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Minnesota Court of Appeals Supports Arbitrator Actions and Authority

Thursday, August, 8, 2013

A recent decision in the Minnesota Court of Appeals in Seagate Technology, LLC V. Western Digital Corp., judges found that an arbitrator didn’t exceed his power by creating a severe sanction for a party involved in arbitration.  The arbitrator had determined that the same party was responsible for fabricating evidence related to those claims. 


Seagate claims that a former employee had taken numerous trade secrets to a competitor, Western Digital Corporation.  The employee, who had gone to Western Digital Corporation, had added slides to PowerPoint files from Seagate to allege that the information on those new slides had been publicly disclosed during his tenure at Seagate.  When the arbitrator uncovered evidence that connected the employee with these actions, he found Western Digital as complicit in evidence fabrication.  The employee and Western Digital were prohibited from presenting evidence or a defense about Seagate’s claims regarding those trade secrets.  The arbitrator entered a judgment against Western Digital for use of the trade secrets and misappropriation.  As a regular, Seagate was awarded $634 million. 


When Western Digital moved to vacate the award, the district court was in the mindset to agree with them.  That district court vacated multiple aspects of the award, stating that the arbitrator did not have the authority to impose sanctions.  In an unexpected action, the Court of Appeals reversed that decision.  The Court of Appeals determined that the arbitrator acted within his bounds under the FAA and Uniform Arbitration Act.  The court stated that Western Digital had waived their rights to argue about the arbitrator exceeding his power by not raising their concern directly with the arbitrator.  The court also found that the wording of the arbitration agreement gave the authority to the arbitrator to sanction a party that participates in the arbitration action in bad faith.