2010 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 8-2-2010 

# P aul Gree n S ch of Ro ck M

u sic F v . Jim S mith P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 09-2718

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2010

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2010 D e c i sion s b y an author i z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " P aul Gr e e n S ch of Rock M usic F v . Jim S mith" (2010). 2010 D e cisio n s . P ape r 813. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2010/813NOT P RE CE DE NT I AL U N I TED STA TES C O U RT O F A PPEA LS F O R T H E T H IR D C IR C U IT

__________ N o. 09- 2718

__________ P AUL GREE N SC HOO L OF ROCK M USI C F RANCHI S I NG, LL C. v. J I M R. S M I T H,

A ppel l ant .

__________ ON APPEAL FROM THE U NI TED STATES DI STRI CT CO UR T F O R T H E E A S T E R N D IS T R IC T O F P E N N S Y L V A N IA

( D . C . C i v. A ct i on N o. 08- 05507) D i s t r i ctJ udge: H onor abl e J . C ur t i s J oyner

__________ Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

J une 11, 2010

__________ B efor e: A M B R O , C H A G A R E S, and G R E E N A W A Y , J R . , C i r cui tJ udges

( O pi ni on Fi l ed: A ugus t2, 2010)

__________ OP I NI ON

__________ G R E E N A W A Y , J R . , C i r cui tJ udge J i m R . Sm i t h ( “Sm i t h”) appea l s fr om the U ni t ed St at es D i s t r i ctC our tforthe E as t ern D i s t r i ctof Penns y l vani a’ s confi r m at i on of an a rbi t r at i on aw ar d i n favorof Paul2

G r een School of R ock M us i c Fr anchi s i ng, L L C ( “School of R ock”) on t he gr ound t hatt he arbi t r at or ’ s aw ar d cons t i tut ed mani fes tdi s r egar d of the l aw . Forthe r eas ons expl ai ned bel ow , w e w i l l aff

i r m t he D i s t r i ctC our t ’ s deci s i on.

I . BA CKGROUND W e w ri te s o le ly f

o r t h e p a rt ie s a n d re c o u n t o n ly th e e s s e n tia l f a c ts . T h is d is p u te a ri s e s o u t o f a m u s ic f

ra n c h is e S m ith p u rc h a s e d f ro m S c h o o l o f

R o c k . T he fr anchi s e agr eement( t he “A gr eement ”) betw een the part i es i ncl uded an a rbi t r at i on cl aus e, w hi ch pr ovi ded thatdi s put es , cl ai m s , orcontr over s i es r el at i ng t o t he A gr eement t hatcoul d notbe r es ol ved bym edi at i on w oul d be s ett l ed byarbi t r at i on conduct ed byt he A m er i can A rbi t r at i on A s s oci at i on ( “A A A ”) i n Phi l adel phi a. T he A gr eemental s o s t at ed th a t itsh a ll b e in terp re ted a n d c o n stru e d e x c lu siv e lyu n d e r th e law s o f th e C o m m o n w e a lth o f P e n n s y lv a n ia . School of R ock s ubm i t t ed t o t he A A A a demand forarbi t r at i on. I n t he demand, School of R ock cl ai m ed thatSm i t h di d notpr oper l yr epor thi s r oy al t i es t o School of R ock. O n M ar ch 12, 2008, Sm i t h fi l ed, i n t he U ni t ed St at es D i s t r i ctC our tforthe C entr al D i s t r i ctof C al i forni a, a mot i on t o compel arbi t r at i on i n C al i forni a. T he gr ounds of the m ot i on w er e thatt he forum - s el ect i on and choi ce- of- l aw pr ovi s i ons i n t he arbi t r at i on cl aus e of the A gr eementar e unenf or cea bl e bec aus e theyar e uncons ci onabl e under C a lif o rn ia la w .S m ith d o es n o t argu e tha t Sc h o o l of R o ck v iolated th e term s o f S ch o o l of R o ck I. 1 3 O n M a y5 , 2 0 0 8 , the U n ited S tate s D istric t C o u rt f o r th e D istric t o f

