motion to vacate arbitration and supporting documents in consumer lawsuit against mgm turnberry

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NOTICE OF MOTION AND MOTION TO VACATE ARBITRATION RULINGCASE NO.: 2: 08-cv-00773

Robert B. Gerard, Esq. (Nevada State Bar #005323)Ricardo R. Ehmann, Esq. (Nevada State Bar #010576)GERARD & ASSOCIATES2840 South Jones BoulevardBuilding D, Suite #4Las Vegas, Nevada 89146Telephone: (702) 251-0093Facsimile: (702) 251-0094

Norman Blumenthal, Esq. (California State Bar #068687)BLUMENTHAL, NORDREHAUG & BHOWMIK2255 Calle ClaraLa Jolla, California 92037Telephone: (858) 551-1223Facsimile: (858) 551-1232

Attorneys for Plaintiffs[Additional counsel listed on signature page]

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

MARY ANN SUSSEX; MITCHELLPAE; MALCOLM NICHOLL andSANDY SCALISE; ERNESTO VALDEZ,SR. and ERNESTO VALDEZ, JR.; JOHNHANSON and ELIZABETH HANSON;

Plaintiffs,vs.

TURNBERRY/MGM GRAND TOWERS,LLC, a Nevada LLC; MGM GRANDCONDOMINIUMS LLC, a Nevada LLC;THE SIGNATURE CONDOMINIUMS,LLC a Nevada LLC; MGM MIRAGE, aDelaware Corporation;TURNBERRY/HARMON AVE., LLC., aNevada LLC; and TURNBERRY WESTREALTY, INC., a Nevada Corporation;

Defendants.

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CASE NO.: 2: 08-cv-00773 -RLH - PAL

NOTICE OF MOTION AND MOTIONTO VACATE ARBITRATION RULING

Hearing Date: TBDHearing Time: TBD

Before: Hon. Roger L. Hunt

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

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NOTICE OF MOTION AND MOTION TO VACATE ARBITRATION RULINGCASE NO.: 2: 08-cv-007731

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

Please take notice that, before the Honorable Roger L. Hunt, Judge for the United States

District Court for the District of Nevada on a date and time to be set by the Court, Plaintiffs Mary

Ann Sussex, Mitchell Pae, Malcolm Nicholl, Sandy Scalise, Ernesto Valdez, Sr., Ernesto Valdez,

Jr., John Hanson and Elizabeth Hanson (“Plaintiffs”) will and hereby do move to vacate the

arbitration ruling. This motion is based upon this notice, the accompanying Memorandum of Points

and Authorities and the Declaration of Norman Blumenthal with exhibits thereto, along with the

pleadings and documents contained in the Court’s record.

Respectfully submitted,

Dated: March 25, 2011 BLUMENTHAL, NORDREHAUG & BHOWMIK

By: /s/ Norman B. Blumenthal Norman B. Blumenthal

Robert B. Gerard, Esq.Gerard & Associates2840 South Jones Blvd.Building D, Unit 4Las Vegas, Nevada 89146Telephone: (702) 251-0093Facsimile: (702) 251-0094

Robert Fellmeth, Esq. California State Bar #49897University of San Diego School of Law5998 Alcala ParkSan Diego, California 92110Telephone: (619) 260-4806Facsimile: (619) 260-4753

Burton Wiand, Esq.Fowler White Boggs Banker, P.A.501 East Kennedy Blvd.Tampa, FL 33602Telephone: (813) 228-7411Facsimile: (813) 229-8313

Attorneys For The Plaintiffs

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

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DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF MOTION TO VACATE ARBITRATION RULINGCASE NO.: 2: 08-cv-00773



Attorneys for Plaintiffs


DISTRICT OF NEVADA


Plaintiffs,vs.


Defendants.

))))))))))))))))))


DECLARATION OF NORMAN B.BLUMENTHAL IN SUPPORT OFMOTION TO VACATE ARBITRATIONRULING



Case 2:08-cv-00773-RLH-PAL Document 85-2 Filed 03/24/11 Page 1 of 3

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28DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING

CASE NO.: 2: 08-cv-007731

I, NORMAN B. BLUMENTHAL, declare:

1. I have personal knowledge as to the facts stated in this declaration. If called as a

witness, I could and would competently testify to the truth of the facts stated in this

declaration. I make this declaration in support of the Motion To Vacate the Arbitration

Ruling.

2. Attached hereto as Exhibit 1 is a true and correct copy of the Arbitrator’s Partial

Final Clause Construction Award.

3. Attached hereto as Exhibit 2 is a true and correct copy of the Purchase Agreement

submitted by the Defendant as part of the Motion to Compel Arbitration [Doc. No. 17-3].

4. Attached hereto as Exhibit 3 is a true and correct copy of the Declaration of Mary

Ann Sussex filed July 31, 2008 [Doc. No. 22-6].

5. Attached hereto as Exhibit 4 is a true and correct copy of the Declaration of

Mitchell Pae filed July 31, 2008 [Doc. No. 22-7].


Malcolm Nicholl filed July 31, 2008 [Doc. No. 22-8].

7. Attached hereto as Exhibit 6 is a true and correct copy of the Declaration of Sandy

Scalise filed July 31, 2008 [Doc. No. 22-9].


Ernesto Valdez, Sr. filed July 31, 2008 [Doc. No. 22-10].


Ernesto Valdez, Jr. filed July 31, 2008 [Doc. No. 22-11].

10. Attached hereto as Exhibit 9 is a true and correct copy of the Declaration of John

Hanson filed July 31, 2008 [Doc. No. 22-12].


Elizabeth Hanson filed July 31, 2008 [Doc. No. 22-13].


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28DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF MOTION TO VACATE ARBITRATION RULING

CASE NO.: 2: 08-cv-007732

I declare under penalty of perjury under the laws of the United States and the State of

Nevada that the foregoing is true and correct. Executed this 24th day of March, 2011 at La

Jolla, California.

/s/ Norman B. Blumenthal Norman B. Blumenthal


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MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULINGCASE NO.: 2: 08-cv-00773





DISTRICT OF NEVADA


Plaintiffs,vs.


Defendants.

