Ehm Productions, Inc. v. Starline Tours of Hollywood ( 2021 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
EHM PRODUCTIONS, INC., DBA No. 20-55426
TMZ,
Petitioner-Appellee, D.C. No.
2:18-cv-00369-
v. AB-JC
STARLINE TOURS OF HOLLYWOOD,
INC., OPINION
Respondent-Appellant.
Appeal from the United States District Court
for the Central District of California
Andre Birotte, Jr., District Judge, Presiding
Argued and Submitted February 2, 2021
Pasadena, California
Filed June 24, 2021
Before: Ronald M. Gould, Kenneth K. Lee, and
Lawrence VanDyke, Circuit Judges.
Opinion by Judge VanDyke;
Concurrence by Judge VanDyke
2 EHM PRODUCTIONS V. STARLINE TOURS
SUMMARY *
Arbitration
The panel affirmed in part and reversed in part the
district court’s judgment confirming an arbitration award
concerning the parties’ joint venture agreement to operate a
celebrity bus tour.
The JAMS arbitrator issued an award in favor of EHM
Productions, Inc. (“TMZ”) and against Starline Tours of
Hollywood, Inc. After the district court entered judgment
confirming the arbitration award, the Ninth Circuit issued
Monster Energy Co. v. City Beverages, LLC, 940 F.3d 1130(9th Cir. 2019), interpreting the standard for “evident
partiality” to warrant vacatur of an arbitration award under
the Federal Arbitration Act. Starline wrote letters to JAMS
requesting disclosures regarding arbitrators. After JAMS
responded, Starline filed a motion for relief under Fed. R.
Civ. P. 59(e), arguing that the arbitrators and JAMS failed to
make disclosures required under the Monster Energy
decision. The district court denied the motion.
The panel held that the district court did not abuse its
discretion in denying Starline’s Rule 59(e) motion and
failing to vacate the arbitration award for evident partiality
based solely on the arbitrators’ failure to disclose JAMS’s
nontrivial business dealings with TMZ or its counsel prior to
arbitration. The panel concluded that Monster Energy
requires disclosure only when an arbitrator holds an
ownership interest in JAMS and JAMS engages in nontrivial
*
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
EHM PRODUCTIONS V. STARLINE TOURS 3
business dealings with a party to the arbitration. Further,
Monster Energy does not require disclosure of nontrivial
business dealings with a party’s counsel.
The panel held that the arbitrator did not demonstrate
evident partiality by failing to provide a supplemental
disclosure form with respect to a law firm when it became
TMZ’s counsel during the arbitration as the result of a law
firm merger.
The panel concluded that the arbitrator did not exhibit
evident partiality or exceed her powers by inappropriately
granting an anti-SLAPP motion, and a JAMS appeal panel
did not exceed its power by conducting a harmless error
analysis of the anti-SLAPP ruling. The panel also concluded
that the arbitrator did not exceed her powers in interpreting
California partnership law.
Reversing in part, the panel held that the district court
abused its discretion in denying Starline’s Rule 59(e) motion
based on the court’s misinterpretation of JAMS’s response
to Starline’s request for information under Monster Energy
as an indication that JAMS and the arbitrators had nothing
to disclose. The panel held that, even though Monster
Energy was published after the district court entered
judgment, Monster Energy applied to the arbitration
proceedings at issue in this case. The panel further held that
the district court clearly erred in its interpretation of JAMS’s
response. The panel remanded this issue to the district court
to consider in the first instance how the parties can obtain
from JAMS the information required by Monster Energy.
Concurring, Judge VanDyke, joined by Judges Gould
and Lee, wrote that he shared the reservations about Monster
Energy articulated in the Monster Energy dissent, and he
4 EHM PRODUCTIONS V. STARLINE TOURS
encouraged his colleagues to reconsider Monster Energy en
banc.
COUNSEL
Mohammed K. Ghods (argued), Jeremy A. Rhyne, and Lori
L. Speak, Lex Opus, Santa Ana, California, for Respondent-
Appellant.
Lennette W. Lee (argued) and Samuel C. Cortina, King &
Spalding LLP, Los Angeles, California, for Petitioner-
Appellee.
EHM PRODUCTIONS V. STARLINE TOURS 5
OPINION
VANDYKE, Circuit Judge:
Today, Starline Tours of Hollywood, Inc. urges us to
adopt a significant expansion of the disclosure requirements
recently set out in Monster Energy Co. v. City Beverages,
LLC, 940 F.3d 1130 (9th Cir. 2019), in the context of
arbitration proceedings. We decline such an invitation. We
are likewise unpersuaded by Starline’s other attempts to
vacate a final award issued in its arbitration with EHM
Productions, Inc. (“TMZ”). Because we agree with Starline,
however, that the district court clearly erred in its
interpretation of JAMS’s response to Starline’s request for
Monster Energy disclosures after the conclusion of the
arbitration, we remand to the district court on that particular
issue.
