The Flying Spaghetti Monster.
Blawgletter has remarked on how so dadburn much litigation flows from arbitration. We've even called the phenomenon arbitragation. Today we find ourselves drowning in it again.
Let's start with the Ninth Circuit case. Improv West alleged in an arbitration that Comedy Club and Al Copeland Investments lost their exclusive license to use Improv West's "Improv" and "Improvisation" trademarks. The arbitration award favored the licensor. The arbitrator concluded that Comedy Club and Copeland Investments forfeited the license by failing to open enough comedy clubs, and he enjoined them and others, under a non-compete provision in the license agreement, from starting any more comedy clubs anywhere in the U.S.
The district court confirmed the award in all respects. The Ninth Circuit reversed in part, but the Supreme Court vacated the decision and remanded for proceedings consistent with its decision in Hall Street Assocs. LLC v. Mattel, Inc., 128 S. Ct. 1396 (2008). The Hall Street Court held that sections 10 and 11 of the federal Arbitration Act, 9 U.S.C. 10 & 11, furnish the sole grounds for vacating or modifying an arbitration award.
The this-time downward trip to the Ninth Circuit produced the same result as before. The court mostly upheld confirmation of the award but concluded that Hall Street didn't conflict with Ninth Circuit precedent recognizing "manifest disregard of the law" as a basis for setting an award aside. The court explained that manifest disregard merely served as a shorthand for a statutory ground for vacatur under FAA section 10(a)(4), which authorizes rejecting of an award where the arbitrator "exceeded [his] powers" under the arbitration agreement. The court proceeded to cut the arbitrator's injunction because, it held, crystal clear California law prohibited enforcement of such a broad (nationwide) and long (through 2019) non-compete. Comedy Club, Inc. v. Improv West Assocs., No. 05-55739 (9th Cir. Jan. 29, 2009).
We can dispatch the Eighth Circuit case more briefly. The parties seeking arbitration, Interface Construction, subcontracted renovation on a federal building to Henderson Electrical, which further subcontracted work to Lighting and Power Services. When Lighting and Power didn't receive payment for its labor and materials, it sued the issuer of a "payment bond", Western Surety, for, well, payment. Lighting and Power didn't accuse anyone of breaching a contract and relied only on the Miller Act, requires bonds for federal projects. But it also joined Interface and Henderson. When Interface tried to enforce an arbitration clause in its subcontract with the government, Lighting and Power opposed the gambit. The district court refused to compel arbitration.
The Eighth Circuit affirmed. It held that neither the arbitration agreement nor principles of equitable estoppel supported forcing Lighting and Power to arbitrate. Lighting and Power didn't sign the agreement (between the government and Interface), and neither did its Miller Act claim necessarily allege a breach of any agreement with Interface such that equitable estoppel might justify requiring non-signatory Lighting and Power into arbitration. United States for the Use of Lighting and Power Services, Inc. v. Interface Construction Corp., No. 07-3678 (8th Cir. Jan. 29, 2009).