C a lifo rn ia i s s ued an opi ni on and or derdeny i ng Sm i t h’ s m ot i on. Sm i t h v. Paul G r een Sch. of R ock M u s i c F r a n c h i s i n g , L L C ( S c h o o l o f Ro c k I ) , No . CV 0 8 - 0 0 8 8 8 , 2 0 0 8 WL 2 0 3 7 7 2 1 ( C. D. C al . M ay5, 2008) . T he courthel d t hatthe forum s el ect i on and choi ce of l aw pr ovi s i ons o f th e A g ree m en t are en fo rce ab le, b u t no ted th at i ts ho lding w as “ co n ti n g en t” on S m ith ’s abi l i t y“t o pur s ue hi s [C al i forni a Fr anchi s e I nves t m entL aw ] r i ght s and r emedi es dur i ng arbi t r at i on i n t he Penns y l vani a forum . ” I d. at*5. T he courtfur t herpr ohi bi t ed School of R ock fr om t aki ng “a pos i t i on befor e the arbi tr at orthatw oul d be i ncons i s t entw i t h t he r epr es ent at i ons m ade he r e i n s eeki ng enfor cementof forum s el ect i on and choi ce of l aw p rov isi o n s. ” Id . T h e re leva n t r ep rese n tat ion S ch o o l of R o ck m ad e w as th at “S m ith ’s r i ght s undert he [Cal i forni a Fr anchi s e I nves t m entL aw ] w i l l notbe di m i ni s hed by e n f o rc e m e n t o f

a rb itr a tio n in P e n n s y lv a n ia .” Id . O n A p ril 1 , 2 0 0 8 , S c h o o l o f R o c k f iled a n a m e n d e d d e m a n d f o r a rb itratio n w ith t he A A A i n Phi l adel phi a. School of R ock s oughtan i nj unct i on, an aw ar d of m oney damages , and att or ney ’ s fee s and cos t s . Sm i t h ans w er ed School of R ock’ s cl ai m s , and fi l ed count er cl ai m s , pur s uantt o t he C al i forni a Fr anchi s e I nves t m entL aw ( “C FI L ”) . T he par t i es fi l ed pr e- arbi t r at i on br i efs on J ul y31, 2008. I n i t s pr e- arbi t r at i on br i ef, School of R ock addr es s ed s ubs t ant i vel ySm i t h’ s C FI L count er cl ai m s , i n acc or d w i t h School of R o ck I. 1T he arbi t r at oral s o or der ed thatSm i t h s hal l payal l cos t s as s oci at ed w i t h t he arbi t r at i on 2 pr ocee di ng. S e c tio n 9 o f

th e F A A p ro v id e s, in p e rtin e n t p a rt: 3 4 O n N ovember18, 2008, t he arbi t r at ori s s ued hi s aw ar d. Fi r s t , the arbi t r at orfound t hatSm i t h br eac hed the A gr eement , and r equi r ed Sm i t h t o pay$401, 748 t o School of R ock. Second, t he arbi t r at ordi s m i s s ed Sm i t h’ s C FI L count er cl ai m s . T hi r d, the

2 arbi t r at orenfor ced the A gr eement ’ s pos t - t erm i nat i on r es t r i ct i ve cove nant , w hi ch pr ovi ded: T he R es pondents hal l not , fora cont i nuous uni nt errupt ed per i od of tw o ( 2) y ear s comm enci ng upon t he dat e her eof, ei t herdi r ect l yori ndi r ect l y , for i t s el f, ort hr ough, on behal f of, ori n conj unct i on w i t h anyper s on orl egal ent i t y , ow n, m ai nt ai n, oper at e, engage i n, be empl oy ed by , pr ovi de assi st ance to, or have anyi nter esti n (as ow ner or otherw i se) anybu si ness t hat( a) ( 1) i s s ubs t ant i al l ys i m i l art o a Paul G r een School of R ock s chool ; or ( i i ) offe r s ors el l s s ervi ces t hatar e the s ame as ors i m i l art o t he s ervi ces bei ng offe r ed byt he Fr anchi s ed B us i nes s underthe Sy s t em, i ncl udi ng but n o t li m ited to , m u sic in stru c tio n o r liv e m u sic p e rf o rm a n c e s; a n d (b ) is, o r is i nt ended t o be, l ocat ed atorw i t hi n: 17. 3. 1 A gour a H i l l s , C al i forni a; 1 7 . 3 . 2 T en (10 ) m il es o f A g o u ra H il ls, C ali fo rnia; or 17. 3. 3 T en ( 10) m i l es of anybus i nes s oper at i ng underthe Paul G reen Sc ho ol of R ock M usi c S y st em and the P ropri et aryM arks. O n N ovember21, 2008, School of R ock fi l ed a mot i on t o confi r m the arbi t r at i on aw ar d, pur s uantt o t he Feder al A rbi t r at i on A ct( “FA A ”) , 9 U . S. C . § 9, i n t he D i s t r i ct C our tfort he East ern D i s t r i ctof Penns y l vani a. O n J anuary12, 2009, Sm i t h fi l ed an 3If the p arti es in their ag ree m en t hav e a g ree d that a jud g m en t of the c o u rt sh a ll b e e n ter e d u p o n th e a w a rd m a d e p u rsu a n t to th e a rb itratio n , an d sh a ll s peci fyt he court , t hen atanyt i m e w i t hi n one y earaft erthe aw ar d i s m ade anypar t yt o t he arbi t r at i on m ayappl yt o t he courts o s peci fi ed foran or der confi r m i ng t he aw ar d, and ther eupon the courtm us tgr ants uch an or der unl es s t he aw ar d i s vaca t ed, m odi fi ed, orcorr ect ed as pr es cr i bed i n s ect i ons 10 and 11 of thi s t i t l e. I f no courti s s peci fi ed i n t he agr eementof the par t i es , t hen s uch appl i cat i on m aybe made t o t he U ni t ed St at es cour ti n and fort he di s t r i ctw i t hi n w hi ch s uch aw ar d w as m ade. 9 U . S. C . § 9. 5 answ er and aff

