This case involves an appeal to the Ninth Circuit Court of Appeals by Appellants Schilling Livestock, Inc., Kenneth Schilling and Lesley Schilling (collectively, the “Schillings”), of a Montana federal district court’s order confirming an arbitration award in favor of Appellee Umpqua Bank, FKA Sterling Savings Bank (“Sterling”). On appeal, the Schillings contended that the arbitration award should be vacated on two grounds: 1) that the arbitrators engaged in misconduct by allowing Sterling to rely on an undisclosed defense premised on the Gramm-Leach-Bliley Act (“GLBA”); and 2) that Sterling’s expert falsely testified that Sterling was not liable for fraudulent investment advice due to a networking exception to the GLBA.
The Ninth Circuit held that the Schillings failed to meet the high standard for vacating an arbitration award. First, the Court noted that the Schillings’ assertion that they were deprived of adequate notice of Sterling’s reliance on the GLBA defense was not supported by the record. The Court further noted that the district court correctly found that the Schillings opened the door to Sterling’s introduction of a rebuttal witness concerning the bank’s statutory duties, and that they were afforded an opportunity to submit supplemental briefing on the GLBA defense, but did not do so. Thus, the Court held that the arbitrators did not engage in misconduct in permitting rebuttal expert testimony regarding the GLBA defense, and that the arbitrators’ decision did not deprive the Schillings of a fair hearing. The Ninth Circuit also found that the record did not support the Schillings’ argument that Sterling’s expert falsely testified concerning the GLBA defense. Rather, it noted that the district court found that the expert responded to an ambiguous question and did not otherwise provide false testimony. The Court further noted that the arbitrators’ award did not refer to the expert’s testimony in finding that Sterling was not liable. Thus, the Ninth Circuit held that the Schillings failed to demonstrate by clear and convincing evidence that any fraud or false testimony warranted vacating the arbitration award. Based on the foregoing, the Ninth Circuit affirmed the Montana district court’s order confirming the arbitration award.
Schilling Livestock, Inc. et al v. Umpqua Bank, FKA Sterling Savings Bank, No. 15-35995 (9th Cir. Dec. 28, 2017).
This post written by Jeanne Kohler.
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