Lapine Technology Corp. v. Kyocera Corp.
| Decision Date | 09 December 1997 |
| Docket Number | PRUDENTIAL-BACHE,96-15321,96-16318,96-16143,96-16142,Nos. 96-15319,s. 96-15319 |
| Citation | 130 F.3d 884 |
| Parties | 97 Cal. Daily Op. Serv. 9183, 97 Daily Journal D.A.R. 14,835 LAPINE TECHNOLOGY CORPORATION, Plaintiff-Appellee, v. KYOCERA CORPORATION, Defendant-Appellant. KYOCERA CORPORATION, Plaintiff-Appellant, v. TRADE SERVICES, INC., fdba Prudential-Bache Trade Corporation; Prudential Capital & Investment Services, Inc.; Lapine Holding Co.; Lapine Technology Corporation, Defendants-Appellees. LAPINE TECHNOLOGY CORPORATION, Plaintiff-Appellee, v. KYOCERA CORPORATION, Defendant-Appellant. KYOCERA CORPORATION, Plaintiff-counter-claimant-Appellant, v.TRADE SERVICES, INC., fdba Prudential-Bache Trade Corporation; Prudential Capital & Investment Services, Inc.; Lapine Technology Corporation; Lapine Holding Company Inc., Defendants-Counter-Claimants-Appellees. KYOCERA CORPORATION, Plaintiff-Appellee, v.TRADE SERVICES, INC., fdba Prudential-Bache Corporation; Prudential Capital & Investment Services, Inc.; Lapine Technology Corporation; Lapine Holding Co., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
James J. Brosnahan, Morrison & Foerster, San Francisco, California, and Shirley M. Hufstedler, Morrison & Foerster, Los Angeles, California, for appellant.
Charles S. Treat and Maureen E. Mahoney, Latham & Watkins, San Francisco, California, for appellees.
Keiichiro Sue, Matsuo & Kosugi, Tokyo, Japan, for amicus curiae Law Association for Asia and the Pacific.
Bettina Redway, Sacramento, California, for amici curiae, California Manufacturers Association, Electronic Industries Association, Shaklee Corporation, International Electronics Manufacturers and Cnsumers of America, U.S. Borax, Inc., Mexinox, S.A. de C.V., New United Motor Manufacturing, Inc. Christopher E. Chenoweth, San Francisco, California, for amici curiae California Bankers Association, American Bankers Association, Bank Securities Association, Consumer Bankers Association, Bankers Roundtable.
Erik Valgaeren, Stibbe Simont Monahan Duhot, Brussels, Belgium, for amici curiae Hans Van Houtte and Bernd Von Hoffman.
Forrest Booth, Rice Fowler Booth & Banning, San Francisco, California, and Bruce Aitken, Aitken Irvin Lewin Berlin Vrooman & Cohn, Orange, California, for amicus curiae The Pro Trade Group.
Paul Grossman, Paul, Hastings, Janofsky & Walker, Los Angeles, California, for amicus curiae California Employment Law Council.
Appeals from the United States District Court for the Northern District of California; William A. Ingram, District Judge, Presiding. D.C. No. CV-87-20316-WAI, D.C. No. CV-91-20159-WAI.
Before: KOZINSKI, MAYER, * and FERNANDEZ, Circuit Judges.
Kyocera Corporation appeals the district court's judgment in favor of LaPine Technology Corporation, LaPine Holding Company, Inc. and Prudential-Bache Trade Services, Inc. 1 The district court determined that it could not review an arbitration award under a substantial evidence and error of law standard, even though that standard was part of the arbitration agreement made by the parties. The court, therefore, confirmed the arbitration award against Kyocera by using the much more deferential standard authorized in the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 10-11. See Lapine Technology Corp. v. Kyocera Corp., 909 F.Supp. 697 (N.D.Cal.1995) (Lapine I ). We affirm in part and reverse and remand in part.
In 1984, Kyocera, LaPine, and Prudential-Bache began a venture to manufacture and market computer disk drives. LaPine had a drive design, which it licensed to the manufacturer, Kyocera. Prudential-Bache provided financing for the venture: it would purchase Kyocera's entire output of drives and sell those drives to LaPine, which would then market them to its customers. However, that arrangement lasted for a relatively short time because LaPine's fortunes took a downward turn in 1986. The change in LaPine's financial condition set off a series of events that culminate in our decision today.
In late 1986, the parties began to negotiate a restructuring of their venture and reached an agreement in principle. On November 13, 1986, they memorialized their deal in a Definitive Agreement ("DA"). A revised DA, circulated on November 14, included as an exhibit the Amended Trading Agreement ("ATA"). The ATA eliminated Prudential-Bache's role as middleman, thus requiring Kyocera to sell drives directly to LaPine. Kyocera objected to that provision some time after the ATA was circulated. When Kyocera refused to comply with the ATA, LaPine gave notice of its claim of breach and then began the instant proceedings in the district court.
