Troilo v. Big Sandy Band

Filed 3/22/07 Troilo v. Big Sandy Band CA5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Fresno County. Donald S. Black, Judge.

Holland & Knight and Rory E. Dilweg for Defendant, Cross-complainant and Appellant.

Wagner & Jones and Andrew B. Jones; Law Offices of John K. Ormond and John K. Ormond for Plaintiff, Cross-defendant and Respondent.

Appellant, Big Sandy Band of Western Mono Indians, a federally recognized Indian tribe (Tribe), challenges the judgment confirming an arbitration award in favor of respondent, Michael Troilo. The Tribe contends the arbitrator exceeded his authority under the employment agreement entered into by Troilo and the Tribe when he awarded $478,000 plus interest in damages to Troilo for wrongful termination. According to the Tribe, the employment agreement limited Troilo to $75,000 in severance pay. The Tribe argues that the arbitrator further exceeded his authority by disregarding the agreements sovereign immunity waiver and definitions of good cause.

As discussed below, the arbitrator did not disregard or modify a plain and unambiguous provision of the agreement when he awarded damages. The employment agreement was silent as to remedies for a wrongful termination. Contrary to the Tribes position, the severance pay was not equivalent to liquidated damages. Rather, it was earned compensation. The arbitrator also considered and applied the agreements sovereign immunity waiver and good cause definitions. Since the arbitrator did not exceed his authority, his interpretation of the contract must be sustained.

BACKGROUND

The Tribe hired Troilo to act as the general manager of the Tribes gaming facility, the Mono Wind Casino (Casino). In doing so, the parties entered into a written employment agreement for a term of three years.

Notwithstanding the three-year term, the Tribe retained the right to terminate Troilo at any time, without cause, upon giving Troilo 90 days written advance notice of its intent to do so. However, under these circumstances, the Tribe was obligated to pay Troilo severance pay of $75,000.00, plus any accrued bonus at time of termination.

The Tribe also retained the right to terminate Troilo at any time for good cause. Good cause was specifically defined in the agreement and included The theft or embezzlement or attempted theft or embezzlement of any funds from the Gaming Resort Operation or acting in concert with another person who steals or embezzles or attempts to steal or embezzle any funds from the Gaming Resort Operation.

The agreement further provided that [a]ny controversy or claim arising out of or relating to this Agreement, or breech [sic] thereof, shall be settled by arbitration.

Shortly after Troilo was hired, the parties executed an addendum to the agreement. The addendum provided that if Troilo were to be terminated without good cause, the Tribe would pay Troilo the balance of the remaining terms of the 3-year contract, whichever is less, and including any other compensation or benefits provided to Employee under the Employment Agreement.

The Tribe further agreed to expressly waive its immunity from suit or from any action or claim in arbitration for any claims by Employee arising out of this Employment Agreement. Limits on this waiver of sovereign immunity were also included. Execution of an award of money damages could only be on nonfixed assets of, or the Tribes share of profits from, the Casino. Additionally, the claim had to: be made by Troilo; allege a breach by the Tribe of one or more of the representations, covenants, warranties, undertakings, obligations or duties in the Employment Agreement; and seek either some specific action or discontinuance of some action to bring the Tribe into full compliance with the employment agreement and/or money damages.

Nine months after hiring Troilo, the Tribe terminated his employment without notice. The Tribe asserted it had good cause to terminate Troilo based on allegations of theft, insubordination, and improper submission of mileage expense claims.

Troilo made a claim for wrongful termination and requested binding arbitration. The parties stipulated to the following issues for resolution: Whether the Claimant was terminated for good cause under the terms of his employment contract? If not, what should the remedy be?

Following a two-day arbitration hearing, the arbitrator decided that Troilo was wrongfully terminated. After analyzing the facts of Troilos alleged misconduct, the arbitrator found that the Tribe had not sustained its burden of proving good cause under the agreement to terminate Troilos employment.

