DeMartini v. Johns

DeMartini v. Johns

Opinion

 [*536]  MEMORANDUM²

Thomas Christopher Johns and the law firm Johns & Allyn, A.P.C. (collectively, "Defendants") appeal the district court's order denying their motion to vacate an arbitration award entered against them on Michael and Renate DeMartini's (collectively, "Plaintiffs") legal malpractice claims. Defendants also appeal the district court's denial of their request for a stay in response to Plaintiffs' motion [**2]  to confirm the arbitration award. Plaintiffs cross-appeal the district court's grant of Defendants' motion to amend the judgment pursuant to Federal Rule of Civil Procedure 59(e). We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm in part and reverse and remand in part.

] We review de novo the district court's decision to deny a motion to vacate an arbitration award. Woods v. Saturn Distrib. Corp., 78 F.3d 424, 427 (9th Cir. 1996). Defendants argue that the district court erred in denying their motion to vacate under § 10 of the Federal Arbitration Act ("FAA"), which, in relevant part, authorizes vacatur "where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C. § 10(a)(4). We have strictly interpreted this standard, emphasizing that review of an arbitration award itself is "both limited and highly deferential." Sheet Metal Workers' Int'l Ass'n v. Madison Indus., Inc., 84 F.3d 1186, 1190 (9th Cir. 1996). Accordingly, "arbitrators 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. v. Prudential—Bache Trade Servs., Inc., 341 F.3d 987, 997 (9th Cir. 2003) (en banc) (internal quotation marks and citations omitted). This means that "[i]t must be clear from the record that the arbitrators recognized [**3]  the applicable law and then ignored it."' Lagstein v. Certain Underwriters at Lloyd's, London, 607 F.3d 634, 641 (9th Cir. 2010) (quoting Mich. Mut. Ins. Co. v. Unigard Sec. Ins. Co., 44 F.3d 826, 832 (9th Cir. 1995)). "As such, mere allegations of error are insufficient." Carter v. Health Net of Cal., Inc., 374 F.3d 830, 838 (9th Cir. 2004).

Defendants argue that the arbitrator showed a manifest disregard of law when she denied their requests to dismiss Plaintiffs' malpractice claims as time-barred. Defendants specifically argue that the arbitrator correctly recognized the one-year statute of limitations that applies to malpractice claims, but then intentionally ignored it in applying the law to the facts before her. See Cal. Code Civ. P. § 340.6(a); see also Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton, LLP, 133 Cal. App. 4th 658, 35 Cal. Rptr. 3d 31, 51 (Cal. Ct. App. 2005) (explaining that ] the one-year limitations period "is triggered by the client's discovery of 'the facts constituting the wrongful act or omission,' not by his discovery that such facts constitute  [*537]  professional negligence"). We cannot conclude from the record that the arbitrator's decision—while perhaps an erroneous application of the California statute of limitations for legal malpractice claims—constitutes a "manifest disregard" of law. See Bosack v. Soward, 586 F.3d 1096, 1104 (9th Cir. 2009) ("[T]here must be some evidence in the record, other than the result, that the arbitrators were aware of the law and intentionally disregarded it." (alteration in original) (quoting Lincoln Nat'l Life Ins. Co. v. Payne, 374 F.3d 672, 675 (8th Cir. 2004)); cf. American Postal Workers Union AFL-CIO v. U.S. Postal Serv., 682 F.2d 1280, 1284 (9th Cir. 1982) (finding a manifest disregard of law when the record showed the [**4]  arbitrator recognized the applicable law, but refused to apply it because of "the arbitrator's belief that the penalty was too severe" under the circumstances). Defendants have failed to carry their heavy burden of showing the arbitrator's award warrants vacatur based on a manifest disregard of law on the part of the arbitrator.

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