Lawyer Fails to Toss $2.6 Million Award for Toyota

PASADENA, Calif. (CN) - Toyota Motor Corp. can collect a $2.6 million arbitration award from its former in-house counsel, the 9th Circuit ruled.

Dimitrios Biller focused on product liability for Toyota Motor Sales until he signed a severance agreement in 2008. The agreement released Toyota from Biller's wrongful termination claims against it and made several requirements of Biller. In addition to protecting and not disclosing Toyota's confidential information, Biller had to return any confidential information he had in his possession and to not make copies of that information. Both parties agreed to compel arbitration for future disputes.

Biller started a legal consulting firm after leaving Toyota, but Toyota claimed that the company website featured confidential information about his work on Toyota product liability litigation.

In a 2008 state court compliant, Toyota demanded a temporary restraining order, permanent injunction and arbitration proceedings. Biller countered with a federal complaint, alleging violations of federal anti-racketeering law, constructive wrongful discharge, emotional distress and defamation.

After the court dismissed Biller's RICO claim and sent the remaining claims to arbitration, Biller and Toyota agreed to consolidate that with the state arbitration. The consolidated arbitration included Toyota's claims of breach of contract, conversion and statutory computer fraud, and all of Biller's federal claims, as well as a cross-claim for fraud.

In November 2010, the arbitrator decided that Biller was liable to Toyota on all of its claims, awarding the automaker injunctive relief and $2.6 million in punitive and liquidated damages, as agreed upon in the original severance agreement.

After dismissing Biller's claims for lack of evidence, the arbitrator ordered the lawyer to return all Toyota's information to the company, finding that he had a continuing duty to safeguard it. Toyota also received permission to forensically inspect Biller's computer equipment, copy any confidential information found and permanently delete that information from Biller's hard drive.

A federal judge confirmed the arbitration award in January 2011, and the superior court did the same in May. Biller subsequently moved to void the judgment and vacate the final award, claiming that Toyota should be held in contempt for improperly removing five files from his computer.

This claim proved unsuccessful, however, and the 9th Circuit affirmed Friday.

"Consistent with state law regarding contract interpretation, the plain language of the severance agreement is unambiguous and shows the parties' intent that while the contract terms are generally to be governed by California law, any arbitration more specifically is to be conducted under the FAA unless 'a decision maker of competent jurisdiction' finds that it should be governed by the CAA," Judge Ronald Gould wrote for a three-judge panel, abbreviating the Federal and California arbitration acts.

"Biller neither alleges nor shows that any decision maker determined that the arbitration agreement should not be governed by the FAA," Gould added. "Absent such a determination, we conclude the plain language of the severance agreement requires that the FAA governs the arbitration proceedings here."

Biller had argued that California law required the arbitrator to expressly address his affirmative defenses of unclean hands and equitable estoppel, but the judges disagreed here, too.

"The arbitrator found that Biller had violated his attorney's duty by 'intentionally and repeatedly disclos[ing] confidential information and documents in violation of ethical, statutory, and contractual prohibitions, as well as court and arbitration injunctions," Gould wrote.

"The District Court found that the arbiter implicitly addressed Biller's unclean hands defense, stating that although the arbiter 'used different language than [Biller] to describe the issues,' the arbiter responded in substance to Biller's unclean hands affirmative defense by essentially pointing out that in light of the lack of justification for Biller's actions, the equities precluded Biller's assertion of the unclean hands affirmative defense under California law," he added. "The District Court found no manifest disregard of the applicable law, and that the FAA did not permit vacatur under these circumstances. We agree."

Biller's equitable estoppel claim likewise failed.

"The arbitrator concluded that Biller was well aware of his ethical duty to TMS [Toyota Motor Sales] and that nothing justified Biller's breach of that ethical duty, not even TMS's allegedly false representations to Biller about the scope of his ethical duties. Biller does not show that the arbiter was aware of the governing state law, but ignored it in rendering his decision and so vacatur under the FAA was not warranted," the 25-page decision states.

Toyota also dodged Biller's contempt claims regarding the alleged improper file removal.

"Biller does not contest that the attachments were prepared while he was employed by TMS," Gould wrote. "Nonetheless, he argues that he conducted the research 'for his own education' rather than for the benefit of TMS, and so the documents should not qualify as TMS's proprietary confidential information. We conclude this argument has no merit."

Biller represented himself. Toyota was represented in the action by David Schrader and Roger Smith of the firm Morgan, Lewis and Bockius in Los Angeles.

Miller's situation is described in a 2009 federal complaint that claimed Toyota withheld evidence in liability cases that involved deaths and injuries.

The lawsuit says Toyota drove Miller out because he documented its campaign "to conceal, withhold, and destroy evidence and information, and obstruct justice."

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