Best Sunshine International, Ltd (Bvi) v. Commonwealth Casino Commission

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 28, 2023
• Docket: 22-16630
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUN 28 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

BEST SUNSHINE INTERNATIONAL, No. 22-16630 LTD (BVI), D.C. No. 1:22-cv-00007 Plaintiff,

and MEMORANDUM*

IMPERIAL PACIFIC INTERNATIONAL (CNMI), LLC,

Plaintiff-Appellee,

v.

COMMONWEALTH CASINO COMMISSION, as Agency of the Commonwealth of the Northern Mariana Islands,

Defendant-Appellant.

Appeal from the United States District Court for the District of the Northern Mariana Islands Ramona V. Manglona, Chief District Judge, Presiding

Argued and Submitted June 8, 2023 Honolulu, Hawaii

Before: BADE, BUMATAY, and SANCHEZ, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.

Panel The Commonwealth Casino Commission appeals the district court’s order

enjoining the Commission’s proceedings to revoke Imperial Pacific International,

LLC’s (“IPI”) casino-operating license and compelling the Commission to arbitrate

its contract dispute with IPI. We have jurisdiction under 9 U.S.C. § 16(a)(3).

Reviewing de novo, see Balen v. Holland America Line Inc., 583 F.3d 647, 652

(9th Cir. 2009), we reverse.

IPI contends that under the casino license agreement (“CLA”), it is entitled

to arbitrate its force majeure defense to the Commission’s license revocation

proceedings. The district court agreed with IPI, concluding that the plain language

of the CLA provides IPI with a contractual right to assert a force majeure defense

and therefore denying arbitration would deprive IPI of this defense. The district

court erred.

The CLA establishes a dispute resolution process that includes the option to

submit a disputed issue to non-binding arbitration: “Parties may submit the dispute

to the American Arbitration Association for non-binding arbitration in accordance

with applicable rules and limited by the terms of this License.” Significantly, the

CLA defines a “dispute” as “any and all disagreements(s) between the Parties as to

terms or requirements of this License Agreement excluding issues relating to . . .

proceedings regarding revocation or suspension of this license.” (emphasis added).

The dispute resolution provision later states again: “This process shall not be

2 applicable to License suspension and revocation proceedings . . . .” The plain

language of the CLA makes clear that license revocation proceedings are not

arbitrable disputes under the agreement. Those two limiting clauses would be

rendered meaningless if IPI could force the Commission into arbitration any time a

contractual dispute arises in a license-revocation proceeding. See N. Marianas

Hous. Corp. v. BankPacific, Ltd., 2021 MP 7, 22 (“[I]nterpreting a contract in a

way that renders at least one clause superfluous or meaningless . . . is not preferred

and will be avoided if possible.” (internal quotation marks removed)); CLA § 33

(“This License Agreement is to be interpreted under the laws of the

Commonwealth of the Northern Mariana Islands . . . .”).

Further, applying the arbitration provision to license-revocation proceedings

would allow IPI to circumvent the Commission’s license-revocation process

because the CLA allows parties to “submit the issue to the Commonwealth

Superior Court” immediately after completion of nonbinding arbitration. The plain

language of the CLA avoids this absurd result—the arbitration provision applies

“prior to the initiation of court proceedings.” (emphasis added). See Riley v.

Public Sch. Sys., 4 N. Mar. I. 85, 88 (1995) (“The intent of contracting parties is

generally presumed to be encompassed by the plain language of contract terms.”);

Manglona v. Baza, 2012 MP 4, 36 (“[W]e avoid contract interpretations that will

3 defy common sense or lead to absurd results.”).1

On appeal, IPI also contends that the CLA’s arbitration provision functions

as a delegation clause, leaving gateway questions of arbitrability to the arbitrator,

not the federal courts. For a delegation clause to be enforceable, “there must be

‘clear and unmistakable evidence that ‘the parties agreed to arbitrate arbitrability.’”

Caremark, LLC v. Chickasaw Nation, 43 F.4th 1021, 1029 (9th Cir. 2022). In

Brennan v. Opus Bank, 796 F.3d 1125 (9th Cir. 2015), we held that “incorporation

of the [American Arbitration Association] rules” meets the “clear and

unmistakable evidence” standard. Id. at 1130. The arbitration provision at issue in

that case, however, stated that disputes “shall be settled by binding arbitration in

accordance with the Rules of the American Arbitration Association.” Id. at 1128

(emphasis added); see also Caremark, 43 F.4th at 1026 (examining an arbitration

provision with similar features).

Here, the arbitration provision uses permissive language—the parties “may”

submit a dispute to arbitration, and it specifies that any such arbitration is “non-

binding.” The CLA’s use of the word “may” to describe the availability of

1 We disagree with the district court’s conclusion that the CLA’s force majeure clause would be “effectively nullif[ied]” if IPI is unable to submit its force majeure defense to arbitration in a revocation proceeding. The CLA provides several venues in which IPI can raise a force majeure defense. IPI may raise a force majeure defense in a revocation proceeding before the Commission, in an arbitration proceeding if the matter involves a covered “dispute” under the CLA, or in a civil proceeding before the Commonwealth Superior Court.

4 arbitration is all the more notable when compared to the other dispute-resolution

clauses of the CLA, which uniformly use the term “must” to require the parties to

perform other obligations. Furthermore, the phrase “in accordance with applicable

rules” leaves unanswered whether the “rules” to be applied are those of the

arbitrator or the CLA. Unlike Brennan and Caremark, where binding arbitration

was the exclusive process for the resolution of disputes in accordance with the

rules of the arbitration association, the arbitration clause here does not evince a

“clear and unmistakable” intent by the parties to delegate questions of arbitrability

to an arbitrator.

The district court’s order enjoining the Commission from proceeding with

license revocation proceedings against IPI and mandating arbitration is reversed,

and the matter is remanded to the district court for proceedings consistent with this

disposition.

REVERSED.2

2 IPI’s motions for judicial notice of materials outside the record are DENIED.