You are on page 1of 30

Case 2:08-cv-00773-RLH-PAL Document 85 Filed 03/24/11 Page 1 of 2

1 Robert B. Gerard, Esq. (Nevada State Bar #005323)


Ricardo R. Ehmann, Esq. (Nevada State Bar #010576)
2 GERARD & ASSOCIATES
2840 South Jones Boulevard
3 Building D, Suite #4
Las Vegas, Nevada 89146
4 Telephone: (702) 251-0093
Facsimile: (702) 251-0094
5
Norman Blumenthal, Esq. (California State Bar #068687)
6 BLUMENTHAL, NORDREHAUG & BHOWMIK
2255 Calle Clara
7 La Jolla, California 92037
Telephone: (858) 551-1223
8 Facsimile: (858) 551-1232
9 Attorneys for Plaintiffs
[Additional counsel listed on signature page]
10
11
UNITED STATES DISTRICT COURT
12
DISTRICT OF NEVADA
13
14 MARY ANN SUSSEX; MITCHELL ) CASE NO.: 2: 08-cv-00773 -RLH - PAL
PAE; MALCOLM NICHOLL and )
15
SANDY SCALISE; ERNESTO VALDEZ, ) NOTICE OF MOTION AND MOTION
16 SR. and ERNESTO VALDEZ, JR.; JOHN ) TO VACATE ARBITRATION RULING
HANSON and ELIZABETH HANSON; )
17 ) Hearing Date: TBD
Plaintiffs,
18 vs. ) Hearing Time: TBD
)
19 TURNBERRY/MGM GRAND TOWERS, ) Before: Hon. Roger L. Hunt
20 LLC, a Nevada LLC; MGM GRAND )
CONDOMINIUMS LLC, a Nevada LLC; )
21 THE SIGNATURE CONDOMINIUMS, )
22 LLC a Nevada LLC; MGM MIRAGE, a )
Delaware Corporation; )
23 TURNBERRY/HARMON AVE., LLC., a )
24
Nevada LLC; and TURNBERRY WEST )
REALTY, INC., a Nevada Corporation; )
25 Defendants. )

26
27
28

NOTICE OF MOTION AND MOTION TO VACATE ARBITRATION RULING


CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85 Filed 03/24/11 Page 2 of 2

1 TO THE COURT, ALL PARTIES AND THEIR ATTORNEYS OF RECORD:


2 Please take notice that, before the Honorable Roger L. Hunt, Judge for the United States
3 District Court for the District of Nevada on a date and time to be set by the Court, Plaintiffs Mary
4 Ann Sussex, Mitchell Pae, Malcolm Nicholl, Sandy Scalise, Ernesto Valdez, Sr., Ernesto Valdez,
5 Jr., John Hanson and Elizabeth Hanson (“Plaintiffs”) will and hereby do move to vacate the
6 arbitration ruling. This motion is based upon this notice, the accompanying Memorandum of Points
7 and Authorities and the Declaration of Norman Blumenthal with exhibits thereto, along with the
8 pleadings and documents contained in the Court’s record.
9
10 Respectfully submitted,
11 Dated: March 25, 2011 BLUMENTHAL, NORDREHAUG & BHOWMIK
12
By: /s/ Norman B. Blumenthal
13 Norman B. Blumenthal
14
Robert B. Gerard, Esq.
15 Gerard & Associates
2840 South Jones Blvd.
16 Building D, Unit 4
Las Vegas, Nevada 89146
17 Telephone: (702) 251-0093
Facsimile: (702) 251-0094
18
Robert Fellmeth, Esq.
19 California State Bar #49897
University of San Diego School of Law
20 5998 Alcala Park
San Diego, California 92110
21 Telephone: (619) 260-4806
Facsimile: (619) 260-4753
22
Burton Wiand, Esq.
23 Fowler White Boggs Banker, P.A.
501 East Kennedy Blvd.
24 Tampa, FL 33602
Telephone: (813) 228-7411
25 Facsimile: (813) 229-8313

26 Attorneys For The Plaintiffs


27
28

NOTICE OF MOTION AND MOTION TO VACATE ARBITRATION RULING


1 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-2 Filed 03/24/11 Page 1 of 3

1 Robert B. Gerard, Esq. (Nevada State Bar #005323)


Ricardo R. Ehmann, Esq. (Nevada State Bar #010576)
2 GERARD & ASSOCIATES
2840 South Jones Boulevard
3 Building D, Suite #4
Las Vegas, Nevada 89146
4 Telephone: (702) 251-0093
Facsimile: (702) 251-0094
5
Norman Blumenthal, Esq. (California State Bar #068687)
6 BLUMENTHAL, NORDREHAUG & BHOWMIK
2255 Calle Clara
7 La Jolla, California 92037
Telephone: (858) 551-1223
8 Facsimile: (858) 551-1232
9 Attorneys for Plaintiffs
10
11 UNITED STATES DISTRICT COURT
12 DISTRICT OF NEVADA
13
MARY ANN SUSSEX; MITCHELL ) CASE NO.: 2: 08-cv-00773 -RLH - PAL
14 )
PAE; MALCOLM NICHOLL and
15 SANDY SCALISE; ERNESTO VALDEZ, ) DECLARATION OF NORMAN B.
SR. and ERNESTO VALDEZ, JR.; JOHN ) BLUMENTHAL IN SUPPORT OF
16 HANSON and ELIZABETH HANSON; ) MOTION TO VACATE ARBITRATION
Plaintiffs, ) RULING
17
vs. )
18 ) Hearing Date: TBD
19 TURNBERRY/MGM GRAND TOWERS, ) Hearing Time: TBD
LLC, a Nevada LLC; MGM GRAND )
20 CONDOMINIUMS LLC, a Nevada LLC; ) Before: Hon. Roger L. Hunt
THE SIGNATURE CONDOMINIUMS, )
21
LLC a Nevada LLC; MGM MIRAGE, a )
22 Delaware Corporation; )
TURNBERRY/HARMON AVE., LLC., a )
23
Nevada LLC; and TURNBERRY WEST )
24 REALTY, INC., a Nevada Corporation; )
Defendants. )
25
26
27
28

DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-2 Filed 03/24/11 Page 2 of 3

1
2 I, NORMAN B. BLUMENTHAL, declare:
3 1. I have personal knowledge as to the facts stated in this declaration. If called as a
4 witness, I could and would competently testify to the truth of the facts stated in this
5 declaration. I make this declaration in support of the Motion To Vacate the Arbitration
6 Ruling.
7 2. Attached hereto as Exhibit 1 is a true and correct copy of the Arbitrator’s Partial
8 Final Clause Construction Award.
9 3. Attached hereto as Exhibit 2 is a true and correct copy of the Purchase Agreement
10 submitted by the Defendant as part of the Motion to Compel Arbitration [Doc. No. 17-3].
11 4. Attached hereto as Exhibit 3 is a true and correct copy of the Declaration of Mary
12 Ann Sussex filed July 31, 2008 [Doc. No. 22-6].
13 5. Attached hereto as Exhibit 4 is a true and correct copy of the Declaration of
14 Mitchell Pae filed July 31, 2008 [Doc. No. 22-7].
15 6. Attached hereto as Exhibit 5 is a true and correct copy of the Declaration of
16 Malcolm Nicholl filed July 31, 2008 [Doc. No. 22-8].
17 7. Attached hereto as Exhibit 6 is a true and correct copy of the Declaration of Sandy
18
Scalise filed July 31, 2008 [Doc. No. 22-9].
19
8. Attached hereto as Exhibit 7 is a true and correct copy of the Declaration of
20
Ernesto Valdez, Sr. filed July 31, 2008 [Doc. No. 22-10].
21
9. Attached hereto as Exhibit 8 is a true and correct copy of the Declaration of
22
Ernesto Valdez, Jr. filed July 31, 2008 [Doc. No. 22-11].
23
10. Attached hereto as Exhibit 9 is a true and correct copy of the Declaration of John
24
Hanson filed July 31, 2008 [Doc. No. 22-12].
25
11. Attached hereto as Exhibit 10 is a true and correct copy of the Declaration of
26
Elizabeth Hanson filed July 31, 2008 [Doc. No. 22-13].
27
28
DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING
1 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-2 Filed 03/24/11 Page 3 of 3

