SEAGATE TECHNOLOGY, LLC, Rеspondent, v. WESTERN DIGITAL CORPORATION, et al., Appellants, Sining Mao, Appellant.
No. A12-1944.
Supreme Court of Minnesota.
Oct. 8, 2014.
854 N.W.2d 750
Clifford M. Greene, Larry D. Espel, John M. Baker, Greene Espel PLLP, Minneapolis, MN; Lisa S. Blatt, Arnold & Porter, LLP, Washington, District of Columbia; and Michael D. Schissel, Arnold & Porter, LLP, New York, NY, for appellants Western Digital Corporation, et al.
Nathan J. Marcusen, Isaac W. Messimore, Bowman and Brooke LLP, Minneapolis, MN; and George W. Soule, Soule & Stull, LLC, Minneapolis, MN, for appellant Sining Mao.
Katherine L. MacKinnon, Law Office of Katherine L. MacKinnon, P.L.L.C., Saint Louis Park, MN, for amicus curiae Minnesota Chamber of Commerce.
Karl E. Robinson, Sweeney & Masterson, P.A., Saint Paul, MN; and Peter R. Afrasiabi, One LLP, Newport Beach, CA, for amicus curiae Professor Georgene M. Vairo.
Scott Cody, Tarshish Cody, PLC, Chaska, MN; and Professor David Allen Larson, Hamline University School of Law, Saint Paul, MN, for amicus curiae Professor David Allen Larson.
Corey J. Ayling, Douglas M. Carnival, McGrann Shea Carnival Straughn & Lamb, Chartered, Minneapolis, MN, for amicus curiae Minnesota High Technology Association.
Alan L. Kildow, Sonya R. Braunschweig, DLA Piper LLP, Minneapolis, MN, for amicus curiae Professor George A. Bermann.
Daniel J. Supalla, Briggs and Morgan, P.A., Minneapolis, MN, for amicus curiae Minnesota Defense Lawyers Association.
Sharon L. Van Dyck, Van Dyck Law Firm, PLLC, Saint Louis Park, MN, for amicus curiae Minnesota Association for Justice.
OPINION
ANDERSON, Justice.
An arbitrator issued an award against appellants Sining Mao, Western Digital Corporation, and Western Digital Technologies, Inc., in an amount exceeding $500 million. The award was vacated in part by the district court and then reinstated by the court of appeals. Mao and the Western Digital entities now separately seek review of the reinstatement decision. Mao and Western Digital argue that the arbitrator‘s punitive sanctions, which precluded any evidence or defense and en
The arbitration agreement at issue arose out of an employment contract between Mao and his former employer, respondent Seagate Technology, LLC. Seagate designs and manufactures hard disk drives for computers. In his role as senior director for advanced head concepts at Seagate, Mao worked on technology that involves incorporating tunneling magnetoresistance (TMR) into read heads,2 which, if done successfully, would allow for vastly improved storage capacity on hard disk drives.
When Mao began working for Seagate, he signed an employment agreement stating, among other requirements, that if he left Seagate, he would preserve the confidentiality of all trade secrets, return all company documents, and not solicit any current Seagate employees for other emplоyment using unfair or deceptive means. The employment agreement also contained the following arbitration clause:
Arbitration: Except as stated below, I agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in Hennepin County, Minnesota, in accordance with the rules then in effect of the American Arbitration Association. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator‘s decision in any court having jurisdiction. The Company and I shall each pay one-half of the costs and expenses of such arbitration, and each of us shall separately pay our counsel fees and expenses.
Mao left Seagate in September 2006 and joined Seagate‘s competitor, Western Digital Corporation, in October 2006. After Mao joined Wеstern Digital, Seagate commenced a district court action seeking injunctive relief to prevent the disclosure of Seagate‘s trade secrets and later amended its claim to allege actual misappropriation of trade secrets. Seagate‘s primary allegation, in essence, was that Mao stole Seagate‘s trade secrets and confidential information regarding TMR technology and provided it to Western Digital, which
Western Digital then used to design and manufacture a TMR read head. Specifi
Western Digital invoked the arbitration clause of the employment agreement, and the district court stayed the lawsuit pending arbitration. Before the arbitration hearing began, Seagate brought a motion for sanctions agаinst Western Digital and Mao based on alleged fabrication of evidence.3 The fabrication related to documents submitted by Western Digital and Mao, which were intended to prove that three of Seagate‘s claimed trade secrets, referred to as Trade Secrets 4-6, had been publicly disclosed before Mao left Seagate. Seagate alleged that Mao had inserted additional PowerPoint slides containing information on Trade Secrets 4-6 into his copy of a presentation that he had given at a conference while employed by Seagate to make it appear as if this information had been presented in public, and therefore did not qualify as trade secrets.
