author: BERZON, Circuit Judge:

text:
    Mary MATSON, Plaintiff-Appellant, v. UNITED PARCEL SERVICE, INC., Defendant-Appellee.
    No. 13-36174
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted May 3, 2016— Seattle, Washington
    Filed November 4, 2016

      Donald H. Mullins (argued) and Jacob D.C. Humphreys, Badgley Mullins Turner PLLC, Seattle, Washington, for Plaintiff-Appellant.
    Eric D. Miller (argued), Tobias S. Pier-ing, Javier F. Garcia, and Michael T. Reynvaan, Perkins Coie LLP, Seattle, Washington, for Defendant-Appellee.
    Before: SUSAN P. GRABER, MARSHA S. BERZON, and MARY H.. MURGUIA, Circuit Judges.
   OPINION

BERZON, Circuit Judge:

We once again address whether a state employment claim can go forward where the employee’s terms and conditions of employment are covered by a collective bargaining agreement. See Kobold v. Good Samaritan Reg’l Med. Ctr., 832 F.3d 1024 (9th Cir. 2016).

This case, unlike any of the three appeals consolidated in the recent Kobold opinion, concerns a state equal employment claim alleging a hostile work environment. Mary Matson brought suit against her employer, United Parcel Service, Inc. (“UPS”), asserting, among other claims, a state law gender-based hostile work environment claim. A jury returned a verdict for Matson on that claim, but her victory was short-lived. The district court granted UPS’s motion for a new trial on the ground that the claim was preempted under § 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185(a): The jury in the second trial found for UPS. Matson challenges the district court’s preemption ruling. We conclude that the district court erred in holding Matson’s claim preempted and so reverse.

I.

Mary Matson worked for UPS at its Boeing Field International hub in Seattle from 2002 to 2010. During most of that time Matson was employed as a “combination worker,” meaning that she was responsible both for unloading and sorting packages that arrived on airplanes and for delivering them locally. Matson was part of a unit of employees represented by the International Brotherhood of Teamsters, Local 174 (“Teamsters”). The terms and conditions of her employment were governed by a collective bargaining agreement (“CBA”) between UPS and the Teamsters.

Matson frequently complained during her employment that, because of her gender, she was subject to unfair and demeaning treatment in the workplace. Among other examples of such treatment, she alleged, her supervisors routinely favored male employees when assigning what she called “extra work”—that is, package deliveries not previously assigned to a particular route. Matson valued such additional work assignments because they enabled her to “stay on the clock longer than normal, thereby increasing her pay.” She. filed numerous grievances through her union seeking redress for these practices, UPS responded to Matson’s grievances several times by agreeing that it would consider the seniority of Matson and other employees when assigning work. Occasionally, UPS agreed to compensate Matson for thirty minutes to one hour at her overtime rate.

Unsatisfied with the results of the grievances, Matson in 2008 filed an employment discrimination and retaliation complaint with the Washington State Human Rights Commission (“WSHRC”), alleging, among other matters, that UPS “has a pattern and practice of favoring male employees by offering extra work to them.” The commission denied the complaint. Matson also filed a similar' charge with the Equal Employment Opportunity Commission, which adopted the findings of the WSHRC.

“Extra work” is not a defined term in Matson’s CBA. The term appears just once, in a “Sort Addendum”, that applies only to “Sorters, Pre-Loaders, Clerks, Car Washers, and all other Inside Employees.” The Sort Addendum does not define “extra work,” but provides that UPS “recognizes that the principles of seniority shall be given prime consideration for extra work.” A separate addendum to the CBA provides generally that UPS “recognizes that the principles of seniority shall be given prime consideration in the every day operation of the business.”

In February 2010, UPS fired Matson for “proven dishonesty,” relying on the results of an investigation into whether Matson had falsified delivery records. Matson initially contested her discharge by filing a grievance in accord -with the procedures outlined in her CBA. A joint Teamsters/UPS labor panel affirmed her discharge, so her case was not sent.to arbitration.

Matson then filed suit against UPS- in Washington state court, asserting several state law causes of action: (1) race and gender discrimination; (2) a race- and gender-based hostile work environment; (3) discrimination and retaliatory termination based on Matson’s opposition to unlawful labor practices; and (4) wrongful termination, based on the filing of a workers’ compensation claim. UPS removed the case to federal court on the basis of diversity of citizenship. See 28 U.S.C. § 1332.

UPS then moved for summary judgment. The district court granted the motion on the merits -with respect to Matson’s claims for race discrimination, race-based hostile work . environment, and wrongful discharge in violation of public policy, but denied summary judgment with respect to Matson’s claims of gender discrimination, gender-based hostile work environment, and discrimination on the basis of opposition to unlawful practices. With regard to Matson’s gender-based hostile work environment claim, UPS maintained that the claim was preempted under LMRA § 301 because it was “inextricably intertwined” with an interpretation of the CBA, but the district court rejected that contention. “[N]o interpretation would be necessary for purposes of Ms. Matson’s gender-based hostile work environment claim, and plaintiff does not dispute the meaning of any of its terms,” the district court concluded.