1 I declare under penalty of perjury under the laws of the United States and the State of
2 Nevada that the foregoing is true and correct. Executed this 24th day of March, 2011 at La
3 Jolla, California.
4
/s/ Norman B. Blumenthal
5 Norman B. Blumenthal
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING
2 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 1 of 23

1 Robert B. Gerard, Esq. (Nevada State Bar #005323)


Ricardo R. Ehmann, Esq. (Nevada State Bar #010576)
2 GERARD & ASSOCIATES
2840 South Jones Boulevard
3 Building D, Suite #4
Las Vegas, Nevada 89146
4 Telephone: (702) 251-0093
Facsimile: (702) 251-0094
5
Norman Blumenthal, Esq. (California State Bar #068687)
6 BLUMENTHAL, NORDREHAUG & BHOWMIK
2255 Calle Clara
7 La Jolla, California 92037
Telephone: (858) 551-1223
8 Facsimile: (858) 551-1232
9 Attorneys for Plaintiffs
[Additional counsel listed on signature page]
10
11
UNITED STATES DISTRICT COURT
12
DISTRICT OF NEVADA
13
14 MARY ANN SUSSEX; MITCHELL ) CASE NO.: 2: 08-cv-00773
PAE; MALCOLM NICHOLL and )
15
SANDY SCALISE; ERNESTO VALDEZ, ) PLAINTIFFS’ MEMORANDUM OF
16 SR. and ERNESTO VALDEZ, JR.; JOHN ) POINTS AND AUTHORITIES IN
HANSON and ELIZABETH HANSON; ) SUPPORT OF MOTION TO VACATE
17 )
Plaintiffs, ARBITRATION RULING
18 vs. )
) Hearing Date: TBD
19 TURNBERRY/MGM GRAND TOWERS, ) Hearing Time: TBD
20 LLC, a Nevada LLC; MGM GRAND )
CONDOMINIUMS LLC, a Nevada LLC; ) Before: Hon. Roger L. Hunt
21 THE SIGNATURE CONDOMINIUMS, )
22 LLC a Nevada LLC; MGM MIRAGE, a )
Delaware Corporation; )
23 TURNBERRY/HARMON AVE., LLC., a )
24
Nevada LLC; and TURNBERRY WEST )
REALTY, INC., a Nevada Corporation; )
25 Defendants. )

26
27
28

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 2 of 23

1
TABLE OF CONTENTS
2
3 I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

4
II. STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5
6 III. THE STOLT-NIELSEN DECISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

7
IV THE ARBITRATOR EXCEEDED HIS AUTHORITY BY REFUSING TO FOLLOW
8 THE SUPREME COURT'S DECISION IN S KEATING AND IGNORING
NEVADA'S "DEFAULT RULE" WHICH PERMITS CONSOLIDATION OF
9 ARBITRATION CLAIMS UNLESS THE AGREEMENT
PROHIBITS CONSOLIDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10
11 V. DEFENDANTS ARE JUDICIALLY ESTOPPED FROM CLAIMING THAT
ARBITRATION OF PLAINT TIFFS' CLASS CLAIMS IS NOT PERMITTED
12 UNDER THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
13
VI. THE ARBITRATOR IGNORED THE UNDISPUTED EVIDENCE OF THE
14 PARTIES’ INTENT AND EXPECTATIONS WHICH IS DETERMINATIVE
UNDER STOLT-NIELSEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15
16 VII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
17
18
19
20
21
22
23
24
25
26
27
28

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


i CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 3 of 23

1 TABLE OF AUTHORITIES

2 Cases:
3 Agostini v. Felton,
521 U.S. 203 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 12
4
Ashe v. Swenson,
5 397 U.S. 436 (1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

6 Anvui, LLC v. G.L. Dragon, LLC,


123 Nev. 212, 215-16 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 16
7
Bridge Fund Capital Corp. v. Fastbucks Franchise Corp.,
8 622 F.3d 996 (9th Cir. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
9 Data Mountain Solutions, Inc. v. Giordano,
680 F.Supp.2d 110 (D .D.C. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10
Discover Bank v. Superior Court,
11 113 P.3d 1100 (Cal.2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
12 Exber, Inc. v. Sletten Const. Co.,
92 Nev. 721 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13
Green Tree Financial Corp. v. Bazzle,
14 539 U.S. 444 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 8, 17
15 Hicks v. Cadle Co.,
2010 WL 4595711 (D. Colo. Nov. 4, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
16
Independent Ass'n of Mailbox Center Owners, Inc. v. Superior Court,
17 133 Cal.App.4th 396, 408 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18 Ingle v. Circuit City Stores, Inc.,
328 F.3d 1165, 1180 (9th Cir.2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
19
Louisiana Health Service Indem. Co. v. Gambro A B,
20 --- F.Supp.2d ----, 2010 WL 5256805, (W.D. La. Dec. 21, 2010) . . . . . . . . . . . . . . . . . . . 11
21
Lowe Enterprises Residential Partners, L.P. v. Eighth Judicial Dist.,
22 118 Nev. 92, 100 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

23 Marcuse v. Del Webb Communities, Inc.,


123 Nev. 278 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 13, 14
24
Nevada Food King, Inc. v. Reno Press Brick Co.,
25 81 Nev. 135 (1965).) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 17

26 New Hampshire v. Maine,


532 U.S. 749(2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 13
27
Omstead v. Dell, Inc.,
28 594 F.3d 1081 (9th Cir. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


ii CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 4 of 23

1 Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp.,


130 S.Ct. 1758 (2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
2
Ting v. AT&T,
3 319 F.3d 1126 (9th Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

4
Other Authority
5
Consolidation by State Court of Arbitration Proceedings Brought Under State Law
6 31 A.L.R.6th 433 §8 (2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 10

7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


iii CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 5 of 23

1 I. INTRODUCTION
2 The Arbitrator’s ruling denying classwide arbitration of Plaintiffs’ claims must be reversed.1
3 The Arbitrator exceeded his authority by (i) ignoring the Nevada default rule for consolidation of
4 arbitration claims; (ii) failing to apply judicial estoppel to Defendants’ change in position as to
5 whether the arbitration provision, which is silent on the issue, prohibits class actions; and (iii) failing
6 to give effect to the parties’ intent.
7
8 A. The Arbitrator Exceeded His Authority by Ignoring the Nevada Default Rule
for Consolidation of Arbitration Claims
9
In this case, the Arbitrator’s ruling cannot stand because the ruling ignores Nevada’s default
10
rule favoring consolidation of arbitration claims. N.R.S. 38.224. See Consolidation by State Court
11
of Arbitration Proceedings Brought Under State Law 31 A.L.R.6th 433 §8 (2008). The Arbitrator
12
acknowledged that Nevada has a default rule allowing consolidation of claims in arbitration where
13
the agreement is silent, but erroneously ruled that this default rule was irrelevant. See Partial Final
14
Award on Claim Construction dated February25, 2010 (“Partial Final Award”) at pp. 10-16, Exhibit
15
1 to the Blumenthal Decl., filed herewith.
16
The Arbitrator’s ruling ignores the fact that Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp.,
17
18 130 S.Ct. 1758 (2010) (“Stolt-Nielsen”) held that arbitrators and the courts must look to the state

19 default rule for consolidation of arbitration claims in deciding whether arbitration agreements

20 should be construed as allowing arbitration of class claims. Stolt-Nielsen, 130 S.Ct at 1779. The

21 Arbitrator acknowledged that the United States Supreme Court held in Southland Corp. v. Keating,

22 465 U.S. 1, 9 n.4 (1984) that a state’s default rule allowing consolidation of claims where the

23 agreement was silent provided analogous authority indicating that the state would also allow class

24 arbitration where the agreement was silent. Partial Final Award at pp. 12-14, Exhibit 1.

