Laughlin v. VMware, Inc.
Filing
58
ORDER granting 45 Motion to Confirm Arbitration Award; denying 47 Motion to Vacate. Signed by Judge Edward J. Davila on 12/20/2012. (ejdlc3, COURT STAFF) (Filed on 12/20/2012)
1
2
3
4
5
6
7
UNITED STATES DISTRICT COURT
8
NORTHERN DISTRICT OF CALIFORNIA
United States District Court
For the Northern District of California
9
SAN JOSE DIVISION
10
11
ELIZABETH MOORE LAUGHLIN,
Plaintiff,
12
v.
13
14
VMWARE, INC.,
Defendant.
15
16
)
)
)
)
)
)
)
)
)
)
)
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S
MOTION TO CONFIRM
ARBITRATION AWARD; DENYING
DEFENDANT’S MOTION TO
VACATE ARBITRATION AWARD
[Re: Docket Nos. 45, 47]
17
Presently before the Court are two motions: Plaintiff Elizabeth Moore Laughlin’s
18
(“Plaintiff”) Motion to Reopen and to Confirm an Arbitration Award and Defendant VMWare,
19
Inc.’s (“Defendant”) Cross-Motion to Vacate the Award on Clause Construction. Pursuant to Local
20
Civil Rule 7–1(b), the Court had concluded that this matter is appropriate for determination without
21
oral argument. Having reviewed the relevant portions of the record, the Court will deny the relief
22
sought by Defendant, and will grant Plaintiff’s motion.
23
24
25
26
I.
Background
On February 3, 2011, Plaintiff, a former employee of Defendant, filed a class action suit on
behalf of herself and other similarly situated employees. See Compl., Docket Item No. 1. Plaintiff
27
28
1
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO CONFIRM ARBITRATION AWARD;
DENYING DEFENDANT’S MOTION TO VACATE ARBITRATION AWARD
1
has alleged that Defendant had failed to pay her and other class members overtime compensation
2
or benefits as required by federal and state law. See id. Plaintiff’s employment was governed by an
3
Employee Agreement, which was executed by the parties in 2004. Decl. of Michael A. Aparicio in
4
Supp. of Def.’s Mot. to Vacate, Ex. A.
5
6
7
8
United States District Court
For the Northern District of California
9
10
11
12
On October 4, 2011, Defendant filed a Motion to Compel Arbitration based on the
following arbitration clause from the Employee Agreement:
Except as provided in Section 7(b) below, I agree that any dispute or controversy
arising out of or relating to any interpretation, construction, performance or breach
of this Agreement, shall be settled by arbitration to be held in Santa Clara County,
California, in accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator shall be final, conclusive and binding on
the parties to the arbitration. Judgment may be entered on the arbitrator’s decision
in any court having jurisdiction. The Company and I shall each pay one half of the
costs and expenses of such arbitration, and each of us shall separately pay our
counsel fees and expenses.
13
14
Id. § VII.a. This Court issued an Order Granting the Motion to Compel Arbitration on February 1,
15
2012. See Docket Item No. 43. In this Order, the Court found the provisions in the arbitration
16
clause regarding cost-splitting and attorney’s fees to be unconscionable; however the Court found
17
that those provisions may be severed from the agreement. Id. at 10:18–23. Because the current
18
dispute relates to Plaintiff’s employment, the Court concluded, the remaining provisions of the
19
arbitration clause were applicable. Id. at 12:4–6. The Court went on to order, “Any further
20
decisions regarding the scope of arbitration, including whether class arbitration may proceed, are
21
left to the arbitrator.” Id.
22
The arbitration proceedings were conducted through the American Arbitration Association
23
(“AAA”), and heard by arbitrator Louise A. LaMothe, Esq. (“the Arbitrator”). See Pl.’s Mot. to
24
Confirm Arbitration Award at 1–2. The Arbitrator was selected through the AAA’s usual
25
procedures, and the arbitration was held telephonically on June 20, 2012. Def.’s Mot. to Vacate at
26
8. During the arbitration, Defendant sought to strike the class references in Plaintiff’s arbitration
27
28
2
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO CONFIRM ARBITRATION AWARD;
DENYING DEFENDANT’S MOTION TO VACATE ARBITRATION AWARD
1
demand so as to require Plaintiff to proceed on an individual basis only. See Aparicio Decl., Ex. L.
