FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JULIE E. COLLINS; ROBERT B. RYAN,
individuals,
No. 05-15737
Plaintiffs-Appellants,
v. D.C. No.
CV-99-00330-ROS
D.R. HORTON, INC., a Delaware
OPINION
corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Arizona
Roslyn O. Silver, District Judge, Presiding
Argued and Submitted
April 17, 2007—San Francisco, California
Filed September 24, 2007
Before: Dorothy W. Nelson, Consuelo M. Callahan, and
Carlos T. Bea, Circuit Judges.
Opinion by Judge Bea
13077
13080 COLLINS v. D.R. HORTON, INC.
COUNSEL
Lawrence Allen Katz, Bennett Evan Cooper, and Elizabeth A.
Schallop Call, Steptoe & Johnson LLP, for plaintiffs-
appellants Julie E. Collins and Robert B. Ryan.
Lonnie J. Williams, Jr. and Deanna R. Rader, Quarles &
Brady Streich Lang LLP, for Defendant-Appellee D. R. Hor-
ton, Inc.
OPINION
BEA, Circuit Judge:
Julie E. Collins and Robert B. Ryan (“Appellants”) appeal
the district court’s denial of their motion to vacate an arbitra-
tion award. Appellants contend their motion should have been
granted because the arbitrators manifestly disregarded the law
when deciding not to apply offensive non-mutual collateral
estoppel1 because judicial review of an arbitration award
under the Federal Arbitration Act (“FAA”) is more limited
than judicial review of a district court judgment. We hold the
arbitrators did not manifestly disregard the law because no
“well defined, explicit, and clearly applicable” law existed to
1
“Offensive non-mutual collateral estoppel is a version of the doctrine
[of collateral estoppel] that arises when a plaintiff seeks to estop a defen-
dant from relitigating an issue which the defendant previously litigated
and lost against another plaintiff.” Appling v. State Farm Mut. Auto. Ins.
Co., 340 F.3d 769, 775 (9th Cir. 2003) (citing Parklane Hosiery Co. v.
Shore, 439 U.S. 322, 326 (1979) (“Defensive use occurs when a defendant
seeks to prevent a plaintiff from asserting a claim the plaintiff has previ-
ously litigated and lost against another defendant.”)).
COLLINS v. D.R. HORTON, INC. 13081
be disregarded. Carter v. Health Net of Cal., Inc., 374 F.3d
830, 838 (9th Cir 2004). Accordingly, we affirm.
I.
Continental Homes Holding Corporation (“Continental”)
was a homebuilding and mortgage business headquartered in
Arizona. In 1996, D.R. Horton, Inc. (“Horton”), a homebuild-
ing company with operations in several states, expressed an
interest in merging with Continental. Although Continental
initially rebuffed Horton’s merger proposals, Horton and Con-
tinental negotiated and entered into a merger agreement in
1997.
To make itself a more attractive merger partner, Continen-
tal entered into employment contracts with key employees
designed to induce them to stay on with the merged company
for at least that period of time sufficient to accomplish the
merger and the related combination of operations. Among
those Continental employees who entered into such employ-
ment contracts were Appellants and W. Thomas Hickcox
(“Hickcox”).2 The employment contracts provided for sever-
ance packages if Appellants or Hickcox were terminated with-
out cause or resigned “for good reason,” such as a significant
reduction in responsibility.
During merger negotiations, an issue arose concerning
whether Continental employees would be able to accelerate
vesting of their unvested Continental stock options prior to or
as part of the merger. Both Appellants and Hickcox contend
Horton overcame this issue by verbally promising to give
30,000 shares of Horton stock to be divided by the group of
Continental managers holding unvested Continental stock
options, including Appellants and Hickcox.
2
Collins was Continental’s Chief Financial Officer, Treasurer, and Sec-
retary. Ryan was the Vice President of Management Information Systems
and a member of the Board of Directors. Hickcox was Continental’s Chief
Executive Officer.