25 The Arbitrator refused to follow the controlling precedent of Keating because the Arbitrator

26 believed that Keating was inconsistent with dicta in Stolt-Nielsen regarding differences between

27
1
28 A true and correct copy of the Arbitrator’s Partial Final Award on Claim Construction is attached
as Exhibit 1 to the Declaration of Norman Blumenthal (“Blumenthal Decl.”), filed herewith.

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


1 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 6 of 23

1 class actions and individual actions. Id. at pp. 14-16. The Arbitrator’s failure to follow Southland
2 Corp. v. Keating violated the fundamental rule that the Supreme Court does not overrule its own
3 precedents sub silentio. Agostini v. Felton, 521 U.S. 203, 237 (1997): “We reaffirm that if a
4 precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in
5 some other line of decisions, the Court of Appeals should follow the case which directly controls,
6 leaving to this Court the prerogative of overruling its own decisions.” Id. The Arbitrator exceeded
7 his authority by refusing to follow controlling Supreme Court precedent based on his own mistaken
8 notion that Southland Corp. v. Keating was no longer good law. The Arbitrators’ rejection of
9 Nevada’s default rule that arbitration claims may be consolidated absent an express contractual
10 prohibition requires that the award be vacated.
11
12 B The Arbitrator Failed to Apply Judicial Estoppel to Defendants’ Change in
Position as to Whether the Arbitration Provision Prohibits Class Actions
13
Defendants, in their Motion to Compel Arbitration in this case, argued that the arbitration
14
clause puts the parties on an equal footing because “The clause does not bar class actions.” [Doc.
15
No. 17, at page 20, lines 12-13]. This initial representation to the Court gave an advantage to
16
Defendants by avoiding the argument about barring class actions because both California courts and
17
18 the Ninth Circuit have refused to enforce arbitration provisions with class action waivers. See e.g.,

19 Discover Bank v. Superior Court, 113 P.3d 1100, 1110 (Cal.2005); Gatton v. T-Mobile USA, Inc.,

20 supra, 152 Cal.App.4th at 588; Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d

21 996, 1004 (9th Cir. 2010); Omstead v. Dell, Inc., 594 F.3d 1081 (9th Cir. 2010) (“the class action

22 waiver renders the entire arbitration provision unenforceable”); Ingle v. Circuit City Stores,

23 Inc., 328 F.3d 1165, 1180 (9th Cir.2003); Ting v. AT&T, 319 F.3d 1126, 1150 (9th Cir. 2003).

24 Having taken the position that class action may be arbitrated in this case as part of their successful

25 motion to compel arbitration, Defendants should have been judicially estopped from arguing before

26 the Arbitrator that the arbitration clause does not allow class arbitration.

27 The Arbitrator exceeded his authority by refusing to apply the doctrine of judicial estoppel

28 and allowing Defendants to change their position. In moving to compel arbitration in this Court,

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


2 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 7 of 23

1 Defendants took the position that the Agreement permitted class arbitration and represented to this
2 Court that “The clause does not bar class actions.” [Doc. No. 17, at 20:12-13]. Judicial estoppel
3 prevents a party from playing "fast and loose" with the courts by taking a position in litigation
4 inconsistent with a position on which he earlier succeeded. New Hampshire v. Maine, 532 U.S.
5 742, 749(2001). Judicial estoppel applies because (i) Defendants asserted in federal court that
6 nothing precludes the arbitration of Plaintiffs' putative class action and then argued in arbitration that
7 the Agreement's silence on the issue precludes arbitration of the putative class action claims; (ii)
8 Defendants took these positions in judicial or quasi-judicial administrative proceedings; (iii)
9 Defendants succeeded in their original position by obtaining an order requiring Plaintiffs to arbitrate
10 all their claims; (iv) Defendants' current position is totally inconsistent with Defendants' position
11 in the motion to compel arbitration; and (v) "the record fails to indicate that [Defendants] took [the]
12 first position as a result of ignorance, fraud, or mistake" Marcuse v. Del Webb Communities, Inc.,
13 123 Nev. 278, 287 (2007). The Arbitrator’s failure to apply judicial estoppel although each of the
14 elements of judicial estoppel was satisfied also requires that the ruling be vacated.
15
16 C. The Arbitrator Failed to Give Effect to the Parties’ Intent
17 Stolt-Nielsen also held that when an arbitration provision that is silent on the issue of class
18
arbitration, the availability of class arbitration depends on the extrinsic evidence of the parties’
19
intent. “Whether enforcing an agreement to arbitrate or construing an arbitration clause, courts and
20
arbitrators must give effect to the contractual rights and expectations of the parties. In this endeavor,
21
as with any other contract, the parties' intentions control.” 130 S.Ct. at 1773-74. Despite
22
Stolt-Nielsen‘s holding that the intent of the parties controls, the Arbitrator ignored the
23
uncontradicted evidence that both Defendants and Plaintiffs understood and intended that class
24
actions arbitrations would be allowed under the arbitration provision.
25
Defendants, in drafting the arbitration provision, manifested Defendants' intent to allow
26
class arbitration, under the principle of expressio unius, by expressly prohibiting punitive damages
27
and otherwise expressly restricting Claimant's procedural rights, without also expressly taking away
28
the right to class litigation. Nevada Food King, Inc. v. Reno Press Brick Co., 81 Nev. 135, 138

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


3 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 8 of 23

1 (1965). See the Purchase and Sales Agreement (“Agreement”), Exhibit 2 to the Blumenthal Decl.
2 Defendants’ failure to submit any declaration or other evidence that Defendants intended that
3 arbitration of class actions would not be allowed under the Agreement is unsurprising because the
4 evidence here shows that Defendants could not possibly have had such an expectation. Defendants
5 knowingly selected the AAA as the arbitral venue after Green Tree Financial Corp. v. Bazzle, 539
6 U.S. 444 (2003) was decided and after AAA arbitrators had issued a series of interlocutory awards
7 consistently ruling that class arbitration was allowed where the contract was silent on the issue.
8 Defendants’ attorneys, who drafted the arbitration provision in the Agreement offer no evidence or
9 assertion that they were unaware of these arbitral decisions when the Agreement was executed.
10 Indeed, in light of these publicly-available AAA decisions, Defendants could not possibly
11 have expected that class arbitration would be prohibited by the AAA arbitrator deciding the issue.
12 Defendants do not and cannot dispute that, by the time the Agreement was executed, the AAA had
13 essentially developed its own default rule permitting class arbitration where the agreement was silent
14 and that Defendants knew, or should have known, this when it chose AAA arbitration in an
15 arbitration provision silent on the class issue.
16 For these reasons, Plaintiffs respectfully submit that the Partial Final Award exceeded the
17 Arbitrator’s authority and manifestly disregarded the controlling law and should therefore be vacated.
18
19
II. STANDARD OF REVIEW
20
The Arbitrator has stayed the Arbitration to allow either party to seek review by this Court
21
vacating or confirming the Partial Final Award. Partial Final Award at p. 23, Exhibit1. In
22
Stolt-Nielsen the Supreme Court addressed the same "gateway matter" of whether the arbitration
23
could proceed as a class action that is at issue in this case. The Supreme Court, before ruling on the
24
merits, held that the courts have jurisdiction to decide this gateway issue because "under the FAA,
25
a party to an arbitration agreement may petition a United States district court for an order directing
26
that ‘arbitration proceed in the manner provided for in such agreement." 130 S. Ct. at 1773, quoting
27
Federal Arbitration Act, 9 U.S.C. § 4.
28
Stolt-Nielsen held that the agreements of the parties, ascertained by the parties’ intent, is