i rm at i ve d efen ses t o S cho ol of R ock ’s m oti on . A m on g o t her ar gu m ents , Sm i t h as s er t ed thatt he arbi t r at ors how ed a mani fes tdi s r egar d of the l aw by( a) i gnor i ng t he C FI L , and ( b) enfor ci ng the A gr eement ’ s pos t - t erm i nat i on r es t r i ct i ve cove nant , w hi ch v io la te s th e C a lif

o rn ia B u s in e s s a n d P ro f e s s io n a l C o d e . I n an opi ni on i s s ued on February17, 2009, the D i s t r i ctC our tgr ant ed School of R o c k ’s m o tio n to c o n f

irm th e a rb itratio n a w a rd . P a u l G re e n S c h . o f R o c k M u sic F r a n c h i s i n g , L L C v . S mi t h ( S c h o o l o f Ro c k I I ) , No . 0 8 - c v - 5 5 0 7 , 2 0 0 9 WL 4 2 6 1 7 5 ( E . D. P a. F eb . 1 7 , 2 0 0 9 ). O n M ay1 2 , 2 0 0 9 , the D istri ct C o u rtg ran ted S ch o o l of R o ck ’s m ot i on forj udgm ent , or der ed Sm i t h t o paya moneyj udgm entof $416, 193. 00 pl us i nt er es tt o School of R ock, and enf or ced the A gr eement ’ s pos t - t erm i nat i on r es t r i ct i ve covena nt . Sm i t h appea l s School of R ock I I , ar gui ng thatthe arbi t r at or ’ s di s m i s s al of Sm i t h’ s C FI L count er cl ai m s and enf or cementof the pos t - t erm i nat i on r es t r i ct i ve cove nant c o n s t i tu t e ma n i f

e s td i s r e g a r d o f

t h e l a w. I I . J URI S DI CTI ON AND S TANDA RD O F REVI EWS m i t h st at es the is sue as w hether“t he arbi t rat or’ s aw ard con st i tutes a m anifest 4 d isr eg ard fo r th e law u n d er T it le 9 U . S . C . § 1 1 . ” (A p p ell an t’ s B r. at 1.) S m ith , h o w ev er, as ks t hi s C our tt o vaca t e, notm odi fy , the arbi t r at or ’ s aw ar d. ( See A ppel l ant ’ s B r . at19 ( “Fort he for egoi ng r eas ons , J i m R . Sm i t h pr ay s thi s C our tvaca t e the February17, 2009 O rde r an d M ay1 2 , 2 0 0 9 Ju d g m en t i n P au l G ree n ’s fa v o r an d ag ains t Ji m R . S m ith . ”).) V a c a tu r i s p ro p e rl ys o u g h t u n d e r § 1 0

