SDNY Confirms $5 Million Award in Heated Miss Universe Beauty Pageant Dispute

The Southern District of New York has confirmed an arbitrator’s $5 million award in a beauty pageant dispute.  In Miss Universe, LP, LLLP v. Sheena Monnin, No. 12 Civ. 9174 (JPO), the newly selected 2012 Miss Pennsylvania, Sheena Monnin, signed three contracts related to her title.  Two of the contracts were entered into with Sanders & Associates, Inc., the owner of the franchise for the Miss Pennsylvania USA Pageant.  A third contract was between Monnin and the Miss Universe LP, LLLP (“MUO”), the owner of the Miss Universe Pageant.  The agreement between Monnin and MOU contained an arbitration clause.  Despite that Monnin claims she failed to read the long contracts in their entirety, she signed each one, initialed each page, and returned all three agreements to Sanders & Associates.  Although Monnin signed her contract with MOU, no one from MOU ever actually signed the agreement.

Later, Monnin competed in the 2012 Miss Universe Pageant.  After she was dismissed during the initial round, Monnin allegedly learned that the results of the competition were predetermined.  Monnin apparently sent a number of text messages to Randy Sanders, the owner of Sanders & Associates, complaining about the “rigged” pageant.  After another contestant was named Miss Universe, Monnin emailed her resignation related to her role as Miss Pennsylvania to Sanders.  In addition, Monnin issued a public statement on her Facebook fan page that accused MOU of fraud.  Later, she issued another statement that said the results of the Miss Universe pageant were predetermined and dishonest.  After a public back and forth between Monnin and MOU’s Donald Trump on the Today Show, MOU filed a Demand for Arbitration and Statement of Claim with JAMS pursuant to the parties’ contract.  In its demand, MOU sought $10 million for Monnin’s alleged breach of contract, defamation, and tortious interference with prospective economic advantage.

After Monnin was served, a representative for JAMS and counsel for MOU entered into discussions with both Monnin and her attorney.  Despite this, neither Monnin nor her lawyer participated in arbitral proceedings.  In addition, Monnin was allegedly unaware that an arbitration hearing was held because her attorney reportedly failed to provide her with notice.  Following the arbitral hearing, the arbitrator assigned to the case issued a $5 million award in favor of MOU.  When MOU filed a petition to confirm the arbitral award, Monnin’s new attorney responded by filing a cross-motion to vacate the award.

Monnin asked the Southern District of New York to vacate the arbitration “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.”

According to the court, Monnin’s argument failed on the first ground because “Monnin’s Today Show statements were within the scope of the original Statement of Claim,” her statements were brought to the arbitrator’s attention at a number of relevant points in the arbitral process, and the narrow exception enumerated in  9 U.S.C. § 10(a)(4) did not apply.

Next, the federal court dismissed Monnin’s notice argument by stating,

Despite Monnin’s characterization of events, it appears that both Monnin and her counsel “received routine, consistent communications about the Arbitration from both the MUO and JAMS and were fully aware of each stage of the proceedings.”

The court continued,

First and foremost, as discussed above, Monnin herself received consistent communication from MUO, counsel to MUO, JAMS, and later, Arbitrator Katz, detailing the various stages of the Arbitration proceedings. Not only was she initially served with the Statement of Claim, but several of the aforementioned parties were in constant contact with Monnin via email and letter for several months. Monnin ceased receiving correspondence only when Klineburger confirmed and emphasized his representation of Monnin, and mandated that all future correspondence regarding the Arbitration be directed at Klineburger, rather than his client. MUO, counsel to MUO, and JAMS all complied with this directive, and were subsequently in constant contact with Klineburger. While it is unfortunate and perhaps unfair that Klineburger, likely in violation of the Model Rules of Professional Conduct, failed to communicate with his client for several months, despite receiving repeated entreaties and status updates regarding the Arbitration, it is well established that notice to an attorney constitutes notice to the represented client.

The Southern District of New York next turned to Monnin’s third argument,

Here, Monnin contends that Arbitrator Katz correctly stated, and was accordingly well aware of, the controlling precedent on defamation, but nevertheless refused to apply the law. (See Monnin Opp. at 24-25.) The crux of Monnin’s argument is that “there was absolutely no evidence offered at the arbitration hearing to suggest Sheena’s comments caused BP to cancel its sponsorship.” (Id. at 25.) The Court disagrees.

First, Arbitrator Katz carefully considered the evidence before him, describing various ways in which Monnin’s statements resulted in “immediate economic consequences” for MUO, including the loss of BP’s sponsorship. (See Final Award, at 14.) The Award painstakingly examines the evidence provided with respect to the traditional relationship between the Miss Universe Pageant and the host site, discussing the importance of the “site fee” as a source of revenue for MUO. (Id. at 12.) Accordingly, there is far more than a “barely colorable” justification for the result reached in Arbitrator Katz’s decision. And second, Monnin’s argument with respect to manifest disregard is ultimately a disagreement with Arbitrator Katz’s factual findings: namely, that the evidence revealed that the BP sponsorship was lost as a result of Monnin’s statements. Manifest disregard would have been reflected if Arbitrator Katz knew of the requirement that MUO prove causation, for example, but chose not to demand it of them, regardless of this knowledge. The vacatur that Monnin seeks on this ground is nothing more than a disagreement with Arbitrator Katz’s application of the admittedly correct legal standard.

After stating it was unfortunate that Monnin stood to pay handsomely for the poor legal representation she apparently received from her attorney, the court said,

…a court’s role in reviewing an arbitration award is necessarily limited, and such decisions may be set aside only in certain, enumerated circumstances. Accordingly, the Court is bound by the law, and its review may not exceed the scope defined for it by this Circuit’s precedent. Sympathy, or apparent inequity, may play no role in a court’s legal analysis, and here, the law is clear.

As a result, the Southern District of New York denied Monnin’s motion and confirmed the arbitral award in favor of MOU.