Bosack v. Soward
| Decision Date | 23 July 2009 |
| Docket Number | No. 08-35458.,No. 08-35248.,08-35248.,08-35458. |
| Citation | 586 F.3d 1096 |
| Parties | In the Matter of the Arbitration Between, Leonard BOSACK; Sandy Lerner; Cartesian Partners LP; The Leonard Bosack Trust; The Sandy Lerner Trust; Richard Troiano; The & Trust; & Capital Partners; The Leonard X. Bosack and Bette M. Kruger Charitable Foundation, Inc.; Capital Inc., Petitioners-Appellants, v. David C. SOWARD; & Management Company, Respondents-Appellees. In The Matter of The Arbitration Between, Leonard Bosack; Sandy Lerner; Cartesian Partners LP; The Leonard Bosack Trust; The Sandy Lerner Trust; Richard Troiano; The & Trust; & Capital Partners; The Leonard X. Bosack and Bette M. Kruger Order and Charitable Foundation, Inc.; Amended Capital Inc., Petitioners-Appellants, v. David C. Soward; & Management Company, Respondents-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Kathleen M. Sullivan, Redwood Shores, CA, for the appellant, Bosack.
Steven Smith, San Francisco, CA, for the appellant, Lerner.
J. Daniel Sharp, San Francisco, CA, for the appellees.
Appeal from the United States District Court for the Western District of Washington, Thomas S. Zilly, Senior District Judge, Presiding. D.C. No. 2:07-cv-00574-TSZ.
Before: WILLIAM C. CANBY, JR., DAVID R. THOMPSON and N. RANDY SMITH, Circuit Judges.
The slip opinion filed July 23, 2009, 573 F.3d 891, is amended as follows:
At slip opinion page 9514, line 25, 573 F.3d at 900, after
At slip opinion page 9514, line 25, through page 9515, line 13, 573 F.3d at 900-01, delete
The full court has been advised of the petition for court rehearing en banc, and no judge of the court has requested en banc rehearing. See Fed. R.App. P. 35(b).
The petitions for panel rehearing and for rehearing by the court en banc are DENIED.
No further petitions for panel rehearing or for rehearing en banc will be accepted for filing.
Leonard Bosack ("Bosack") and Sandy Lerner ("Lerner") entered into arbitration with their former financial manager, David C. Soward ("Soward") to resolve multiple disputes arising out of the parties' soured relationship.
The panel of arbitrators ("panel") made several interim awards, one of which was final, and one Final Award. Soward prevailed on his conversion and tort claims, and was awarded substantial compensatory and punitive damages as well as attorney fees and costs. The district court confirmed the award. Bosack and Lerner appeal. We have jurisdiction under 28 U.S.C. § 1291 and we affirm.
Bosack and his wife Lerner were the founders of Cisco Systems. They employed Soward as their investment manager. The three formed & Capital Partners, L.P., ("& Capital"). Soward served as the general partner, and Bosack and Lerner were limited partners.
Several years later, Bosack and Soward formed Cartesian, a second partnership, for the purpose of managing Bosack's "high touch" investments. Soward was the general partner of Cartesian; Bosack was a limited partner. A written partnership agreement for Cartesian (the "Wood Agreement") was drafted, but never signed.
A decade or so later, Bosack and Lerner began to suspect Soward had breached his fiduciary duties in managing their assets. They discovered that Soward had made undocumented loans to himself and his friends. Soward was removed as the general partner of & Capital, and of Cartesian. Bosack and Lerner then formed SLLB, L.L.C., and it replaced Soward as the general partner of Cartesian.
Soward demanded arbitration, seeking (among other things) a dissolution of Cartesian and an accounting of his partnership interest. Bosack and Lerner participated with Soward in the arbitration proceeding. It lasted two years, during which more than sixty days of hearings were held, more than twenty witnesses testified, and over five hundred exhibits were entered into evidence. Due to the complicated nature of the proceedings, the parties agreed to proceed in stages. The panel entered a series of five interim awards, and then one Final Award.
The results of the awards were mixed. In Interim Award 1, the panel determined that the terms of the Wood Agreement governed the Cartesian partnership, though that agreement had never been signed. The panel determined that Soward breached his fiduciary duties, but that Bosack had no right to remove him as a general partner of Cartesian. Under the terms of the Wood Agreement, the panel held that Soward remained a limited partner in Cartesian after he was removed as the general partner. The panel concluded that the value of Soward's partnership should be calculated as of September 30, 2006. Interim Award 1 was not made final.
Interim Award 2 is not involved in this appeal.
In Interim Award 3, the panel determined the value of Soward's partnership interest was $1,496,391. Award 3 was the only interim award the arbitration panel made final and immediately enforceable.
In Interim Award 4, the panel ruled in favor of Soward on two tort claims. After Bosack removed Soward as the general partner of Cartesian, the panel determined that, under Delaware law, Soward was entitled to an accounting and a prompt distribution of his partnership interest. The panel found that Bosack had breached his fiduciary duties to Soward by failing to provide him with an accounting and distribution, and by improperly taking control of all the Cartesian assets. The panel also found Bosack and Lerner liable for conversion by their improper appropriation of Soward's interest in Cartesian. Damages awarded under Interim Award 4 were subject to a credit for payments made to satisfy Interim Award 3.
