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Morelite Construction Corp. v. New York City District Council Carpenters Benefit Funds

November 5, 1984

MORELITE CONSTRUCTION CORP. (A DIVISION OF MORELITE ELECTRIC SERVICE, INC.), PETITIONER-APPELLANT,
v.
NEW YORK CITY DISTRICT COUNCIL CARPENTERS BENEFIT FUNDS AND THE DISTRICT COUNCIL OF NEW YORK CITY AND VICINITY OF THE UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF AMERICA, RESPONDENTS-APPELLEES



Morelite appeals from a judgment of the United States District Court for the Southern District of New York (Cannella, Judge) denying its motion to vacate an arbitration award pursuant to 9 U.S.C. § 10 and granting respondent's motion to confirm the arbitrator's award pursuant to 9 U.S.C. § 9. Reversed and remanded.

Author: Kaufman

Before: KAUFMAN and WINTER, Circuit Judges and WYZANSKI, Senior District Judge.*fn*

KAUFMAN, Circuit Judge:

In deciding this appeal, we are once again called upon to address the elusive standards under which an arbitrator's award may be vacated pursuant to Section 10 of the United States Arbitration Act, 9 U.S.C. § 10 (1982).Specifically, the question before us is whether a father-son relationship between an arbitrator and an officer of one party to the arbitration rises to the level of "evident partiality" required by Section 10 for vacating an award. Notwithstanding our traditional reluctance to inquire into the merits of an arbitrator's award, or to require of an arbitrator the same demanding level of impartiality as that dictated for judges, we believe this relationship deprived the opposing party of the impartiality to which it has a right. Accordingly, we reverse the decision of the district court, and remand with instructions to vacate the award.

An inquiry into issues of fairness, bias, partiality and the like overflows with factual questions. Consequently, we set forth the concrete background of the instant dispute before turning to the legal issues.

FACTS

Appellant Morelite Construction Corp. ("Morelite"), a division of Morelite Electric Services, Inc., is a construction contractor. Appellees are The District Council of New York City and Vicinity of the United Brotherhood of Carpenters and Joiners of America (the "District Union") and the Trustees of the New York City District Council Carpenters Benefit Funds (the "Benefit Funds"). The instant appeal arises from Morelite's alleged nonpayment of contributions to the Benefit Funds pursuant to a collective bargaining agreement between Morelite and the District Union.

In 1979 and 1980, Morelite was engaged to perform contracting services in connection with two construction projects in New York City. Morelite entered into job agreements with the District Union applicable to each site. The agreements expressly incorporated the construction industry's "Master Collective Bargaining Agreement" and provided for arbitration of disputes arising from the agreements.

In 1980, the Benefit Funds audited Morelite's financial records, and charged that the company was delinquent in contributions to the Funds in the amount of some $80,000.On October 8, 1980, the Benefit Funds served notice upon Morelite of their intention to arbitrate their claim for unpaid contributions. Later that month, Morelite commenced a proceeding in New York State Supreme Court seeking to stay arbitration. The Benefit Funds removed the action to the United States District Court for the Southern District of New York, and cross-petitioned to compel arbitration. By order dated May 6, 1981, Judge Cannella denied Morelite's petition, and granted the Benefit Funds' cross-petition on the condition that the District Union be joined as a party to the arbitration (which it subsequently was).

On March 11, 1982, Morelite moved in the District Court to disqualify Patrick M. Campbell, Jr. as the arbitrator, because his father was then a Vice-President of the United Brotherhood of Carpenters and Joiners of America, the international union of which the District Union was a local. Campbell, Sr. also served as the international union's supervisor and trustee of the District Union. Judge Cannella denied the motion, holding the court had no authority to entertain an attack on an arbitrator's partiality until after the rendition of an award,*fn1 and ordered the arbitration to proceed forthwith.

Hearings were held before Patrick Campbell, Jr. during the months of April and May of 1982, and in June of 1983, he filed his opinion and award. Campbell found that Morelite was "delinquent in payment of fringe benefit monies due under its written agreements and is also obligated to pay liquidated damages and interest on its delinquency." In sum, the District Union was awarded $128,429.50 plus interest from the date of the award.

In September 1983, Morelite moved pursuant to 9 U.S.C. § 10 (1982) to set aside the arbitration award, again claiming that the position of Campbell's father -- who, during the pendency of the arbitration, had been named General President of the international union -- precluded Campbell from acting impartially. Judge Cannella, noting that he "remain[ed] troubled by the relationship," nevertheless denied the motion and granted the District Union's cross-petition to confirm the arbitrator's award. In March of 1984, final judgment was entered in favor of the Benefit Funds and the District Union, and Morelite timely filed a notice of appeal.

Discussion

In 1925, Congress promulgated the United States Arbitration Act, 9 U.S.C. §§ 1-14, which set forth the delicate relationship between the role of private arbitration and the federal courts. Section 10 of the Act delineates the grounds upon which a court may vacate an arbitrator's award. Subsection (b) provides that such a ...


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