MD Spa Shop, LLC v. Med-Aesthetic Solutions, Inc. ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 MD SPA SHOP LLC, a Colorado Limited Case No.: 21-CV-1050 TWR (LL) Liability Company, 12 ORDER: (1) DENYING Petitioner, 13 PETITIONER’S PETITION AND v. MOTION TO VACATE 14 ARBITRATION AWARD, MED-AESTHETIC SOLUTIONS, INC., 15 (2) GRANTING RESPONDENT’S a California Corporation, PETITION AND MOTION TO 16 Respondent. CONFIRM ARBITRATION AWARD, 17 (3) DENYING PETITIONER’S MOTION TO SEAL, AND 18 (4) CONFIRMING ARBITRATION 19 AWARD 20 (ECF Nos. 1, 8, 9, 11, 16) 21 22 Presently before the Court are the Petition to Vacate Arbitration Award (“Pet. to 23 Vacate,” ECF No. 1) filed by Petitioner and Counter-Respondent MD Spa Shop, LLC 24 (“MDSS”) and the Petition to Confirm Arbitration Award (“Pet. to Confirm,” ECF No. 11) 25 filed by Respondent and Counter-Claimant Med-Aesthetic Solutions, Inc. (“MAS”), as 26 well as each Party’s respective Motion (“Mot. to Vacate,” ECF No. 8; “Mot. to Confirm,” 27 ECF No. 16). Also before the Court is MDSS’s Motion for Leave to File Exhibit F to the 28 Declaration of Thomas F. Gallagher in Support of Motion to Vacate Arbitration Award 1 Under Seal (“Mot. to Seal,” ECF No. 9). The Court heard oral argument on October 27, 2 2021. (See ECF No. 21.) Having carefully reviewed the Parties’ arguments, the record, 3 and the law, the Court DENIES MDSS’s Petition and Motion to Vacate, GRANTS MAS’s 4 Petition and Motion to Confirm, DENIES MDSS’s Motion to Seal, and CONFIRMS the 5 arbitration award. 6 BACKGROUND1 7 MAS is the assignee of a patent for the Total Salt Facial (“TSF”) device.2 (See ECF 8 No. 6-2 at 28–39 (“Final Award”) at 30.3) MAS purchases all the components of the device 9 and has them shipped to KMI IMI, which then manufactures the TSF device. (See id.) In 10 approximately January 2017, MAS began selling the TSF system through a network of 11 independent distributors. (See id. at 31.) It later engaged Aesthetic Management Partners, 12 but the partnership failed. (See id.) 13 MAS met MDSS in 2018. (See id.) Over several months, the Parties negotiated a 14 distribution agreement for MDSS to become MAS’s exclusive nationwide sales agent for 15 the TSF device. (See id.; see also generally ECF No. 6-2 at 1–23 (the “Agreement”).) 16 Under the terms of the Agreement, MDSS was to sell a quarterly quota of TSF devices, 17 with all third-party purchases to be approved by MAS. (See Final Award at 31–32; see 18 also Agreement ¶¶ 1.4.1, 2.2.1, 10.2.) MDSS was to submit advance payment for the TSF 19 devices each quarter. (See Final Award at 5–6; see also Agreement ¶ 1.4.2.) From January 20 / / / 21 22 1 MDSS requests that the Court take judicial notice of certain documents, including the underlying Agreement between the Parties, the Arbitrator’s Final Award, and MDSS’s post-arbitration hearing brief. 23 The Court GRANTS IN PART MDSS’s request and incorporates by reference the underlying Agreement 24 and incorporates by reference and takes judicial notice of the Arbitrator’s Final Award and MDSS’s post- arbitration hearing brief. Because the Court does not rely on any of the other exhibits of which MDSS 25 seeks judicial notice, the Court DENIES IN PART the remainder of MDSS’s Request for Judicial Notice (ECF No. 8-3). 26 2 Although certain filings and exhibits define TSF as “The Salt Facial,” the Court relays the facts as found 27 by the Arbitrator. 28 1 2019, until the Agreement was executed on May 22, 2019, the Parties operated under the 2 terms that were later finalized in the Agreement. (See Final Award at 32.) 3 MAS and MDSS’s relationship began to disintegrate in the summer of 2019 because 4 of multiple breaches of the Agreement on the part of MDSS, including failing to meet its 5 sales quotas, failing to obtain MAS’s approval for third-party sales, and allowing its sales 6 personnel to make unauthorized promises to customers. (See id. at 33.) MAS’s Chief 7 Executive Officer, Allan Danto, formally terminated the Agreement on August 15, 2019. 