In Interim Award 5, the panel ruled that Bosack and Lerner had "acted with malice and oppression," and that Soward was entitled to punitive damages of $10,999,494 against Bosack, and $8,555,162 against Lerner.
Bosack and Lerner moved the district court to vacate Interim Awards 4 and 5, as well as the panel's Hearing Order No. 49 (). They also asked the district court to vacate the Final Award as to Soward's tort claims and punitive damages, and the award of related costs and attorney fees. The district court denied that motion and confirmed the panel's Final Award, which incorporated its earlier interim awards.
We review de novo the district court's confirmation of the Final Award entered by the arbitration panel. Comedy Club, Inc. v. Improv West Assocs., 553 F.3d 1277, 1284 (9th Cir.2009) (hereinafter "Comedy Club II"). Our review is limited by the Federal Arbitration Act ("FAA"), which "enumerates limited grounds on which a federal court may vacate, modify, or correct an arbitral award." Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 994 (9th Cir.2003). "Neither erroneous legal conclusions nor unsubstantiated factual findings justify federal court review of an arbitral award under the statute, which is unambiguous in this regard." Id. Under § 9 of the FAA1, "a court `must' confirm an arbitration award `unless' it is vacated, modified, or corrected `as prescribed' in §§ 10 and 11." Hall St. Assocs., L.L.C., v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 1402, 170 L.Ed.2d 254 (2008) (citing 9 U.S.C. § 10(a)).
Bosack and Lerner argue Awards 4 and 5, and the portion of the Final Award confirming those awards, should be vacated because: (1) the panel allegedly violated Rule 46 of the Commercial Arbitration Rules of the American Arbitration Association ("Rule 46") and the functus officio doctrine, (2) the panel manifestly disregarded the law, and (3) the appealed awards are completely irrational. They also appeal the award of attorney fees and costs.
Rule 46 provides that "[t]he arbitrator is not empowered to redetermine the merits of any claim already decided." This rule essentially codifies the common law doctrine of functus officio, which "forbids an arbitrator to redetermine an issue which he has already decided." McClatchy Newspapers v. Central Valley Typographical Union No. 46, 686 F.2d 731, 734 n. 1 (9th Cir.1982) (quoting La Vale Plaza, Inc. v. R.S. Noonan, Inc., 378 F.2d 569, 573 (3d Cir.1967)). We include both Rule 46 and functus officio in our references to functus officio.
Before determining whether the arbitrators violated the functus officio doctrine, we must first address a threshold question: whether or not the functus officio doctrine may be applied to an interim award. This is a question of first impression in our circuit.
The Eighth Circuit has held that an interim award may be deemed final for functus officio purposes if the award states it is final, and if the arbitrator intended the award to be final. See, e.g., Legion Ins. Co. v. VCW, Inc., 198 F.3d 718, 720 (8th Cir.1999). We adopt the criteria used by the Eighth Circuit, and apply them to the instant case.
Only Interim Award 3 satisfies the criteria for finality. The panel explicitly stated that Interim Awards 1, 2, 4, and 5 were not final. Furthermore, as the district court correctly found, the panel expressly reserved jurisdiction over all issues (with the exception of the accounting performed in Award 3) until issuance of the final award. Of the five...
To continue reading
Request your trial
-
Tutor Perini Bldg. Corp. v. S. Cal. Dist. Council of Laborers, Case No. 2:18-cv-01723-SVW-JC
... ... from the agreement, viewed in light of the agreement's language and context, as well as other indications of the parties' intentions." Bosack v. Soward , 586 F.3d 1096, 1106 (9th Cir. 2009). In summary, based on the above standards, confirmation of an arbitration award under the FAA is ... ...
-
Johnson v. Wells Fargo Home Mortgage Inc.
...it is technically reviewing a district court's decision confirming or vacating an arbitrator's award. See, e.g., Bosack v. Soward, 586 F.3d 1096, 1102 (9th Cir.2009). In such cases, this Court has jurisdiction under 28 U.S.C. § 1291. See, e.g., id. at 1101; see also 9 U.S.C. § 16(a) (settin......
-
Countrywide Financial Corp. v. Bundy
...the applicable, governing law and then ignores it. ( Frazier v. CitiFinancial Corp., LLC, supra, 604 F.3d at p. 1322; Bosack v. Soward (9th Cir.2009) 586 F.3d 1096, 1104; DMA Intern. Inc. v. Qwest Communications Intern., Inc. (10th Cir.2009) 585 F.3d 1341, 1345; McGrann v. First Albany Corp......
-
T3 Enters., Inc. v. Safeguard Bus. Sys., Inc.
...different from a mere error in the law or failure on the part of the arbitrators to understand and apply the law.’ " Bosack v. Soward , 586 F.3d 1096, 1104 (9th Cir. 2009) (quoting Collins v. D.R. Horton, Inc. , 505 F.3d 874, 879 (9th Cir. 2007) ). "There must be some evidence in the record......