2
On August 27, 2012, in a Partial Final Award on Clause Construction (“the Award”), the Arbitrator
3
denied Defendant’s motion to strike the class allegations. Id. Pursuant to the AAA’s
4
Supplementary Rule for Class Arbitrations 3, the Arbitrator stayed the proceedings for a period of
5
30 days to permit “any party to move a court of competent jurisdiction to confirm or to vacate the
6
Clause Construction Award.” Id. at 7.
7
On September 7, 2012, Plaintiff moved this Court to reopen the case and confirm the
Award. See Docket Item No. 45. For its part, on September 21, 2012, Defendant cross-moved to
9
United States District Court
For the Northern District of California
8
vacate the Award. See Docket Item No. 47.
10
11
II.
Standard of Review
12
This case presents the issue of whether a district court may vacate a binding award of an
13
arbitrator pursuant to the Federal Arbitration Act (“FAA”). In reviewing an award, a court must
14
afford great deference to the arbitrator’s decision as well as the interpretation of the arbitrability of
15
the dispute. See Sheet Metal Workers’ Int’l Ass’n v. Madison Indus., Inc., 84 F.3d 1186, 1190 (9th
16
Cir. 1996); see also Pack Concrete, Inc. v. Cunningham, 866 F.2d 283, 285 (9th Cir. 1989). Such
17
deference is given even in light of the speed and informality in which arbitration can take place.
18
See Collins v. D.R. Horton, Inc., 505 F.3d 874, 879 (9th Cir. 2007). Indeed, it is these twin
19
advantages that are lauded by federal policy and make arbitration favorable for the many private
20
parties in resolving their disputes. See Fairchild & Co., Inc. v. Richmond, Fredericksburg &
21
Potomac R.R. Co., 516 F. Supp. 1305, 1313 (D.D.C. 1981); see also Madison Indus., Inc., 84 F.3d
22
at 1190; Scherk v. Alberto–Culver Co., 417 U.S. 506 (1974) (acknowledging that the FAA
23
“reflects a legislative recognition of the ‘desirability of arbitration as an alternative to the
24
complications of litigation.’”) (quoting Wilko v. Swan, 346 U.S. 427, 431 (1953)).
25
26
In assessing cases such as the instant one, it is important to remember that “arbitration is a
consensual agreement of the parties to substitute a final and binding judgment of an impartial entity
27
28
3
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO CONFIRM ARBITRATION AWARD;
DENYING DEFENDANT’S MOTION TO VACATE ARBITRATION AWARD
1
for the judgment of the court.” See Coast Trading Co. v. Pac. Molasses Co., 681 F.2d 1195, 1197
2
(9th Cir. 1982). The FAA itself provides limited grounds on which a federal court may vacate an
3
arbitral award, and such awards are binding and enforceable unless the district court finds present
4
one of the specified grounds. See 9 U.S.C. § 10; see also Kyocera Corp. v. Prudential–Bache Trade
5
Servs., Inc., 341 F.3d 987, 994 (9th Cir. 2003) (en banc). While the FAA generally presumes that
6
arbitration awards will be confirmed, the statute enumerates four narrow bases for vacatur:
7
In any of the following cases the United States court in and for the district wherein
the award was made may make an order vacating the award upon the application of
any party to the arbitration—
8
United States District Court
For the Northern District of California
9
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of
them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the
hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent
and material to the controversy; or of any other misbehavior by which the rights
of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them
that a mutual, final, and definite award upon the subject matter submitted was
not made.
10
11
12
13
14
15
16
17
18
9 U.S.C. § 10(a).
III.
Discussion
Defendant’s argument is grounded in the fourth basis for vacatur enumerated in 9 U.S.C.
19
§ 10(a): that the Arbitrator exceeded her powers in denying Defendant’s motion to strike the class.
20
Under 9 U.S.C. § 10(a)(4), “arbitrators exceed their powers when they express a ‘manifest
21
disregard for the law,’ or when they issue an award that is ‘completely irrational.’” See Bosack v.