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


4 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 9 of 23

1 paramount and that, when an arbitrator ignores the parties’ agreement, the arbitrator exceeds his
2 powers. As the Supreme Court explained, because arbitration is matter of consent, an arbitrator’s
3 power is all derived from and defined by the parties agreement. Accordingly, an arbitration decision
4 contrary to the parties’ agreement "exceeded [his] powers" Id. at 1776. 9 U.S.C. §10(a)(4) authorizes
5 a district court to “make an order vacating the award upon the application of any party to the
6 arbitration ... where the arbitrators exceeded their powers.” Id. Where, as here, the Arbitrator
7 “exceeded his powers”, the Court has the power under § 10(a)(4) of the FAA to reverse this error.2
8 Under Stolt-Nielsen, where, as here, the Arbitrator fails to correctly enforce the agreement
9 of the parties regarding class arbitration, immediate judicial review of the interlocutory gateway
10 arbitration decision is appropriate. Consistent with this ruling, there can be no doubt that this Court
11 has the jurisdiction and power to issue an order vacating the Partial Final Award.3
12
13 III. THE STOLT-NIELSEN DECISION
14 In Stolt-Nielsen, the United States Supreme Court held that class arbitration was not permitted
15 under an arbitration provision in a “charter party” standardized maritime commercial contract
16 covering the shipment of certain goods negotiated among highly sophisticated commercial parties.
17 The charter party contract was not drafted by either party and was not a consumer or investment
18
contract. The charter contract was one of many standard maritime shipping agreements selected at
19
arms length by commercial parties. That agreement was not a contract of adhesion unilaterally
20
imposed on Animalfeeds, the party who later brought an antitrust class action against Stolt-Nielsen
21
S.A. and other commercial shippers. Indeed, the Supreme Court noted that the plaintiff, Animalfeeds,
22
23
2
24 Nevada law, which governs the agreement, provides that any award made in an arbitral proceeding
may be vacated by the court if the “arbitrator exceeded his powers.” N.R.S. § 38.241 (1)(d).
25
3
The Supreme Court declined to rule on whether “manifest disregard” of the law is an independent
26 grounds for vacating an arbitration award but held that “[a]ssuming, arguendo, that such a standard
27 applies, we find it satisfied.” 130 S. Ct. at 1768, n. 3. The “manifest disregard” standard is satisfied
in this case for the same reasons as in Stolt-Nielsen: the Arbitrator failed to apply the state law
28 default rule, failed to follow controlling Supreme Court precedent and ignored the undisputed
evidence of the parties’ intent.
MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING
5 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 10 of 23

1 was the contracting party who chose the governing charter party contract. 130 S.Ct. at 1764.
2 Animalfeed subsequently brought an antitrust action against Stolt-Nielsen S.A. and other
3 shipping companies. After, the defendants successfully moved to compel arbitration, Animal Feed
4 filed a demand for class arbitration and the issue of class arbitration was briefed and argued by the
5 parties pursuant to Rule 3 of the AAA’s Supplementary Rules for Class Arbitration (“Class Rules”).
6 Id. at 1765-66.
7 At the hearing the shippers presented “undisputed evidence that the Vegoilvoy charter party
8 [contract] had ‘never been the basis of a class action...." Id. at 1769. The shippers also proffered
9 uncontradicted expert opinion evidence that "sophisticated, multinational commercial parties of the
10 type that are sought to be included in the class would never intend that the arbitration clauses would
11 permit a class arbitration." Id. Stolt-Nielsen held that the silence of an arbitration provision on the
12 issue of class actions creates an ambiguity, which must be resolved in accordance with the state law
13 default rule regarding consolidation of arbitration claims and extrinsic evidence of the parties' intent.
14 Id. at 773-74. To resolve this ambiguity, the Supreme Court relied on the default rule governing
15 consolidation of arbitrations rather than any default rule specifically applicable to class arbitration.
16 130 S.Ct at 1769 and n. 5. In determining the controlling default rule, the Court relied on “court cases
17 denying consolidation of arbitrations.” where the agreement was silent and the fact that that “these
18
decisions were available to the parties when they entered into their contracts.” Id. at 1769 and n. 5.4
19
The Supreme Court in Stolt-Nielsen, reaffirmed the fundamental rule that the ultimate
20
touchstone for interpreting an arbitration contract, including an arbitration contract that was silent on
21
the issue of whether class actions were allowed was the intent of the parties who negotiated the
22
contract. Id. at 1774. The Court also reaffirmed the rule that the arbitration provision’s silence about
23
class action created an ambiguity, which presented a question of fact which had to be resolved on a
24
case-by-case basis under the applicable state law principles of contract construction, which in
25
Stolt-Nielsen was New York and maritime law. “Under both New York law and general maritime law,
26
evidence of “custom and usage” is relevant to determining the parties' intent when an express
27
28
4
Emphasis added unless otherwise stated.
MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING
6 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 11 of 23

1 agreement is ambiguous. Id. at 1769, n. 6.


2 As a result, applying New York and maritime law to resolve the contractual ambiguity, the
3 Supreme Court held that the arbitration clause between merchants was only intended by them to apply
4 to bilateral commercial disputes as there was no evidence that either merchant intended or expected
5 the arbitration provision to apply to class actions when the contract was signed. 0As the Supreme
6 Court held, the contract’s silence regarding class-wide arbitration created an ambiguity and “[u]nder
7 both New York law and general maritime law, evidence of "custom and usage" is relevant to
8 determining the parties' intent when an express agreement is ambiguous.” Id. at 1769, n. 6. The
9 arbitrators in Stolt-Nielsen therefore erred in ruling that class arbitration was permitted because they
10 failed to apply New York law and maritime law requiring analysis of "custom and usage" to resolve
11 the ambiguity and because they ignored the undisputed custom usage evidence, that class arbitration
12 had never been allowed under this standard contract. Id. .
13 Animalfeeds presented no evidence of any default rule allowing consolidation of claims where
14 the agreement was silent. Animalfeeds also submitted no evidence that class litigation was expected
15 or intended by either party, which intention would have been contrary to the well-established industry
16 custom and prevailing admiralty law. In fact the parties stipulated that there was no agreement on
17 class arbitration. “Counsel for AnimalFeeds explained to the arbitration panel that the term ‘silent’
18
did not simply mean that the clause made no express reference to class arbitration. Rather, he said,
19
‘[a]ll the parties agree that when a contract is silent on an issue there's been no agreement that
20
has been reached on that issue.’" Id. at 1766.
21
The Supreme Court held that because the parties had stipulated that there was not agreement
22
to arbitrate class claims the arbitrator should have determined the default rule governing arbitration
23
provisions where the parties had reached no agreement on the issue:
24
Because the parties agreed their agreement was “silent” in the sense that they had not
25 reached any agreement on the issue of class arbitration, the arbitrators' proper task
was to identify the rule of law that governs in that situation. Had they engaged in
26 that undertaking, they presumably would have looked either to the FAA itself or to one
of the two bodies of law that the parties claimed were governing, i.e., either federal
27 maritime law or New York law.