13082 COLLINS v. D.R. HORTON, INC.
The merger between Continental and Horton became effec-
tive in April 1998. Shortly after the merger, Horton termi-
nated Hickcox without cause and Appellants resigned
pursuant to the “for good reason” provisions in their employ-
ment contracts. Horton failed to honor the severance packages
called for under both Appellants’ and Hickcox’s employment
contracts. Appellants and Hickcox also contend Horton failed
to honor its promise to give Continental’s managers holding
unvested Continental stock options 30,000 shares of Horton
stock.
On February 22, 1999, Hickcox alone filed a diversity
action against Horton in district court, alleging state law
claims for breach of contract, failure to pay wages, promis-
sory estoppel, and fraud. The same day, Appellants jointly
filed a separate and distinct diversity action against Horton in
the same district court, also alleging breach of contract, fail-
ure to pay wages, promissory estoppel, and fraud. Appellants
and Hickcox made nearly identical breach of contract and
fraud claims related to Horton’s 30,000 share promise.
On May 14, 1999, pursuant to a mandatory arbitration
clause in Hickcox’s employment contract, Horton moved to
dismiss Hickcox’s case and compel arbitration. At the time,
our precedent held that the FAA did not apply to employment
contracts and, therefore, compulsory arbitration clauses in
employment contracts were unenforceable.3 See Craft v.
3
In relevant part, the FAA states:
A written provision in any maritime transaction or a contract evi-
dencing a transaction involving commerce to settle by arbitration
a controversy thereafter arising out of such contract or transac-
tion, or the refusal to perform the whole or any part thereof, or
an agreement in writing to submit to arbitration an existing con-
troversy arising out of such a contract, transaction, or refusal,
shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any con-
tract.
COLLINS v. D.R. HORTON, INC. 13083
Campbell Soup Co., 177 F.3d 1083, 1093 (9th Cir. 1999). The
district court, therefore, denied Horton’s motion to compel
arbitration in Hickcox’s case.
After discovery and unsuccessful summary judgment
motions, Horton moved to consolidate Appellants’ and Hick-
cox’s cases for trial on the basis that both cases involved Hor-
ton’s alleged 30,000 share promise. The district court denied
the motion because the difference between Appellants’ and
Hickcox’s employment contract claims, i.e., resignation for
good cause versus termination without cause, outweighed the
benefit of consolidation. Hickcox’s and Appellants’ trials
were set for March 12, 2002 and May 14, 2002, respectively.
On March 28, 2002, a jury found Horton liable for breaching
the severance package provisions of Hickcox’s employment
contract and fraud as to the making of the 30,000 share prom-
ise. The jury awarded Hickcox $87,500 in compensatory dam-
ages on the breach of contract claim, $87,000 in damages on
the fraud claim, and $4,100,000 in punitive damages, which
the district court ordered remitted to $1,000,000 in punitive
damages.
Prior to the start of Appellants’ trial, the district court
granted a motion by Horton to compel arbitration of Appel-
lants’ case because the Supreme Court had reversed our pre-
cedent and held that arbitration clauses in employment
contracts are enforceable under the FAA. See Circuit City
Stores, 532 U.S. at 114.
9 U.S.C. § 2 (emphasis added).
In Craft v. Campbell Soup Co., 177 F.3d 1083 (9th Cir. 1999), we held
that the FAA did not apply to employment contracts because an employ-
ment contract is not a “contract evidencing a transaction involving inter-
state commerce.” The Supreme Court overruled Craft, holding the phrase
“contract evidencing a transaction involving interstate commerce” is not
limited to commercial contracts and, therefore, includes employment con-
tracts. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 114 (2001).
13084 COLLINS v. D.R. HORTON, INC.
Appellants’ claims were arbitrated before a panel of three
arbitrators. Appellants moved for summary judgment as to
their 30,000 share claims, contending that offensive non-
mutual collateral estoppel based on the judgment in Hickcox’s
case barred Horton from relitigating their 30,000 share claims.
