Swenson v. Bushman Investment Properties, Ltd.
870 F. Supp. 2d 1049
D. Idaho2012Background
- In Jan. 2012, an arbitrator awarded respondents about $458,000 in damages plus $2.27 million in potential prospective damages if contingencies occurred.
- Respondents are real estate investors who purchased fractional interests in land in Arapahoe County, CO from DBSI E-470 East LLC, a DBSI, Inc. subsidiary.
- Petitioners include Douglas Swenson (former DBSI, Inc. president/CEO) and his sons Jeremy and David Swenson (DBSI Realty employees).
- Arbitration was ordered in July 2010, with an evidentiary hearing in June–July 2011; interim award in Sept. 2011 found Swensons liable for breach and Douglas Swenson liable for fraud; final damages award issued Dec. 2011 and modified Jan. 2012.
- Swensons moved to vacate; respondents moved to confirm arbitration award; court vacated a portion for clarification and remanded that ambiguity to the arbitrator, otherwise confirming the award.
- Arbitration involved piercing the corporate veil to impose liability on non-shareholders (David and Jeremy Swenson) as insiders controlling DBSI entities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of vacatur motions | Swensons contend motions filed after interim award were timely under 9 U.S.C. § 12. | Swensons argue different start date for limitations due to final vs. interim award timing. | Motions to vacate were timely filed. |
| Whether the arbitration award is subject to judicial review despite a waiver | Waiver clause forecloses review or appeals of the award. | Arbitration clause may not preclude limited judicial review under FAA; review permitted if not clearly waived. | Limited judicial review under FAA is available; waiver did not clearly eliminate review. |
| Governing standard for vacating an arbitration award | Arbitrator manifestly disregarded Idaho law and evidence supported fraud/veil-piercing. | Clashes with deference to arbitral findings; review is highly limited. | FAA standard applied; standard of review is highly deferential and limited. |
| Manifest disregard of the law | Arbitrator erred on veil-piercing, fraud elements, reliance, Fifth Amendment inferences, and punitive damages. | Arbitrator’s findings were supported by evidence; no manifest disregard found. | Swensons failed to show manifest disregard; no vacatur on these grounds, but an ambiguity in one damages award portion merits remand. |
| Ambiguity in the potential prospective damages award | Awarding contingent prospective damages based on foreclosure and tax liens should be clear and certain. | Flexibility allows contingent future damages where events are defined; not an improper award. | Isolated portion of the potential prospective damages award is ambiguous and vacated/remanded for clarification. |
Key Cases Cited
- Bosack v. Soward, 586 F.3d 1096 (9th Cir. 2009) (interim awards may be final for functus officio purposes when intended)
- Kyocera Corp. v. Prudential-Bache Trade Services, Inc., 341 F.3d 987 (9th Cir. 2003) (courts may not expand review beyond 9 U.S.C. § 10(a))
- Aerojet-General Corp. v. American Arbitration Association, 478 F.2d 248 (9th Cir. 1973) (clear intent to eliminate review must appear for waivers)
- Collins v. D.R. Horton, Inc., 505 F.3d 874 (9th Cir. 2007) (manifest disregard standard and vacatur considerations)
- Weitzel v. Jukich, 251 P.2d 542 (Idaho 1953) (superior-knowledge/exceptions in fraud analysis)