Bartlit Beck, LLP v. Kazuo Okada ( 2022 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 21-1633
BARTLIT BECK LLP,
Petitioner-Appellee,
v.
KAZUO OKADA,
Respondent-Appellant.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 19-cv-08508 — John F. Kness, Judge.
____________________
ARGUED NOVEMBER 10, 2021 — DECIDED FEBRUARY 8, 2022
____________________
Before MANION, ROVNER, and WOOD, Circuit Judges.
WOOD, Circuit Judge. This case originated as a high-stakes
lawsuit between Kazuo Okada, a titan of the gambling indus-
try, and Wynn Resorts, another major player in that field. But
the merits of that dispute are not before us. Instead, we must
address only attorneys’ fees, and only whether the award of
the arbitrators to whom the fee dispute was submitted should
be enforced or set aside.
2 No. 21-1633
Recognizing that vacatur would be an unusual step,
Okada insists that his is the rare case in which it is warranted.
He contends that he was not able to present his case to the
arbitrators. But that oversimplifies matters. Although Okada
had participated for over a year in the arbitral process that
Bartlit Beck LLP, the law firm seeking to collect its fees, had
initiated on July 27, 2018, his cooperation ended abruptly just
days before an evidentiary hearing that had long been sched-
uled for Monday, October 28, 2019. The preceding Friday,
Okada suddenly announced that he would not attend the
hearing. The arbitrators (“the Panel”) held him in default and
proceeded based only on the written submissions from Bartlit
Beck. After the Panel entered a final award in favor of Bartlit
Beck, the firm petitioned the district court to confirm the
award. Okada urged the court to vacate the award instead, on
the ground that the proceeding was fundamentally unfair.
The district court sided with Bartlit Beck and confirmed the
award. We affirm.
I
In 2017 Okada hired Bartlit Beck to represent him in a
multi-billion-dollar lawsuit against Wynn Resorts and its
then-CEO, Steve Wynn. But when the Wynn litigation settled
in Okada’s favor for $2.6 billion, Okada refused to pay the $50
million contingent fee specified in the parties’ engagement
agreement. That agreement included an arbitration clause,
and so Bartlit Beck initiated arbitration before the Interna-
tional Institute for Conflict Prevention and Resolution
(“CPR”), the forum agreed upon by the parties.
As we noted, Okada participated in the arbitration for
over a year. But less than 72 hours before the evidentiary hear-
ing set by the Panel, Okada informed the arbitrators that he
No. 21-1633 3
would not be attending. Initially, he cited no reason for this
sudden shift. The Panel immediately stated that it planned to
proceed with or without him and that his nonattendance
could subject him to default. Okada replied that his reason for
boycotting the hearing was that he rejected the validity of the
engagement agreement. He later added that even if he were
inclined to attend, he would be unable to make the journey
from Japan to Chicago (the agreed site of the arbitration) for
undisclosed medical reasons. Shortly thereafter, Okada an-
nounced that he was not authorizing his attorneys to partici-
pate in the arbitration, and he was canceling all witnesses, res-
ervations, and services.
The Panel decided to take Okada at his word, and it held
him to be in default. Relying on CPR Rule 16, which allows
the Panel to “receive [the non-defaulting party’s] evidence
and argument without the defaulting party’s presence or par-
ticipation,” it proceeded based only on Bartlit Beck’s written
submissions. On December 20, 2019, the Panel entered its Fi-
nal Award, which found that Okada owed the firm $54.6 mil-
lion, a sum that included a $963,032 sanction for the costs and
fees of the proceeding.
Bartlit Beck followed up on December 30, 2019, with a pe-
tition in the district court to confirm the award. Okada moved
to vacate the award and remand the matter to CPR. He con-
tended that he had been deprived of a fundamentally fair pro-
ceeding when the Panel decided the case without his partici-
pation or his evidence. The district court was unpersuaded: it
ruled that the Panel had several reasonable bases for proceed-
ing without him and there was nothing unfair about the pro-
ceeding. It thus confirmed the award, and Okada now ap-
peals. (Initially he was represented by counsel, but we
4 No. 21-1633
granted counsel’s motion to withdraw in an order dated De-
cember 21, 2021, and so Okada is now proceeding pro se.)
