Saturday, September 26, 2015

Lying IRS Assessments and 26 USC § 83

fn:Bob Hurt
org:Bob Hurt Publishing
adr:;;2460 Persian Drive #70;Clearwater;Florida;33763-1925;USA

Chris Chapman likes to help people prevent a tax crime indictment, inexpensively.

You can write to the IRS and demand an assessment if you have tax deficiency problems.  If you receive an alleged assessment in a computer printout from the IRS, call Chris at 321 264 6383 to discuss how to deal with it. 

You might use the government as a witness that "one cannot rely upon the accuracy of computer generated documents." The GAO has said the equivalent of this about IRS documents since 1992.  You might ask the DOJ for documents that would not be considered inaccurate or unreliable.  Most likely they will respond that they know of no such documents.

Regarding whether you owe a tax on money you received in exchange for your personal services (labor, etc), the information below speaks for itself...

-------- Forwarded Message --------
Date: Sat, 26 Sep 2015 11:01:00 -0400
From: Chris Chapman at AMERICAN LIBERTIES <>
26 U.S. Code Chapter 1, Subchapter B - Computation of Taxable Income
§ 83. Property transferred in connection with performance of services
(a) General rule
If, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of
(1) the fair market value of such property (determined without regard to any restriction other than a restriction which by its terms will never lapse) at the first time the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, over
(2) the amount (if any) paid for such property, shall be included in the gross income of the person who performed such services in the first taxable year in which the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. The preceding sentence shall not apply if such person sells or otherwise disposes of such property in an arm's length transaction before his rights in such property become transferable or not subject to a substantial risk of forfeiture.
Now, to put it all into prospective now read:
If, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of … the fair market value of such property … over … the amount (if any) paid for such property, shall be included in the gross income of the person who performed such services…


Chris Chapman (Chappy)

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Friday, September 18, 2015

Nationstar v Brown - Statute of Limitations No Defense Against Foreclosure

Statute of Limitations Applies to Whole Payment Stream

By Bob Hurt, 18 September 2015
Florida’s 1st District Appellate Court gave Germaine and Andrea Brown a rude awakening by telling them the Florida foreclosure 5-year statute of limitations does not apply a 30-year stream of mortgage payments even after the creditor accelerates the loan, making the entire balance immediately due and payable.  The panel cited the Florida Supreme Court opinion in Singleton v Greymar (2004) as the controlling authority (“the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship.”).  The panel held that “the subsequent and separate alleged default created a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action.”  In other words, every default of a scheduled payment provides a new right to sue, throughout the original term of the loan.

The panel admitted that Florida’s 3rd District had reached a contrary conclusion in Deutsche Bank v Beauvais (2014).  But the panel harked to the USDC adverse opinion in Stern v BOA (2015) which claimed that Beauvis opinion went against ”overwhelming weight of authority.”  Now the Beauvais court plans to review its decision.

This should make it abundantly clear that the foreclosure statute of limitations in Florida does not constitute a valid defense against foreclosure, except on payments more than 5 years overdue on which the creditor has failed to take action.

Why should this matter to mortgage victims facing foreclosure?  Because you cannot depend on Foreclosure Defense to defeat foreclosure.  The court/trustee will NOT give you a free house.

ONLY ONE methodology gives home loan borrowers a reliable chance beat the appraiser, mortgage broker, title company, servicer, and creditor in a mortgage dispute:  MORTGAGE ATTACK.  Borrowers must ATTACK THE VALIDITY OF THE LOAN, and to do that, they must get a comprehensive mortgage examination.

If you have a mortgage dispute, contact Mortgage Attack NOW for a full explanation of the ONLY WINNING METHODOLOGY.

NATIONSTAR MORTGAGE, LLC v. Brown, Fla: Dist. Court of Appeals, 1st Dist. 2015
District Court of Appeal of Florida, First District.
Opinion filed August 24, 2015.

Nancy M. Wallace of Akerman LLP, Tallahassee; William P. Heller of Akerman LLP, Fort Lauderdale; Celia C. Falzone of Akerman LLP, Jacksonville, for Appellant.
Jared D. Comstock of John F. Hayter, Attorney at Law, P.A., Gainesville, for Appellees.

Appellant challenges a final summary judgment holding that the statute of limitations bars appellant's action to foreclose the subject mortgage. We agree with appellant that the statute of limitations did not bar the action. Thus, we reverse.