In the motion for sanctions based on fabrication, Seagate requested “a sanction commensurate with the severity of the misconduct.” Specifically, Seagate requested an order precluding Western Digital and Mao “from presenting any defense to the trade secret misappropriation claims asserted against them, including barring [Western Digital and Mao] from (1) disputing the validity and misappropriation of any of Seagate‘s eight asserted trade secrets, and (2) disputing Western Digital‘s use of Seagate‘s eight asserted trade secrets.” Seagate also requested compensation for “the costs and attorneys’ fees it was forced to incur to investigate and expose the document fabrication and to bring this motion to remedy it.” Western Digital and Mao responded by requesting sanctions against Seagate to “compensate the Claimants for the unnecessary fees and costs incurred in defending against Seagate‘s frivolous charges.” Western Digital and Mao also asked the arbitrator to defer consideration of the sanctions motions until after the arbitrator had heard evidence “in the context of the full arbitration hearing,” and the arbitrator granted this latter request.
The arbitration hearing was held over 34 days in 2011. The arbitrator found in favor of Mao and Western Digital with respect to claims arising out of Trade Secrets 1-3 and 7-8, concluding that Seagate had failed to prove that the information reflected in these claims met the definition of a trade secret.4 Trade Secrets 4-6 were addressed separately, as the arbitrator first reviewed the motion for sanctions based on fabrication and determined that Mao fabricated the disputed slides for the purpose of litigation while working at Western Digital. The arbitrator stated: “The fabrications were obvious. There is no question that Western Digital had to know of the fabrications and yet continued to represent to the Arbitrator that Dr. Mao did in fact insert the disputed slides ... at the time of the conferences.” The arbitrator concluded that “Dr. Mao‘s fabrication of evidence and Western Digital‘s complicity by submitting the obviously fabricated evidence to the Arbitrator is an
egregious form of litigation misconduct and warrants severe sanctions.” The arbi
- Preclusion of any evidence or defense by Western Digital and Dr. Mao disputing the validity of Seagate‘s asserted trade secrets 4, 5, and 6;
- Preclusion of any evidence or defense by Western Digital and Dr. Mao regarding misappropriation by Western Digital and Dr. Mao of Seagate‘s asserted trade secrets 4, 5, and 6;
- Preclusion of any evidence or defense by Western Digital disputing that it has used or is using Seagate‘s asserted trade secrets 4, 5, and 6 in Western Digital‘s manufactured TMR read heads; and
- Entry of judgment against Western Digital and Dr. Mao of liability for misappropriation and use of Seagate‘s asserted trade secrets 4, 5, and 6.
After determining that Seagate had established that Trade Secrets 4-6 qualified as trade secrets and, consistent with the sanctions, that these trade secrets had been improperly used by Western Digital, the arbitrator found in favor of Seagate on its claims arising out of Trade Secrets 4-6. The arbitrator also found that Mao‘s testimony, in part due to the fabrication of evidence, lacked credibility and that Mao had breached his employment contract by disclosing confidential information, not returning company documents, and soliciting a Seagate employee for employment at Western Digital. The arbitrator calculated damages based on “the unjust enrichment method,” awarding Seagate compensatory damages of $525 million, prejudgment interest totaling nearly $96 million, and post-award interest. The arbitrator determined that Western Digital and Mao are jointly and severally liable for the damages.
