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Olivarius v. Stanley J. Sarnoff Endowment for Cardiovascular Science

September 9, 2004

ANN MCALLISTER OLIVARIUS, APPELLANT/CROSS-APPELLEE,
v.
THE STANLEY J. SARNOFF ENDOWMENT FOR CARDIOVASCULAR SCIENCE, INC., APPELLEE/CROSS-APPELLANT.



Appeals from the Superior Court of the District of Columbia (CA-8769-98) (Hon. Gregory E. Mize, Trial Judge).

Before Farrell and Glickman, Associate Judges, and Steadman, Associate Judge, Retired.*fn1

The opinion of the court was delivered by: Glickman, Associate Judge

Argued December 10, 2003

The main issue in this appeal is whether the trial court erred in denying a motion to vacate a final judgment confirming an arbitration award that allegedly had been procured by fraud. To decide that issue, we must explore the potential bases for such a motion that are set forth in Superior Court Civil Rule 60 (b). Ultimately we conclude that the motion in this case was untimely under Rule 60 (b), and non-compliant in other respects as well with that Rule's requirements, and hence that the motion properly was denied.

A second issue before us, raised in the cross-appeal, is whether the trial court erred in denying a motion for sanctions under Superior Court Civil Rule 11 (c) without first holding an evidentiary hearing. We conclude that, under the circumstances, the court did not abuse its discretion in deciding that a hearing would be unnecessary and unproductive.

I.

Appellant Ann McAllister Olivarius was employed by The Stanley J. Sarnoff Endowment for Cardiovascular Science, Inc. ("the Endowment") as its President, Chief Executive Officer, and General Counsel until June 1996, when the Board of Directors of the Endowment voted to terminate her for cause. At that time, the Endowment was pursuing a lawsuit in Maryland against Olivarius's former employer, the law firm of Shearman & Sterling, over a sizable bequest to the Endowment from its founder, while Shearman & Sterling was simultaneously suing Olivarius in New York over her alleged misconduct during her tenure at the firm. The decision by the Endowment's Board to terminate Olivarius for cause was precipitated by certain actions she took in connection with the Maryland and New York litigation. These actions included (1) Olivarius's allegedly deceptive attempts to deprive the Board of its litigation counsel's advice at a meeting on June 7, 1996, regarding her request that the Endowment fund her defense and her assertion of counterclaims in the New York action, and (2) Olivarius's allegedly unauthorized disclosure to her personal counsel in the New York action of a confidential litigation memorandum prepared for the Board by its counsel.

Olivarius disputed the Board's justifications for terminating her and tried without success to persuade the Board to rescind its action. Her employment contract, which stated that it was governed by Maryland law, provided that any disputes relating to her termination would be settled by arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association. In accordance with that provision, Olivarius initiated an arbitration proceeding in which she claimed that the Endowment had terminated her without cause and therefore owed her severance benefits.

The arbitration was held in Washington, D.C., over the course of twelve days in April and May of 1998. On August 12, 1998, the arbitrator issued a comprehensive, 67-page Opinion and Award setting forth his determination that the Board had "ample cause" to terminate Olivarius. The arbitrator summarized his main conclusions as follows:

Specifically, I conclude that Claimant [Olivarius] attempted to conceal from the Board material information relating to the actions proposed in the Agenda for the June 7, 1996 Board meeting [relating to Olivarius's indemnification and counterclaims]; attempted to deprive the Board of the advice of its counsel on the actions proposed; intentionally altered the Agenda forwarded to F & S [the Board's counsel] to prevent F & S from participating in and providing advice to the Board at the June 7, 1996 Board meeting; concealed material information from the Board relating to the risks and possible adverse consequences to the Endowment of Claimant's assertion of counterclaims in the New York action; deceived the Board by advising it during the Board meeting that F & S did not wish to be present at the Board meeting due to a "conflict"; and attempted to conceal from F & S that she intended to present to the Board for approval resolutions which would enable her to obtain indemnification and, at she [sic] and her counsel's discretion, assert counterclaims in the New York action. Those actions breached Claimant's fiduciary obligations to the Endowment and constituted, as indicated, prohibited conflicts of interest. I conclude that the Endowment had ample cause for the termination of Claimant and that it properly terminated Claimant pursuant to the resolutions unanimously adopted by the Board on June 20, 1996.

The arbitrator further concluded that the Board also had cause to terminate Olivarius for her unauthorized disclosure of the confidential litigation memorandum to her personal counsel.

Unwilling to accept this adverse outcome, Olivarius filed a motion in District of Columbia Superior Court to vacate the arbitrator's award. The Endowment moved to confirm it. On December 14, 1999, the court denied Olivarius's motion and confirmed the award. Olivarius did not appeal this judgment.

Sixteen months later, however, on April 13, 2001, Olivarius moved in Superior Court to vacate both the arbitration award and the December 1999 judgment confirming it. In her motion, Olivarius alleged that during the preceding month she was granted access to the file of a sympathetic former director of the Endowment. Olivarius claimed that she found documents in that file that would have exonerated her had they been produced in the arbitration. "[I]n particular," Olivarius alleged, the file contained a letter that she had faxed to the Board of the Endowment on June 6, 1996 -- the day before the fateful Board meeting -- in which she had "revealed the very information that the Endowment claimed she had concealed." This June 6 letter also allegedly confirmed that Olivarius had the Board's prior authorization to share the Endowment's confidential litigation memorandum with her counsel in the New York litigation. In short, the letter served to refute every ground on which the arbitrator had found in favor of the Endowment. Olivarius charged that the Endowment had withheld this key letter, even though she had requested it specifically during the discovery phase of the arbitration,*fn2 as well as other documents of lesser, though still significant, import that she had culled from the former director's file. The Endowment, Olivarius concluded, thereby had procured its arbitration award by fraud.

Olivarius based her motion on the Maryland Arbitration Act, which provides that a court "shall vacate" an award if it was "procured by corruption, fraud, or other undue means." MD. CODE ANN., CTS. & JUD. PROC. § 3-224 (b)(1) 2002. She claimed that her motion was timely because the Maryland Act provides that "[i]f a petition [to vacate an award] alleges corruption, fraud, or other undue means it shall be filed within 30 days after the grounds become known or should have been known to the petitioner." Id. at § 3-224 (a)(2). Olivarius argued ...


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