28 Id. at 1768.

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


7 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 12 of 23

1 The Supreme Court held that to identify this governing rule of law, the arbitrators should have
2 looked to “court cases denying consolidation of arbitrations.” Id. at 1769.
3 Ignoring the default rule governing consolidation of claims where the arbitration provision
4 was silent, the panel instead relied on AAA awards allowing class-wide arbitration of consumer cases
5 where the arbitration provision was silent and “[p]erceiving a post- Bazzle consensus among
6 arbitrators that class arbitration is beneficial in "a wide variety of settings," the panel considered only
7 whether there was any good reason not to follow that consensus in this case.” Id. at 1769.
8 As the Supreme Court observed, the panel’s reliance on these post-Bazzle arbitral decisions
9 confirmed that “the panel’s decision was not based on a determination regarding the parties’
10 intent” because all of these arbitral awards were issued after the parties had entered into the charter
11 party contracts. Id. at 1768 and n. 4.
12 The Stolt-Nielsen decision is clear that the requirement that the ambiguity of an arbitration
13 clause must be resolved under state law and analysis of the parties’ intent and expectations.
14 Accordingly, while the panel in Stolt-Nielsen had erroneously assumed that class arbitration was
15 always permitted under Bazzle where the contract was silent, it would be equally erroneous to argue
16 that silence means that class arbitration is never the parties’ intent.
17 As the Supreme Court noted, even where the contract is silent there may be a
18
contractual basis to “support a finding that the parties agreed to authorize class-action
19
arbitration.” Id. at 1776, n. 10. This is a case where both the actual intent of the parties, the
20
applicable Nevada law governing construction of ambiguous contracts, and the Nevada default rule
21
allowing consolidation of arbitration claims where the contract is silent all compel a finding that the
22
parties agreement to arbitrate was intended to include class arbitration.
23
The charter party contract in Stolt-Nielsen was not a contract of adhesion because the contract
24
was negotiated among sophisticated commercial companies and was selected by the plaintiff,
25
Animalfeeds. The Agreement here, on the other hand, was drafted by Respondents and imposed on
26
Claimants on a take-it-or-leave it basis without any opportunity to negotiate. See Declaration of Mary
27
Ann Sussex ¶3 [Doc. No. 22-6]; Declaration of Mitchell Pae ¶3 [Doc. No. 22-7]; Declaration of
28
Malcolm Nicholl ¶3 [Doc. No. 22-8]; Declaration of Sandy Scalise ¶3 [Doc. No. 22-9]; Declaration

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


8 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 13 of 23

1 of Ernesto Valdez, Sr. ¶3 [Doc. No. 22-10]; Declaration of Ernesto Valdez, Jr. ¶3 [Doc. No. 22-11];
2 Declaration of John Hanson ¶3 [Doc. No. 22-12]; and Declaration of Elizabeth Hanson ¶3 [Doc. No.
3 22-13].5 Nevada law requires the ambiguity to be resolved against Respondents, as the parties
4 drafting the contract. Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. 212, 215-16 (2007).
5 IV. THE ARBITRATOR EXCEEDED HIS AUTHORITY BY REFUSING TO FOLLOW
THE SUPREME COURT’S DECISION IN S KEATING AND IGNORING NEVADA’S
6 “DEFAULT RULE” WHICH PERMITS CONSOLIDATION OF ARBITRATION
CLAIMS UNLESS THE AGREEMENT PROHIBITS CONSOLIDATION
7
In Stolt-Nielsen, the Supreme Court ruled that where an arbitration agreement is silent
8
regarding class arbitration, the arbitrator must look to the applicable state law “default rule” governing
9
consolidation of arbitration claims. 130 S.Ct at 1768-69. Finding that class arbitration is subject to
10
the rules governing claims consolidation, the Supreme Court relied on a default rule against
11
consolidation of arbitration claims in holding that class arbitration was not allowed in that case. Id.
12
In non-admiralty cases like this one, where the Agreement states that it is governed by Nevada law
13
and the arbitration agreement is silent, the arbitrator must look to the Nevada default rule governing
14
arbitration claims consolidation.
15
Nevada’s ‘default rule’ is codified in N.R.S. 38.224 which provides:
16
1. Except as otherwise provided in subsection 3, upon motion of a party to an
17 agreement to arbitrate or to an arbitral proceeding, the court may order consolidation
18 of separate arbitral proceedings as to all or some of the claims if:

19 (a) There are separate agreements to arbitrate or separate arbitral proceedings


between the same persons or one of them is a party to a separate agreement to arbitrate
20 or a separate arbitral proceeding with a third person;

21 (b) The claims subject to the agreements to arbitrate arise in substantial


part from the same transaction or series of related transactions;
22
(c) The existence of a common issue of law or fact creates the possibility of
23 conflicting decisions in the separate arbitral proceedings; and

24 (d) Prejudice resulting from a failure to consolidate is not outweighed by the


risk of undue delay or prejudice to the rights of or hardship to parties opposing
25 consolidation.

26 2. The court may order consolidation of separate arbitral proceedings as to some claims
and allow other claims to be resolved in separate arbitral proceedings.
27
28 5
True and correct copies of these Declarations are attached to the Blum Dec. as Exhibits 3-10.

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


9 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 14 of 23

1 3. The court may not order consolidation of the claims of a party to an agreement
to arbitrate if the agreement prohibits consolidation.
2
N.R.S. 38.224 clearly provides that consolidation of arbitral claims may be ordered unless “the
3
agreement prohibits consolidation.” Since the Agreement here does no prohibit consolidation, the
4
Nevada default rule applies and consolidated class arbitration must be allowed.
5
In Exber, Inc. v. Sletten Const. Co., 92 Nev. 721, 731-32 (1976), the Nevada Supreme Court
6
held that arbitration claims could be consolidated where the arbitration provision was silent on the
7
issue. Consolidation by State Court of Arbitration Proceedings Brought Under State Law 31
8
A.L.R.6th 433 §8 (2008) identifies Nevada as among the states with a default rule allowing
9
consolidation where agreement is silent, citing Exber, Inc. v. Sletten Const. Co.6
10
N.R.S. 38.224 provides the default rule applicable in this case. N.R.S. 38.224 allows
11
consolidation of claims and permits consolidated class arbitration where, as here, it is not specifically
12
prohibited in the Agreement. As a result, this default rule distinguishes this case from
13
Stolt-Nielsen and here requires class-wide arbitration.
14
The Stolt-Nielsen decision requires arbitrators and the courts to look to the state default rule
15
for consolidation of arbitration claims in deciding whether arbitration agreements should be construed
16
as allowing arbitration of class claims. Stolt-Nielsen S.A., 130 S.Ct at 1773.
17
18 The Stolt-Nielsen Court itself relied on the default rule governing “consolidation of

19 arbitrations” rather than any default rule specifically applicable to class arbitration. 130 S.Ct at 1768-
7
20 69 and n. 5. This makes perfect sense, because class actions are a form of claim consolidation and
21
6
22 By enacting N.R.S. 38.224, the Nevada legislature has thus created an identifiable default rule
allowing consolidation of arbitration claims unless a contrary intent is expressed in the arbitration
23 agreement. This Nevada default rule requires a different result than in Stolt-Nielsen where the
24 Supreme Court relied on case law prohibiting consolidation of claims where the agreement was
silent. Because the Agreement here does not express any intent to prohibit class actions, the Nevada
25 default rule is controlling.

26 7
The Stolt-Nielsen Court held that the arbitrators erred by failing to determine “whether the FAA,
maritime law, or New York law contains a “default rule” under which an arbitration clause is
27 construed as allowing class arbitration in the absence of express consent, the panel proceeded as if
28 it had the authority of a common-law court to develop what it viewed as the best rule to be applied
in such a situation. Id. at 1768-69. To determine the “default rule”, the Supreme Court ruled that

