NuVasive, a manufacturer of medical products, had an exclusive distribution agreement, including noncompetition provisions, with Absolute Medical, LLC. After Absolute Medical disclaimed that agreement and started using the same salespeople to work for NuVasive’s competitor, NuVasive sued. The district court ordered arbitration of one of NuVasive’s claims—for breach-of-contract damages—and stayed most of the other claims. The arbitration panel issued an award finding that Absolute Medical had breached the contract, but denied NuVasive’s claims for lost profit damages.
Back in court, discovery proceeded. Documents produced by Absolute Medical after NuVasive prevailed on a motion to compel included text messages which Absolute Medical’s principal had sent to a witness—a sales representative—while the witness testified, remotely, before the arbitration panel. The texts concerned the subjects of the witness’s testimony, and appeared to be consistent with answers the witness had given. Shortly after receiving the text messages, NuVasive moved the district court to vacate the arbitration award pursuant to 9 U.S.C. § 10(a)(1), on the ground that the award had been procured by fraud.
NuVasive filed its motion to vacate after expiration of the three-month period prescribed by 9 U.S.C. § 12. That section requires that “[n]otice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered.” The district court nevertheless granted NuVasive’s motion, holding that the three-month deadline could be equitably tolled and that the standards for tolling and for vacatur were met. Absolute Medical appealed.
The Eleventh Circuit, in an opinion written by Judge Jill Pryor, affirmed. NuVasive, Inc. v. Absolute Medical, LLC, 71 F.4th 861 (11th Cir. 2023). Noting that the availability of equitable tolling for § 12’s three-month period is “a question of first impression in this Circuit,” the court looked first to Holland v. Florida, 560 U.S. 631 (2010), in which the Supreme Court identified textual factors to be considered in determining whether Congress intended equitable tolling not to apply to a particular statute. Those include “unusually emphatic” time limitations, “detailed and technical language” with little room for implicit exceptions, and reiteration of a time limit, as well as limitations the tolling of which would have substantial practical consequences or which would result in substantive limitations on the amount of recovery. The court also considered the Ninth Circuit’s decision in Move, Inc. v. Citigroup Global Markets, 840 F.3d 1152 (9th Cir. 2016), which held that the text of § 12 “does not preclude equitable tolling,” and that equitable tolling could be applied to the three-month period in circumstances warranting that “extraordinary remedy.” The Move, Inc. court observed that the statute did not use especially emphatic or technical language, and rejected the argument that to permit tolling would be to undermine the one-year period in which a party must seek to confirm an arbitration award. The Move, Inc. court also noted that 9 U.S.C. § 10’s “limited grounds for review were . . . designed to preserve due process,” reinforcing the conclusion that tolling the applicable limitations period was not prohibited. The Eleventh Circuit, finding the Ninth’s reasoning in Move, Inc. “thorough and persuasive,” concluded that equitable tolling was not incompatible with the FAA’s “text, structure, or purpose.”
The court also held that the three-month period was not jurisdictional. Noting that “a procedural requirement” is “jurisdictional only if Congress clearly states that it is,” Boechler, P.C. v. Comm’r of Internal Revenue, 142 S. Ct. 1493 (2022), the court observed that the three-month limitation in § 12 “makes no reference to jurisdiction,” and held that the three-month period is not jurisdictional.
The court also affirmed application of equitable tolling in the case at hand. Equitable tolling is an “extraordinary remedy,” but may be applied “‘when a movant untimely files because of extraordinary circumstances that are both beyond his control and unavoidable even with diligence.’” Reviewing the evidence with respect to texting during the arbitration, and Absolute Medical’s delay in turning over the texts, the court found that the district court’s findings were not clearly erroneous and supported the conclusion that equitable tolling was warranted.
Finally, the court affirmed the district court’s vacatur of the arbitration award. A party moving for vacatur under 9 U.S.C. § 10(a)(1) must establish the fraud by clear and convincing evidence and must show both that the fraud was not discoverable with due diligence before or during the arbitration and that the fraud “materially related to an issue in the arbitration.” Absolute Medical argued that the subject matter of the texts to the witness related to sales representative’s work for NuVasive’s competitors, not to lost profits, and thus were not material to the arbitration panel’s decision. But the proper question is not whether the fraud was outcome-determinative; it is “whether the fraud was ‘materially related to an issue in the arbitration.’” That test, the court held, was met.
Posted By: Valerie S. Sanders