I. Factual Background and Procedural History
Starline and TMZ launched a joint venture in 2012 to
operate a celebrity bus tour together, but after several years,
TMZ terminated their agreement on the grounds that Starline
repeatedly failed to handle the enterprise’s revenues in
accordance with the agreement’s terms. Under the joint
venture agreement, Starline’s failure to follow such revenue
procedures was considered an incurable material breach and
released TMZ from the agreement’s non-compete clause.
After ending the joint venture with Starline, TMZ ran a
separate celebrity bus tour.
TMZ and Starline brought their claims (and
counterclaims) to arbitration before Hon. Margaret Nagle
(Ret.) (the “Arbitrator”), an arbitrator for JAMS. Several
months after the arbitration hearing, but before the Arbitrator
issued her final decision, TMZ’s counsel at the time,
6 EHM PRODUCTIONS V. STARLINE TOURS
Caldwell Leslie, merged with the law firm Boies Schiller
Flexner, LLP and notified JAMS and the parties of the
merger in April 2017. The Arbitrator issued the final award
in favor of TMZ on October 26, 2017. That same day,
Starline emailed a JAMS case manager asking if there had
been a conflicts check for Boies Schiller. The case manager
responded that JAMS and the parties were notified of the law
firm substitution in April 2017 and the Arbitrator “had
nothing further to disclose.”
In the final arbitration award, the Arbitrator concluded,
among many other findings, that TMZ legally terminated the
agreement. The Arbitrator also granted TMZ’s anti-SLAPP 1
motion, striking four of Starline’s counterclaims, and
concluded “that the litigation privilege codified in California
Civil Code Section 47(b) provides an additional basis for
dismissing the four Starline counterclaims.” Starline
appealed the award to a three-arbitrator JAMS appellate
panel (the “Appeal Panel,” and collectively with the
Arbitrator, the “Arbitrators”). The Appeal Panel affirmed
the award, except with respect to the Arbitrator’s decision
regarding the anti-SLAPP motion, which the Appeal Panel
concluded was not allowed in arbitration proceedings.
Despite the Arbitrator’s interpretive mistake, the Appeal
Panel reasoned that Starline could not demonstrate
prejudicial error, and its four counterclaims would have
otherwise failed.
1
The anti-SLAPP statute creates “a special motion to strike” any
cause of action brought against a person for exercising his “right of
petition or free speech under the United States Constitution or the
California Constitution in connection with a public issue.” Cal. Civ.
Proc. Code § 425.16(b)(1).
EHM PRODUCTIONS V. STARLINE TOURS 7
After the Appeal Panel affirmed the majority of the
Arbitrator’s award, Starline moved to vacate the award in
district court, and TMZ sought to confirm the award. The
court denied Starline’s motion, and granted TMZ’s petition
to confirm the award. A few days after the district court
entered judgment on the arbitration award, the Ninth Circuit
issued Monster Energy, interpreting the standard for
“evident partiality” to warrant vacatur of an arbitration
award under the Federal Arbitration Act (FAA). 940 F.3d at
1132, 1135–36. Based on the reasoning in that case, Starline
wrote letters to JAMS requesting disclosure of each
Arbitrator’s ownership interest therein and “the number of
arbitrations and mediations for which JAMS as an entity was
engaged by” TMZ, its affiliated entities, and their counsel.
JAMS responded that each Arbitrator “issued disclosures
consistent with [its/her] legal and ethical obligations during
the pendency of the [appeal/arbitration],” and given that the
Arbitrators had issued their respective final decisions, they
“ha[d] no further jurisdiction. As such, no further disclosures
will be provided.” Starline filed a Rule 59(e) motion,
arguing in relevant part that the Arbitrators and JAMS failed
to make disclosures required under the Monster Energy
decision, but the district court denied that motion as well.
Starline timely appealed to this court, and we have
jurisdiction pursuant to 9 U.S.C. § 16 and 28 U.S.C. § 1291.
II. Failure to Disclose JAMS’s Business Dealings with
TMZ and Its Counsel
Starline contends that the district court should have
granted its Rule 59(e) motion and vacated the arbitration
award for evident partiality based on the intervening Ninth
Circuit opinion in Monster Energy. This court reviews the
denial of a Rule 59(e) motion for abuse of discretion.
McCarthy v. Mayo, 827 F.2d 1310, 1314 (9th Cir. 1987). A
8 EHM PRODUCTIONS V. STARLINE TOURS
Rule 59(e) motion may be granted when there is an
“intervening change in controlling law.” Turner v.