The arbitration panel denied Appellants’ motion for summary
judgment:
Although the argument for collateral estoppel to at
least some issues might be compelling if this were an
appealable proceeding in a court of law, the arbitra-
tors conclude that collateral estoppel should not be
applied in this binding arbitration. The reason is that
an appeal is pending in the Hickcox matter, an
appeal that we gather will not be resolved until well
beyond the projected end of the current proceedings.
We recognize that the pendency of—and possibility
of reversal in—an appeal would not necessarily
deprive a judgment of preclusive effect in a collat-
eral proceeding in a court of law. There, the avail-
ability of an appeal of the second proceeding would
permit the estoppel to be undone and the second
judgment to be set aside if the prior judgment were
ultimately reversed. Practicality and fairness suggest
a different conclusion in this binding arbitration,
however, in which the estoppel, if now ordered, can-
not later be undone if the Hickcox judgment is later
reversed. Such, in any event, is our understanding,
and on the basis of that understanding we . . . deny[ ]
the motion of Plaintiffs . . . that collateral estoppel
be attributed in this matter to issues resolved against
[Horton] . . . in the Hickcox case.
Thereafter, the arbitrators found for Appellants on their
breach of employment contract claims. The arbitrators, how-
ever, found for Horton on Appellants’ claims arising from
Horton’s alleged 30,000 share promise.
COLLINS v. D.R. HORTON, INC. 13085
Pursuant to 9 U.S.C. § 9,4 Appellants filed in district court
an application to vacate that portion of the arbitration award
holding Appellants had “not established, either on grounds of
breach of contract, promissory estoppel, or fraud, that Horton
made an enforceable promise” to give 30,000 shares of Hor-
ton stock to Continental managers holding unvested Conti-
nental stock options. Appellants’ application to vacate the
arbitration award contended that the arbitrators displayed a
manifest disregard for the law when deciding not to apply
offensive non-mutual collateral estoppel to bar Horton from
relitigating whether Horton made an enforceable 30,000 share
promise.
The district court denied Appellants’ application to vacate
the arbitration award, holding that the arbitrators erred by not
giving preclusive effect to Hickcox’s judgment but that this
error did not rise to the level of a manifest disregard for the
law.
II.
We review de novo the district court’s denial of Appellants’
motion to vacate the arbitration award. See Woods v. Saturn
Distrib. Corp., 78 F.3d 424, 427 (9th Cir. 1996). Our review,
however, is necessarily limited: “Broad judicial review of
4
In relevant part, § 9 of the FAA states:
If the parties in their agreement have agreed that a judgment of
the court shall be entered upon the award made pursuant to the
arbitration, and shall specify the court, then at any time within
one year after the award is made any party to the arbitration may
apply to the court so specified for an order confirming the award,
and thereupon the court must grant such an order unless the
award is vacated, modified, or corrected as prescribed in sections
10 and 11 of this title. If no court is specified in the agreement
of the parties, then such application may be made to the United
States court in and for the district within which such award was
made.
9 U.S.C. § 9.
13086 COLLINS v. D.R. HORTON, INC.
arbitration decisions could well jeopardize the very benefits of
arbitration, [i.e., speed and informality,] rendering informal
arbitration merely a prelude to a more cumbersome and time-
consuming judicial review process.” Kyocera Corp. v.
Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998 (9th
Cir. 2003) (en banc).
Under 9 U.S.C. § 10, a district court may vacate an arbitra-
tion award only:
(1) where the award was procured by corruption,
fraud or undue means; (2) where there was evident
partiality or corruption on the part of the arbitrators;
(3) where the arbitrators were guilty of misbehavior
by which the rights of any party have been preju-
diced; or (4) where the arbitrators exceeded their
powers, or so imperfectly executed them that a
mutual, final, and definite award upon the subject
matter submitted was not made.
