Michael Ruhe v. Masimo Corporation , 640 F. App'x 685 ( 2016 )

FILED
NOT FOR PUBLICATION
FEB 19 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHAEL RUHE and VICENTE Nos. 14-55556
CATALA, 14-55725
D.C. No. 8:11-cv-00734-CJC-JCG
Plaintiffs - Appellants,
Cross-Appellee
v. MEMORANDUM*
MASIMO CORPORATION,
Defendant - Appellee.
Cross-Appellant
Appeal from the United States District Court
for the Central District of California
Cormac J. Carney, District Judge, Presiding
Argued and Submitted February 1, 2016
Pasadena, California
Before: PREGERSON, WARDLAW, and HURWITZ, Circuit Judges.
Michael Ruhe and Vicente Catala appeal the district court’s order vacating
an arbitration award against Masimo Corporation. We have jurisdiction pursuant
to 9 U.S.C. § 16(a)(1)(E), and we reverse.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
The district court erred in holding that the arbitrator exhibited “evident
partiality.” 9 U.S.C. § 10(a)(2). Masimo did not establish that the arbitrator
“failed to disclose to the parties information that creates ‘[a] reasonable impression
of bias.’” Lagstein v. Certain Underwriters at Lloyd’s, London, 607 F.3d 634, 646
(9th Cir. 2010) (alteration in original) (quoting Woods v. Saturn Distribution
Corp., 78 F.3d 424, 427 (9th Cir. 1996)). As the arbitrator noted, Masimo
“furnish[ed] no coherent explanation” as to how his brother’s litigation practice or
his role in a SIDS foundation “would cause a person reasonably to doubt [his]
impartiality in this case.” Nor did Masimo “establish specific facts indicating
actual bias.” Id. at 645–46. Although the arbitrator committed an error in applying
Third Circuit instead of California law as to punitive damages, that was not the
central basis for the punitive damages award. Moreover, that error did not rise to
the level of “affirmative misconduct” or “irrational[ity].” Douglas v. U.S. Dist.
Court for Cent. Dist. of Cal., 495 F.3d 1062, 1068 (9th Cir. 2007) (per curiam)
(alteration in original) (quoting Kyocera Corp. v. Prudential– Bache Trade Servs.,
Inc., 341 F.3d 987, 998 (9th Cir. 2003) (en banc)).
2
For the same reason, Masimo’s remaining challenges to the arbitration
award are unavailing.1 The arbitrator’s rulings, even if erroneous, did not “exceed
his powers” or rise to the level of manifest disregard of the law. Biller v. Toyota
Motor Corp., 668 F.3d 655, 665 (9th Cir. 2012) (“[A]rbitrators exceed their powers
. . . not when they merely interpret or apply the governing law incorrectly, but
when the award is completely irrational . . . .” (citation omitted)); Collins v. D.R.
Horton, Inc., 505 F.3d 874, 879 (9th Cir. 2007) (“The manifest disregard exception
requires ‘something beyond and different from a mere error in the law or failure on
the part of the arbitrators to understand and apply the law.’” (quoting San Martine
Compania De Navegacion, S.A. v. Saguenay Terminals Ltd., 293 F.2d 796, 801
(9th Cir. 1961)). Accordingly, on remand, the district court is directed to issue an
order confirming the arbitration award in its entirety.
REVERSED AND REMANDED.
1
The concurrence argues that the amount of the punitive damages award—
sixteen times the compensatory damages award—raises due process concerns.
However, neither party raised this issue on appeal, and, therefore, it was waived.
Moreover, the Supreme Court has recognized that “low awards of compensatory
damages may properly support a higher ratio” of punitive to actual damages.
BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 582 (1996). That is especially true
where, as here, the low award of compensatory damages reflects the plaintiffs’
successful efforts to mitigate their damages, and not the reprehensibility of the
defendants’ conduct.
3
FILED
Ruhe v. Masimo Corp., Nos. 14-55556, 14-55725
FEB 19 2016
MOLLY C. DWYER, CL
U.S. COURT OF APPEA
HURWITZ, Circuit Judge, concurring:
The Federal Arbitration Act permits a district court to vacate an arbitration
award “only in very unusual circumstances.” First Options of Chi., Inc. v. Kaplan,
514 U.S. 938, 942 (1995). Although I am troubled by this case, I am unable to
conclude that one of the “narrow grounds” in section 10(a) of the Act justifies the
district court’s refusal to confirm the arbitrator’s award. See Collins v. D.R.
Horton, Inc., 505 F.3d 874, 883 (9th Cir. 2007) (quoting Chiron Corp. v. Ortho
Diagnostic Sys., Inc., 207 F.3d 1126, 1133 (9th Cir. 2000)).
In general, an arbitrator should not himself determine whether he should be
recused, given his financial interest in continued employment. See Pitta v. Hotel
Ass’n of N.Y. City, Inc., 806 F.2d 419, 423-24 (2d Cir. 1986). Thus, regardless of
the JAMS procedural rules, the arbitrator should have referred Masimo’s belated
request for recusal to another for decision. But, because the recusal request raised
only matters of general public knowledge and occurred very late in an extended
arbitration (when the arbitrator had earned virtually all of his fees), and because
Masimo’s claims of “evident partiality” fail on the merits, any error by the
arbitrator in not referring the issue to others does not mandate vacation of the
award.
The punitive damages award also gives me concern. As my colleagues note,
the judge applied the wrong law; he thus incorrectly based the amount of the award
in part on the conduct of Massimo’s attorneys during the arbitration. Moreover,
the amount of the award, about sixteen times the amount of compensatory
damages, raises obvious due process concerns. See BMW of N. Am., Inc. v. Gore,
517 U.S. 559, 581-82 (1996). But, section 10(a)(4) of the Act only allows a court
to refuse to confirm an award when the arbitrator exhibits “manifest disregard of
the law.” Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1289-90 (9th
Cir. 2009). Like my colleagues, I cannot conclude that this very demanding
standard was met here.