II
“Judicial review of arbitration awards is tightly limited.
Confirmation is usually routine or summary, and a court will
set aside an arbitration award only in very unusual circum-
stances.” Standard Sec. Life Ins. Co. of N.Y. v. FCE Benefit Adm’rs,
Inc., 967 F.3d 667, 671 (7th Cir. 2020) (cleaned up). “We review
‘a district court’s decision confirming an arbitration award
under ordinary standards: accepting findings of fact that are
not clearly erroneous and deciding questions of law de novo.’”
Id.On procedural and evidentiary matters, federal courts de-
fer to arbitrators’ decisions so long as those decisions are rea-
sonable. See, e.g., Laws v. Morgan Stanley Dean Witter, 452 F.3d
398, 400 (5th Cir. 2006); El Dorado Sch. Dist. No. 15 v. Cont’l Cas.
Co., 247 F.3d 843, 848 (8th Cir. 2001). Although they are enti-
tled to fair proceedings, “parties that have chosen to remedy
their disputes through arbitration rather than litigation
should not expect the same procedures they would find in the
judicial arena.” Generica Ltd. v. Pharm. Basics, Inc., 125 F.3d
1123, 1130 (7th Cir. 1997).
In this appeal, Okada raises only one issue: did the district
court err when it concluded that the Panel did not deny
Okada a fundamentally fair proceeding? The court found that
the Panel had a reasonable basis for moving ahead as it did,
and that was enough to settle the question. Okada counters
that rationale with several arguments. First, he contends that
both the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards and Chapter 1 of the Federal
No. 21-1633 5
Arbitration Act entitle him to a fundamentally fair proceed-
ing. The district court here erred, in his view, when it did not
conduct an independent examination of the fairness of the
proceedings. Second, Okada contends that, by asking only
whether the Panel had a reasonable basis for its actions, the
court adopted a standard that is too deferential to the arbitra-
tors. He asserts that it should have determined independently
whether the Panel violated principles of fundamental fair-
ness. Third and finally, Okada argues that even if we were to
accept the district court’s legal framework, the record shows
that the Panel’s actions lacked a reasonable basis.
We address these points in the order Okada has adopted.
A
The Convention on the Recognition and Enforcement of
Foreign Arbitral Awards of June 10, 1958 (the “Convention”),
implemented in Chapter 2 of the Federal Arbitration Act
(“FAA”), governs arbitration awards that have a significant
international element, such as foreign parties, or a dispute
about property located abroad, or “some other reasonable re-
lation with one or more foreign states.” 9 U.S.C. § 202. See Pine
Top Receivables of Ill., LLC v. Banco de Seguros del Estado, 771
F.3d 980, 988 (7th Cir. 2014) (per curiam). Bartlit Beck is a
United States citizen and Okada is a citizen of Japan, a signa-
tory nation. This satisfies one of the ways in which an arbitra-
tion agreement may be governed by the Convention. See 9
U.S.C. § 202.
The Convention mandates that “[t]he court shall confirm
the award unless it finds one of the grounds for refusal or de-
ferral of recognition or enforcement of the award specified in
the said Convention.” 9 U.S.C. § 207. Under Article V(1)(b) of
6 No. 21-1633
the Convention, a court may refuse to recognize or enforce an
arbitral award if “[t]he party against whom the award is in-
voked was … unable to present his case.” This provision does
not authorize a court to refuse to recognize or enforce an
award unless it finds a denial of fundamental fairness in the
arbitration proceedings. See Generica Ltd., 125 F.3d at 1129;
Slaney v. Int’l Amateur Athletic Fed’n, 244 F.3d 580, 592 (7th Cir.
2001).
Even though the arbitral award here is governed by the
Convention, as implemented in Chapter 2 of the FAA, Okada
reminds us that Chapter 1 of the FAA applies to proceedings
governed by the Convention when there is no conflict be-
tween the relevant provisions. See 9 U.S.C. § 208. Chapter 1,
which governs domestic disputes, sets forth the grounds on
which a court may vacate an arbitral award. That list includes
the situation “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 … .” 9 U.S.C. § 10(a)(3). This has been in-
terpreted similarly to Article V(1)(b) of the Convention—that
is, an arbitral award may be vacated where there has been a
denial of fundamental fairness. See Mical v. Glick, 581 F. App’x
568, 570 (7th Cir. 2014); Interface Sec. Sys., L.L.C. v. Edwards,
No. 03-4054, 2006 WL 8444029, at *14 (C.D. Ill. Mar. 30, 2006).
