Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-00854/USCOURTS-cand-3_04-cv-00854-4/pdf.json

Parties Involved:
Ramesh Chand
Defendant
Jitendra Kumar Kapadia
Defendant
Jesus Navarez
Defendant
Real Sensors, Inc.
Defendant
VICI Metronics, Inc.
Plaintiff

Document Text:

United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

VICI METRONICS, INC., a Washington

corporation,

Plaintiff,

 v.

REAL SENSORS, INC., a California

corporation, RAMESH CHAND, an

individual, JESUS NAVAREZ, an

individual, JITENDRA KUMAR KAPADIA,

an individual,

Defendants. 

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No. C 04-0854 SC

ORDER GRANTING

DEFENDANT RAMESH

CHAND'S MOTION TO

CONFIRM ARBITRATION

AWARD 

I. Introduction

Plaintiff VICI Metronics ("VICI") filed the above captioned

action against various defendants including its former employee

Defendant Ramesh Chand ("Chand"). On August 27, 2004, the Court

compelled arbitration between Chand and VICI according to the

terms of the employment agreement between VICI and Chand

("Employment Agreement") and stayed the action before it. See

Docket No. 49. Chand now moves the Court to confirm the resulting

arbitration award; VICI, in opposition, moves the Court to vacate

or, in the alternative, modify the award. For the following

reasons the Court hereby GRANTS Chand's Motion to Confirm the

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Award and DENIES VICI's Motion to Vacate or Modify the Award. 

II. BACKGROUND

The Employment Agreement's arbitration clause ("Arbitration

Clause") states:

Any controversy or claim arising out of or relating to

this agreement, or the breach thereof, shall be settled

by binding arbitration in accordance with the Commercial

Rules of the American Arbitration Association by a

single arbitrator to be located in San Francisco,

California, and judgment upon the award rendered by the

arbitrator may be entered by any court having

jurisdiction thereof, and shall not be appealable.

Townsend Decl. in Sup. Conf., Ex. B at 5.

The American Arbitration Association's ("AAA") Commercial

Arbitration Rules and Mediation Procedures, as amended July 1,

2003, ("Commercial Rules"), state in their relevant section:

R-1. Agreement of Parties*+

(a)The parties shall be deemed to have made these rules

a part of their arbitration agreement whenever they have

provided for arbitration by the . . . AAA . . . under

its Commercial Arbitration Rules. . . . These rules and

any amendment of them shall apply in the form in effect

at the time the administrative requirements for a demand

for arbitration or submission agreement received by the

AAA. . . .

+ A dispute arising out of an employer promulgated plan

will be administered under the AAA's National Rules for

the Resolution of Employment Disputes.

Townsend Decl. Opp. Vacate, Ex. B at 7-8. The Commercial Rules

were in effect when VICI initiated arbitration at AAA in November

2004. See Isola Decl., Ex. A; www.adr.org/sp.asp?id=22440. 

From November 7 to 9, 2005, the AAA, Norman Brand, Esq.

presiding ("Arbitrator"), held arbitration hearings in the case. 

Townsend Decl. in Sup. Conf., at 1-2. Prior to the hearing, the

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AAA designated the case as an "employment" case and requested that

VICI make the appropriate payments associated with such a

designation. Isola Decl., at 2-3. VICI disputed this designation

and a series of communications between VICI and the AAA ensued. 

Id. Finally, on November 4, 2005, AAA Case Manager Jose Ibarra

sent a letter to parties informing them inter alia that the AAA's

"final decision is that this dispute arises from an employer plan,

and the National Rules for the Resolution of Employment Disputes

and fee schedule shall apply." Id., Ex D at 32.

On May 30, 2006, the Arbitrator issued his final award

("Award"), which incorporated prior interim awards, awarding Chand

$9,230.77 with statutory interest of 10% per annum from August 4,

2002 for his unpaid severance pay counterclaim and $19,050 in

attorneys fees, and ordered VICI to pay the entire amount of AAA

administrative fees, $2,254.05, and the Arbitrator's compensation,

$34,200.00. Townsend Decl. in Sup. Conf., Ex. A at 10, 30. 

On August 4, 2006, Chand moved the Court to confirm the

Award. See Mot. to Conf. VICI resoponded by moving the Court to

vacate the award or, in the alternative, modify it. See Mot. to

Vacate.

III. LEGAL STANDARD

A party seeking to confirm an arbitration award may, pursuant

to Section 9 of the Federal Arbitration Act ("FAA"), may make an

application for confirmation of the award in the federal court of

the district in which the award was made, 9 U.S.C. § 9, assuming

that there exists an independent basis for that court's subject

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matter jurisdiction. Southland Corp. v. Keating, 465 U.S. 1, 15

n.9 (1984). Subject to the same conditions, a party may make an

application for an order vacating or modifying an arbitration

award. 9 U.S.C. § § 10, 11. 

Once brought before a federal court, review of an arbitration

decision is "both limited and highly deferential." Coutee v.

Barington Capital Group, L.P., 336 F.3d 1128, 1133 (9th Cir.

2003)(internal quotation omitted). A federal court may modify or

vacate an arbitration award "only if the conduct of the

arbitrators violated the Federal Arbitration Act (FAA), or if the

award itself is completely irrational or constitutes manifest

disregard of the law." Id. (internal quotations omitted)(emphasis

added). 

The FAA describes four grounds for vacation: "(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 on refusing to postpone the hearing, upon sufficient

cause shown, or refusing to hear evidence pertinent and material

to the controversy, or for 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." 9 U.S.C. § 10. 

