United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
REBECCA R. PALLMEYER UNITED STATES DISTRICT JUDGE.
James Boldischar sued his former employer, Defendant
ReliaStar Life Insurance Company ("ReliaStar"),
seeking a declaratory judgment that he was not obligated to
repay Defendant for alleged excess compensation he received
as a ReliaStar employee. After this court stayed the
proceedings and ordered arbitration of the parties'
dispute, an arbitration panel issued an award favoring
Defendant. Defendant moved for confirmation of the
arbitration award, and Plaintiff responded by filing a
cross-motion to vacate or modify the award. This court denied
that cross-motion, viewing it as a "thinly veiled
attempt to obtain appellate review of the Arbitrators'
decision, " Boldischar v. Reliastar Life Ins.
Co., No. 14 C 6844, 2016 WL 3997596, at *6 (N.D. Ill.
July 26, 2016), and confirmed the award. Roughly three and a
half months after the court's ruling, Defendant moved for
entry of final judgment and for an award of sanctions and
attorneys' fees  pursuant to 28 U.S.C. § 1927
and the court's inherent authority. The court entered
final judgment in the case two days later on November 20,
that the request for sanctions is untimely and fails on its
merits, Plaintiff urges the court to deny it. Defendant
responds that the motion cannot be untimely because it was
filed two days before the court entered judgment. Defendant
also argues that sanctions are appropriate here because
Plaintiff or his counsel displayed objective bad faith, and
multiplied the proceedings, by filing a legally baseless
motion to vacate the arbitral award. For the reasons
explained here, the court denies the motion for sanctions.
request for fees is aimed at Plaintiff's motion to vacate
the arbitral award, purportedly filed "to raise the
errors made by the arbitrators on several points."
(Pl.'s Mem. of Law in Supp. of His Mot. to Vacate and/or
Modify Arb. Award  (hereinafter "Pl.'s
Mem."), 1.) Such a motion faced substantial obstacles.
The purported legal basis for that motion, 9 U.S.C. §
10(a)(4), authorizes a district court to vacate an
arbitration award "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." The case law that has developed makes it clear,
however, that judicial review of an arbitral award is
extremely limited; "[f]actual or legal error, no matter
how gross, is insufficient to support overturning an
arbitration award." Halim v. Great Gatsby's
Auction Gallery, Inc., 516 F.3d 557, 563 (7th Cir.
2008). In his motion, Plaintiff maintained that the
arbitrators erred by ignoring the plain meaning of the
parties' contract, interpreting unambiguous language,
failing to allow Plaintiff to present alternative defenses,
miscalculating the extent to which Plaintiff was unjustly
enriched, and awarding interest without adequately
considering Financial Industry Regulatory Authority
guidelines. (Pl.'s Mem. at 1-2.) But as the court
explained in denying Plaintiff's cross-motion, any such
purported errors, if they were made, would not provide a
basis for vacating or modifying the arbitrators' award.
Boldischar, 2016 WL 3997596, at *3.
contends Plaintiff's motion was frivolous and seeks
sanctions against Plaintiff's counsel under 28 U.S.C.
§ 1927 and against both Plaintiff and his counsel under
the court's inherent powers. Significantly, this is not
the first time Defendant has requested such an award. In its
response to Plaintiff's cross-motion, Defendant moved for
sanctions under Rule 11 of the Federal Rules of Civil
Procedure; Rule 11 could have been a good fit for this
motion, but the court denied it because Defendant failed to
comply with that rule's safe-harbor requirements. See
Boldischar, 2016 WL 3997596, at *6.
1927, the provision Defendant invokes now, provides that an
attorney "who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and
attorneys' fees reasonably incurred because of such
conduct." 28 U.S.C. § 1927. That test is met here,
Defendant argues, because a reasonably careful attorney would
have realized that the motion to vacate the arbitral award
was a non-starter. Seventh Circuit law is clear that
"even gross error is [not] a ground for vacating an
[arbitral] award." IDS Life Ins. Co. v. Royal All.
Assocs., Inc., 266 F.3d 645, 650 (7th Cir. 2001);
see also Id. at 650-51 ("[I]f the district
judge is satisfied that the arbitrators resolved the entire
dispute and can figure out what that resolution is, he must
confirm the award."). Plaintiff's motion displayed
apparent indifference to this clear authority.