9 U.S.C. § 10. Although § 10 does not sanction judicial
review of the merits of arbitration awards, we have adopted
a narrow “manifest disregard of the law” exception under
which a procedurally proper arbitration award may be
vacated. This standard was first articulated in dicta in Wilko
v. Swan, 346 U.S. 427, 436-37 (1953) (“[T]he interpretations
of the law by the arbitrators in contrast to manifest disregard,
are not subject, in the federal courts, to judicial review for
error in interpretation.” (emphasis added)). The manifest dis-
regard exception requires “something beyond and different
from a mere error in the law or failure on the part of the arbi-
trators to understand and apply the law.” San Martine Com-
pania De Navegacion, S.A. v. Saguenay Terminals Ltd., 293
F.2d 796, 801 (9th Cir. 1961). Accordingly, we may not
reverse an arbitration award even in the face of an erroneous
interpretation of the law. See A.G. Edwards v. McCollough,
967 F.2d 1401, 1403 (9th Cir. 1992). Rather, to demonstrate
manifest disregard, the moving party must show that the arbi-
COLLINS v. D.R. HORTON, INC. 13087
trator “underst[oo]d and correctly state[d] the law, but
proceed[ed] to disregard the same.” San Martine Compania
De Navegacion, 293 F.2d at 801.
[1] In short, “federal courts of appeals have repeatedly
held, ‘manifest disregard of the law’ means something more
than just an error in the law or a failure on the part of the arbi-
trators to understand or apply the law. It must be clear from
the record that the arbitrators recognized the applicable law
and then ignored it. As such, mere allegations of error are
insufficient.” Carter, 374 F.3d at 838 (internal citations, quo-
tation marks, and alterations omitted). Moreover, to rise to the
level of manifest disregard “[t]he governing law alleged to
have been ignored by the arbitrators must be well defined,
explicit, and clearly applicable.” Id. (emphasis added).
III.
[2] We have “not specifically addressed whether arbitrators
are bound by prior federal court decisions under the doctrines
of collateral estoppel and/or res judicata[.]” Collins v. Horton,
361 F. Supp. 2d 1085, 1097 (D. Ariz. 2005). Other circuits,
however, have held that where the prerequisites for collateral
estoppel are satisfied arbitrators must give preclusive effect to
prior federal judgments. See, e.g., Aircraft Braking Sys. Corp.
v. Local 856, 97 F.3d 155, 159 (6th Cir. 1996); Miller v. Run-
yon, 77 F.3d 189, 193 (7th Cir. 1996); John Morrell & Co. v.
Local Union 304A, 913 F.2d 544 (8th Cir. 1990). We agree:
“Arbitrators are not free to ignore the preclusive effect of
prior judgments under the doctrines of res judicata and collat-
eral estoppel, although they generally are entitled to deter-
mine in the first instance whether to give the prior judicial
determination preclusive effect.” Aircraft Braking Sys. Corp.,
97 F.3d at 159; see also Miller Brewing Co. v. Fort Worth
Distrib. Co., 781 F.2d 494, 499 (5th Cir. 1986) (reasoning that
parties should be barred from seeking relief from an arbitra-
tion panel if res judicata principles would bar relief in federal
13088 COLLINS v. D.R. HORTON, INC.
court because an arbitration award involves the entry of judg-
ment by a court).
[3] These circuits, however, have not addressed the ques-
tion presented here, i.e., whether arbitrators possess the same
broad discretion possessed by district courts to determine
when to apply offensive non-mutual collateral estoppel. As
noted above, “[o]ffensive non-mutual collateral estoppel is a
version of the doctrine [of collateral estoppel] that arises
when a plaintiff seeks to estop a defendant from relitigating
an issue which the defendant previously litigated and lost
against another plaintiff.” Appling, 340 F.3d at 775 (citing
Parklane Hosiery Co., 439 U.S. at 326). The Supreme Court
has explained why district courts possess broad discretion in
the application of offensive non-mutual collateral estoppel:
Collateral estoppel, like the related doctrine of res judi-
cata,[5] has the dual purpose of protecting litigants
from the burden of relitigating an identical issue with
the same party or his privy and of promoting judicial
economy by preventing needless litigation. Until rel-
atively recently, however, the scope of collateral
estoppel was limited by the doctrine of mutuality of
parties. Under this mutuality doctrine, neither party
could use a prior judgment as an estoppel against the
other unless both parties were bound by the judg-
ment. Based on the premise that it is somehow unfair
to allow a party to use a prior judgment when he
himself would not be so bound, the mutuality
requirement provided a party who had litigated and
5
“Under the doctrine of res judicata, a judgment on the merits in a prior
suit bars a second suit involving the same parties or their privies based on
the same cause of action. Under the doctrine of collateral estoppel, on the
other hand, the second action is upon a different cause of action and the
judgment in the prior suit precludes relitigation of issues actually litigated
and necessary to the outcome of the first action.” Parklane Hosiery Co.,
Inc., 439 U.S. at 326-27 n.5 (citations omitted).
