EHM Productions, Inc. v. Starline Tours of Hollywood, Inc., No. 20-55426 (9th Cir. 2021)
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Years after Starline and TMZ launched a joint venture to operate a celebrity bus tour together, TMZ terminated their agreement. TMZ and Starline brought their claims (and counterclaims) to arbitration, and the arbitrator ultimately issued the final award in favor of TMZ. After the Appeal Panel affirmed the majority of the arbitrator's award, Starline moved to vacate the award in district court, and TMZ petitioned to confirm the award. The district court denied Starline's motion and granted TMZ's petition. The Ninth Circuit subsequently issued Monster Energy Co. v. City Beverages, LLC, 940 F.3d 1130 (9th Cir. 2019), interpreting the standard for "evident partiality" to warrant vacatur of an arbitration award under the Federal Arbitration Act (FAA).
The Ninth Circuit concluded that the district court did not abuse its discretion in denying Starline's Federal Rule of Civil Procedure 59(e) motion on the grounds that the arbitrators did not exhibit evident partiality by failing to disclose JAMS's prior business dealings with TMZ or its counsel. The panel also concluded that the district court likewise did not err when it declined to vacate the arbitration award on the grounds that (1) the arbitrator did not produce a form indicating she had no conflicts with the Boies Schiller law firm, (2) the arbitrator improperly granted an anti-SLAPP motion, or (3) based on her interpretation of California partnership law.
However, the panel concluded that the district court clearly erred in concluding that JAMS provided a disclosure in accordance with Monster Energy, where JAMS declined to make such disclosure and instead asserted that the arbitrators no longer had jurisdiction over the arbitration. Accordingly, the panel remanded this issue to the district court to consider in the first instance how the parties can obtain from JAMS the information required by Monster Energy. The panel affirmed in part, reversed in part, and remanded in part.
Court Description: Arbitration. The panel affirmed in part and reversed in part the district court’s judgment confirming an arbitration award concerning the parties’ joint venture agreement to operate a celebrity bus tour. The JAMS arbitrator issued an award in favor of EHM Productions, Inc. (“TMZ”) and against Starline Tours of Hollywood, Inc. After the district court entered judgment confirming the arbitration award, the Ninth Circuit issued Monster Energy Co. v. City Beverages, LLC, 940 F.3d 1130 (9th Cir. 2019), interpreting the standard for “evident partiality” to warrant vacatur of an arbitration award under the Federal Arbitration Act. Starline wrote letters to JAMS requesting disclosures regarding arbitrators. After JAMS responded, Starline filed a motion for relief under Fed. R. Civ. P. 59(e), arguing that the arbitrators and JAMS failed to make disclosures required under the Monster Energy decision. The district court denied the motion. The panel held that the district court did not abuse its discretion in denying Starline’s Rule 59(e) motion and failing to vacate the arbitration award for evident partiality based solely on the arbitrators’ failure to disclose JAMS’s nontrivial business dealings with TMZ or its counsel prior to arbitration. The panel concluded that Monster Energy requires disclosure only when an arbitrator holds an ownership interest in JAMS and JAMS engages in nontrivial EHM PRODUCTIONS V. STARLINE TOURS 3 business dealings with a party to the arbitration. Further, Monster Energy does not require disclosure of nontrivial business dealings with a party’s counsel. The panel held that the arbitrator did not demonstrate evident partiality by failing to provide a supplemental disclosure form with respect to a law firm when it became TMZ’s counsel during the arbitration as the result of a law firm merger. The panel concluded that the arbitrator did not exhibit evident partiality or exceed her powers by inappropriately granting an anti-SLAPP motion, and a JAMS appeal panel did not exceed its power by conducting a harmless error analysis of the anti-SLAPP ruling. The panel also concluded that the arbitrator did not exceed her powers in interpreting California partnership law. Reversing in part, the panel held that the district court abused its discretion in denying Starline’s Rule 59(e) motion based on the court’s misinterpretation of JAMS’s response to Starline’s request for information under Monster Energy as an indication that JAMS and the arbitrators had nothing to disclose. The panel held that, even though Monster Energy was published after the district court entered judgment, Monster Energy applied to the arbitration proceedings at issue in this case. The panel further held that the district court clearly erred in its interpretation of JAMS’s response. The panel remanded this issue to the district court to consider in the first instance how the parties can obtain from JAMS the information required by Monster Energy. Concurring, Judge VanDyke, joined by Judges Gould and Lee, wrote that he shared the reservations about Monster Energy articulated in the Monster Energy dissent, and he 4 EHM PRODUCTIONS V. STARLINE TOURS encouraged his colleagues to reconsider Monster Energy en banc.
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