The district court granted Kyocera's motion to compel arbitration pursuant to § 8.10(d) of the DA. That arbitration clause provided as follows:
(d) Manner. A party desiring to submit a matter to arbitration shall give written notice to the other parties hereto.... The arbitrators shall decide the matters submitted based upon the evidence presented The dispute was submitted to a panel of three arbitrators (the "Tribunal") for decision in accordance with a document entitled "Terms of Reference." That document provided, inter alia, that,
the terms of this Agreement, the Agreement in Principle and the laws of the State of California. The arbitrators shall issue a written award which shall state the bases of the award and include detailed findings of fact and conclusions of law. The United States District Court for the Northern District of California may enter judgment upon any award, either by confirming the award or by vacating, modifying or correcting the award. The Court shall vacate, modify or correct any award: (i) based upon any of the grounds referred to in the Federal Arbitration Act, (ii) where the arbitrators' findings of fact are not supported by substantial evidence, or (iii) where the arbitrators' conclusions of law are erroneous.
The decisions and awards of the Tribunal may be enforced by the judgment of the Court or may be vacated, modified or corrected by the Court (a) based upon any grounds referred to in the Act, or (b) where the Tribunal's findings of fact are not supported by substantial evidence, or (c) where the Tribunal's conclusions of law are erroneous.
The Tribunal issued its final decision on August 24, 1994 and on November 23, 1994, Kyocera made a Motion to Vacate, Modify and Correct the Arbitral Award. Kyocera based its motion on claims that: (1) the Tribunal's findings of fact were not supported by substantial evidence, (2) the Tribunal had made errors of law, and (3) there existed various statutory grounds for vacatur or modification under the FAA. 2 See 9 U.S.C. §§ 10, 11.
The district court denied Kyocera's motion to vacate. In doing so, the court held that it would not review the arbitration award for errors of law or fact as provided in the DA and Terms of Reference. Rather, it considered only the statutory grounds for vacatur and found none of them applicable in this case. Thus, the court denied vacatur, granted Claimants' motion to confirm, and subsequently entered judgment. It also awarded Claimants attorneys fees and disbursements for both the pre- and post-arbitration phases of the litigation. However, the district court denied Claimants' request for prejudgment interest on the attorneys fees and disbursements award. Kyocera appeals from the district court's judgment and its award of attorneys fees. Claimants cross-appeal the denial of prejudgment interest.
The district court had diversity jurisdiction pursuant to 28 U.S.C. § 1332 and we have jurisdiction under 28 U.S.C. § 1291. We review de novo the district court's decision to deny vacatur and to confirm the arbitration award. See Woods v. Saturn Distribution Corp., 78 F.3d 424, 427 (9th Cir.), cert. dismissed, --- U.S. ----, 117 S.Ct. 30, 135 L.Ed.2d 1123 (1996).
This appeal boils down to one major issue: Is federal court review of an arbitration agreement necessarily limited to the grounds set forth in the FAA or can the court apply greater scrutiny, if the parties have so agreed? The district court answered It is beyond peradventure that in the absence of any contractual terms regarding judicial review, a federal court may vacate or modify an arbitration award only if that award is "completely irrational," exhibits a "manifest disregard of law," or otherwise falls within one of the grounds set forth in 9 U.S.C. §§ 10 or 11. Todd Shipyards Corp. v. Cunard Line, Ltd., 943 F.2d 1056, 1060 (9th Cir.1991) (citation omitted). The instant case does not, however, fall neatly within the contours of the usual rule. That is because the parties indisputably contracted for heightened judicial scrutiny of the arbitrators' award when they agreed that review would be for errors of fact or law.
"yes" to the first part of the question and "no" to the second. It said: "This court is satisfied that the parties may not by agreement alter by expansion the provisions for judicial review contained in the Federal Arbitration Act." Lapine I, 909 F.Supp. at 705. We do not agree with its answers.
We hold that we must honor that agreement. We must not disregard it by limiting our review to the FAA grounds. To locate the principle that animates our holding, one need not look very much further than the Supreme Court's decisions applying and interpreting the FAA. Those decisions make it clear that the primary purpose of the FAA is to ensure enforcement of private agreements to arbitrate, in accordance with the agreements' terms. As the Supreme Court said in Volt Info. Sciences v. Board of Trustees, 489 U.S. 468, 478-79, 109 S.Ct. 1248, 1255-56, 103 L.Ed.2d 488 (1989) (citations omitted):
In recognition of Congress' principal purpose of ensuring that private arbitration agreements are enforced according to...
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