## Facts

- On September 1, 1970, Carroll County Coal Company (CCCC) obtained a federal coal lease requiring royalty payments to the United States and permitting the government to readjust royalties at the end of each 20-year term if it gave timely notice of the proposed readjustment.
- On January 11, 1973, CCCC subleased the mining rights to Peabody Coal Co. (Peabody). The sublease transferred CCCC’s lease rights to Peabody, tied sublease royalties to the federal lease, and allowed sublease royalty readjustments at the end of each 20-year term with timely notice.
- The Louisiana D. Brown 1992 Irrevocable Trust later succeeded to CCCC’s position as sublessor under the sublease.
- Under the sublease’s timing scheme, CCCC/the Trust could readjust sublease royalties 20 years from the lease date—by September 1, 1990.
- In 1988, the federal government notified CCCC that the lease terms would be adjusted effective September 1, 1990. CCCC forwarded the notice to Peabody but did not state that it would seek any sublease readjustment.
- In March 1990, the government sent CCCC the specific adjusted lease terms that would apply beginning September 1, 1990. Again, CCCC did not notify Peabody that it intended to readjust the sublease.
- In March 1993, CCCC notified Peabody that it intended to readjust royalties. Peabody disputed the notice as untimely.
- The Trust later sent Peabody a proposed readjusted sublease; Peabody refused to sign.
- The Trust sued Peabody, and the dispute was ordered to arbitration.
- After notice, full briefing, and oral argument, a three-member arbitration panel refused to permit discovery and granted summary judgment to Peabody, effectively concluding the Trust/CCCC had not given timely notice of readjustment.
- The federal district court confirmed the arbitration award. The Trust appealed.

## Issues

1. Whether the arbitrators committed misconduct under FAA § 10(a)(3) by denying discovery and a live evidentiary hearing before granting summary judgment.
2. Whether the procedures used in the arbitration denied the Trust a fundamentally fair hearing requiring vacatur of the award.

## Decision

- The Sixth Circuit affirmed the district court’s confirmation of the arbitration award (unpublished table decision).
- The court rejected the Trust’s claim that it had an absolute right in arbitration to discovery and an evidentiary hearing.
- The court held the arbitration was fundamentally fair where the Trust had notice and a meaningful chance to present its evidence and arguments through the submissions and oral argument, and there was no showing of arbitrator bias.
- The court concluded the panel’s choice to decide the dispute on a written record without discovery or live testimony did not justify vacatur under FAA § 10(a)(3).

## Legal Principles

- FAA § 10(a)(3) permits vacatur only when an arbitrator’s procedural rulings prejudice a party’s rights by denying a fundamentally fair hearing.
- A fundamentally fair arbitration requires notice, a fair chance to present relevant and material evidence and arguments, and impartial decisionmakers; it does not require all trial-type procedures.
- Parties do not have an absolute right in arbitration to prehearing discovery, to present every item of evidence they seek, or to confront witnesses as they would in court.
- Arbitrators have broad discretion to manage the process, including resolving a dispute on dispositive motion when the parties have been heard through briefing and argument.

## Conclusion

The Sixth Circuit affirmed confirmation of an arbitration award for Peabody, holding that the panel’s refusal to allow discovery and its decision to grant summary judgment without a live evidentiary hearing did not amount to FAA § 10(a)(3) misconduct because the Trust received notice and a fair opportunity to present its arguments and materials, satisfying the requirement of a fundamentally fair hearing.


Louisiana D. Brown 1992 Irrevocable Trust v. Peabody Coal Co., 205 F.3d 1340 (Table) (2000)