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


10 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 15 of 23

1 accordingly are governed by the same default rule. See Independent Ass'n of Mailbox Center
2 Owners, Inc. v. Superior Court, 133 Cal.App.4th 396, 408 (2005) (relying on California’s default rule
3 for class arbitrations where the agreement is silent in reversing denial of consolidation of arbitration
4 claims where the agreement was silent.); Ashe v. Swenson, 397 U.S. 436, 456 (1970) ("Rule 23
5 permits the consolidation of separate claims in a class action").
6 Nevada’s default rule for silent arbitration agreements is consistent with Nevada’s
7 broader rule presuming that a party does not intend to waive judicial rights and remedies absent
8 express language to the contrary. See e.g., Lowe Enterprises Residential Partners, L.P. v. Eighth
9 Judicial Dist., 118 Nev. 92, 100 (2002) (contractual waiver of right to jury trial must be clear and
10 entered into knowingly, voluntarily and intentionally). Recently, the district court in Louisiana Health
11 Service Indem. Co. v. Gambro A B, --- F.Supp.2d ----, 2010 WL 5256805, *1, *7 (W.D. La. Dec. 21,
12 2010) recently applied Louisiana law that “waiver of a right must be clear and unambiguous” in
13 holding that Stolt-Nielsen permitted under an arbitration provision that was silent on the issue.
14 The arbitrator acknowledged that Nevada has a default rule allowing consolidation of claims
15 in arbitration where the agreement is silent, but erroneously ruled that this default rule was irrelevant
16 because class certification was different from consolidation of claims. See Partial Final Award at pp.
17 15-16. That ruling ignores the fact that the Stolt-Nielsen decision requires arbitrators and the courts
18
to look to the state default rule for consolidation of arbitration claims in deciding whether arbitration
19
agreements should be construed as allowing arbitration of class claims. Stolt-Nielsen S.A., 130 S.Ct
20
at 1773. The Supreme Court also acknowledged that the default rule for consolidation of arbitration
21
claims was analogous authority relevant to the issue of arbitration of class claims in Southland Corp.
22
v. Keating, 465 U.S. 1 (1984):
23
The California Supreme Court cited "[a]nalogous authority" supporting
24 consolidation of arbitration proceedings by federal courts. E.g., Compania
Espanola de Petroleos, S.A. v. Nereus Shipping, S.A., 527 F.2d 966, 975 (CA2 1975),
25 cert. denied, 426 U.S. 936, 96 S.Ct. 2650, 49 L.Ed.2d 387 (1976); In re
Czarnikow-Rionda Co., 512 F.Supp. 1308, 1309 (SDNY 1981). This, along with
26
27
the arbitrators should have followed “court cases denying consolidation of arbitrations” which
28 “decisions were available to the parties when they entered into their contracts.” Id. at 1769 and n.
5.

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


11 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 16 of 23

1 support by other state courts and the California legislature for consolidation of
arbitration proceedings permitted the court to conclude that class action
2 proceedings were authorized.
3 Id. at 9, n.4 quoting, Keating v. Superior Court, 645 P.2d 1192, 1209 (Cal. 1982).8
4 The Arbitrator acknowledged that the United States Supreme Court held in Southland Corp.
5 v. Keating, 465 U.S. 1, 9 n.4 (1984) that a state's default rule allowing consolidation of claims where
6 the agreement was silent provided analogous authority indicating that the state would also allow class
7 arbitration where the agreement was silent. Partial Final Award at pp. 12-14. The Arbitrator refused
8 to follow the controlling precedent of Keating because the Arbitrator believed that it was inconsistent
9 with dicta in Stolt-Nielsen regarding differences between class actions and individual actions. Id. at
10 pp. 14-16.9 The Arbitrator's failure to follow Keating violated the fundamental rule that the Supreme
11 Court does not overrule its own precedents sub silentio. Agostini v. Felton, 521 U.S. 203, 237 (1997):
12 "We reaffirm that if a precedent of this Court has direct application in a case, yet appears to rest on
13 reasons rejected in some other line of decisions, the Court of Appeals should follow the case which
14 directly controls, leaving to this Court the prerogative of overruling its own decisions." Id. The
15 Arbitrator exceeded his authority by refusing to follow controlling Supreme Court precedent based
16 on his own mistaken notion that Southland Corp. v. Keating was no longer good law. The Arbitrators'
17 rejection of Nevada's default rule that arbitration claims may be consolidated absent an express
18
19
8
The Supreme Court recognized that the default rule for consolidation of arbitration claims was
20 analogous authority relevant to the issue of arbitration of class claims “[S]upport by other state
21 courts and the California legislature for consolidation of arbitration proceedings permitted the
court to conclude that class action proceedings were authorized.” Id. at 9, n. 4. Although the
22 Supreme Court reversed the California Supreme Court’s decision in Southland in part on other
grounds, it did not disagree with the California’s Supreme Court’s reliance on the authority allowing
23 consolidation of arbitration claims where the agreement was silent in holding that the California
24 default rule allowed class actions where the arbitration agreement was silent
9
25 Nothing in Stolt-Nielsen is even arguably inconsistent with the Supreme Court’s holding in
Southland Corp. v. Keating. The dicta in Stolt-Nielsen discussed the differences between class
26 actions and individual actions not the differences between consolidation and class certification of
arbitral claims. Moreover, the Arbitrator’s erroneous conclusion that Stolt-Nielsen silently overruled
27
Southland Corp. v. Keating ignores the fact that the Stolt-Nielsen actually followed Keating by
28 looking to the default rule for consolidation of arbitral claims in determining the analogous default
rule for class arbitration. 130 S.Ct at 1768-69 and n. 5.

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


12 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 17 of 23

1 contractual prohibition requires that the award be vacated.


2
V. DEFENDANTS WERE JUDICIALLY ESTOPPED FROM CLAIMING THAT
3 ARBITRATION OF PLAINTIFFS’ CLASS CLAIMS IS NOT PERMITTED UNDER
THE AGREEMENT
4
Respondents, in their original pre-Stolt-Nielsen Motion to Compel Arbitration in this case,
5
argued that their arbitration clause puts the parties on an equal footing because "The clause does not
6
bar class actions.” [Doc. No. 17, at 20:12-13]. Having taken the position that class action may be
7
arbitrated as part of their successful motion to compel arbitration, Respondents are now judicially
8
estopped from arguing post- Stolt-Nielsen that the arbitration clause does not allow class arbitration.
9
Judicial estoppel prevents a party from playing "fast and loose" with the courts by taking a
10
position in litigation inconsistent with a position on which he earlier succeeded. New Hampshire v.
11
Maine, 532 U.S. 742, 749(2001).
12
Judicial estoppel applies when the following five criteria are met:
13
“(1) the same party has taken two positions; (2) the positions were taken in judicial or
14 quasi-judicial administrative proceedings; (3) the party was successful in asserting the
first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two
15 positions are totally inconsistent; and (5) the first position was not taken as a result of
ignorance, fraud, or mistake.”
16
Marcuse v. Del Webb Communities, Inc., 123 Nev. 278, 287 (2007).
17
18 Respondents are unable to show that any of the five elements of judicial estoppel are not

19 satisfied in this case. See Marcuse v. Del Webb Communities, Inc., 123 Nev. 278, 287 (2007).
20 1) There can be no dispute that Respondents have taken inconsistent positions. In moving to

21 compel arbitration of this class action in federal court, Respondents took the position that the
22 Agreement did not bar arbitration of class claims but now argue that arbitration of class claims is
23 barred under the Agreement; 2) It is uncontested that Respondents took these positions in judicial
24 or quasi-judicial administrative proceedings; 3) Respondents succeeded in federal court by obtaining
25 an order requiring Claimants to arbitrate all their claims including their class claims; 4) Respondents’
26 current position is totally inconsistent with Respondents’ position in their motion to compel
27 arbitration; and 5) “the record fails to indicate that [Respondents] took [their] first position as a
28 result of ignorance, fraud, or mistake” Marcuse, 123 Nev. at 288.

