Opinion
14-P-1076
10-20-2015
RONALD PAASCH & others v. CLAUDE RANOUX.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiffs appeal, alleging that the Superior Court judge erred when he confirmed an arbitration award in favor of the defendant, Claude Ranoux, because, in the plaintiffs' view, the award violates Delaware law and public policy. Because our power to vacate an arbitration award on the basis of legal error or public policy is limited, we affirm.
Background. "To place our discussion in context, we set forth the facts found by . . . the arbitrator." Conway v. CLC Bio, LLC, 87 Mass. App. Ct. 503, 503 (2015). The plaintiffs were minority stockholders in a company founded by Ranoux, the Medelle Corporation (Medelle), a Delaware company that was formed to make and design products to aid in human fertility. In an amended complaint dated March, 2010, the plaintiffs sued Ranoux, Medelle, and related parties. After numerous motions, all that remained of the suit were two claims against Ranoux -- one for breach of fiduciary duty and the other for fraud. With a trial date looming in November, 2012, the parties submitted the case, with the court's permission, to binding arbitration. The plaintiffs did not succeed in arbitration.
The related parties that were sued were Invo Bioscience, Inc., Bio-Egg-Cell, Inc., and Kathleen Karloff. The action was dismissed as to Invo Bioscience, Inc., Bio-Egg-Cell, Inc., and Kathleen Karloff, and default judgment entered against Medelle.
The arbitrator found that Ranoux did not commit fraud and that there was no breach of fiduciary duty, and on February 15, 2013, the arbitrator entered an award dismissing the plaintiffs' claims. The plaintiffs moved to vacate the arbitration award in Superior Court, and Ranoux moved to confirm it. The judge allowed Ranoux's motion to confirm the arbitration award, and judgment entered accordingly.
Analysis. "There is a 'strong public policy' favoring arbitration of commercial disputes . . . [and such] arbitration awards . . . are subject to a narrow scope of judicial review." Conway, supra at 505, citing G. L. c. 251, § 12. Factual or legal errors made by an arbitrator are generally not grounds for vacating the award. Conway, supra at 505. See Trustees of the Boston & Maine Corp. v. Massachusetts Bay Transp. Authy., 363 Mass. 386, 390 (1973) ("Even a grossly erroneous decision is binding in the absence of fraud"). An award may be vacated when, among other reasons, an arbitrator exceeds his authority. See G. L. c. 251, § 12(a)(3). An arbitrator exceeds his authority by granting "relief of a nature which offends public policy or which directs or requires a result contrary to express statutory provision." Superadio Ltd. Partnership v. Winstar Radio Prod., LLC, 446 Mass. 330, 334 (2006), quoting from Plymouth-Carver Regional Sch. Dist. v. J. Farmer & Co., 407 Mass. 1006, 1007 (1990).
The plaintiffs contend that the arbitrator exceeded his authority when he "refused" to apply a section of Delaware law, namely 8 Del. C. § 271, which requires that stockholders be notified and have consented before "all or substantially all" of the assets of a corporation are sold, leased, or exchanged. Basing his decision on Delaware cases, Massachusetts cases, treatises, statutes, and practice guides, the arbitrator was "not persuaded that the statutory duties of the Board to notify the shareholders and to obtain their consent . . . in a sale of all the assets is applicable to a sale pursuant to an assignment for the benefit of creditors," as was the case here. This legal conclusion is shielded from our review. Compare Conway, 87 Mass. App. Ct. at 505, 506-507, quoting from Dane v. Aetna Cas. & Sur. Co., 369 Mass. 966, 967 (1976) (Arbitrator's finding that employer did not violate the Wage Act "'is in substance a claim that the arbitrator committed an error of law,' and is not subject to judicial review").
The plaintiffs next contend that the arbitrator's award offends public policy, namely, Delaware public policy of providing stockholders with a right to vote on the sale of assets which, they claim, is "[e]mbodied in the [s]tatute." In asserting this claim, the plaintiffs "rel[y] on cases decided under the statutory arbitration provisions of the [Massachusetts] Education Reform Act of 1993, G. L. c. 71, § 42." Conway, 87 Mass. App. Ct. at 507.
"Massachusetts cases vacating an arbitrator's award on public policy grounds have addressed awards which directly conflicted with a statutory limit on, or delegation of power." Massachusetts Hy. Dept. v. Perini Corp., 79 Mass. App. Ct. 430, 440 (2011), quoting from Massachusetts Hy. Dept. v. American Fedn. of State, County & Mun. Employees, Council 93, 420 Mass. 13, 16 (1995). However, the plaintiffs have not "identified 'a well defined and dominant public policy, ascertained from laws and legal precedents,' that is offended by the award . . . in this case." Perini, supra at 442, quoting from American Fedn., supra at 20. An error of law, even one amounting to a misapplication of a statute, is not, in and of itself, a violation of public policy. See Lyons v. School Comm. of Dedham, 440 Mass. 74, 79 (2003). Accordingly, we see no error with the confirmation of the arbitration award.
Judgment affirmed.
By the Court (Vuono, Agnes & Maldonado, JJ.),
The panelists are listed in order of seniority. --------
Clerk Entered: October 20, 2015.