The case proceeded to trial. At trial, Matson testified that, in her view, what she termed “extra work” should have been assigned to her but was, instead, performed by male employees with less seniority. She testified that she would be “humiliated in front of [her] coworkers” and treated as “some kind of troublemaker just because [she was] asking for extra work.”

In addition to her allegations regarding work assignments, Matson testified to numerous other incidents that, she contended, contributed to a hostile work environment including:

• A supervisor and other employees refused to help her lift a 150-pound package, and laughed at her as she struggled to do it alone. During that incident, one supervisor acted in an intimidating manner, as he “clenched up his fists, put them behind his back, and stepped right into [Matson’s] face, gritted his teeth.” Matson was forced to seek out another coworker to help her lift the package. Matson’s effort to lift the package resulted in a serious back ipjury that caused her to miss more than a year of work.
• Various UPS managers disregarded her complaints of workplace hostility and threatened to file charges against her if she continued to make what they called “false statements.”
• A male coworker screamed at her and “began to choke [her]” after she had playfully tapped his knee. In response .to this incident her supervisors did nothing.
• Matson’s supervisors assigned her a less desirable package car rather than a van. All of the male employees, many of whom had less seniority than Matson, were given vans.
• In the meeting in which she was terminated, she was confronted by seven men, all of whom were “very hostile.” Matson was accused of both lying and stealing time, while a man involved in the same activity was not charged with stealing time.

At the close of Matson’s case-in-chief, UPS moved for judgment as a matter of law, arguing once more that Matson’s hostile work environment claim was preempted under § 301. The court determined that ruling on the motion before hearing the defense witnesses would be premature.

UPS then presented witnesses who disputed Matson’s claim that the additional package deliveries constituted extra work. One UPS employee stated that such deliveries were “really what I called part of normal dispatch.”

After hearing UPS’s witnesses, the district court denied UPS’s motion for judgment as a matter of law. It explained that “preemption is not mandated simply because defendant refers to the CBA in mounting its defense.” The court specifically noted that Matson had presented evidence “that work was given to men instead of her.” That fact, along with the other incidents of hostility she described, “in theory, support a hostile work environment claim without reference to the CBA.” Finally, the court noted that for the purposes of Matson’s claim, “extra work, seniority, and prime consideration are simply a reference point that elucidates her claims. Whether or not seniority was actually given prime consideration is not necessary for determination of these claims.”

Matson next offered rebuttal testimony in which she disagreed with UPS’s evidence regarding the disputed work assignments. She maintained that certain package deliveries were work that should have been awarded in “seniority order,” and that other such work was improperly dispatched by a male hourly employee rather than by a supervisor. When asked on-cross-examination whether she had ever filed grievances against higher-seniority employees, Matson stated that “this is a very muddy area, because .... in the contract, there’s a lot of work that’s considered full-time work and part-time work. And there’s a lot -of different categories .... And all that people are trying to do is separate whose job is whose so that you know whether or not you can bid on it. And that’s considered extra work.”

The jury found for UPS on Matson’s-discrimination and retaliation claims. The jury returned a verdict for Matson, however, on her hostile work environment claim and awarded $500,000 in damages for emotional distress. The district court’s jury-instruction regarding Matson’s hostile work environment claim did not use the term “extra work” or “seniority” or refer to the CBA; it simply stated the elements of the claim that Matson had the burden of proving.

Following the verdict, UPS filed a renewed motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(b), or, alternatively, for a partial new trial under , Federal Rule of Civil Procedure 59, again arguing - § 301 preemption of the hostile work environment claim. This time, the court granted the motion.

In so ruling, the district court concluded that Matson’s rebuttal testimony acknowledged that the definition of “extra work” was “a very muddy area” and so “put the interpretation of extra work under the CBA directly in dispute.” The court .went on to hold that Matson’s hostile work environment claim “with respect to ‘extra work’ assignments is substantially dependent on analysis of the CBA because the court would have to interpret the meaning of ‘extra work.’ ” The court ordered a new trial, holding that jury questions remained regarding whether Matson had suffered a hostile work environment on the basis of incidents she had described that were unrelated to the assignment of “extra work.” The court further held that, in-light of its preemption ruling, the jury’s award of $500,000 was “grossly excessive” and, “[ajccordingly, the question of damages must be tried again as well.”

After the second trial, the jury returned a verdict for UPS. This appeal followed.

II.

Section 301 provides that “[s]uits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce ... may be brought in any district court of the United States having jurisdiction of the parties.” 29 U.S.C. § 185(a). The Supreme Court has long construed this provision “as a congressional mandate to the federal courts to fashion a body of federal common law to be used to addréss disputes arising out of labor contracts.” Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 209, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985) (citing Textile Workers Union of Am. v. Lincoln Mills of Ala., 353 U.S. 448, 456-57, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957)). This federal common law, in turn, “preempts the use of state contract law in CBA interpretation and enforcement.” Cramer v. Consol. Freightways, Inc., 255 F.3d 683, 689 (9th Cir. 2001) (en banc) (citing Local 174, Teamsters of Am. v. Lucas Flour Co., 369 U.S. 95, 103-04, 82 S.Ct. 571, 7 L.Ed.2d 593 (1962)). Preemption under § 301 is not limited to “cases specifically alleging contract violation,” id. (citing Lueck, 471 U.S. at 220, 105 S.Ct. 1904), but also applies “when resolution of a state-law claim is substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract,” Lueck, 471 U.S. at 220, 105 S.Ct. 1904.

