Bungie, Inc. v. aimjunkies.com

• Court: Court of Appeals for the Ninth Circuit
• Decided: August 26, 2024
• Docket: 23-35468
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 26 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

BUNGIE, INC., a Delaware corporation, No. 23-35468

Plaintiff-Appellee, D.C. No. 2:21-cv-00811-TSZ

v. MEMORANDUM* AIMJUNKIES.COM, a business of unknown classification; PHOENIX DIGITAL GROUP LLC, an Arizona limited liability company; JEFFREY CONWAY, an individual; DAVID SCHAEFER, an individual; JORDAN GREEN, an individual; JAMES MAY, an individual,

Defendants-Appellants.

Appeal from the United States District Court for the Western District of Washington Thomas S. Zilly, District Judge, Presiding

Submitted August 20, 2024** Portland, Oregon

Before: NGUYEN and JOHNSTONE, Circuit Judges, and EZRA,*** District

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable David A. Ezra, United States District Judge for the District of Hawaii, sitting by designation. Judge.

Bungie, Inc. (“Bungie”) filed suit against Appellants Aimjunkies.com,

Phoenix Digital Group LLC, Jeffrey Conway, David Schaefer, Jordan Green, and

James May (collectively, “AimJunkies”). AimJunkies moved to refer six of

Bungie’s nine causes of action to binding arbitration in accordance with Bungie’s

Limited Software License Agreement. Bungie’s other claims remain pending

before the District Court.

The Honorable Ronald E. Cox was the JAMS-appointed arbitrator. Judge

Cox (the “Arbitrator”) issued a Final Arbitration Award in the amount of

$4,396,222 against AimJunkies. The District Court confirmed the arbitration

award.

We have jurisdiction pursuant to 9 U.S.C. § 16(a), and this Court reviews

questions of law de novo and factual findings for clear error. First Options of Chi.,

Inc. v. Kaplan, 514 U.S. 938, 948 (1995).

AimJunkies contend that the Arbitrator violated JAMS Rule 22(e), which

provides that an “[a]rbitrator shall receive and consider relevant deposition

testimony recorded by transcript or videotape.” AimJunkies argue that the

Arbitrator denied them the ability to use prior deposition testimony for

impeachment purposes, and that the Arbitrator disallowed testimony from a prior

deposition. They contend that the district court should have vacated the arbitration

2 award pursuant to 9 U.S.C. § 10(a)(3), which provides for vacating awards “where

the arbitrators were guilty of misconduct . . . in refusing to hear evidence pertinent

and material to the controversy; or of any other misbehavior by which the rights of

any party have been prejudiced.” Alternatively, AimJunkies contend that the

district court should have vacated the award under § 10(a)(4), which provides for

vacating awards “where the arbitrators exceeded their powers.”

An arbitration award can be vacated under 9 U.S.C. § 10(a)(3) only if an

Arbitrator’s error was “in bad faith or so gross as to amount to affirmative

misconduct,” United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 40

(1987), and thus deprived the parties of a “fundamentally fair” hearing, Move, Inc.

v. Citigroup Glob. Mkts., Inc., 840 F.3d 1152, 1158 (9th Cir. 2016). We do not

review the correctness of the arbitrator’s procedural rulings; fundamental fairness

requires only that the arbitrator “give each of the parties to the dispute an adequate

opportunity to present its evidence and arguments.” Sunshine Mining Co. v.

United Steelworkers of Am., 823 F.2d 1289, 1295 (9th Cir. 1987).

Vacatur under § 10(a)(4) “is a high standard.” HayDay Farms, Inc. v.

FeeDx Holdings, Inc., 55 F.4th 1232, 1240 (9th Cir. 2022) (quoting Lagstein v.

Certain Underwriters at Lloyd’s, London, 607 F.3d 634, 641 (9th Cir. 2010)). The

arbitral award must “exhibit[] a manifest disregard of law” or be “completely

irrational.” Id.

3 Bungie’s case relied in part on the testimony of Dr. Edward Kaiser, Bungie’s

principal witness. Bungie called Dr. Kaiser during its case in chief before the

Arbitrator. On cross-examination, AimJunkies’ counsel asked Dr. Kaiser if he

recalled being deposed in both his personal capacity and as Bungie’s corporate

representative. AimJunkies’ counsel then asked, “Do you recall when I asked you

to identify all the technological measures that Bungie contends were compromised

by [Appellant] Phoenix Digital?” Bungie’s counsel objected “to the form of [the]

question” because AimJunkies did not include any Digital Millennium Copyright

Act (“DMCA”) topics in its Federal Rule of Civil Procedure 30(b)(6) deposition

notice to Bungie. Therefore, Bungie’s counsel argued, Dr. Kaiser’s “[Rule]

30(b)(6) testimony explicitly did not include anything on the [DMCA] violation”

because he was not required to be prepared on those topics. The Arbitrator

sustained the objection to form and invited AimJunkies’ counsel to “[a]sk another

question.” AimJunkies argue that this action amounted to the Arbitrator violating

JAMS Rule 22(e) by excluding and refusing to consider material evidence.

The District Court did not err in confirming the arbitration award. The

Arbitrator did not disallow any relevant testimony in instructing AimJunkies’

counsel to ask another question during the hearing. It is common practice to ask

counsel to ask another question or rephrase a question in response to an objection

to form. The Arbitrator did not entirely dismiss AimJunkies’ attempt or ability to

4 impeach Dr. Kaiser. For example, AimJunkies’ counsel could have tried to

rephrase its question, question Dr. Kaiser about his transcripts, or read Dr. Kaiser’s

transcripts into the record to impeach Dr. Kaiser. AimJunkies’ counsel did not

attempt to do so. Instead, counsel abandoned the line of questioning entirely. This

in no way amounts to an error under § 10(a)(3), especially not an error that was “in

bad faith or so gross as to amount to affirmative misconduct,” United

Paperworkers, 484 U.S. at 40, and thus deprived the parties of a “fundamentally

fair” hearing, Move, Inc., 840 F.3d at 1158. Nor did the Arbitrator exhibit “a

manifest disregard of law” or make a “completely irrational” award so as to

commit an error under § 10(a)(4). HayDay Farms, 55 F.4th at 1240.1

AFFIRMED.

1 The motion to stay enforcement of the arbitration award (Dkt. No. 26) is denied as moot.