It is undisputed that appellees have failed to make any mortgage payments since February 2007, the first month in which they defaulted. In April 2007, appellant's predecessor in interest gave notice of its intent to accelerate the note based on the February 2007 breach, and filed a foreclosure action. However, the trial court dismissed that action without prejudice in October 2007, after counsel for the lender failed to attend a case management conference.

The next relevant event occurred in November 2010, when appellant sent appellees a new notice of intent to accelerate, based on appellees' breach in March 2007 and subsequent breaches. Appellees took no action to cure the default, and appellant filed a new foreclosure action in November 2012. Appellees asserted the statute of limitations as an affirmative defense, arguing that the new action and any future foreclosure actions were barred because they were not filed within five years after the original 2007 acceleration of the note. § 95.11(2)(c), Fla. Stat. (2012) (establishing five year statute of limitations on action to foreclose a mortgage).

The principles set forth in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004), apply in this case. In Singleton, the Florida Supreme Court recognized "the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship." 882 So. 2d at 1007 (emphasis added). The court sought to avoidboth unjust enrichment of a defaulting mortgagor, and inequitable obstacles "prevent[ing] mortgagees from being able to challenge multiple defaults on a mortgage." Id. at 1007-08. Giving effect to those principles in light of the continuing obligations of a mortgage, the court held that "the subsequent and separate alleged default created a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action." Id. at 1008. The court found it irrelevant whether acceleration had been sought in earlier foreclosure actions. Id. The court's analysis in Singleton recognizes that a note securing a mortgage creates liability for a total amount of principal and interest, and that the lender's acceptance of payments in installments does not eliminate the borrower's ongoing liability for the entire amount of the indebtedness.

The present case illustrates good grounds for the Singleton court's concern with avoiding both unjust enrichment of borrowers and inequitable infringement on lenders' remedies. Judgments such as that under review run afoul of Singleton because they release defaulting borrowers from their entire indebtedness and preclude mortgagees from collecting the total debt evidenced by the notes securing the mortgages they hold, even though the sum of the installment payments not made during the limitations period represents only a fraction of the total debt. See GMAC Mortg., LLC v. Whiddon, 164 So. 3d 97, 100 (Fla. 1st DCA 2015) (dismissal of earlier foreclosure action "did not absolve the Whiddons of their responsibility to make mortgage payments for the remaining twenty-five years of their mortgage agreement"). We further observe that both the note and the mortgage at issue here contain typical provisions reflecting the parties' agreement that the mortgagee's forbearance or inaction do not constitute waivers or release appellees from their obligation to pay the note in full. These binding contractual terms refute appellees' arguments and are inconsistent with the judgment under review.

We have held previously that not even a dismissal with prejudice of a foreclosure action precludes a mortgagee "from instituting a new foreclosure action based on a different act or a new date of default not alleged in the dismissed action." PNC Bank, N.A. v. Neal, 147 So. 3d 32, 32 (Fla. 1st DCA 2013); see also U.S. Bank Nat. Ass'n v. Bartram, 140 So. 3d 1007, 1014 (Fla. 5th DCA), review granted, 160 So. 3d 892 (Fla. 2014) (Case No. SC14-1305) (dismissal of earlier foreclosure action, whether with or without prejudice, did not bar subsequent foreclosure action based on a new default);Evergrene Partners, Inc. v. Citibank, N.A., 143 So. 3d 954, 955 (Fla. 4th DCA 2014)(foreclosure and acceleration based on an earlier default "does not bar subsequent actions and acceleration based upon different events of default"). The dismissal in this case 
was without prejudice, so much the more preserving appellant's right to file a new foreclosure action based on appellees' breaches subsequent to the February 2007 breach asserted as the procedural trigger of the earlier foreclosure action. We find that appellant's assertion of the right to accelerate was not irrevocably "exercised" within the meaning of cases defining accrual for foreclosure actions, when the right was merely asserted and then dismissed without prejudice. See Olympia Mortg. Corp. v. Pugh, 774 So. 2d 863, 866-67 (Fla. 4th DCA 2000) ("By voluntarily dismissing the suit, [the mortgagee] in effect decided not to accelerate payment on the note and mortgage at that time."); see also Slottow v. Hull Inv. Co., 129 So. 577, 582 (Fla. 1930) (a mortgagee could waive an acceleration election in certain circumstances). After the dismissal without prejudice, the parties returned to the status quo that existed prior to the filing of the dismissed complaint. As a matter of law, appellant's 2012 foreclosure action, based on breaches that occurred after the breach that triggered the first complaint, was not barred by the statute of limitations. Evergrene, 143 So. 3d at 955 ("[T]he statute of limitations has not run on all of the payments due pursuant to the note, and the mortgage is still enforceable based upon subsequent acts of default.").

