Ostrom v. WorldVentures Marketing, LLC

160 F. Supp. 3d 942, 2016 U.S. Dist. LEXIS 13458, 2016 WL 447616
CourtDistrict Court, M.D. Louisiana
DecidedFebruary 4, 2016
DocketCIVIL ACTION NO. 12-213-JJB-RLB
StatusPublished
Cited by1 cases

This text of 160 F. Supp. 3d 942 (Ostrom v. WorldVentures Marketing, LLC) is published on Counsel Stack Legal Research, covering District Court, M.D. Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ostrom v. WorldVentures Marketing, LLC, 160 F. Supp. 3d 942, 2016 U.S. Dist. LEXIS 13458, 2016 WL 447616 (M.D. La. 2016).

Opinion

RULING

JUDGE JAMES J. BRADY, UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF LOUISIANA

This matter is before the Court on two motions related to an arbitration proceeding. The first is a Motion to Vacate (Doc. . 82) brought by the plaintiff, Randy Lee Ostrom (“Ostrom”). The defendant, World-Ventures Marketing, L.L.C., d/b/a World-Ventures, L.L.C. (‘WorldVentures”), filed an opposition (Doc. 38) to which the plaintiff filed a reply brief (Doc. 42). The second is a Motion to Confirm Arbitration Award and to Dismiss Lawsuit with Prejudice (Doc. 26) brought by WorldVentures. The Court held oral arguments on the motions on October 21, 2015. The Court’s jurisdiction exists pursuant to 28 U.S.C. § 1332. For the reasons stated herein, the plaintiffs Motion to Vacate (Doc. 32) is DENIED, and the defendant’s Motion to Confirm Arbitration Award and to Dismiss Lawsuit with Prejudice (Doc. 26) is GRANTED.

I. Background

In April 2012, Ostrom filed a complaint asserting several claims, including breach of contract, against his employer, World-Ventures. After this Court denied World-Ventures’ motion to compel arbitration (Doc. 17), the parties entered into an Arbitration Agreement whereby they agreed to submit Ostrom’s claims to binding arbitration. Pursuant to that agreement, both parties selected a New Orleans lawyer, A.J. Krouse, as the arbitrator (“Krouse” or “the Arbitrator”).

During the arbitrator selection process, Krouse completed a “Notice of Appointment” form, in which he indicated that he did not have “any professional or social relationship with, counsel for any party in the proceeding or the firms for which they work.” Notice of Appointment, Doc. 32-4. However, in the first prehearing conference, Krouse disclosed to the parties that he knew of WorldVentures’ counsel (though only professionally), had interactions with WorldVentures’ counsel when counsel worked as a law clerk at a federal court in New Orleans, and that the small legal community in New Orleans meant that he and WorldVentures’ counsel had mutual acquaintances and connections. Ostrom’s hearing counsel1 did not object; he stated that he understood and advised that the situation was the same in Michigan. Later in the proceedings, Krouse disclosed that he clerked at Phelps Dunbar as a law student. Ostrom’s counsel again expressed “no objection” to Krouse’s disclosures. See E-mail from Steven A. Hilger, to Elizabeth Kidd, Dir. of ADR Servs., Am. Arbitration Ass’n (August 18, 2014, 12:16 PM), Doc. 38-1 (Ex. B).

[946]*946Both Ostrom and WorldVentures engaged in extensive discovery prior to the arbitration hearing. Six days before the start of the hearing, WorldVentures supplemented its discovery and disclosed new evidence, which Krouse ruled was admissible. After the proceedings began, several relevant events occurred. First, Krouse allowed WorldVentures to call a witness to testify, despite that witness not being explicitly mentioned in the Witness List. Second, after Ostrom testified on direct examination, Krouse delayed WorldVentures’ cross-examination for two days. Finally, according to Ostrom, “a high ranking partner of Phelps Dunbar—Harry Rosenberg—showed up at the arbitration proceeding to visit with Krouse.” Pl.’s Supp. Mem. 12, Doc. 32-1.

After the arbitration hearing concluded, Krouse issued his decision (“the Award”) dismissing with prejudice all of Ostrom’s claims against WorldVentures. See Award of Arbitrator 36, Doc. 32-8. In the Award, Krouse ruled that Ostrom was not entitled to declaratory relief, and determined that WorldVentures had not breached its contract with Ostrom. See id.

After Krouse entered the Award, Os-trom discovered several connections between Krouse’s law firm, Frilot L.L.C., and the law firm representing WorldVen-tures, Phelps Dunbar L.L.P. (“Phelps Dunbar”). Specifically, Ostrom discovered 20 reported cases where Frilot L.L.C. and Phelps Dunbar were involved in litigations together. In 18 of those cases, Frilot L.L.C. and Phelps Dunbar were on the “same side” in the litigation, but represented different parties. PI. ’s Supp. Mem. 11, Doc. 32-1. In three cases, the Arbitrator served as an attorney of record on the “same side” as Phelps Dunbar—meaning Krouse and Phelps Dunbar attorneys separately represented individual defendants in those cases. See List of Cases between Krouse and/or Frilot, L.L.C. and Phelps Dunbar, L.L.P., Doc. 32-12. In one of those cases, Krouse himself served as counsel along with Harry Rosenberg (the “high ranking partner of Phelps Dunbar”).

II. Motion To Vacate (Doc. 32)

The Federal Arbitration Act imposes significant limits on judicial review of arbitrator’s awards so that arbitration will be an “efficient and cost-effective” alternative to litigation for the parties. Positive Software Sols., Inc. v. New Century Mortg. Corp., 476 F.3d 278, 280 (5th Cir.2007) (en banc). Thus, judicial review of the arbitration award is exceedingly deferential and vacatur is only available on very narrow grounds. Brabham v. A.G. Edwards & Sons Inc., 376 F.3d 377, 380 (5th Cir.2004). Vacatur of an arbitrator’s award is only available in the four limited circumstances listed in § 10(a) of the FAA:

(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, upon sufficient cause shown, 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 then-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; Citigroup Glob. Mkts., Inc. v. Bacon, 562 F.3d 349, 358 (5th Cir.2009). Ostrom argues that the arbitration award should be vacated because: (1) the Arbitrator was guilty of evident partiality towards the defendant’s counsel (§ 10(a)(2)); (2) the Arbitrator was guilty of misconduct [947]*947(§ 10(a)(3)); and (3) the Arbitrator exceeded his authority (§ 10(a)(4)). Pl.’s Supp. Mem. 6, Doc. 32-1.

A. Evident Partiality

Ostrom argues that the Award should be vacated under § 10(a)(2) because there was evident partiality in the Arbitrator. Ostrom attempts to demonstrate evident partiality on two grounds: (1) the Arbitrator failed to disclose his professional relationship with the law firm representing WorldVentures, Phelps Dunbar; and (2) a partner from Phelps Dunbar appeared at the arbitration proceedings to “visit” with the Arbitrator. Id. at 6-13.

1. Nondisclosure

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160 F. Supp. 3d 942, 2016 U.S. Dist. LEXIS 13458, 2016 WL 447616, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ostrom-v-worldventures-marketing-llc-lamd-2016.