Sanders-Midwest, Inc. v. Midwest Pipe Fabricators, Inc.

857 F.2d 1235, 1988 U.S. App. LEXIS 13638, 1988 WL 100399
Court of Appeals for the Eighth Circuit·Decided October 3, 1988·No. 87-2468·Published·Cited by 12 cases

Opinion

FAGG, Circuit Judge.

Sanders-Midwest, Inc. (Sanders) appeals the district court’s rulings in favor of Midwest Pipe Fabricators, Inc. (Midwest) in this action seeking judicial review of an arbitration award. We affirm.

Sanders and Midwest agreed to submit a contract dispute between them to binding arbitration. Minutes before the arbitration hearing was to begin, one of the three arbitrators scheduled to hear the case informed the parties his law firm represented a client in litigation against Sanders. The arbitrator assured Sanders and Midwest, however, that he was not personally involved in the case. With that understanding, the parties went forward with the hearing.

The arbitrator’s time records later revealed his representations to the parties at the hearing were significantly inaccurate. The arbitrator actually had logged close to 100 hours related to the lawsuit against Sanders and had earned over $10,000 in fees. The arbitration panel made its award in favor of Midwest and against Sanders, and the award was delivered to Sanders on October 11, 1986.

On January 6, 1987, Sanders filed an application to vacate the award in Missouri state court relying on the Missouri Uniform Arbitration Act, Mo.Ann.Stat. §§ 435.350 to 435.470 (Vernon Supp.1988) (the Missouri Act). As grounds for the application Sanders claimed, among other things, that the award was procured by fraud and was not made by an impartial panel because of the presence of the arbitrator who was involved in litigation against Sanders. In accordance with the Missouri Act, Sanders’ application to vacate was made within ninety days after delivery of the award. See id. § 435.405.2. Service of process on Midwest, however, was obtained on February 24, 1987, after the ninety day period expired. See id. § 435.425.

Meanwhile Midwest, on February 13, 1987, filed a separate application for confirmation of the award in federal district court under the Federal Arbitration Act, 9 U.S.C. §§ 1-14 (the Federal Act). After becoming aware of Sanders’ state court application challenging the same award, Midwest petitioned for removal of Sanders’ state court action on diversity of citizenship grounds. 28 U.S.C. §§ 1332(a)(1), 1441(a). The removed state case and Midwest’s separate federal case were consolidated for consideration by the district court.

Midwest moved for summary judgment on its application to confirm the award and *1237 for dismissal of Sanders’ application to vacate, asserting the Federal Act governed the parties’ rights. Relying on section 12 of the Federal Act, Midwest claimed Sanders’ application to vacate was untimely because notice had not been served on Midwest “within three months after the award [was] * * * delivered.” 9 U.S.C. § 12. In opposition, Sanders contended that because it had filed its application to vacate the award in state court, and because removal had been premised only on diversity grounds, Sanders’ motion to vacate was subject to the requirements of the Missouri Act. Thus, Sanders argued it need not comply with the service requirements of the Federal Act and that it was entitled to raise the fraud and partiality issues as grounds to vacate the award.

The district court held it could not consider Sanders’ grounds for vacating the award because Sanders had failed to comply with the Federal Act. Accordingly, the district court granted Midwest’s motions for summary judgment and for confirmation of the award and denied Sanders’ application to vacate.

On appeal, Sanders argues we are required to apply Missouri rather than federal law and that under the Missouri Act, Sanders’ application to vacate was timely. We believe this argument is misplaced. The Federal Arbitration Act is “ ‘a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.’ ” Perry v. Thomas, — U.S. -, 107 S.Ct. 2520, 2525, 96 L.Ed.2d 426 (1987) (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983)). This substantive law controls in either state or federal court. Southland Corp. v. Keating, 465 U.S. 1, 12, 104 S.Ct. 852, 859, 79 L.Ed.2d 1 (1984). This means traditional choice of law principles in diversity actions, see Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938), are not available when the Federal Act applies to the case. See Webb v. R. Rowland & Co., 800 F.2d 803, 806-07 (8th Cir.1986); Collins Radio Co. v. Ex-Cell-O Corp., 467 F.2d 995, 998 (8th Cir.1972); see also, e.g., Foster v. Turley, 808 F.2d 38, 40 (10th Cir.1986); Goodwin v. Elkins & Co., 730 F.2d 99, 108 (3d Cir.), cert. denied, 469 U.S. 831, 105 S.Ct. 118, 83 L.Ed.2d 61 (1984); Huber, Hunt & Nichols, Inc. v. Architectural Stone Co., 625 F.2d 22, 25-26 (5th Cir.1980). The Missouri Supreme Court also recognizes the principle that when the Federal Act applies to a dispute, it “is obliged to apply federal law, and may not apply state law, substantive or procedural, [that] is in derogation of federal law.” Bunge Corp. v. Perryville Feed & Produce, Inc., 685 S.W.2d 837, 839-40 (Mo. 1985) (en banc).

Sanders does not dispute the district court’s determination that the parties’ agreement to arbitrate in this case falls within the scope of the Federal Act. Thus, we are required to apply federal rather than Missouri law to resolve this appeal.

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Sanders-Midwest, Inc. v. Midwest Pipe Fabricators, Inc., 857 F.2d 1235, 1988 U.S. App. LEXIS 13638, 1988 WL 100399 (8th Cir. 1988).

857 F.2d 1235 (Sanders-Midwest, Inc. v. Midwest Pipe Fabricators, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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