8 (See id.) MDSS in turn retaliated by submitting a claim to American Express (“AmEx”) 9 to reverse certain charges MDSS had made to MAS for TSF devices. (See id.) MAS later 10 entered into a distribution agreement with MERZ Aesthetic. (See id.) 11 Pursuant to the Agreement, MAS filed a claim with the American Arbitration 12 Association (“AAA”) on October 8, 2019. (See id. at 29.) MDSS filed an answer and 13 counterclaim on November 12, 2019. (See id.) The Arbitrator, John H. L’Estrange, Jr., 14 conducted a hearing over Zoom on March 29 through 31, 2021. (See id. at 28.) The matter 15 was deemed closed on May 10, 2021, upon the Arbitrator’s receipt of the Parties’ closing 16 briefs. (See id. at 29.) 17 On May 24, 2021, the Arbitrator issued his Final Award. (See generally id.) He 18 awarded MAS damages in the amount of $1,334,825 for breach of contract but denied 19 MAS’s claim for fraud based on MDSS’s claim to AmEx. (See id. at 34–36; see also id. 20 at 38–39.) The Arbitrator denied MDSS’s counterclaims for fraud, breach of contract, and 21 conversion. (See id. at 36–38; see also id. at 39.) Consequently, the Arbitrator determined 22 MAS to be the prevailing party, (see id. at 38), and ordered that the AAA administrative 23 fees and Arbitrator’s compensation be paid by MDSS. (See id. at 39.) Including these fees 24 and costs, MAS’s final award came to $1,358,546.50. (See id.) The Arbitrator concluded 25 that, “[t]o the extent that any party made other allegations or claims in this proceeding that 26 have not been withdrawn, abandoned, or expressly decided, they are DENIED.” (See id. 27 (emphasis in original).) 28 / / / 1 Pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. ch. 1, and the California 2 Arbitration Act (“CAA”), Cal. Civ. Proc. Code §§ 1280–1294.2, MDSS filed its Petition 3 to Vacate with this Court on June 6, 2021, on the grounds that “(1): the arbitrator[] 4 exceeded [his] powers and the award cannot be corrected without affecting the merits of 5 the decision upon the controversy submitted[] (Cal. Civ. Proc.[ Code] § 1286.2, subd. 6 (a)(4)); and (2) that enforcement of the award would violate[] existing federal law as 7 established by the Food Drugs & Cosmetics Act [(“FDCA”)] (21 U.S.C. ch. 9 §[§] 301 et 8 seq.).” (Pet. to Vacate at 2.) MAS filed its initial Answer and Counterclaim/Petition to 9 Confirm the Arbitration Award on June 15, 2021, (see generally ECF No. 6), which it 10 amended on June 29, 2021. (See generally Pet. to Confirm.) MDSS filed its instant 11 Motions to Vacate and to Seal on June 23, 2021. (See generally Mot. to Vacate; Mot. to 12 Seal.) 13 On June 24, 2021, the Court ordered the Parties to show cause why this action should 14 not be dismissed for lack of subject-matter jurisdiction. (See generally ECF No. 10 (“Order 15 to Show Cause”).) The Parties responded on July 1, 2021, with MAS providing proof of 16 complete diversity between the Parties. (See generally ECF No. 12.) On August 2, 2021, 17 the Court therefore discharged its Order to Show Cause and set a hearing and briefing 18 schedule on the Petitions. (See generally ECF No. 13 (the “Aug. 2 Order”).) Pursuant to 19 the August 2 Order, MAS filed its instant Motion to Confirm on August 18, 2021. (See 20 generally Mot. to Confirm.) The Motions are fully briefed and ripe for adjudication. (See 21 generally ECF Nos. 8, 16–20.) 22 CROSS PETITIONS AND MOTIONS TO VACATE OR CONFIRM ARBITRATION AWARD 23 24 I. Legal Standard 25 Pursuant to the FAA, “at any time within one year after the [arbitration] award is 26 made any party to the arbitration may apply to the court . . . for an order confirming the 27 award.” 9 U.S.C. § 9. “[T]he court must grant such an order unless the award is vacated, 28 / / / 1 modified, or corrected.” Id. Upon confirming an arbitration award, “[t]he judgment shall 2 be docketed as it if was rendered in an action.” 