Western Digital and Mao brought a motion in Hennepin County District Court to vacate the portion of the arbitration award concerning Trade Secrets 4-6, and Seagate moved to confirm the entire award. Following a hearing, the district court issued an order confirming the award in part, vacating the award in part, and ordering a rehearing before a new arbitrator. The district court determined that the arbitrator‘s ability to impose sanctions was determined by the arbitration agreement, and that the agreеment in this case did not contain provisions that could be interpreted as authorizing sanctions beyond attorney fees. Furthermore, the district court determined that even if sanctions had been permitted, the arbitrator misapplied sanctions law by not allowing Western Digital and Mao to rebut the presumption created by the fabricated evidence that their defense was without substantial foundation. Thus, the district court concluded that the arbitrator exceeded his authority by issuing punitive sanctions against Western Digital and Mao, and so vacatur of the portion of the award impacted by the sanctions was appropriate under
Seagate appealed, arguing that the district court erred by: (1) determining that the arbitrator had exceeded his authority by issuing sanctions and concluding that Western Digital and Mao had not waived their right to challenge the sanctions; (2) reviewing the merits of the arbitrator‘s decision to impose sanctions; (3) granting vacatur based on public policy; and (4) ordering a rehearing before a new arbitrator. The court of appeals granted discretionary review, then reversed and remanded for entry of an order confirming the award and judgment entered on that order. Seagate Tech., LLC v. W. Digital Corp., 834 N.W.2d 555, 567 (Minn.App. 2013). The court of appeals applied a method of waiver analysis from the Eighth Circuit, which holds that there is a waiver if the party did not object during the arbitration and that party asked the arbitrator to use a power similar to the power they now challenge. Id. at 561-62; see Wells Fargo Bank, N.A. v. WMR e-PIN, LLC, 653 F.3d 702, 711-12 (8th Cir.2011). Using this Eighth Circuit method, the court of appeals concluded that Western Digital and Mao had waived their right to challenge the arbitrator‘s ability to issue punitive sanctions. Seagate Tech., 834 N.W.2d at 561-62.
Although the court of appeals stated that its finding of waiver “is dispositive of the issue of arbitrator authority and could end our analysis,” it nonetheless reviewed the merits of the arbitrator‘s use of punitive sanctions and the district court‘s order for a rehearing before a new arbitrator. Id. at 562. The court of appeals concluded that a broadly worded arbitration agreement confers inherent authority on the arbitrator to impose punitive sanctions, that the arbitrator‘s possible misapplication of sanctions law did not compel vacatur, that the arbitration award did not violate public policy, and that the district court abused its discretion by directing a rehearing before a new arbitrator. Id. at 564-67. We granted Western Digital and Mao‘s request for further review.
I.
Before evaluating if the arbitrator imposed permissible sanctions on Western Digital and Mao, we must determine if Western Digital and Mao waived their right to request vacatur under
The grounds for Western Digital and Mao‘s challenges to the arbitration award are statutory. Therefоre, although other jurisdictions have developed various methods for analyzing waiver in the context of an arbitration, the necessity of an objection before requesting vacatur under
Upon application of a party, the court shall vacate an award where:
(1) The award was procured by corruption, fraud or other undue means;
(2) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party;
(3) The arbitrators exceeded their powers;
(4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of
section 572.12 , as to prejudice substantially the rights of a party; or(5) There was no arbitration agreement and the issue was not adversely determined in proceedings under
section 572.09 and the party did not participate in the arbitration hearing without raising the objection.
Western Digital and Mao challenge the arbitration award on the basis of subdivision 1(3), alleging that the arbitrator exceeded his authority, and subdivision 1(4), alleging that the arbitrator refused to hear material evidence. They note that while subdivision 1(5) requires that “the party did not participate in the arbitration hearing without raising the objection,” subdivisions 1(3) and (4) do not contain any similar limiting language.
