Carolyn Burton v. Class Counsel and Party to Arb , 737 F.3d 1262 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE: WAL-MART WAGE AND HOUR No. 11-17718
EMPLOYMENT PRACTICES
LITIGATION, D.C. No.
2:06-cv-00225-
PMP-PAL
CAROLYN BEASLEY BURTON;
ROBERT MILLS; THE MILLS LAW
FIRM,
Appellants,
v.
CLASS COUNSEL AND PARTY TO
ARBITRATION; ARBITRATOR,
Appellees.
IN RE: WAL-MART WAGE AND HOUR No. 11-17778
EMPLOYMENT PRACTICES
LITIGATION, D.C. No.
2:06-cv-00225-
PMP-PAL
CAROL POWELL LAPLANT,
Appellant,
v. OPINION
CLASS COUNSEL AND PARTY TO
ARBITRATION; ARBITRATOR,
Appellees.
2 IN RE: WAL-MART
Appeal from the United States District Court
for the District of Nevada
Philip M. Pro, Senior District Judge, Presiding
Argued and Submitted
October 8, 2013—San Francisco, California
Filed December 17, 2013
Before: Dorothy W. Nelson, Milan D. Smith, Jr.,
and Sandra S. Ikuta, Circuit Judges.
Opinion by Judge Milan D. Smith, Jr.
SUMMARY*
Arbitration
Affirming the district court’s confirmation of an
arbitration award allocating attorneys’ fees, the panel held
that a non-appealability clause in an arbitration agreement
that eliminates all federal court review of arbitration awards,
including review under § 10 of the Federal Arbitration Act,
is not enforceable.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
IN RE: WAL-MART 3
COUNSEL
Joshua D. Boxer (argued) and Robert W. Mills, The Mills
Law Firm, San Rafael, California; Carolyn Beasley Burton,
San Ramon, California, pro se, for Appellants Burton et al.
Carol P. LaPlant (argued), Berkeley, California, pro se
Appellant.
Robert J. Bonsignore (argued), Bonsignore & Brewer,
Belmont, New Hampshire, for Appellees.
OPINION
M. SMITH, Circuit Judge:
Appellants Carolyn Burton, Robert Mills, the Mills Law
Firm, and Carol LaPlant (collectively, the Burton Group)
appeal from the district court’s confirmation of an arbitration
award allocating attorneys’ fees. The Burton Group contends
that the district court erred in declining to vacate the
arbitration award pursuant to § 10(a) of the Federal
Arbitration Act (FAA), 9 U.S.C. § 10(a). Appellee Robert
Bonsignore counters that we lack jurisdiction to hear this
appeal because the parties agreed to binding, non-appealable
arbitration. Alternatively, Bonsignore argues that the district
court correctly found that there was no basis for vacatur under
the FAA.
This appeal presents a question of first impression in this
circuit: Is a non-appealability clause in an arbitration
agreement that eliminates all federal court review of
arbitration awards, including review under § 10 of the FAA,
4 IN RE: WAL-MART
enforceable?1 We conclude that it is not. Accordingly, we
proceed to the merits of the Burton Group’s claims, and
affirm the district court’s confirmation of the arbitration
award in a memorandum disposition filed contemporaneously
with this opinion.
FACTUAL AND PROCEDURAL BACKGROUND
This appeal arises out of a protracted dispute over
attorneys’ fees awarded in the Wal-Mart wage and hour
multidistrict litigation, MDL 1735, in the United States
District Court for the District of Nevada (the Wal-Mart
Litigation). On April 25, 2006, the district court appointed
Robert Bonsignore and Carolyn Burton as plaintiffs’ co-lead
counsel. Carol LaPlant was named liaison counsel for the
Wal-Mart Litigation.
On December 14, 2008, the parties to the Wal-Mart
Litigation participated in a mediation with the Honorable
Layn R. Phillips (retired). The parties agreed to a global
settlement (Settlement Agreement) whereby Wal-Mart agreed
to pay up to $85 million to settle all claims against it. The
parties also agreed that any fee disputes among plaintiffs’
counsel would be arbitrated by Phillips (the Arbitrator).
The district court preliminarily approved the Settlement
Agreement on May 28, 2009, and granted final approval on
November 2, 2009. On November 20, 2009, the district court
awarded plaintiffs approximately $28 million in attorneys’
1
Because the Burton Group did not seek review of the arbitration award
under § 11 of the FAA, which allows a district court to modify or correct
an arbitration award, we do not reach the question whether a party could
waive review under its terms.
