Opinion ID: 3064630
Heading Depth: 2
Heading Rank: 3

Heading: the united states’ motion to vacate

Text: Under the FAA, once a controversy has been arbitrated pursuant to a valid arbitration provision and the arbitrator has made an award, either party to the arbitration may file a motion to vacate an arbitration award. See 9 U.S.C. § 10. We consider first the jurisdictional grounds for entertaining the motion, and then turn to the merits of the request for vacatur.
[1] The FAA provides a means of judicial enforcement where a controversy has been arbitrated pursuant to a valid arbitration provision and the arbitrator has made an award. See 9 U.S.C. §§ 9, 10. However, the FAA does not itself confer jurisdiction on federal district courts over actions to compel arbitration or to confirm or vacate arbitration awards, see 9 U.S.C. § 4; Garrett v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 882, 883-84 (9th Cir. 1993), nor does it create a federal cause of action giving rise to federal question jurisdiction under 28 U.S.C. § 1331. See Kehr v. Smith Barney, Harris Upham & Co., Inc., 736 F.2d 1283, 1287 (9th Cir. 1984). As the Supreme Court has explained: The [FAA] is something of an anomaly in the field of federal-court jurisdiction. It creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal-question jurisdic4682 UNITED STATES v. PARK PLACE ASSOCIATES tion. . . . [T]here must be diversity of citizenship or some other independent basis for federal jurisdiction. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n.32 (1983); see also Southland Corp. v. Keating, 465 U.S. 1, 15 n.9 (1984). An action under the FAA is an action in contract to enforce the arbitration provision. See Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 474 (1989) (the FAA was created “to overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate and place such agreements upon the same footing as other contracts” (internal citations and quotations omitted)). Accordingly, as in any contract dispute, to be brought in federal court an action under the FAA must have an independent basis for jurisdiction. See Luong v. Circuit City Stores, Inc. 368 F.3d 1109, 1111 (9th Cir. 2004).7 [2] Section 1345 of Title 28 furnishes an independent basis for federal subject matter jurisdiction for “all civil actions, suits or proceedings commenced by the United States.” 28 U.S.C. § 1345; see United States v. Yakima Tribal Court, 806 F.2d 853, 858 (9th Cir. 1986). Here, the United States commenced civil proceedings when it filed a complaint and motion to vacate the arbitration award in the Central District of California on October 8, 2004. See FED. R. CIV. P. 3. Section 1345 is sufficient to support the district court’s jurisdiction over the motion to vacate even though the United States 7 Typically, the diversity statute, 28 U.S.C. § 1332, supplies jurisdiction for actions under the FAA. See Theis Research, Inc. v. Brown & Bain, 400 F.3d 659, 662 (9th Cir. 2005); Circuit City Stores, Inc. v. Najd, 294 F.3d 1104, 1106 (9th Cir. 2002). The United States, however, is neither a state nor a citizen of a state, and may neither sue nor be sued under § 1332. See 28 U.S.C. § 1332(e); State of Texas v. Interstate Commerce Comm’n, 258 U.S. 158, 160 (1922); United States v. Dry Dock Sav. Inst., 149 F.2d 917, 918 (2d. Cir. 1945) (“Obviously the United States is not a citizen of any state.”). UNITED STATES v. PARK PLACE ASSOCIATES 4683 did not initiate the arbitration proceedings that underlie the current action.8 [3] The FAA also enumerates orders from which an appeal may be taken. Although the denial of a motion to vacate an arbitration award is not one of the specified grounds for appeal,9 the order falls within the catchall provision providing for appeal of “a final decision with respect to an arbitration that is subject to this title.” 9 U.S.C. § 16(a)(3); see Bridas 8 The United States filed a motion to vacate as a defensive measure, and its timing reflects the short statute of limitations governing such motions. Although a party seeking to confirm an arbitration award has one year to apply to a court for confirmation, see 9 U.S.C. § 9, “[n]otice of a motion to vacate . . . an award must be served . . . within three months after the award is filed or delivered,” 9 U.S.C. § 12 (emphasis added). As sovereign, the United States is generally not subject to limitations periods, except “when Congress has expressly created one” such as in the FAA. United States v. Thornburg, 82 F.3d 886, 893 (9th Cir. 1996) (citing Guaranty Trust Co. v. United States, 304 U.S. 126, 133 (1938)). When the arbitration panel entered an award on July 9, 2004, that date triggered the statute of limitations periods for any motions to confirm or vacate under the FAA. The United States timely filed its notice of appeal. 9 An appeal may be taken from—
(A) refusing a stay of any action under [9 U.S.C. § 3], (B) denying a petition under [9 U.S.C. § 4] to order arbitration to proceed, (C) denying an application under [9 U.S.C. § 206] to compel arbitration, (D) confirming or denying confirmation of an award or partial award, or (E) modifying, correcting, or vacating an award. (2) an interlocutory order granting, continuing, or modifying an injunction against an arbitration that is subject to this title; or (3) a final decision with respect to an arbitration that is subject to this title. 9 U.S.C. § 16(a). 4684 UNITED STATES v. PARK PLACE ASSOCIATES S.A.P.I.C. v. Gov’t of Turkm., 345 F.3d 347, 353 (5th Cir. 2003). We have previously found such orders appealable. See Fid. Fed. Bank, FSB v. Durga Ma Corp., 386 F.3d 1306, 1308 (9th Cir. 2004); Sovak v. Chugai Pharm. Co., 280 F.3d 1266, 1271 (9th Cir. 2002). We thus have jurisdiction over the United States’ appeal of the district court’s order pursuant to 28 U.S.C. § 1291.