Burlington N. Santa Fe R.R. Co., 338 F.3d 1058, 1063 (9th
Cir. 2003) (citation omitted). Under the FAA, a district court
may vacate an arbitration award “where there was evident
partiality . . . in the arbitrators.” 9 U.S.C. § 10(a)(2). A few
days after the district court entered judgment confirming the
arbitration award in this case, the Ninth Circuit issued
Monster Energy, declaring that an arbitrator exhibited
“evident partiality” when he failed to disclose his ownership
interest in JAMS, given that JAMS administered a
significant number of arbitrations for one of the parties in the
arbitration. 940 F.3d at 1132. To that end, the court held
that prior to performing arbitrations, “arbitrators must
disclose their ownership interests, if any, in the arbitration
organizations with whom they are affiliated in connection
with the proposed arbitration, and those organizations’
nontrivial business dealings with the parties to the
arbitration.” Id. at 1138.
Armed with evidence that TMZ and its counsel each
participated in a number of arbitrations and mediations with
JAMS in the last five years, Starline argues that the
Arbitrators’ failure to disclose JAMS’s nontrivial business
dealings with TMZ and its counsel prior to arbitration
constitutes evident partiality under Monster Energy
sufficient to warrant vacatur of the arbitration award. In the
alternative, Starline contends that the Arbitrators’ failure to
disclose JAMS’s prior dealings with TMZ alone establishes
evident partiality under Monster Energy.
Starline’s argument that the arbitration award should be
vacated for evident partiality based solely on the failure to
disclose JAMS’s nontrivial business dealings—regardless of
whether such dealings were with TMZ itself or with TMZ
EHM PRODUCTIONS V. STARLINE TOURS 9
and its counsel—seeks a significant and unwarranted
extension of Monster Energy. Monster Energy only requires
disclosure when an arbitrator holds an ownership interest in
JAMS and JAMS engages in nontrivial business dealings
with a party to the arbitration. Monster Energy, 940 F.3d
at 1138. The Monster Energy court repeatedly focused on
the combination of these two circumstances to evince
“evident partiality”; only when both exist must they be
disclosed. See, e.g., id. at 1136 (assessing “(1) whether the
Arbitrator’s ownership interest in JAMS was sufficiently
substantial, and (2) whether JAMS and Monster were
engaged in nontrivial business dealings,” concluding that
“[i]f the answer to both questions is affirmative, then the
relationship required disclosure, and supports vacatur”
(second emphasis added)).
In fact, the Monster Energy court explicitly stated that
knowledge of “the number of disputes that Monster sent to
JAMS . . . alone would not have revealed that this specific
Arbitrator was potentially non-neutral,” but rather “the
Arbitrator’s ownership interest in JAMS [was] the key fact
that triggered the specter of partiality.” Id. at 1135. It would
thus ignore Monster Energy’s own rationale to interpret it as
requiring the disclosure of JAMS’s nontrivial business
dealings with TMZ regardless of whether the Arbitrators
also had an ownership interest in JAMS. The arbitration
award need not be vacated solely for the failure to disclose
JAMS’s nontrivial business dealings with TMZ.
Assuming, without deciding, that at least one of the
Arbitrators had an ownership interest in JAMS and was
therefore required to disclose JAMS’s nontrivial business
dealings in this case, Starline’s argument that such
disclosure must include those nontrivial business dealings
with TMZ’s counsel, in addition to TMZ itself, is similarly
10 EHM PRODUCTIONS V. STARLINE TOURS
unpersuasive. Starline asserts that the disclosure
requirements set out in Monster Energy were intended “to
disclose repeat relationships that may be a source of bias in
the arbitration proceedings,” and that attorneys, who may
influence the selection of arbitration forums and individual
arbitrators, pose the same or greater risk of repeat player bias
as the parties themselves.
But Monster Energy focuses on the unique economic
incentives of a JAMS co-owner to find in favor of repeat
clients. See, e.g., id. at 1136 (explaining that “as a co-owner
of JAMS, the Arbitrator has a right to a portion of profits
from all of its arbitrations, not just those that he personally
conducts,” and as a result, such ownership interest “greatly
exceeds the general economic interest that all JAMS neutrals
naturally have in the organization”). While the court
reasoned that it need not determine the “exact profit-share
that the Arbitrator obtained,” id. (emphasis added), it clearly
deemed the existence of a profit-share as centrally relevant,
not merely the familiarity and rapport established with repeat
players per se. The Monster Energy court was therefore
concerned with the potential bias created by repeat payors in
the arbitral forum, as opposed to merely repeat players. 2
With that context, it makes sense that the court continually
referred to disclosing business dealings with parties only—
i.e., those who actually pay the arbitration bill—as opposed
to parties and counsel. See, e.g., id. at 1135–36 (“[T]o
support vacatur of an arbitration award, the arbitrator’s
undisclosed interest in an entity must be substantial, and that
entity’s business dealings with a party to the arbitration
2
If being “repeat players”—without the additional financial
relationship emphasized by Monster Energy—was alone sufficient to
create concerns about “evident partiality,” that would cast an ethics pall
on any court that has a specialized bar.
EHM PRODUCTIONS V. STARLINE TOURS 11
must be nontrivial.” (second emphasis added)). We decline
to stretch the Monster Energy opinion to require disclosure
of nontrivial business dealings with counsel.