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CASE NO.: 2: 08-cv-00773

PLAINTIFFS’ MEMORANDUM OFPOINTS AND AUTHORITIES INSUPPORT OF MOTION TO VACATE ARBITRATION RULING




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MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULINGCASE NO.: 2: 08-cv-00773i

TABLE OF CONTENTS

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

III. THE STOLT-NIELSEN DECISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

IV THE ARBITRATOR EXCEEDED HIS AUTHORITY BY REFUSING TO FOLLOW THE SUPREME COURT'S DECISION IN S KEATING AND IGNORING NEVADA'S "DEFAULT RULE" WHICH PERMITS CONSOLIDATION OF ARBITRATION CLAIMS UNLESS THE AGREEMENTPROHIBITS CONSOLIDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

V. DEFENDANTS ARE JUDICIALLY ESTOPPED FROM CLAIMING THAT ARBITRATION OF PLAINT TIFFS' CLASS CLAIMS IS NOT PERMITTED UNDER THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

VI. THE ARBITRATOR IGNORED THE UNDISPUTED EVIDENCE OF THE PARTIES’ INTENT AND EXPECTATIONS WHICH IS DETERMINATIVE UNDER STOLT-NIELSEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

VII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


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MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULINGCASE NO.: 2: 08-cv-00773ii

TABLE OF AUTHORITIES

Cases:

Agostini v. Felton, 521 U.S. 203 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 12

Ashe v. Swenson,

397 U.S. 436 (1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. 212, 215-16 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 16

Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996 (9th Cir. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Data Mountain Solutions, Inc. v. Giordano, 680 F.Supp.2d 110 (D .D.C. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Discover Bank v. Superior Court, 113 P.3d 1100 (Cal.2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Exber, Inc. v. Sletten Const. Co., 92 Nev. 721 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Green Tree Financial Corp. v. Bazzle,

539 U.S. 444 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 8, 17

Hicks v. Cadle Co., 2010 WL 4595711 (D. Colo. Nov. 4, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Independent Ass'n of Mailbox Center Owners, Inc. v. Superior Court, 133 Cal.App.4th 396, 408 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1180 (9th Cir.2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Louisiana Health Service Indem. Co. v. Gambro A B, --- F.Supp.2d ----, 2010 WL 5256805, (W.D. La. Dec. 21, 2010) . . . . . . . . . . . . . . . . . . . 11

Lowe Enterprises Residential Partners, L.P. v. Eighth Judicial Dist., 118 Nev. 92, 100 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Marcuse v. Del Webb Communities, Inc., 123 Nev. 278 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 13, 14

Nevada Food King, Inc. v. Reno Press Brick Co., 81 Nev. 135 (1965).) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 17

New Hampshire v. Maine,

532 U.S. 749(2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 13

Omstead v. Dell, Inc., 594 F.3d 1081 (9th Cir. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2


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MEMORANDUM IN SUPPORT OF MOTION TO VACATE ARBITRATION RULINGCASE NO.: 2: 08-cv-00773iii

Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S.Ct. 1758 (2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Other Authority

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


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


I. INTRODUCTION

The Arbitrator’s ruling denying classwide arbitration of Plaintiffs’ claims must be reversed.1

The Arbitrator exceeded his authority by (i) ignoring the Nevada default rule for consolidation of

arbitration claims; (ii) failing to apply judicial estoppel to Defendants’ change in position as to

whether the arbitration provision, which is silent on the issue, prohibits class actions; and (iii) failing

to give effect to the parties’ intent.

A. The Arbitrator Exceeded His Authority by Ignoring the Nevada Default Rulefor Consolidation of Arbitration Claims

In this case, the Arbitrator’s ruling cannot stand because the ruling ignores Nevada’s default

rule favoring consolidation of arbitration claims. N.R.S. 38.224. See Consolidation by State Court

of Arbitration Proceedings Brought Under State Law 31 A.L.R.6th 433 §8 (2008). The Arbitrator

acknowledged that Nevada has a default rule allowing consolidation of claims in arbitration where

the agreement is silent, but erroneously ruled that this default rule was irrelevant. See Partial Final

Award on Claim Construction dated February25, 2010 (“Partial Final Award”) at pp. 10-16, Exhibit

1 to the Blumenthal Decl., filed herewith.

The Arbitrator’s ruling ignores the fact that Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp.,

130 S.Ct. 1758 (2010) (“Stolt-Nielsen”) held that arbitrators and the courts must look to the state

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

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

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

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

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

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

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

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


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class actions and individual actions. Id. at pp. 14-16. The Arbitrator’s failure to follow Southland

Corp. v. Keating violated the fundamental rule that the Supreme Court does not overrule its own

precedents sub silentio. Agostini v. Felton, 521 U.S. 203, 237 (1997): “We reaffirm that if a

precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in

some other line of decisions, the Court of Appeals should follow the case which directly controls,

leaving to this Court the prerogative of overruling its own decisions.” Id. The Arbitrator exceeded

his authority by refusing to follow controlling Supreme Court precedent based on his own mistaken

notion that Southland Corp. v. Keating was no longer good law. The Arbitrators’ rejection of

Nevada’s default rule that arbitration claims may be consolidated absent an express contractual

prohibition requires that the award be vacated.

B The Arbitrator Failed to Apply Judicial Estoppel to Defendants’ Change inPosition as to Whether the Arbitration Provision Prohibits Class Actions

Defendants, in their Motion to Compel Arbitration in this case, argued that the arbitration

clause puts the parties on an equal footing because “The clause does not bar class actions.” [Doc.

No. 17, at page 20, lines 12-13]. This initial representation to the Court gave an advantage to

Defendants by avoiding the argument about barring class actions because both California courts and

the Ninth Circuit have refused to enforce arbitration provisions with class action waivers. See e.g.,

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

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

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

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

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

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

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

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

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

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


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Defendants took the position that the Agreement permitted class arbitration and represented to this

Court that “The clause does not bar class actions.” [Doc. No. 17, at 20:12-13]. Judicial estoppel

prevents a party from playing "fast and loose" with the courts by taking a position in litigation

inconsistent with a position on which he earlier succeeded. New Hampshire v. Maine, 532 U.S.