— n o t § 1 1 , w h ic h a d d re s s e s a w a rd m o d if ic a tio n . Fur t her , w e have appl i ed the mani fes tdi s r egar d doctr i ne onl yi n t he cont extof § 10 m ot i ons t o vaca t e, and noti n t he cont extof § 11 m ot i ons t o m odi fy . See D l uhos v. St r as ber g, 321 F. 3d 365, 369 ( 3d C i r . 2003) ( “the j udi ci al l ycr eat ed ‘ m ani fes tdi s r egar d of the law ’ st an d ard all o w s a d istri ct co u rtto v ac ate a n arb itrati o n aw ard ”); L o ca l 86 3 Int’l B hd. of Team s t er s , C hauff eur s , W ar ehous emen & H el per s of A m . v. J er s eyC oas tE gg P ro d u c e rs, In c ., 7 7 3 F .2 d 5 3 0 , 5 3 3 (3 d C ir. 1 9 8 5 ) (“ A n a w a rd m a yb e se t as id e o n lyin l i m i t ed cir cum st ances, for exam ple, w here the arbi t rat or’ s deci si on evidences m anifest di s r egar d fort he l aw r athert han an e r r oneous i nt erpr et at i on of the l aw . ” ( ci t i ng W i l ko v. 6 T h e D is tr ic t C o u rt h a d s u b je c t m a tte r j u ri s d ic tio n , p u rs u a n t to 9 U .S .C . § 9 . Sect i on 9 pr ovi des t hatan appl i cat i on t o confi r m an arbi t r at or ’ s aw ar d “maybe made by t he U ni t ed St at es cour ti n and fort he di s t r i ctw i t hi n w hi ch the aw ar d w as m ade. ” The a w a rd w a s is su e d in P h ilad e lp h ia. T h is C o u rt h a s ju risd ictio n o v e r th e a p p e a l, pu rsu a n t to 2 8 U .S .C . § 1 2 9 1 , b e c a u se th e D istric t C o u rt issu e d a f in a l d e c isio n d isp o sin g o f a ll p a r t i e s ’ c l a i ms . I n r e v i e wi n g a d i s t r i c tc o u r t ’ s o r d e rc o n f i r mi n g a n a rb i t r a t i o n a wa r d , we revi ew t hat court ’s factual fi nd i ng s for cl ear error , and i t s l egal conclusi on s de novo . C hi na M i nm et al s M at er i al s I m p. & E xp. C o. , L t d. v. C hi M ei C orp. , 334 F. 3d 274, 278 ( 3d C i r . 2003) ( ci t i ng Fi r s tO pt i ons of C hi cago, I nc. v. K apl an, 514 U . S. 938, 947- 48 (19 9 5 )). III . A N A L Y S IS Sect i on 10 of the FA A pr ovi des the l i m i t ed gr ounds on w hi ch a di s t r i ctcour tm ay vaca t e an a rbi t r at i on aw ar d: 4Sw an, 346 U . S. 427, 436 ( 1953) ) ) . T hus , w e cons t rue Sm i t h’ s ar gum entas one s eeki ng

vaca turof the arbi tr at or ’ s aw ar d. See al s o School of R ock I I , 2009 W L 426175, at*3 (c o n stru in g a s a m o tio n to v a c a te S m ith ’s o p p o sitio n to S c h o o l o f R o c k ’s m o tio n to co n firm the a rbitrator’s aw ard ). I n H al l St r eet , t he Supr eme C our tcons i der ed w hetherthe FA A ’ s “gr ounds forpr om pt 5 v ac atur a n d m o d ifi ca ti o n m ayb e su p p lem en ted b yco n tr ac t. ” 5 2 2 U . S . at 57 8 . T h e C o u rt hel d t hatt he s t atut or ygr ounds es t abl i s hed i n t he FA A forpr om ptvaca turand m odi fi cat i on ar e exc l us i ve. I d. at580. I n s o hol di ng, the C our taddr es s ed the ar gum ent t hat“expa ndabl e j udi ci al r evi ew author i t yhas been a cce pt ed as the l aw s i nce W i l ko v. S w a n ,” in w h ich th e C o u rt sta ted th a t “th e in terp re tatio n s o f th e law b yth e a rb itrato rs in contr as tt o m ani fes tdi s r egar d [of the l aw ] ar e nots ubj ect , i n the fe der al cour t s , t o j udi ci al r evi ew forerr ori n i nt erpr et at i on. ” I d. at584 ( m odi fi cat i on i n or i gi nal ) ( quot i ng W i l ko v. Sw an, 346 U . S. 427, 436- 37 ( 1953) ) . I n H al l St r eet , the part yr eques t i ng vaca turar gued t hat , underW i l ko, j udges can a dd gr ounds t o vaca t e an a rbi t r at or ’ s deci s i on, and that par t i es s houl d al s o be abl e t o add gr ounds forvaca turbyagr eement . I d. at585. T he C our tdi s agr eed: 7 (1) w here the aw ard w as procured bycorrup t i on , fraud, or und ue m eans; ( 2) w her e ther e w as evi dentpart i al i t yorcorrupt i on i n t he arbi t r at or s , or e i t h e ro f t h e m; ( 3) w her e the arbi t r at or s w er e gui l t yof m i s conducti n r efus i ng t o pos tpone t he hea r i ng, upon s uffi ci entcaus e s how n, ori n r efus i ng t o hearevi dence per t i nentand mat er i al t o t he contr over s y ; orof anyot herm i s behavi orby w hi ch the r i ght s of anypar t yhave be en pr ej udi ced; or ( 4) w her e the arbi t r at or s exce eded thei rpow er s , ors o i m per fec t l yexec ut ed t hem t hata mut ual , fi nal , and def i ni t e aw ar d upon t he s ubj ectm att er s u b m itte d w a s n o t m a d e . 9 U .S .C . § 1 0 . Sm i t h appea l s t he D i s t r i ctC our t ’ s confi r m at i on of the arbi t r at or ’ s deci s i on on t he gr ound t hatt he dec i s i on cons t i tut es m ani fes tdi s r egar d of the l aw . T hi s C our thas noty et addr es s ed w hetherm ani fes tdi s r egar d of the l aw r emai ns a val i d gr ound forvaca t i ng an a rb itratio n a w a rd u n d e r th e F A A , in th e w a k e o f th e S u p re m e C o u rt’s d e c isio n in H a ll S tr ee t A sso c., L . L . C . v . M att el, Inc . , 5 5 2 U . S . 5 7 6 (20 0 8 ). P rio r to H a ll S tre e t, th is 5[ T] h i s i s t o o mu c h f o rW i l k o t o b e a r . Qu i t e a p a r tf r o m i t s l e a p f

