T hi s di s pos i t i on i s notappr opr i a t e f orpubl i c a t i on a nd i s notpr e c e de nt * e xc e pta s pr ovi de d by 9th C i r . R . 36- 3.

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o r n ia B ef ore: G O U L D and C A L L A H A N , C i rc ui tJudg es , and K O R M A N , S eni or D i stri ct Judg e. ** 

# FI LED JAN 14 2 011 M OLLY C. DW Y ER, CLERK U . S. C O U R T OF APPE ALST he part i es ar e f am i l i arw i th the fa ct s a nd w e r epea tthem here on l y a s 1 ne c e s s a r y t o e xpl a i n ourde c i s i on. 2 M or ga n S t a nl e y D W , I nc . ( “ M S D W ” ) , appe a l s the di s tr i c tc our t ’ s va c a t i on o f an arb i trat i o n aw ard ag ai n stS ee M o re L i g h tIn v estm en t s (“ S M L I”). B ecau se 1 w e f i nd tha tthe C uba n A s s e t s C ontr ol R e gul a t i ons , 31 C . F . R . §§ 515. 101 e t s e q. ( 2009) ( “ C A C R ” ) , a r e not“ w e l l de f i ne d, e xpl i c i t , a nd c l e a r l y appl i c a bl e ” t o the bo nd tra nsac t i on ati ss ue here a nd because i ti s notcl ea r thatthe arbi tra t ors e x e r c is e d a m a n if

e s t d is r e g a r d f

o rth e la w , w e r e v e r s e . F irst, w e d en y M S D W ’s m o ti o n to strik e E x h ib it s 7 -2 3 fr o m S M L I’s supp l em ent al exce rpt s of r ec ord. A l tho ug h S M L I di d n otfol l ow the prop er p ro ced u re t o su p p l em en tth e reco rd , w e ex erci se o u r au th o ri ty t o co n si d er th ese d o c u m e n ts a s th is is th e e x tr a o r d in a r y c a s e in w h ic h th e d o c u m e n ts a r e h e lp f u l to th e c o u r t a n d a r e n o t p r e ju d ic ia l to e ith e rp a r ty . See U ni t ed Stat es v. W

. R . G race , 5 0 4 F .3 d 7 4 5 , 7 6 6 ( 9 th C ir . 2 0 0 7 ) . N ext , w e r ever se the di stri ctcourt ’ s det erm i nat i on thatthe arbi tra t ors a ct ed i n m a n i f e s td i s r e g a r d o f

th e l a w b y f

i n d i n g i n f

a v o ro f MS DW. We r e v i e w a de c i s i on t o va c a t e orc onf i r m a n a rbi tr a t i on a w a r d de no vo . L a gs te in v . C e r ta in U nde r w r i t e rs at

L l oy d’s , L ondon , 60 7 F . 3d 63 4, 64 0 (9t h C i r. 20 10 ). T he bu rden o f e s ta b lis h in g g r o u n d s f

o rv a c a tin g a n a rb itr a tio n a w a r d is o n th e p a r ty s e e k in g it.3

U . S. L i f e I ns . C o. v . Supe r i orN

at ’ l I ns . C o. , 5 9 1 F .3 d 1 1 6 7 , 1 1 7 3 ( 9 th C ir . 2 0 1 0 ) . R e v ie w o f

th e a w a r d is “b o th lim ite d a n d h ig h ly d e f e r e n tia l” b e c a u s e a rb itr a tio n is a f a v o r e d f o r m o f d is p u te r e s o lu tio n . P ow e r A ge nt I nc . v . E l e c . D ata Sys . C or p. , 358 F . 3d 1187, 1193 ( 9th C i r . 2004) ( i nt e r na l quot a t i on m a r ks a nd c i t a t i on o m itte d ) . T he F e de r a l A rbi tr a t i on A c t( “ F A A ” ) l i m i t s the c i r c um s t a nc e s i n w hi c h a f e d e r a l c o u r t m a y v a c a te a n a rb itr a tio n p a n e l’s a w a r d . See 9 U .S .C . § § 9 - 1 0 . S pe c i f i c a l l y , 9 U . S . C . § 10 pr ovi de s , i n pa rt , tha ta c our tm a y va c a t e a n a rbi tr a t i on aw ar d “ w here the arbi tra t ors e xcee ded t hei r pow er s, or so i m perf ec t l y e xecut ed them thata m utual , fi nal , and d ef i ni t e a w ar d u po n the subj ec tm att ersubm i tt ed w as no tm ade. ” I