IN RE: WAL-MART 5
fees. The district court’s approval of the settlement was
unanimously affirmed by a different panel of our court on
August 10, 2010.
During the course of the Wal-Mart Litigation, the
relationships among plaintiffs’ counsel deteriorated.
Plaintiffs’ counsel quarreled concerning the proper allocation
of the $28 million fee award, and were unable to resolve their
dispute. Consequently, the fee dispute was submitted to
“binding, non-appealable arbitration” before the Arbitrator,
as provided in the Settlement Agreement.
On January 10, 2011, the Arbitrator handed down an
opinion and order allocating the $28 million fee award
amongst plaintiffs’ counsel. The Arbitrator allocated over $6
million to the Burton Group, over $11 million to Bonsignore,
and over $730,000 to LaPlant. Bonsignore moved to confirm
the Arbitrator’s award on January 26, 2011, while the Burton
Group filed a motion to vacate the award on April 11, 2011.
The district court granted Bonsignore’s motion on October
11, 2011, and found no legal basis for vacating the
Arbitrator’s award. The district court entered judgment on
October 19, 2011, and this appeal followed.
DISCUSSION
We ordinarily have jurisdiction pursuant to 28 U.S.C.
§ 1291 and 9 U.S.C. § 16(a)(1)(D) to review a district court
order confirming an arbitration award. However, Bonsignore
questions whether we have jurisdiction in the present action
because § 22.9 of the Settlement Agreement contains a non-
6 IN RE: WAL-MART
appealability clause.2 Specifically, § 22.9 provides, in
relevant part:
Class Counsel agree on behalf of themselves,
their clients, and all Class Counsel to submit
any disputes concerning fees (including, but
not limited to, disputes concerning the fee
allocation to any Class Counsel as
recommended by Co-Lead Counsel, and
disputes between Co-Lead Counsel regarding
the determination of appropriate fee
allocations) to binding, non-appealable
arbitration to the Honorable Layn Phillips
within fourteen (14) days of the fee
2
The Burton Group contends that § 15.2 of the Settlement Agreement,
read in conjunction with § 22.9, preserves its rights to challenge the
fairness of the arbitration process and to appeal any decision of the district
court to our court. Section 15.2 provides, in relevant part:
In the event that the Court does not approve the
Attorneys’ Fees and Costs in the amount requested by
Class Counsel, or in the event that the Attorneys’ Fees
and Costs requested by Class Counsel is reduced, that
finding shall not be a basis for rendering any unrelated
section of Settlement null, void, or unenforceable.
Class Counsel retain their right to appeal any decision
by the Court regarding the Attorneys’ Fees and Costs
and such appeal shall not be deemed an appeal of the
Settlement.
We reject this argument because § 15.2, by its terms, concerns only
the award of attorneys’ fees and costs by the district court, and preserves
appellate review of any decision of the district court regarding that award.
It does not encompass the Arbitrator’s decision concerning the allocation
of those fees, which is governed solely by § 22.9.
IN RE: WAL-MART 7
allocations set forth by and/or recommended
by Co-Lead Counsel.
Courts have construed non-appealability clauses like that
in § 22.9 in two different ways. First, as the district court
concluded, the phrase “binding, non-appealable arbitration”
may be understood to preclude only federal court review of
the merits of the Arbitrator’s decision, and not to eliminate
the parties’ right to appeal from the Arbitrator’s decision
under § 10 of the FAA, which provides grounds for the
vacatur of an arbitration award. The district court’s reasoning
tracks that employed by some of our sister circuits, which
have held that a contract provision stating that arbitration is
non-appealable signifies that the parties only waive review of
the merits of the arbitration. See Southco, Inc. v. Reell
Precision Mfg. Corp., 331 F. App’x 925, 927–28 (3d Cir.
2009) (citing Tabas v. Tabas, 47 F.3d 1280, 1288 (3d Cir.
1995) (en banc)); Rollins, Inc. v. Black, 167 F. App’x 798,
799 n.1 (11th Cir. 2006); cf. Dean v. Sullivan, 118 F.3d 1170,
1171 (7th Cir. 1997).
A second possible construction of the “binding, non-
appealable arbitration” clause is that the arbitration clause
divests both the district court and our court3 of jurisdiction to
3
This arbitration clause is different from the clause at issue in MACTEC,
Inc. v. Gorelick, which stated in relevant part that “[j]udgment upon the
award rendered by the arbitrator shall be final and nonappealable . . . .”