Accordingly, the district court did not abuse its
discretion in denying Starline’s Rule 59(e) motion on the
basis of a failure to disclose only JAMS’s prior business
dealings with TMZ or its counsel.
III. Failure to Provide a Form Confirming No
Conflicts with Boies Schiller
Starline argues that the arbitration award should be
vacated because the Arbitrator demonstrated evident
partiality by failing to provide a supplemental disclosure
form with respect to Boies Schiller when it became TMZ’s
counsel during the arbitration as the result of a law firm
merger. A district court’s denial of a motion to vacate an
arbitration award is reviewed de novo. Woods v. Saturn
Dist. Corp., 78 F.3d 424, 427 (9th Cir. 1996). Starline does
not claim that “there was a secret business or personal
relationship [between the Arbitrator and Boies Schiller] that
was not disclosed,” creating a reasonable impression of bias.
In fact, a JAMS case manager informed Starline upon
request that the Arbitrator “had nothing further to disclose”
after the law firm merger. Instead, Starline essentially
equates (1) a failure to provide a standard disclosure form
confirming there were no matters with Boies Schiller that
were required to be disclosed with (2) a failure to disclose a
particular matter, as identical grounds for establishing an
arbitrator’s evident partiality.
Starline’s argument would literally elevate form over
substance. Starline asserts that the Arbitrator was required
to produce the supplemental disclosure form under Rule
15(h) of the JAMS Comprehensive Arbitration Rules &
12 EHM PRODUCTIONS V. STARLINE TOURS
Procedures. That rule, however, merely directs the arbitrator
to make disclosures as required by law and clarifies that such
duty to disclose continues throughout the arbitration process;
it does not require the arbitrator to go through the motions of
providing a disclosure form, regardless of its contents. See
JAMS Comprehensive Arbitration Rules & Procedures,
Rule 15(h), https://www.jamsadr.com/rules-comprehensive-
arbitration/#Rule-15 (last visited May 4, 2021). Under the
California Rules of Court, Ethics Standards for Neutral
Arbitrators in Contractual Arbitration, if an arbitrator
becomes aware of a relationship or circumstance that could
create the appearance of bias or otherwise affect the
arbitrator’s ability to do her job under Standard 7(d) & (e)
therein, then “the arbitrator must disclose that matter to the
parties in writing within 10 calendar days after the arbitrator
becomes aware of the matter.” Cal. R. Ct. RB Ethics
Standard 7(c)(2). But it would be nonsensical to interpret
this language as requiring the Arbitrator to affirmatively
disclose that she has nothing to disclose. The fact that an
arbitrator is serving or has, in the past five years, served as
an arbitrator in zero other arbitrations involving a lawyer in
the current arbitration is certainly not something “that could
cause a person aware of th[is] fact[] to reasonably entertain
a doubt that the arbitrator would be able to be impartial.” Id.
at 7(d); see also Cal. Civ. Proc. Code § 1281.9(a) (requiring
an arbitrator to “disclose all matters that could cause a person
aware of the facts to reasonably entertain a doubt that the
proposed neutral arbitrator would be able to be impartial”).
Starline correctly points out that an “arbitrator’s failure
to disclose to the parties any dealings that might create an
impression of possible bias is sufficient to support vacatur.”
New Regency Prods., Inc. v. Nippon Herald Films, Inc.,
501 F.3d 1101, 1105 (9th Cir. 2007) (citation and internal
quotation marks omitted). But the cases that Starline cites in
EHM PRODUCTIONS V. STARLINE TOURS 13
support of its argument all involve an arbitrator’s failure to
disclose a specific relationship or business dealing that could
create the impression of bias—not an arbitrator’s failure to
provide a form confirming there was nothing to disclose.
See, e.g., Lagstein v. Certain Underwriters at Lloyd’s,
London, 607 F.3d 634, 645–46 (9th Cir. 2010) (analyzing
whether an arbitrator’s “failure to disclose his and [another
arbitrator]’s roles in an ethics controversy” constituted
evident partiality); New Regency Prods., Inc., 501 F.3d
at 1105, 1111 (discussing the arbitrator’s failure to disclose
his new employment with a company that was negotiating a
project with an executive of one of the corporate parties to
the arbitration).
“[V]acatur of an arbitration award is not required simply
because an arbitrator failed to disclose a matter of some
interest to a party.” Lagstein, 607 F.3d at 646. While there
is nothing wrong with providing confirmation that an
arbitrator had no prior professional interactions with a law
firm, there is no requirement that the arbitrator do so. The
Arbitrator’s decision not to provide a supplemental
disclosure form revealing no further disclosures with regard
to Boies Schiller does not demonstrate evident partiality
here, and the district court correctly rejected this claim in
denying Starline’s request to vacate the arbitration award.