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


13 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 18 of 23

1 In Marcuse, the Nevada Supreme Court held that a developer defendant was judicially
2 estopped from asserting that the homeowners' construction defect action was precluded by res judicata
3 by the settlement of a class action in which homeowners were unnamed members, where developer
4 took an inconsistent position in the class action by opposing the home purchasers' motions to
5 consolidate their claims with those of the class and for a separate trial in the class action when
6 developer asserted that the homeowners could file a separate action to address their claim. Id. at 288.
7 Just as the developer defendant in Marcuse was estopped from denying that home purchasers could
8 bring individual actions after a class action settled, here Respondents are estopped from denying that
9 Plaintiffs’ class claims are subject to arbitration by its earlier position that nothing precludes
10 arbitration of the class claims.
11 In Hicks v. Cadle Co., 2010 WL 4595711 (D. Colo. Nov. 4, 2010), the federal court recently
12 held that judicial estoppel prevented a defendant from asserting that the arbitrator lacked jurisdiction
13 over the claims against him in and distinguished Stolt-Nielsen on the basis that there was no issue of
14 judicial estoppel in that case
15 In Stolt-Nielsen, the United States Supreme Court held that an arbitration panel may
not infer the parties' assent to class-action arbitration where the arbitration agreement
16 is silent on the issue, since "class-action arbitration changes the nature of arbitration
to such a degree that it cannot be presumed the parties consented to it by simply
17 agreeing to submit their disputes to an arbitrator." While the Court, in so holding,
18 relied upon established precedent articulating the "consensual nature of private dispute
resolution" and the duty of courts and arbitrators to "give effect to the intent of the
19 parties," the Court in no part addressed the application of judicial estoppel or
agency to the arbitrability of claims. Stolt-Nielsen does not undermine the Tenth
20 Circuit's determination in this case that Cadle is bound by the arbitration clause based
upon principles of judicial estoppel and agency
21
Id. at *4.
22
Here, as in Hicks, Respondents can take no refuge in the language in Stolt-Nielsen about the
23
“consensual nature” of arbitration because Respondents are estopped by the position they took in
24
federal court when successfully moving to compel arbitration.
25
Similarly, in Data Mountain Solutions, Inc. v. Giordano, 680 F.Supp.2d 110, 126 (D .D.C.
26
2010), the defendant represented to the Court that all matters in the complaint were arbitrable.
27
Mr. Giordano's current claim that those issues were not within the jurisdiction of the
28 arbitrator is a direct contradiction of his prior representations to this Court. If the
Court were to permit Mr. Giordano to espouse such obviously inconsistent

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


14 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 19 of 23

1 arguments and then accepted his current position on the merits, Mr. Giordano
would receive an undeserved advantage while inflicting an unfair burden on the
2 petitioners.
Id. at 128.
3
Respondents argued that judicial estoppel does not apply because Stolt-Nielsen changed the
4
law and justifies Respondents’ inconsistent positions. No Nevada case has ever applied this purported
5
exception to judicial estoppel. Arizona v. Shamrock Foods Co., 729 F.2d 1208, 1215-16 (9th
6
Cir.1984), the federal case Respondents cite, is easily distinguishable. Here, the representation was
7
one of fact not law and Stolt-Nielsen did not change any facts.
8
In moving to compel arbitration, Respondents made the tactical decision to take the position
9
that the Agreement permitted class arbitration in order to avoid the substantial authority holding that
10
a class action bar renders the provision unenforceable. Respondents’ recent tactical decision to take
11
a contrary position in an attempt to exploit the Stolt-Nielsen decision does not allow them to escape
12
judicial estoppel. See American Honda Motor Co., Inc. v. Richard Lundgren, Inc., 314 F.3d 17, 21
13
(1st Cir. 2002) (distinguishing Shamrock and holding that defendant was not entitled to relief from its
14
position in a prior related lawsuit “even though intervening change in law had arguably occurred, since
15
dealer could have made legal arguments in prior suit that it wished to make in current suit, but
16
tactically choose not to do so.” ).
17
18 Here, by the same token, Respondents could have asserted as a matter of fact that class

19 arbitration was barred when moving to compel arbitration but tactically choose not to do so. See also
20 Whaley v. Belleque, 520 F.3d 997 (9th Cir. 2008) (judicial estoppel “applies to a party's legal as well
21 as factual assertions” and “precludes a party from gaining an advantage by taking one position, and
10
22 then seeking a second advantage by taking an incompatible position.”)
23
10
Respondents also argued that judicial estoppel does not apply because the position taken by
24
Respondents was not relied upon by the Court since the Nevada Supreme Court in KJH did not reach
25 the issue of substantive unconscionability based on its finding that there was no procedural
unconscionability. In other words, Respondents argue that the availability of class action arbitration
26 affects only substantive not procedural unconscionability and Respondents’ position that class
arbitration was not barred could not therefore have affected the outcome of the motion to compel
27 arbitration. To the contrary, as the Nevada Supreme Court held in D.R. Horton, Inc. v. Green, 120
28 Nev. 549, 558-9 (2004), an arbitration provision in a real estate sales contract was procedurally
unconscionable where it was "inconspicuous, one-sided and failed to advise the real estate

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


15 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 20 of 23

1 This is a text-book example for the application of judicial estoppel in order to “prevent the
2 perversion of the judicial process.” New Hampshire v. Maine, 532 U.S. at 750. The Arbitrator’s
3 failure to apply judicial estoppel also requires that the award be vacated.
4
5
VI. THE ARBITRATOR IGNORED THE UNDISPUTED EVIDENCE OF THE PARTIES’
6 INTENT AND REASONABLE EXPECTATIONS WHICH IS DETERMINATIVE
UNDER STOLT-NIELSEN
7
As Stolt-Nielsen held, that the ultimate touchstone for interpreting an arbitration agreement
8
was the intent and expectation of the parties to the contract. Stolt-Nielsen reaffirmed the rule that the
9
touchstone for arbitration clause construction is the intent and expectations of the parties:
10
Whether enforcing an agreement to arbitrate or construing an arbitration clause, courts
11 and arbitrators must "give effect to the contractual rights and expectations of the
parties." Volt, supra, at 479, 109 S.Ct. 1248. In this endeavor, "as with any other
12 contract, the parties' intentions control." Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).
13
Id. at 1773-74.
14
Under Nevada law the fundamental goal of contract interpretation is also to “effectuate the
15
intent of the parties”Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. 212, 215 (2007). Stolt-Nielsen
16
reaffirmed the rule that the arbitration provision’s silence about class action created an ambiguity,
17
18 which presented a question of fact which had to be resolved on a case-by-case basis under the
19 applicable state law principles of contract construction. 103 S. Ct.. at 1768-69 and n. 6.
20 Here there is direct evidence of Respondents’ intent. In moving to compel arbitration they

21 candidly stated: “The clause does not bar class actions.” Defendant’s Motion to Compel Arbitration
22 at page 20 lines 12-13 [Doc. No.17].
23 The language of the arbitration provision also supports the parties’ expectation that class-wide

24 arbitration was part of the agreement. Respondents also manifested the intent that the arbitration
25 agreement include class arbitration. Here, the Agreement expressly provides that the parties, in
26
purchaser that significant rights under Nevada law would be waived by agreeing to
27
arbitration." The right to bring a class action is a significant right under Nevada law. Accordingly,
28 if Respondents had asserted that the Agreement silently prohibited class arbitration, both procedural
and substantive unconscionability would have been affected.

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


16 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 21 of 23

1 agreeing to arbitrate, gave up certain enumerated rights such as the right to seek punitive damages
2 and the right to unlimited discovery. Agreement ¶ 24.10. The fact that the right to bring a class action
3 was not included among such-expressly waived rights further compels a finding that Respondents
4 intended to agree to class arbitration under the doctrine of expressio unius est exclusio alterius. See
5 Nevada Food King, Inc. v. Reno Press Brick Co., supra, 81 Nev. 135, 138 (1965).
6 The Agreement broadly requires arbitration of “any dispute related to this Agreement
7 (including, but not limited to the interpretation of enforceability of this Agreement.” Agreement ¶
8 24.10, Exhibit 2. The Agreement also provides that the “arbitrator shall have the authority to award
9 any remedy of relief that a court of the State of Nevada could grant in conformity to the applicable law
10 except that the arbitrator shall have no authority to award punitive damages. Id. That broad grant of
11 authority gives the arbitrator the same remedial powers as a Nevada court, which necessarily includes
12 the power to adjudicate class actions and grant class-wide remedies. The language providing that
13 punitive damages are not allowed, supports the expectation that only legal rights and remedies
14 specified in the agreement will not be allowed in arbitration – and the class action remedy is not
15 mentioned.
16 Respondents knowingly selected the AAA as the arbitral venue after Green Tree Financial
17 Corp. v. Bazzle, 539 U.S. 444 (2003) was decided and after AAA arbitrators had issued a series of
18
interlocutory awards consistently ruling that class arbitration was allowed where the contract was
19
silent on the issue. Defendants’ attorneys, who drafted the arbitration provision in the Agreement and
20
in the Agreement offer no evidence or assertion that they were unaware of these arbitral decisions
21
when the Agreement was executed.
22
Indeed, in light of these publicly-available AAA decisions, Respondents could not
23
possibly have expected that class arbitration would be prohibited by the AAA arbitrator
24
deciding the issue. Respondents cannot dispute that, by the time the Agreement was executed, the
25
AAA had essentially developed its own default rule permitting class arbitration where the agreement
26
was silent and that Respondents knew, or should have known, this when it chose AAA arbitration in
27
28

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


17 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 22 of 23

1 an arbitration provision silent on the class issue.11.