[43] On appeal, the United States asserts that the district court erred in denying its motion to vacate under 9 U.S.C. § 10. Section 10 restricts the permissible grounds for vacatur to four specified circumstances. In relevant part, § 10 authorizes vacatur “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)(4). We have strictly interpreted this standard, emphasizing that “review of the award itself is both limited and highly deferential.” PowerAgent Inc. v. Elec. Data Sys. Corp., 358 F.3d 1187, 1193 (9th Cir. 2004) (internal quotation marks omitted). As such, “arbitrators exceed their powers in this regard not when they merely interpret or apply the governing law incorrectly, but when the award is completely irrational, or exhibits a manifest disregard of law.” Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 997 (9th Cir. 2003) (internal quotation marks and citations omitted). This means that “ ‘[i]t must be clear from the record that the arbitrators recognized the applicable law and then ignored it. As such, mere allegations of error are insufficient.’ ” Collins, 505 F.3d at 879 (quoting Carter v. Health Net of Cal., Inc., 374 F.3d 830, 838 (9th Cir. 2004)). The United States offers three independent reasons why the arbitration award was in manifest disregard of the law and thus warrants vacatur. First, the United States contends that Park Place waived any right to arbitrate claims against the United States by abandoning its 1997 arbitration demand in UNITED STATES v. PARK PLACE ASSOCIATES 4685 favor of litigation. Second, the United States argues that the arbitration panel should have applied the California rather than the federal statute of limitations. Third, the United States asserts that California partnership law precludes the enforcement of an arbitration award against a general partner where creditors have not first attempted to collect against the partnership. We consider each argument in turn.
The United States first contends that the award was in manifest disregard of the law because Park Place waived its right to arbitration under the JVA. The United States raised the waiver issue before the arbitration panel in its response to Park Place’s arbitration demand and before the district court in its motion to vacate. The panel rejected the United States’ argument without explanation and the district court held it need not revisit the issue. Although the United States asserts that waiver is a question for courts, not arbitrators, we need not address this question because no matter the appropriate decision-maker, our review under 9 U.S.C. § 10 is the same. Because the United States now raises this argument as part of its motion to vacate, we review the arbitration award for whether it exhibits a manifest disregard of the law of waiver. [5] The right to arbitration, like any other contract right, can be waived. See Van Ness Townhouses v. Mar Indus. Corp., 862 F.2d 754, 758-59 (9th Cir. 1988). However, we have emphasized that “waiver of the right to arbitration is disfavored because it is a contractual right, and thus ‘any party arguing waiver of arbitration bears a heavy burden of proof.’ ” Id. at 758 (quoting Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1025 (11th Cir. 1982)). To demonstrate waiver of the right to arbitrate, a party must show: “(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Fisher v. A.G. Becker Paribas Inc., 791 4686 UNITED STATES v. PARK PLACE ASSOCIATES F.2d 691, 694 (9th Cir. 1986).10 The United States cannot satisfy the second or third Fisher requirements. We find no evidence that Park Place abandoned its right to arbitrate. Park Place first sought arbitration in 1997 in Florida. The United States opposed that effort and prevailed in part. Park Place subsequently asked the AAA to hold the matter in abeyance to pursue suit, first in California and then in the Court of Federal Claims. It then renewed its arbitration demand in 2003. As the United States knows well, Park Place has vigorously pursued its remedies, and the United States has just as vigorously resisted its efforts at every step. Park Place has not abandoned its arbitration rights; it has only moved the battle from one venue to another. [6] In any event, the United States has not shown it has been prejudiced by the delay. Its sole assertion of prejudice rests on an observation by the Court of Federal Claims, of “the extreme burdens of discovery, which were disproportionately imposed on [the United States].” This statement, made when considering Park Place’s motion to stay litigation pending arbitration, is insufficient to establish prejudice. See, e.g., Fisher, 791 F.2d at 697 (holding that even extensive discovery into both arbitrable and non-arbitrable claims before mov10 Waiver of a right is distinct from forfeiture of a right. As we have explained, “[w]aiver is ‘the intentional relinquishment or abandonment of a known right,’ whereas forfeiture is ‘the failure to make the timely assertion of [that] right.’ ” United States v. Jacobo Castillo, 496 F.3d 947, 952 n.1 (9th Cir. 2007) (en banc) (alteration in original) (quoting United States v. Olano, 507 U.S. 725, 733 (1993)). Park Place asserts that a waiver argument may not be raised after an arbitration award has been entered. We do not find any such limitation in the FAA. Although § 10 does not specifically refer to waiver as grounds for vacatur, it does not discuss any specific legal grounds for vacatur. Instead, its general language encompasses any way in which “the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). Presumably an arbitration panel exceeds its power by entering an award in manifest disregard of law where the prevailing party plainly waived its right to arbitration in a way that prejudiced an opposing party. UNITED STATES v. PARK PLACE ASSOCIATES 4687 ing to compel arbitration is insufficient prejudice for a waiver if that discovery is available for trial of the non-arbitrable claim in federal district court). Moreover, the costs of discovery referred to by the Court of Federal Claims were sunk costs, not marginal costs, and have no bearing on the prejudice the United States would suffer by proceeding through arbitration. It is far from clear that the arbitration panel was wrong, much less that the award exhibits a manifest disregard of law. In light of the deference we afford the arbitrators, we decline to accept this basis for vacatur.
