N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
B UR TON WA Y HOTELS, LTD., a C a l ifornia lim ite d pa

rtne rship; e t a l., Pla i ntiffs-Appe lla

nts,
v. FOUR SEASONS HOTELS LIM ITED, a n Onta rio C a na da c orporation, De fe nda n t-Appe l le e . No. 14-56846 D.C . No. 2:11-c v-00303-PSG-PLA
M EM O R ANDUM *

Appe a l from

the Unite d

Sta t e s Distric t C ourt for the C e ntra l Distric t of C a lifornia Philip S. Gutie rre z , Distric t Judge , Pre siding Argue d and Subm i tte d

Oc tobe r 6, 2016 Pa sa de n a , C a l ifornia B e fore : REINHAR

DT, OW E NS, and FR IEDLAND, C irc uit Judge s . B urton W ay

Hote ls (“ B urton W ay ” ) a p pe a ls from

the distric t c ourt’ s
c onfirm ation of a

n a rbitration a

ward in fa

vor of Four Se a sons Hote ls Lim ite d (“ Four Se a sons” ). W e have jurisdic tion pursua nt to 28 U.S.C . § 1291. Unde r the



# FIL ED OCT 18 2016 M OLLY C. DW Y ER, CLERK U

. S

. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t 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.arbitration a gre e m e n t , we re vie w issue s of la w de nov o but do not re vie w the
arbitration pa

ne l’ s findings of fa c t. W e re v e rse an d re m a n d the de c ision of the distric t c o urt in pa

rt, a nd a ffirm in pa rt. 1. W e hold tha

t the distric t c ourt e rre d in c o nfirm ing the arbitrat ion pa ne l’ s gran t of sum

m ary judgm e n t to Four Se a sons on B urton W ay ’ s c la im tha t Four Se a sons bre a c h e d the pa

rtie s’ 1998 Hote l M ana ge m e nt Agre e m e nt (“ HM A” ). Unde r C a lifornia

c ontra c t la

w, e xtrinsic e vide nc e is a dm i ssible whe n the offe re d e vide nc e is “ re le va nt to prove a

m e aning to whic h the la

ngua ge of the instrum e nt is re a sona

bly susc e ptible .” First N

at’l. Morg. C

o v . Fe de ral Re alty

Inv
. Trust , 631 F.3d 1058, 1067 (9th C ir. 2011) ( quoting Pac . Gas & Ele c . C o. v . G. W

. Thomas Dray age & Rigging C o. , 442 P.2d 641 (C a l. 1968)). If the c ontra c t is
re a s ona bly susc e ptible to both pa

rtie s’ inte rpre tations, a

c onflic t in the e vide nc e pre s e nte d “ m

ust be re solve d in the tria l c ourt, a s with a ny que s tion of fa c t , be fore the c ourt c an de c la

re the m e aning of the c ontra c t a s a m a tte r of la

w.” W olf v

. Supe rior C

ourt , 8 C a l. R

ptr. 3d 649, 662 (C t . App. 2004) (quoting S. C al. Edison C o. v . Supe rior C

ourt , 44 C a l. R

ptr. 2d 277 (C t. App. 1995)), as modifie d on de nial of re h'g (Fe b. 19, 2004); se e More y v . Vannuc c i , 75 C a l. R

ptr. 2d 573, 579 (C t. App. 1998) (sta

ting tha t it is the “ trie r of fa c t” who m

ust “ re solve any c onflic t in the e xtrinsic e vide nc e . . . a dm itte d to inte rpre t the la ngua ge of a

c ontra c t” ).
2Se c tion 26.01(a ) of the 1998 HM A sta

te s tha t Four Se a s ons m a

y not “ own, le a se , m ana ge or ope ra t e in whole or pa rt, or c ontra c t or lic e nse any of the Four Se a sons Ope ra tion B e ne fits for use in c onne c t ion with,”any hote l within fourte e n
m ile s of the Four Se a s ons Los Ange l e s— the hote l owne d by

B urton W ay

and
m ana ge d by

Four Se a sons. 1 Se c tion 26.01(b) provide s a lim i te d e xc e p tion to this
ra dius re stric t ion, pe rm itting Four Se a sons to “ m ana ge or ope ra te ” the R e ge nt B e ve rly W i lshire hote l, subje c t to spe c ific provisions. B urton W ay a sse rts tha

t § 26.01(b) doe s not giveFour Se a sons the right to provide Four Se a sons Ope ra tiona l B e ne fits (“ FSOB s” ) to the R e ge nt B e ve rly W i lshire , a

n d tha t it is ba rre d from doing so under § 26.01(a ). Four Se a sons c la im s tha t § 26.01(b) doe s in fa c t a llow it to provide