We have fashioned a two-part test to determine whether a state law claim is preempted under § 301. At the first 'step, we ask “whether a particular right inheres in state law or, instead, is grounded in a CBA.” Burnside v. Kiewit Pac. Corp., 491 F.3d 1053, 1060 (9th Cir. 2007). In making this determination we focus on “the legal character of a claim, as ‘independent’ of rights under the collective-bargaining agreement, ... and not whether a grievance arising from ‘precisely the same set of facts’ could be pursued.” Livadas v. Bradshaw, 512 U.S. 107, 123-24, 114 S.Ct. 2068, 129 L.Ed.2d 93 (1994) (citation omitted) (quoting Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 410, 108 S.Ct. 1877, 100 L.Ed.2d 410 (1988)). Only if the claim is “founded directly on rights created by collective-bargaining agreements” is preemption warranted at this step. Caterpillar Inc. v. Williams, 482 U.S. 386, 394, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987).

At step two, “to determine whether a state law right is ‘substantially dependent’ on the terms of a CBA,” we ask “whether the claim can be resolved by ‘looking] to’ versus interpreting the CBA.” Burnside, 491 F.3d at 1060 (alterations in original) (quoting Caterpillar, 482 U.S. at 394, 107 S.Ct. 2425; Livadas, 512 U.S. at 125, 114 S.Ct. 2068). “If the latter, the claim is preempted; if the former, it is not.” Id. “We have stressed that ... the term ‘interpret’ is defined narrowly [in this context]—it means, something more than ‘consider,’ ‘refer to,’ or ‘apply.’ ” Baleorta v. Twentieth Century-Fox Film Corp., 208 F.3d 1102, 1108 (9th Cir. 2000). Merely “alleging a hypothetical connection between the claim and the terms of the CBA is not enough to preempt the claim,” nor is “[a] creative linkage between the subject matter of the claim and the wording of a CBA provision.” Cramer, 255 F.3d at 691-92. Moreover, preemption is warranted only where “the need to interpret the CBA ... inhere[s] in the nature of the plaintiff’s claim. If the claim is ... based on state law, § 301 preemption is not mandated simply because the defendant refers to the CBA in mounting a defense.” Id. at 691.

As we recently observed, the “Burnside factors reflect two driving concerns of preemption doctrine.” Kobold, 832 F.3d at 1033. Mandating preemption when a purported state law claim is founded on a right grounded in a CBA prevents “parties’ efforts to renege on their [CBA] arbitration promises by ‘relabeling’ as tort suits actions simply alleging breaches of duties assumed in collective-bargaining agreements.” Lavadas, 512 U.S. at 123, 114 S.Ct. 2068 (quoting Lueck, 471 U.S. at 211, 105 S.Ct. 1904). By contrast, requiring preemption when a state law claim requires interpretation of a CBA serves a separate interest: preserving “a central tenet of federal labor-contract law ... that it is the arbitrator, not the court, who has the responsibility to interpret the labor contract in the first instance.” Lueck, 471 U.S. at 220, 105 S.Ct. 1904. Put differently, because of the pivotal role that an arbitrator plays in interpreting and administering CBAs, a court “can determine questions of state law involving labor-management relations only if such questions do not require construing collective-bargaining agreements.” Lingle, 486 U.S. at 411, 108 S.Ct. 1877.

Because the second step of the Burnside test is centrally concerned with safeguarding the role of the contractual grievance/arbitration system, “there.is no basis for scuttling the state law cause of action if any necessary CBA interpretation can in some fashion be conducted via the appropriate grievance/arbitration forum.” Kobold, 832 F.3d at 1033. As we explained in Kobold, “[t]o allow such scuttling disadvantages employees covered by CBAs, as they lose state law protections because of an embedded CBA issue possibly peripheral to their core cause of action. The interest in sending substantial CBA issues through grievance/arbitration does not justify creating this disadvantage unless the interest cannot be otherwise accommodated.” Id.

Against this doctrinal backdrop we turn to the present case.

III.

The thrust of UPS’s argument for preemption is that because Matson’s hostile work environment claim focused in part on her allegation that UPS improperly gave “extra work” assignments to male employees with less seniority, that claim cannot be resolved without interpreting the term “extra work,” as used in the CBA, to determine whether Matson was in fact entitled to the work she claimed. More specifically, UPS maintains that “to prove that particular work was improperly assigned because of her gender, Matson first had to establish that she, as opposed to other employees, was entitled to the work under the. CBA.” UPS’s premise is wrong, for several reasons.

As an initial matter, we reject UPS’s suggestion that Matson’s claim is nothing more than a repackaged “contractual dispute” over the assignment of extra work. This assertion mischaracterizes her claim. Matson’s claim included the allegation that UPS systematically assigned men work to which they were not entitled by seniority, but- only as one element of a pervasively hostile work environment. The hostile environment, Matson maintained, was also characterized by intimidation and derision having nothing to do with work assignments, Matson’s'right not to work in a gender-based hostile work environment is a “nonnegotiable state-law right[ ] ... independent of any right established by contract.” Lueck, 471 U.S. at 213, 105 S.Ct. 1904. The claim, therefore, is not preempted under the first Burnside factor, as it is not grounded in any. right created by the CBA.

