United States District Court, N.D. Ohio, Eastern Division
MICHAEL H. SHAUT, Petitioner,
ANDREW HATCH, et al, Respondents.
MEMORANDUM OPINION AND ORDER
C. NUGENT UNITED STATES DISTRICT JUDGE
matter is before the Court on the Respondents' Motion to
Dismiss Petitioner's Motion to Vacate the Arbitration
Award, and/or to Strike Petitioner's Motion to Vacate the
Arbitration Award and for Sanctions. (ECF #8) For the reasons
that follow, Respondents' Motion to Dismiss the Motion to
Vacate the Arbitration Award is granted.
Michael H. Shaut began this action in this Court on February
16, 2018 by filing a Motion to Vacate an Arbitration Award
against him that was issued on November 21, 2017 in an
arbitration captioned John Hart, et al, v. Downing
Investment partners, et al, American Arbitration
Association arbitration No. 01 -16-0005-1632. (See ECF # 1)
Following a "documents only" arbitration conducted
in Philadelphia, Pennsylvania, the Arbitrator awarded damages
to Respondents in the amount of $2, 423, 190.94 (including
$1, 109, 444.97 in punitive damages) against Petitioner
Michael H. Shaut, jointly and severally with other
Respondents who are not part of the action before this
Court. In his Motion to Vacate Petitioner seeks
to vacate the Award, only as against him, pursuant to 9
U.S.C. § 10.
months prior to Petitioner's filing of this action, on
December 1, 2017, Respondents (the successful Claimants in
the Arbitration proceeding) filed a Petition to Confirm the
Arbitration Award in the Supreme Court of the State of New
York, New York County, the district in which Respondents
allege the Award was rendered. Petitioner Shaut was served
with Respondent's Petition to Confirm the Award on
December 21, 2017. On or about February 22, 2018,
Respondents' counsel served a Notice of Settlement and
Proposed Judgment on Petitioner Shaut. The same proposed
Judgment was submitted to Judge Goetz of the Supreme Court of
New York, New York County along with a proposed bill of
costs. Judge Goetz signed and entered the proposed Judgment
and the Bill of Costs on February 23, 2018. On March 20,
2018, Judge Goetz signed a Judgment confirming the
Arbitration Award and that Judgment was filed with the County
Clerk's Office, New York on April 12, 2018. Thereafter,
Judge Goetz signed an Order to Show Cause which restrained
and enjoined Petitioners therein from taking any action to
enforce the April 12, 2018 Judgment against Michael H. Shaut.
Judge Goetz is scheduled to hold a hearing on two motions
filed by Petitioner Shaut, one motion to dismiss the New York
action as to Mr. Shaut for lack of jurisdiction, and one
motion to vacate the Judgment confirming the Arbitration
Award entered against Mr. Shaut. Petitioner Shaut has also
filed a Notice of Appeal to the Appellate Division, First
Department appealing Judge Goetz' Judgment dated April
12, 2018, confirming the Arbitration Award.
Andrew Hatch, John Hart, Stephen Forden and Ed Stefanides now
move to Dismiss the Motion to Vacate the Arbitration Award
pursuant to Fed.R.Civ.P. 12(b)(5) and (6) arguing that (1)
Respondents have not been properly served pursuant to 9
U.S.C. § 12 of the Federal Arbitration Act
("FAA"); (2) Petitioner's Motion to Vacate is
time barred under the three month time period under 9 U.S.C.
§ 12 of the FAA; (3) Petitioner's Motion is barred
by the doctrine of res judicata as the Arbitration
Award at issue has already been confirmed by Judge Paul Goetz
of the New York Supreme Court, New York County; and finally
Respondents alternatively assert that the Court should strike
Petitioner's 87 page Motion to Vacate because it violates
the 20 page limit for dispositive motions set forth in Local
Rule 7.1(f) and sanction Petitioner because he ignored
Respondents' letters informing him of the Local Rule and
Respondents' intention to seek sanctions for the page
limit violation and for filing two allegedly false
certificates of service. (ECF #8) Petitioner has filed an
Opposition to the Motion to Dismiss, Respondents' have
filed a Reply brief in Support of their Motion to Dismiss and
Petitioner has filed a Sur-Reply. The Motion to Dismiss is
now ready for decision.