r o m a s uppos ed j udi ci al expans i on bycontr act , H al l St r eetover l ooks the fa ctthat t he s t at ementi tr el i es on expr es s l yr ej ect s j us tw hatH al l St r eetas ks for her e, gener al r evi ew foran arbi t r at or ’ s l egal err or s . T hen ther e i s the vaguene s s of W i l ko’ s phr as i ng. M aybe the t erm “mani fes tdi s r egar d” w as m eantt o name a new gr ound forr evi ew , butm aybe i tm er el yr efe r r ed t o t he § 1 0 g ro u n d s c o llec tiv e ly , rath e r th a n a d d in g to th e m . O r, as so m e c o u rts have thought , “mani fes tdi s r egar d” mayhave be en s hor t hand for§ 10( a) ( 3) o r § 1 0 (a)(4), th e p ara g rap h s au tho ri zing v ac atur w h en the a rbitrators w ere “gui l t yof m i s conduct ” or“exc eede d t hei rpow er s . ” Id. T he C ou rtdid not, ho w ever, cl earl yst at e w hether“m anifestdis regar d” survi ved as a j udi ci al , r athert han as a contr actual , gr ound forvaca tur . See St ol t - N i el s en S. A . v. A ni m al Feeds I nt ’ l C orp. , N o. 08- 1198, - - - U . S. - - - - , 2010 W L 1655826, at*7 n. 3 ( 2010) ( “W e do notdeci de w hether‘ m ani fes tdi s r egar d’ s ur vi ves ourdeci s i on i n H al l St r eet[] as an i ndepende ntgr ound forr evi ew oras a j udi ci al gl os s on t he enumer at ed gr ounds for v ac atur se t fo rth at 9 U . S . C . § 1 0 . ”). 8 C our t , al ong w i t h eac h of ours i s t erci r cui t s , had hel d t hatan arbi t r at or ’ s deci s i on m aybe vaca t ed on the gr ound t hatt he arbi t r at orexhi bi t ed mani fes tdi s r egar d forthe l aw . See D lu h o s v . S tra sb e rg , 3 2 1 F .3 d 3 6 5 , 3 7 0 (3 d C ir. 2 0 0 3 ) (“ A d istric t co u rt m a ya lso v a c a te an arb itrator’s d ec isi o n w h ere the a rbitrator’s d ec isi o n ‘ev iden ce [s] a m an ifest disreg ard f o r th e law ra th e r th a n a n e rro n e o u s in terp re tatio n o f th e law .’” ( m o d if

ica tio n in o rig in a l) ( quot i ng L ocal 863 I nt ’ l B hd. O f Team s t er s v. J er s eyC oas tE gg Pr oducer s , I nc. , 773 F. 2d 530, 534 ( 3d C i r . 1985) ) ) ; C i t i gr oup G l obal M arket s , I nc. v. B acon, 562 F. 3d 349, 353- 54 & 353 n. 3 ( 5t h C i r . 2009) ( l i s t i ng r ecogni t i on of the mani fes tdi s r egar d doctr i ne byeac h c ir c u it c o u rt o f

