Seagate Technology, LLC v. Western Digital Corp., 834 N.W.2d 555

Seagate sued Mao and Western Digital for trade secrets; arbitration clause in Mao’s employment agreement provided for AAA arbitration in Minnesota with broad authority including injunctive relief.
Mao allegedly fabricated evidence: two slides added to a presentation; arbitrator found fabrication and that Western Digital knew; sanctions were to preclude use of Trade Secrets 4-6 evidence.
Arbitrator imposed sanctions precluding Western Digital and Mao from defending Trade Secrets 4-6 and entered judgment against them for misappropriation; award totaled over $630 million.
District court vacated part of the award, holding the arbitrator lacked authority to sanction for fabrication and that the sanctions were misapplied; ordered a rehearing before a new arbitrator.
Seagate moved to confirm the award; respondents moved to vacate; Western Digital petitioned for discretionary review; issue on waiver, arbitrator authority, public policy, and rehearing before a different arbitrator.
This court reverses, finds waiver of objection to arbitrator’s authority, holds arbitrator had authority to sanction, holds no public-policy ground to vacate, and remands for entry of judgment confirming the award.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Waiver of objection to arbitrator’s authority	Mao/WD waived by failing to raise during arbitration and by seeking sanctions	Respondents did not waive because objections were preserved	Waiver found; obstruction to review but addressed further issues
Arbitrator’s authority to impose sanctions	Arbitrator had inherent authority to sanction for bad-faith fabrication	AAA rules/contract silent on sanctions; no authority	Arbitrator had authority to impose sanctions; district court erred in limiting authority
Merits review of sanctions decision	Arbitrator’s sanction decision merits review as misapplication of law	Arbitrator’s merits should be final; no de novo review of legal conclusions	District court erred by reviewing the merits; arbitrator is final judge of law and fact on merits
Public policy vacatur	Award does not violate well-defined public policy despite sanctions issues	Vacatur necessary to avoid contravention of public policy	No dominant public-policy ground to vacate; remand for judgment confirmation
Rehearing before a different arbitrator	Remand before same arbitrator preferred to promote speed	Remand before new arbitrator appropriate only if fraud or partiality shown	District court abused discretion; remand should be before same arbitrators absent fraud/partiality findings

Wells Fargo Bank, N.A. v. WMR e-PIN, LLC, 653 F.3d 702 (8th Cir.2011) (waiver of objections to arbitration remedies by failure to object and by seeking relief)
ReliaStar Life Ins. Co. v. EMC Nat’l Life Co., 564 F.3d 81 (2nd Cir.2009) (inherent authority of arbitrators to sanction in absence of contract language)
AmeriCredit Financial Servs., Inc. v. Oxford Mgmt. Servs., 627 F.Supp.2d 85 (E.D.N.Y.2008) (arbitrator may dismiss claims as sanctions for destruction of evidence)
City of Bloomington v. Local 2828 of Am. Fed’n of State, County & Municipal Emps., 290 N.W.2d 598 (Minn.1980) (power to fashion a remedy implicit in broad arbitration grants)
Metro Airports Comm’n v. Metro. Airports Police Fed’n, 443 N.W.2d 519 (Minn.1989) (arbitrators are final judges of law and fact; review limited)
Regenscheid v. Farm Bureau Mut. Ins. Co., 652 N.W.2d 261 (Minn.2002) (no-fault context; rely on objection preservation for arbitrability)
Metro Waste Control Comm’n v. City of Minnetonka, 308 Minn. 385, 242 N.W.2d 830 (Minn.1976) (scope of arbitrator’s power controlled by submission)