## Facts

- Trademark Remodeling, Inc. (Trademark), a remodeling contractor, entered into a residential construction contract with Greg and Sharon Rhines (the Rhines).
- The contract contained a clause requiring disputes to be resolved by binding arbitration.
- A dispute arose and was submitted to arbitration.
- During the arbitration hearing, the Rhines’ counsel revealed confidential personal accounting information concerning Trademark’s principal owner.
- The confidential information was withdrawn, and the arbitrator did not consider it in reaching the award.
- A former Trademark employee testified for the Rhines after receiving a gift card from the Rhines.
- Trademark’s attorney cross-examined the former employee about the gift card, and the circumstances were presented to the arbitrator.
- Trademark also complained about the arbitrator’s management of the hearing, including allowing certain testimony by telephone and limiting Trademark’s ability to present its case compared to the Rhines.
- The arbitrator issued a monetary award in favor of the Rhines.
- The Rhines filed an action seeking enforcement of the arbitration award, and Trademark moved to vacate the award or, alternatively, to modify or correct it under the Federal Arbitration Act (FAA).

## Issues

1. Whether the arbitration award should be vacated under the FAA on the ground that it was “procured by corruption, fraud, or undue means,” based on the withdrawn disclosure of confidential financial information and the gift card provided to a witness.
2. Whether the arbitrator’s procedural rulings (including permitting telephonic testimony and managing hearing time) amounted to misconduct that denied Trademark a fair arbitration hearing warranting vacatur.
3. Whether, if vacatur was not available, the award should be modified or corrected under the FAA.

## Decision

- The court denied Trademark’s motion to vacate the arbitration award.
- The court denied Trademark’s alternative request to modify or correct the award.
- The arbitration award in favor of the Rhines remained enforceable.

## Legal Principles

- Review of arbitration awards under the FAA is highly limited; courts do not treat arbitration as a first step before full judicial review.
- Under 9 U.S.C. § 10(a), vacatur is allowed only on the statute’s specific grounds, including where an award was procured by “corruption, fraud, or undue means,” or where arbitrator misconduct deprived a party of a fair hearing.
- “Undue means” requires serious wrongdoing comparable to fraud or corruption and must be tied to how the award was obtained; minor irregularities or conduct that does not affect the result is not enough.
- A party seeking vacatur based on alleged wrongdoing must show more than suspicion; it must show that the complained-of conduct likely had a material effect on the award.
- When challenged information is withdrawn and the arbitrator states (and the record supports) that the information was not considered, the moving party generally cannot show the needed prejudice.
- Allegations that a witness was improperly influenced may fail where the alleged benefit is disclosed, explored through cross-examination, and left for the arbitrator to weigh; courts will not redo the arbitrator’s credibility judgments.
- Arbitrators have broad discretion over evidentiary and procedural matters, including whether to allow telephonic testimony and how to structure the hearing, so long as each side has a fair chance to present evidence and argument.
- Under 9 U.S.C. § 11, modification or correction is reserved for limited problems (such as evident material miscalculations or form errors) and is not a vehicle to revisit factual findings or the merits.

## Conclusion

The court left the Rhines’ arbitration award intact because Trademark did not meet the FAA’s narrow standards for vacatur or modification. The confidential financial material was withdrawn and not considered by the arbitrator, the gift card issue was disclosed and tested through cross-examination, and the arbitrator’s hearing-management choices did not amount to misconduct that deprived Trademark of a fair opportunity to present its case.


Trademark Remodeling, Inc. v. Rhines, 2012 U.S. Dist. LEXIS 109819 (2012)