PHILADELPHIA – Per the U.S. Court of Appeals for the Third Circuit, an arbitration ruling surrounding the song catalog of two late Philadelphia musicians will not be vacated.
Judges Julio M. Fuentes, Michael A. Chagares and Morton I. Greenberg ruled Jan. 22 to uphold the decision of the U.S. District Court for the Eastern District of Pennsylvania in not rendering arbitration results null and void.
John Whitehead and Gene McFadden were musicians in the 1970s music scene of Philadelphia and in 2002, David Pullman approached both men to purchase their song catalog. Though a contract was prepared, it was never finalized and Whitehead and McFadden passed away before it could be finalized (in 2004 and 2006, respectively).
Pullman became involved in litigation with the estates of both men over the catalog. Pullman had the opportunity to do 180 days of due diligence and found tax liens on the music catalog, which he informed the songwriters of personally. However, it was claimed this fact was not communicated to either Whitehead or McFadden’s estates, and it later nullified a $4.4 million potential deal the estates had set up with Warner Chappell Music to purchase the catalog. Litigation ensued.
The parties later entered arbitration and the arbitration panel determined while the 2002 agreement was a valid contract, it also found Pullman failed to notify Whitehead and McFadden he had completed his due diligence. Pullman argued he didn’t expect the two songwriters would die, hence why he didn’t notify them of that in writing. However, the panel found through the Dead Man's Statute that Pullman’s option to purchase the catalog had lapsed and the 2002 agreement was no longer enforceable.
Pullman claimed the arbitration panel erred in its decision and moved to the district court to vacate it. The district court denied that motion, and Pullman appealed to the Third Circuit.
Fuentes said, “For an error to justify vacating an arbitration award, it must be not simply an error of law, but one which so affects the rights of a party that it may be said that he was deprived of a fair hearing” and which results in “fundamental unfairness”.
Fuentes added the Third Circuit discerned no such error or unfairness happened in this case.
“In these circumstances, where the arbitrators were fully cognizant of the Dead Man’s Statute, permitted the parties to brief the issue, and then applied the Statute in a way designed to promote efficiency and fairness in the arbitral proceedings, we see no legal error at all – much less one that would rise to the level of manifest disregard of the law,” Fuentes said.
“Even if we were to agree with Pullman that the arbitrators misapplied the law – and we do not – legal error alone is not a sufficient basis to vacate the results of an arbitration,” Fuentes concluded.
The appellants are represented by Armen Manasserian in Glendale, Calif. and Felton T. Newell of the Newell Law Firm in Los Angeles.
The appellees are represented by Sayde J. Ladov of Dolchin Slotkin & Todd, in Philadelphia.
U.S. Court of Appeals for the Third Circuit case 15-1627 & 15-1628
U.S. District Court for the Eastern District of Pennsylvania case 2:08-cv-00192
U.S. District Court for the Eastern District of Pennsylvania case 2:08-cv-00193
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at firstname.lastname@example.org