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Halim v. Great Gatsby's Auction Gallery

February 15, 2007


The opinion of the court was delivered by: Charles P. Kocoras, District Judge


This matter is before this Court on Plaintiff Cameel Halim ("Halim")'s application to vacate an arbitration award. In response to Halim's application, Defendant The Great Gatsby's Auction Gallery, Inc. ("Gatsby") filed a motion to confirm that same award. For the reasons set forth below, Halim's application to vacate the award is denied, and Gatsby's motion to confirm the award is granted.


This matter originally came before this Court on Halim's complaint against Gatsby for breach of novation, fraudulent and negligent misrepresentation, and breach of express warranty, arising out of purchases Halim made from one of Gatsby's auctions. The nature of the dispute is set out in detail in our prior opinion, in which we ordered the parties to arbitration pursuant to an arbitration clause contained in the auction agreement ("Auction Agreement") entered into by Halim and Gatsby. See Halim v. The Great Gatsby's Auction Gallery, Inc., 2004 WL 434191 (N.D. Ill., Mar. 5, 2004). The parties submitted the matter to an arbitrator, who, in his award of September 15, 2006, denied Halim's claims in their entirety and ordered that the parties share the costs of the arbitration. Halim then filed an application with this Court, seeking vacatur of the award and a remand for further arbitral proceedings.


Halim asks that we vacate the arbitrator's award because the arbitrator manifestly disregarded the law, in that he 1) refused to resolve a material discovery dispute; 2) neglected to issue a "reasoned opinion"; and 3) allowed Halim's expert to testify as an "undisclosed witness" for Gatsby. Gatsby opposes Halim's motion and has filed its own motion to confirm the award.

I. Application to Vacate Arbitration Award

Under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10(a), the grounds for overturning an arbitral award are "narrowly limited." IDS Life Ins. Co. v. Royal Alliance Associates, Inc., 266 F.3d 645, 649 (7th Cir. 2001). As the Seventh Circuit has explained:

It is tempting to think that courts are engaged in judicial review of arbitration awards under the Federal Arbitration Act, but they are not. When parties agree to arbitrate their disputes they opt out of the court system, and when one of them challenges the resulting arbitration award he perforce does so not on the ground that the arbitrators made a mistake but that they violated the agreement to arbitrate, as by corruption, evident partiality, exceeding their powers, etc.-conduct to which the parties did not consent when they included an arbitration clause in their contract.

Wise v. Wachovia Securities, LLC, 450 F.3d 265, 269 (7th Cir. 2006). Halim argues that the arbitration award should be vacated pursuant to § 10(a)(3) of the FAA, because the arbitrator refused to hear pertinent and material evidence, and pursuant to § 10 (a)(4) because the arbitrator exhibited "manifest disregard of the law" in exceeding or imperfectly executing his powers.

For Halim to succeed on his main argument - that the arbitrator manifestly disregarded the law - he must show more than mere error. Neither factual nor legal error, no matter how gross, is sufficient to support overturning an arbitral award. IDS Life Ins. Co., 266 F.3d at 650. Accordingly, the Seventh Circuit has limited the "manifest disregard of the law" standard to encompass only two possibilities - 1) an order requiring the parties to violate the law; or 2) an order that does not adhere to the legal principles specified by contract. George Watts & Son, Inc. v. Tiffany and Co., 248 F.3d 577, 581 (7th Cir. 2001). With the applicable legal standards in mind, we address each of Halim's grounds for seeking to vacate the arbitration award.

A. Discovery Dispute

First, Halim argues that the arbitrator refused to hear a discovery dispute between the parties concerning the production of copies of all invoices for all items sold at the Gatsby auction in which Halim participated. Gatsby did not produce the documents, and Halim requested that the arbitrator resolve the issue. The arbitrator did not rule on the issue and instead referred the parties to his prior order concerning discovery, which he had entered in an attempt to resolve earlier discovery disputes. Halim argues that the arbitrator's act amounted to a refusal to hear evidence pertinent and material to the controversy in violation of § 10(a)(3) of the FAA as well as a failure to follow the rules of the American Arbitration Association ("AAA") and the parties' "own rules" in violation of § 10(a)(4).

Not every refusal to receive evidence justifies vacating an arbitration award. Newark Stereotypers' Union No. 18 v. Newark Morning Ledger Co., 297 F.2d 594, 599 (3d Cir. 1968) (vacating an award is justified only by errors in receipt of the evidence "which so affects the rights of a party that it may be said that he was deprived of a fair hearing.") Evidence contained within the invoices, Halim claims, was of "paramount importance" because he intended to prove that the auction was fraudulent in that it was not conducted "absolute and without reserve," as advertised. Gatsby argues that evidence of items auctioned without reserve is irrelevant, because Halim did not bid on items without a reserve, and was still able to argue issues of fraud before the tribunal. In his reply, Halim appears to have abandoned his argument under ยง 10(a)(3) in that he does not explain how he was prejudiced by an inability to introduce evidence from the invoices. Instead, he argues that the question is not whether or not the evidence was admitted, but whether or not the arbitrator's ...

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