United States v. Park Place Association

CourtCourt of Appeals for the Ninth Circuit
DecidedApril 22, 2009
Docket05-56235
StatusPublished

This text of United States v. Park Place Association (United States v. Park Place Association) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Park Place Association, (9th Cir. 2009).

Opinion

FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,  Plaintiff-Appellant, v. No. 05-56235 PARK PLACE ASSOCIATES, LTD., a  D.C. No. CV-04-08387-DT California limited partnership; GEORGE HARDIE; KARD KING, INC., a California corporation, Defendants-Appellees. 

UNITED STATES OF AMERICA,  Plaintiff-Appellee, v. No. 05-56312 PARK PLACE ASSOCIATES, LTD., a  D.C. No. CV-04-08387-DT California limited partnership; GEORGE HARDIE; KARD KING, INC., OPINION a California corporation, Defendants-Appellants.  Appeal from the United States District Court for the Central District of California Dickran M. Tevrizian, District Judge, Presiding

Argued May 10, 2007 Submitted April 15, 2009 Pasadena, California

Filed April 22, 2009

Before: Barry G. Silverman, Kim McLane Wardlaw, and Jay S. Bybee, Circuit Judges.

4665 4666 UNITED STATES v. PARK PLACE ASSOCIATES Opinion by Judge Bybee 4670 UNITED STATES v. PARK PLACE ASSOCIATES

COUNSEL

Peter D. Keisler, David M. Cohen, Franklin E. White, Jr., Civil Division, Department of Justice, Washington, DC, for the petitioner-appellant.

Christopher H. Buckley, Jr., Daniel W. Nelson, Thomas H. Dupree, Jr., Amir C. Tayrani, Gibson, Dunn & Crutcher, Washington, DC, for the respondents-appellees.

OPINION

BYBEE, Circuit Judge:

An arbitration panel in Los Angeles awarded Park Place Associates, Ltd. $93,612,892 against the United States, after a proceeding in which the United States declined to partici- pate. Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., where a controversy has been arbitrated pursuant to a valid arbitration provision and the arbitrator has made an award, the parties may seek to confirm, see 9 U.S.C. § 9, or to vacate, see 9 U.S.C. § 10, that award in the appropriate UNITED STATES v. PARK PLACE ASSOCIATES 4671 court. The District Court for the Central District of California denied the United States’ motion to vacate the award and granted Park Place’s motion to confirm the award.

Because we, no less than private parties, “must turn square corners” when we deal with the government as a litigant, Rock Island, A. & L. R. Co. v. United States, 254 U.S. 141, 143 (1920), we find that, under the unique circumstances presented here, the district court had jurisdiction over the United States’ motion to vacate, and we affirm the district court’s order denying that motion. However, we find that the district court had no authority to confirm the arbitration award against the United States and we vacate the district court’s order granting Park Place’s motion.1 We remand to the district court with instructions to dismiss the action to confirm as barred by sovereign immunity.

I. FACTS AND PROCEEDINGS

The events at issue span twenty years, resulted in congres- sional hearings, and involve litigation in three circuits. We are not sure if the appropriate literary metaphor belongs to Tol- stoy or to Kafka, but we are going to set forth the history of this case in some detail.

The contract and arbitration provision that governs the cur- rent dispute was part of an agreement between two private parties and did not involve the United States. In 1983, Park Place entered into a Joint Venture Agreement (“JVA”) with LCP Associates to develop, own, and operate the Bell Gar- dens Bicycle Club (“Club”), a legal card-playing club in Bell Gardens, California. Section 5.03 of the JVA set out proce- dures for dispute resolution between the contracting parties, requiring that the parties arbitrate controversies arising under the JVA in Los Angeles County, California; that an arbitration 1 Because the district court could not validly confirm the arbitration award, we do not reach the question of interest on the award. 4672 UNITED STATES v. PARK PLACE ASSOCIATES award would be “final and binding”; and that “judgment may be entered [on an arbitration award] in any court of competent jurisdiction in the State of California.”2 Park Place originally held a thirty percent interest and LCP held the remaining sev- enty percent interest in the Club, which opened for business in November 1984.3 In 1987, after certain loans were repaid, Park Place’s share increased to thirty-five percent and LCP’s interest decreased to sixty-five percent.

A. Forfeiture of the Club

What Park Place did not know was that LCP had financed more than twelve million dollars of the initial investment using the proceeds of a drug trafficking ring. United States v. Gilbert, 244 F.3d 888, 894 (11th Cir. 2001). The United States discovered this fraudulent activity following a money laundering investigation, and in 1987, indicted various indi- viduals, including some LCP partners, in the Southern District of Florida. In March 1990, certain LCP partners were con- victed of laundering the profits of a drug-smuggling business. In April 1990, a jury returned a verdict in favor of the United States in a subsequent forfeiture proceeding pursuant to the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1963. In response, the Southern Dis- 2 In full, section 5.03 provides: 5.03 Arbitration. Any dispute or controversy arising under, out of, in connection with, or in relation to this Agreement, or any breach thereof, or in connection with the dissolution thereof, shall be determined and settled by arbitration in Los Angeles County pursuant to the rules of the American Arbitration Association. Any award ren- dered therein shall be final and binding on all of the parties, and judgment may be entered thereon in any court of competent juris- diction in the State of California. 3 By 1990 the Club was reportedly the largest card club in the world. The Club differs from a Las Vegas-style casino in that the house has no stake in the game, but makes its money by charging players a fee for play- ing. See United States v. Gilbert, 244 F.3d 888, 893 n.5 (11th Cir. 2001). UNITED STATES v. PARK PLACE ASSOCIATES 4673 trict of Florida entered an order forfeiting the entire Club to the United States in rem and freezing all distributions to LCP, Park Place, and their respective partners. In either May or September 1990, the district court confirmed that Park Place was an innocent owner and returned its thirty-five percent interest in the Club.

The United States retained its interest in LCP following the forfeiture proceedings. By August 1993, as the result of nego- tiated settlements with LCP partners, the United States ulti- mately obtained a fifty-five percent interest in LCP. Consequently, the United States controlled the LCP partner- ship and, because LCP was the majority shareholder in the venture, possessed effective control of the Club under the terms of the JVA. From 1990 to 1999, the United States man- aged its interest in LCP—and the Club—through a series of trustees appointed by the Southern District of Florida on its behalf. The United States continued its control of the Club’s management until it sold its LCP interests in May 1999.4 According to Park Place, the Club’s value declined dramati- cally during the period the United States managed it.

B. Court Proceedings

The arbitration underlying this litigation concerns the United States’ conduct during its eight-year management of the Club.

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