742, 749(2001). Judicial estoppel applies because (i) Defendants asserted in federal court that

nothing precludes the arbitration of Plaintiffs' putative class action and then argued in arbitration that

the Agreement's silence on the issue precludes arbitration of the putative class action claims; (ii)

Defendants took these positions in judicial or quasi-judicial administrative proceedings; (iii)

Defendants succeeded in their original position by obtaining an order requiring Plaintiffs to arbitrate

all their claims; (iv) Defendants' current position is totally inconsistent with Defendants' position

in the motion to compel arbitration; and (v) "the record fails to indicate that [Defendants] took [the]

first position as a result of ignorance, fraud, or mistake" Marcuse v. Del Webb Communities, Inc.,

123 Nev. 278, 287 (2007). The Arbitrator’s failure to apply judicial estoppel although each of the

elements of judicial estoppel was satisfied also requires that the ruling be vacated.

C. The Arbitrator Failed to Give Effect to the Parties’ Intent

Stolt-Nielsen also held that when an arbitration provision that is silent on the issue of class

arbitration, the availability of class arbitration depends on the extrinsic evidence of the parties’

intent. “Whether enforcing an agreement to arbitrate or construing an arbitration clause, courts and

arbitrators must give effect to the contractual rights and expectations of the parties. In this endeavor,

as with any other contract, the parties' intentions control.” 130 S.Ct. at 1773-74. Despite

Stolt-Nielsen‘s holding that the intent of the parties controls, the Arbitrator ignored the

uncontradicted evidence that both Defendants and Plaintiffs understood and intended that class

actions arbitrations would be allowed under the arbitration provision.

Defendants, in drafting the arbitration provision, manifested Defendants' intent to allow

class arbitration, under the principle of expressio unius, by expressly prohibiting punitive damages

and otherwise expressly restricting Claimant's procedural rights, without also expressly taking away

the right to class litigation. Nevada Food King, Inc. v. Reno Press Brick Co., 81 Nev. 135, 138


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(1965). See the Purchase and Sales Agreement (“Agreement”), Exhibit 2 to the Blumenthal Decl.

Defendants’ failure to submit any declaration or other evidence that Defendants intended that

arbitration of class actions would not be allowed under the Agreement is unsurprising because the

evidence here shows that Defendants could not possibly have had such an expectation. Defendants

knowingly selected the AAA as the arbitral venue after Green Tree Financial Corp. v. Bazzle, 539

U.S. 444 (2003) was decided and after AAA arbitrators had issued a series of interlocutory awards

consistently ruling that class arbitration was allowed where the contract was silent on the issue.

Defendants’ attorneys, who drafted the arbitration provision in the Agreement offer no evidence or

assertion that they were unaware of these arbitral decisions when the Agreement was executed.

Indeed, in light of these publicly-available AAA decisions, Defendants could not possibly

have expected that class arbitration would be prohibited by the AAA arbitrator deciding the issue.

Defendants do not and cannot dispute that, by the time the Agreement was executed, the AAA had

essentially developed its own default rule permitting class arbitration where the agreement was silent

and that Defendants knew, or should have known, this when it chose AAA arbitration in an

arbitration provision silent on the class issue.

For these reasons, Plaintiffs respectfully submit that the Partial Final Award exceeded the

Arbitrator’s authority and manifestly disregarded the controlling law and should therefore be vacated.

II. STANDARD OF REVIEW

The Arbitrator has stayed the Arbitration to allow either party to seek review by this Court

vacating or confirming the Partial Final Award. Partial Final Award at p. 23, Exhibit1. In

Stolt-Nielsen the Supreme Court addressed the same "gateway matter" of whether the arbitration

could proceed as a class action that is at issue in this case. The Supreme Court, before ruling on the

merits, held that the courts have jurisdiction to decide this gateway issue because "under the FAA,

a party to an arbitration agreement may petition a United States district court for an order directing

that ‘arbitration proceed in the manner provided for in such agreement." 130 S. Ct. at 1773, quoting

Federal Arbitration Act, 9 U.S.C. § 4.

Stolt-Nielsen held that the agreements of the parties, ascertained by the parties’ intent, is


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2 Nevada law, which governs the agreement, provides that any award made in an arbitral proceedingmay be vacated by the court if the “arbitrator exceeded his powers.” N.R.S. § 38.241 (1)(d).

3 The Supreme Court declined to rule on whether “manifest disregard” of the law is an independentgrounds for vacating an arbitration award but held that “[a]ssuming, arguendo, that such a standardapplies, we find it satisfied.” 130 S. Ct. at 1768, n. 3. The “manifest disregard” standard is satisfiedin this case for the same reasons as in Stolt-Nielsen: the Arbitrator failed to apply the state lawdefault rule, failed to follow controlling Supreme Court precedent and ignored the undisputedevidence of the parties’ intent.


paramount and that, when an arbitrator ignores the parties’ agreement, the arbitrator exceeds his

powers. As the Supreme Court explained, because arbitration is matter of consent, an arbitrator’s

power is all derived from and defined by the parties agreement. Accordingly, an arbitration decision

contrary to the parties’ agreement "exceeded [his] powers" Id. at 1776. 9 U.S.C. §10(a)(4) authorizes

a district court to “make an order vacating the award upon the application of any party to the

arbitration ... where the arbitrators exceeded their powers.” Id. Where, as here, the Arbitrator

“exceeded his powers”, the Court has the power under § 10(a)(4) of the FAA to reverse this error.2

Under Stolt-Nielsen, where, as here, the Arbitrator fails to correctly enforce the agreement

of the parties regarding class arbitration, immediate judicial review of the interlocutory gateway

arbitration decision is appropriate. Consistent with this ruling, there can be no doubt that this Court

has the jurisdiction and power to issue an order vacating the Partial Final Award.3

III. THE STOLT-NIELSEN DECISION

In Stolt-Nielsen, the United States Supreme Court held that class arbitration was not permitted

under an arbitration provision in a “charter party” standardized maritime commercial contract

covering the shipment of certain goods negotiated among highly sophisticated commercial parties.

The charter party contract was not drafted by either party and was not a consumer or investment

contract. The charter contract was one of many standard maritime shipping agreements selected at

arms length by commercial parties. That agreement was not a contract of adhesion unilaterally

imposed on Animalfeeds, the party who later brought an antitrust class action against Stolt-Nielsen

S.A. and other commercial shippers. Indeed, the Supreme Court noted that the plaintiff, Animalfeeds,


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284Emphasis added unless otherwise stated.


was the contracting party who chose the governing charter party contract. 130 S.Ct. at 1764.