COLLINS v. D.R. HORTON, INC. 13089
lost in a previous action an opportunity to relitigate
identical issues with new parties.[6]
By failing to recognize the obvious difference in
position between a party who has never litigated an
issue and one who has fully litigated and lost, the
mutuality requirement was criticized almost from its
inception. Recognizing the validity of this criticism,
the Court in Blonder-Tongue Laboratories, Inc. v.
University of Illinois Foundation, [402 U.S. 313, 329
(1971)], abandoned the mutuality requirement, at
least in cases where a patentee seeks to relitigate the
validity of a patent after a federal court in a previous
lawsuit has already declared it invalid.
* * *
The Blonder-Tongue case involved defensive use of
collateral estoppel—a plaintiff was estopped from
asserting a claim that the plaintiff had previously liti-
gated and lost against another defendant. The present
case, by contrast, involves offensive use of collateral
estoppel—a plaintiff is seeking to estop a defendant
from relitigating the issues which the defendant pre-
viously litigated and lost against another plaintiff. In
both the offensive and defensive use situations, the
party against whom estoppel is asserted has litigated
and lost in an earlier action. Nevertheless, several
reasons have been advanced why the two situations
should be treated differently.
First, offensive use of collateral estoppel does not
promote judicial economy in the same manner as
6
“It is a violation of due process for a judgment to be binding on a liti-
gant who was not a party or a privy and therefore has never had an oppor-
tunity to be heard.” Parklane Hosiery Co., Inc., 439 U.S. at 327 (citations
omitted).
13090 COLLINS v. D.R. HORTON, INC.
defensive use does. Defensive use of collateral
estoppel precludes a plaintiff from relitigating identi-
cal issues by merely switching adversaries. Thus
defensive collateral estoppel gives a plaintiff a
strong incentive to join all potential defendants in the
first action if possible. Offensive use of collateral
estoppel, on the other hand, creates precisely the
opposite incentive. Since a plaintiff will be able to
rely on a previous judgment against a defendant but
will not be bound by that judgment if the defendant
wins, the plaintiff has every incentive to adopt a
“wait and see” attitude, in the hope that the first
action by another plaintiff will result in a favorable
judgment. Thus offensive use of collateral estoppel
will likely increase rather than decrease the total
amount of litigation, since potential plaintiffs will
have everything to gain and nothing to lose by not
intervening in the first action.
A second argument against offensive use of collat-
eral estoppel is that it may be unfair to a defendant.
If a defendant in the first action is sued for small or
nominal damages, he may have little incentive to
defend vigorously, particularly if future suits are not
foreseeable. Allowing offensive collateral estoppel
may also be unfair to a defendant if the judgment
relied upon as a basis for the estoppel is itself incon-
sistent with one or more previous judgments in favor
of the defendant. Still another situation where it
might be unfair to apply offensive estoppel is where
the second action affords the defendant procedural
opportunities unavailable in the first action that
could readily cause a different result.[7]
7
“If, for example, the defendant in the first action was forced to defend
in an inconvenient forum and therefore was unable to engage in full scale
discovery or call witnesses, application of offensive collateral estoppel
may be unwarranted. Indeed, differences in available procedures may
COLLINS v. D.R. HORTON, INC. 13091
We have concluded that the preferable approach for
dealing with these problems in the federal courts is
not to preclude the use of offensive collateral estop-
pel, but to grant trial courts broad discretion to
determine when it should be applied.