9 U.S.C. § 13. 3 The FAA enumerates the limited and exclusive grounds on which a federal court 4 may vacate, modify, or correct an arbitral award. See Hall St. Assocs., L.L.C. v. Mattel, 5 Inc., 552 U.S. 576, 584 (2008); Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 6 F.3d 987, 994 (9th Cir. 2003). For example, a judge may vacate an arbitral award only: 7 (1) where the award was procured by corruption, fraud, or undue means; 8 (2) where there was evident partiality or corruption in the arbitrators, or 9 either of them; 10 (3) where the arbitrators were guilty of misconduct in refusing to postpone 11 a hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent to and material to the controversy; or of any other misbehavior 12 by which the rights of any party have been prejudiced; or 13 (4) where the arbitrators exceeded their powers, or so imperfectly executed 14 them that a mutual, final, and definite award upon the subject matter 15 submitted was not made. 16 9 U.S.C. § 10(a). “[Section] 10 of the FAA provides no authorization for a merits review.” 17 Biller v. Toyota Motor Corp., 668 F.3d 655, 664 (9th Cir. 2012). Rather, to obtain vacatur 18 under Section 10(a)(4), the petitioner “must clear a high hurdle.” Stolt-Nielsen S.A. v. 19 AnimalFeeds Int’l Corp., 559 U.S. 662, 671 (2010); see also U.S. Life Ins. Co. v. Super. 20 Nat. Ins. Co., 591 F.3d 1167, 1173 (9th Cir. 2010) (“The burden of establishing grounds 21 for vacating an arbitration award is on the party seeking it.” (citing Emps. Ins. of Wausau 22 v. Nat’l Union Fire Ins. Co. of Pittsburgh, 933 F.2d 1481, 1489 (9th Cir. 1991))). “It is 23 not enough for petitioners to show that the panel committed an error—or even a serious 24 error.” Id. (citing E. Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62 (2000); 25 United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987)). 26 / / / 27 / / / 28 / / / 1 “[A]rbitrators ‘exceed their powers’ in this regard . . . when the award is ‘completely 2 irrational,’ . . . or exhibits a ‘manifest disregard of law[.]’”4 Kyocera Corp., 341 F.3d at 3 997 (first quoting French v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 784 F.2d 902, 4 906 (9th Cir. 1986); then quoting Todd Shipyards Corp. v. Cunard Line, Ltd., 943 F.2d 5 1056, 1059–60 (9th Cir. 1991)) (citing G.C. & K.B. Invs., Inc. v. Wilson, 326 F.3d 1096, 6 1105–06 (9th Cir. 2003)). On the one hand, “‘[m]anifest disregard of the law’ means 7 something more than just an error in the law or a failure on the part of the arbitrators to 8 understand or apply the law.” Lagstein v. Certain Underwriters at Lloyd’s, London, 607 9 F.3d 634, 641 (9th Cir. 2010) (quoting Mich. Mut. Ins. Co. v. Unigard Sec. Ins. Co., 44 10 F.3d 826, 832 (9th Cir. 1995)). “To vacate an arbitration award on this ground, ‘[i]t must 11 be clear from the record that the arbitrators recognized the applicable law and then ignored 12 it.’” Id. (quoting Mich. Mut. Ins., 44 F.3d at 832) (citing Comedy Club, 553 F.3d at 1293). 13 On the other hand, “[a]n award is completely irrational only where the arbitration 14 decision fails to draw its essence from the agreement.” Id. at 642 (9th Cir. 2010) (quoting 15 Comedy Club, 553 F.3d at 1288) (internal quotation marks omitted). “An arbitration award 16 ‘draws its essence from the agreement if the award is derived from the agreement, viewed 17 in light of the agreement’s language and context, as well as other indications of the parties’ 18 intentions.’” Id. (quoting Bosack v. Soward, 586 F.3d 1096, 1106 (9th Cir. 2009)). 