Animalfeed subsequently brought an antitrust action against Stolt-Nielsen S.A. and other

shipping companies. After, the defendants successfully moved to compel arbitration, Animal Feed

filed a demand for class arbitration and the issue of class arbitration was briefed and argued by the

parties pursuant to Rule 3 of the AAA’s Supplementary Rules for Class Arbitration (“Class Rules”).

Id. at 1765-66.

At the hearing the shippers presented “undisputed evidence that the Vegoilvoy charter party

[contract] had ‘never been the basis of a class action...." Id. at 1769. The shippers also proffered

uncontradicted expert opinion evidence that "sophisticated, multinational commercial parties of the

type that are sought to be included in the class would never intend that the arbitration clauses would

permit a class arbitration." Id. Stolt-Nielsen held that the silence of an arbitration provision on the

issue of class actions creates an ambiguity, which must be resolved in accordance with the state law

default rule regarding consolidation of arbitration claims and extrinsic evidence of the parties' intent.

Id. at 773-74. To resolve this ambiguity, the Supreme Court relied on the default rule governing

consolidation of arbitrations rather than any default rule specifically applicable to class arbitration.

130 S.Ct at 1769 and n. 5. In determining the controlling default rule, the Court relied on “court cases

denying consolidation of arbitrations.” where the agreement was silent and the fact that that “these

decisions were available to the parties when they entered into their contracts.” Id. at 1769 and n. 5.4

The Supreme Court in Stolt-Nielsen, reaffirmed the fundamental rule that the ultimate

touchstone for interpreting an arbitration contract, including an arbitration contract that was silent on

the issue of whether class actions were allowed was the intent of the parties who negotiated the

contract. Id. at 1774. The Court also reaffirmed the rule that the arbitration provision’s silence about

class action created an ambiguity, which presented a question of fact which had to be resolved on a

case-by-case basis under the applicable state law principles of contract construction, which in

Stolt-Nielsen was New York and maritime law. “Under both New York law and general maritime law,

evidence of “custom and usage” is relevant to determining the parties' intent when an express


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

As a result, applying New York and maritime law to resolve the contractual ambiguity, the

Supreme Court held that the arbitration clause between merchants was only intended by them to apply

to bilateral commercial disputes as there was no evidence that either merchant intended or expected

the arbitration provision to apply to class actions when the contract was signed. 0As the Supreme

Court held, the contract’s silence regarding class-wide arbitration created an ambiguity and “[u]nder

both New York law and general maritime law, evidence of "custom and usage" is relevant to

determining the parties' intent when an express agreement is ambiguous.” Id. at 1769, n. 6. The

arbitrators in Stolt-Nielsen therefore erred in ruling that class arbitration was permitted because they

failed to apply New York law and maritime law requiring analysis of "custom and usage" to resolve

the ambiguity and because they ignored the undisputed custom usage evidence, that class arbitration

had never been allowed under this standard contract. Id. .

Animalfeeds presented no evidence of any default rule allowing consolidation of claims where

the agreement was silent. Animalfeeds also submitted no evidence that class litigation was expected

or intended by either party, which intention would have been contrary to the well-established industry

custom and prevailing admiralty law. In fact the parties stipulated that there was no agreement on

class arbitration. “Counsel for AnimalFeeds explained to the arbitration panel that the term ‘silent’

did not simply mean that the clause made no express reference to class arbitration. Rather, he said,

‘[a]ll the parties agree that when a contract is silent on an issue there's been no agreement that

has been reached on that issue.’" Id. at 1766.

The Supreme Court held that because the parties had stipulated that there was not agreement

to arbitrate class claims the arbitrator should have determined the default rule governing arbitration

provisions where the parties had reached no agreement on the issue:

Because the parties agreed their agreement was “silent” in the sense that they had notreached any agreement on the issue of class arbitration, the arbitrators' proper taskwas to identify the rule of law that governs in that situation. Had they engaged inthat undertaking, they presumably would have looked either to the FAA itself or to oneof the two bodies of law that the parties claimed were governing, i.e., either federalmaritime law or New York law.

Id. at 1768.


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The Supreme Court held that to identify this governing rule of law, the arbitrators should have

looked to “court cases denying consolidation of arbitrations.” Id. at 1769.

Ignoring the default rule governing consolidation of claims where the arbitration provision

was silent, the panel instead relied on AAA awards allowing class-wide arbitration of consumer cases

where the arbitration provision was silent and “[p]erceiving a post- Bazzle consensus among

arbitrators that class arbitration is beneficial in "a wide variety of settings," the panel considered only

whether there was any good reason not to follow that consensus in this case.” Id. at 1769.

As the Supreme Court observed, the panel’s reliance on these post-Bazzle arbitral decisions

confirmed that “the panel’s decision was not based on a determination regarding the parties’

intent” because all of these arbitral awards were issued after the parties had entered into the charter

party contracts. Id. at 1768 and n. 4.

The Stolt-Nielsen decision is clear that the requirement that the ambiguity of an arbitration

clause must be resolved under state law and analysis of the parties’ intent and expectations.

Accordingly, while the panel in Stolt-Nielsen had erroneously assumed that class arbitration was

always permitted under Bazzle where the contract was silent, it would be equally erroneous to argue

that silence means that class arbitration is never the parties’ intent.

As the Supreme Court noted, even where the contract is silent there may be a

contractual basis to “support a finding that the parties agreed to authorize class-action

arbitration.” Id. at 1776, n. 10. This is a case where both the actual intent of the parties, the

applicable Nevada law governing construction of ambiguous contracts, and the Nevada default rule

allowing consolidation of arbitration claims where the contract is silent all compel a finding that the

parties agreement to arbitrate was intended to include class arbitration.

