Kyocera Corp. v. Prudential-Bache Trade Services

Kyocera Corporation (defendant), Prudential-Bache Trade Services, Inc. (Prudential) (plaintiff), and LaPine Technology Corporation (LaPine) (plaintiff) worked together to produce and sell computer disk drives. LaPine provided the design, Kyocera manufactured the drives, and Prudential purchased drives from Kyocera and resold them to LaPine to market to LaPine’s customers. The parties entered into two written agreements, a general agreement and an amended trading agreement. The general agreement contained an arbitration provision governing all disputes. The provision stated that arbitrators would issue an award and that a federal district court could alter the award on review based on any grounds in the Federal Arbitration Act (FAA) or on any unsupported findings of fact or incorrect conclusions of law made by the arbitrators. According to LaPine and Prudential, the amended agreement contained a provision stating that Prudential would stop buying drives and that Kyocera would sell directly to LaPine. Kyocera refused to execute the agreement according to those terms, and LaPine sued in federal district court. Kyocera moved to compel arbitration, and the district court granted the motion. The arbitrators found that the amended agreement required Kyocera to sell directly to LaPine and that Kyocera breached the contract by failing to do so. The arbitrators issued an award to LaPine and Prudential. Kyocera petitioned the district court to vacate the award on all three grounds listed in the general agreement’s arbitration provision. The district court confirmed the award, stating that courts could vacate awards only on the stated FAA grounds, not on other contractual grounds. Kyocera appealed to the Ninth Circuit, which reversed the district court’s decision, finding that parties could contractually agree to add additional grounds for judicial review. The case was remanded for the district court to review the award on the grounds listed in the general agreement. The district court confirmed the award a second time, and Kyocera appealed again to the Ninth Circuit. The Ninth Circuit confirmed the district court’s ruling, and Kyocera appealed to an en banc rehearing.