Financial Network Investment v. Kayvan Karoon , 540 F. App'x 597 ( 2013 )

FILED
SEP 11 2013
NOT FOR PUBLICATION
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
FINANCIAL NETWORK INVESTMENT No. 11-56672
CORP.; et al.,
D.C. No. 2:10-cv-09844-DSF
Petitioners-Appellees, (JCGx)
v. MEMORANDUM*
KAYVAN KAROON and KAROON
CAPITAL MARKETS, INC.,
Respondents-Appellants.
Appeal from the United States District Court
for the Central District of California
Dale S. Fischer, District Judge, Presiding
Argued** and Submitted August 8, 2013
Pasadena, California
Before: SILVERMAN and WARDLAW, Circuit Judges, and GEORGE, Senior
District Judge.***
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
Despite our grant of appellants’ counsel’s belated request to appear
telephonically for oral argument, counsel could not be reached for the hearing at
the number provided.
***
The Honorable Lloyd D. George, Senior District Judge for the U.S. District
Court for the District of Nevada, sitting by designation.
Kayvan Karoon and Karoon Capital Markets, Inc., (“KCM”) (collectively
“Karoon”) appeal the district court’s confirmation of a Financial Industry
Regulatory Authority arbitration panel (the “panel”) award in favor of Financial
Network Investment Corp., ING Advisors Network, Jack Handy, and Albert
Johnson (collectively “FNIC”), and its dismissal of Karoon’s petition to vacate the
award. The panel originally awarded $565,063.83 in favor of FNIC, and $65,000
in favor of Karoon. On remand by the district court, the panel offset the two awards
for an amended award of $500,063.83 in favor of FNIC.1
We review the district court’s confirmation of the panel’s award de novo.
Bosack v. Soward, 586 F.3d 1096, 1102 (9th Cir. 2009). However, our review of
the actual award is “both limited and highly deferential,” and “[w]e must affirm an
order to confirm an arbitration award unless it can be vacated, modified, or
corrected as prescribed by the [Federal Arbitration Act (“FAA”)].” Schoenduve
Corp. v. Lucent Technologies, Inc., 442 F.3d 727, 730, 731 (9th Cir. 2006). A
federal court may vacate an award if the arbitrator exceeds his powers in rendering
1
Karoon himself filed for Chapter 7 bankruptcy in New Jersey in 2011 and
was discharged on April 16, 2013. While the discharge would appear to moot his
appeal of the monetary awards against him, because this matter involves multiple
parties and the setoff of claims among the various parties, we proceed with our
review.
2
such an award, and “arbitrators exceed their powers in this regard . . . when the
award is completely irrational, or exhibits a manifest disregard of law.” Id. at 731(quoting Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 997
(9th Cir. 2003) (en banc)).
In this context, “‘[m]anifest disregard of the law’ means something more than
just an error in the law or a failure on the part of the arbitrators to understand or
apply the law.” 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)). Rather, “[i]t must be clear from the record that the
arbitrators recognized the applicable law and then ignored it.” Id. (quoting Mich.
Mut. Ins. Co., 44 F.3d at 832). An award is completely irrational “only ‘where the
arbitration decision fails to draw its essence from the agreement.’” Lagstein, 607
F.3d at 642 (quoting Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1281
(9th Cir. 2009)). An arbitration award “draws its essence from the agreement if the
award is derived from the agreement, viewed in the light of the agreement’s
language and context, as well as other indications of the parties’ intentions.”
Lagstein, 607 F.3d at 642 (quoting Bosack, 586 F.3d at 1106). We conclude that
Karoon has established neither manifest disregard of law nor complete irrationality.
3
In this appeal, Karoon attempts to relitigate the merits of his claims and
defenses. He fails, however, to point out how the arbitrators recognized the law but
chose to ignore it, or how the award is untethered from the parties’ agreements.2
While Karoon focuses on the factual substance of his claims, “[w]hether or not the
panel’s findings are supported by the evidence in the record is beyond the scope of
our review.” Lagstein, 607 F.3d at 642 (quoting Bosack, 586 F.3d at 1105).
Karoon also argues that the district court erred in failing to find that the panel
should have awarded punitive damages against FNIC. Karoon asserts that the panel
found that FNIC had maliciously defamed Karoon when it ordered expunged
certain information in the form U-5s that FNIC filed about Karoon based on “the
defamatory nature of the information.” However, the panel made no finding of
maliciousness or defamation by FNIC.
AFFIRMED.
2
At one point, Karoon argues that the panel’s failure to find that Karoon
himself and KCM were distinct entities and not subject to joint liability was
“irrational and contrary to law” for purposes of the setoff made by the amended
award. Even if this argument did not misconstrue the law as it regards our review
of an award confirmation, as the district court found below, there is no basis to
conclude that the inclusion of KCM was a clerical error, and the panel could have
reasonably concluded from the petition that KCM had no separate existence from
Karoon himself.
4