Some judges want 9th Circuit to take another look at decision on arbitrator disclosures

In 2019, Judge Michelle T. Friedland warned in a dissent that a ruling wiping out a JAMS arbitrator's award due to his failure to disclose repeat business would create a mess by possibly vacating scores of old cases.

On Thursday, three of her 9th U.S. Circuit Court of Appeals colleagues agreed with Friedland and called on the court to reconsider that 20-month-old decision en banc.

Blaine I. Green, a partner with Pillsbury Winthrop Shaw Pittman LLP who is not involved in the case, said the "very unusual" concurrence "invites a petition for rehearing."

"The concurrence foreshadows more litigation, including potential for another 9th Circuit decision in the near term, regarding arbitrator disclosures and motions to vacate awards," Green commented in an email.

The underlying dispute in the case that gave Friedland's renewed importance concerned a joint venture agreement between Starline Tours of Hollywood Inc. and EHM Productions Inc., which does business as TMZ, to operate a celebrity bus tour.

JAMS neutral Margaret A. Nagle, a retired U.S. magistrate judge in the Central District of California, agreed with TMZ that the company legally terminated its agreement with Starline Tours, a decision that was affirmed by a three-arbitrator panel.

9th Circuit Judge Lawrence VanDyke, an appointee of President Donald Trump, rejected all but one of Starline Tours' appeals of the arbitration award confirmation by U.S. District Judge Andre Birotte Jr. of Los Angeles.

Citing the 9th Circuit decision Friedland criticized, VanDyke wrote Birotte erred in accepting the argument that JAMS and its arbitrators had nothing to disclose.

"If none of the arbitrators had an ownership interest in JAMS or JAMS only had trivial business dealings with TMZ, JAMS could have responded by stating that the arbitrators 'had nothing further to disclose' like it did in response to Starline's request regarding whether the arbitrator had any conflicts" with Boies, Schiller & Flexner LLP, which had merged with TMZ's counsel, VanDyke wrote.

"But saying you have nothing further to disclose is markedly different than simply refusing to provide any further disclosures based on the shifty reasoning that the arbitrators no longer have jurisdiction over the case, which is deliberately evasive on the key question of whether they have something to disclose or not," he added.

VanDyke, in a concurrence joined by 9th Circuit Judges Ronald M. Gould and Kenneth K. Lee, wrote that Friedland -- an appointee of President Barack Obama -- was right when she warned Monster Energy was "likely to generate endless litigation over arbitrations that were intended to finally resolve disputes outside the court system."

"This case is certainly some evidence that her warning was warranted," he added. EHM Productions Inc. v. Starline Tours of Hollywood Inc., 2021 DJDAR 6350 (9th Cir., filed April 23, 2020).

In her dissent, Friedland voiced sympathy for litigants who have no choice but to arbitrate disputes but sees no purpose in requiring disclosure to prove a bias in favor of "repeat players" who often use the same arbitration companies repeatedly to handle disputes outside of the court system.

"The majority laudably seeks to mitigate disparities between repeat players and one-shot players in the arbitration system," she wrote. "But I disagree that requiring disclosures about the elephant that everyone knows is in the room will address those disparities." Monster Energy Co. v. City Beverages LLC, 940 F.3d 1130 (2019).

JAMS spokeswoman Michele Apostolos wrote in a statement Thursday afternoon that the case was closed when it received a request seeking to determine if any of its arbitrators had an ownership interest.

"JAMS believes it has complied with and fulfilled disclosure requirements under Monster Energy and given the recent opinion will continue to follow the law," she added. "JAMS will respond accordingly should the request be resubmitted."

Mohammed K. Ghods, an attorney with Lex Opus who represents Starline Tours, could not be reached for comment. Lennette W. Lee, a King & Spalding LLP partner who represents TMZ, also could not be reached.