FSOB s to the R e ge nt B e ve rly W ilshire , a s pa

rt of its broa de r right to

“ m ana ge and ope ra te ” the hote l. At a rbitra tion, e a c h pa

rty pre se nte d e xtrinsic e vide nc e fa voring its re s pe c tive inte rpre tation of § 26.01. In support of its cla im tha t the 1998 HM A doe s not gra nt Four Se a sons the right to provide the full ra

nge of FSOB s to the R e ge nt B e ve rly

1 “ Four Se a sons Ope ra tiona l B e ne fits” are de fine d in the 1998 HM A a s “ (1) any of the nam e s “ Four Se a sons,” “ Le Quat re Sa i sons,” or “ Inn on the Park,” or any of [Four Se a sons’ ] tra de nam e s, tra de m arks, distinc tive e m ble m s, insignia , logos, sloga

ns, or distinguishing c

ha ra c te ristic s; (2) pa

rtic ipation in a

ny of the c e ntra liz e d re se rva tions, purc h a sing or sa le s a nd m arke t ing sy ste m s . . . or (3) the se rvic e s of [Four Se a sons’ ] se nior m ana ge m e nt pe rsonne l if suc h se rvic e s in (3) a

re m a te ria l , ongoing a

nd provide d on a

c ontra c tua l ba sis.” 3W ilshire , B urton W ay subm itte d de c la

ra tions from

its dire c tor a

nd c o unse l, a s we ll
a s re le v an t c o rre sponde nc e an d dra fts of the 1998 HM A . The se sta te m e nts a nd doc um e nts support B urton W ay ’ s a sse rtion tha t the te rm s “ m ana ge and ope ra te ” in § 26.01(b) do not inc l ude the right to “ c ontra c t or lic e nse FSOB s.” In ruling tha

t the 1998 HM A is not “re a s ona bly susc e p tible ” to B urton W ay ’ s inte rpre tation of thesc ope of § 26.01, the arbitration pa ne l sta t e d tha t Four Se a sons’ e vide n c e “ re but[te d] ” tha t proffe re d by B urton W ay . To re a c h this
c onc lusion, the

pa ne l we ighe d the pa

rtie s’ c onflic ting e v i de nc e , a nd m a de de te rm i na tions of c re dibility re ga rding the ir c om

p e ting de c la

ra tions. W e hold tha

t
suc h fa c t-finding a

t sum m ary judgm e nt by the pa

ne l is le ga l e rror. Unde r C a lifornia la w, inquiry

into there lative m e rits of thee x trinsic e v ide nc e is a m a tte r to be de t e rm i ne d at a

full, e vide ntia

ry he aring. Se e

, e .g. , C ac hil De he Band of W intun Indians of C

olusa Indian C

mty . v . C alifornia , 618 F.3d 1066, 1077 (9th C ir. 2010) (a

pply ing C a lifornia

c ontra c t la w a nd holding tha

t “ whe n the re is a
m a te ria l c onflic t

in e xtrinsic e vide nc e supporting c om pe ting inte rpre tations” the
c ourt m ust “ re nde r the e vide n c e to the fa c tfinde r for e va luation of its c re dibility ” ). W e the re fore re ve rse the distric t c ourt’ s c onfirm a tion of thearbitra tion pa ne l’ s de c ision with re s pe c t to whe the r Four Se a s ons bre a c he d the 1998 HM A by

4providing FSOB s to the R e ge nt B e v e rly W i lshire and re m and for de t e rm i na tion by the finde r of fa c ts. 2. W e a ffirm , howe v e r, the distric t c o urt’ s c o n firm a tion of thearbitration pa ne l’ s ruling tha

t Four Se a sons did not owe B urton W ay a fiduc ia ry duty of disc losure whe n ne gotia

ting the 1998 Am e ndm e n t to the pa rtie s’ 1989 HM A. An
a ge nt is a fiduc ia ry for m atte rs “ within thesc ope of his a ge nc y .” R e sta te m e nt (Se c ond) of Age nc y

§ 13. W h e n the a ge nt “ a c t s on his own a c c ount in a tra nsa c tion in whic h he is e m

ploy e d,” he m

ust “ d e a l fa irly

with the princ ipa l a

nd . . . disc lose to him a ll fa c ts.” R e sta

te m e nt (Se c ond) of Age n c y § 390; s e e also Batson v

. Stre hlow , 441 P.2d 101, 110 (C a l. 1968) (holding tha t with re s pe c t to “ a c ts done by the a ge nt in thec ourse of the a ge nc y ,” he m u st “prove that he a c te d with the utm ost good fa ith towa

rd the princ i pa l a

nd . . . m a de a full disc losure of a ll the fa c t s” ). B urton W a

y a lle ge s tha

t Four Se a sons viola

te d its fiduc ia

ry duty during
ne gotia tions le a ding to the

1998 HM A by fa iling to disc l ose pote ntia l ly a d ve rse inform a t ion re late d to Four Se a sons’ a c quisition of the R e ge nt B e ve rly