IV. Inappropriate Grant of an Anti-SLAPP Motion
and Preventing Starline from Conducting
Discovery or Presenting Evidence on Four of its
Counterclaims
Starline alleges that the Arbitrator exhibited evident
partiality and exceeded her power by inappropriately
granting an anti-SLAPP motion and dismissing four of
Starline’s counterclaims that were the subject of the motion,
thereby preventing Starline from conducting discovery and
14 EHM PRODUCTIONS V. STARLINE TOURS
presenting evidence on such claims. In addition to allowing
a district court to vacate an arbitration award on the basis of
an arbitrator’s “evident partiality,” the FAA also allows for
vacatur “where the arbitrators exceeded their powers.”
9 U.S.C. § 10(a). One way an arbitrator can exceed her
powers is when she “purport[s] to exercise powers that the
parties did not intend [her] to possess.” Kyocera Corp. v.
Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 1002
(9th Cir. 2003). Based on this definition, Starline essentially
argues that the parties did not intend the Arbitrator to have
the authority to entertain an anti-SLAPP motion—which
cannot be used in arbitration proceedings under California
law—where the joint venture agreement expressly required
the Arbitrator to “follow California law . . . in adjudicating
the Dispute.” The Arbitrator’s consideration and granting of
the anti-SLAPP motion therefore requires vacatur of the
arbitration award, according to Starline.
Although an anti-SLAPP motion may have been the
incorrect procedural mechanism to consider Starline’s
counterclaims in the arbitration proceedings, the parties
obviously intended for the Arbitrator to exercise jurisdiction
over the substance of those counterclaims—and Starline
does not contend otherwise. For instance, the Arbitrator had
jurisdiction to consider a more traditional demurrer to those
counterclaims for legal insufficiency. See Cal. Civ. Proc.
Code § 430.10(e) (explaining “[t]he party against whom a
complaint . . . has been filed may object, by demurrer . . . ,
to the pleading” on the basis that “[t]he pleading does not
state facts sufficient to constitute a cause of action”); see also
Trs. of the Cap. Wholesale Elec. Co. Profit Sharing & Tr.
Fund v. Shearson Lehman Brothers, Inc., 270 Cal. Rptr. 566,
568 (Ct. App. 1990) (“The function of a demurrer is to test
the legal sufficiency of a pleading by raising questions of
law.”). If TMZ had demurred to Starline’s counterclaims
EHM PRODUCTIONS V. STARLINE TOURS 15
instead of filing an anti-SLAPP motion, the Arbitrator could
have sustained the demurrer and would have done so based
on the alternative rationale she provided in the arbitration
award—that the counterclaims failed as a matter of law
pursuant to the litigation privilege codified in California
Civil Code Section 47(b). 3 Sustaining a demurrer with
3
Starline counters that the California courts have declared “[a]n
anti-SLAPP suit motion is not a substitute for a demurrer or summary
judgment motion.” Lam v. Ngo, 111 Cal. Rptr. 2d 582, 597 n.12 (Ct.
App. 2001); see also Commonwealth Energy Corp. v. Inv. Data Exch.,
Inc., 1 Cal. Rptr. 3d 390, 393 (Ct. App. 2003). But Starline ignores the
context in which these statements were made. In those cases, the courts
identified a two-prong analysis in considering an anti-SLAPP suit
motion: (1) whether defendant demonstrated that the cause of action
arose from actions taken in furtherance of his First Amendment rights,
and (2) whether plaintiff established a probability that he will prevail on
his claim. See Commonwealth Energy Corp., 1 Cal. Rptr. 3d at 392;
Lam, 111 Cal. Rptr. 2d at 592. But “the second part of the anti-SLAPP
analysis [is] reached only if the defendant satisfies its burden on the first
part . . . .” Anderson v. Geist, 186 Cal. Rptr. 3d 286, 291 (Ct. App. 2015)
(emphasis added).
With respect to the quotes relied on by Starline, the California courts
had just determined that the defendants’ challenged activities were not
protected by the anti-SLAPP statute. See Commonwealth Energy Corp.,
1 Cal. Rptr. 3d at 391 (concluding that the challenged speech was not
“being made in connection with a public issue or an issue of public
interest” and therefore not protected by the anti-SLAPP statute); Lam,
111 Cal. Rptr. 2d at 597 n.12 (in analyzing acts of violence committed
by unidentified protestor defendants, referred to as “the Does,” the court
explained “[b]ecause this case comes to us in an appeal from an anti-
SLAPP suit motion, we confine our determination . . . to the question of
whether the Does enjoyed First Amendment protection for their acts.
(Answer, with regard to the violent acts: no.)”). Finding the first prong
unsatisfied, the courts appropriately declined to reach the merits of
plaintiffs’ claims. See Commonwealth Energy Corp., 1 Cal. Rptr. 3d
at 393 n.4 (explaining certain caselaw “is only relevant to the second
step, which we don’t take in this opinion”); Lam, 111 Cal. Rptr. 2d at 597
n.12 (“We do not address the substantive merits of each cause of action
16 EHM PRODUCTIONS V. STARLINE TOURS
respect to such counterclaims likewise could have disposed
of such claims prior to Starline conducting discovery or
presenting evidence. See AREI II Cases, 157 Cal. Rptr. 3d
368, 381 (Ct. App. 2013) (“[Plaintiffs] complain that they
were not allowed to take discovery before the demurrer was
sustained and ask to pursue discovery to develop specific
facts that may support amendments to the complaint.
