United States v. 2008-12-09 | 07-56070 | the Upper Deck Company, LLC V. American International…

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
 THE UPPER DECK COMPANY, LLC
and RICHARD P. MCWILLIAM, No. 07-56070
Plaintiffs-Appellants, D.C. No.
v. CV-05-1945 IEG 
AMERICAN INTERNATIONAL (RBB)
SPECIALTY LINES INSURANCE OPINION
COMPANY,
Defendant-Appellee. 
Appeal from the United States District Court
for the Southern District of California
Irma Gonzalez, District Judge, Presiding
Argued and Submitted
November 20, 2008—Pasadena, California
Filed December 9, 2008
Before: Pamela Ann Rymer and Milan D. Smith, Jr.,
Circuit Judges, and Edward R. Korman,* District Judge.
Per Curiam Opinion
*The Honorable Edward R. Korman, Senior United States District
Judge for the Eastern District of New York, sitting by designation.
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COUNSEL
Duke F. Wahlquist, Rutan & Tucker, LLP, Costa Mesa, Cali-
fornia, for the plaintiffs-appellants.
Peter A. Stroili, D’Amato & Lynch, LLP, New York, New
York, (argued); Jeffry A. Miller, Lewis Brisbois Bisgaard &
Smith LLP, San Diego, California, for the defendant-appellee.
OPINION
PER CURIAM:
This appeal arises out of an insurance policy that The
Upper Deck Corporation (“Upper Deck”), purchased from
American International Specialty Lines Insurance Company
(“AISLIC”). The policy insured a tax strategy that KPMG, an
accounting firm, developed for Upper Deck. The IRS investi-
gated the tax strategy and determined that it constituted an
improper tax shelter. Upper Deck then settled with the IRS for
$80 million in back taxes and interest, and with the California
Franchise Tax Board for $17 million in back taxes and inter-
est.
16170 THE UPPER DECK v. AMERICAN INT’L

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After AISLIC rejected Upper Deck’s claim that the policy
covered the loss incurred as a result of the settlement, Upper
Deck and its Chief Executive Officer, Richard McWilliam,
filed a complaint in the United States District Court for the
Southern District of California seeking, inter alia, a declara-
tory judgment that the policy issued by AISLIC covered the
loss. Subsequently, the district court granted AISLIC’s
motion to compel arbitration.
A three-member panel of arbitrators held that Upper Deck
and McWilliam were not entitled to coverage because Upper
Deck had abandoned the tax strategy that AISLIC had
insured. The district court confirmed the arbitration award.
Upper Deck Co. v. Am. Int’l Specialty Lines Ins. Co., 495
F.Supp.2d 1092, 1104 (S.D. Cal. 2007). Upper Deck and
McWilliam appeal. We affirm for substantially the same rea-
sons stated in the opinion of the district court, except for its
discussion of the arbitrators’ reliance on the failure of McWil-
liam to comply with § 9(b) of the policy. Id. at 1096-1104.
We do not reach that issue because we agree with the district
court that the alternative grounds for the arbitrators’ award
“drew [their] essence from the [p]olicy and plausibly inter-
preted [it].” Id. at 1104.
AFFIRMED.
16171 THE UPPER DECK v. AMERICAN INT’L

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