The charter party contract in Stolt-Nielsen was not a contract of adhesion because the contract

was negotiated among sophisticated commercial companies and was selected by the plaintiff,

Animalfeeds. The Agreement here, on the other hand, was drafted by Respondents and imposed on

Claimants on a take-it-or-leave it basis without any opportunity to negotiate. See Declaration of Mary

Ann Sussex ¶3 [Doc. No. 22-6]; Declaration of Mitchell Pae ¶3 [Doc. No. 22-7]; Declaration of

Malcolm Nicholl ¶3 [Doc. No. 22-8]; Declaration of Sandy Scalise ¶3 [Doc. No. 22-9]; Declaration


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285 True and correct copies of these Declarations are attached to the Blum Dec. as Exhibits 3-10.


of Ernesto Valdez, Sr. ¶3 [Doc. No. 22-10]; Declaration of Ernesto Valdez, Jr. ¶3 [Doc. No. 22-11];

Declaration of John Hanson ¶3 [Doc. No. 22-12]; and Declaration of Elizabeth Hanson ¶3 [Doc. No.

22-13].5 Nevada law requires the ambiguity to be resolved against Respondents, as the parties

drafting the contract. Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. 212, 215-16 (2007).

IV. THE ARBITRATOR EXCEEDED HIS AUTHORITY BY REFUSING TO FOLLOWTHE SUPREME COURT’S DECISION IN S KEATING AND IGNORING NEVADA’S“DEFAULT RULE” WHICH PERMITS CONSOLIDATION OF ARBITRATIONCLAIMS UNLESS THE AGREEMENT PROHIBITS CONSOLIDATION

In Stolt-Nielsen, the Supreme Court ruled that where an arbitration agreement is silent

regarding class arbitration, the arbitrator must look to the applicable state law “default rule” governing

consolidation of arbitration claims. 130 S.Ct at 1768-69. Finding that class arbitration is subject to

the rules governing claims consolidation, the Supreme Court relied on a default rule against

consolidation of arbitration claims in holding that class arbitration was not allowed in that case. Id.

In non-admiralty cases like this one, where the Agreement states that it is governed by Nevada law

and the arbitration agreement is silent, the arbitrator must look to the Nevada default rule governing

arbitration claims consolidation.

Nevada’s ‘default rule’ is codified in N.R.S. 38.224 which provides:

1. Except as otherwise provided in subsection 3, upon motion of a party to anagreement to arbitrate or to an arbitral proceeding, the court may order consolidationof separate arbitral proceedings as to all or some of the claims if:

(a) There are separate agreements to arbitrate or separate arbitral proceedingsbetween the same persons or one of them is a party to a separate agreement to arbitrateor a separate arbitral proceeding with a third person;

(b) The claims subject to the agreements to arbitrate arise in substantialpart from the same transaction or series of related transactions;

(c) The existence of a common issue of law or fact creates the possibility ofconflicting decisions in the separate arbitral proceedings; and

(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 opposingconsolidation.

2. The court may order consolidation of separate arbitral proceedings as to some claimsand allow other claims to be resolved in separate arbitral proceedings.


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6 By enacting N.R.S. 38.224, the Nevada legislature has thus created an identifiable default ruleallowing consolidation of arbitration claims unless a contrary intent is expressed in the arbitrationagreement. This Nevada default rule requires a different result than in Stolt-Nielsen where theSupreme Court relied on case law prohibiting consolidation of claims where the agreement wassilent. Because the Agreement here does not express any intent to prohibit class actions, the Nevadadefault rule is controlling.

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 isconstrued as allowing class arbitration in the absence of express consent, the panel proceeded as ifit had the authority of a common-law court to develop what it viewed as the best rule to be appliedin such a situation. Id. at 1768-69. To determine the “default rule”, the Supreme Court ruled that


3. The court may not order consolidation of the claims of a party to an agreementto arbitrate if the agreement prohibits consolidation.

N.R.S. 38.224 clearly provides that consolidation of arbitral claims may be ordered unless “the

agreement prohibits consolidation.” Since the Agreement here does no prohibit consolidation, the

Nevada default rule applies and consolidated class arbitration must be allowed.

In Exber, Inc. v. Sletten Const. Co., 92 Nev. 721, 731-32 (1976), the Nevada Supreme Court

held that arbitration claims could be consolidated where the arbitration provision was silent on the

issue. Consolidation by State Court of Arbitration Proceedings Brought Under State Law 31

A.L.R.6th 433 §8 (2008) identifies Nevada as among the states with a default rule allowing

consolidation where agreement is silent, citing Exber, Inc. v. Sletten Const. Co.6

N.R.S. 38.224 provides the default rule applicable in this case. N.R.S. 38.224 allows

consolidation of claims and permits consolidated class arbitration where, as here, it is not specifically

prohibited in the Agreement. As a result, this default rule distinguishes this case from

Stolt-Nielsen and here requires class-wide arbitration.

The Stolt-Nielsen decision requires arbitrators and the courts to look to the state default rule

for consolidation of arbitration claims in deciding whether arbitration agreements should be construed

as allowing arbitration of class claims. Stolt-Nielsen S.A., 130 S.Ct at 1773.

The Stolt-Nielsen Court itself relied on the default rule governing “consolidation of

arbitrations” rather than any default rule specifically applicable to class arbitration. 130 S.Ct at 1768-

69 and n. 5.7 This makes perfect sense, because class actions are a form of claim consolidation and


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the arbitrators should have followed “court cases denying consolidation of arbitrations” which“decisions were available to the parties when they entered into their contracts.” Id. at 1769 and n.5.


accordingly are governed by the same default rule. See Independent Ass'n of Mailbox Center

Owners, Inc. v. Superior Court, 133 Cal.App.4th 396, 408 (2005) (relying on California’s default rule

for class arbitrations where the agreement is silent in reversing denial of consolidation of arbitration

claims where the agreement was silent.); Ashe v. Swenson, 397 U.S. 436, 456 (1970) ("Rule 23

permits the consolidation of separate claims in a class action").

Nevada’s default rule for silent arbitration agreements is consistent with Nevada’s

broader rule presuming that a party does not intend to waive judicial rights and remedies absent

express language to the contrary. See e.g., Lowe Enterprises Residential Partners, L.P. v. Eighth

Judicial Dist., 118 Nev. 92, 100 (2002) (contractual waiver of right to jury trial must be clear and

entered into knowingly, voluntarily and intentionally). Recently, the district court in Louisiana Health

Service Indem. Co. v. Gambro A B, --- F.Supp.2d ----, 2010 WL 5256805, *1, *7 (W.D. La. Dec. 21,

2010) recently applied Louisiana law that “waiver of a right must be clear and unambiguous” in

holding that Stolt-Nielsen permitted under an arbitration provision that was silent on the issue.