We agree that this distinction is significant. We construe a statute “as a
conduct in the arbitration. The district court framed the issue as whether Western Digital and Mao conceded that the arbitrator had the authority to impose punitive sanctions by “not stating that the Arbitrator had no authority” to impose punitive sanctions during the arbitration. Likewise, in their briefs to the court of appeals, the main focus of both parties was whether Western Digital and Mao had objected and if such an objection was required either by statute or the American Arbitration Association Employment Arbitration Rules and Mediation Procedures. For example, at the court of appeals Seagate argued that “[t]he failure to object to the Arbitrator‘s power to decide the issue precludes any argument thаt the Arbitrator‘s ruling should be vacated as beyond the scope of his authority.” In its brief to our court, Seagate also contends that Western Digital and Mao were required to object during the arbitration regardless of their conduct, arguing that the “failure to object would constitute waiver,” that not requiring an objection would risk parties abusing the arbitration process, and that not requiring an objection would be unfair. Mao also frames the issue as a question of waiver by failing to object, regardless of conduct, as he asks us to decide whether “a party waive[s] its right to judicial review if the party d[oes] not make a precisely worded, formal objection during the arbitral proceedings.” Thus, the concurrence is simply incorrect in suggesting that we are addressing an issue not raised by the parties by deciding whether or not an objection is required before requesting vacatur under
The concurrence raises a question that is not squarely presented by the parties, which is whether Western Digital and Mao‘s conduct was an intentional relinquishment of their right to object. Although Seаgate argues that Western Digital and Mao invoked the arbitrator‘s power to sanction, the parties have failed to expressly argue whether such an invocation served as an intentional relinquishment of the right to object. For example, none of the parties have addressed whether Western Digital and Mao‘s conduct was an intentional relinquishment, which would be a key issue under the concurrence‘s framing of the issue. As the concurrence notes, the argument that Western Digital and Mao intentionally gave up their right to object “may be more complex” than the parties appreciate, and so we decline to resolve this issue in a case such as this where the parties have not expressly argued or fully briefed the issue. See Plunkett v. First Nat‘l Bank of Austin, 259 Minn. 562, 563, 107 N.W.2d 220, 220 (1961) (declining to decide “issues [that] have not been fully briefed or presented to us“). Therefore, we disagree with the approach adopted by the concurrence.
Our case law also supports this reasoning. In Twomey v. Durkee, 291 N.W.2d 696, 699 (Minn.1980), we held that the plaintiffs were estopped from challenging the arbitrability of a dispute because they had participated in the arbitration proceedings without objection. Twomey recognized that
In addition to the statutory analysis, the structure of arbitration proceedings supports this result. Given the very limited appeal rights, the absence of a transcript in many informal arbitration proceedings, and the use of nonlawyers as arbitrators in some arbitration hearings, the imposition of an objection requirement by our court when the Legislature did not do so would be an awkward fit at best. See, e.g., Larson v. Nygaard, 148 Minn. 104, 107-08, 180 N.W. 1002, 1003 (1921) (discussing an arbitration in which the arbitrators did not have legal training, all proceedings were oral, no attorneys or advisors could participate, and “[a]ll technicalities were to be disregarded“).
Based on this analysis, we conclude that under
We hold that Western Digital and Mao did not waive their right to сhallenge the arbitration award on the basis of
II.
Having concluded that Western Digital and Mao did not waive their right to challenge the arbitration award under
A.
We first examine whether the arbitrator had the authority to impose punitive sanc6tions that precluded any evidence or defense on certain issues and entered a judgment of liability. Western Digital and Mao contend that by issuing these sanctions, the arbitrator exceeded his authority. Accordingly, they request vacatur under
We determine the scope of an arbitrator‘s authority de novo. Cnty. of Hennepin v. Law Enf‘t Labor Servs., Inc., Local No. 19, 527 N.W.2d 821, 824 (Minn.1995). An arbitration award “will be set aside by the courts only when
the objecting party meets its burden of proof that the arbitrators have clearly exceeded the powers granted to them in the arbitration agreement; courts will not overturn an award merely because they may disagree with the arbitrators’ decision on the merits.” Children‘s Hosp., Inc. v. Minn. Nurses Ass‘n, 265 N.W.2d 649, 652 (Minn.1978) (emphasis added); see also State v. Minn. Ass‘n of Prof‘l Emps., 504 N.W.2d 751, 755-56 (Minn.1993) (“In evaluating challenges to the scope of an arbitrator‘s powers, this court‘s scope of review is very limited....“). In our review of an arbitrator‘s authority, “[e]very reasonable presumption is exercised in favor of the finality and validity of the award.” Nat‘l Indem. Co. v. Farm Bureau Mut. Ins. Co., 348 N.W.2d 748, 750 (Minn.1984).