A federal court may modify an arbitration award of Section 11

of the FAA: "(a) [w]here there was an evident material

miscalculation of figures or an evident material mistake in the

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The California law-based arguments which VICI attempts to

hang on this claim are irrelevant to the Court's evaluation of

VICI's Motion to Vacate, which is governed solely by federal law. 

G.C. and K.B. Investments, Inc. v. Wilson,326 F.3d 1096, 1105 (9th

Cir. 2003).

 

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description, thing, or property referred to in the award[;] (b)

[w]here the arbitrators have awarded upon a matter not submitted

to them, unless it is a matter not affecting the merits of the

decision upon the matter submitted[; or] (c) [w]here the award is

imperfect in matter of form not affecting the mertis of the

controversy." 9 U.S.C. § 11.

IV. DISCUSSION

VICI makes essentially one argument for vacating or modifying

the Award: the Arbitration Clause called for arbitration under

the Commercial Rules, but the Arbitrator applied the Employment

Rules. See Mot. Vacate. VICI places this argument in a variety

of packages shaped by federal and California law in the hopes that

the Court will accept one. The federal law-based arguments are: 

(1) in deciding to apply the Employment Rules, the Arbitrator

exceeded his authority, see id., at 7-9; (2) the final award is

irrational, because it is not clear which rules are being applied,

id. at 9; (3) the award involves a manifest disregard for the law,

because the Arbitration Clause provides that the Commercial Rules

should apply, but the Arbitrator instead applied the Employment

rules. Id. at 10-11. None of these arguments purportedly based

on federal law are availing for the reasons stated herein.1

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A. The Arbitrator Did Not Exceed His Authority

VICI's claim that the Arbitrator exceeded his authority by

applying the Employment Rules to the dispute is unavailing. It is

a basic tenet of arbitration law that parties have the right to

arbitrate their dispute according to the terms of their

arbitration agreement. Western Employer Ins. Co. v. Jefferies &

Co., Inc., 958 F.2d 258, 261 (9th Cir. 1992). The Arbitration

Clause provides that disputes between the parties are to be

"settled by binding arbitration in accordance with the Commercial

Rules of the American Arbitration Association." Townsend Decl. in

Sup. Conf., Ex. B at 5. Those rules provide that "[a] dispute

arising out of an employer promulgated plan will be administered

under the AAA's National Rules for the Resolution of Employment

Disputes." Townsend Decl. Opp. Vacate, Ex. B at 8. The AAA

determined that the dispute between the parties arose out of an

employer promulgated plan. See Isola Decl., Ex. D at 32. Thus,

the Arbitrator's decision to apply the Employment Rules was in

accordance with the Commercial Rules and therefore in accordance

with the Arbitration Clause providing for arbitration according to

the Commercial Rules. It is, honestly, difficult to understand

how VICI can complain otherwise. 

B. The Final Award is Not Completely Irrational

VICI also argues that the Final Award is irrational because,

according to VICI, the Arbitrator was not always completely clear

which arbitration rules of the AAA he applied in three of the

decisions he issued ("Three Decisions"). See Mem. Opp. to Conf. at

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9. This argument is even more unavailing. To vacate an

arbitration award on this ground the award must be "completely

irrational," not a bit confusing or sort of unclear. Coutee, 336

F.3d at 1133. More precisely, an award is completely irrational

if "the arbitrator's interpretation cannot be rationally derived"

from the arbitration agreement on which it is purportedly based. 

Swift Industries, Inc. v. Botany Industries, Inc., 466 F.2d 1125,

1131 (3rd Cir. 1972); see French v. Merrill Lynch, Pierce, Fenner

& Smith, Inc.,784 F.2d 902, 906 (9th Cir. 1986). 

VICI's complaint about the Arbitrator's choice of wording in

the three decisions goes to the decisions' clarity not their

rationality. See Mem. Opp. to Conf. at 9. And each of the

complained of descriptions of applicable rules are reasonably

deriveable from the Arbitration Clause's instruction that the

arbitration be conducted according to the Commercial Rules, which,

as discussed above, the arbitration was. There are no grounds for

vacating the Award as completely irrational.

C. The Award Does Not Involve Any Manifest Disregard of Law

If possible, VICI's argument that the Arbitrator's decision

to apply the Employment Rules constituted a manifest disregard of

law is even more unavailing than its two other arguments. 

"'Manifest disregard' means something more than just an error in

the law or a failure on the part of the arbitrators to understand

or apply the law." Michigan Mut. Ins. Co. v. Unigard Sec. Ins.

Co., 44 F.3d 826, 832 (9th Cir. 1995). Rather, it occurs only

when an arbitrator "recognized the applicable law and then ignored

it." Id. 

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VICI's argument purportedly based on these grounds simply

rehashes its flawed argument about the scope of the Arbitrator's

authority: by applying the Employment Rules, the Arbitrator

ignored the clear law which requires him to conduct the

arbitration according to the terms of the arbitration clause under

which the arbitration is constituted. Mem. Opp. Conf. at 10-11. 

In the first place, this argument fails because, as discussed

above, the Arbitrator's decision to apply the Employment Rules was

completely proper under the law. However, even assuming that the

Arbitrator's decision to apply the Employment Rules was incorrect,

which it wasn't, it still would only constitute an error of law,

not a manifest disregard of it, and so not grounds for the Award's

vacation. 

V. CONCLUSION

For the foregoing reasons, the Court DENIES VICI's Motion to

Vacate the Award and GRANTS Chand's Motion to Confirm the Award. 

The Award is hereby CONFIRMED.

 

IT IS SO ORDERED.

Dated: September 29, 2006

 

UNITED STATES DISTRICT JUDGE

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