract.

On August 19, 1997, Coady filed an application for arbitration in Massachusetts state court; Ashcraft & Gerel removed that action to the federal district court for the District of Massachusetts and moved to dismiss, stay, or transfer venue to the District of Columbia court. Although the Massachusetts federal district court initially decided to transfer the case to the D.C. court, it later reconsidered the transfer. See Coady v. Ashcraft & Gerel, 996 F.Supp. 95, 98 (D.Mass.1998). It reconsidered because its original transfer decision had been premised not on the first-filed doctrine, but on a ground never presented to it by the parties. See id.

After reconsideration, the Massachusetts district court denied Ashcraft & Ger-el’s motion to transfer, citing the existence of what it perceived as a judicial emergency in the federal district court for the District of Columbia as its primary reason for refusing to transfer the case. See id. at 100, 106. The court then considered Coady’s application for arbitration. Coady sought an order compelling arbitration of “all of the matters in dispute” between himself and Ashcraft & Gerel. Id. at 106. The court found, however, that the arbitration clause in his employment contract was an unusually limited one: it authorized arbitration only of questions of ambiguity or interpretation of the contract; questions of breach of contract were not within the scope of the clause. See id. at 106-07. Neither party disputes this holding. The court identified four major issues that it considered to be contract interpretation issues and referred them to an arbitration panel in Massachusetts. See id. at 108-10. The court acknowledged that the arbitration could not completely resolve the parties’ disagreements: “Unless the parties mutually agree to continue arbitration for the purpose of complete resolution of a dispute, the dispute must be resolved through litigation, or private settlement.” Id. at 107.

In May 1998, the D.C. district court denied Coady’s motion for a stay of proceedings pending the arbitration. From that point on, one federal district court action proceeded in Massachusetts while another proceeded between the same parties in the District of Columbia on essentially the same subject matter. In addition, the arbitration, related to both lawsuits, proceeded in Massachusetts.

The arbitration panel held a three-day hearing in Boston in November 1998, and issued its first Findings, Orders, and Award on February 16, 1999. Ashcraft & Gerel then filed a motion in the Massachusetts district court to vacate the panel’s decision. On April 29, 1999, the Massachusetts district court denied the motion. The court affirmed the arbitrators’ order that there be additional discovery in order to assist the panel in calculating Coady’s bonus. The panel had decided at least two issues of breach of contract, finding that Coady was not in breach, but the law firm was. Ashcraft & Gerel protested to the district court that these findings exceeded the panel’s authority. The court declined to address the breach issues, saying they *5 should be resolved by the D.C. district court. The panel had also awarded Coady his expenses and counsel fees on a finding that he was the winner of the arbitration. 3 The court made no determination on that issue because of its decision to refer the breach issues to the D.C. court. 4

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223 F.3d 1, 16 I.E.R. Cas. (BNA) 1025, 25 Employee Benefits Cas. (BNA) 1425, 2000 U.S. App. LEXIS 19001, 2000 WL 1072386, Counsel Stack Legal Research, https://law.counselstack.com/opinion/coady-v-ashcraft-gerel-ca1-2000.