The arbitrator acknowledged that Nevada has a default rule allowing consolidation of claims

in arbitration where the agreement is silent, but erroneously ruled that this default rule was irrelevant

because class certification was different from consolidation of claims. See Partial Final Award at pp.

15-16. That ruling ignores the fact that the Stolt-Nielsen decision requires arbitrators and the courts

to look to the state default rule for consolidation of arbitration claims in deciding whether arbitration

agreements should be construed as allowing arbitration of class claims. Stolt-Nielsen S.A., 130 S.Ct

at 1773. The Supreme Court also acknowledged that the default rule for consolidation of arbitration

claims was analogous authority relevant to the issue of arbitration of class claims in Southland Corp.

v. Keating, 465 U.S. 1 (1984):

The California Supreme Court cited "[a]nalogous authority" supportingconsolidation of arbitration proceedings by federal courts. E.g., CompaniaEspanola de Petroleos, S.A. v. Nereus Shipping, S.A., 527 F.2d 966, 975 (CA2 1975),cert. denied, 426 U.S. 936, 96 S.Ct. 2650, 49 L.Ed.2d 387 (1976); In reCzarnikow-Rionda Co., 512 F.Supp. 1308, 1309 (SDNY 1981). This, along with


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8 The Supreme Court recognized that the default rule for consolidation of arbitration claims wasanalogous authority relevant to the issue of arbitration of class claims “[S]upport by other statecourts and the California legislature for consolidation of arbitration proceedings permitted thecourt to conclude that class action proceedings were authorized.” Id. at 9, n. 4. Although theSupreme Court reversed the California Supreme Court’s decision in Southland in part on othergrounds, it did not disagree with the California’s Supreme Court’s reliance on the authority allowingconsolidation of arbitration claims where the agreement was silent in holding that the Californiadefault rule allowed class actions where the arbitration agreement was silent

9 Nothing in Stolt-Nielsen is even arguably inconsistent with the Supreme Court’s holding inSouthland Corp. v. Keating. The dicta in Stolt-Nielsen discussed the differences between classactions and individual actions not the differences between consolidation and class certification ofarbitral claims. Moreover, the Arbitrator’s erroneous conclusion that Stolt-Nielsen silently overruledSouthland Corp. v. Keating ignores the fact that the Stolt-Nielsen actually followed Keating bylooking to the default rule for consolidation of arbitral claims in determining the analogous defaultrule for class arbitration. 130 S.Ct at 1768-69 and n. 5.


support by other state courts and the California legislature for consolidation ofarbitration proceedings permitted the court to conclude that class actionproceedings were authorized.

Id. at 9, n.4 quoting, Keating v. Superior Court, 645 P.2d 1192, 1209 (Cal. 1982).8

The Arbitrator acknowledged that the United States Supreme Court held in Southland Corp.

v. Keating, 465 U.S. 1, 9 n.4 (1984) that a state's default rule allowing consolidation of claims where

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

arbitration where the agreement was silent. Partial Final Award at pp. 12-14. The Arbitrator refused

to follow the controlling precedent of Keating because the Arbitrator believed that it was inconsistent

with dicta in Stolt-Nielsen regarding differences between class actions and individual actions. Id. at

pp. 14-16.9 The Arbitrator's failure to follow Keating violated the fundamental rule that the Supreme

Court does not overrule its own precedents sub silentio. Agostini v. Felton, 521 U.S. 203, 237 (1997):

"We reaffirm that if a precedent of this Court has direct application in a case, yet appears to rest on

reasons rejected in some other line of decisions, the Court of Appeals should follow the case which

directly controls, leaving to this Court the prerogative of overruling its own decisions." Id. The

Arbitrator exceeded his authority by refusing to follow controlling Supreme Court precedent based

on his own mistaken notion that Southland Corp. v. Keating was no longer good law. The Arbitrators'

rejection of Nevada's default rule that arbitration claims may be consolidated absent an express


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contractual prohibition requires that the award be vacated.

V. DEFENDANTS WERE JUDICIALLY ESTOPPED FROM CLAIMING THATARBITRATION OF PLAINTIFFS’ CLASS CLAIMS IS NOT PERMITTED UNDERTHE AGREEMENT

Respondents, in their original pre-Stolt-Nielsen Motion to Compel Arbitration in this case,

argued that their arbitration clause puts the parties on an equal footing because "The clause does not

bar class actions.” [Doc. No. 17, at 20:12-13]. Having taken the position that class action may be

arbitrated as part of their successful motion to compel arbitration, Respondents are now judicially

estopped from arguing post- Stolt-Nielsen that the arbitration clause does not allow class arbitration.

Judicial estoppel prevents a party from playing "fast and loose" with the courts by taking a

position in litigation inconsistent with a position on which he earlier succeeded. New Hampshire v.

Maine, 532 U.S. 742, 749(2001).

Judicial estoppel applies when the following five criteria are met:

“(1) the same party has taken two positions; (2) the positions were taken in judicial orquasi-judicial administrative proceedings; (3) the party was successful in asserting thefirst position (i.e., the tribunal adopted the position or accepted it as true); (4) the twopositions are totally inconsistent; and (5) the first position was not taken as a result ofignorance, fraud, or mistake.”

Marcuse v. Del Webb Communities, Inc., 123 Nev. 278, 287 (2007).

Respondents are unable to show that any of the five elements of judicial estoppel are not

satisfied in this case. See Marcuse v. Del Webb Communities, Inc., 123 Nev. 278, 287 (2007).

1) There can be no dispute that Respondents have taken inconsistent positions. In moving to

compel arbitration of this class action in federal court, Respondents took the position that the

Agreement did not bar arbitration of class claims but now argue that arbitration of class claims is

barred under the Agreement; 2) It is uncontested that Respondents took these positions in judicial

or quasi-judicial administrative proceedings; 3) Respondents succeeded in federal court by obtaining

an order requiring Claimants to arbitrate all their claims including their class claims; 4) Respondents’

current position is totally inconsistent with Respondents’ position in their motion to compel

arbitration; and 5) “the record fails to indicate that [Respondents] took [their] first position as a

result of ignorance, fraud, or mistake” Marcuse, 123 Nev. at 288.