However, a vague suggestion that additional facts might be
uncovered through discovery is insufficient to justify
allowing plaintiffs further leave to amend their complaint.”);
cf. Sui v. Price, 127 Cal. Rptr. 3d 99, 103 (Ct. App. 2011)
(“A demurrer tests the pleading alone, and not the evidence
or the facts alleged.” (citation omitted)). The Arbitrator did
not demonstrate evident partiality or exceed her powers by
addressing Starline’s counterclaims.
Based on this same interpretation of when an arbitrator
“exceeds her power,” Starline also asserts that the Appeal
Panel exceeded its power by conducting a harmless error
analysis on (1) the Arbitrator granting the anti-SLAPP
motion and (2) Starline’s resulting inability to obtain
discovery and present evidence on its counterclaims. But the
case that Starline relies on for the first proposition is
apart from the question of First Amendment protection.”). It makes
sense that the courts would then comment that unnecessarily considering
the merits of plaintiffs’ claims under prong two would “turn the anti-
SLAPP statute into a cheap substitute for summary judgment,”
Commonwealth Energy Corp., 1 Cal. Rptr. 3d at 393, and warn that “[a]n
anti-SLAPP suit motion is not a substitute for a demurrer or summary
judgment motion,” Lam, 111 Cal. Rptr. 2d at 597 n.12. But the
Arbitrator here, by necessity, did reach the second prong and thus the
merits of Starline’s four counterclaims, finding that they were precluded
as a matter of law. It is thus not improper to conclude that the Arbitrator
would have reached the same determinations in the context of a demurrer
to Starline’s four counterclaims.
EHM PRODUCTIONS V. STARLINE TOURS 17
premised on the Arbitrator acting “in excess of [her]
jurisdiction,” which, as explained above, was not true here
in the sense that she clearly had authority to address and
resolve Starline’s counterclaims—just not under the
procedural rubric of California’s anti-SLAPP law. See In re
Marriage of Jackson, 39 Cal. Rptr. 3d 365, 377–78 (Ct. App.
2006). When an arbitrator (or, as in Marriage of Jackson,
the trial court) does not act outside of her jurisdiction, the
court explained that “[i]t is generally true the existence of
procedural error alone . . . is insufficient to set aside an order
or judgment; the party challenging the order or judgment
must also demonstrate the error was prejudicial.” Id. at 377.
After reversing the award of attorneys’ fees granted under
the anti-SLAPP statute, the Appeal Panel here reasonably
concluded that Starline failed to demonstrate prejudice from
the Arbitrator’s error because the Arbitrator would have
correctly reached the same conclusion outside the anti-
SLAPP context.
And with respect to Starline’s claimed prejudice from its
inability to conduct discovery or present evidence, Starline
would not necessarily have had the opportunity to engage in
discovery or present evidence on the counterclaims if they
had been dismissed as the result of a sustained demurrer.
Starline was therefore not improperly deprived of procedural
rights it was otherwise guaranteed.
Starline’s final argument for vacatur—that the Appeal
Panel admitted the Arbitrator “exceeded her authority” and
“refused to follow” a California case—is unpersuasive. One
way an arbitrator exceeds her power is when she
demonstrates a “manifest disregard of law,” which requires
a showing that “the arbitrator understood and correctly stated
the law, but proceeded to disregard the same.” Bosack v.
Soward, 586 F.3d 1096, 1104 (9th Cir. 2009) (citations,
18 EHM PRODUCTIONS V. STARLINE TOURS
internal quotation marks, and alteration marks omitted).
Although the Appeal Panel did say the Arbitrator “exceeded
her authority” and “refused to follow” a California case, it
also characterized the Arbitrator’s anti-SLAPP decision as
“misread[ing]” the caselaw and reading it “too narrowly,”
and concluded that the Arbitrator was “mistaken” and
“erred.” In the arbitration award, the Arbitrator analyzed
caselaw raised by both parties regarding the applicability of
the anti-SLAPP statute to arbitrations and provided
specific—albeit incorrect—reasons why Starline’s two cases
were distinguishable from the current matter. In neither case
did the Arbitrator intentionally ignore or disregard
applicable law; she just misunderstood it to be inapplicable.
Because “manifest disregard requires something beyond and
different from a mere error in the law or failure on the part
of the arbitrators to understand and apply the law,” Bosack,
586 F.3d at 1104 (citation, internal quotation marks, and
alteration marks omitted), the Arbitrator did not manifestly
disregard the law here, nor did she “exercise powers that the
parties did not intend [her] to possess” to warrant vacatur of
the arbitration award, Kyocera Corp., 341 F.3d at 1002.