22
Soward, 586 F.3d 1096, 1104 (9th Cir 2009); Comedy Club, Inc. v. Improv West Assocs., 553 F.3d
23
1277, 1290 (9th Cir. 2009). “This is a high standard for vacatur: ‘[i]t is not enough ... to show that
24
the panel committed an error—or even a serious error.’” Lagstein v. Certain Underwriters at
25
Lloyd’s, 607 F.3d 634, 642 (9th Cir. 2010) (quoting Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp.,
26
––– U.S. –––,130 S.Ct. 1758, 1767 (2010)). Indeed, “[n]either erroneous legal conclusions nor
27
28
4
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO CONFIRM ARBITRATION AWARD;
DENYING DEFENDANT’S MOTION TO VACATE ARBITRATION AWARD
1
unsubstantiated factual findings justify federal court review of an arbitral award under the statute,
2
which is unambiguous in this regard.” Bosack, 586 F.3d at 1102; see also Kyocera Corp. v.
3
Prudential–Bache T Servs., 341 F.3d 987, 997 (9th Cir. 2003) (en banc) (holding that “arbitrators
4
‘exceed their powers’ ... when the award is ‘completely irrational,’ or exhibits a ‘manifest disregard
5
of law.’”).
6
Defendant argues when she issued the Award, the Arbitrator manifestly disregarded the
relevant and applicable law—and thus she exceeded her powers. In support of this notion,
8
Defendant argues that the Arbitrator ignored dispositive federal and state case law on class
9
United States District Court
For the Northern District of California
7
arbitration and contract interpretation. Specifically, Defendant contends that United States Supreme
10
Court precedent requires a contractual basis to permit class arbitration, and that in this case, there
11
was none. Defendant also argues that California contract interpretation rules establish that the
12
Employee Agreement does not allow for class arbitration.
13
Under 9 U.S.C. § 10(a)(4), “‘manifest disregard of the law’ means something more than
14
just an error in the law or a failure on the part of the arbitrators to understand or apply the law.”
15
Lagstein, 607 F.3d at 642. “[T]o demonstrate manifest disregard, the moving party must show that
16
the arbitrator underst[ood] and correctly state[d] the law, but proceed[ed] to disregard the same.”
17
Bosack, 586 F.3d at 1104; Collins v. D.R. Horton, Inc., 505 F.3d 874, 879 (9th Cir. 2007). “[T]here
18
must be some evidence in the record, other than the result, that the arbitrators were aware of the
19
law and intentionally disregarded it.” Bosack, 586 F.3d at 1104; Collins, 505 F.3d at 879. In some
20
cases, “legally dispositive facts are so firmly established that an arbitrator cannot fail to recognize
21
them without manifestly disregarding the law.” Coutee v. Barington Capital Group, L.P., 336 F.3d
22
1128, 1133 (9th Cir. 2003).
23
In light of this highly deferential standard, the Court finds that Defendant’s argument is
24
without merit. Contrary to Defendant’s contention, the Arbitrator did not ignore the federal and
25
state law relevant to the task at hand, which was to decide whether the arbitration clause in the
26
Employee Agreement would permit class arbitration. Rather, the Arbitrator addressed the rules and
27
28
5
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO CONFIRM ARBITRATION AWARD;
DENYING DEFENDANT’S MOTION TO VACATE ARBITRATION AWARD
1
case law that Defendant refers to, explicated their application, and distinguished the facts from the
2
present case from those of other relevant and precedential cases when necessary.
3
For example, Defendant heavily relies on the Supreme Court decision in Stolt–Nielsen S.A.
v. AnimalFeeds Int’l Corp. in support of its position that the Arbitrator exceeded her powers. As
5
the Arbitrator noted, Stolt-Nielsen requires arbitrators to find evidence that the parties agreed to
6
class arbitration. See Stolt-Nielsen, ––– U.S. –––, 130 S.Ct. 1758, 1775 (2010) (“[A] party may not
7
be compelled under the FAA to submit to class arbitration unless there is a contractual basis for
8
concluding that the party agreed to do so.”). The Arbitrator in this case applied that reasoning in
9
United States District Court
For the Northern District of California
4
reaching her decision: She examined the Employee Agreement and the relevant case law in
10
reaching her conclusion that at the time the contract was entered into the parties understood that
11
class arbitration was a possible consequence of the arbitration clause. See Award at 6 (“The
12
reasonable expectations of parties entered into contracts with language such as this one with
13
California governing law in 2004 was that there would be class arbitration of claims such as those
14
raised in this Arbitration.”). As such, she determined, there was indeed a contractual basis for
15
concluding that the parties had agreed to the possibility of class arbitration. Stolt-Nielsen held that
16
arbitrators may not infer an implicit agreement from class arbitration “solely from the fact of the
17
parties’ agreement to arbitrate.” 130 S.Ct. at 1775. This is not what the Arbitrator did here. She did
18
not rely solely on the fact of an agreement to arbitrate generally; rather, she looked to the entirety
19
of the relevant circumstances surrounding execution of the Agreement in order to glean the
20
understanding of the parties at the time the contract was entered into.
