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<xTITLE>Whatever Happened to Monster Energy on Remand to JAMS?</xTITLE>

Whatever Happened to Monster Energy on Remand to JAMS?

by George Friedman
January 2021 George Friedman

This article first appeared in the Securities Arbitration Alert (SAA) Blog, here.

A party is challenging JAMS’ neutrality as an administrator because the provider filed an Amicus Brief at the Supreme Court supporting the position taken by its adversary in the same arbitration.

When an Award is vacated, the case typically ends up back at the ADR administrator. If the Award was vacated due to arbitrator misconduct – for example, failure to make a required disclosure – the arbitration typically is reheard before a new arbitrator or panel. Usually, there’s not much controversy surrounding these events. Every rule, however, has its exception, as demonstrated by Monster Energy Co. v. City Beverages, LLC940 F.3d 1130 (9th Cir. Oct. 22, 2019), a case on which we reported in SAA 2019-41 (Oct. 30).

Case Below

The basic facts as described in the Appellant’s Brief: “The Arbitrator in this matter failed to disclose ownership in a firm that has substantial and ongoing business with the prevailing party, Monster Energy. The undisclosed ownership in JAMS -- a for-profit company -- gave the Arbitrator a direct financial interest in up to half of the fees paid in at least 97 arbitrations directed to JAMS by Monster over the last five years and in future fees from the ongoing relationship.” A divided Monster Panel at the Ninth Circuit vacated the $3 million Award for “evident partiality” under the Federal Arbitration Act (“FAA”), because the Arbitrator failed to disclose an ownership interest in for-profit ADR provider JAMS (even though the arbitration involved a “repeat player”). Then, as reported in SAA 2020-25 (July 8), SCOTUS on May 28 denied Monster’s Petition  for Certiorari in case No. 19-1333. With the Award vacated, the case was back at JAMS for a new arbitration before a new panel.

JAMS’ Neutrality Challenged

So far, so good. However, City Beverages has now asked the District Court to disqualify JAMS as the administrator, contending in Monster Energy Co. v. City Beverages LLC, No. 5:17-cv-00295 (C.D. Calif.), that JAMS is not neutral. How so? City contends that JAMS essentially took sides when it filed an Amicus Brief in support of Monster’s position when the Cert. Petition was pending at SCOTUS. In its December 21 “Motion to Compel Arbitration in a Neutral Forum,” City asks the Court to exercise its authority under FAA section 5 to appoint a different administrator such as the AAA:

“JAMS and its neutrals violated the ongoing impartiality requirement and disqualified themselves from serving as a neutral forum when they decided to support Monster Energy. Even if JAMS were to argue that it can be neutral in this matter, which it has not done, Olympic Eagle has the right to disqualify JAMS [under California’s Ethics Standards for Neutral Arbitrators in Contractual Arbitration standards (10(a)(2) and (c)] and its neutrals because they have created, at a minimum, reasonable doubt about their impartiality.... In the unique circumstances of this case, the only case where JAMS has filed adversarial briefs taking sides against one party following a JAMS arbitration, Olympic Eagle respectfully asks the Court compel arbitration in a different, neutral forum.”

 

 

(ed: *Hard to say where this will land. We don’t see JAMS as having taken sides – it argued an issue, not on behalf of a party. Other ADR providers have filed Amicus Briefs over the years. **Nice to see our old friend, the California Ethics Standards, making a guest appearanceRecall that the Standards in Jevne v. Superior Court, 111 P.3d 954 (Cal. 2005) and Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119 (9th Cir. 2005), were held preempted by the 1934 Act as to SROs. They are very much applicable to JAMS, however. The cited sections establish a presumption of arbitrator disqualification after a party objects. ***An SAA h/t to Law 360 for reporting on these latest developments. ****Email us at Help@SecArbAlert.com for a copy of the Motion to Compel.)

 

 

 

Biography


George H. Friedman is the publisher and Editor-in-Chief of the Securities Arbitration Alert, a weekly online publication covering the latest developments in financial services arbitration and mediation. He is also the principal of George H. Friedman Consulting, LLC, providing expert advice on arbitration and mediation in general and the FINRA dispute resolution forum in particular.

He is former Executive Vice President - Dispute Resolution of the Financial Industry Regulatory Authority (“FINRA”), a position he held through January 2013. He held the same title at NASD, which consolidated with NYSE Member Regulation to form FINRA in 2007. In this capacity, he was in overall charge of FINRA's dispute resolution program, carried out by the company's four regional offices and 72 hearing locations in the United States and abroad, 200 employees, and an annual budget of $50 million. He also served as Secretary of the Securities Industry Conference on Arbitration. He has been referred to by the U.S. Court of Appeals—4th Circuit as a “leading arbitration expert.” He is a member of the American Arbitration Association's National Roster of Neutrals.

Mr. Friedman is an Adjunct Professor of Law at Fordham Law School, where he has taught a course on alternative dispute resolution since 1996. He is Chairman of the Board of Directors of Arbitration Resolution Services, Inc. of Coral Springs, Florida. Arbitration Resolution Services is an innovative online arbitration services company facilitating an affordable alternative to costly courtroom litigation and in-person arbitration for resolving Business-to-Business, Business-to-Individual, and Vehicle and Property Damage disputes. ARS is unique in that its entire process can be completed online through the company website.

In his extensive dispute resolution career, he previously held a variety of positions of responsibility at the American Arbitration Association, most recently as Senior Vice President from 1994 to 1998. He joined NASD in 1998 as Senior Vice President of NASD's Dispute Resolution Division, and was named Executive Vice President in 2002.

Mr. Friedman received a B.A. in Political Science from Queens College, and a Juris Doctor from Rutgers Law School - Newark, where he was an editor of the Law Review. He is admitted to the New York and New Jersey Bars and the United States Supreme Court, and is a Certified Regulatory and Compliance Professional. Mr. Friedman is a member of the Securities Experts Roundtable, and of several bar associations. He is past chair of the Committee on Alternative Dispute Resolution of the New York County Lawyers Association. He is a member of the Banking Advisory Committee of Bergen (NJ) Community College.

Mr. Friedman has lectured extensively on the subject of alternative dispute resolution, and has the distinction of being one of the architects of the American Arbitration Association’s Due Process Fairness Protocols for both employment arbitration and health care dispute resolution, and assisted in creating the Consumer Due Process Protocol. He has published often, with articles appearing in the Securities Arbitration Commentator, the ABA's Dispute Resolution Magazine, the New York Law Journal, the Rutgers Law Review, and the National Law Journal. He has blogs at Arbitration Resolution Services, Inc., the Securities Arbitration Commentator, and the World Future Society, among others.



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