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7th Circuit affirms arbitration award

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The 7th Circuit Court of Appeals affirmed a District Court's confirmation of an arbitration award, but it denied the plaintiff recovery of attorney fees and costs because he will be reimbursed those under the terms of the arbitration agreement.

In Peter A. Prostyakov v. Masco Corporation, No. 06-3928, Prostyakov asked the federal appellate court to affirm his arbitration award against his former employer, Michigan-based Masco Corp. Masco appealed to vacate the award.

In 1992, Masco joined an Indiana and Moscow trade consortium founded after the fall of the Soviet Union. The building, plumbing, and cabinetry company wanted to develop a sales and distribution network in Russia. Masco hired Prostyakov, who was later appointed managing director and agent for the Moscow office.

Masco and Prostyakov's business relationship soured, which the appellate opinion does not detail, and Masco's president issued a company directive in April removing Prostyakov from his position. The two parties entered a settlement agreement which stated the following: both mutually agreed to release all claims either party could bring on acts that occurred before the agreement took effect; Indiana law would govern the interpretation of the agreement; future disputes would be settled by "private" arbitration; the rules of the American Arbitration Association (AAA) would apply and govern the conduct of the arbitration; and neither party would seek to enforce the agreement through legal action.

In addition, the parties agreed to communicate to third parties that the business relationship end was amicable.

Prostyakov sought employment with a bank in Moscow after his termination, but was not hired because of problems with his labor book. In Russia, as a holdover from communist times, labor law requires every citizen entering the workforce to have one. This book records employment and explains why the worker is no longer at his or her former job and is given to the next employer upon hiring. When a worker is terminated or leaves a job, the labor book is to be returned to the worker.

Prostyakov was delayed in receiving his labor book back from Masco. When he received it, he noticed the company had falsified his termination date and stated he was fired, which was not what the two parties agreed to report in the settlement agreement.

Prostyakov tried to resolve the issue through arbitration, but Masco made no moves on the issue, so Prostyakov went through the Russian judicial system. In 2002, the Russian court determined Masco violated the country's labor code by falsifying the labor book entry. With that judgment, Prostyakov filed a claim for arbitration. The parties agreed on Indianapolis attorney Max J. Hittle Jr. - who was affiliated with the AAA - to arbitrate the claim. Hittle issued awards to both parties: Masco won on its counterclaim, determining under Indiana law that Prostyakov breached the settlement agreement by going to Russian court instead of arbitration; Hittle awarded in Prostyakov's favor by finding the delayed return and falsification of the labor book hurt Prostyakov's ability for employment. Because Indiana's conflict-of-law provisions required Hittle to apply the Russian labor code for an award, he ordered Masco to correct the labor book entry and awarded Prostyakov $780,000. Prostyakov petitioned to the District Court to affirm the arbitration, which it did.

The 7th Circuit agreed with the District Court's decision, finding Masco's claims on appeal to be without merit. Masco argued Hittle lacked proper authority to serve as arbitrator because he was affiliated with the AAA; the labor book was not arbitratable because it fell outside the scope of the settlement agreement; and Hittle fashioned improper monetary and equitable awards.

The settlement only released claims stemming from pre-existing acts at the time of the settlement agreement; the falsifying of the labor book came after the agreement, wrote Judge Michael Kanne.

Finally, Hittle abided by the Indiana choice-of-law provision and interpreted the agreement in good faith. Also, nothing in the settlement limited Hittle's authority to fashion the equitable award to Prostyakov.

Prostyakov wanted the 7th Circuit to award him attorney fees and costs regarding the appeal because he claimed Masco took this appeal only to delay the enforcement of the District Court judgment. Because the settlement agreement states the breaching party will be responsible for the other party's attorney fees and costs in claims, there is no need to award them to Prostyakov. Judge Kanne wrote the court trusts Masco will promptly pay Prostyakov what he is owed.

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

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  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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