a p p e a ls ).O n one hand, t he Second a nd N i nth C i r cui t s have he l d t hatm ani fes tdi s r egar d s ur vi ves 6 H al l S t reetas a val i d g round for vacatur , becau se arbitrat ors w ho exh i bitm anifest di s r egar d fort he l aw have “ exce eded thei rpow er s ” under9 U . S. C . § 10( a) ( 4) . C om edy Cl ub I nc . v. I mpr ov W . A s s oc s . , 55 3 F. 3d 12 77 , 12 90 ( 9th Ci r . 20 09 ) ; St ol t - N i e l s e n SA v. A ni m al Feeds I nt ’ l C orp. , 548 F. 3d 85, 93- 95 ( 2d C i r . 2008) , overrul ed on other g r o u n d s , N o . 0 8 - 1 1 9 8 , - - - U . S . - - - - , 2 0 1 0 W L 1 6 5 5 8 2 6 ( 2 0 1 0 ) ; s e e a l s o C o f f e e B e a n e r y, L t d. v. W W , L . L . C . , 300 F. A pp’ x 415, 418- 19 ( 6th C i r . 2008) ( hol di ng, i n an u n p u b li sh ed o p inion , that m an ifest disreg ard su rviv es H all S tr ee t as a n o n -st atuto ry gr ound forvaca tur ) . O n t he otherhand, the Fi fth and El eventh C i r cui t s have he l d t hat m a n if e s t d is re g a rd o f

th e la w is n o lo n g e r a v a lid g ro u n d f o r v a c a tu r p o s t- H a ll S tr e e t. F raz ier v. C it iFina n cial C o rp., L L C , N o s. 0 8 -15 1 8 8 , 0 8 -10 5 6 , 0 8 -15 7 0 9 , --- F . 3 d --- -, 2010 W L 1727446, at*10 ( 11t h C i r . A pr i l 30, 2010) ; C i t i gr oup G l obal M arket s , 562 F. 3d at 35 7 ; see a lso R am o s-S an ti ag o v . U n it ed P arc el S erv . , 5 2 4 F . 3 d 1 2 0 , 1 2 4 n . 3 (1st C ir . 2008) ( s t at i ng, i n di ctum , t hatm ani fes tdi s r egar d i s no l ongera val i d gr ound forvaca t i ng o r m o d ify ing an arb itral aw ard ). 9 In the w ake o f H al l S t reet , a ci rcui tspl i thas em erged regardi ng w hetherm anifest d isr eg ard o f th e law rem ains a v ali d g rou n d fo r va ca tur. T hi s C our thas noty etent er ed 6 t hatdebat e. See B apu v. C hoi ce H ot el s I nt ’ l I nc. , N o. 09- 1011, 2010 W L 925985, at*3 ( 3d C i r . M ar . 16, 2010) ( “W hi l e ours i s t erci r cui t s ar e s pl i ton t hi s ques t i on [of w hether m ani fes tdi s r egar d of the l aw byan arbi t r at orw oul d cont i nue t o exi s tas an i ndepende nt bas i s forvaca tur ] , w e have y ett o rul e on i t . ”) ; A ndor r a Servs . I nc. v. V enfl eet , L t d. , 355 F . A p p ’x 6 2 2 , 6 2 7 (3 d C ir. 2 0 0 9 ) (“ W h e th e r [ m a n if e st d isre g a rd o f

th e law ] c o n tin u e s to exi s tt odayas an i ndepende nt , vi abl e gr ound forvaca tur[i s ] an i s s ue w e nee d notdeci de, [bec aus e] t hi s cas e does notevi dence one of thos e extr emel ynarr ow ci r cumst ance s s uppor t i ng an i s s ue t o vaca t e. ” ( ci t at i on and i nt ernal quot at i on m arks om i t t ed) ) . B as ed on t he fa ct s of t his case, w e need no tdecide w hetherm anifestdis regar d o f t he law rem ai ns, af ter H all S tr ee t, a v ali d g rou n d fo r va ca tur.10

B e f o re H a ll S tre e t, th is C o u rt h e ld th a t an a rb itrato r’s a w a rd “ m a yb e se t as id e o n ly i n li m i t ed cir cum st ances, for exam ple, w here the arbi t rat or’ s deci si on evidences m anifest di s r egar d fort he l aw r athert han an e r r oneous i nt erpr et at i on of the l aw . ” Local 863, 773 F. 2d at533 ( ci t i ng W i l ko, 346 U . S. at436) ; s ee a l s o D l uhos , 321 F. 3d at370; M etrom ed ia E n erg y , Inc . v . E n serc h E n erg yS erv s. , Inc . , 4 0 9 F . 3 d 5 7 4 , 5 7 8 (3d C ir . 2005) . “The cour tm aynotr eeva l uat e s uppos ed i ncons i s t enci es i n t he arbi t r at or ’ s l ogi c or r evi ew t he mer i t s of the arbi t r at or ’ s deci s i on. ” Local 863, 773 F. 2d at534. R ather , as t he S ec o n d C ir cu itex p lai n ed in S tolt -N iel sen , the p artysee k ing to v ac ate a n arb itrator’s deci s i on on t he gr ound of m ani fes tdi s r egar d of the l aw m us tdemonstr at e thatthe a rb itrato r (1 ) k n e w o f

