O’Neal Constructors, LLC v. DRT America, LLC.

Issue Discussed: Whether a Notice of a Motion to Vacate May be Accomplished Via Email Service Under 9 U.S.C. § 12

Submitted by Michele Jacobson, TaLona Holbert

Date Promulgated: April 1, 2021

O’Neal Constructors, LLC v. DRT America, LLC., 957 F.3d 337 (11th Cir. 2021)

Court:                         United States Court of Appeals for the Eleventh Circuit

Date Decided:            April 1, 2021

Issue Decided:           Whether a Notice of a Motion to Vacate May be Accomplished Via Email Service Under 9 U.S.C. § 12

Submitted by             Michele L. Jacobson, Esq. and TaLona H. Holbert, Esq.[1]

In O’Neal Constructors, LLC v. DRT America, LLC., the United States Court of Appeals for the Eleventh Circuit held that notice of a motion to vacate an arbitration award cannot be effectuated by emailing the memorandum of law in support of the motion if opposing counsel did not consent to email service.  According to the Federal Arbitration Act (“FAA”) and the Federal Rules of Civil Procedure, opposing counsel must expressly consent in writing to email service of a notice of motion to vacate and, once consent is obtained, the moving party must serve the actual motion upon the nonmoving party.  DRT America, LLC (“DRT”) (1) failed to obtain O’Neal Constructors, LLC’s (“O’Neal”) express written consent to accept service by email, and (2) emailed the supporting memorandum of law instead of the motion to O’Neal.  The Eleventh Circuit ruled that service was not timely, dismissed the appeal, and affirmed the district court’s order and judgment confirming the arbitration award and denying the motion to vacate.

 

The arbitration award at issue arises from a dispute related to a contract between DRT and O’Neal.  The contract contained an arbitration provision providing that any arbitration between the parties would be governed by the American Arbitration Association’s (“AAA”) Construction Industry Arbitration Rules (the “AAA Construction Rules”).  As a result of its contract with DRT, O’Neal entered into a subcontract with Excel Contractors, Inc. (“Excel”)  When a dispute arose between O’Neal and Excel, the companies entered arbitration and DRT participated as a third-party respondent.  On January 7, 2019, the arbitration panel awarded O’Neal attorney’s fees, inter alia, from DRT, pursuant to the parties’ contract.  O’Neal Constructors, LLC, 957 F.3d at 1378.

 

DRT refused to pay O’Neal’s attorney’s fees, and O’Neal filed suit in Georgia state court on April 4, 2019.  The case was removed to the United States District Court for the Northern District of Georgia on April 11, 2019, seeking confirmation of the arbitration award.  DRT separately filed suit in the Northern District of Georgia on April 5, 2019, seeking to vacate the attorney’s fees portion of the arbitration award.  Though DRT emailed O’Neal a “courtesy copy” of the memorandum of law in support of its motion to vacate when the suit was filed, it did not formally serve notice of the motion until April 30, 2019, more than three months after the arbitration award was entered.  The cases were consolidated in the Northern District of Georgia and the district court confirmed the arbitration award and denied the motion to vacate.  The court ruled that the award must be confirmed because O’Neal never consented to email service and thus, DRT’s service was untimely.  Even if O’Neal had consented to service by email, the district court reasoned that DRT’s email service would have been defective because the email did not include a copy of the motion itself.  Id. at 1378-79.

 

On appeal, DRT argued that O’Neal consented to service by email because the arbitration provision of their contract provided that the arbitration would be governed by the AAA Construction Rules, which allow for service by email.  The “Serving of Notice” provision of the AAA Construction Rules provides that:

 

(a) Any papers, notices, or process necessary or proper for the initiation or continuation of an arbitration under these rules; for any court action in connection therewith; or for the entry of judgment on any award made under these[] rules may be served on a party by mail addressed to the party or its representative at the last known address or by personal service, in or outside the state where the arbitration is to be held, provided that reasonable opportunity to be heard with regard thereto has been granted to the party.