Parklane Hosiery Co., Inc., 439 U.S. at 326-31 (citations,
footnotes, internal quotation marks omitted) (emphasis
added). Significantly, the Supreme Court expressly held: “The
general rule should be that in cases where a plaintiff could
easily have joined in the earlier action or where, either for the
reasons discussed above or for other reasons, the application
of offensive estoppel would be unfair to a defendant, a trial
judge should not allow the use of offensive collateral estop-
pel.” Id. at 331 (emphasis added).
[4] Accordingly, even when the traditional prerequisites for
collateral estoppel are satisfied,8 trial courts have “broad dis-
cretion” to decide whether to apply offensive non-mutual col-
lateral estoppel. Id. Indeed, where “the application of
offensive collateral estoppel would be unfair to a defendant,
a trial judge should not allow the use of collateral estoppel.”
sometimes justify not allowing a prior judgment to have estoppel effect in
a subsequent action even between the same parties, or where defensive
estoppel is asserted against a plaintiff who has litigated and lost.” Park-
lane Hosiery Co., Inc., 439 U.S. at 331 (citations omitted). As discussed
below, rather than affording Horton with additional procedural opportuni-
ties, the FAA’s narrow scope of review deprived Horton of the procedural
opportunities available in district court to attack a collateral estoppel-
based judgment should the underlying judgment be vacated or reversed on
appeal.
8
The prerequisites for offensive non-mutual collateral estoppel are
whether “(1) there was a full and fair opportunity to litigate the identical
issue in the prior action; (2) the issue was actually litigated in the prior
action; (3) the issue was decided in a final judgment; and (4) the party
against whom [collateral estoppel] is asserted was a party or in privity
with a party in the prior action.” Syverson v. IBM, 472 F.3d 1072, 1078
(9th Cir. 2007) (citations omitted).
13092 COLLINS v. D.R. HORTON, INC.
Id. (emphasis added); see also Eureka Fed. Sav. & Loan
Ass’n v. Am. Cas. Co., 873 F.2d 229, 234 (9th Cir. 1989)
(“[I]t is inappropriate to apply collateral estoppel when its
effect would be unfair.”).
[5] We discern no basis for denying arbitrators the same
broad discretion possessed by district courts. Accordingly, we
hold (1) “[a]rbitrators are not free to ignore the preclusive
effect of prior judgments under the doctrines of res judicata
and collateral estoppel,” Aircraft Braking Sys. Corp., 97 F.3d
at 159, (2) arbitrators are entitled to determine in the first
instance whether the prerequisites for collateral estoppel are
satisfied, id., and (3) arbitrators possess broad discretion to
determine when they should apply offensive non-mutual col-
lateral estoppel. See Parklane Hosiery Co., Inc., 439 U.S. at
331.
IV.
We have held that a final judgment retains its collateral
estoppel effect, if any, while pending appeal. See Tripati v.
Henman, 857 F.2d 1366, 1367 (9th Cir. 1988) (stating that a
pending appeal does not affect a judgment’s finality for pre-
clusion purposes). This rule creates the potential for a collat-
eral estoppel-based judgment based on a prior judgment that
is subsequently vacated or reversed on appeal. See Wright &
Miller, 18A Federal Practice & Procedure: Jurisdiction 2d.
§ 4433 (2002). Indeed, “in some cases, litigants and the courts
have collaborated so ineptly that the second judgment has
become conclusive even though it rested solely on a [prior]
judgment that was later reversed.” Id. (citing Reed v. Allen,
286 U.S. 191, 196-201 (1932)). In the context of district court
litigation, this potential problem can be “avoided, whether by
delaying further proceedings in the second action pending
conclusion of the appeal in the first action, by a protective
appeal in the second action that is held open pending determi-
nation of the appeal in the first action, or by a direct action
to vacate the second judgment.” Collins, 361 F. Supp. 2d at
COLLINS v. D.R. HORTON, INC. 13093
1096 (citing Wright & Miller § 4433). Accordingly, we have
held that the benefits of giving a judgment preclusive effect
pending appeal outweigh any risks of a later reversal of that
judgment. See Tripati, 857 F.2d at 367.