We are aware that the Third District has reached a contrary conclusion in Deutsche Bank Trust Co. Americas v. Beauvais, 40 Fla. L. Weekly D1, 2014 WL 7156961 (Fla. 3d DCA Dec. 17, 2014) (Case No. 3D14-575). A federal district court has refused to follow Beauvais, noting that it is "contrary to the overwhelming weight of authority." Stern v. Bank of America Corp., 2015 WL 3991058 at *2-3 (M.D. Fla. June 30, 2015) (No. 2:15-cv-153-FtM-29CM). The court in Beauvais acknowledges that its conclusion is contrary to the weight of authority on the questions presented. 2014 WL 7156961, at *8-9. That court's docket shows that the court has set the case for rehearing en banc; it remains to be seen whether the merits disposition will change.

Accordingly, we reverse and remand for further proceedings on appellant's foreclosure action.


Thursday, September 17, 2015

IF the servicer's home preservation company steals your stuff...

This US 8th Circuit Appellate opinion should give you heart, IF you can get a damages award from an arbitrator or trial court for theft of your stuff by a home preservation company's felonious employees.  In this case, the arbitrator awarded the Starks $6 million to punish the servicer, note holder, and home preservation company for breaking into the home during a foreclosure dispute after the Starks had moved into an apartment across the street (still in possession, did not abandon).  The 8th Circuit upheld the award.  Appellants appealed to the SCOTUS which denied certiorari.

