Poweragent v. Electronic Data Systems
| Decision Date | 25 February 2004 |
| Docket Number | No. 02-17022.,02-17022. |
| Citation | 358 F.3d 1187 |
| Parties | POWERAGENT INC., a California corporation, Plaintiff-Appellant, v. ELECTRONIC DATA SYSTEMS CORPORATION, a Delaware corporation, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Andrew W. Hayes, Boies, Schiller & Flexner, LLP, Armonk, New York, for the plaintiff-appellant.
James G. Gilliland, Jr., Townsend and Townsend and Crew, LLP, San Francisco, California, for the defendant-appellee.
Appeal from the United States District Court for the Northern District of California; Maxine M. Chesney, District Judge, Presiding. D.C. No. CV-98-00745-MMC.
Before Edward LEAVY, Richard A. PAEZ, and Marsha S. BERZON, Circuit Judges.
PowerAgent Inc. ("PowerAgent") appeals the district court's orders striking its Amended Complaint and confirming an arbitration award in favor of Electronic Data Systems Corp. ("EDS"). Because PowerAgent itself argued that the arbitration panel should independently determine the arbitrability of all its claims and fails to provide a sufficient basis to vacate the arbitration award, we affirm.
PowerAgent's initial complaint in district court alleged that EDS breached several interrelated contracts — a Services Agreement and two investment agreements — and committed RICO violations. The Services Agreement between PowerAgent and EDS contained the following arbitration clause:
Any dispute, controversy or claim arising under, out of, in connection with or in relation to this Agreement, or the breach, termination, validity or enforceability of any provision of this Agreement, will be settled by final and binding arbitration conducted in accordance with and subject to the Commercial Arbitration Rules of the American Arbitration Association then applicable (the "Rules"). Unless otherwise mutually agreed upon by the parties, the arbitration hearings will be held (i) in Plano, Texas if the claim is brought by PowerAgent, or (ii) in San Diego, CA if the claim is brought by EDS. A panel of three arbitrators will be selected in accordance with the Rules, and the arbitrators will allow such discovery as is appropriate, consistent with the purposes of arbitration in accomplishing fair, speedy and cost effective resolution of disputes. The arbitrators will reference the rules of evidence of the Federal Rules of Civil Procedure then in effect in setting the scope of discovery. Judgment upon the award rendered in any such arbitration may be entered in any court having jurisdiction thereof, or application may be made to such court for a judicial acceptance of the award and an enforcement, as the law of such jurisdiction may require or allow.
Pursuant to that agreement, EDS filed a motion to dismiss or stay the complaint and compel arbitration. The district court found that, consistent with the initial complaint, the contracts were interrelated, and that the claims in the complaint were subject to the arbitration agreement.
After the district court found that the claims in PowerAgent's first complaint were subject to arbitration, PowerAgent amended its complaint to: (1) focus on an additional, later, oral agreement, concerning further investments, that contained no arbitration clause; (2) drop its RICO claim; and (3) omit any reference to the interrelationship it had previously asserted between the service agreements and the investment agreements. The district court granted EDS's motion to strike the Amended Complaint on the ground that, among other reasons, a plaintiff should not be allowed to contradict allegations in a prior complaint to avoid arbitration.
Following the determination of arbitrability and the decision to strike the Amended Complaint, PowerAgent petitioned this court for a writ of mandamus directing the district court to (1) vacate its order striking the Amended Complaint; (2) determine whether the claims in the Amended Complaint are arbitrable; and (3) retain jurisdiction over the non-arbitrable claims. See PowerAgent, Inc. v. United States Dist. Court for the N. Dist. of Cal., 210 F.3d 385, 2000 WL 32073, at *1 (9th Cir. Jan. 14, 2000). This court denied the petition, stating:
If a plaintiff could drop factual allegations in an amended complaint to circumvent a previously issued order compelling arbitration, every order compelling arbitration would become merely provisional, subject to a plaintiff's "right" to amend to defeat the order. Here, the district court relied on facts asserted by the petitioner in reaching its decision to stay the case and compel arbitration. Once the district court reached that decision, the petitioner was not free to retract those assertions in an effort to avoid arbitration.