Nor does anything “in the- nature of’ Matson’s hostile work environment claim require interpretation of the CBA. Cramer, 255 F.3d at 691. As the district court instructed, “[t]o find for plaintiff, the jury had to find that ‘there was conduct that occurred because of Ms. Matson’s gender’; ‘this conduct was unwelcome in the sense that Ms. Matson regarded the conduct as undesirable and offensive, and did not solicit or incite it’; ‘this conduct was so offensive or pervasive that it altered the conditions of. Ms.', Matson’s employment’; and ‘management knew ... of this conduct, and UPS failed to take reasonably prompt and adéquate corrective action reasonably designed to end it.’” As these elements illustrate, the focus of inquiry in a hostile work environment casé is properly on the actual workplace treatment of the plaintiff and the actual practice of the management in responding—or contributing—to that treatment. UPS’s alleged discrimination in assigning extra work was just one of several factors that Matson contends contributed to a hostile.work environment. The multi-factor, fact-based inquiiy required to decide Matson’s hostile environment claim could be conducted without interpreting any -provision .of the CBA.

Even were we to grant that Matson’s hostile environment claim rested on the allegedly discriminatory assignment of certain work assignments to men, and, further, that whether the CBA gave Matson a seniority-based right to that work requires interpretation of the CBA, Matson’s hostile work environment claim still would not require interpretation of any contractual provision.

We note, first/that the only CBA provision that uses the term “extra work” applies to “[ijnside employees,” and so does not apply to the deliveries here in dispute. In using the1 term “extra work,” with regard to outside deliveries,' Matson was not relying on that provision. Instead, she was more colloquially referring to sporadic work not covered by pre-set assignments.

Matson could have a viable hostile environment claim whether or not the CBA actually requires assignment of that work based on seniority. Contrary to UPS’s assumption, nothing in Matson’s argument depends on her having been contractually entitled to the disputed work. Even if she did not have a right to the work under the CBA, management’s systematic favoring of men in assigning the disputed work could contribute to a hostile work environment. The correct interpretation of the CBA, in other words, is purely peripheral to the relevant question with respect to assigning work. That question was whether UPS showed systematic favoritism toward men in making its work assignments, thereby contributing to a hostile work environment for Matson and other women.

Put differently, Matson’s contention is not that UPS created a hostile work environment by violating her contractual seniority rights. Rather, her position is that failing to assign her the work despite her seniority is evidence of UPS’s hostility toward her because of her gender. Matson’s central contention was that she should have been awarded the disputed work on any of the usual rationales for work assignment—seniority, proximity to the location where the work was to begin, or temporal availability—and that all those usual criteria were disregarded. As UPS did not assign the work on the basis of any of those criteria, Matson maintained, hostility toward her because of her sex is the likely explanation for the failure to assign her the work.

Additionally, to the extent UPS chose to emphasize its interpretation of the CBA to dispute Matson’s right to the work as part of its defense, that defense does not undermine Matson’s reliance on the assignment of the disputed work as part of her hostile work environment claim. For one thing, “§ 301 preemption is not mandated simply because the defendant refers to the CBA in mounting a defense.” Cramer, 255 F.3d at 691. For another, UPS does not put forward any interpretation of the CBA under which it was required to award the work as it did. At best, the company’s contention is that nothing in the CBA required that the work be awarded to Mat-son. Whether that is so or not does not detract from Matson’s statutory gender-based hostile work environment claim. An employer who is free to make job assignments as it chooses can still violate the state law proscription on creating a gender-based hostile work environment by, among other things, favoring men over women when assigning work.

Further, even if any interpretation of the CBA had been required, the relevant interpretive issues were addressed in formal settlements after invocation of the grievance procedure. For example, following one of Matson’s grievances, the parties reached a settlement according to which UPS agreed that “[t]he Company will recognize that the principles of seniority be given prime consideration in the assigning of extra work to unassigned geographic delivery areas of the combination air delivery drivers dispatched out of the [Boeing Field International] facility.” The record includes fifteen other grievances filed by Matson. Of these, seven were ultimately withdrawn. Three were resolved when UPS agreed to compensate Matson for lost work. One was settled when UPS agreed to “use by seniority Monday through Friday air drivers for the Saturday air shuttles when needed.” Four were settled when UPS agreed to “abide by” or “consider” Matson’s seniority in the “day to day dispatching of [early morning] routes.”

One could view these agreements as agreed-upon CBA interpretations on the very issue that UPS contends remains disputed: that work Matson complained about was supposed to be assigned in accord with seniority principles. Or one could view them as independent labor-management agreements, which would also be covered by § 301 of the LMRA. See Retail Clerks Int’l Ass’n, Local Unions Nos. 128 & 633 v. Lion Dry Goods, Inc., 369 U.S. 17, 28, 82 S.Ct. 541, 7 L.Ed.2d 503 (1962). Either way, the clarity of the agreements means that no further interpretation was required; the grievance settlements need only be looked to or applied. See Burnside, 491 F.3d at 1060; Balcorta, 208 F.3d at 1108. Finally, the grievance settlements were, at the very least, evidence that seniority was as a practical matter a factor usually used in making work assignments in the workplace.