The arbitrator‘s ability to issue punitive sanctions is controlled by the arbitration agreement. Law Enforcement Labor Servs., 527 N.W.2d at 824 (“The scope of an arbitrator‘s authority is a matter of contract interpretation to be determined from a reading of the parties’ arbitration agreement.“). Therefore, parties are able to include or exclude the use of punitive sanctions when constructing an arbitration agreement, either through express provision or through the incorporation of a particular set of arbitration rules.8 When reviewing an arbitration agreement to determine the scope of an arbitrator‘s authority, we use principles of contract interpretation. Children‘s Hospital, 265 N.W.2d at 652. While courts possess
Following principles of contract law, we begin by looking at the language of the agreement. Interpreting a contract requires us to “determine if the language is clear and unambiguous, meaning it has only one reasonable interpretation. If so, we give effect to the language of the [agreement].” Halla Nursery, Inc. v. City of Chanhassen, 781 N.W.2d 880, 884 (Minn.2010) (citation omitted). Seagate notes that we have often construed arbitration agreements broadly. See, e.g., Michael-Curry Cos. v. Knutson S‘holders Liquidating Trust, 449 N.W.2d 139, 142 (Minn.1989); David Co. v. Jim W. Miller Constr., Inc., 444 N.W.2d 836, 842 (Minn.1989). But we cannot convey broader powers than the words of the arbitration agreement provide under their ordinary meaning. See Halla Nursery, 781 N.W.2d at 884-85 (rejecting an interpretation that “directly contradicts the plain terms” of a contract). Although Seagate argues that the arbitrator is empowered to interpret his authority on the basis of the agreement and to impose any award that does not manifestly disregard the spirit of the
enacted after this case, and therefore not relevant here, one example of this type of authority is found in
The arbitration agreement empowered the arbitrator to settle “any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach” of the employment agreement, and the agreement states that “[t]he arbitrator may grant injunctions or other relief in such dispute or controversy.” The agreement also says that the arbitration will be conducted in accordancе with the “the rules then in effect of the American Arbitration Association.” The American Arbitration Association Employment Arbitration Rules and Mediation Procedures (AAA Employment Rules) do not specifically address punitive sanctions, but they do authorize arbitrators to “grant any remedy or relief that would have been available to the parties had the matter been heard in court including awards of attorney‘s fees and costs.” AAA Employment R. 39(d) (2009).
We must determine, therefore, whether the power to grant “injunctions or other relief” or “any remedy or relief that would have been available to the parties had the matter been heard in court” includes the power to impose punitive sanctions. Western Digital argues that punitive sanctions are neither a remedy nor a form of relief. Western Digital distinguishes between sanctions issued to punish a party after misconduct, which it labels “punitive sanctions,” and sanctions intended to remedy a
harm caused to one party, which it labels “remedial sanctions.” Thus, Western Digital argues that while remedial sanctions, being a form of remеdy, are permitted under the parties’ arbitration agreement, the punitive sanctions issued here were outside the arbitrator‘s authority because they did not serve as a remedy or relief to either party. Seagate argues that there is no distinction between punitive and remedial sanctions, but that even if there was, the term “relief” is broad enough to encompass both.
We look first at the language in the arbitration agreement authorizing the arbitrator to “grant injunctions or other relief” in “any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach” of the employment agreement. “Relief” is defined as “[t]he redress or benefit, esp[ecially] equitable in nature (such as an injunction or specific performance), that a party asks of a court.” Black‘s Law Dictionary 1482 (10th ed.2014). Here, the punitive sanctions issued were requested by Seagate as a redress for the wrong committed by Western Digital and Mao when Mao fabricated evidence. In addition, although punitive sanctions are issued in large part to punish one party, because they also benefit the other party, they are appropriately categorized as a form of relief. The Legislature has also categorized punitive measures as a form of relief, such as when discussing the authority of an arbitrator to award “punitive damages or other exemplary relief.”
