Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_04-cv-01069/USCOURTS-casd-3_04-cv-01069-3/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 09:0010 Petition to Vacate Arbitration Award

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 1

 The Order was amended on December 11, 2006 for typographical corrections, and entered

on the docket. 

- 1 - 04CV1069 BEN (BLM)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ERNESTINE F. STROBEL, individually and

as Trustee of the STROBEL CHARITABLE

REMAINDER UNITRUST DATED

11/29/00,

Petitioner,

CASE NO. 04CV1069 BEN (BLM)

ORDER DENYING EX PARTE

APPLICATION FOR STAY [Dkt. No

52]

vs.

MORGAN STANLEY DEAN WITTER; and

SUZANNE LATOUR,

Respondents.

I. INTRODUCTION

Respondents Morgan Stanley Dean Witter and Suzanne LaTour (collectively

“Respondents” or “Morgan Stanley”) move this Court ex parte for a stay of its November 16,

20061

 Order (“November 16 Order”) and its April 11, 2007 Order (“April 11 Order” or

“Reconsideration Order”) pending appellate review. In its November 16 Order, the Court denied

Respondents’ Petition to Confirm an NASD Arbitration Award, denied Petitioners’ Petition to

Vacate the Award, and remanded to the panel for determination of a proper damage award in

keeping with the substance of the Order. In its April 11 Order, the Court clarified the November

16 Order, denied Respondents’ Motion for Reconsideration, and denied Respondents’ Motion to

Stay. The Court further Ordered that the arbitration panel comply with the Court’s Order within

30 days or show cause why it should not be held in contempt.

Case 3:04-cv-01069-BEN-BLM Document 58 Filed 04/24/07 Page 1 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 - 04CV1069 BEN (BLM)

II. DISCUSSION

For purposes of this motion, the Court will assume familiarity with the factual and

procedural history of this case. 

The standard for granting a stay pending appeal is similar to that employed for deciding

whether to grant a preliminary injunction. Lopez v. Heckler, 713 F.2d 1432, 1435 (9th Cir. 1983). 

The Ninth Circuit uses two interrelated tests, which represent “the outer reaches of a single

continuum.” Los Angeles Memorial Coliseum Commission v. National Football League, 634 F.2d

1197, 1201 (9th Cir. 1980). At one end of the continuum, the moving party is required to show

both a probability of success on the merits and the possibility of irreparable injury. At the other

end of the continuum, the moving party must demonstrate that serious legal questions are raised

and that the balance of hardships tips sharply in its favor. Sun Microsystems, Inc. v. Microsoft

Corp., 188 F.3d 1115, 1119 (9th Cir. 1999). “[T]he relative hardship to the parties” is the “critical

element” in deciding at which point along the continuum a stay is justified. Benda v. Grand Lodge

of International Association of Machinists, etc., 584 F.2d 308, 314-15 (9th Cir.1978), cert.

dismissed, 441 U.S. 937 (1979). 

In support of the first factor, a likelihood of success on the merits, Respondents argue that

the Court is likely to be reversed on appeal. In doing so, they reiterate their now twice-heard

arguments in support of confirmation of the arbitration award. Needless to say, the Court will not

address those arguments again. However, as Respondents note, “[w]hen the request for a stay is

made to a district court, common sense dictates that the moving party need not persuade the court

that it is likely to be reversed on appeal.” Canterbury Liquors & Pantry v. Sullivan, 999 F. Supp.

144, 150 (D. Mass. 1998). Rather, “the movant must only establish that the appeal raises serious

and difficult questions of law in an area where the law is somewhat unclear.” Id.

According to Respondents, the appeal raises several serious questions of law, primarily

revolving around the Court’s equitable tolling analysis. While the Court disagrees with

Respondents regarding the validity of the Court’s analysis of the issue, it is fair to say that the

question is one on which the current case law is thin. But the existence of a serious or novel legal

issue alone is insufficient to support the grant of a stay. It must be coupled with the balance of

Case 3:04-cv-01069-BEN-BLM Document 58 Filed 04/24/07 Page 2 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 - 04CV1069 BEN (BLM)

hardships tipping strongly in favor of the party seeking a stay. Sun Microsystems, Inc. v.

Microsoft Corp., 188 F.3d at 1119. This is where Respondents’ argument loses traction.

Under no set of circumstances in this case does the balance of hardships tip in Morgan

Stanley’s favor. Morgan Stanley argues three forms of “irreparable injury” if the Court does not

stay its Order: (1) Respondents will be deprived of the benefit of the arbitration agreement; (2)

enforcement of the Order could eliminate the Ninth Circuit’s ability to grant relief; and (3) LaTour

may be adversely affected by further action of the arbitrators, who exonerated her in their award. 

