Ignore an Arbitration Notice at your Peril (Recent Case)

A recent S.D.N.Y case confirms that a party to an arbitration agreement ignores the notice of arbitration at its peril. In Miss Universe L.P., LLLP., v. Sheena Monnin (SDNY, Civ. Action No. 9174, July 2, 2013), Sheena Monnin (“Monnin”) signed three contracts after being crowned Miss Pennsylvania: two with Sanders & Associates, Inc., which owns the Miss Pennsylvania pageant, and one with Miss Universe L.P., LLLP (“MUO”). The contract with MUO contained an arbitration clause.

Monnin later went on to compete in the Miss USA pageant, but did not win. After being eliminated she claims that the results were predetermined beforehand and subsequently emailed her resignation to Sanders. Afterwards Monnin issued various statements on her Facebook page accusing MUO of fraud and rigging the competition. After the statements, each side traded barbs through various public outlets, but it was Monnin’s appearance on the Today show that resulted in the Arbitration Award against her.

Monnin’s contract with MUO provided for Mediation first, and if unsuccessful, an Arbitration to be administered by JAMS. Monnin refused to participate in mediation and MUO subsequently filed its Demand for Arbitration demanding over $10M from Monnin for alleged defamation, tortious interference with prospective economic advantage, and breach of contract. Neither Monin nor her lawyer, Richard Klineburger III (“Klineburger”), participated in the arbitration and on December 10, 2012 Arbitrator Theodore Katz issued his Arbitration Award. Arbitrator Katz awarded $5 million in monetary damages to MUO, finding that Monnin had defamed the organization with her public statements.

MUO filed its petition with the Southern District of New York to confirm the award on December 17, 2012, and on February 5, 2013, Monnin filed her cross motion to vacate the award.

Monnin moved  to vacate the Arbitrator’s “award on three alternative grounds: (1) that Arbitrator Katz exceeded the scope of his powers, as proscribed by 9 U.S.C. § 10(a)(4); (2) that Monnin lacked both actual and constructive notice of the Arbitration Hearing and the claims it was to resolve, making the process fundamentally unfair, as contemplated in 9 U.S.C. § 10(a)(3); and (3) that Arbitrator Katz’s decision was based upon a manifest disregard for the law.”

The argument failed on the first ground because the narrow exception enumerated in  9 U.S.C. § 10(a)(4) did not apply and because her statements on the Today’s show were within the scope of the arbitration agreement.

The second argument also failed because the Court concluded that Monin and her counsel received routine, consistent communications about the Arbitration from both the MUO and JAMS and were put on notice of each stage of the proceedings. The Court later iterated that Monnin received consistent communications from JAMS detailing the various stages of the proceedings and that Monnin only ceased receiving correspondence after Klineburger instructed that all communications be directed to him. It is well established that notice to an attorney constitutes notice to the client.

The Court also dismissed the third claim holding that Arbitrator Katz did not disregard the law in reaching his decision and that the argument rests on nothing more than his application of the correct legal standard.

The Court confirmed the Arbitration Award.

by

Leonides Viajar
CPR Fall Intern