381 F.3d 793
Stanley William STARK; Patricia Garnet Stark, Plaintiffs-Appellants,
SANDBERG, PHOENIX & VON GONTARD, P.C.; Scott Greenberg; EMC Mortgage Corporation; SpvG Trustee, Defendants-Appellees.
No. 03-2366.
United States Court of Appeals, Eighth Circuit.
Submitted: January 15, 2004.
Filed: August 26, 2004.
Appeal from the United States District Court for the Western District of Missouri, Ortrie D. Smith, J. COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Roy B. True, argued, Kansas City, Missouri, for appellant.
Mark G. Arnold, argued, St. Louis, Missouri (Robert B. Best, Jr. and Leonard L. Wagner on the brief), for appellant.
Before BYE, HEANEY and SMITH, Circuit Judges.
BYE, Circuit Judge.
Stanley and Patricia Stark appeal the district court's order vacating in part an arbitration award granting them punitive damages. We reverse.
* Stanley and Patricia are husband and wife and live near Kansas City, Missouri. In 1999, in hopes of shoring up a failing business, the Starks borrowed $56,900 against their home and secured the loan with a mortgage. Despite the infusion of funds, the business failed and in April 2000 the Starks petitioned for bankruptcy protection. At about the same time, the Starks' lender sold the note, which was in default, to EMC Mortgage Corporation making EMC a debt collector under the provisions of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692o. In anticipation of foreclosure, the Starks vacated the home and moved into an apartment across the street. The Starks, however, remained in possession of legal title and did not abandon the home. In June 2000, EMC's motion to lift the automatic stay was granted and it proceeded with foreclosure.
The Starks were represented throughout the foreclosure and bankruptcy proceedings by attorney Roy True who notified EMC's attorney, Scott Greenberg of Sandberg, Phoenix & von Gontard, P.C., that his representation of the Starks extended beyond the bankruptcy proceedings. Between October 2000 and March 2001, despite letters from True advising EMC he represented the Starks and not to contact them directly, EMC tried several times to deal directly with the Starks. In April 2001, the Starks filed suit against EMC and its attorneys alleging violations of the FDCPA.
EMC moved to compel arbitration as required by the parties' loan agreement, and the district court ordered the dispute submitted to arbitration. The order compelling arbitration is not at issue in this appeal. During the pendency of the arbitration, EMC's agent, without the Starks' consent, forcibly entered the home and posted a sign in the front window indicating the "Property has been secured and winterized. Not for sale or rent. In case of emergency call 1st American (732) 363-3626." The agent then contacted Mrs. Stark at her apartment, and EMC contacted Mr. Stark at work regarding the matter. Further, on November 5, 2001 and January 27, 2002, EMC wrote to the Starks directly regarding insurance coverage on the home. In total, the Starks testified EMC contacted them by mail, telephone or in person at least ten times after being advised they were represented by counsel.
After these incidents, the Starks moved to amend their complaint to include claims alleging intentional torts against EMC and seeking punitive damages. EMC opposed the motion arguing the arbitration agreement expressly precluded an award of punitive damages. The Starks contended the limitation on punitive damages was unconscionable and unenforceable. After extensive briefing, the arbitrator concluded the limitation was ambiguous and construed the language against EMC. The arbitrator noted the agreement purported to grant him "all powers provided by law" and then purported to deny the power to award "punitive ... damages ... as to which borrower and lender expressly waive any right to claim to the fullest extent permitted by law." The arbitrator concluded,
In at least three places the Stark's [sic] are promised that they can seek all damages allowed by law, and then that promise is taken away. This is the keystone of an ambiguous contract, and the Agreement is to be interpreted in their favor. As a matter of law they are not prohibited from seeking punitive damages from EMC.
Appellee's app. at 22.
The arbitrator found EMC violated the FDCPA and awarded the Starks $1000 each in statutory damages, $1000 each in actual damages, $22,780 in attorneys fees, and $9300 for the cost of the arbitration. The arbitrator found EMC's forcible entry into the premises "reprehensible and outrageous and in total disregard of plaintiff's [sic] legal rights" and awarded $6,000,000 in punitive damages against EMC. Id. app. at 17.1
The Starks moved to confirm the award, and EMC moved to vacate the punitive damages award arguing the arbitration agreement expressly prohibited punitive damages. No other aspect of the award was challenged. The district court vacated the award of punitive damages, holding the agreement was unambiguous and not susceptible to the arbitrator's interpretation.
On appeal, the Starks contend the arbitrator acted within his authority in construing the contract and his finding of an ambiguity was not irrational. EMC argues the district court's order vacating the award of punitive damages should be affirmed.
When reviewing a district court's order confirming or vacating an arbitral award, the court's findings of fact are reviewed for clear error and questions of law are reviewed de novo. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Titan Wheel Corp. of Iowa v. Local 2048, Int'l Ass'n of Machinists & Aerospace Workers, 253 F.3d 1118, 1119 (8th Cir. 2001).