Since there appears to be no conflict between the Conven-
tion and Chapter 1 of the FAA here, Okada asks us to hold
that both Article V(1)(b) of the Convention and section 10 of
the FAA apply to his request to vacate the award. He points
out that other courts have concluded as much. See, e.g., Zeiler
v. Deitsch, 500 F.3d 157, 164 (2d Cir. 2007). Faced with a similar
question in Johnson Controls, Inc. v. Edman Controls, Inc., we
No. 21-1633 7
wrote that “[i]t is not clear whether a party may bring an ac-
tion under Chapter 1 to vacate an award issued by an arbitra-
tor in a U.S. jurisdiction, but governed by the Convention.”
712 F.3d 1021, 1025 (7th Cir. 2013). We recognized that “[t]his
could be important in some cases, because the Convention
grounds for vacatur are slightly different from those in Chap-
ter 1 of the FAA.” Id. Because “we d[id] not regard [Johnson
Controls] as a close case,” however, we saw no reason to an-
swer the question. Id.For the same reason, we decline to do so now. As we now
explain, Okada cannot prevail under either provision.
B
Okada insists that when fundamental fairness is at issue,
rather than the merits of an award, it is not enough simply to
find that there is a minimally reasonable basis for the arbitral
panel’s actions. Instead, he argues, a court must ask whether
the panel’s decision was reasonable and fair. Looking only at
reasonableness, he concludes, leads to an overly deferential
standard of review.
This is a strained argument to begin with, but worse, it
mischaracterizes the district court’s decision. The district
court did not overlook fairness. It concluded that the Panel’s
decision to proceed without Okada was fair because it was rea-
sonable. Every circuit to conduct a fairness inquiry under sim-
ilar circumstances has adopted this approach. See, e.g., Laws,
452 F.3d at 400 (“Laws was not denied a fair hearing because
the record supports several bases on which the panel reason-
ably could have denied him a continuance.”); id. at 401 (“In
light of these reasonable bases for denying Laws’s continu-
ance, the panel did not deny him a fair hearing.”); El Dorado,
8 No. 21-1633
247 F.3d at 848 (explaining that “[c]ourts will not intervene in
an arbitrator’s decision not to postpone a hearing if any rea-
sonable basis for it exists” and finding no fundamental flaw
because “[a]ny or all of these explanations would provide a
reasonable basis for the decision not to postpone.”); Tempo
Shain Corp. v. Bertek, Inc., 120 F.3d 16, 20 (2d Cir. 1997) (revers-
ing district court’s decision that there was no denial of funda-
mental fairness because “[w]e find that there was no reasona-
ble basis for the arbitration panel[’s decision].”); Scott v. Pru-
dential Sec., Inc., 141 F.3d 1007, 1016 (11th Cir. 1998) (explain-
ing that “[i]n reviewing an arbitrator’s refusal to delay a hear-
ing, we must decide whether there was ‘any reasonable basis’
for failing to postpone the hearing to receive relevant evi-
dence” and concluding that there was no denial of fundamen-
tal fairness because there was, in fact, such a reasonable basis).
The only case cited by Okada that deserves brief mention
is Bisnoff v. King, 154 F. Supp. 2d 630 (S.D.N.Y. 2001). The dis-
trict court there did analyze reasonableness and fairness sep-
arately and sequentially, see id. at 637, but that fact appears to
reflect only the author’s organizational preferences. It does
not undermine the weight of the authorities we just cited, and
in any event, we are not bound by an out-of-circuit district
court decision.
Moreover, Okada’s argument is beside the point, because
on this record a more exacting review would have made no
difference. Okada was not denied a fundamentally fair pro-
ceeding when, after he unequivocally announced his refusal
to participate, the Panel chose to proceed without him.
