U.S. Supreme Court Allows to Stand a Landmark Appellate Court Ruling for Olympic Eagle Distributing that Protects the Right to a Fair and Impartial Judge in Arbitration
Olympic Eagle Distributing announced today that the United States Supreme Court allowed to stand a Ninth Circuit Court of Appeals (Ninth Circuit) ruling requiring arbitrators to disclose whether they have an ownership interest in their for-profit alternative dispute company.
The landmark decision protects the rights of parties to a fair and impartial judge or "neutral" in an arbitration hearing. It is the first decision in the country to require an arbitrator to disclose an ownership interest in a for-profit arbitration business.
"A fair and impartial judge is an essential right in arbitration and today's action by the Supreme Court upholds those important principles," said Shawn Bai, Chief Financial Officer at Olympic Eagle. "This is an important step to ensuring that thousands of businesses and consumers who are required to submit to arbitration will get a fair trial."
The decision stems from a 2006 dispute over an agreement between Olympic Eagle, and Monster Energy, to distribute the company's drinks for 20 years in an exclusive territory in Washington state. When Monster terminated the 20-year agreement 12 years early, as part of its $2.15 billion equity transaction with Coca-Cola Co., Olympic Eagle sought relief under the Washington Franchise Investment Protection Act, which prohibits termination prior to the end of the term without cause.
A JAMS arbitrator ruled in favor of JAMS' long-time and substantial client Monster Energy. After the district court confirmed the arbitration award, the Ninth Circuit vacated it, ruling that the arbitrator's failur to disclose an ownership interest in his for-profit company created the "appearance of partiality" as he didn't disclose the right to receive income from all of the 97 arbitration cases Monster Energy directed to the company.
The Ninth Circuit's decision also noted what the court called the "crucial fact-the Arbitrator's ownership interest-was not unearthed through public sources" and that "JAMS repeatedly stymied Olympic Eagle's efforts to obtain information about JAMS ownership structure and the Arbitrator's interest" after the arbitration award was entered.
In its ruling the Ninth Circuit panel wrote that the "proliferation of arbitration clauses in everyday life-including employment-related disputes, consumer transactions, housing issues and beyond-means that arbitration will often take place between unequal parties." The court noted that it is "simplicity itself, and no real burden, for an arbitrator to disclose his or her ownership interest in the arbitration company for which he or she works, as well as the organization's prior dealings with the parties to the arbitration."
Monster Energy-the maker of popular energy drinks-petitioned the Supreme Court to review the Ninth Circuit's decision. JAMS, the for profit arbitration service provider, filed its first ever amicus brief in the U.S. Supreme Court urging the Court to review and reverse the Ninth Circuit decision.
Olympic Eagle waived its right to respond to Monster Energy's petition and the Supreme Court did not ask for a response prior to denying it.
The landmark decision is the first to make clear that a judge or "neutral" in arbitration must disclose whether he or she is an owner in a for-profit organization like JAMS, the organization involved in the case, to avoid the appearance that an arbitrator may be partial to a party.
U.S. Circuit Judges Milan D. Smith Jr. and Michelle T. Friedland (dissenting) and U.S. District Judge Michael H. Simon sat on the panel for the Ninth Circuit.
Olympic Eagle is represented by Michael K. Vaska, Rylan Weythman and Devra Cohen of Foster Garvey P.C. in Seattle and Jonathan Solish and David A. Harford of Bryan Cave Leighton Paisner LLP in Los Angeles and Orange (News - Alert) County.
Monster Energy Company, fka Hansen Beverage Company, Petitioner, v. City Beverages LLC dba Olympic Eagle Distributing, U.S. Supreme Court No. 19-1333.
About Olympic Eagle Distributing
Olympic Eagle is a local family owned beverage wholesaler in Puyallup, WA. The company's 240 employees warehouse, sell, deliver and merchandise alcoholic and non-alcoholic beverages from in South King, Pierce, Kitsap, Thurston, Mason and Grays Harbor counties in Washington state to 2,500 retail accounts.