19 Consequently, “[a]n arbitrator does not exceed its authority if the decision is a ‘plausible 20 interpretation’ of the arbitration contract[,]” see U.S. Life Ins., 591 F.3d at 1177 (quoting 21 Emps. Ins. of Wausau, 933 F.2d at 1486), and “the court must defer to the arbitrator’s 22 decision ‘as long as the arbitrator . . . even arguably constru[ed] or appl[ied] the 23 contract.’” Id. (quoting Misco, 484 U.S. at 38) (alterations in original) (citing Teamsters 24 Local Union 58 v. BOC Gases, 249 F.3d 1089, 1093 (9th Cir. 2001); New Meiji Market v. 25 26 4 Although the Supreme Court has declined to consider whether the “manifest disregard” standard survived its decision in Hall Street Associates, 552 U.S. 576, see Stolt-Nielsen, 559 U.S. at 672 n.3, the 27 Ninth Circuit continues to apply it. See, e.g., Johnson v. Wells Fargo Home Mortg., Inc., 635 F.3d 401, 28 415 (9th Cir. 2011) (citing Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1290–91 (9th Cir.), 1 United Food & Com. Workers Local Union #905, 789 F.2d 1334, 1335–36 (9th Cir. 1986)). 2 “[T]he question is whether the award is ‘irrational’ with respect to the contract, not whether 3 the panel’s findings of fact are correct.” Lagstein, 607 F.3d at 642 (quoting Bosack, 586 4 F.3d at 1106). “Whether or not the panel’s findings are supported by the evidence in the 5 record is beyond the scope of [the court’s] review.” Id. (quoting Bosack, 586 F.3d at 1105). 6 In sum, “[n]either erroneous legal conclusions nor unsubstantiated factual findings 7 justify federal court review of an arbitral award under the statute.” Kyocera Corp., 341 8 F.3d at 994. Rather, the grounds for vacating or modifying an arbitral award “afford an 9 extremely limited review authority, a limitation that is designed to preserve due process 10 but not to permit unnecessary public intrusion into private arbitration procedures.” See id. 11 at 998. This is because the FAA reflects “Congress’s decision to permit sophisticated 12 parties to trade the greater certainty of correct legal decisions by federal courts for the speed 13 and flexibility of arbitration.” See id. Consequently, “[t]he risk that arbitrators may 14 construe the governing law imperfectly in the course of delivering a decision that attempts 15 in good faith to interpret the relevant law, or may make errors with respect to the evidence 16 on which they base their rulings, is a risk that every party to arbitration assumes, and such 17 legal and factual errors lie far outside the category of conduct embraced by § 10(a)(4).” 18 See id. at 1003. 19 II. Analysis 20 Pursuant to Section 10 of the FAA,5 MDSS seeks to vacate the Arbitrator’s Final 21 Award, (see generally Pet. to Vacate; Mot. to Vacate), while MAS seeks an Order 22 23 5 MDSS also seeks to vacate the arbitration award under the CAA. (See Pet. to Vacate at 2 (citing Cal. 24 Civ. Proc. Code § 1286.2(a)(4)).) But “the strong default presumption is that the FAA, not state law, supplies the rules for arbitration.” Sovak v. Chugai Pharm. Co., 280 F.3d 1266, 1269 (9th Cir.2002) 25 (citing Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1213 (9th Cir. 1998). The parties may overcome this strong presumption by “clearly evidenc[ing] their intent to be bound by” state arbitration rules. See 26 id. (citing Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 61–62 (1995); Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1131 (9th Cir. 2000)). “But, a general choice-of-law clause 27 within an arbitration provision does not trump the presumption that the FAA supplies the rules for 28 arbitration.” Id. at 1270 (citing Wolsey, 144 F.3d at 1213; Chiron, 207 F.3d at 1131). Accordingly, the 1 confirming the Final Award and entering judgment under Sections 9 and 13. (See generally 2 Pet. to Confirm; Mot. to Confirm.) Specifically, MDSS raises two challenges to the 3 Arbitrator’s Final Award: (1) the Arbitrator made an “irrational” computational error in 4 calculating MAS’s damages for breach of contract, (see Pet. to Vacate ¶ 6; Mot. to Vacate 5 at 2–5); and (2) the Agreement is illegal—and therefore void ab initio—under the FDCA 6 because MAS has not registered the TSF device with the United States Food and Drug 7 Administration (“FDA”). (See Pet. to Vacate ¶¶ 7–8; Mot. to Vacate at 5–11.) The Court 8 concludes that neither of MDSS’s arguments merits vacatur under the Court’s “extremely 9 limited review authority.” See Kyocera Corp., 341 F.3d at 998. 