When reviewing an arbitral award, courts accord "an extraordinary level of deference" to the underlying award itself, Keebler Co. v. Milk Drivers & Dairy Employees Union, Local No. 471, 80 F.3d 284, 287 (8th Cir.1996), because federal courts are not authorized to reconsider the merits of an arbitral award "even though the parties may allege that the award rests on errors of fact or on misinterpretation of the contract." Bureau of Engraving, Inc. v. Graphic Communication Int'l Union, Local 1B, 284 F.3d 821, 824 (8th Cir.2002) (quotingUnited Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 36, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987)). Indeed, an award must be confirmed even if a court is convinced the arbitrator committed a serious error, so "long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority." Bureau of Engraving, 284 F.3d at 824 (quoting Misco, 484 U.S. at 38).
The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, established "a liberal federal policy favoring arbitration agreements." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Thus, the FAA only allows a district court to vacate an arbitration award
(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.
(4) Where the arbitrators exceeded their 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(a).
Similarly, under 9 U.S.C. § 11 a reviewing court may only modify the arbitrator's award
(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.
(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.
(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.
9 U.S.C. § 11.
A "district court must take the award as it finds it and either vacate the entire award using section 10 or modify the award using section 11." Legion Ins. Co. v. VCW, Inc., 198 F.3d 718, 721 (8th Cir.1999). The deference owed to arbitration awards, however, "is not the equivalent of a grant of limitless power," Leed Architectural Prods., Inc. v. United Steelworkers of Am., Local 6674, 916 F.2d 63, 65 (2d Cir.1990), and "courts are neither entitled nor encouraged simply to `rubber stamp' the interpretations and decisions of arbitrators."Matteson v. Ryder Sys. Inc., 99 F.3d 108, 113 (3d Cir.1996). Thus, courts may also vacate arbitral awards which are "completely irrational" or "evidence[] a manifest disregard for the law." Hoffman v. Cargill Inc., 236 F.3d 458, 461 (8th Cir.2001) (internal quotations and citations omitted).
An award is "irrational where it fails to draw its essence from the agreement" or it "manifests disregard for the law where the arbitrators clearly identify the applicable, governing law and then proceed to ignore it." Id. at 461-62. "An arbitrator's award draws its essence from the [parties' agreement] as long as it is derived from the agreement, viewed in light of its language, its context, and any other indicia of the parties' intention." Johnson Controls, Inc., Sys. & Servs. Div. v. United Ass'n of Journeymen, 39 F.3d 821, 825 (7th Cir.1994) (internal quotations omitted).
Faced with these limitations on a court's ability to review arbitration awards, EMC argues the arbitrator's award of punitive damages was properly vacated under § 10 because the arbitrator exceeded his powers by modifying the unambiguous agreement, and properly modified under § 11 because in considering the issue of punitive damages the arbitrator made a decision on a matter not submitted to him.2 EMC also argues the arbitrator's finding of an ambiguity was irrational and without foundation in reason or fact because the clear language of the agreement precludes an award of punitive damages. Finally, EMC argues the award of punitive damages was excessive and made in manifest disregard of the law. Because we conclude the arbitration agreement unambiguously permitted the award of punitive damages, we hold the award of punitive damages was proper and reverse the district court.
The plain language of the arbitration agreement states the "borrower and lender expressly waive any right to claim [punitive damages] to the fullest extent permitted by law." Appellee's app. at 19 (emphasis added). Thus, the agreement only effected a limited waiver of punitive damages, that is, punitive damages were waived only if the governing law permitted such a waiver. Conversely, if the law did not permit the waiver of punitive damages, the arbitration agreement unambiguously preserved the right to claim them.
Under Missouri law "there is no question that one may never exonerate oneself from future liability for intentional torts or for gross negligence, or for activities involving the public interest." Alack v. Vic Tanny Int'l of Mo., Inc., 923 S.W.2d 330, 337 (Mo.1996) (citingLiberty Fin. Mgmt. Corp. v. Beneficial Data Processing Corp., 670 S.W.2d 40, 48 (Mo.App.1984)) (in turn citing 6A Corbin on Contracts, § 1472 (1962)). An attempt to procure a waiver of punitive damages is an attempt to exonerate oneself from future liability for intentional torts or gross negligence, because the remedy of punitive damages would otherwise be available for such acts. Thus, Missouri law did not permit EMC to exonerate itself from liability for the intentional torts committed against the Starks by procuring the punitive damages waiver, and the arbitrator did not exceed his authority in awarding punitive damages.
We recognize the FAA allows parties to incorporate terms into arbitration agreements that are contrary to state law. See UHC Mgmt. Co. v. Computer Sciences, Corp., 148 F.3d 992, 997 (8th Cir.1998) (holding "[p]arties may choose to be governed by whatever rules they wish regarding how an arbitration itself will be conducted.") (citation omitted). Thus, had the parties to this agreement intended its interpretation to be governed solely by the FAA, the punitive damages waiver might have barred any such award. The plain language of the agreement, however, makes it clear Missouri law applies to this issue.
