The opinion of the court was delivered by: Honorable A. Howard Matz, U.S. District Judge
Present: The Honorable A. HOWARD MATZ, U.S. DISTRICT JUDGE
Stephen Montes Not Reported
Deputy Clerk Court Reporter / Recorder Tape No. Attorneys NOT Present for Plaintiffs: Attorneys NOT Present for Defendants:
Proceedings: IN CHAMBERS (No Proceedings Held)
Petitioner Fund Raising Inc. ("FRI") filed this suit to compel Respondents to arbitrate a dispute between the parties. FRI's motion to compel was successful-some Respondents proceeded to arbitration voluntarily and the Court ordered the remaining Respondents to arbitration. At the conclusion of arbitration, in a remarkably detailed 59 page initial order, the arbitrator, retired Superior Court Judge G. Keith Wisot, found in favor of Respondents and awarded them over $4,000,000 in compensatory damages, punitive damages, and attorneys' fees and costs. Motion to Vacate Ex. C at 25. In accordance with the parties' arbitration agreement, the award was doubled to over eight million dollars when FRI failed to pay it within thirty days. Notice of Final Arbitration Award at 25--26, Dkt. 86.
Predictably dissatisfied with this result, FRI has filed the present motion to vacate the arbitration award.*fn1 A court may vacate an arbitration award only for a few narrowly circumscribed reasons. Because none of those reasons is applicable here, FRI's motion is DENIED.
Congress enacted the Federal Arbitration Act to overcome judicial hostility to arbitration agreements. Hall Street Associates, LLC v. Mattel, Inc., 552 U.S. 576, 581 (2008). Because broad judicial review would diminish the benefits of private arbitration, federal courts have only limited authority to review arbitration awards. Kyocera Corp. v. Prudential-Bache Trade Services, Inc., 341 F.3d 987, 998 (9th Cir. 2003). "Neither erroneous legal conclusions nor unsubstantiated factual findings justify federal court review of an arbitral award under the [FAA], which is unambiguous in this regard." Id. at 994. Instead, section 10 of the FAA provides the "exclusive means by which a court reviewing an arbitration award under the FAA may grant vacatur of a final arbitration award." Biller v. Toyota Motor Corp., 668 F.3d 655, 664 (9th Cir. 2012).
Section 10(a)(4) of the FAA permits a court to vacate an arbitration award "where the arbitrators exceeded their powers . . . ." 9 U.S.C. § 10(a)(4).*fn2 Under this provision, an award may not be vacated simply for "failure on the part of the arbitrators to understand and apply the law" or even for "an erroneous interpretation of the law." Collins v. D.R. Horton, Inc., 505 F.3d 874, 879 (9th Cir. 2007). Instead, an award may be vacated only where it is "completely irrational" or exhibits "manifest disregard" for the law. Kyocera, 341 F.3d at 997.
The "manifest disregard" of the law standard is extremely demanding. As an initial matter, the law in question must be "well defined, explicit, and clearly applicable." Collins, 505 F.3d at 880. But in addition, "[i]t must be clear from the record that the arbitrators recognized the applicable law and then ignored it." Id. at 879.
Similarly, the "completely irrational" standard is narrow. Despite its name, this basis for vacatur is not concerned with the internal consistency or coherence of the award. Bosack v. Soward, 586 F.3d 1096, 1106 (9th Cir. 2009). Instead, it tests whether the award is rationally related to the underlying agreement. Under this standard of review, the court does not evaluate the "rightness or wrongness of the arbitrators' contract interpretation." Id. (internal citations omitted). An award is completely irrational only where it "fails to draw its essence from the agreement." Id. (citing Hoffman v. Cargill , 236 F.3d 458, 461--62 (8th Cir. 2001)). "An arbitration award 'draws its essence from the agreement' if the award is derived from the agreement, viewed in light of the agreement's language and context, as well as other indications of the parties' intentions." , 668 F.3d at 665 (internal citations omitted).
An arbitration award may also be vacated if the relief awarded by the arbitrator is contrary to public policy. Aramark Facility Services v. Service Employees International , 530 F.3d 817, 823 (9th Cir. 2008). To vacate an award on this basis, a court must find that (1) an explicit, well defined, and dominant policy exists and (2) that the policy is one that specifically militates against the relief ordered by the arbitrator. Id. In evaluating a public policy argument, courts must focus on the award itself, not the behavior of the parties. Id. Furthermore, a court should be reluctant to vacate an arbitral award on this basis because "the finality of arbitral awards must be preserved" if arbitration is to remain a desirable alternative." Id. (internal citations omitted).
In deciding whether an award should be vacated, a court must accept the arbitrator's factual findings. Aramark, 530 F.3d at 823; Coutee v. Barington Capital Group, L.P., 336 F.3d 1128, 1133 (9th Cir. 2003). This is because "[t]he parties did not bargain for the facts to be found by a court, but by an arbitrator chosen by them." Aramark, 530 F.3d at 823 (internal citations omitted).
Respondents Alaskans for Clean Water Inc. ("AFCW"), Renewable Resources Coalition Inc. ("RRC"), and Renewable Resources Foundation Inc. ("RRF") are nonprofits that are engaged in environmental advocacy. The remaining Respondents, Hackney & Hackney and Arthur Hackney, assist the non-profit Respondents in their advocacy efforts. In 2008, Respondents were involved in supporting Alaska's Ballot Measure 4, a law that would have imposed new environmental regulations on large mines in Alaska.
Respondents hired FRI to assist them. In the short term, FRI was to raise money in support of Ballot Measure 4. In the long term, FRI was to develop a financial support base for the non-profit Respondents. The parties signed a consulting agreement to that effect. That agreement contained a mandatory arbitration clause.
A few months after the parties signed the consulting agreement, the relationship between FRI and Respondents broke down and Respondents terminated the agreement. The arbitrator found that Respondents violated the consulting agreement by the timing and nature of their termination of the contract. But, in addition, the arbitrator found that FRI's subsequent ...