A federal appeals panel agrees a Japanese billionaire owes his former lawyers $54 million for their work in securing him a $2.6 billion settlement from Wynn Resorts.
The U.S. Seventh Circuit Court of Appeals issued an opinion Feb. 8 in a dispute stemming from what it called “high-stakes lawsuit between Kazuo Okada, a titan of the gambling industry, and Wynn Resorts, another major player in that field.”
Seventh Circuit Judge Diane Wood wrote the panel’s opinion; Circuit Judges Daniel Manion and Ilana Rovner concurred.
According to the panel, Okada hired Bartlit Beck LLP to represent him in the matter, but refused to pay a $50 million contingency fee specified in their contract. Because the deal included an arbitration clause, the firm brought the issue to the International Institute for Conflict Prevention and Resolution.
“Okada participated in the arbitration for over a year,” Wood wrote. “But less than 72 hours before the evidentiary hearing set by the panel, Okada informed the arbitrators that he would not be attending.”
Although he initially gave no reason for his absence, Oakada later said he was boycotting over questions concerning the validity of the contract with Bartlit Beck. He further claimed medical reasons would prevent him from traveling to Chicago.
“Shortly thereafter, Okada announced that he was not authorizing his attorneys to participate in the arbitration, and he was canceling all witnesses, reservations and services,” Wood wrote. “The panel decided to take Okada at his word, and it held him to be in default.”
On Dec. 20, 2019, the panel said Okada owed $54.6 million, which included a $963,032 sanction for costs associated with arbitration. Ten days later, Bartlit Beck filed a petition in federal district court to confirm the award, but Okada moved to vacate and send the case back to the arbitration panel. He argued the decision deprived him of a fundamentally fair proceeding.
U.S. District Judge John Kness ruled in favor of Bartilt Beck.
The Seventh Circuit ruled on Okada’s appeal after granting his lawyers’ motion to withdraw on Dec. 21, 2021.
On appeal, Okada said the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Chapter 1 of the Federal Arbitration Act guarantee a fundamentally fair proceeding, further arguing Judge Kness erred by not independently examining whether his hearing was fair. He also said Kness was too deferential to the arbitrators because he only considered whether it had a reasonable basis for its actions. Finally, Okada said even if the appeals panel did accept Kness’ legal frameworks, the record shows the panel didn’t act reasonably.
Wood said the Seventh Circuit, in a 2013 opinion in Johnson Controls v. Edman Controls, wrote it isn’t clear infa party can sue under the FAA to vacate an award issued in the U.S., but governed by the CREFAA. That panel declined to answer the question and Wood said her panel also would decline.
“The district court did not overlook fairness,” Wood wrote. “It concluded that the panel’s decision to proceed without Okada was fair because it was reasonable. Every circuit to conduct a fairness inquiry under similar circumstances has adopted this approach.”
It was Okada who “unequivocally announced his refusal to participate,” Wood wrote, and only then did the panel proceed in his absence. On appeal, Okada said the panel rejected concerns about his medical emergency. Wood said the record showed otherwise.
“He offered no explanation, let alone something like a doctor’s note, to support his claimed health problem,” Wood wrote. “He did not even hint that it was an emergency. Nor did he offer to appear by video or phone, and he never asked for a continuance. Finally, despite a lengthy back-and-forth over email regarding his nonattendance, he never mentioned his alleged health limitations again.”
Okada further argued the panel still could have considered his evidence despite his absence, but Wood noted Okada’s written instructions — submitted before the default finding — withdrawing his attorneys’ authority to participate and his cancellation of witnesses.
“Put plainly, Okada took himself out of the race,” Wood wrote. “He cannot now complain that he was unfairly deprived of the chance to win. We affirm the district court’s judgment confirming the panel’s final award.”
Bartlit Beck has been represented by attorneys Sean M. Berkowitz, of Latham & Watkins, and Adam L. Hoeflich Joshua P. Ackerman, of Bartlit Beck, all of Chicago.
Okada was represented by attorneys Alex E. Gude, Meaghan K. Haller and William E. Walsh, of the Dentons firm, of Indianapolis and Chicago.