Regarding severance pay, the arbitrator concluded that the original employment agreement and the addendum had to be read together. Thus, the Tribe could have terminated Troilo without cause by giving 90 days written notice plus severance pay in the amount of the lesser of $75,000 or the balance of Troilos salary and other compensation due under the employment agreement.

However, the arbitrator determined that the Tribe had terminated Troilo without good cause and without the required 90-days notice. The Tribe argued that, nevertheless, the $75,000 severance pay cap should still apply. The arbitrator disagreed.

The arbitrator noted that neither the original agreement nor the addendum addressed the matter of damages in the situation where a for cause termination took place but was unsuccessful. The arbitrator concluded that, in this situation, the parties apparently intended the issue to be decided under general damage principles. Accordingly, the arbitrator interpreted the agreement to mean that Troilo was not limited by the $75,000 cap and awarded damages in the amount of $478,000 plus interest, attorney fees and costs.

Troilo filed a petition to confirm the arbitration award in the superior court. The Tribe responded with a cross-petition to vacate, correct or modify the award. The trial court granted Troilos petition to confirm the arbitration award, denied the Tribes cross-petition and entered judgment accordingly.

DISCUSSION

1. Review of arbitration awards.

Troilo asserts, and the Tribe impliedly agrees, that that this case is governed by the Federal Arbitration Act. (9 U.S.C.  1 et seq.)

Under the Federal Arbitration Act, a courts review of an arbitration award is extremely narrow. (Hoffman v. Cargill, Inc. (8th Cir. 2001) 236 F.3d 458, 461.) Courts do not review the merits of such awards. (Osceola County Rural Water System v. Subsurfco (8th Cir. 1990) 914 F.2d 1072, 1075.) The parties bargained for the arbitrators construction and thus, it is for the arbitrator to interpret the contract. (Timken Co. v. Local U. No. 1123, United Steelworkers of Am. (6th Cir. 1973) 482 F.2d 1012, 1014.) Accordingly, if the award represents a plausible interpretation of the contract, judicial inquiry ceases and the award must be enforced. (Employers Insurance of Wausau v. National Union Fire Ins. Co. (9th Cir. 1991) 933 F.2d 1481, 1486.) The court may not set aside the award simply because it might have interpreted the contract differently or because the arbitrator erred in interpreting the law or in determining the facts. (Hoffman v. Cargill, Inc., supra, 236 F.3d at p. 462.)

However, the powers of an arbitrator are not unlimited. (Monongahela Power Co. v. Local No. 2332, Intern. Bro. (4th Cir. 1976) 566 F.2d 1196, 1198.) The award must draw its essence from the agreement. (Id. at pp. 1198-1199.)The arbitrator may interpret ambiguous language but may not disregard or modify unambiguous contract provisions. (Osceola County Rural Water System v. Subsurfco, supra, 914 F.2d at p. 1075.) If the arbitrator interprets unambiguous language in any way different from its plain meaning, [the arbitrator] amends or alters the agreement and acts without authority. [Citation.] (Ibid.)

2. The arbitrator did not exceed his authority in awarding damages.

As noted above, the employment agreement permitted the Tribe to terminate Troilo without good cause. However to do so, the Tribe was required to give Troilo 90 days written notice and a maximum payment of $75,000. The employment agreement also contained a provision limiting the scope of an arbitration award. The arbitrator was not permitted to add to, subtract from, or otherwise modify the provisions of the Employment Agreement.

The arbitrator found that the Tribe terminated Troilo without good cause and did not give the required 90-days notice. Thus, the Tribe was in breach of the agreement. The arbitrator determined that the employment agreement was silent on the issue of damages for this breach and concluded that the parties intended to apply general damage principles.

The employment agreement referred to damages or money damages several times. The original agreement stated that Any finding by the arbitrators of an award of damages maybe [sic] entered in any court having jurisdiction thereof. The addendum set forth limits on what Tribe assets could be executed against to enforce an award of money damages and stated that the appropriate court shall have the authority to issue an order requiring the parties to pay over any income or profits subject to attachment. Finally, as a condition precedent to the waiver of sovereign immunity, the addendum required that the employees claim seek either a specific action or discontinuance of some action by the Tribe or money damages. Thus, it is apparent that the employment agreement contemplated an award of damages for breach of the agreement.