2 The Stolt-Nielsen Court’s factual determination that the parties in that case could not possibly
3 have expected or intended that their arbitration agreement would include class actions was based on
4 evidence that "sophisticated, multinational commercial parties of the type that are sought to be
5 included in the class would never intend that the arbitration clauses would permit a class arbitration."
6 130 S.Ct. at 1769. In fact, in Stolt-Nielsen the plaintiff actually admitted that there had been no
7 agreement to arbitrate class actions. Id. at 1766. Here, by contrast, Claimants have never stipulated
8 or admitted that there was no agreement to arbitrate class claims and the extrinsic evidence clearly
9 shows that both Claimants and Respondents expected and intended that class claims would be
10 arbitrated.
11 This evidence that all parties understood that class-wide arbitration would be permitted under
12 the Agreement compels construction of the Agreement as allowing class-wide arbitration. The
13 Arbitrator exceeded his authority by disregarding the undisputed evidence.
14
15 VII. CONCLUSION
16 For the foregoing reasons, Plaintiffs respectfully submit that the Partial Final Clause
17 Construction Award should be vacated.
18
Respectfully submitted,
19
Dated: March 25, 2011 BLUMENTHAL, NORDREHAUG & BHOWMIK
20
21 By: /s/ Norman B. Blumenthal
Norman B. Blumenthal
22
Robert B. Gerard, Esq.
23 Gerard & Associates

24
11
25 In Stolt-Nielsen, the post-Bazzle AAA decisions consistently permitting class arbitration where
the agreement was silent were irrelevant to the intent or expectations of the contracting parties
26 because they all post-dated the contract in that case. 130 S.Ct. at 1768, n. 4. Here, these AAA
decisions already existed when the Agreement was drafted and certainly informed the expectations
27
of Respondents and their attorneys. This state of the law at AAA when the Agreement was drafted
28 stands in sharp contrast to the case law consistently prohibiting consolidated arbitrations in
Stolt-Nielsen when the contract in that case was formed.

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


18 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 85-1 Filed 03/24/11 Page 23 of 23

1 2840 South Jones Blvd.


Building D, Unit 4
2 Las Vegas, Nevada 89146
Telephone: (702) 251-0093
3 Facsimile: (702) 251-0094
4 Robert Fellmeth, Esq.
California State Bar #49897
5 University of San Diego School of Law
5998 Alcala Park
6 San Diego, California 92110
Telephone: (619) 260-4806
7 Facsimile: (619) 260-4753
8 Burton Wiand, Esq.
Fowler White Boggs Banker, P.A.
9 501 East Kennedy Blvd.
Tampa, FL 33602
10 Telephone: (813) 228-7411
Facsimile: (813) 229-8313
11
12 Attorneys For The Plaintiffs

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING


19 CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 86 Filed 03/24/11 Page 1 of 2

1 Robert B. Gerard, Esq. (Nevada State Bar #005323)


Ricardo R. Ehmann, Esq. (Nevada State Bar #010576)
2 GERARD & ASSOCIATES
2840 South Jones Boulevard
3 Building D, Suite #4
Las Vegas, Nevada 89146
4 Telephone: (702) 251-0093
Facsimile: (702) 251-0094
5
Norman Blumenthal, Esq. (California State Bar #068687)
6 BLUMENTHAL, NORDREHAUG & BHOWMIK
2255 Calle Clara
7 La Jolla, California 92037
Telephone: (858) 551-1223
8 Facsimile: (858) 551-1232
9 Attorneys for Plaintiffs
[Additional counsel listed on signature page]
10
11
UNITED STATES DISTRICT COURT
12
DISTRICT OF NEVADA
13
14 MARY ANN SUSSEX; MITCHELL ) CASE NO.: 2: 08-cv-00773 -RLH - PAL
PAE; MALCOLM NICHOLL and )
15
SANDY SCALISE; ERNESTO VALDEZ, ) NOTICE OF MOTION AND MOTION
16 SR. and ERNESTO VALDEZ, JR.; JOHN ) FOR RECONSIDERATION OF ORDER
HANSON and ELIZABETH HANSON; ) COMPELLING ARBITRATION
17 )
Plaintiffs,
18 vs. ) Hearing Date: TBD
) Hearing Time: TBD
19 TURNBERRY/MGM GRAND TOWERS, )
) Before: Hon. Roger L. Hunt
20 LLC, a Nevada LLC; MGM GRAND
CONDOMINIUMS LLC, a Nevada LLC; )
21 THE SIGNATURE CONDOMINIUMS, )
22 LLC a Nevada LLC; MGM MIRAGE, a )
Delaware Corporation; )
23 TURNBERRY/HARMON AVE., LLC., a )
24
Nevada LLC; and TURNBERRY WEST )
REALTY, INC., a Nevada Corporation; )
25 Defendants. )

26
27
28

NOTICE OF MOTION AND MOTION FOR RECONSIDERATION OF ORDER COMPELLING ARBITRATION


CASE NO.: 2: 08-cv-00773
Case 2:08-cv-00773-RLH-PAL Document 86 Filed 03/24/11 Page 2 of 2

1 TO THE COURT, ALL PARTIES AND THEIR ATTORNEYS OF RECORD:


2 Please take notice that, before the Honorable Roger L. Hunt, Judge for the United States
3 District Court for the District of Nevada on a date and time to be set by the Court, Plaintiffs Mary
4 Ann Sussex, Mitchell Pae, Malcolm Nicholl, Sandy Scalise, Ernesto Valdez, Sr., Ernesto Valdez,
5 Jr., John Hanson and Elizabeth Hanson (“Plaintiffs”) will and hereby do move for an order granting
6 reconsideration of the Court’s prior order compelling arbitration. This motion is based upon this
7 notice, the accompanying Memorandum of Points and Authorities and the Declaration of Norman
8 Blumenthal with exhibits thereto, along with the pleadings and documents contained in the Court’s
9 record.
10
11 Respectfully submitted,
12 Dated: March 25, 2011 BLUMENTHAL, NORDREHAUG & BHOWMIK
13
14 By: /s/ Norman B. Blumenthal
Norman B. Blumenthal
15
Robert B. Gerard, Esq.
16 Gerard & Associates
2840 South Jones Blvd.
17 Building D, Unit 4
Las Vegas, Nevada 89146
18 Telephone: (702) 251-0093
Facsimile: (702) 251-0094
19
Robert Fellmeth, Esq.
20 California State Bar #49897
University of San Diego School of Law
21 5998 Alcala Park
San Diego, California 92110
22 Telephone: (619) 260-4806
Facsimile: (619) 260-4753
23
Burton Wiand, Esq.
24 Fowler White Boggs Banker, P.A.
501 East Kennedy Blvd.
25 Tampa, FL 33602
Telephone: (813) 228-7411
26 Facsimile: (813) 229-8313
27 Attorneys For The Plaintiffs
28

NOTICE OF MOTION AND MOTION FOR RECONSIDERATION OF ORDER COMPELLING ARBITRATION


1 CASE NO.: 2: 08-cv-00773