Schoenduve Corp. v. Lucent Technologies

• Citation: 442 F.3d 727
• Decision Date: 22 March 2006
• Docket Number: No. 04-15529.,04-15529.
• Parties: SCHOENDUVE CORPORATION, a California corporation, Petitioner-Appellee, v. LUCENT TECHNOLOGIES, INC., a Delaware corporation, Respondent-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 727

442 F.3d 727

SCHOENDUVE CORPORATION, a California corporation, Petitioner-Appellee, v. LUCENT TECHNOLOGIES, INC., a Delaware corporation, Respondent-Appellant.

No. 04-15529.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 17, 2005.

Filed March 22, 2006.

Jeffrey K. Riffer, Jeffer, Mangels, Butler & Marmaro, Los Angeles, CA, for the respondent-appellant.

Jack Russo, Tim C. Hale, Michael Risch, Russo & Hale, Palo Alto, CA, for the petitioner-appellee.

Appeal from the United States District Court for the Northern District of California Ronald M. Whyte, District Judge, Presiding. D.C. No. CV-03-03523-RMW.

Before O'SCANNLAIN, THOMAS, and TALLMAN, Circuit Judges.

TALLMAN, Circuit Judge.

Lucent Technologies ("Lucent") appeals the district court's order confirming an arbitration award entered in favor of Schoenduve Corporation ("Schoenduve"). Lucent asks this Court to vacate or modify the arbitration award claiming that the arbitrator (1) exceeded his authority by ruling on an issue not submitted by the parties, (2) modified or expanded the unambiguous language of the agreement requiring arbitration, and (3) failed to provide Lucent an opportunity to rebut Schoenduve's claim for commissions under a quasi-contract or estoppel theory. Lucent also asks us to vacate the portion of the arbitrator's decision awarding attorneys' fees to Schoenduve as a manifest disregard of the law. Because the arbitrator stayed within the bounds of his authority in applying New York substantive law as the parties had contractually agreed, and made a good faith effort to apply the applicable provisions of the California Civil Code to the award of attorneys' fees, we affirm.

I

A

Lucent is a manufacturer of wireless communication products and Schoenduve is a manufacturer's sales representative. On August 14, 1996, Lucent entered into a Manufacturer's Representative Agreement ("MRA") with Schoenduve, authorizing Schoenduve to solicit orders for Lucent's wireless communication products from Original Equipment Manufacturers ("OEMs") in Northern California and Nevada.

Beginning in December 1997, Schoenduve worked to procure a sale of Lucent's wireless communication products to Apple Computer.¹ On December 15, 1998, two days before it signed an initial agreement with Apple Computer, Lucent terminated the MRA and its relationship with Schoenduve.² Lucent and Apple Computer finalized the agreement for the sale and purchase of Lucent's wireless communication products in July 1999. The supply contract was worth millions of dollars to Lucent.

Schoenduve filed suit in Santa Clara County Superior Court on May 18, 2001, seeking unpaid commissions for its role in procuring the Apple transaction. The MRA contained an arbitration clause that applied to any "dispute aris[ing] out of or relat[ing] to th[e][MRA], or its breach."³ Lucent removed the case to federal court, where the district court granted Lucent's motion to compel arbitration.

B

As required by the Commercial Arbitration Rules of the AAA, Schoenduve filed a Demand for Arbitration in order to initiate the arbitration proceedings. The Demand for Arbitration was very broad, describing the nature of the dispute as "an action to recover those commissions, interest and other damages arising from the wrongful conduct of [Lucent]." Schoenduve claimed to "ha[ve] substantial damages arising from breach of contract and other claims against[Lucent], including [Lucent's] failure to disclose and account for substantial monies owed to [Schoenduve]."

Throughout the arbitration, Lucent argued that the MRA governed the entire transaction and that, pursuant to the termination provisions of the MRA, Schoenduve was not entitled to any post-termination commissions for the Apple transaction. Schoenduve disagreed. It argued that the "boilerplate" provisions of the MRA did not apply to the "design win" Apple transaction; rather, it argued that only the appendices of the MRA, which contained no termination provision, governed this transaction.

The parties participated in 11 days of arbitration hearings spread out over approximately eight months in New York, New York, the venue established by the MRA. The arbitrator issued his 19-page written opinion on July 3, 2003. He rejected Schoenduve's claim for post-termination commissions under the unambiguous terms of the MRA. Furthermore, the arbitrator ruled that Lucent had an unfettered contractual right to terminate Schoenduve's representation on 30 days' notice and that this precluded any argument that Lucent acted in "bad faith" or had breached a duty of good faith and fair dealing.