The United States also contends that the arbitration panel erred in applying the six-year federal statute of limitations from the Tucker Act, see 28 U.S.C. § 2501, rather than the four-year limitations period for California breach of contract actions, see CAL. CIV. PROC. § 337, and erred in tolling the limitations period pending the Court of Federal Claims suit. The United States asserts that, consistent with the Federal Circuit’s holdings, because the United States was “standing in the shoes of” the former general partner of LCP, it should be subjected to the California statute of limitations, like any other private party. [7] The United States’ argument has no merit, and certainly cannot meet the higher threshold of establishing that the award exhibits a manifest disregard of the law. In the case of an action brought under the Federal Tort Claims Act (“FTCA”), we have long recognized that “[a] court must look to state law for the purpose of defining the actionable wrong for which the United States shall be liable, but to federal law for the limitations of time within which the action must be brought.” Poindexter v. United States, 647 F.2d 34, 36 (9th Cir. 1981); see also United States v. Kubrick, 444 U.S. 111, 117-18 (1979) (applying the FTCA statute of limitations). The Court of Federal Claims has reached the same conclusion as to actions brought pursuant to the Tucker Act. Richmond, 4688 UNITED STATES v. PARK PLACE ASSOCIATES Fredericksburg & Potomac R.R. Co. v. United States, 27 Fed. Cl. 275, 287, 289 (1992) (applying Tucker Act statute of limitations although Virginia law governed claims). Despite the United States’ contention that such a result is unfair where the statutes of limitations differ, we have emphasized that the federal statute of limitations governs “even when the state period of limitations is longer or shorter.” Poindexter, 647 F.2d at 36. Because the statute of limitations period of the Tucker Act is an express condition on the United States’ waiver of sovereign immunity, courts should neither extend nor narrow that waiver beyond that which Congress intended. Cf. Kubrick, 444 U.S. at 117-18. [8] The United States also argues that, even if the arbitration panel correctly applied the six-year federal statute of limitations, the panel erroneously calculated the limitations period as beginning on October 26, 1999, the date Park Place filed suit in the Court of Federal Claims. Measuring from that date, the arbitration panel found that because all alleged breaches occurred after October 26, 1993, the arbitration action was timely. Relying on California law, the United States asserts that it was “absurd” to use that date, and that the arbitration panel should have calculated the limitations period as triggered by the filing of the arbitration demand, not the start of litigation. We offer no view as to whether the arbitration panel is correct. We can conclude that the date the panel chose has a reasonable basis in common sense and that the award did not manifestly disregard the law.
Lastly, the United States argues that California partnership law precludes enforcing an arbitration award against a general partner where creditors have not first attempted to collect against the partnership. To support this proposition, the United States cites California Corporations Code § 16307(d), which prohibits “[a] judgment creditor of a partner” from “levy[ing] execution against the assets of [a] partner.” We UNITED STATES v. PARK PLACE ASSOCIATES 4689 think there is a simple response to this, however, as this provision is inapplicable where recovery is sought by a partner. [9] “Under California law, partners are permitted to ‘maintain an action against the partnership or another partner for legal or equitable relief.’ ” Schnabel v. Lui, 302 F.3d 1023, 1030 (9th Cir. 2002) (quoting CAL. CORP. CODE § 16405(b)); see also Tyrone v. Kelley, 507 P.2d 65, 74 (Cal. 1973). The Federal Circuit noted this proposition in Hardie I, when it allowed Park Place to sue the government under the JVA. See 19 F. App’x at 903 (“Under the law of California, which indisputably governs the [JVA], the general partner of a partnership is directly liable for the partnership’s debts.” (citing CAL. CORP. CODE §§ 15509(1), 16306)). The statute cited by the United States, California Corporations Code § 16307(d), concerns recovery by “a judgment creditor of a partner.” The recovery here was sought by a partner directly, not its creditor. Indeed, California Corporations Code § 16307(d) falls within the article of the Code concerning “Relations of Partners to Persons Dealing with Partnerships” and is inapt to this situation. By contrast, the appropriate provision, California Corporations Code § 16405(b), is contained within the article entitled “Relations of Partners to Each Other and to Partnership.” The award does not exhibit manifest disregard of California partnership law.