The Court will address these arguments seriatim. 

First, Respondents argue that they will be deprived of the benefit of their arbitration

agreement should the Court deny them a stay. This argument seems to imply that the arbitration

agreement Respondents entered into with Strobel was intended to be beyond the reach of the

Court’s review powers under the Federal Arbitration Act, 9 U.S.C. § 9, et seq. (“FAA”). 

Respondents have presented no evidence to support this idea. The other inference to be drawn

from this argument is that any time a district court uses the limited review power granted to it by

Congress under the FAA, it is denying the parties the benefit of their arbitration agreement. Surely

Congress would not go to the effort of passing legislation it intended to be completely toothless. 

The authority cited by Respondents is wholly inapposite on this point. Alascom, Inc. v. ITT North

Elec. Co., 727 F.2d 1419 (9th Cir. 1984) deals with the effect of granting a stay of arbitration in

favor of judicial proceedings, and whether that order should be appealable. It is in this context that

the Ninth Circuit comments “if that party must undergo the expense and delay of a trial before

being able to appeal [the order staying arbitration], the advantages of arbitration - speed and

economy - are lost forever,” and further responds to that loss as “serious, perhaps, irreparable.” Id.

at 1422. That is a far cry from Respondents’ attempt to have those words stand for the proposition

that this Court must allow a judicial appeal process to be completed before the arbitration panel

can act on the basis of the Court’s Remand Order.

Respondents’ second “irreparable harm” is equally illusory. The Ninth Circuit’s ability to

review this Court’s Orders does not disappear once those Orders are implemented. Nor is its

ability to fashion effective relief endangered here. Respondents’ suggestion that should the panel

Case 3:04-cv-01069-BEN-BLM Document 58 Filed 04/24/07 Page 3 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 - 04CV1069 BEN (BLM)

issue a new damages award the Ninth Circuit would be unable to reverse this Court and find that

the original award should have been confirmed, is without basis or authority. 

Third, Respondents’ argument that LaTour may be adversely affected by further actions of

the arbitrators again seems to ignore the Court’s actual Order, as well as its clarification thereof. 

The Court did not disturb the panel’s liability findings, solely its assessment of damages. The

panel found LaTour not liable, and recommended that her public record be expunged. The Court

is unclear as to what basis the panel would have to reopen proceedings as to LaTour’s liability or

anything other than the award of damages. The Court finds that none of these arguments support a

finding of irreparable harm to Respondents, or that the balance of hardships tips in their favor.

Finally, the remaining factors the Court must consider come out in favor of denying a stay. 

The public interest, which Respondents define as preserving the finality of arbitration proceedings,

does not weigh strongly here one way or the other. The public has an equally strong interest in

arbitration awards not being rendered in manifest disregard of the law. The crucial factor here is

the potential harm to Petitioner from the granting of a stay. As the Court noted in its April 11

Order, Petitioner is 86 years old, and has already been prejudiced by undue delay on the part of the

arbitration panel. Without any authority, Respondents suggest that because delay in enforcement

of an order always results from a stay, it is not a “true harm”. The fact that a harm is not unique

does not render it nonexistent. Delay can be a particularly irreparable harm to an elderly

individual. See e.g.. Lopez v. Heckler, 713 F.2d at 1437 (finding when plaintiff’s life span was

limited, deprivation of benefits pending further litigation was irreparable harm, whereas financial

status quo could be later restored for other party). In this case, the only real harm that can be made

out to Morgan Stanley would be the payment of damages to Strobel, in an amount which given

Morgan Stanley’s size and worth, is barely a drop in the proverbial bucket. This does not qualify

as irreparable injury because Morgan Stanley can be made whole again by the return of those same

money damages. Where there is an adequate remedy at law, i.e. money damages, equitable relief

is not appropriate. See Easyriders Freedom F.I.G.H.T. v. Hannigan, 92 F.3d 1486, 1495 (9th Cir.

1996).

Case 3:04-cv-01069-BEN-BLM Document 58 Filed 04/24/07 Page 4 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 - 04CV1069 BEN (BLM)

III. CONCLUSION

For the reasons stated above, Respondents’ Ex Parte Application for Stay Pending Appeal

is DENIED. 

IT IS SO ORDERED.

DATED: April 24, 2007

Hon. Roger T. Benitez

United States District Judge

Case 3:04-cv-01069-BEN-BLM Document 58 Filed 04/24/07 Page 5 of 5