However the settlements are viewed, the jury was not asked to interpret the CBA differently from the representations UPS made when settling Matson’s grievances, and nothing in the elements of the hostile work environment claim required it to do so. As we recognized in Kobold, “there is no basis for scuttling the state law cause of action if any necessary CBA interpretation can ... be conducted via the appropriate grievance/arbitration forum.” 832 F.3d at 1033. Here, use of that forum resulted in resolutions consistent with Matson’s partial reliance on work assignment patterns to support her hostile work environment claim.

Finally, contrary to UPS’s argument, Perugini v. Safeway Stores, Inc., 935 F.2d 1083 (9th Cir. 1991) does not control the result here. In Perugini, the plaintiff charged her employer with intentional infliction of emotional distress (“IIED”) in part based on its refusal to assign her to light duty while she was pregnant. To establish her IIED claim, Perugini had to show that Safeway’s conduct was “extreme and outrageous.” Id. at 1087. This court concluded that, “if Safeway’s managerial freedom is not constrained in any material way by the CBA, a rational jury could not find that Safeway’s conduct in discharging Perugini from heavy work instead of reassigning her to light work” met this standard, Id. at 1088. Therefore, the court concluded, it was required to “look to the CBA to judge the appropriateness of Safeway’s behavior in regard to -this allegation.” Id.

By contrast, here, even if UPS’s “managerial freedom is not constrained in any material way by the CBA”—i.e., if Matson had no contractual right to the disputed work assignments—for the company consistently to assign the work to men rather than to equally eligible, or more eligible, women was evidence of a gender-based hostile environment. Matson’s gender-based hostile work environment claim was thus viable even if UPS had complete “managerial freedom” over the assignment of the disputed work under the CBA.

Notably, the IIED preemption analysis in Perugini did not concern a sex discrimination or hostile work environment claim. If it had, then the existence of employer discretion under the CBA would not have been dispositive, or even pertinent; discriminatory exercise of that discretion would still be actionable.

IV.

For all these reasons, the “adjudication of [Matson’s] claim [does not] require interpretation of a provision of the CBA,” and § 301 preemption is not warranted. Cramer, 255 F.3d at 691-92.

Kobold noted that “although § 301 preemption questions arise fairly frequently,familiarity ,,. has not bred facility.’ ” 832 F.3d at 1032 (alterations in original) (quoting Cramer, 255 F.3d at 689). This case illustrates the pitfalls of expanding the preemptive effect of the federal common law governing the interpretation of collective bargaining agreements to limit the enforcement of state law employment discrimination protections. Litigation concerning such protections ordinarily focuses on adverse workplace incidents, probing into whether discriminatory motives underlay those incidents. As the focus is not only on what happened but why it happened, resolving such litigation will rarely rest on rights created by CBAs or require interpreting CBAs in the sense required for § 301 preemption.

In this instance, however “muddy” the CBA was concerning the assignment of the disputed work, the questions for the jury—to the extent it considered the assignment issue at all—were not whether the disputed assignments were “extra work” as the term is used in the CBA, or whether the CBA required that they be awarded by seniority. Rather, the jury’s focus was directed to whether the assignments were discriminatory in that men were systematically favored over similarly situated women. Making that determination did not require the jury to decide what any provision of the CBA requires. And the jury had the resolutions of Mat-son’s grievances as evidence that, in fact, seniority was usually or often considered.

We therefore reverse the decision of the district court that Matson’s claims were preempted to the extent they relied on her allegations .regarding UPS’s extra. work assignments, and we reinstate the- jury-verdict from the first trial. Because the district court’s conclusion that the jury’s damages award was “grossly excessive” rested in part on its erroneous preemption ruling, we reverse that determination as well, and remand for reconsideration of the damages question.

REVERSED AND REMANDED.

      . The CBA permitted a terminated employee to file a grievance with the Teamsters appealing her termination. Once an employee filed a grievance, the employee received a hearing before a "labor panel” composed of an equal number of Teamsters and UPS representatives. The labor panel then voted on whether to affirm the termination or to reinstate the employee. The CBÁ required that the panel vote be unanimous. If the panel did not reach unanimity, the grievance proceeded to arbitration.

      . Neither Matson’s race-based claims nor her wrongful termination claims are at issue on appeal.

      . The court instructed the jury on Matson’s hostile work environment claim as follows:
      To establish her claim of hostile work environment on the basis of gender, Ms. Matson has the burden of proving each of the following propositions: (1) That there was conduct that occurred because of Ms. Mat-son’s gender; (2) That this conduct was unwelcome in the sense that Ms. Matson' regarded the conduct as undesirable and offensive, and did not solicit or incite it; (3) That this conduct was so offensive or pervasive that it altered the conditions of Ms. Matson's employment; and (4) That management knew, through complaints or other circumstances, of this conduct, and UPS failed to take reasonably prompt and adequate corrective action reasonably designed to end it:
      If you find from your consideration of all of the evidence that each of these propositions has been proved, then your verdict should be for Ms. Matson on this claim. On the other hand, if any of these propositions has not been proved, your verdict should be for UPS on this claim.
      Jury Instructions at 15, Matson v. UPS, No. 2:10-cv-01528 (W.D. Wash. July 18, 2012).

