You don't have to be a brilliant scholar of civil procedure to figure out that (1) when a plaintiff files in state court, (2) the state court stays the action in favor of arbitration, but (3) retains jurisdiction, the state court's going to be able to confirm the subsequent arbitration award. Even if the defendant files a federal lawsuit to vacate the arbitration award one day before the state court's asked to confirm that award.
State court had jurisdiction first. Still had it. That defendant ran in first and filed a federal suit to vacate the award doesn't mean squat given that the plaintiff filed in state court years ago.
The California Court of Appeal does the right thing. As will -- I strongly predict -- the Ninth Circuit when it hears defendant's pending appeal in federal court of the federal court's absention in favor of the pending state court suit. Which has not been set for oral argument yet, but which is presumably coming up. (Unless it's settled or dismissed. Which, truthfully, it should be.)
State court suit filed first. State court gets to confirm or vacate the award. Not federal court.
P.S. - Reading this opinion also made quite palpable to me the "repeat player" problem of private arbitration. Something that I knew about before, but that really hit home when I read this one. The parties intially choose to arbitration before Justice Panelli. It's an insurance bad faith suit with a high-low baseball arbitration of $500,000/$7.5 million, with the limits undisclosed to the arbitrator. The insurance company -- Travelers -- subsequently requests (and receives) Justice Panelli's recusal. (A decision they might, in retrospect, regret.) The parties then decide on Alex Polsky. Polsky hears the case and decides in plaintiff's favor. Awarding a pretty astounding award: only $100,000 or so in compensatory damages, but another $50,000 in interest, $2.4 million in punitive damages (based upon Traveler's "shocking" handling of the claim), and then adding another 40% on top of all of this -- another cool million dollars plus -- for Brandt fees. So a total award of nearly $3.7 million. For a case with (remember) a compensatory damage award of only $100,000.
So you can see why Travelers is bummed, and files a motion to vacate. Which it's going to lose, mind you. Even if Polsky erred. It's arbitration. It happens. You're done.
But what's palpable to me is what Polsky must be thinking -- if only in the back of his mind -- about the case. Travelers is a repeat player. So are their attorneys. Plaintiff's not. Polsky has got to know that Travelers ain't going to select him again once he gives this award. They aren't going to forget this one. Lots of other insurance companies may have a similar view. So unlike an actual trial court judge, Polsky's self-interest is definitely at stake.
Sure, Polsky's got lots of other potential arbitration parties. And it's not like he's going to the poor house anytime soon in any event.
But still. If you want to stay a "player" in the big-ticket arbitration world, you've got to be thinking -- if only in the back of your mind -- that awards like this risk your status. A lot.
I had this keen sense when I read the parts of the Court of Appeal's opinion when the court mentions Polsky's repeated statements that this was an "unusual" case and that he doesn't usually slam people as much as he did here and that this was really special. I'm certain he feels that way. Genuinely.
But I also wonder if he didn't somewhat feel compelled to say that. In the same way that other private arbitrators might feel compelled, at some level, to make sure that their awards are not only just, but also palpable to everyone. So that no one -- or (more dangerously) no repeat players -- get crushed in a way that they (and others like them) won't forget.
A neat little dynamic plays out here. Both on the litigation as well as the arbitration side.
Worth mention.