The Tribe does not dispute this interpretation. Nevertheless, the Tribe contends that the agreement limited the arbitrator to awarding Troilo a maximum of $75,000 in money damages in the event of a termination without cause. According to the Tribe, this specified severance pay is equivalent to liquidated damages. Thus, the Tribe argues, the arbitrator exceeded his authority by adding to or modifying the provisions of the employment agreement when he made an award in excess of $75,000 plus pre- and post-award interest.

However, contrary to the Tribes position, the severance pay provided for in the agreement is not equivalent to liquidated damages. Troilo was entitled to severance pay when terminated without cause in accordance with the agreement. In other words, Troilo would receive a maximum of $75,000 in severance pay when given 90 days written notice of the termination, i.e., when the termination was not in breach of the contract. When an employee is entitled to the severance pay for termination without a breach of contract, such pay cannot logically be considered liquidated damages. Rather, the promised severance pay is part of the employees compensation package. (Cf. McMillian v. F.D.I.C. (11th Cir. 1996) 81 F.3d 1041, 1054; Monrad v. F.D.I.C. (9th Cir. 1995) 62 F.3d 1169, 1173-1174.)

Thus, although the employment agreement contemplated a damage award for breach, it was silent as to the calculation of that award. In fact, the parties specifically asked the arbitrator to resolve what the remedy should be. In such a situation, the fashioning of an appropriate remedy is not an addition to, or modification of, the agreements provisions. (Tobacco Wkrs. Int. U., Local 317 v. Lorillard Corporation (4th Cir. 1971) 448 F.2d 949, 956.) Rather, the arbitrators conclusion that the parties intended general damage principles to apply in the event of breach is merely his interpretation of the agreement. This interpretation is not irrational, i.e., it draws its essence from the contract. Nor does the interpretation manifest a disregard for the law. (Hoffman v. Cargill, Inc., supra, 236 F.3d at pp. 461-462.) Accordingly, the award must be enforced as a plausible interpretation of the contract. (Employers Insurance of Wausau v. National Union Fire Ins. Co., supra, 933 F.2d at p. 1486.)

The Tribe further argues that the arbitrator exceeded his authority in awarding pre- and post-award interest. The Tribe notes that no provision for such interest was made in the agreement.

However, the arbitration award was the contractual equivalent of a judgment in Troilos favor. (Britz, Inc. v. Alfa-Laval Food & Dairy Co. (1995) 34 Cal.App.4th 1085, 1107.) Under general damage principles, interest after judgment accrues as to the entire award. (Ibid.) Prejudgment interest is an element of damages. (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 830.) Accordingly, the arbitrator did not exceed his authority in awarding both pre- and post-award interest.

3. The Tribes sovereign immunity waiver did not limit the award to $75,000.

Indian tribes have long been recognized as possessing the common-law immunity from suit traditionally enjoyed by sovereign powers. (Santa Clara Pueblo v. Martinez (1978) 436 U.S. 49, 58.) Accordingly, an Indian tribe is subject to suit only where either Congress has authorized the suit or the tribe has waived its immunity. (Trudgeon v. Fantasy Springs Casino (1999) 71 Cal.App.4th 632, 636.) However, a waiver of sovereign immunity cannot be implied. (Santa Clara Pueblo v. Martinez, supra, 436 U.S. at p. 58.) Rather, a tribes waiver must be unequivocal and express. (Ibid.) Moreover, sovereign immunity waivers are construed narrowly and strictly. (Metropolitan Water Dist. of Southern Cal. v. U.S. (9th Cir. 1987) 830 F.2d 139, 143.)