th e re lev a n t leg a l p rin c ip le, (2 ) a p p re c iate d th a t th is p rin c ip le contr ol l ed the out come of t he di s put ed i s s ue, and ( 3) nonethel es s w i l l ful l yfl out ed the g o v e rn in g la w b yre f

u s in g to a p p ly it. 5 4 8 F .3 d a t 9 5 . S m ith co n tend s tha t th e D istri ct C o u rterred b yco n firm ing the a rbitrator’s aw ard beca us e the arbi t r at orfai l ed t o cons i derSm i t h’ s cl ai m s m ade pur s uantt o t he C FI L , as re q u ire d b yS c h o o l o f

R o c k I. S p e c if

ica lly , S m ith a rg u e s th a t S c h o o l o f R o c k m a ter ially m i s r epr es ent ed thati tt aughtm us i c t o i t s s tudent s , w hen s tudent s ar e notpr ovi ded in stru c tio n b yS c h o o l o f R o c k o n h o w to re a d o r w rite m u sic ; an d th a t ith a d a ro c k m u sic curr i cul um , w hen the curr i cul um m er el ycons i s t ed of s ongs thatSchool of R ock thought “cool , ” w i t houtanycorr el at i on t o s ki l l l evel ort echni que. Sm i t h al s o as s ert s thatSchool11

of R ock provided d i fferentt erm s i n the A greem ent than tho se provi ded t o h i m atl east f o u rt e e n d a y s p ri o r t o its e x e c u tio n . Th e Di s t r i c tCo u r tf

o u n d t h a t“ t h e a rb i t r a t o rs p e c i f i c a l l yd i s mi s s e d c o u n t e r c l a i ms t hatSm i t h m ade pur s uantt o [the] C FI L . ” School of R ock I I , 2009 W L 426175, at*3. T he br i efs s uppl i ed t o t he arbi t r at orbyboth t he pl ai nt i ff a nd the def endant f u llya rg u e d th e c o u n ter c laim s p re se n ted u n d e r C F IL ; [ S c h o o l o f R o c k ] d id notar gue thatt he C FI L cl ai m s s houl d notbe hea r d, buts i m pl yar gued agai ns tt hem. C l ear l y , t he arbi t r at orw as aw ar e of the C FI L cl ai m s and the ar gum ent s on bot h s i des . W i t hi n hi s aw ar d t he arbi t r at ors peci fi cal l ynot es t hathe di s m i s s ed Sm i t h’ s count er cl ai m , i . e. hi s C FI L cl ai m s . T her e i s no evi dence t hatt he arbi t r at orcons ci ous l ychos e t o i gnor e pr i nci pl e. [School o f Ro c k ] p r o v i d e d f

a c tu a l a n d l e g a l a r g u me n ta g a i n s tS mi t h ’ s CF I L c l a i ms an d the a rbitrator clea rl yruled in f av o r of [S ch o o l of

R o ck ]. Id . (cita tio n s o m itt e d ). T h e se f in d in g s a re u n c o n tes ted b yS m ith , an d re f u te h is con t enti on t hat the arbi t rat or i gn ored his C F IL co un t ercl ai m s. S m ith a ls o a rg u e s th a t th e a rb itr a to r e rr o n e o u s ly ap p lie d th e la w to th e s e f a c ts . O u r c a se law m a k e s c lea r th a t an a rb itrato r w ill n o t b e f o u n d to h a v e m a n if

e stly d i s r e g a r d e d t h e l a w f

o ra l l e g e d e r r o r s i n i t s a p p l i c a t i o n . L o c a l 8 6 3 , 7 7 3 F . 2 d a t5 3 4 . We agr ee w i t h t he D i s t r i ctC our tt hatt he arbi t r at ordi d notm ani fes t l ydi s r egar d t he l aw re g a rd in g S m ith ’s C F IL c o u n te rc la im s . Fi nal l y , Sm i t h ar gues t hatt he arbi t r at or ’ s deci s i on t o enfor ce the pos t - t erm i nat i on r es t r i ct i ve cove nantagai ns tSm i t h cons t i tut es m ani fes tdi s r egar d of both C al i forni a and Penns y l vani a l aw . Sm i t h’ s pr i m aryar gum enti s thatC al i forni a B us i nes s and Pr ofes s i ons C o d e § 1 6 6 0 0