Plaintiff's counsel now suggests that a
combination of the arbitration panel's errors
demonstrated they made a deliberate effort to reach their
intended outcome even though it was "unjustified by
law." This appears to be an argument that the
arbitrators displayed "evident partiality or corruption,
" see 9 U.S.C. § 10(a)(2), but Plaintiff
did not develop this argument in the original briefing,
beyond a brief hint in the conclusion of his initial
memorandum and in his response to Defendant's motion to
confirm the award. (See Pl.'s Mem. at 13;
Pl.'s Resp. to Defs.' Mot. to Vacate , 2.) And
the statutory reference to "evident partiality or
corruption" under section 10(a)(2) "is confined to
situations where the arbitrator has had dealings or
relationships with one of the parties that might cause him to
be biased." Reichman v. Creative Real Estate
Consultants, Inc., 476 F.Supp. 1276, 1284 (S.D.N.Y.
1979); see also Lashco, Inc. v. Erickson, 700
F.Supp. 960, 963 (N.D. Ill. 1988) (rejecting argument that
collection of arbitrators' errors amounts to
"partiality" toward prevailing party because
Seventh Circuit defines "evident partiality or
corruption" as "'actual bias' or
circumstances that are 'powerfully suggestive of
bias'") (quoting Merit Ins. v. Leatherby Ins.
Co., 714 F.2d 673, 680-81 (7th Cir. 1983)).
frivolous challenge to an arbitration award may indeed
justify an award of sanctions. See CUNA Mutual Ins. Soc.
v. Office and Professional Employees Intern'l Union,
Local 39, 443 F.3d 556, 56-61 (7th Cir. 2006); Dreis
& Krump Mfg. Co. v. Intern'l Ass'n of Machinists
and Aeorospace Workers, Dist. No. 8, 802 F.2d 247,
254-55 (7th Cir. 1986). The court is nevertheless reluctant
to award a sanction in this case. In most instances, awards
were made under Rule 11; an award under section 1927 may not
be appropriate where Rule 11 sanctions were denied for
failure to comply with the safe-harbor procedures. This court
itself recognized an exception in Intellect Wireless,
Inc. v. Sharp Corp., 87 F.Supp.3d 817 (N.D. Ill. 2015),
but in that case, the defendant sought sanctions for an abuse
that it did not discover until after judgment had been
entered, and therefore could not have sounded a warning bell
in time for plaintiff to take corrective action. In this
case, Defendant unquestionably could have provided Plaintiff
with the safe-harbor notice as directed in Rule 11.
rubrics for awarding sanctions overlap substantially, but
Rule 11 is aimed at improper or baseless filings, while
Section 1927 addresses unreasonable and vexatious conduct. An
award under Rule 11 is appropriate when a party files papers
without adequate investigation, and may be imposed even where
the party did not act in bad faith. Perfection Bakeries,
Inc. v. Chauffeurs, Teamsters and Helpers, Local Union No.
414, 105 Fed.Appx. 102, 104 (7th Cir. 2004). Section
1927 authorizes sanctions against an attorney who has engaged
in a "serious and studied disregard for the orderly
process of justice." "Badillo v. Central Steel
& Wire Co., 717 F.2d 1160, 1166 (7th Cir. 1983)
(citations omitted). Badillo noted that section 1927
"has been strictly construed" because of its penal
nature, and the court cited West Virginia v. Charles
Pfizer & Co., 440 F.2d 1079 (2nd Cir. 1971), for the
proposition that sanctions under § 1927 are "highly
unusual" and require clear evidence of bad faith. And
the courts have long recognized that sanctions issued under a
court's inherent power require a showing of subjective
bad faith. Fields v. City of Chicago, No. 10 C 1168,
2015 WL 12806567, at *4 (N.D. Ill. Nov. 6, 2015).
challenge to the arbitral award in this case borders on
frivolous, but it caused comparatively minimal harm. The
parties were already engaged in briefing Defendant's
motion to confirm the award. The Perfection Bakeries
case drew a distinction between an argument "over the
proper interpretation of the correct legal standard" on
the one hand and "advancing the wrong legal standard
altogether" on the other. 105 F.App'x. at 105.
Plaintiff here argued that the arbitrators' award was so
misguided as to reflect their policy desires. This court
disagrees with Plaintiff's interpretation of the standard
for review of the award, but is not prepared to conclude that
Plaintiff's argument advanced "the wrong legal
standard altogether." Nor does the court find any
evidence of subjective bad faith. In any event, the Seventh
Circuit has recently noted that section 1927 "is a
permissive statute, and so the district court [is] not
required to impose sanctions even if it [finds] evidence of
objective or subjective bad faith." Bommiasamy v.
Parikh, 633 Fed.Appx. 351, 354 (7th Cir. 2016).
Defendant issued the safe-harbor notice called for by Rule
11, the analysis of this issue might be different. For the
reasons discussed above, the court does not believe that
sanctions are warranted under the circumstances of this case.
The motion for sanctions pursuant to section 1927 or the
court's inherent power is denied.
motion for ...