Motion to Dismiss for Improper Service
Motions to Dismiss for improper service in federal court
brought pursuant to Fed.R.Civ.P. 12(b)(5) are usually
governed by the service rules in Rule 4, in this case since
Petitioner filed this action to vacate an arbitration award
pursuant to federal arbitration rules set forth in 9 U.S.C.
§§ 10 and 11, the service requirements are found in
Section 12 of the arbitration rules. Thus, methods of proper
service for a Motion to Vacate an Arbitration Award are
governed by 9 U.S.C. § 12. Section 12 provides in
Notice of a motion to vacate, modify, or correct an award
must be served upon the adverse party or his attorney within
three months after the award is filed or delivered. If the
adverse party is a resident of the district within which the
award was made, such service shall be made upon the adverse
party or his attorney as prescribed by law for service of
notice of motion in an action in the same court. If
the adverse party shall be a nonresident then the notice of
the application shall be served by the marshal of
any district within which the adverse party may be
found in like manner as other process of the court.
(Emphasis added). Here, the parties agree that Respondents
are "nonresidents'" thus, under the provisions
of § 12, Respondents should have been served by a
marshal. Instead, Petitioner's counsel served an
incomplete copy of the Motion to Vacate (unsigned and lacking
exhibits) on Respondents' counsel via email on February
16, 2018, the day the Motion was filed with this Court.
Petitioner's counsel later sent a copy of the Motion to
Vacate to Respondents' counsel by United States Postal
Service on February 26, 2018, which was received by
Respondents' counsel on February 27, 2018.
Respondents' further assert that the certificate of
service attached to Petitioner's Motion to Vacate filed
with this Court was false when filed as it certifies that
Petitioner's counsel served a copy of the Motion to
Vacate on Respondents' counsel via U.S.P.S. on February
16, 2018. On March 12, 2018, Petitioner's counsel filed a
"Notice of Amended Certificate of Service" (ECF #5)
that states that a true and accurate copy of the Motion to
Vacate was served via electronic mail on Respondents'
counsel on February 16, 2018. Petitioner's counsel did
not seek consent from Respondent's counsel to accept
service of the Motion to Vacate nor did he ever seek consent
to make such service by electronic mail.
wording of § 12 is clear. Service by marshal is required
if the adverse party is a nonresident. Courts have regularly
enforced this requirement. See PTA-FLA, Inc., v. ZTE
USA, 2015 WL 12819186 (M.D. Fla. 2015) (service by
private process server instead of a marshal insufficient);
Eagle Energy, Inc. v. United Mine Workers, 177
F.R.D. 357, 359 (S.D. W.Va. 1998)(notice of motion by mail
insufficient); Jason v. Halliburton Co., No.
02-1593, 2002 U.S.Dist. LEXIS 19796, at *5, *9-10 (E.D. La.
Oct. 15, 2002 (same); Oberwager v. McKechnie, Ltd,
No. 06-2685, 2007 U.S. Dist. LEXIS 90869, at *25-28 (E.D. Pa.
Dec. 10, 2007) (email service insufficient).
asserts that service compliant with Fed.R.Civ.P. 4 is
sufficient as the purpose of Section 12 is to ensure that
Respondents are properly notified to avoid the risk of
surprise. See Day v. Zimmeran, Inc., E.D. Pa. No.
11-6008, 2012 U.S. Dist. LEXIS 151222 at *14 (Oct. 22, 2012)
(permitted email service because adverse party had consented
to such service) However, Petitioner's request to ignore
the clear language of § 12 in this instance is
unpersuasive. While some courts have permitted service by
alternate methods based upon the facts or equities in those
cases, the facts presented here do not support a variance
from the required method of service set forth in §12.
Petitioner did not seek Respondents' consent for email
service here. While email service was used in the underlying
arbitration, Petitioners's attorney specifically refused
to accept service or email service when asked by
Respondents' counsel prior to Respondents' filing to
confirm the Arbitration Award in New York Supreme Court.
Having refused such service six weeks before filing here,
Petitioner's arguments of consent-or implied consent ring
false. Further, Petitioner's fairness arguments are
hollow because dismissal of this action will not deprive him
the opportunity of review of the Arbitration Award as that
has already been addressed by the New York court and the
confirmation of the Award is now on appeal. In these
circumstances, Petitioner's non-compliance with the
service requirements of § 12 merit dismissal of the
Petitioner's Motion ...