Court Opinion

ID: 616415
Source: CourtListenerOpinion
Date Created: 2011-10-31 21:55:25+00
Date Added: 2024-06-11T14:59:52.927335
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                OCT 31 2011

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                           FOR THE NINTH CIRCUIT

VIVINE H. WANG,                                  Nos. 10-55147 & 10-55901

              Petitioner - Counter-              D.C. No. 2:09-cv-05731-GHK-CT
              Respondent - Appellant,

  v.                                             MEMORANDUM*

BEAR STEARNS & CO., INC., d/b/a J.P.
MORGAN SECURITIES, INC.,

             Respondent - Counter-
             Petitioner - Appellee.

                   Appeal from the United States District Court
                      for the Central District of California
                    George H. King, District Judge, Presiding

                     Argued and Submitted October 13, 2011
                              Pasadena, California

Before: FERNANDEZ and CALLAHAN, Circuit Judges, and ERICKSON, Chief
                         District Judge.**

       Vivine Wang appeals from the district court’s ruling confirming an

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable Ralph R. Erickson, Chief District Judge for the U.S.
District Court for North Dakota, Fargo, sitting by designation.
arbitration award entered in favor of Bear Stearns & Co., Inc.1 On appeal, Wang

challenges (1) both the district court’s interpretation of the Customer Agreement

she entered into with Bear Stearns and the court’s determination that Bear Stearns’

claims were arbitrable, and (2) the district court’s decision to confirm the

arbitration award. Finally, Wang challenges the district court’s award of attorney

fees and costs incurred by Bear Stearns to confirm the arbitration award. We

affirm.2

      We review the district court’s decision to confirm an arbitration award de

novo. New Regency Productions, Inc. v. Nippon Herald Films, Inc., 501 F.3d

1101, 1105 (9th Cir. 2007). We also consider the construction and interpretation

of a contract term relating to the validity and scope of an arbitration clause, which

are questions of law, de novo. Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1267

(9th Cir. 2006) (en banc).

      The claim submitted by Bear Stearns in the arbitration proceedings was one

to recover unpaid debt. Resolution turned on the terms of the Customer Agreement

specifying that Wang was obligated to pay for any completed stock purchases.

      1
             Bear Stearns & Co. has undergone a number of restructurings during
the course of the litigation. Because Bear Stearns was the original contracting
company, this name is used throughout the memorandum for the sake of clarity.
      2
            Because the parties are familiar with the facts and procedural history,
we do not restate them here except as necessary to explain our decision.
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Both parties agree that under their dispute arbitration agreement, arbitration is the

contractually agreed upon forum for resolution of these claims so long as the

“carve out” clause does not apply. In order for the carve out clause to apply, the

claim submitted to arbitration must be “encompassed by” a putative class action.

      The collection claim and the putative class action in this case arise out of the

same set of operative facts. A plain reading of the term “encompassed by” requires

more than simply arising out of the same set of facts. It suggests that the

arbitration claims must lie “within” the class action claim.

      Although the facts giving rise to the claims at issue are the same, the

essential elements of the claims are distinct and bear little relation to each other.

Bear Stearns seeks to be paid for Wang’s stock purchases. Its claim is fact-

specific, demanding only proof of the orders and whether payment for the orders

was made. In the pending class actions, Wang alleges Bear Stearns committed

fraud and/or other securities law violations with regard to the sale of the stock. It

is axiomatic that Bear Stearns cannot assert a counterclaim for monetary damages

in the pending class actions where Wang is not a named party. See Fed. R. Civ. P.

13 (outlining circumstances in which a pleader must state a counterclaim and may

state a counterclaim against “an opposing party”); Allapattah Services, Inc. v.

Exxon Corp. 333 F.3d 1248, 1260 (11th Cir. 2003). Moreover, where

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individualized inquiries predominate over common issues, class certification is

inappropriate. Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011).

Interpreting the scope of the carve out clause so broadly as to include any claim

related to the transactions is contrary to the plain language of the provision and

may serve to defeat legitimate class actions.

      Wang’s overbroad interpretation of the phrase “encompassed by” would

create a rule in which a party with a legitimate arbitrable claim would be precluded

from getting the benefit of its bargain (the execution of a pre-dispute arbitration

agreement) even where the pending class action claims would not or could not

resolve the arbitration claim.

      Arbitration in front of the duly-appointed subsidiary of the Financial

Industry Regulatory Authority (“FINRA”) was proper under the terms of the

Customer Agreement, as was the arbitrator’s reliance on the FINRA Rules. The

district court’s ruling allowed Bear Stearns to collect what is due under the contract

while not interfering with Wang’s putative class action claims. We affirm the

district court’s confirmation of the arbitration award.

      In the second of these consolidated appeals, Wang argues the district court

erred by awarding attorney’s fees and costs that Bear Stearns incurred in

confirming the arbitration award. This issue can be resolved by reference to the

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language of the underlying contract. There is no need to reach a statutory analysis.

Accordingly, our review of the issue is de novo. Cape Flattery, Ltd. v. Titan

Maritime, LLC, 647 F.3d 914, 917 (9th Cir. 2011) (validity and scope of arbitration

clause reviewed de novo). The contract provided:

      You [Wang] hereby agree to pay, on demand, all reasonable costs, fees,
      expenses, liabilities and damages (collectively “Costs”) incurred by Bear
      Stearns in connection with (i) enforcing its rights hereunder, (ii) any
      investigation, litigation or proceeding involving your Account(s) or any
      property therein, (iii) . . . (B) the failure by you or any person authorized
      to act on your behalf to comply with any terms, conditions, or limitations
      . . . (iv) any breach or failure by you to perform any term or provision of
      this Agreement . . .

This provision unambiguously provides for the reasonable reimbursement of all

costs to Bear Stearns in enforcing its rights, including any litigation undertaken in

that pursuit. Bear Stearns was forced to litigate this case in federal court in order

to secure the arbitration award. The costs of this endeavor are clearly covered by

the plain language of the contract, and we affirm the district court’s ruling

authorizing reimbursement of expenses incurred by Bear Stearns in confirming the

arbitrator’s award.

      AFFIRMED.

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