Gupta v. Cisco Systems, Inc.

United States Court of Appeals
For the First Circuit

No. 01-1122

DEV VRAT GUPTA,

Petitioner, Appellant,

v.

CISCO SYSTEMS, INC.,

Respondent, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, U.S. District Judge]

Before

Lipez, Circuit Judge,
Bownes, Senior Circuit Judge,
and Barbadoro,* District Judge.

Michael E. Norton, with whom Robinson Murphy & McDonald,
David C. Casey, and Bingham Dana LLP were on brief for
appellant.

Thomas M. Peterson, with whom Franklin Brockway Gowdy, Brian
L. Johnsrud, Brett M. Schuman, and Brobeck, Phleger & Harrison
LLP were on brief for appellee.
 December 3, 2001

______________________

*Of the District of New Hampshire, sitting by designation.
 BOWNES, Senior Circuit Judge. Petitioner-appellant Dev

Vrat Gupta is an engineer and former employee of respondent-

appellee Cisco Systems, Inc. At issue is the ownership of

several million dollars’ worth of stock in Maxcomm Technologies,

Inc., a company Gupta founded while employed by Cisco. An

arbitrator issued an award upholding Cisco's right to repurchase

the stock, and the District Court for the District of

Massachusetts denied Gupta's motion to vacate the award. We

affirm the decisions below.

I. Background

Gupta began working for Cisco in July, 1997. In March,

1998, he founded Maxcomm. Gupta remained employed by Cisco

while serving as Maxcomm's President and Chief Executive

Officer. On July 17, 1998, the parties signed a Founder’s

Agreement in which Gupta, in exchange for financing, gave

Maxcomm or its successors the right to repurchase Gupta’s shares

if he left Maxcomm before January of 2002.

On September 9, 1999, Gupta and Cisco entered into an

Employment Agreement. 1 The Employment Agreement contained an

integration clause providing that the Agreement superceded and

1
Cisco and Gupta had executed an earlier Employment
Agreement on July 25, 1997, as well as a Proprietary Information
and Invention Agreement and agreements concerning stock and
stock options. None of these agreements is directly at issue in
this case.

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replaced all prior agreements between Gupta and Maxcomm, as well

as Gupta and Cisco, "relating to the subject matter hereof,

including, but not limited to, any and all prior employment

agreements." The integration clause explicitly excepted certain

other agreements, but did not mention the Founder's Agreement.

The Employment Agreement also contained an arbitration clause

and a choice-of-law provision specifying California law.

Also on September 9, 1999, Gupta signed an amendment

to the Founder's Agreement referring to Maxcomm's right to

repurchase "unvested shares" in the event of the termination of

his employment. The amendment provided, inter alia, that absent

shareholder approval Gupta "shall not be entitled to any

accelerated vesting of the Shares in connection with the

acquisition of the Company by Cisco."

On September 13, 1999, Cisco acquired Maxcomm.

Effective that date, Maxcomm and Cisco entered into a Merger

Agreement providing, inter alia, that Cisco could exercise

repurchase rights equivalent to those held by Maxcomm under the

Founder's Agreement. Gupta had negotiated that contract on

behalf of Maxcomm, with the assistance of counsel.

On May 24, 2000, Gupta voluntarily resigned from his

employment at Cisco. Cisco repurchased the Maxcomm stock

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pursuant to the Founder's Agreement and compensated Gupta for

the repurchased shares.

The matter proceeded to arbitration in April, 2000.

The arbitrator performed a "contextual analysis" in interpreting

the contract: she examined several other contracts as well as

the plain language of the integration clause to determine the

intent of the parties.2 She concluded that the integration

clause in the Employment Agreement covered only contracts

relating to employment; that the Founder’s Agreement did not

relate to employment; and hence that the Employment Agreement

did not replace or supercede the Founder’s Agreement.

Accordingly, she held that Cisco retained the right to

repurchase the Maxcomm stock.

Gupta filed suit under the Federal Arbitration Act, 9

U.S.C. § 10, to vacate the arbitrator's award. On December 19,

2000, the district court affirmed the award.

II. Discussion

Our review of an arbitrator's decision is “extremely

narrow and exceedingly deferential.” Keebler Co. v. Truck

Drivers, Local 170, 247 F.3d 8, 10 (1st Cir. 2001) (citation

omitted); Bull HN Info. Sys., Inc. v. Hutson, 229 F.3d 321, 330

2
The arbitrator cited California law, pursuant to the
choice-of-law provision in the Employment Agreement, in support
of this analysis.

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(1st Cir. 2000) (citation omitted). We recently emphasized that

“disputes that are committed by contract to the arbitral process

almost always are won or lost before the arbitrator. Successful

court challenges are few and far between.” Keebler, 247 F.3d at

10 (quoting Teamsters Local Union No. 42 v. Supervalu, Inc., 212

F.3d 59, 61 (1st Cir. 2000)) (interpreting collective bargaining

agreement). Indeed, "judicial review of an arbitration award is

among the narrowest known to the law.” Coastal Oil v. Teamsters

Local A/W, 134 F.3d 466, 469 (1st Cir. 1998) (citation omitted).

In this Circuit, arbitral awards are subject to review

only in two relevant instances: (1) where an award is contrary

to the plain language of the contract or (2) where it is clear

from the record that the arbitrator recognized the applicable

law, but ignored it. Bull HN Info. Sys., 229 F.3d at 330-31.

"In the parlance of this and other circuits, a reviewing court

may vacate an arbitral award if it was made in 'manifest

disregard' of the law." Id. at 331. Thus, we will affirm the

arbitrator’s interpretation of the Employment Agreement if it is

in any way plausible, even if we think she committed serious

error. See Coastal Oil, 134 F.3d at 469; Dorado Beach Hotel

Corp. v. Union de Trabajadores de La Industria Gastronomica de

Puerto Rico Local 610, 959 F.2d 2, 4 (1st Cir. 1992). “[I]t is

the arbitrator’s view of the facts and of the meaning of the

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contract that [the parties] have agreed to accept." Bull HN

Info. Sys., 229 F.3d at 330 (internal quotation marks omitted).

Gupta maintains that the arbitrator and district court

erred in concluding that the Founder’s Agreement did not relate

to employment. He contends that the very purpose of that

agreement was to secure his continued relationship with Cisco,

and points out that his employment was explicitly mentioned

several times therein. This argument is not without force.

We are constrained, however, by the standard of review. See

Wheelabrator Envirotech Operating Serv. Inc. v. Mass. Laborers

Dist. Council Local 1144, 88 F.3d 40, 48 (1st Cir. 1996)

(affirming arbitrator’s award even though “as a matter of first

impression we might well have decided the case otherwise”).

Even if we disagree with the arbitrator's interpretation of the

integration clause in the Employment Agreement, it does not

amount to manifest disregard of the law. See Bull HN Info.

Sys., 229 F.3d at 330-31. The arbitrator's determination that

the parties did not intend to cut off Cisco's repurchase rights

is sufficiently grounded in the record such that we cannot say

it is contrary to the plain language of the Employment

Agreement. See id. Nor is this a situation wherein the

arbitrator recognized but ignored the applicable law. See id.

Hence, we defer to her conclusion that the Employment Agreement

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does not supercede or replace the Founder’s Agreement, and

affirm the award in favor of Cisco.

Affirmed.

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