427 F.3d 821, 827 (10th Cir. 2005) (emphasis added). The Tenth Circuit
held that the non-appealability clause in that case foreclosed only
appellate review, and was enforceable because it preserved federal court
review by the district court. Id. at 829–30. The clause at issue here, in
contrast, arguably forecloses all federal court review. We express no
opinion concerning whether a non-appealability clause that precludes only
appellate review is enforceable.
8 IN RE: WAL-MART
review the Arbitrator’s fee allocation on any ground,
including those enumerated in § 10 of the FAA.4 See Hoeft
v. MVL Grp., Inc., 343 F.3d 57, 63–64 (2d Cir. 2003),
overruled on other grounds by Hall St. Assocs., L.L.C. v.
Mattel, Inc., 552 U.S. 576 (2008).5
Thus, the arbitration clause is ambiguous. We need not
resolve the question of which interpretation is correct if we
conclude that the second possible construction is
unenforceable because it eliminates judicial review under
§ 10 of the FAA.
The FAA provides for expedited judicial review of
arbitration awards. 9 U.S.C. § 1 et seq.6 However, federal
court review of arbitration awards is almost entirely limited
4
Bonsignore contends that § 22.10 of the Settlement Agreement
provides for judicial review of the Arbitrator’s award in the district court.
However, that section is expressly limited by § 22.9, which renders the
Arbitrator’s decision non-appealable.
5
In Hoeft, the Second Circuit adopted this reading of a similar
arbitration clause, which provided that in the event of a dispute, the parties
were to
use their reasonable best efforts to resolve such dispute,
and in the event that they are unable to do so such
dispute shall be resolved by Steven Sherrill, whose
decision in such matters shall be binding and
conclusive upon each of the parties hereto and shall not
be subject to any type of review or appeal whatsoever.
Hoeft, 343 F.3d at 60, 63–64.
6
The FAA does not grant federal jurisdiction, but rather requires an
independent jurisdictional basis. Hall St. Assocs., 552 U.S. at 581–82; see
also 9 U.S.C. § 4.
IN RE: WAL-MART 9
to the grounds enumerated in the FAA, under which a court
may vacate, modify, or correct an arbitration award. Id.
§§ 10–11; Bosack v. Soward, 586 F.3d 1096, 1102 (9th Cir.
2009). Specifically, a district court may vacate an arbitration
award upon the application of any party to the arbitration:
(1) where the award was procured by
corruption, fraud, or undue means;
(2) where there was evident partiality or
corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of
misconduct in refusing to postpone the
hearing, upon sufficient cause shown, or in
refusing to hear evidence pertinent and
material to the controversy; or of any other
misbehavior by which the rights of any party
have been prejudiced; or
(4) 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.
10 IN RE: WAL-MART
9 U.S.C. § 10(a).7 The Supreme Court has already clarified
that the statutory grounds for judicial review in the FAA are
exclusive, and may not be supplemented by contract. Hall St.
Assocs., 552 U.S. at 578. But since Bonsignore’s contention
is that we lack jurisdiction to review the Arbitrator’s award
on any ground, we must also determine whether the statutory
grounds for vacatur in the FAA may be waived or eliminated
by contract.
Congress enacted the FAA to promulgate a “national
policy favoring arbitration and [to] place[] arbitration
agreements on equal footing with all other contracts . . . .”
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443
(2006); see also Hall St. Assocs., 552 U.S. at 581. Although
parties may tailor certain aspects of arbitration through
private contract, and “courts must . . . enforce [such contracts]
according to their terms,” AT&T Mobility LLC v. Concepcion,
131 S. Ct. 1740, 1745 (2011) (internal citations omitted), the
Supreme Court has articulated limits on parties’ freedom to
modify judicial review of arbitration awards. See Hall St.
Assocs., 552 U.S. at 578 (holding that the statutory grounds
for vacatur and modification of arbitration awards may not be
supplemented by contract); see also Kyocera Corp. v.
Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 1000 (9th
7
Courts may also vacate arbitration awards on the basis of an
arbitrator’s manifest disregard for law. See Hall St. Assocs., 552 U.S. at
584–85; Wilko v. Swan, 346 U.S. 427, 436–37 (1953), overruled on other
grounds by Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S.
477 (1989). “Although the words ‘manifest disregard for law’ do not
appear in the FAA, they have come to serve as a judicial gloss on the
standard for vacatur set forth in FAA § 10(a)(4).” Johnson v. Wells Fargo
Home Mortg., Inc., 635 F.3d 401, 414 (9th Cir. 2011). To the extent that
it informs § 10(a)(4), parties may not contract to preclude judicial review
of manifest disregard for law.