W ilshire
. Four Se a sons a lle ge s tha

t it wa s not a c ting within the sc ope of its a ge n c y

whe n
re ne gotia ting its own m

ana ge m e nt c ontra c t. Four Se a sons wa s e m

ploy e d by B urton W ay to be the e xc lusive ope ra tor of the Four Se a sons Los Ange le s . Unde r the 1989 HM A, Four Se a sons wa s B urton
5W ay ’ s a ge nt with re spe c t to the “ ope ra tion, dire c tion, m ana ge m e nt a nd supe rvision” of the Four Se a sons Los Ange le s hote l. It wa s not le g a l e rror for the
arbitration pa

ne l to c onc lude tha

t ne gotia tions be twe e n the two pa

rtie s ove r the te rm s of the ir m ana g e m e nt a gre e m e nt fe ll outside the sc ope of this princ ipa l-a ge nt
re lationship, a

nd tha t Four Se a sons the re fore did not bre a c h its fiduc ia ry duty
. 3. W e a dditiona lly

a ffirm the distric t c ourt’ s c onfirm ation of thearbitration pa ne l’ s ruling tha

t B urton W ay

wa ive d its c la i m

tha t it wa s fra

udule n tly induc e d by Four Se a sons to e n te r into the 1998 HM A. The arbitration pa n e l c onc lude d tha

t B urton W ay

im plic itly wa i v e d its fra

ud c la im s re ga

rding the 1998 a gre e m e nt whe n it subse que ntly

e nte re d into the2010 HM A. Although it inc lude d a c la u se
re se rving le ga l c la im s, the 2010 HM A a l so e xplic itly a ffirm e d the pa

rtie s’ two prior a gre e m e nts. Thus, it wa s not le ga l e rror for the arbitration pa ne l to c onc lude that B urton W ay

wa ive d its c l a im

for fra ud in the induc e m e nt. 2 Se e Sc h midt v

. Me s me r , 48 P. 54, 56 (C a l. 1897) (holding tha t to re ta i n a

c la im for fra u dule nt induc e m e nt, a

pa rty “ m ust not m a ke any

ne w a gre e m e nt or e nga ge m e nt

2 At ora l a rgum e nt, B urton W a

y ra ise d for the first tim e in this a ppe a l the c la im tha t it wa s not a

ware of the fa c ts unde rly ing its a lle ga tion of fra ud prior to signing the

2010 HM A. W e ne e d not a ddre ss this a rgum e nt a s it wa s not brie fe d be fore this c ourt a

nd, a s note d by

the distric t

c o urt, the arbitrat ion pa

ne l m a de an unre vie wa

ble fa c tua l finding tha

t B urton W ay wa s aware of the ba s is for its fra ud c la im be fore it signe d the 2010 HM A. 6re spe c ting” the prior c ontra c t); se e also Oak land Raide rs v . Oak

land-Alame da C

ty
. C olise um, Inc
. , 51 C a l. R

ptr. 3d 144, 151 (C t. App. 2006) (“ [O] ne who, a fte r disc ove ry of a n a lle g e d fra

ud, ratifie s the origina l c ontra c t by e nte ring into a

ne w
a gre e m e nt gra

n t ing him substa n tia l be ne fits with re spe c t to the sa m e subje c t
m a tte r, is de e m e d

to ha ve wa i ve d his right to c la im dam a ge s for fra

udule nt induc e m e nt.” ). 3 4. Fina lly , we re ve rse the distric t c ourt’ s c onfirm a tion of the arbitration pa ne l’ s de te rm ination of sa

nc tions a ga inst Four Se a sons for spolia tion of e vide nc e . The pa ne l’ s sa nc tions ruling re s te d in pa rt on its finding tha

t Four Se a sons’ de struc tion of e vide nc e did not pre judic e B urton W ay

during the arbitration proc e e ding. B e c a

u se we re m and for a

ne w a rbitrat ion on them e rits of B urton W ay ’ s bre a c h of c ontra c t c la i m , we re ve rse the sa nc tions de c ision to a llow the
arbitration pa

ne l to re de te rm ine the que stion of pre j udic e an d the a

ppropria te
re m e dy for spolia

tion.
For the fore going re a sons, we R EVER SE the distric t c ourt de c ision in pa rt and AFFIRM in pa

rt. W e R EM AND for furthe r proc e e dings c onsiste nt with this

3 B e c a u se we a ffirm the distric t c ourt de c i sion tha t the arbitrat ion pa

ne l did not c om m it le g a l e rror in dism issing B urton W a y ’ s fra ud a nd bre a c h of fiduc ia

ry duty c la im s, we ne e d not a ddre ss B urton W ay ’ s a dditiona l a rgum e nt tha

t it wa s e ntitle d to re s c ind the 1998 HM A if it pre va ile d on suc h c la im s. 7m e m o ra ndum d i sposition a n d VAC ATE the arbitration a ward for re de te rm ination following suc h proc e e dings.

8