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In Marcuse, the Nevada Supreme Court held that a developer defendant was judicially

estopped from asserting that the homeowners' construction defect action was precluded by res judicata

by the settlement of a class action in which homeowners were unnamed members, where developer

took an inconsistent position in the class action by opposing the home purchasers' motions to

consolidate their claims with those of the class and for a separate trial in the class action when

developer asserted that the homeowners could file a separate action to address their claim. Id. at 288.

Just as the developer defendant in Marcuse was estopped from denying that home purchasers could

bring individual actions after a class action settled, here Respondents are estopped from denying that

Plaintiffs’ class claims are subject to arbitration by its earlier position that nothing precludes

arbitration of the class claims.

In Hicks v. Cadle Co., 2010 WL 4595711 (D. Colo. Nov. 4, 2010), the federal court recently

held that judicial estoppel prevented a defendant from asserting that the arbitrator lacked jurisdiction

over the claims against him in and distinguished Stolt-Nielsen on the basis that there was no issue of

judicial estoppel in that case

In Stolt-Nielsen, the United States Supreme Court held that an arbitration panel maynot infer the parties' assent to class-action arbitration where the arbitration agreementis silent on the issue, since "class-action arbitration changes the nature of arbitrationto such a degree that it cannot be presumed the parties consented to it by simplyagreeing to submit their disputes to an arbitrator." While the Court, in so holding,relied upon established precedent articulating the "consensual nature of private disputeresolution" and the duty of courts and arbitrators to "give effect to the intent of theparties," the Court in no part addressed the application of judicial estoppel oragency to the arbitrability of claims. Stolt-Nielsen does not undermine the TenthCircuit's determination in this case that Cadle is bound by the arbitration clause basedupon principles of judicial estoppel and agency

Id. at *4.

Here, as in Hicks, Respondents can take no refuge in the language in Stolt-Nielsen about the

“consensual nature” of arbitration because Respondents are estopped by the position they took in

federal court when successfully moving to compel arbitration.

Similarly, in Data Mountain Solutions, Inc. v. Giordano, 680 F.Supp.2d 110, 126 (D .D.C.

2010), the defendant represented to the Court that all matters in the complaint were arbitrable.

Mr. Giordano's current claim that those issues were not within the jurisdiction of thearbitrator is a direct contradiction of his prior representations to this Court. If theCourt were to permit Mr. Giordano to espouse such obviously inconsistent


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10 Respondents also argued that judicial estoppel does not apply because the position taken byRespondents was not relied upon by the Court since the Nevada Supreme Court in KJH did not reachthe issue of substantive unconscionability based on its finding that there was no proceduralunconscionability. In other words, Respondents argue that the availability of class action arbitrationaffects only substantive not procedural unconscionability and Respondents’ position that classarbitration was not barred could not therefore have affected the outcome of the motion to compelarbitration. To the contrary, as the Nevada Supreme Court held in D.R. Horton, Inc. v. Green, 120Nev. 549, 558-9 (2004), an arbitration provision in a real estate sales contract was procedurallyunconscionable where it was "inconspicuous, one-sided and failed to advise the real estate


arguments and then accepted his current position on the merits, Mr. Giordanowould receive an undeserved advantage while inflicting an unfair burden on thepetitioners.

Id. at 128.

Respondents argued that judicial estoppel does not apply because Stolt-Nielsen changed the

law and justifies Respondents’ inconsistent positions. No Nevada case has ever applied this purported

exception to judicial estoppel. Arizona v. Shamrock Foods Co., 729 F.2d 1208, 1215-16 (9th

Cir.1984), the federal case Respondents cite, is easily distinguishable. Here, the representation was

one of fact not law and Stolt-Nielsen did not change any facts.

In moving to compel arbitration, Respondents made the tactical decision to take the position

that the Agreement permitted class arbitration in order to avoid the substantial authority holding that

a class action bar renders the provision unenforceable. Respondents’ recent tactical decision to take

a contrary position in an attempt to exploit the Stolt-Nielsen decision does not allow them to escape

judicial estoppel. See American Honda Motor Co., Inc. v. Richard Lundgren, Inc., 314 F.3d 17, 21

(1st Cir. 2002) (distinguishing Shamrock and holding that defendant was not entitled to relief from its

position in a prior related lawsuit “even though intervening change in law had arguably occurred, since

dealer could have made legal arguments in prior suit that it wished to make in current suit, but

tactically choose not to do so.” ).

Here, by the same token, Respondents could have asserted as a matter of fact that class

arbitration was barred when moving to compel arbitration but tactically choose not to do so. See also

Whaley v. Belleque, 520 F.3d 997 (9th Cir. 2008) (judicial estoppel “applies to a party's legal as well

as factual assertions” and “precludes a party from gaining an advantage by taking one position, and

then seeking a second advantage by taking an incompatible position.”)10


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purchaser that significant rights under Nevada law would be waived by agreeing toarbitration." The right to bring a class action is a significant right under Nevada law. Accordingly,if Respondents had asserted that the Agreement silently prohibited class arbitration, both proceduraland substantive unconscionability would have been affected.


This is a text-book example for the application of judicial estoppel in order to “prevent the

perversion of the judicial process.” New Hampshire v. Maine, 532 U.S. at 750. The Arbitrator’s

failure to apply judicial estoppel also requires that the award be vacated.

VI. THE ARBITRATOR IGNORED THE UNDISPUTED EVIDENCE OF THE PARTIES’INTENT AND REASONABLE EXPECTATIONS WHICH IS DETERMINATIVEUNDER STOLT-NIELSEN

As Stolt-Nielsen held, that the ultimate touchstone for interpreting an arbitration agreement

was the intent and expectation of the parties to the contract. Stolt-Nielsen reaffirmed the rule that the

touchstone for arbitration clause construction is the intent and expectations of the parties:

Whether enforcing an agreement to arbitrate or construing an arbitration clause, courtsand arbitrators must "give effect to the contractual rights and expectations of theparties." Volt, supra, at 479, 109 S.Ct. 1248. In this endeavor, "as with any othercontract, the parties' intentions control." Mitsubishi Motors Corp. v. SolerChrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).