Here, the Tribe expressly waived its immunity from suit for any claims by Employee arising out of this Employment Agreement but also set specific limits on this waiver. The waiver was limited to certain actions and judicial remedies, including the remedy of monetary damages, and the arbitrator was prohibited from adding to, subtracting from, or otherwise modifying the provisions of the agreement. Certain conditions precedent also had to be met. The claim had to: (1) be made by Troilo; (2) allege a breach by the Tribe of one or more of the representations, covenants, warranties, undertakings, obligations or duties in the employment agreement; and (3) seek either injunctive relief or money damages.

The Tribe alleges that, under a strict and narrow construction of its sovereign immunity waiver, the arbitrator was obligated to limit the damages for termination without good cause and without notice to $75,000. Again, the underlying premise of the Tribes argument is that the $75,000 represented liquidated damages. As discussed above, this premise is incorrect. The promised $75,000 in severance pay was additional compensation, as Troilo was entitled to it without a breach of contract. Thus, the employment agreement was silent as to remedies for its breach.

Moreover, Troilo satisfied the conditions precedent to application of the immunity waiver. Troilo made a claim arising out of the employment agreement, the claim alleged a breach by the Tribe of one of its obligations under the employment agreement, and the claim sought money damages. Accordingly, the damages awarded to Troilo were within the scope of the Tribes sovereign immunity waiver.

4. The arbitrator followed the agreements definitions of good cause.

The Tribe contends that one instance of Troilos alleged misconduct provided the Tribe with good cause to terminate him. When Casino employee, Ed Sites, wanted to purchase a vehicle that had been won by a Casino customer in a raffle, Troilo used Casino funds to provide Sites with an interest free three-day bridge loan in the amount of $12,000. Sitess own financing was pending at the time. According to the Tribe, Troilos action amounted to acting in concert with another person who steals or embezzles or attempts to steal or embezzle any funds from the Gaming Resort Operation.

The arbitrator found that the agreements definition of good cause did not cover this conduct. The arbitrator first noted that the Tribe did not claim that theft or attempted theft was involved in this transaction. Further, the transaction did not appear to relate to any other of the definitional examples of good cause. According to the arbitrator, the transaction did not constitute interference with the internal affairs of the Tribe and it was not gross negligence as the term was defined in the employment contract (lying, insubordination or failure to perform a material term or condition of the employment agreement).

The arbitrator did conclude that Troilos conduct fell well short of demonstrating good sense, let alone satisfying prudent business practice requirements. However, because this conduct was not linked to any good cause rationale in the agreement, the arbitrator ruled that the Tribe did not have grounds to terminate the agreement based on this incident. The arbitrator noted that he was required to restrict his rulings to the terms of the agreement and not impose his own standards of discipline.

Despite the above analysis of the good cause requirements, the Tribe argues that the arbitrator disregarded the good cause definitions. The Tribe relies on some general prefatory comments the arbitrator made regarding the meaning and scope of good cause as used in the agreement. After summarizing the good cause definitions, the arbitrator stated, Beyond this, the parties left to an arbitrator the determination of the scope and meaning of good cause based on the galaxy of facts and circumstances appropriate to each case. The arbitrator then explained that, in considering this matter, he relied on two basic principles, i.e., that the reasonable expectations of the contracting parties and applicable industry standards define good cause.

However, contrary to the Tribes position, these comments do not demonstrate that the arbitrator subtracted from or modified the terms of the employment agreement. Rather, it is clear from his analysis that the arbitrator applied the agreements good cause definitions and nothing more. The arbitrator made no reference to industry standards or the parties intent with respect to this incident. The fact that the arbitrator mentioned extraneous considerations earlier in the decision is not determinative.

Accordingly, the arbitrators finding that the Tribe did not have good cause to terminate Troilo must be affirmed. In light of the applicable standard of review, grounds to set aside the arbitration award do not exist.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to respondent.

_________________________

Levy, J.

WE CONCUR:

_______________________________

Vartabedian, Acting P.J.

_______________________________

Wiseman, J.

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