V. Arbitrator’s Interpretation of California Partnership
Law
Starline claims that the Arbitrator exceeded her powers
by manifestly disregarding California law in concluding that
TMZ did not breach its fiduciary duty to Starline or
otherwise violate California partnership law when it
launched a celebrity bus tour shortly after ending the joint
venture with Starline. “[F]or an arbitrator’s award to be in
manifest disregard of the law, ‘[i]t must be clear from the
record that the arbitrator [ ] recognized the applicable law
and then ignored it.’” Bosack, 586 F.3d at 1104 (alterations
in original) (quoting Comedy Club, Inc. v. Improv W.
EHM PRODUCTIONS V. STARLINE TOURS 19
Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009)). In other
words, Starline must point to record evidence—not just the
result—demonstrating “that the arbitrators were aware of the
law and intentionally disregarded it.” Id. (citation and
internal quotation marks omitted). “[E]rroneous legal
conclusions [do not] . . . justify federal court review of an
arbitral award under the statute, which is unambiguous in
this regard.” Kyocera Corp., 341 F.3d at 994.
Starline specifically contends that the Arbitrator
superficially distinguished the case Leff v. Gunter, 658 P.2d
740 (Cal. 1983) and related cases from this case by reasoning
that those cases involve oral agreements and the present case
involves a written agreement. But Starline’s quote from Leff
reveals exactly why this case is different from those cited by
Starline:
It may be assumed, although perhaps not
always easily proven, that such competition
with one’s own partnership is greatly
facilitated by access to relevant information
available only to partners. Moreover, it is
equally obvious that a formal disassociation
of oneself from a partnership does not change
this situation unless the interested parties
specifically agree otherwise.
Id. at 744 (emphasis added). The parties here “specifically
agree[d] otherwise” in the text of their written joint venture
agreement. While the agreement included a non-compete
clause that extended beyond its term, the parties expressly
agreed that such clause would no longer apply to TMZ if
TMZ terminated the agreement due to Starline’s incurable
material breach related to its financial responsibilities. TMZ
terminated the joint venture on that basis, and the Arbitrator
20 EHM PRODUCTIONS V. STARLINE TOURS
determined that TMZ had good cause to terminate the joint
venture agreement per its terms. Starline has failed to point
to any caselaw indicating that a party could breach its
fiduciary duty when exercising a right granted under the
joint venture agreement (i.e., an ability to compete with the
joint venture after the extinguishment of the non-compete
clause therein). As a result, the Arbitrator’s rationale for
distinguishing Leff from the current case—far from being a
manifest disregard of the law—seems imminently
reasonable. Again, vacatur is not warranted here.
VI. JAMS’s Response to Starline’s Request for
Disclosures under Monster Energy
Starline contends that the district court abused its
discretion in denying Starline’s Rule 59(e) motion on the
grounds that the district court erroneously interpreted
JAMS’s response to Starline’s request for information under
Monster Energy as an indication that JAMS and the
Arbitrators had nothing to disclose. As noted previously, the
denial of a Rule 59(e) motion is reviewed for abuse of
discretion. McCarthy, 827 F.2d at 1314. “A district court
may abuse its discretion if . . . it rests its decision on a clearly
erroneous finding of material fact.” United States v.
Plainbull, 957 F.2d 724, 725 (9th Cir. 1992).
Before turning to this question, we must first determine
whether Monster Energy applies to these arbitration
proceedings given that the decision was published after the
district court entered judgment confirming the final
arbitration award in this case. The Monster Energy decision
indicates that it does. It is apparent from the opinion that
both the majority and the dissent expected the new ruling to
apply to arbitration awards that were finalized prior to the
issuance of the opinion, where a party could still challenge
and legally move to vacate such awards. See Monster
EHM PRODUCTIONS V. STARLINE TOURS 21
Energy, 940 F.3d at 1138 (“Although our dissenting
colleague raises concerns about the finality of recent arbitral
judgments in light of our ruling in this case, she correctly
notes that the applicable statute of limitations to vacate an
arbitration award, which is only three months, will limit the
impact of our ruling on recently decided arbitrations.”). As
a result, when Starline requested the information required by
Monster Energy, “the onus [was] on [the] arbitrators to
disclose their ownership interests in” JAMS and JAMS’s
“nontrivial business dealings” with TMZ (if both existed),
even though the final arbitration award preceded Monster
Energy. Id.
We must therefore determine whether the district court
correctly interpreted JAMS’s response to the request for
information under Monster Energy. The district court
clearly erred in this respect. When Starline asked for the
Monster Energy disclosures with respect to each Arbitrator,
JAMS answered that each Arbitrator “issued disclosures
consistent with [its/her] legal and ethical obligations during
the pendency of the [appeal/arbitration],” and given that the
Arbitrators had issued their respective final decisions, they
“ha[d] no further jurisdiction. As such, no further disclosures
will be provided.” (emphasis added). This language
undoubtedly reflects JAMS’s position that the Arbitrators
were not required to provide the information set out in
Monster Energy because they no longer had jurisdiction of
the matter. But the district court construed this response as
the Monster Energy disclosure itself—one “indicating the
Arbitrators have no ownership interest [in JAMS].” This
was clear error. Furthermore, construing JAMS’s non-
response as a Monster Energy disclosure would effectively
prevent any challenge to arbitration awards entered prior to
Monster Energy’s publication, against the obvious intent and
understanding of the panel majority.