The sanctions issued were also authorized by the AAA Employment Rules, which were incorporated into the arbitration agreement and allow the arbitrator to grant “any remedy or relief that would have been available to the parties had the matter been heard in court including awards of attorney‘s fees and costs.” AAA Employment R. 39(d). As we have established, punitive sanctions fall within the ordinary meaning of relief. Punitive sanctions can also be properly construed as a remedy. Remedy is defined as “[t]he means of enforcing a right or preventing or redressing a wrong; legal or equitable reliеf” and “anything a court can do for a litigant who has been wronged or is about to be wronged.” Black‘s Law Dictionary 1485 (10th ed.2014) (quoting Douglas Laycock, Modern American Remedies (4th ed.2010)). Here, the sanctions were issued in part to redress a wrong, the fabrication of evidence, which harmed Seagate during the arbitration. Thus, the sanctions constitute a remedy provided to Seagate.
Our conclusion that punitive sanctions are a remedy is also supported by case law. For example, in State v. Miller we equated a punitive sanction with a remedy, noting that a district court sanction excluding certain testimony was a “proper remedy” that “appropriately reflect[ed] the seriousness of the ethical violation and the prejudice to appellant.” 600 N.W.2d 457, 468 (Minn.1999). Likewise, the Eighth Circuit has found dismissal to be an appropriate sanction “when there has been a clear record of delay or contumacious conduct by the plaintiff.” Bergstrom v. Frascone, 744 F.3d 571, 575 (8th Cir.2014) (citation omitted) (internal quotation marks omitted).12
Having established that the sanctions qualify as a “relief or remedy” for purposes of AAA Employment Rule 39(d), we next examine whether the sanctions issued also satisfy the second requirement set out in AAA Employment Rule 39(d). That requirement states that the relief or remedy would “have been available to the parties had the matter been heard in court.” The preclusion of evidence or any defense on an issue is a sanction used by courts. See, e.g., State v. Richards, 495 N.W.2d 187, 199 (Minn.1992) (noting that the “preclusion of evidence is a severe sanction“). This type of sanction has also been applied as a response to fabricated evidence. See, e.g., Aoude v. Mobil Oil Corp., 892 F.2d 1115, 1119 (1st Cir.1989) (“We find the caselaw fully consonant with the view that a federal district judge can order dismissal or default where a litigant has stooped to the level of fraud on the court.“); Vargas v. Peltz, 901 F.Supp. 1572, 1581 (S.D.Fla. 1995) (“The federal case law is well established that dismissal is the appropriate sanction where a party manufactures evidence which purports to corroborate its substantive claims.“); Sun World, Inc. v. Lizarazu Olivarria, 144 F.R.D. 384, 391 (E.D.Cal.1992) (ordering the entry of de-
Western Digital argues that it did not act with a level of culpability to warrant punitive sanctions and that the arbitrator exceeded the level of authority given to a court to issue punitive sanctions. Likewise, Mao argues that the arbitrator exceeded his authority by not applying sanctions law in the same way that a Minnesota court would have. But the arbitration agreement did not specify that the remedies or relief must be awarded utilizing judicial principles or limitations; instead, the agreement broadly authorized the arbitrator to grant “injunctions or other relief.”13 In addition, although AAA Employment Rule 39(d) requires the relief to be one available to the parties in a court action, it does not require the arbitrator to employ the sanction using the same standards as any particular court. “Where the arbitrators are not restricted by the submission to decide according to principles of law, they may make an award according to their own notion of justice without regard to the law.” Metro. Waste Control Comm‘n v. City of Minnetonka, 308 Minn. 385, 389, 242 N.W.2d 830, 832 (1976).
Furthermore, we have previously held that arbitrators havе broad power to fashion remedies within the scope authorized by the language of the arbitration agreement. See David Co., 444 N.W.2d at 840 (allowing an arbitrator to fashion an equitable award instead of providing a monetary remedy). And we have recognized that “an award will not be vacated merely because the court may believe the arbitrators erred.” Id.; see also
Here, despite the best efforts of experienced appellate counsel to argue otherwise, Mao and Western Digital‘s decision to demand arbitration necessarily limited the availability of the protections and advantages of the judicial system. See Bowles Fin. Grp., Inc. v. Stifel, Nicolaus & Co., 22 F.3d 1010, 1011 (10th Cir.1994) (“Those who choose to resolve a dispute by arbitration can expect no more than they have agreed. One choosing arbitration should not expect the full panoply of procedural and substantive protection offered by a court of law.“). In addition, we reit-
erate that the scope of arbitrator authority is a matter of contract, Law Enforcement Labor Servs., 527 N.W.2d at 824, and parties are always free to fashion arbitration agreements in ways that limit the arbitrator‘s power to award certain types of relief.