 

(b) The AAA, the arbitrator and the parties may also use overnight delivery, electronic fax transmission (fax), or electronic mail (email) to give the notices required by these rules. Where all parties and the arbitrator agree, notices may be transmitted by other methods of communication.

 

AAA Construction Rule 44 (“Rule 44”).  The Eleventh Circuit disagreed with DRT’s reading of Rule 44, reasoning that subsection (a) does not allow for service by email or encompass motions to vacate.  Though subsection (b) of Rule 44 allows for email service, the Eleventh Circuit pointed out that the provision only applies to “notices required by these rules.”  The AAA Construction Rules do not specifically provide for notices of a motion to vacate, so the Eleventh Circuit rejected DRT’s argument that the rules permit email service of such notices and that O’Neal consented to email service by agreeing that the rules governed the parties’ arbitration.  Id. at 1380.

 

Unlike the AAA Construction Rules, Section 12 of the FAA requires notice of a motion to vacate.  Under the FAA, notice must be served within three months after the arbitration award is filed or delivered.  9 U.S.C. § 12.  The FAA also requires that service be made on opposing counsel according to the law of the court in which the motion to vacate is made if opposing counsel is a resident of that court’s district.  Id.  If a moving party fails to follow the FAA’s service procedures, it is barred from challenging the arbitration award as invalid (or moving to vacate the award) when the opposing party seeks to confirm it.  Cullen v. Paine, Webber, Jackson, and Curtis, Inc., 863 F.2d 851, 854 (11th Cir. 1989); see, e.g., Corey v. N.Y. Stock Exch., 691 F.2d 1205, 1212 (6th Cir. 1982) (citing Piccolo v. Dain, Kalman, & Quail, Inc., 641 F.2d 598, 601 (8th Cir. 1981).  Id. at 1379.

 

The Eleventh Circuit explained that DRT should have served O’Neal with the motion to vacate by April 8, 2019 in order to meet the FAA’s three-month time limit because the arbitration award was issued on January 7, 2019.  As O’Neal is a resident of the Northern District of Georgia where the cases are pending, the Eleventh Circuit applied the Federal Rules of Civil Procedure to determine how service should have been made.  Rule 5 of the Federal Rules of Civil Procedure allows service by email if the nonmoving party expressly agrees to electronic service in writing.  Fed. R. Civ. P.(5)(b)(2)(E); see Fed. R. Civ. P.(5)(b)(2)(E), Advisory Committee Note to 2001 Amendment.  Although O’Neal’s counsel responded to DRT’s April 5, 2019 by stating “[g]uess we need to figure out which court can hear these issues the quickest,” the Eleventh Circuit ruled that express consent cannot be implied from conduct, pursuant to Rule 5.  See Fed. R. Civ. P.(5)(b)(2)(E), Advisory Committee Note to 2001 Amendment.  As neither O’Neal’s response to DRT’s email nor the parties’ contract (as discussed above) constituted express, written consent to email service, the Court ruled that the district court properly held that DRT’s service was not timely and appropriately confirmed the arbitration award and denied DRT’s motion to vacate.  Accordingly, the Eleventh Circuit affirmed the district court’s order and judgment.  Id. at 1378-81.

[1] Michele L. Jacobson is a Partner at Stroock & Stroock & Lavan LLP, where she serves as Co-chair of the General Litigation Practice Group, Head of the New York General Litigation Practice Group, Co-Chair of the Insurance Industry Practice Group, and member of the Executive Committee.  She concentrates her practice on complex insurance and reinsurance matters in the property, casualty and life insurance fields.  She has represented clients in a wide array of disputes involving issues of misrepresentation, coverage, standard-of-conduct, broker negligence, underwriting and claims handling, YRT rate increases, and insurance regulatory issues.  Ms. Jacobson regularly appears in state and federal courts, as well as before arbitration Panels throughout the country.

 

TaLona H. Holbert is an Associate in the Insurance Industry Practice Group of Stroock & Stroock & Lavan LLP, where she serves on the Associates’ Committee. She concentrates her practice on complex insurance and reinsurance matters in the property, casualty, and life insurance fields.