— w h ich is n o t part of the C F IL an d w as n o t add resse d b ythe D istri ct C o u rtT h e D istri ct C o u rtfu rth er h eld th at, ev en if sec ti o n 1 6 6 0 0 ap p li ed , itw o u ld sti ll co n firm 7 t he arbi t r at or ’ s deci s i on beca us e School of R ock pr ovi ded fa ctual and l egal s uppor tfor th e p ro p o s itio n th a t s e c tio n 1 6 6 0 0 d o e s n o t a p p ly to th e u s u rp a tio n o f tr a d e s e c re ts . School of R ock I I , 2009 W L 426175, at*3. School of R ock al l eged thatSm i t h us urped tr a d e s e c re ts . S e e id . H e re , to o , w e c o n c u r w ith th e D is tr ic t C o u rt ’s a n a lysis . 12 i n School of R ock I

— i nval i dat es t he A gr eement ’ s r es t r i ct i ve cove nant , and thatthe arbi t r at or ’ s deci s i on t o enfor ce the cove nantther ebycons t i tut es m ani fes tdi s r egar d of the l aw . Sect i on 16600 s t at es : “Exceptas pr ovi ded i n t hi s chapt er , everycontr actbyw hi ch any one i s r es t r ai ned fr om engagi ng i n a l aw ful pr ofes s i on, tr ade, orbus i nes s of anyki nd i s t o t hatext entvoi d. ” T h e D istric t C o u rt c o n c lu d e d th a t S c h o o l o f R o c k I d id n o t re q u ire th e a rb itrato r to a p p lyC a lifo rn ia la w in th is in sta n c e : W hi l e [the] C FI L [] w as t o be appl i ed bas ed on a c hoi ce of l aw anal y s i s and r epr es ent at i ons m ade i n t he C entr al D i s t r i ctof C al i forni a C our tby[School o f R o c k ], th e c h o ice o f

law p ro v isio n f

o r P e n n sy lv a n ia la w w a s s til l h e ld val i d and enf

or cea bl e i n al l otherr es pect s . T hus , thi s C our tw i l l not in d e p e n d e n tlyp re su m e th a t C a lifo rn ia B u sin e ss & P ro f e ss io n s C o d e sh o u ld h a v e b e e n a p p lie d b yth e a rb itr a to r. School of R ock I I , 2009 W L 426175, at*3. T he D i s t r i ctC our tneed nothave de t erm i ned t hatPenns y l vani a l aw appl i es t o t he r es t r i ct i ve cove nant . R ather , i tw oul d have be en enough t o fi nd t hatt he arbi t r at ordi d notw i l l ful l yfl outknow n, governi ng l aw i n r eadi ng S c h o o l o f

R o c k I t o h o ld th a t C a lif o rn ia la w d o e s n o t a p p ly to th e re s tr ic tiv e c o v e n a n t. L ocal 863, 773 F. 2d at533. H er e, the arbi t r at orpl ai nl ydi d notw i l l ful l yfl outknow n, governi ng l aw , beca us e, as t he D i s t r i ctC our tobs erved, s ect i on 16600 i s notpartof the CFI L. 713

A l t ernat i vel y , Sm i t h ar gues thatthe r es t r i ct i ve cove nanti s i nval i d under P e n n sy lv a n ia la w . T h e D istric t C o u rt c o n c lu d e d th a t th e n o n -c o m p e te p ro v isio n is v a lid underPenns y l vani a l aw . School of R ock I I , 2009 W L 426715, at*3 ( ci t i ng Pi er ci ng Pagoda, I nc. v. H offman, 351 A . 2d 207 ( Pa. 1976) ) . Pi er ci ng Pagoda uphel d a r es t r i ct i ve covena nti n t he cont extof a f r anchi s ee/ fr anchi s orr el at i ons hi p. Pi er ci ng Pagoda, 351 A . 2d at21 1 (holdi ng t hat a r estri ct i ve co ven ant w i l l be u ph el d w here a franchis or has a p rotec table intere st i n the s ale o f h is fran ch ise). A s p rev iou slyn o ted, th e D istri ct C o u rt need nothave de t erm i ned thatPenns y l vani a l aw perm i t s r es t r i ct i ve cove nant s of the type ati s s ue her e. I ti s enough fora courtt o det erm i ne that , as w as true i n t hi s cas e, an arbi t r at or ’ s deci s i on w as nota w i l l ful fl out i ng of know n, governi ng l aw . L ocal 863, 773 F. 2d at533. I V. CO NC L US I ON Fort he for egoi ng r eas ons , w e w i l l aff i r m the D i s t r i ctC our t ’ s confi r m at i on of the a rb itr a to r’ s d e c is io n .