In Johnson v. Gruma Corp., No. 08-56911 (9th Cir. 2010), the Ninth Circuit Court of Appeals – applying the California Arbitration Act (“CAA”) in lieu of the Federal Arbitration Act (“FAA”) – affirmed a District Court decision refusing to vacate an arbitration award on the ground that the arbitrator failed to disclose his wife’s former professional relationship with the law firm ultimately retained to represent the respondent in the arbitration. For a copy of the Ninth Circuit’s decision, click here.

Plaintiffs brought a class action against Gruma alleging that it misrepresented that plaintiffs were independent contractors instead of Gruma employees. In response, Gruma moved to compel arbitration pursuant to the arbitration clause in the employment agreement (the “Agreement”) entered into by the parties. Gruma’s motion was granted by the District Court, and the arbitrator eventually found in Gruma’s favor. Plaintiffs then moved to vacate the arbitration award in a California District Court, and Gruma cross-moved to confirm. After the District Court confirmed the award, plaintiffs appealed.

On appeal, plaintiffs argued that the arbitration clause in the Agreement required the District Court to apply the CAA disclosure and vacatur standards, and not those set forth in the FAA (and related case law). The Ninth Circuit agreed, finding that the parties intended to be governed by the CAA’s rules:

In this case, [] the arbitration clause is more than a general choice of law provision. It requires arbitration to be “conducted and subject to enforcement pursuant to the provisions of California Code of Civil Procedure sections 1280 through 1295, or other applicable law.” The arbitrator read the arbitration clause to mean that the parties intended to be governed by the CAA’s rules. We agree. The clause exhibits the parties’ “clear intent” that the CAA’s procedures shall govern.

Plaintiffs further argued that vacatur of the arbitration award was required because the arbitrator failed to disclose that his wife had been a partner at the law firm that became Gruma’s counsel five years into the arbitration. The Ninth Circuit, however, concluded that the arbitrator complied with the CAA’s rules governing initial disclosures, since his wife’s former law firm was not counsel for Gruma when the arbitration commenced in 2002.