Court Opinion

ID: 1040466
Source: CourtListenerOpinion
Date Created: 2013-09-11 21:13:57.356983+00
Date Added: 2024-06-11T12:38:05.977777
License: Public Domain

FILED
                                                                           SEP 11 2013
                           NOT FOR PUBLICATION
                                                                       MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS
                    UNITED STATES COURT OF APPEALS

                           FOR THE NINTH CIRCUIT

 FINANCIAL NETWORK INVESTMENT                         No. 11-56672
 CORP.; et al.,
                                                      D.C. No. 2:10-cv-09844-DSF
              Petitioners-Appellees,                  (JCGx)

      v.                                              MEMORANDUM*

 KAYVAN KAROON and KAROON
 CAPITAL MARKETS, INC.,

              Respondents-Appellants.

                    Appeal from the United States District Court
                       for the Central District of California
                     Dale S. Fischer, District Judge, Presiding

                      Argued** and Submitted August 8, 2013
                               Pasadena, California

  Before: SILVERMAN and WARDLAW, Circuit Judges, and GEORGE, Senior
                          District Judge.***

  *
      This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
  **
      Despite our grant of appellants’ counsel’s belated request to appear
telephonically for oral argument, counsel could not be reached for the hearing at
the number provided.
  ***
      The Honorable Lloyd D. George, Senior District Judge for the U.S. District
Court for the District of Nevada, sitting by designation.
      Kayvan Karoon and Karoon Capital Markets, Inc., (“KCM”) (collectively

“Karoon”) appeal the district court’s confirmation of a Financial Industry

Regulatory Authority arbitration panel (the “panel”) award in favor of Financial

Network Investment Corp., ING Advisors Network, Jack Handy, and Albert

Johnson (collectively “FNIC”), and its dismissal of Karoon’s petition to vacate the

award. The panel originally awarded $565,063.83 in favor of FNIC, and $65,000

in favor of Karoon. On remand by the district court, the panel offset the two awards

for an amended award of $500,063.83 in favor of FNIC.1

      We review the district court’s confirmation of the panel’s award de novo.

Bosack v. Soward, 586 F.3d 1096, 1102 (9th Cir. 2009). However, our review of

the actual award is “both limited and highly deferential,” and “[w]e must affirm an

order to confirm an arbitration award unless it can be vacated, modified, or

corrected as prescribed by the [Federal Arbitration Act (“FAA”)].” Schoenduve

Corp. v. Lucent Technologies, Inc., 442 F.3d 727, 730, 731 (9th Cir. 2006). A

federal court may vacate an award if the arbitrator exceeds his powers in rendering

  1
       Karoon himself filed for Chapter 7 bankruptcy in New Jersey in 2011 and
was discharged on April 16, 2013. While the discharge would appear to moot his
appeal of the monetary awards against him, because this matter involves multiple
parties and the setoff of claims among the various parties, we proceed with our
review.

                                          2
such an award, and “arbitrators exceed their powers in this regard . . . when the

award is completely irrational, or exhibits a manifest disregard of law.” Id. at 731

(quoting Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 997

(9th Cir. 2003) (en banc)).

      In this context, “‘[m]anifest disregard of the law’ means something more than

just an error in the law or a failure on the part of the arbitrators to understand or

apply the law.” Lagstein v. Certain Underwriters at Lloyd’s, London, 607 F.3d

634, 641 (9th Cir. 2010) (quoting Mich. Mut. Ins. Co. v. Unigard Sec. Ins. Co., 44

F.3d 826, 832 (9th Cir. 1995)). Rather, “[i]t must be clear from the record that the

arbitrators recognized the applicable law and then ignored it.” Id. (quoting Mich.

Mut. Ins. Co., 44 F.3d at 832). An award is completely irrational “only ‘where the

arbitration decision fails to draw its essence from the agreement.’” Lagstein, 607

F.3d at 642 (quoting Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1281

(9th Cir. 2009)). An arbitration award “draws its essence from the agreement if the

award is derived from the agreement, viewed in the light of the agreement’s

language and context, as well as other indications of the parties’ intentions.”

Lagstein, 607 F.3d at 642 (quoting Bosack, 586 F.3d at 1106). We conclude that

Karoon has established neither manifest disregard of law nor complete irrationality.

                                            3
      In this appeal, Karoon attempts to relitigate the merits of his claims and

defenses. He fails, however, to point out how the arbitrators recognized the law but

chose to ignore it, or how the award is untethered from the parties’ agreements.2

While Karoon focuses on the factual substance of his claims, “[w]hether or not the

panel’s findings are supported by the evidence in the record is beyond the scope of

our review.” Lagstein, 607 F.3d at 642 (quoting Bosack, 586 F.3d at 1105).

      Karoon also argues that the district court erred in failing to find that the panel

should have awarded punitive damages against FNIC. Karoon asserts that the panel

found that FNIC had maliciously defamed Karoon when it ordered expunged

certain information in the form U-5s that FNIC filed about Karoon based on “the

defamatory nature of the information.” However, the panel made no finding of

maliciousness or defamation by FNIC.

      AFFIRMED.

  2
       At one point, Karoon argues that the panel’s failure to find that Karoon
himself and KCM were distinct entities and not subject to joint liability was
“irrational and contrary to law” for purposes of the setoff made by the amended
award. Even if this argument did not misconstrue the law as it regards our review
of an award confirmation, as the district court found below, there is no basis to
conclude that the inclusion of KCM was a clerical error, and the panel could have
reasonably concluded from the petition that KCM had no separate existence from
Karoon himself.

                                           4