Id. at *2 (citations omitted).
After this court denied the petition, PowerAgent filed a Notice of Arbitration with the American Arbitration Association regarding the claims in the Complaint and the Amended Complaint. PowerAgent asserted that the arbitration panel, not the district court, should determine arbitrability and asked the arbitrators independently to address whether all their claims were arbitrable. Specifically, PowerAgent argued:
[T]he parties agreed to give the tribunal the power to rule on its own jurisdiction, "including any objections with respect to the existence, scope or validity of the arbitration agreement" (emphasis added). The district court was obligated to honor the parties' clearly expressed intent. Thus the district court's Stay Order was just that — an order staying litigation pending a decision from the tribunal, pursuant to the tribunal's rules.
After briefing and oral argument, the arbitrators unanimously determined that all the claims in the dispute, including the claims added in the Amended Complaint, were subject to the arbitration clause. In the Order Regarding Jurisdiction, the arbitrators stated:
Even if this arbitration panel were not bound by the prior orders of the District Court and the Appellate Court, we conclude that the disputes in this action are subject to arbitration.... [W]e find those purported subsequent oral contracts to be interrelated to each other and to the three written contracts referred to by the District Court in the First District Court Order, and to be a part of the same ongoing transaction or series of transactions, and to therefore be subject to arbitration....
Following extensive proceedings, the arbitration panel found in favor of EDS on the merits of all the disputes.
PowerAgent moved to vacate the arbitration award and EDS cross-moved to confirm the award. The district court confirmed the award, finding that "[a]ll decisions made by the Arbitrators, including their findings on arbitrability, waiver, and the merits, were within their authority and in no instance constituted a manifest disregard of the law."
The law of the case does not preclude PowerAgent from challenging the statement in this court's mandamus decision that a plaintiff may not drop factual allegations in an effort to avoid arbitration. A denial of a petition for mandamus usually does not constitute the law of the case, because of the special limitations on granting such a writ. Kirshner v. Uniden Corp. of Am., 842 F.2d 1074, 1078-79 (9th Cir.1988) (citations omitted). Only when the decision to deny the writ was on the merits does the law of the case doctrine apply to mandamus actions. See id. Where the denial is or may be the result of the special limitations applying to the writ, the second panel is not bound by the earlier decision and thus need not speculate as to whether the decision was on the merits. See id.
In this case, the previous panel did address the merits of PowerAgent's argument, but only in the context of the special limitations on granting an extraordinary writ. See PowerAgent, 210 F.3d 385, 2000 WL 32073 at *1 (). Such emphasis on the special limitations of mandamus precludes applying the law of the case doctrine in this instance. See Kirshner, 842 F.2d at 1078-79. Thus, this panel is not bound by the reasoning of the previous panel as we review the district court's order confirming the arbitration award.
We nonetheless conclude, without reaching the question whether the district court should have allowed the filing of the Amended Complaint in the first instance, that PowerAgent is now bound by the arbitrators' decision that this entire dispute — encompassing both the original and the Amended Complaint — was arbitrable.
Arbitrability is ordinarily for courts, not arbitrators, to decide unless the parties agree otherwise. "Courts should not assume that the parties agreed to arbitrate arbitrability unless there is `clea[r] and unmistakeabl[e]' evidence that they did so." First Options v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) (citing AT & T Techs. v. Communications Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). Where parties do agree to arbitrate the issue of arbitrability, courts give the arbitrators' conclusion regarding arbitrability the same respect otherwise accorded arbitrators' decisions. Id. at 943, 115 S.Ct. 1920.
Here, as will appear, neither paradigm quite fits. Whether or not the parties agreed with one another to arbitrate the arbitrability issue, PowerAgent affirmatively submitted the issue to the arbitrators and urged that they had power to decide it. The question we face is whether PowerAgent, dissatisfied with the answer to the question it insisted the arbitrators could and should decide, can now ask us to determine that the arbitrators in fact lacked authority to determine the arbitrability question.
Contrary to PowerAgent's submission, First Options does not resolve the question before us. In First...
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