IN RE: WAL-MART 11
Cir. 2003) (en banc) (“Private parties’ freedom to fashion
their own arbitration process has no bearing whatsoever on
their inability to amend the statutorily prescribed standards
governing federal court review.”).
In Hall Street Associates, for example, Hall Street argued
that the arbitration clause in its contract, which expanded
judicial review beyond what is provided for in the FAA, was
enforceable because arbitration is a “creature of contract.”
Hall St. Assocs., 552 U.S. at 585. The Supreme Court
rejected this argument, concluding that Hall Street’s
arbitration clause was unenforceable because it was “at odds”
with the “textual features” of the FAA, which provide that the
grounds for judicial review in §§ 10 and 11 are exclusive. Id.
at 586.
Just as the text of the FAA compels the conclusion that
the grounds for vacatur of an arbitration award may not be
supplemented, it also compels the conclusion that these
grounds are not waivable, or subject to elimination by
contract. A federal court “must” confirm an arbitration award
unless, among other things, it is vacated under § 10. 9 U.S.C.
§ 9; Hall St. Assocs., 552 U.S. at 582. This language “carries
no hint of flexibility” and “does not sound remotely like a
provision meant to tell a court what to do just in case the
parties say nothing else.” Id. at 587. By contrast, other
provisions in the FAA expressly permit modification by
contract. Id. at 587–88. For example, § 5 provides rules for
appointing an arbitrator that apply “if no method [is] provided
[in the arbitration agreement] . . . .” 9 U.S.C. § 5. If the text
of the statute trumps a contractual arrangement to expand
review beyond the statute, then it follows that the statute
forecloses a contractual arrangement to eliminate review
12 IN RE: WAL-MART
under its terms, and we reject Bonsignore’s contention that
§ 22.9 can be so read.
Permitting parties to contractually eliminate all judicial
review of arbitration awards would not only run counter to
the text of the FAA, but would also frustrate Congress’s
attempt to ensure a minimum level of due process for parties
to an arbitration. Through § 10 of the FAA, Congress
attempted to preserve due process while still promoting the
ultimate goal of speedy dispute resolution. See Kyocera
Corp., 341 F.3d at 998 (“The[] grounds [in § 10] afford an
extremely limited review authority, a limitation that is
designed to preserve due process but not to permit
unnecessary public intrusion into private arbitration
procedures.”); see also Hall St. Assocs., 552 U.S. at 588
(“[T]he three provisions, §§ 9–11, . . . substantiat[e] a
national policy favoring arbitration with just the limited
review needed to maintain arbitration’s essential virtue of
resolving disputes straightaway.”); Hoeft, 343 F.3d at 64 (“In
enacting § 10(a), Congress impressed limited, but critical,
safeguards onto this process, ones that respected the
importance and flexibility of private dispute resolution
mechanisms, but at the same time barred federal courts from
confirming awards tainted by partiality, a lack of elementary
procedural fairness, corruption, or similar misconduct.”). If
parties could contract around this section of the FAA, the
balance Congress intended would be disrupted, and parties
would be left without any safeguards against arbitral abuse.
IN RE: WAL-MART 13
In light of the above, we hold that 9 U.S.C. § 10(a), the
statutory grounds for vacatur in the FAA, may not be waived
or eliminated by contract.8
AFFIRMED.
8
In Aerojet-General Corp. v. American Arbitration Ass’n, we noted in
dicta, citing a district court decision from South Carolina, “that parties to
an arbitration can agree to eliminate all court review of the proceedings
. . . .” 478 F.2d 248, 251 (9th Cir. 1973). That dicta is not controlling,
and we do not elect to follow its reasoning. See In re Magnacom
Wireless, LLC, 503 F.3d 984, 993–94 (9th Cir. 2007) (“In our circuit,
statements made in passing, without analysis, are not binding precedent.”);
see also United States v. Johnson, 256 F.3d 895, 915 (9th Cir. 2001) (en
banc) (Kozinski, J., concurring) (“Of course, not every statement of law
in every opinion is binding on later panels. Where it is clear that a
statement is made casually and without analysis, where the statement is
uttered in passing without due consideration of the alternatives, or where
it is merely a prelude to another legal issue that commands the panel’s full
attention, it may be appropriate to re-visit the issue in a later case.”).