22 EHM PRODUCTIONS V. STARLINE TOURS
If none of the Arbitrators had an ownership interest in
JAMS or JAMS only had trivial business dealings with
TMZ, JAMS could have responded by stating that the
Arbitrators “had nothing further to disclose” like it did in
response to Starline’s request regarding whether the
Arbitrator had any conflicts with Boies Schiller. 4 But saying
you have nothing further to disclose is markedly different
than simply refusing to provide any further disclosures based
on the shifty reasoning that the Arbitrators no longer have
jurisdiction over the case, which is deliberately evasive on
the key question of whether they have something to disclose
or not. As such, it was clearly erroneous for the district court
to (mis)construe JAMS’s response to the request for Monster
Energy disclosures as indicating that the Arbitrators had
4
To be clear, some response was expected from JAMS and the
Arbitrators in this case—either providing the Monster Energy disclosure
or confirming there was nothing further to disclose—because Starline
specifically inquired whether the Arbitrators had anything to disclose
under Monster Energy. In a different arbitration commencing post-
Monster Energy, where neither of the parties requested the information,
silence from the arbitrator as to the Monster Energy disclosure might
properly establish a presumption that the arbitrator was not required to
provide such a disclosure—i.e., because he did not have an ownership
interest in JAMS, or JAMS had only trivial business dealings with the
parties, or both. In other words, Monster Energy does not necessarily
require an arbitrator to provide a piece of paper confirming that he is not
required to make a disclosure. We expect and trust that on a going
forward basis, arbitrators and JAMS will comply with Monster Energy’s
holding that “before an arbitrator is officially engaged to perform an
arbitration, to ensure that the parties’ acceptance of the arbitrator is
informed, arbitrators must disclose their ownership interests, if any, in
the arbitration organizations with whom they are affiliated in connection
with the proposed arbitration, and those organizations’ nontrivial
business dealings with the parties to the arbitration.” Monster Energy,
940 F.3d at 1138.
EHM PRODUCTIONS V. STARLINE TOURS 23
nothing further to disclose, and the district court thus abused
its discretion in denying the Rule 59(e) motion on that basis. 5
VII. Conclusion
The district court did not abuse its discretion in denying
Starline’s Rule 59(e) motion on the grounds that the
Arbitrators did not exhibit evident partiality by failing to
disclose JAMS’s prior business dealings with TMZ or its
counsel. The court likewise did not err when it declined to
vacate the arbitration award on the grounds that (1) the
Arbitrator did not produce a form indicating she had no
conflicts with Boies Schiller, (2) the Arbitrator improperly
granted an anti-SLAPP motion, or (3) based on her
interpretation of California partnership law. The district
court, however, clearly erred in concluding that JAMS
provided a disclosure in accordance with Monster Energy,
where JAMS declined to make such disclosure and instead
asserted that the Arbitrators no longer had jurisdiction over
the arbitration. We therefore remand this particular issue to
the district court to consider in the first instance how the
parties can obtain from JAMS the information required by
Monster Energy.
5
Starline argues that the refusal to disclose whether the Arbitrators
held ownership interests in JAMS and whether JAMS had prior business
dealings with TMZ—as opposed to a failure to disclose existing
ownership interests and nontrivial business dealings—establishes
evident partiality, warranting vacatur of the arbitration award. Because
the district court erroneously concluded that JAMS’s response
constituted a disclosure under Monster Energy, it never reached the issue
of whether JAMS’s refusal to disclose based on a supposed lack of
jurisdiction established evident partiality. Presumably this issue will be
mooted on remand once JAMS makes the disclosures required by
Monster Energy.
24 EHM PRODUCTIONS V. STARLINE TOURS
AFFIRMED IN PART; REVERSED IN PART;
REMANDED IN PART.
VANDYKE, Circuit Judge, with whom GOULD and LEE,
Circuit Judges join, concurring:
In Judge Friedland’s Monster Energy Company v. City
Beverages, LLC dissent, she predicted the majority’s
decision was “likely to generate endless litigation over
arbitrations that were intended to finally resolve disputes
outside the court system.” 940 F.3d 1130, 1141 (9th Cir.
2019) (Friedland, J., dissenting). This case is certainly some
evidence that her warning was warranted. The result here
was required by Monster Energy, which the opinion
faithfully applies. But because I share many of the same
reservations about the Monster Energy decision that Judge
Friedland so aptly articulates in her dissent, I encourage my
colleagues to reconsider Monster Energy en banc.