10 As for MDSS’s first challenge, the Court concludes that the Arbitrator’s calculation 11 of MAS’s lost profits is not “completely irrational.” Here, the Arbitrator calculated MAS’s 12 lost profits damages based on his findings that (1) MDSS failed to pay for 87 units it 13 committed to purchase under the Agreement, and (2) MAS’s profit on each unit would 14 have been $14,050. (See Final Award at 7.) Multiplying MAS’s anticipated profit per unit 15 by the 87 units, the Arbitrator arrived at a damages award of $1,222,350 for MAS’s lost 16 profits. (See id.) According to MDSS, the Arbitrator committed two computational errors: 17 “(1) error in calculation of the timeline of quarterly sales/payments due and (2) error in the 18 computation of the number of units purchased by MDSS.” (See Mot. to Vacate at 2 19 (emphasis in original).) But the Arbitrator’s computation is based on his factual findings, 20 including his credibility determinations and, as MDSS itself conceded at oral argument, 21 the Arbitrator’s alleged misreading of the Parties’ respective obligations under the 22 Agreement. “Whether or not the [Arbitrator]’s findings are supported by the evidence in 23 the record is beyond the scope of [the Court’s] review,” see Lagstein, 607 F.3d at 642 24 (quoting Bosack, 586 F.3d at 1105), and “the court must defer to the arbitrator’s decision 25 ‘as long as the arbitrator . . . even arguably constru[ed] or appl[ied] the contract.’” See U.S. 26 Life Ins., 591 F.3d at 1177 (quoting Misco, 484 U.S. at 38) (alterations in original) 27 (citing Teamsters Local Union 58, 249 F.3d at 1093; New Meiji Market, 789 F.2d at 28 / / / 1 1335–36). MDSS therefore fails to establish that the Arbitrator exceeded his powers 2 regarding his calculation of MAS’s lost profits.6 3 As to MDSS’s contention that the Agreement is illegal, the Court concludes that 4 MDSS has forfeited this challenge.7 Despite the general “maxim that the illegality of a 5 contract . . . can be asserted at any time[] and is never waived[,] . . . it is not clear that all 6 issues of illegality in a contract fall within the unwaivable category.” Styne v. Stevens, 26 7 Cal. 4th 42, 54 n.5 (2001) (emphasis in original); cf. ECF No. 17 (“Confirm Opp’n”) at 4 8 (“The defense of illegality may be raised at any time.” (emphasis in original) (citing S. Bay 9 Radiology Med. Assocs. v. Asher, 220 Cal. App. 3d 1074, 1079–1080 (1990)).8 Under 10 certain circumstances, arbitration can be one such exception. See Moncharsh v. Heily & 11 Blase, 3 Cal. 4th 1, 29–31 (1992). This is because, “if an otherwise enforceable arbitration 12 agreement is contained in an illegal contract, a party may avoid arbitration altogether.” Id. 13 at 29–30 (citing Cal. State Council of Carpenters v. Super. Ct., 11 Cal. App. 3d 144, 157 14 (1970); Bianco v. Super. Ct., 265 Cal. App. 2d 126 (1968)). Consequently, a party 15 contending that the entirety of a contract is illegal—such as MDSS, (see, e.g., Mot. to 16 Vacate at 5 (“This renders the entire distribution agreement illegal.”))—must raise the 17 illegality issue “prior to participating in the arbitration process.” See Moncharsh, 3 Cal. 18 19 20 6 While the Court may “modify[] or correct[] the award . . . [w]here there was an evident material miscalculation,” see 9 U.S.C. § 11, MDSS does not advocate for an alternative damages calculation. The 21 Court therefore declines to determine whether the Arbitrator made “an evident material miscalculation.” 