C
No. 21-1633 9
Okada argues that the Panel’s decision to move ahead
with the hearing was both unreasonable and unfair because it
did so in the face of knowledge that Okada (then in Japan)
was facing a medical emergency, and for that reason could
not come to Chicago for the hearing. The problem with this
argument is that it finds no support in the record.
A review of the relevant email correspondence between
Okada’s attorney and the Panel makes plain that, sick or not,
Okada was not going to participate in the hearing. The first
relevant email from Okada’s attorney to the Panel stated only
that Okada “recently informed me that he is not attending the
scheduled arbitration” and asked how the Panel wished to
proceed. The email did not request a continuance, nor did it
mention any illness that would bar Okada’s attendance.
After the Panel replied that it would proceed with or with-
out Okada and that Okada could be subject to default under
CPR Rule 16 for failure to appear at a “duly and long noticed
hearing,” Okada replied that “[i]f Bartlit Beck does not agree
that the alleged agreement is invalid, there is no need for me
to attend the proposed arbitration.” He added that “[e]ven if I
were to agree to participate in the proposed arbitration, I am unable
to do so due to my health.” (Emphasis added.) That was it. He
offered no explanation, let alone something like a doctor’s
note, to support his claimed health problem. He did not even
hint that it was an emergency. Nor did he offer to appear by
video or phone, and he never asked for a continuance. Finally,
despite a lengthy back-and-forth over email regarding his
nonattendance, he never mentioned his alleged health limita-
tions again.
As if to remove any doubt that his refusal to attend was
unrelated to his health, when the Panel said that it would
10 No. 21-1633
entertain arguments at the start of the hearing about the ap-
propriate remedy for his nonattendance, Okada replied that
his attorneys were “not authorized to attend the arbitration
because he rejects the validity of the engagement agreement
and objects to the proceeding.” He added that “all reserva-
tions, witnesses and ordered services” were thus being can-
celed. At this juncture, the Panel declared that “[p]ursuant to
CPR Rule 16, we will proceed with [Bartlit Beck’s] evidence
… given that Mr. Okada will not be presenting a defense.”
Shortly thereafter, the Panel added that “[Okada] has for-
feited the right to present any defense so the Panel will not
accept or consider any papers that he may now seek to sub-
mit.” A week later, Okada’s attorney sent the Panel a follow-
up email in which he asked the Panel, “[i]f I could convince
Mr. Okada to commit to a date certain … would you all con-
sider … reschedul[ing] the hearing?” (Emphasis added.) If
Okada’s nonattendance had been health-related, he would
need no convincing to attend at a later time; he would either
be well enough to do so or not.
Okada now paints the Panel’s action as a refusal to delay
the hearing in the face of his asserted medical emergency. But
nothing in the record supports that story. To the contrary, the
Panel was both reasonable and fair when it decided to move
ahead without him. It is hard to imagine what else it could
have done, given Okada’s flat refusal to participate.
But, Okada notes, just because he was not present did not
mean that the Panel had to ignore his evidence and decide (as
it did) exclusively on Bartlit Beck’s written submissions. But
Okada never asked the Panel to consider evidence from him
notwithstanding his absence. The only thing in the record that
even approximates such a request is an email from his
No. 21-1633 11
attorney asking the Panel “whether or not we will be entitled
to present a defense if authorized to do so” by Okada. (Emphasis
added.) Shortly thereafter, Okada told the Panel that his attor-
neys were not authorized to participate in the arbitration be-
cause he rejected its validity, and that he was canceling all res-
ervations, witnesses, and services. Importantly, Okada com-
municated this before the Panel officially defaulted him and
decided that he had forfeited his right to present a defense.
His argument that it would have been futile to ask the Panel
to consider his evidence (because the Panel had already made
up its mind) is meritless.
In short, Okada was not denied any right to be heard when
the Panel proceeded without evidence that he never offered.
As Bartlit Beck points out, the Panel proceeded as expressly
authorized by the default rule of the parties’ chosen arbitral
facility: “The [Panel] may receive [the non-defaulting party’s]
evidence and argument without the defaulting party’s pres-
ence or participation.” CPR Rule 16.
III
Put plainly, Okada took himself out of the race. He cannot
now complain that he was unfairly deprived of the chance to
win. We AFFIRM the district court’s judgment confirming the
Panel’s Final Award.