Here, the arbitrators were faced with a different, albeit sim-
ilar, question. Specifically, they were faced with the question
whether a judgment pending appeal should be given preclu-
sive effect in an arbitration, a question that appears to be one
of first impression in all jurisdictions.
The arbitrators recognized the district court’s judgment as
final,9 but proceeded not to apply offensive non-mutual collat-
eral estoppel because the FAA’s narrow scope of review lim-
its the ability of an arbitration defendant to overturn a
collateral estoppel-based arbitration award in the event the
judgment upon which it is based is vacated or reversed on
appeal. See Collins, 361 F. Supp. 2d at 1089-90. Our case law
supports the drawing of such a distinction:
Indeed, there are fundamental differences between
confirmed arbitration awards and judgments arising
from a judicial proceeding. Absent an objection on
one of the narrow grounds set forth in sections 10 or
11,[10] the [FAA] requires the court to enter judgment
9
The arbitrators’ concern that the Hickcox judgment was on appeal was
not inconsistent with an understanding that the Hickcox judgment was
final for collateral estoppel purposes. Indeed, the arbitrators would not
have relied on the equities underlying the case to reach their decision had
they simply denied Appellants’ motion for summary judgment based on
any one of the Syverson factors.
10
“Sections 10 and 11 [of the FAA] permit a district court to vacate or
modify an arbitration award under limited circumstances unrelated to the
merits. For example, a court may vacate an award procured by corruption,
fraud or undue means or rendered by a partial or corrupt arbitrator. See 9
U.S.C. § 10(a)(1), (2). Also, a court may modify an award to correct an
obvious material miscalculation of figures or an imperfection in matter of
form not affecting the merits. See 9 U.S.C. § 11(a), (c).” Chiron Corp. v.
Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1134 n.2 (9th Cir. 2000)
(emphases added).
13094 COLLINS v. D.R. HORTON, INC.
upon a confirmed arbitration award, without review-
ing either the merits of the award or the legal basis
upon which it was reached. A judgment upon a deci-
sion or order rendered by the court at the conclusion
of a judicial proceeding, by contrast, confirms the
merits of that decision. Along the same lines, a judg-
ment under § 13 of the FAA is not subject to Federal
Rules of Civil Procedure 59 or 60 whereas a judg-
ment arising from a judicial proceeding is subject to
reopening and challenge under those rules. And,
unless the provisions of the parties’ agreement pro-
vides to the contrary, there is no right under the FAA
to appeal the merits of a confirmed arbitration
award. In sum, a judgment upon a confirmed arbitra-
tion award is qualitatively different from a judgment
in a court proceeding, even though the judgment is
recognized under the FAA for enforcement pur-
poses.
Chiron Corp., 207 F.3d at 1133-34.
[6] We need not, however, resolve the question whether the
arbitrators abused their discretion when they determined the
qualitative difference between a district court judgment and
an arbitration award rendered the application of offensive
non-mutual collateral estoppel unfair. Rather, we resolve this
case on the basis that “[t]he governing law alleged to have
been ignored by the arbitrators [was not] well defined,
explicit, and clearly applicable.” See Carter, 374 F.3d at 838
(emphasis added). In short, the arbitrators could not mani-
festly disregard the law because no binding precedent existed
as to whether (1) arbitrators are required to afford federal
judgments preclusive effect, (2) arbitrators possess the same
broad discretion as district courts in determining whether to
apply offensive non-mutual collateral estoppel, and (3) the
qualitative difference between a district court judgment and
an arbitration award renders unfair the application of offen-
COLLINS v. D.R. HORTON, INC. 13095
sive non-mutual collateral estoppel in arbitration on the basis
of a prior judgment pending appeal.
AFFIRMED.