B.
We next review whether an arbitrator‘s imposition of sanctions that preclude any evidence or defense on a claim warrants vacatur as a refusal to hear evidence.
ern Digital. Seagate notes in response that the arbitrator‘s award was one-third of Seagate‘s maximum damage claim. We take no position on the merits of these arguments.
We begin by noting that the arbitrator heard the challenged evidence at the request of Western Digital and Mao and conducted the hearing in accordance with
The scope of
Based on an analysis of the statutory lаnguage, we conclude that it is appropriate to read
III.
Having concluded that the arbitrator did not exceed his authority or refuse to hear material evidence as provided in
Affirmed.
Concurring, STRAS, J.
STRAS, Justice (concurring).
I agree with the court that none of the grounds for vacating an arbitration award are present here. See
When the court answers the question of what happens to a party‘s challenge to the authority of the arbitrator under
The record seems clear on this point. When Western Digital first movеd to vacate the arbitration award, Seagate‘s response was that “Western Digital waived its objections to imposition of sanctions by itself requesting sanctions.” Although the district court disagreed with Seagate, it accurately summarized Seagate‘s position as follows: Mao and Western Digital agreed that the arbitrator had the authority to impose sanctions by “(1) ... not argu[ing] that the Arbitrator had no authority to impose sanctions, and (2) [them-selves] request[ing] sanctions” (emphasis added). Seagate advanced the same argument before the court of appeals, stating that, “having invoked the Arbitrator‘s sanctioning power, [Mao and Western Digital] cannot seriously dispute that power.” This time, Seagate prevailed because the court of appeals concluded that Mao and Western Digital “waived their challenge to the arbitrator‘s authority to impose sanctions by (1) failing to make that challenge to the arbitrator during the arbitration and (2) requesting the arbitrator to impose sanctions against [Seagate].” Seagate Tech. v. W. Digital Corp., 834 N.W.2d 555, 561 (Minn.App.2013) (emphasis added). Seagate argues yet again in its brief to this cоurt that Mao and Western Digital waived their challenges when they “told the Arbitrator he had ‘inherent’ sanction-
It is possible that the court confuses forfeiture with waiver. The absence of an objection, standing alone, would raise a question of forfeiture. “‘[F]orfeiture is the failure to make the timely assertion of a right,‘” Kontrick v. Ryan, 540 U.S. 443, 458 n. 13, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) (quoting United States v. Olano, 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)), usually through “failing to raise a timely objection,” see United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 275, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010). Seagate‘s argument, by contrast, raises a question of waiver: whether Mao‘s and Western Digital‘s actions during the arbitration, coupled with their failure to object, constituted the “intentional relinquishment or abandonment of a known right or privilege,” Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938).
In any event, by focusing on the absence of an objection by Mao and Western Digital, the court silently converts a question of waiver into one of forfeiture. The court answers the forfeiture question easily enough, because, as it concludes, the statute requires an objection only when an argument for vacatur rests on the absence of an arbitration agreement. See
An example illustrates my point. Suppose the parties had expressly agreed to waive their rights to challenge the arbitrator‘s authority to impose punitive sanctions. Under those circumstances, presumably the court would not allow Mao and Western Digital to seek vacatur, notwithstanding the fact that the relevant statutory provisions do not require an objection. Seagate‘s argument is that this case is no different, and that the real question is whether Mao‘s and Western Digital‘s conduct had the same effect as an express waiver. On that question, the text of section 572.19 does not yield an easy answer.
Because the waiver issue is both difficult1 and unnecessary to our decision, I see no reason to address it. But if the court insists on doing so, it should answer the question actually posed, not one of its own making.