d. at§ 1 0(a) (4). W h e r e , a s w a s th e c a s e h e r e , th e c la im is th a t th e a rb itr a to r s e x c e e d e d th e ir p o w e r s th e N in th C ir c u it h a s im p o s e d a h ig h s ta n d a r d . “[ A ]rb itr a to r s e x c e e d th e ir p o w ers . . . n o tw h en th ey m erel y i n t erp reto r ap p l y th e g o v ern i n g l aw i n co rrect l y, butw he n the a w a r d i s c om pl e t e l y i r r a t i ona l , ore xhi bi t s a m a ni f e s tdi s r e ga r d of l aw . ” K yoce ra C orp. v. P rudent i al -B ache T . Servs. , Inc. , 3 4 1 F .3 d 9 8 7 , 9 9 7 ( 9 th C i r. 20 03 ) ( i nt ernal qu ot at i on m arks and ci t at i on s om i tt ed). “ ‘ M ani fe stdi sr egar d of the l a w ’ m e a ns s om e thi ng m or e tha n j us ta n e r r ori n the l a w ora f a i l ur e on the partof the arbi tra t ors t o u nd er st and o r app l y the l aw . ” Mi ch. Mut . Ins. C o. v.S M L I di d nots ubm i ta ny e xc e rpt s ore xhi bi t s f r om the a rbi tr a t i on 2 pr oc e e di ng i n s uppor tof i t s m ot i on t o va c a t e the a rbi tr a t i on a w a r d.

4 U ni gar d Se c . I

ns . C o. , 44 F . 3d 826, 832 ( 9th C i r . 1995) . “ I tm us tbe c l e a rf r om the re cord thatthe arbi tra t ors r ec og ni ze d the appl i cabl e l aw and t hen i gn ored i t . ” I d.

“ ‘ A s s uch, m er e a l l egat i on s of e rr or ar e i nsuffi ci ent . ’ ” C ol l i ns v . D . R . H or ton, Inc. , 505 F . 3d 874, 879 ( 9th C i r . 2007) ( quot i ng C art erv. H eal th N et of C al . , Inc. , 37 4 F . 3d 83 0, 83 8 (9th C i r. 20 04 )) . T he di stri ctcourthel d thatthe arbi tra t ors m ani fe st l y di sr egar ded t he l aw wh e n th e y r e c o g n i z e d th a tth e C AC R ap p l i e d t o b o n d tr a n s a c t i o n b e twe e n MS DW and S M L I butfa i l ed t o fi nd thatthe C A C R proh i bi t ed the tra nsac t i on . T he di stri ct court ’ s dec i si on re st s on i t s i nt erpret at i on of the t extof the C A C R . T he di stri ct 2 c o u r t h e ld th a t, u n d e rth e C A C R , “th e s a le o f C u b a n b o n d s u n q u e s tio n a b ly const i tut es a tra nsac t i on as defi ned b y the R egul at i on s, [s o] there i s no d ou btthat th e tr a n s a c tio n b e tw e e n P la in tif f a n d D e f e n d a n t is p r o h ib ite d a n d n u ll a n d v o id . T h e R e g u la tio n s a r e w e ll d e f in e d , e x p lic it, a n d c le a r ly ap p lic a b le , in a c c o r d w ith the N i nth C i r c ui t ’ s r e qui r e m e nti n C art er , 3 7 4 F .3 d a t 8 3 8 .” W e d is a g r e e . W e d o n o t f in d th a t th e C A C R a r e a s “w e ll d e f in e d , e x p lic it, and cl ea rl y app l i cabl e” as di d the di stri ctcourt . F or exam pl e, the di stri ctcourt do es no tdi sc uss the prov i si on se tforth at31 C . F . R . § 5 15 . 20 3(d) thatprov i des a n5

e x c e p tio n f

o rc e r ta in o th e r w is e v o id tr a n s a c tio n s u n d e rth e C A C R . S p e c if ic a lly , it prov i des thattra nsac t i on s thatar e otherw i se nu l l and v oi d, and t here fore une nf or c e a bl e unde rthe C A C R , a r e notvoi d i f the tr a ns f

e rw a s nota “ w i l l f

ul vi ol a t i on” a nd the a c t ordi d notha ve “ r e a s ona bl e c a us e ” t o know of the vi ol a t i on, a nd upon di s c ove r y of

the pos s i bl e vi ol a t i on the a c t or“ [ p] r om pt l y ” r e por t e d the tr a n s a c tio n to th e U .S . T r e a s u r y . I d. H e r e , it is u n d is p u te d th a t th e a rb itr a to r s c o n s id e r e d th e C A C R . A c c or di ngl y the a rbi tr a t or s m a y ha ve c onc l ude d tha tthe e xc e pt i on de s c r i be d i n § 515. 203( d) appl i e d t o the bond tr a ns a c t i on a ti s s ue he r e . S M L I , w hi c h c a r r i e d the bur de n of

pr oof , di d nota ddr e s s w he the rM S D W f e l l w i thi n thi s e xc e pt i on, a nd the di s tr i c tc our tdi d nota ddr e s s thi s e xc e pt i on. M or e ove r , the a rbi tr a t or s m a y ha ve c o n s i d e r e d s o me o th e rp r o v i s i o n o f th e CA CR, o ri n t e rp r e t e d th e CA CR di ff er ent l y, then t he di stri ctcourtdi d. A bsenta s ho w i ng thatthe arbi tra t ors m ani fe st l y di sr egar ded t he C A C R , w e a re com pel l ed t o con fi rm the aw ar d u nd er o u rd e f e r e n tia l s ta n d a r d o f

r e v ie w . Mi c h. Mut . I

ns . C o. , 4 4 F .3 d a t 8 3 2 . W e there fore R EVER SE the di s tr i c tc our t ’ s or de rva c a t i ng the a rbi tr a t or s ’ a w a r d.