22 7 MAS raises several other arguments against MDSS’s illegality challenge, including that: (1) MDSS, as a private litigant, cannot enforce the FDCA, (see ECF No. 18 (“Vacate Opp’n”) at 5); (2) MDSS is 23 estopped from arguing illegality, (see id. at 6–7); (3) MDSS has failed to identify “‘an explicit, well 24 defined and dominant public policy’ affecting or pertaining to a jurisdiction’s most basic notions of morality and justice,” (see id. at 7–8 (quoting Hollern v. Wachovia Secs., Inc., F.3d 1169, 1172 (10th Cir. 25 2006)); and (4) MDSS prevented MAS from introducing evidence that it was not necessary for MAS to register the TSF device with the FDA. (See id. at 8–9.) Because the Court agrees with MAS that MDSS 26 has forfeited its illegality defense, (see id. at 5–6), the Court declines to address MAS’s additional arguments. 27 28 8 Consistent with the Agreement’s choice-of-law provision, to which neither Party objects, the Court 1 4th at 31. “This rule applies even if the party does not discover the basis for opposing 2 arbitration until after arbitration proceedings have begun.” Reed v. Mut. Serv. Corp., 106 3 Cal. App. 4th 1359, 1372 n.12 (2003), abrogated on other grounds by Haworth v. Super. 4 Ct., 50 Cal. 4th 372 (2010). “In such a case, the objecting party must withdraw from the 5 arbitration process, and commence litigation on the issue of enforceability.” Id. 6 “[A] party who knowingly participates in the arbitration process without disclosing 7 a ground for declaring it invalid is properly cast into the outer darkness of forfeiture.” See 8 Cummings v. Future Nissan, 128 Cal. App. 4th 321, 329, as modified (Apr. 8, 2005). A 9 contrary rule would “permit a party to sit on its rights, content in the knowledge that should 10 he suffer an adverse decision, he could then raise the illegality issue in a motion to vacate 11 the arbitrator’s award.” See Moncharsh, 3 Cal. 4th at 30. Not only would this “waste . . . 12 arbitral and judicial time and resources,” but it also “would condone a level of ‘procedural 13 gamesmanship’ that [the California Supreme Court] ha[s] condemned as ‘undermining the 14 advantages of arbitration.’” See id. (citing Erickson, Arbuthnot, McCarthy, Kearney & 15 Walsh, Inc. v. 100 Oak Street, 35 Cal. 3d 312, 323 (1983); Christensen v. Dewor Devs., 33 16 Cal. 3d 778, 783–84 (1983)). 17 Here, MDSS first raised the purported illegality issue before the Arbitrator in its 18 post-arbitration hearing brief.9 (See Mot. to Vacate at 5 (citing ECF No. 8-2 at E-5:16–22, 19 / / / 20 21 22 9 In its Reply, MDSS asserts for the first time that it raised the issue of illegality in its pre-arbitration hearing brief. (See ECF No. 20 (“Vacate Reply”) at 4 (citing ECF No. 20-2 at 11 (per ECF numbering)).) 23 The highlighted passage clearly makes no reference to illegality, the FDA, or the FDCA: 24 MDSS maintains that it was fraudulently induced into entering the distribution agreement 25 drafted by MAS by MAS’s misrepresentation of its status as manufacturer. In reality MAS was a reseller of the SaltFacial medical devices that were manufactured for MAS by KMI 26 IMI GROUP, a separate company based in Irvine, California. 27 In the January 1, 2019 Distribution Agreement, MAS represented itself as follows: “MAS 28 is the manufacturer of aesthetic medical devices along with related accessories, supplies, 1 E-8:8–10, E-16:6–9, E-18:8–11, E-18:23–26, E-24:8–10 ); Confirm Opp’n at 4 (citing 2 ECF No. 8-2 at E-8, E-10).) At the hearing, MDSS revealed that it first suspected that the 3 Agreement might be illegal approximately three months before the arbitration hearing and 4 approximately two months before it filed its pre-arbitration hearing brief. There is no 5 indication, however, that MDSS raised the illegality issue prior to proceeding with the 6 arbitration or that MDSS objected to proceeding with the arbitration upon “discover[ing] 7 the basis for opposing arbitration” approximately three months earlier.11 See Reed, 106 8 Cal. App. 4th at 1372 n.12. Further, by not