The agreement's arbitration clause provides,
Arbitration. To the extent allowed by applicable law, any Claim ... shall be resolved by binding arbitration in accordance with (1) the Federal Arbitration Act, . . . (2) the Expedited Procedures of the Commercial Arbitration Rules of the American Arbitration Association ... and (3) this Agreement.
Appellee's app. at 19 (emphasis added).
The agreement then defines applicable law as "the laws of the state in which the property which secures the Transaction is located." Id.(emphasis added). In other words, the agreement makes clear the parties intent to apply Missouri state substantive law while operating within the framework of the FAA, American Arbitration Association rules and the agreement. As previously noted, the punitive damages waiver expressly states the parties intended to waive punitive damages only to the extent permitted by Missouri law. Because Missouri law would not permit a waiver under the facts of this case, we hold the arbitrator's award of punitive damages was proper.
Alternatively, while we believe the plain meaning of the agreement supports the award of punitive damages, we also conclude the arbitrator's finding of an ambiguity was not irrational.
The arbitration clause states any claims will be resolved in accordance with the FAA, which permits a waiver of punitive damages. The choice of laws provision, however, states claims must be resolved in accordance with "applicable [Missouri] law," which does not permit the waiver of punitive damages argued for by EMC in this case. Thus, an arbitrator could reasonably conclude this agreement is ambiguous.
In Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995), the Supreme Court considered the juxtaposition of a choice of laws provision prohibiting punitive damages with an arbitration clause permitting an award of punitive damages. The Court concluded "[a]t most, the choice-of-law clause introduces an ambiguity into an arbitration agreement that would otherwise allow punitive damages awards." Id. (Emphasis added). As in Mastrobuono, an arbitrator interpreting this agreement could reasonably conclude the apparent conflict between the arbitration clause and the choice of laws provision introduced an ambiguity into the agreement. Accordingly, the Supreme Court's recognition that an ambiguity is created when an agreement purports to be governed by conflicting state and federal law is instructive, and supports the arbitrator's finding of an ambiguity.
Additionally, we cannot ignore well-settled precedent from this court holding state contract law governs whether an arbitration agreement is ambiguous. See Lyster v. Ryan's Family Steak Houses, Inc., 239 F.3d 943, 946 (8th Cir.2001). Under Missouri law, "[t]he primary rule in the interpretation of a contract is to ascertain the intention of the parties and to give effect to that intention." Speedie Food Mart, Inc. v. Taylor, 809 S.W.2d 126, 129 (Mo.Ct.App.1991). The test for determining if an ambiguity exists in a written contract is "whether the disputed language, in the context of the entire agreement, is reasonably susceptible of more than one construction giving the words their plain meaning as understood by a reasonable average person." Speedie Food Mart, 809 S.W.2d at 129.
In this case, EMC argues the exclusionary language is clear and unambiguous and shields it from liability for any award of punitive damages. When viewed in the context of Missouri law governing exculpatory clauses, however, this clause could easily be viewed as ambiguous. "A `latent ambiguity' arises where a writing on its face appears clear and unambiguous, but some collateral matter makes the meaning uncertain." Royal Banks of Missouri v. Fridkin, 819 S.W.2d 359, 362 (Mo. 1991) (en banc) (citation omitted). Here, the ambiguity arises because the clause attempts to effect a prospective waiver of rights which Missouri law holds may not be waived. Under Missouri law "there is no question that one may never exonerate oneself from future liability for intentional torts or for gross negligence, or for activities involving the public interest." Alack, 923 S.W.2d at 337 (citations omitted). Words purporting to waive claims which cannot be waived "demonstrate the ambiguity of the contractual language." Id.
Finally, EMC "cannot overcome the common-law rule of contract interpretation that a court should construe ambiguous language against the interest of the party that drafted it." Mastrobuono, 514 U.S. at 62, 115 S.Ct. 1212 (citations omitted). EMC "cannot now claim the benefit of the doubt. The reason for this rule is to protect the party who did not choose the language from an unintended or unfair result." Id. at 63, 115 S.Ct. 1212.
Accordingly, we conclude the arbitrator's finding that the contract was ambiguous was not irrational.
EMC next argues the award of punitive damages was properly vacated because it is excessive and exhibits a manifest disregard of the law. We disagree.
"Beyond the grounds for vacation provided in the FAA, an award will only be set aside where it is completely irrational or evidences a manifest disregard for the law." Hoffman, 236 F.3d at 461 (internal citations and quotations omitted) (emphasis added). "These extra-statutory standards are extremely narrow: ... [A]n arbitration decision only manifests disregard for the law where the arbitrators clearly identify the applicable, governing law and then proceed to ignore it." Id. at 461-62 (citing Stroh Container Co. v. Delphi Indus., 783 F.2d 743, 749-50 (8th Cir.1986)) (emphasis added).