Id. at 1773-74.

Under Nevada law the fundamental goal of contract interpretation is also to “effectuate the

intent of the parties”Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. 212, 215 (2007). Stolt-Nielsen

reaffirmed the rule that the arbitration provision’s silence about class action created an ambiguity,

which presented a question of fact which had to be resolved on a case-by-case basis under the

applicable state law principles of contract construction. 103 S. Ct.. at 1768-69 and n. 6.

Here there is direct evidence of Respondents’ intent. In moving to compel arbitration they

candidly stated: “The clause does not bar class actions.” Defendant’s Motion to Compel Arbitration

at page 20 lines 12-13 [Doc. No.17].

The language of the arbitration provision also supports the parties’ expectation that class-wide

arbitration was part of the agreement. Respondents also manifested the intent that the arbitration

agreement include class arbitration. Here, the Agreement expressly provides that the parties, in


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agreeing to arbitrate, gave up certain enumerated rights such as the right to seek punitive damages

and the right to unlimited discovery. Agreement ¶ 24.10. The fact that the right to bring a class action

was not included among such-expressly waived rights further compels a finding that Respondents

intended to agree to class arbitration under the doctrine of expressio unius est exclusio alterius. See

Nevada Food King, Inc. v. Reno Press Brick Co., supra, 81 Nev. 135, 138 (1965).

The Agreement broadly requires arbitration of “any dispute related to this Agreement

(including, but not limited to the interpretation of enforceability of this Agreement.” Agreement ¶

24.10, Exhibit 2. The Agreement also provides that the “arbitrator shall have the authority to award

any remedy of relief that a court of the State of Nevada could grant in conformity to the applicable law

except that the arbitrator shall have no authority to award punitive damages. Id. That broad grant of

authority gives the arbitrator the same remedial powers as a Nevada court, which necessarily includes

the power to adjudicate class actions and grant class-wide remedies. The language providing that

punitive damages are not allowed, supports the expectation that only legal rights and remedies

specified in the agreement will not be allowed in arbitration – and the class action remedy is not

mentioned.

Respondents knowingly selected the AAA as the arbitral venue after Green Tree Financial

Corp. v. Bazzle, 539 U.S. 444 (2003) was decided and after AAA arbitrators had issued a series of

interlocutory awards consistently ruling that class arbitration was allowed where the contract was

silent on the issue. Defendants’ attorneys, who drafted the arbitration provision in the Agreement and

in the Agreement offer no evidence or assertion that they were unaware of these arbitral decisions

when the Agreement was executed.

Indeed, in light of these publicly-available AAA decisions, Respondents could not

possibly have expected that class arbitration would be prohibited by the AAA arbitrator

deciding the issue. Respondents cannot dispute that, by the time the Agreement was executed, the

AAA had essentially developed its own default rule permitting class arbitration where the agreement

was silent and that Respondents knew, or should have known, this when it chose AAA arbitration in


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


an arbitration provision silent on the class issue.11.

The Stolt-Nielsen Court’s factual determination that the parties in that case could not possibly

have expected or intended that their arbitration agreement would include class actions was based on

evidence that "sophisticated, multinational commercial parties of the type that are sought to be

included in the class would never intend that the arbitration clauses would permit a class arbitration."

130 S.Ct. at 1769. In fact, in Stolt-Nielsen the plaintiff actually admitted that there had been no

agreement to arbitrate class actions. Id. at 1766. Here, by contrast, Claimants have never stipulated

or admitted that there was no agreement to arbitrate class claims and the extrinsic evidence clearly

shows that both Claimants and Respondents expected and intended that class claims would be

arbitrated.

This evidence that all parties understood that class-wide arbitration would be permitted under

the Agreement compels construction of the Agreement as allowing class-wide arbitration. The

Arbitrator exceeded his authority by disregarding the undisputed evidence.

VII. CONCLUSION

For the foregoing reasons, Plaintiffs respectfully submit that the Partial Final Clause

Construction Award should be vacated.




Robert B. Gerard, Esq.Gerard & Associates


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2840 South Jones Blvd.Building D, Unit 4Las Vegas, Nevada 89146Telephone: (702) 251-0093Facsimile: (702) 251-0094





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NOTICE OF MOTION AND MOTION FOR RECONSIDERATION OF ORDER COMPELLING ARBITRATIONCASE NO.: 2: 08-cv-00773





DISTRICT OF NEVADA


Plaintiffs,vs.


Defendants.

))))))))))))))))))


NOTICE OF MOTION AND MOTIONFOR RECONSIDERATION OF ORDERCOMPELLING ARBITRATION



Case 2:08-cv-00773-RLH-PAL Document 86 Filed 03/24/11 Page 1 of 2

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NOTICE OF MOTION AND MOTION FOR RECONSIDERATION OF ORDER COMPELLING ARBITRATIONCASE NO.: 2: 08-cv-007731

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

Please take notice that, before the Honorable Roger L. Hunt, Judge for the United States

District Court for the District of Nevada on a date and time to be set by the Court, Plaintiffs Mary

Ann Sussex, Mitchell Pae, Malcolm Nicholl, Sandy Scalise, Ernesto Valdez, Sr., Ernesto Valdez,

Jr., John Hanson and Elizabeth Hanson (“Plaintiffs”) will and hereby do move for an order granting

reconsideration of the Court’s prior order compelling arbitration. This motion is based upon this

notice, the accompanying Memorandum of Points and Authorities and the Declaration of Norman

Blumenthal with exhibits thereto, along with the pleadings and documents contained in the Court’s

record.




Robert B. Gerard, Esq.Gerard & Associates2840 South Jones Blvd.Building D, Unit 4Las Vegas, Nevada 89146Telephone: (702) 251-0093Facsimile: (702) 251-0094




Case 2:08-cv-00773-RLH-PAL Document 86 Filed 03/24/11 Page 2 of 2

motion to vacate arbitration and supporting documents in consumer lawsuit against mgm turnberry

Documents

nevada state bar

nevada llc mgm mirage

blumenthal norman

nevada corporation defendants

blumenthal robert

arbitration ruling case

plaintiffs notice of

support of motion