      . Matson makes several claims on appeal regarding various district court rulings during the second trial. Because we reverse the initial preemption ruling and hold that the first jury verdict must be reinstated, we need not and do not consider those claims.

      . For example, one of Matson's female coworkers testified that both she and Matson were denied work assignments even though they were immediately available and even though they had greater seniority than the male employees who received the assignments.

      . Perugini did allege emotional distress caused by ‘‘on-the-job harassment” based on • her sex, as well as the refusal to assign her light work. Perugini, 935 F.2d at 1088. We held that the emotional distress claims premised on her employer’s alleged sex-based harassment were not preempted. Id. at 1088-89.


source: Caselaw Access Project

author:
MURGUIA, Circuit Judge:
      BERZON, Circuit Judge,

license: Public Domain

text:
    IN RE NEW INVESTMENTS, INC, Debtor. Pacifica L 51 LLC, Creditor-Appellant, v. New Investments Inc., Debtor-Appellee.
    No. 13-36194
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted May 3, 2016— Seattle, Washington
    Filed November 4, 2016

      Dillon E. Jackson (argued) and Terrance J. Keenan, Foster Pepper PLLC, Seattle, Washington; Stuart P. Kastner, Stuart P. Kastner PLLC, Seattle, Washington; for Creditor-Appellant.
    Lawrence K. Engel (argued), Bellevue, Washington, for Debtor-Appellee.
    Before: SUSAN P. GRABER, MARSHA S. BERZON, and MARY H. MURGUIA, Circuit Judges.
   Dissent by Judge BERZON

OPINION

MURGUIA, Circuit Judge:

In loan agreements—and any subsequent bankruptcy proceedings—a borrower “defaults” on a loan when he fails to fulfill a material obligation under the terms of the loan agreement, such as making a payment by a particular date. A default can trigger certain consequences, such as foreclosure on any property securing the loan, late fees and penalties, or “acceleration,” which occurs when the entire unpaid amount of the loan becomes immediately due and payable. But the borrower can also “cure” the default, most often by paying the arrearages and bringing the loan current. A cure generally allows the borrower to avoid the consequences of default, restores the loan to its original terms, and allows the borrower to keep the property.

The Bankruptcy Code incorporates the concept of cure. Chapter 11 provides that a debtor’s plan of reorganization must “provide adequate means for the plan’s implementation,” including the “curing or waiving of any default.” 11 U.S.C. § 1123(a)(5)(G). This statute means that a plan of reorganization may include a provision authorizing the debtor to remedy any breach of a loan agreement with a creditor and return to pre-default conditions. Great W. Bank & Tr. v. Entz-White Lumber & Supply, Inc. (In re Entz-White Lumber & Supply, Inc.), 850 F.2d 1338, 1340 (9th Cir. 1988).

We held in Entz-White that a debtor who cures a default “is entitled to avoid all consequences of the default—including higher post-default interest rates.” Id. at 1342. In other words, if a loan agreement provided for a higher, post-default interest rate on arrearages in the event of default, a debtor who “cures” is entitled to repay, the arrearages at the lower, pre-default interest rate. We concluded that “the power to cure under the Bankruptcy Code authorizes a plan to nullify all consequences of default, including avoidance of default penalties such as higher interest,” even when the terms of the loan agreement called for a higher interest rate upon default. Id.

The case before us requires us to decide whether Entz-White ⅛ rule that a debtor may nullify a loan agreement’s requirement of post-default interest remains good law in light of 11 U.S.C. § 1123(d), a provision that Congress enacted after Entz-White. Section 1123(d) provides that, if a plan proposes to cure a default, “the amount necessary to cure the default shall be determined in accordance with the underlying agreement and applicable non-bankruptcy law.” 11 U.S.C. § 1123(d). We hold that Entz-White ’s rule of allowing a curing debtor to avoid a contractual post-default interest rate in a loan agreement is no longer valid in light of § 1123(d).

I.

New Investments, Inc. (“New Investments”) borrowed $3,045,760.51 from Paci-fica L 51, LLC’s (“Pacifica”) predecessor in interest to purchase a hotel property in Kirkland, Washington. The note, which was secured by a deed of trust, provided for an interest rate of 8 percent. The note also specifically provided that in the' event of default, the interest rate would increase by 5 percent.

New Investments defaulted on the note in 2009. When Pacifica commenced nonjudicial foreclosure proceedings, New Investments filed for Chapter 11 bankruptcy. New Investments’s plan of reorganization proposed to cure the default by selling the property to a third party and using the proceeds of the sale to pay the outstanding amount of the loan at the pre-default interest rate. Pacifica objected to the plan on the ground that, under the terms of the note, it was entitled to be paid at the higher, post-default interest-rate.

