N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
W ATER M ILL VENTUR

ES, LTD. a

nd W ATER M ILL-TOOLR OC K ENTER PR ISES, LLC , Pla i ntiffs-Appe lla

nts,
v. C APPELLO C APITAL C ORPOR A TION, De fe nda n t-Appe l le e . No. 15-55145 D.C . No. 2:14-c v-08182-C AS-PLA
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the C e ntra l Distric t of C a lifornia C hristina A. Sny de r, Distric t Judge , Pre s iding Subm itte d Nove m

be r 8, 2016 ** Pa sa de n a , C a l ifornia B e fore : WARDLAW

and B YB EE, C irc uit Judge s, a nd B ELL, *** Distric t

Judge
. 

# FIL ED
DEC 01 2016 M OLLY C. DW Y ER, CLERK U

. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public at ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.

* * The pa

ne l una nim ously c onc lude s this c a se is suita ble for de c ision without ora l a

rgum e nt. Se e Fe d. R . App. P. 34(a )(2).

* * * The Honora

ble R obe rt Holm e s B e ll, Unite d State s Distric t Judge for the W e ste rn Distric t of M i c higa n, sitting by

de signa t ion.W a te rm i ll Ve nture s, Lim ite d a nd W ate rm ill-Toolroc k Ente rprise s, LLC (“ W a te rm ill” ) a

ppe a l the distric t c ourt’ s de nia l of the i r m otion to va c ate the
arbitration a

ward in fa

v o r of de fe nda

nt C a p p e llo C a pita l C orporation (C a

p pe llo) unde r the Fe de ra l Arbitra tion Ac t (FAA), 9 U.S.C . §§ 10(a )(1) & 10(a )(4). W e
a ffirm
. 1. The distric t c ourt c o rre c tly c onc lude d tha

t C a ppe l lo’ s a lle ge d a s signm e nt of its rights to the

arbitration proc e e ds wa s not a m ate ria l bre a c h of the “ Se ttle m e nt Agre e m e nt” unde r Ne w York la w, a nd thus did not exc use W ate rm ill from its duty to submit the “ Equity Split Dispute ” to binding a rbitration. 1 The c ourt he ld tha t
e ve n if C a

ppe llo’ s a lle ge d a ssignm e n t did bre a c h the Se ttle m e nt Agre e m e nt, it did not re lie ve W a te rm ill of its duty to a rbitrate be c a

use the a gre e m e nt wa s m e re ly a pe rsona l “ c ove na

nt not to a s sign” tha

t “ [gave ] rise only

to a right to sue

for dam a ge s.” W

ate rmill Ve nture

s, Ltd. v . C

appe llo C apital C o rp. , No. 2:14-c v08182-C AS (PLAx), 2015 W L 251895 (C .D. C a l. Ja n. 5, 2015), a

t *6–7; se e also Pro C ardiac o Pronto Soc orro C ardiologic a S.A. v . Trusse l l , 863 F. Supp. 135, 137 (S.D.N.Y. 1994). Howe ve r, we ne e d not de c ide whe t he r the anti-a ssignm e nt

1 The pa rtie s a gre e , a

n d the distric t c o urt c onc lude d , tha t Ne w York sta

te la w gove rns our inte rpre t a tion of theSe ttle m e nt Agre e m e nt. 2provision he re wa s a pe rsona l c ove na

nt tha t ga ve rise to a

right to da

m a ge s only , be c a use the a l le ge d bre a c h wa s not m ate ria l in a ny e ve nt. A m ate ria l b re a c h is “ a

bre a c h whic h is so substa ntia l a s to de fe at the purpose of the e ntire tra

nsa c tion,” re lie v i ng the non-bre a c hing pa rty of its duty

to pe rform unde r the c ontra c t. Lipsk y v . C ommonw e alth United

C o rp. , 551 F.2d 887, 895 (2d C ir. 1976). Thepurpose of the Se ttle m e n t Agre e m e nt wa s to re solve
c e rta in dispute s be twe e n the pa rtie s a nd re se rve the re m a i ning Equity Split Dispute for arbitra tion. Unde r the s e fa c ts, the a l le ge d a ssignm e n t of rights in one c la im doe s not “ de fe a t the purpose of the e ntire ” Se ttle m e nt Agre e m e nt, whic h re s olve d $550,000 worth of othe

r c l a im s. W a te rm i ll’ s undisc lose d be lie f that the anti-a ssignm e nt c la use wa s “ c ritic a l” is a lso insuffic ie n t to e sta blish m ate ria lity
. J

ac ob & Youngs v . K

e n t , 129 N.E. 889, 891 (N.Y. 1921) (“ Inte ntion not othe rwise re ve a le d m ay

be pre sum e d to hold in
c onte m p lation there a sona

ble an d proba

ble . If som e thing e lse is in vie w, it m ust not be le ft to im

plic a tion.” ). Fina lly , a dditiona l fa c t-finding wa s not re quire d be c a use the distric t c ourt a ssum e d a s true W ate rm ill’ s fa c tua l a lle g at ions, le aving only a que stion of la

w. Se e W ILJ EFF, LLC

v . Unite d Re alty

Mgmt. C orp. , 82 A.D.3d 1616, 1617–18 (N.Y. App. Div. 2011).

32. Give n tha t C a ppe l lo’ s a lle ge d

bre a c h of the anti-a ssignm e nt provision wa s not m a te ria l, the FAA provide s no grounds for va c atur. The arbitration a ward wa s not “proc ure d by

. . . fra ud” be c a use W ate rm ill would ha

ve be e n re q uire d to
arbitrate re ga

rdle ss of whe the r C a

p pe llo “ fraudule ntly

c onc e a le d” the a s signm e nt. Se e 9 U.S.C . § 10(a )(1). And the arbitrator did not e xc e e d his powe rs by issuing the a ward, se e 9 U.S.C
. § 10(a )(4), be c a u se W ate rm ill ha d

no de fe nse to
arbitration. M ore ove r, W a te rm ill c ite s no c a se in whic h a c ourt va c ate d

an a ward unde r se c tion 10(a)(4) ba se d on a n a rbitrator’ s fa ilure to c o nside r an a rgum e nt the pa rtie s did not pre se nt during the arbitration. 3. B e c a

use we a ffirm

on othe r grounds, we de c line to c onside r whe the r W a te rm ill’ s c om

pla int wa s untim e ly

unde r the FAA, 9 U.S.C . § 12. AFFIRM E D.

4