raising the issue prior to the arbitration hearing, 9 MDSS “deprived [MAS] of the opportunity ‘during the evidentiary portion of this 10 arbitration to make a record on this issue.’” See ECC Cap. Corp. v. Manatt, Phelps & 11 Phillips, LLP, 9 Cal. App. 5th 885, 907 (2017). In other words, MDSS attempted to 12 “conceal an ace up [its] sleeve[] for use in the event of an adverse outcome.” See 13 Cummings, 128 Cal. App. 4th at 328. Under these circumstances, forfeiture is necessary 14 to preserve the basic purpose and advantages of private arbitration. See Moncharsh, 3 Cal. 15 4th at 30; Cummings, 128 Cal. App. 4th at 328–29. 16 Even assuming MDSS had not forfeited its challenge to the alleged illegality of the 17 Agreement, MDSS has not met its burden of showing that the Arbitrator manifestly 18 disregarded the law. MDSS contends that it “raised the issue to the arbitrator, without 19 recognition or consideration.” (See Mot. to Vacate at 5; see also id. at 8 (“[The Arbitrator] 20 ignored MDSS’ argument and MAS’ admission that it was not registered with the FDA.”); 21 Pet. to Vacate ¶ 7 (“The arbitrator further exceeded his authority by refusing to consider 22 23 under the brand name SaltFacial L’avantage™ Skin Renewal System (“TSF”).” (Ex. 1, p. 24 1). This was a foundational and material representation of the parties’ contract. 25 (ECF No. 20-2 at 11.) 26 10 Citations to MDSS’s exhibits refer to the pagination provided by MDSS. 27 11 Nor is there any reason why MDSS could not have discovered the alleged illegality of the Agreement, 28 which was executed on May 22, 2019, (see Final Award at 32), until over one-and-a-half years later when 1 evidence of the illegal nature of MAS’ interstate commercial sale of The Salt Facial . . . 2 medical devices.”).) But “[i]n making []his Final Award[,] the arbitrator considered all the 3 evidence presented at the multi-day hearing including testimony, exhibits and the pre- and 4 post-hearing briefs from counsel.” (See Final Reward at 29.) The Arbitrator therefore 5 considered—and rejected—MDSS’s illegality argument. (See Final Reward at 39 (“This 6 Final Award is intended to dispose finally of all claims, counterclaims and issues in this 7 arbitration. To the extent that any party made other allegations or claims in this proceeding 8 that have not been withdrawn, abandoned, or expressly decided, they are DENIED.” 9 (emphasis in original)).) Consequently, at most, MDSS demonstrates “failure on the part 10 of the arbitrators to understand or apply the law.” See Lagstein, 607 F.3d at 641 (quoting 11 Mich. Mut. Ins., 44 F.3d at 832). Manifest disregard, however, requires “something more.” 12 See id. (quoting Mich. Mut. Ins., 44 F.3d at 832). MDSS therefore fails to meet its burden 13 of demonstrating that the Arbitrator manifestly disregarded the law. 14 Because the Court determines that MDSS has failed to establish any grounds for 15 vacating the Arbitrator’s Final Award, the Court DENIES MDSS’s Petition and Motion to 16 Vacate. Accordingly, the Court GRANTS MSA’s Petition and Motion to Confirm, see 9 17 U.S.C. § 9, and DIRECTS the Clerk of Court to enter judgment. See 9 U.S.C. § 13. 18 MOTION TO SEAL 19 MDSS seeks to file under seal Exhibit F to the Declaration of Thomas F. Gallagher 20 in support of its Motion to Vacate. (See Mot. to Seal at 1–2.) “[T]he courts of this country 21 recognize a general right to inspect and copy public records and documents, including 22 judicial records and documents.” Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 23 (1978). “Unless a particular court record is one ‘traditionally kept secret,’ a ‘strong 24 presumption in favor of access’ is the starting point.” Kamakana v. City & Cnty. of 25 Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (citing Foltz v. State Farm Mut. Auto Ins. 26 Co., 331 F.3d 1122, 1135 (9th Cir. 2003)). A party seeking to seal a judicial record bears 27 the burden of overcoming this strong presumption. Foltz, 331 F.3d at 1135. The showing 28 required to meet this burden depends upon whether the documents to be sealed relate to a 1 motion that is “more than tangentially related to the merits of the case.” Ctr. for Auto 2 Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1102 (9th Cir. 2016). Where the underlying 3 motion is more than tangentially related to the merits of the case, the stringent “compelling 4 reasons” standard applies. Id. at 1096–98. Where the underlying motion does not surpass 5 the tangential relevance threshold, the less exacting “good cause” standard applies. Id. 6 Under either standard, MDSS fails to demonstrate that sealing is warranted here. 7 Exhibit F is “MAS’ accounting of TSF systems purchased by MDSS.” (See ECF No. 8-2 8 at 3 ¶ 11.) It “contain[s] sensitive pricing and financial information” and that “[t]he release 9 of such information would invade the privacy rights and proprietary financial interests of 10 the parties.” (See ECF No. 9 at 4 ¶ 3.) MAS agrees with MDSS’s assessment. (See id. 11 ¶ 4.) Generally, business information that might harm a litigant’s competitive standing— 12 including pricing terms—are subject to sealing, even under the more stringent compelling 13 reasons standard. See In re Elec. Arts, Inc., 298 F. App’x 568, 569–70 (9th Cir. 2008) 14 (granting writ of mandamus and ordering district court to file under seal confidential 15 business information, including pricing terms); AFL Telecomms. LLC v. SurplusEQ.com 16 Inc., 946 F. Supp. 2d 928, 946 (D. Ariz. 2013) (citing Elec. Arts, F. App’x at 569–10); 17 Pulse Elecs., Inc. v. U.D. Elec. Corp., --- F. Supp. 3d ---, 2021 WL 1226470, at *29 (S.D. 18 Cal. Mar. 31, 2021) (collecting cases). 19 Unfortunately, however, rather than lodging Exhibit F under seal as required under 20 this District’s filing procedures, see Office of the Clerk, United States District Court for 21 the Southern District of California, Electronic Case Filing Administrative Policies and 22 Procedures Manual, § 2(j) (Mar. 31, 2021), Mr. Gallagher erroneously filed it on the public 23 docket. (See generally ECF No. 9 Ex. 2.) “A request to seal information that was publicly 24 disclosed involves ‘an inherent logical dilemma’ in that ‘information that has already 25 entered the public domain cannot in any meaningful way be later removed from the public 26 domain.’” WAG Acquisition, LLC v. Flying Crocodile, Inc., No. 2:19-CV-1278-BJR, 2021 27 WL 2778578, at *10 (W.D. Wash. July 2, 2021) (quoting Victory Sports & Entm’t LLC v. 28 Pedraza, No. 2:19-cv-00826-APG-NJK, 2019 WL 2578767, at *2 (D. Nev. June 24, 1 ||2019)). In other words, the “relief [MDSS seeks] is no longer available because the [exhibit 2 ||is] now available to the public.” See Doe No. 1 v. Reed, 697 F.3d 1235, 1238 (9th Cir. 3 |}2012). Under circumstances such as these, denial of MDSS’s Motion to Seal is appropriate. 4 ||See, e.g., Victory Sports & Ent., LLC v. Pedraza, No. 219CV00826APGNJK, 2019 WL 5 || 2578767, at *2 (D. Nev. June 24, 2019) (denying motion to seal complaint that had already 6 || been filed on the public docket after the plaintiff took “no action for weeks”). The Court 7 || therefore DENIES MDSS’s Motion to Seal. 8 CONCLUSION 9 In light of the foregoing, the Court DENIES MDSS’s Petition and Motion to Vacate 10 || Arbitration Award (ECF Nos. 1, 8), GRANTS MAS’s Petition and Motion to Confirm 11 || Arbitration Award (ECF Nos. 11, 16), DENIES MDSS’s Motion to Seal (ECF No. 9), and 12 || CONFIRMS the Arbitrator’s Final Award (ECF No. 6-2 at 28-39). Accordingly, the 13 || Clerk of Court SHALL ENTER JUDGMENT in accordance with this Order and the Final 14 || Arbitration Award and SHALL CLOSE the file. 15 IT IS SO ORDERED. 16 Dated: October 29, 2021 : Tan \Qbn— □ Honorable Todd W. Robinson 19 United States District Court 20 21 22 23 24 25 26 27 28