Court Vacates Arbitration Award on Grounds of Evident Partiality
City Beverages LLC, doing business as Olympic Eagle Distributing, and Monster Energy Co. entered into an agreement under which Monster had exclusive distribution rights for its products in a certain territory for 20 years. Monster exercised its contractual right to terminate the agreement and, in response, Olympic invoked Washington’s Franchise Investment Protection Act, which prohibits termination of a franchise contract absent good cause. Monster thereafter initiated an arbitration proceeding before JAMS pursuant to a mandatory arbitration clause in the parties’ agreement. The parties chose an arbitrator, who submitted disclosure statements prior to the arbitration. The arbitrator ultimately issued a final award in favor of Monster.
Monster filed a petition to confirm the award, and Olympic cross-petitioned to vacate the award based on later-discovered information that Olympic alleged demonstrated that the arbitrator was not impartial. The court vacated the arbitration award. Initially, the court explained that the Federal Arbitration Act permits a court to vacate an arbitration award when there is evident partiality on the part of the arbitrators. Evident partiality includes instances in which the arbitrator fails to disclose to the parties any dealings or interests that might create an impression of possible bias. Here, the arbitrator failed to disclose his ownership interest in JAMS, and that JAMS had administered 97 arbitrations for Monster over the past five years. Based on these facts, the court held that vacatur of the arbitration award was necessary on grounds of evident partiality.
Monster Energy Co. v. City Beverages, LLC, Nos. 17-55813, 17-56082 (9th Cir. Oct. 22, 2019).