"A party seeking vacatur [based on manifest disregard of the law] bears the burden of proving that the arbitrators were fully aware of the existence of a clearly defined governing legal principle, but refused to apply it, in effect, ignoring it." Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389 (2d Cir.2003). Because "[a]rbitrators are not required to elaborate their reasoning supporting an award," El Dorado Sch. Dist. # 15 v. Continental Cas. Co., 247 F.3d 843, 847 (8th Cir.2001) (internal quotations omitted), "[i]f they choose not to do so, it is all but impossible to determine whether they acted with manifest disregard for the law." W. Dawahare v. Spencer,210 F.3d 666, 669 (6th Cir.2000) (citing Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir. 1995)).
Manifest disregard of the law "is more than a simple error in law or a failure by the arbitrators to understand or apply it; and, it is more than an erroneous interpretation of the law." Duferco Int'l, 333 F.3d at 389 (citations omitted). "Our disagreement with an arbitrator's interpretation of the law or determination of the facts is an insufficient basis for setting aside his award." El Dorado Sch. Dist., 247 F.3d at 847 (citing Hoffman, 236 F.3d at 462).
In support of its claim, EMC argues the arbitrator disregarded the Supreme Court's pronouncements in BMW of N. Am., Inc. v. Gore,517 U.S. 559, 572-74, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) (describing a 500:1 ratio of punitive to compensatory damages as "breathtaking" and suspicious), and State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 426, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003) (finding a 145:1 ratio of punitive to compensatory damages presumptively excessive). In so arguing, however, EMC has failed to present any evidence that the arbitrator "clearly identif[ied] the applicable, governing law and then proceed[ed] to ignore it." Hoffman,236 F.3d at 461-62 (citing Stroh Container, 783 F.2d at 749-50). None of the cases relied upon by EMC are cited in the arbitrator's decision,3 and there is nothing in the record to demonstrate "one of the parties clearly stated the law and the arbitrator[ ] expressly chose not to follow it." W. Dawahare, 210 F.3d at 670; see also Duferco Int'l, 333 F.3d at 390 ("In determining an arbitrator's awareness of the law, we impute only knowledge of governing law identified by the parties to the arbitration.") (citation omitted).
Indeed, to the extent the arbitrator's decision sets forth the basis for the punitive damages award, it is apparent the arbitrator did not disregard governing law. The arbitrator's award was intended to punish EMC and to deter others from similar conduct. In arriving at the appropriate amount, the arbitrator specifically found the $6,000,000 award (amounting to one-tenth of one percent of shareholder equity) was "not great punishment but it should act as a deterence [sic]." Appellee's app. at 18; see also Barnett v. La Societe Anonyme Turbomeca France, 963 S.W.2d 639, 655 (Mo.App.1998) (holding under Missouri law the net worth of a defendant is relevant when determining the extent of punitive damages necessary to punish and deter the defendant). Accordingly, we reject EMC's claim of manifest disregard.
"Although this result may seem draconian, the rules of law limiting judicial review and the judicial process in the arbitration context are well established and the parties ... can be presumed to have been well versed in the consequences of their decision to resolve their disputes in this manner." Stroh Container, 783 F.2d at 751. Moreover, "[a]rbitration is not a perfect system of justice, nor it is [sic] designed to be."Hoffman, 236 F.3d at 462 (citation omitted). Rather, it "is designed primarily to avoid the complex, time-consuming and costly alternative of litigation." Id.
In the arbitration setting we have almost none of the protections that fundamental fairness and due process require for the imposition of this form of punishment. Discovery is abbreviated if available at all. The rules of evidence are employed, if at all, in a very relaxed manner. The factfinders (here the panel) operate with almost none of the controls and safeguards [present in traditional litigation.]
Lee v. Chica, 983 F.2d 883, 889 (8th Cir. 1993) (Beam, J. concurring in part and dissenting in part).
Here, EMC chose to resolve this "dispute quickly and efficiently through arbitration." Schoch v. InfoUSA, Inc., 341 F.3d 785, 791 (8th Cir.2003), cert. denied, ___ U.S. ___, 124 S.Ct. 1414, 158 L.Ed.2d 81 (2004). Indeed, it was EMC that insisted on removing the matter to arbitration. In so doing, EMC "got exactly what it bargained for." Id. "Having entered such a contract, [EMC] must subsequently abide by the rules to which it agreed." Hoffman, 236 F.3d at 463 (citation omitted).
We reverse the district court's order vacating the award of punitive damages and remand with instructions to confirm the arbitrator's award in its entirety.
The arbitrator indicated the award of punitive damages was calculated as one percent of EMC's shareholder equity. One percent of equity, however, would have resulted in an award of $60,000,000. The arbitrator later clarified this mistake indicating it was his intent to award $6,000,000. Thus, the award was actually calculated as one-tenth of one percent of shareholder equity
EMC's § 11 argument is clearly without merit. The issue of punitive damages was submitted to the arbitrator. If the award was improper because it exceeded the scope of the agreement, § 10 is the proper avenue to redress the arbitrator's error
The arbitrator's decision predatesState Farm making it impossible for the arbitrator to have identified the decision as controlling.