The bankruptcy court confirmed New Investments’s plan over Pacifica’s objection and authorized the sale of the hotel for $6,890,000. Of the sale proceeds, $2,830,877.28 would be paid to Pacifica, reflecting the pre-default interest rate and extinguishing any other late penalties. Anticipating an appeal, the bankruptcy court ordered that $100,000 of the proceeds be reserved for Pacifica’s attorney’s fees on appeal and that $670,000 be set aside as a disputed claim reserve for Pacifica. Pacifi-ca timely appeals from the confirmation order.

II.

We have jurisdiction under 28 U.S.C. § 158(d), and we review the bankruptcy court’s interpretation of bankruptcy statutes de novo. Boyajian v. New Falls Corp. (In re Boyajian), 564 F.3d 1088, 1090 (9th Cir. 2009). “When construing the meaning of a statute, we begin with the language of that statute.” Benko v. Quality Loan Serv. Corp., 789 F.3d 1111, 1118 (9th Cir. 2015). “If the statutory text is ambigúous, we employ other tools, such as legislative history, to construe, the meaning of ambiguous terms.” Id. “A party contending that legislative action changed settled law has the burden of showing that the legislature intended such a change.” Green v. Bock Laundry Mach. Co,, 490 U.S. 504, 521, 109 S.Ct. 1981, 104 L.Ed.2d 557 (1989).

III.

Chapter 11 of the Bankruptcy Code provides that a plan of reorganization must, among other things, “provide adequate' means for the plan’s implementation,” including the “curing or waiving of any default.” 11 U.S.C. § 1123(a)(5)(G). In Entz-White, we observed that the Bankruptcy Code did not define “cure.” 850 F.2d at 1340. We borrowed the Second Circuit’s definition: “A default is an event in the debtoi’-creditor relationship which triggers certain consequences. Curing a default commonly means taking care of the triggering event and returning to pre-de-fault conditions. The consequences are thus nullified. This is the concept of ‘cure’ used throughout the Bankruptcy Code.” Id. (alteration omitted) (quoting Di Pierro v. Taddeo (In re Taddeo), 685 F.2d 24, 26-27 (2d Cir. 1982)). We held that “the power to cure under the Bankruptcy Code authorizes a plan to nullify all consequences of default, including avoidance of default penalties such as higher interest.” Id. at 1342. As a result, a debtor whose plan proposed to cure a default would allow him to avoid having to pay a higher, post-default interest rate called for in the loan agreement.

Entz-White was decided in 1988. In 1994, Congress amended § 1123 to add subsection (d). Pub. L. No. 103-394, Title II, § 305, Oct. 22, 1994, 108 Stat. 4106. Subsection (d) provides:

Notwithstanding subsection (a) of this section and sections 506(b), 1129(a)(7), and 1129(b) of this title, if it is proposed in a plan to cure a default the amount necessary to cure the default shall be determined in accordance with the underlying agreement and applicable non-bankruptcy law.

11 U.S.C. § 1123(d).

Subsection § 1123(d) renders void Entz-White ’s rule that a debtor who proposes to cure a default may avoid a higher, post-default interest rate in a loan agreement. Subsection (d) governs here because New Investments’s plan proposes to cure a default. The underlying agreement—here, the promissory note—requires the payment of a higher interest rate upon default. And “applicable nonbankruptcy law”—here, Washington state law—allows for a higher interest rate upon default when provided for in the loan agreement. See Wash. Rev. Code Ann. § 61.24.090(l)(a) (providing that a borrower may cure a monetary default by paying the trustee “[t]he entire amount then due under the terms of the deed of trust and the obligation secured thereby, other than such portion of the principal as would not then be due had no default occurred”). In other words, under § 1123(d), “the amount necessary to cure [New Investments’s] default” is governed by the deed of trust and Washington law, which respectively require and permit repayment at a higher, post-default interest rate.

The plain language of § 1123(d) compels the holding that a debtor cannot nullify a preexisting obligation in a loan agreement to pay post-default interest solely by proposing a cure. But even if we were to. read ambiguity into the statute, the legislative history would not help New Investments. The House Report for the bill that became § 1123(d) states that Congress was primarily concerned with overruling the Supreme Court’s decision in Rake v. Wade, 508 U.S. 464, 113 S.Ct. 2187, 124 L.Ed.2d 424 (1993). H.R. Rep. No. 103-835, at *55 (1994). Rake had held that a Chapter 13 debtor who proposed to cure a default was required to pay interest on his arrearages to a secured creditor even if the underlying loan agreement did not provide for such interest. 508 U.S. at 472, 113 S.Ct. 2187. Congress viewed this as an untoward result that allowed for “interest on interest payments” and provided an unbargained-for windfall to creditors. H.R. Rep. No. 103-835, at *55. The House Report states that-§ 1123(d) would “limit the secured creditor to the benefit of the initial bargain with no court contrived windfall.” Id. It further stated that it was “the Committee’s intention that a cure pursuant to a plan should operate to put the debtor in the same position as if the default had never occurred.” Id.