Although Lucent prevailed on all claims specifically arising out of the MRA, the arbitrator subsequently concluded that the MRA did not apply to this type of "whale sized" transaction. Consequently, he found that "since Lucent's form of MRA was not intended to cover this type [of] transaction, and did not in fact cover it[,] [Schoenduve] [wa]s entitled to recover compensation pursuant to the legal doctrine recognized in New York of quasi-contract." Alternatively, the arbitrator ruled that because Lucent had excluded Schoenduve from the negotiations only after Lucent's Sales Manager had become involved, "Lucent should be estopped to deny Schoenduve's entitlement to commissions it worked for and earned."

The arbitrator held that although Lucent did not willfully fail to enter into a written contract, it did fail to enter into a written contract that covered the Apple transaction. Lucent therefore violated California Civil Code § 1738.13, which requires all manufacturers to enter into a written contract with their representatives. Because Schoenduve was the prevailing party, the arbitrator also awarded Schoenduve attorneys' fees and costs under California Civil Code § 1738.16.

II

The district court had jurisdiction pursuant to 28 U.S.C. § 1332(a) and we have jurisdiction under 28 U.S.C. § 1291. We review the district court's decision to confirm an arbitration award de novo. Poweragent Inc. v. Elec. Data Sys. Corp., 358 F.3d 1187, 1193 (9th Cir.2004). However, review of the actual award is "both limited and highly deferential." Id. (internal quotation marks omitted). We are also mindful of long-settled jurisprudence that encouraging alternative dispute resolution outside the courtroom was the principal motivation behind passage of the Federal Arbitration Act ("FAA"). See E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 289, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002) ("[The FAA's] `purpose was to reverse the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts.'" (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991))); Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir.2003) (same); Sink v. Aden Enters., Inc., 352 F.3d 1197, 1201 (9th Cir.2003) ("One purpose of the FAA's liberal approach to arbitration is the efficient and expeditious resolution of claims." (citing H.R. REP. No. 68-96 (1924))).

The strict procedural requirements that govern litigation in federal courts do not apply to arbitration. Arbitration offers flexibility, an expeditious result, and is relatively inexpensive when compared to litigation. Gilmer, 500 U.S. at 31, 111 S.Ct. 1647 ("[B]y agreeing to arbitrate, a party `trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.'" (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985))); Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir.2003) (en banc) (stating that arbitration was designed "to respond to the wishes of the parties more flexibly and expeditiously than the federal courts' uniform rules of procedure allow"); Pack Concrete, Inc. v. Cunningham, 866 F.2d 283, 285 (9th Cir.1989) (describing "congressional policy in favor of expeditious and relatively inexpensive means of settling [disputes]" (internal quotation marks omitted)).

To protect the overall purpose of arbitration and avoid any tendency of a court to impute its own strict and rigid practices onto arbitration proceedings, Congress has limited the ability of federal courts to review arbitration awards. See 9 U.S.C. § 9; see also Pack Concrete, Inc., 866 F.2d at 285 (stating that permitting a plenary review of arbitration would undermine Congress's policy of favoring arbitration as an expeditious and relatively inexpensive means of resolving disputes); Kyocera Corp., 341 F.3d at 998 ("Congress's decision to permit sophisticated parties to trade the greater certainty of correct legal decisions by federal courts for the speed and flexibility of arbitration determinations is a reasonable legislative judgment that we have no authority to reject.").⁴

We must affirm an order to confirm an arbitration award unless it can be vacated, modified, or corrected as prescribed by the FAA. 9 U.S.C. §§ 9-11; see Kyocera Corp., 341 F.3d at 1000 ("hold[ing] that a federal court may only review an arbitral decision on the grounds set forth in the[FAA]" and that the "parties have no power to alter or expand those grounds"). A federal court may vacate an award if the arbitrator engages in misbehavior that prejudices a party, or if the arbitrator exceeds his powers in rendering such an award. 9 U.S.C. § 10(a)(3)-(4). "[A]rbitrators exceed their powers in this regard not when they merely interpret or apply the governing law incorrectly, but when the award is completely irrational, or exhibits a manifest disregard of law." Kyocera Corp., 341 F.3d at 997 (internal quotation marks and citations omitted).

Alternatively, a federal court may modify or correct an award "[w]here the arbitrators have awarded upon a matter not submitted to them." 9 U.S.C. § 11(b). A court may ...