21
Additionally, as instructed by Stolt-Nielsen, the Arbitrator examined the applicable law
22
governing the Agreement. In Stolt-Nielsen, the Supreme Court took issue with the arbitrators’
23
wholly ignoring the applicable New York and maritime laws when it reached its decision:
24
“[I]nstead of identifying and applying a rule of decision derived from the [Federal Arbitration Act]
25
or either maritime or New York law, the arbitration panel imposed its own policy choice and thus
26
exceeded its powers.” 130 S.Ct. at 1770. This is not what has occurred here. In reaching her
27
28
6
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO CONFIRM ARBITRATION AWARD;
DENYING DEFENDANT’S MOTION TO VACATE ARBITRATION AWARD
1
decision that the Employee Agreement allows for class arbitration, the Arbitrator explored the
2
relevant California law and policy, cited key cases and statutes, and considered Defendant’s
3
opposing arguments. Her decision was not based on “[her] own policy choice,” Stolt-Nielsen, 130
4
S.Ct. at 1770, but rather on the “background of California law in the area of employment
5
agreements,” Award at 6. The arbitrator noted that “California state contract law favors procedural
6
devices of class actions and class arbitrations in cases such as this one” and that “[t]he strong
7
public policy of the state [in 2004] . . . supported class arbitration.” Id.
8
Irrespective of what this Court—or Defendant—thinks of the merits of the Arbitrator’s
United States District Court
For the Northern District of California
9
decision, this is not a case where there has been a “manifest disregard of the law.” As noted, for an
10
arbitrator’s award to be in manifest disregard of the law, “[i]t must be clear from the record that the
11
arbitrator [ ] recognized the applicable law and then ignored it.” Mich. Mut. Ins. Co. v. Unigard
12
Sec. Ins. Co., 44 F.3d 826, 832 (9th Cir. 1995). Defendant has failed to show that this occurred
13
here. The Arbitrator applied the relevant case law to the facts at hand in making her determination;
14
this is apparent from her discussion of her reasoning for the Award. Moreover, nowhere can
15
Defendant show that the Arbitrator was aware of the law and “intentionally disregarded it.”
16
Bosack, 586 F.3d at 1104. Even if the Arbitrator erroneously applied or misunderstood the relevant
17
law, that would not be enough to constitute a “manifest disregard of the law” such that the
18
Arbitrator exceeded her decisionmaking authority. See Mich. Mut. Ins. Co., 44 F.3d at 832
19
(“‘Manifest disregard of the law’ means something more than just an error in the law or a failure on
20
the part of the arbitrators to understand or apply the law.”). What Defendant has presented in its
21
motion is a disagreement with the Arbitrator’s decision, not a showing that she manifestly ignored
22
the law.
23
24
25
26
IV.
Conclusion
Defendant’s motion to vacate essentially takes issue with the result of the arbitration and
asks this Court to sit in de novo review of the arbitration proceedings and the Arbitrator’s
27
28
7
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO CONFIRM ARBITRATION AWARD;
DENYING DEFENDANT’S MOTION TO VACATE ARBITRATION AWARD
1
determination. Because the Court’s discretion is limited by the well-established standard of review
2
of arbitration awards, the Court cannot review the determination as Defendant requests. Having
3
found that the Arbitrator did not manifestly disregard the relevant law for the reasons explained
4
above, the Court cannot pass judgment on the substance of the Arbitrator’s decision. Accordingly,
5
the Court cannot vacate the Award.
6
7
8
United States District Court
For the Northern District of California
9
V.
Order
For the reasons stated above Plaintiff’s motion to confirm the Arbitrator’s Award is
GRANTED; Defendant’s motion to vacate the Award is DENIED.
10
11
IT IS SO ORDERED.
12
Dated: December 20, 2012
13
14
_________________________________
EDWARD J. DAVILA
United States District Judge
15
16
17
18
19
20
21
22
23
24
25
26
27
28
8
Case No.: 5:11-CV-00530-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO CONFIRM ARBITRATION AWARD;
DENYING DEFENDANT’S MOTION TO VACATE ARBITRATION AWARD
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?