The fact that Congress had a particular purpose in mind when enacting a statute does not limit the effect of the statute’s text, a principle Entz-White' itself recognized. See 850 F.2d at 1341 (noting that a Senate Report for the bill that became 11 U.S.C. § 1124 showed “only that the drafters in the Senate were concerned primarily with defaults resulting in acceleration; it does not show that they meant to confine the section to that situation”). Rather, “[t]he fact that Congress may not have foreseen all of the consequences of a statutory enactment is not a sufficient reason for refusing to give effect to its plain meaning.” Union Bank v. Wolas, 502 U.S. 151, 158, 112 S.Ct. 527, 116 L.Ed.2d 514 (1991). By its terms, § 1123(d) tells us to look to the promissory note and Washington law to determine what amount New Investments must pay to cure its default. Here, that analysis requires the payment of post-default interest. ,

This result is further consistent with the intent of § 1123(d) because it holds the parties to the benefit of their bargain. Moreover, the House Report’s statement “that a cure pursuant to a plan should operate to put the debtor in the same position as if the default had never occurred” is consistent with the concept of cure generally, which § 1123(d) has not altered or attempted to define. See Taddeo, 685 F.2d at 26-27 (“Curing a default commonly means taking care of the triggering event and returning to pre-default conditions. The consequences are thus nullified.”).

What § 1123(d) affects is hoio a debtor returns to pre-default conditions, which can include returning to a lower, pre-default interest rate. In the traditional case, a borrower who has defaulted on a loan obligation can cure the default by paying arrearages. See Restatement (Third) of Property (Mortgages) § 8.1(b) <& cmt. c (1997); Wash. Rev. Code Ann. § 61.24.090(a)(1). This procedure allows the borrower to avoid acceleration or foreclosure, which are some of the more common consequences of default. See Restatement (Third) of Property (Mortgages) § 8.1(a); Wash. Rev. .. Code Ann. § 61.24.090(a). However, the borrower does not effectuate a cure merely by paying past due installments of principal at the pre-default interest rate. Rather, the borrower’s cure obligations, may also include “late charges, attorneys’ and trustee’s fees, and publication, and court costs.” Restatement (Third) of Property (Mortgages) § 8.1 cmt. c; see also Wash. Rev. Code Ann. § 61.24.090(l)(b). It is only once these penalties are paid that the debtor can return to pre-default conditions as to the remainder of the loan obligation.

The common law treatment of cure is consistent with the Bankruptcy Code’s protections for creditors who would have been'entitled to receive accelerated payment on a defaulted loan. For a debtor to render such a creditor. “unimpaired” and unable to object to the debtor’s plan, Platinum Capital, Inc. v. Sylmar Plaza, L.P. (In re Sylmar Plaza, L.P.), 314 F.3d 1070, 1075 (9th Cir. 2002); 11 U.S.C. § 1126(f), the debtor must cure the default but may not “otherwise alter the legal, equitable, or contractual rights” of the creditor, 11 U.S.C. § 1124(2)(E). Here, one of those rights is post-default interest, and New Investments’s cure may not alter that right.

Consistent with § 1124(2), the debtor can return to pre-default, conditions, which can include a lower, pre-default interest rate, only by fulfilling the obligations of the underlying loan agreement and applicable state law. 11 U.S.C. § 1123(d). By its terms, § 1123(d) requires that we look to the “underlying agreement,” not only to the “pre-default interest provisions” of the underlying agreement. To read any such limitation into § 1123(d) would be “to add specific language that Congress did not include in a carefully considered statute.” Illinois v. Abbott & Assocs., Inc., 460 U.S. 557, 572, 103 S.Ct. 1356, 75 L.Ed.2d 281, (1983); see also United States v. Plaza Health Labs., Inc., 3 F.3d 643, 649 (2d Cir. 1993) (“[W]e cannot add to the statute what congress did not provide.”). Here, the note provided that upon default, the interest rate on the loan would increase by 5 percent. Unfortunately for New Investments, the increased interest rate applies to the entirety of the note and not just to arrearages.

We are mindful that “[t]he principal purpose of the Bankruptcy Code is to grant a fresh start to the honest but unfortunate debtor.” Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007) (internal quotation marks omitted). And Congress wanted to protect debtors against unbar-gained-for interest requirements in enacting. § 1123(d). But the Bankruptcy Code is not a purely remedial statute. Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 51, 128 S.Ct. 2326, 171 L.Ed.2d 203 (2008). “Rather, Chapter 11 strikes a balance between a debtor’s interest in reorganizing and restructuring its debts and the creditors’ interest in maximizing the value of the bankruptcy estate.” Id. If the loan agreement did not require a higher, post-default interest rate, New Investments would not have to pay it. However, today’s result holds New Investments to its bargain by adhering to the terms of its loan agreement with Pacifica, as required by § 1123(d).

Both the text and the legislative history of § 1123(d) make clear that the provision was intended to limit parties to the benefit of their bargain when a debtor seeks to effectuate a cure and return to pre-default conditions. The parties bargained for a higher interest rate on the note in the event of default, and Pacifica is entitled to the benefit of that bargain under the terms of§ 1123(d).

IV.

We conclude that Pacifica is entitled to receive payment of the loan at the post-default interest rate. We therefore reverse the decision of the bankruptcy court and remand for further proceedings.

REVERSED and REMANDED.

BERZON, Circuit Judge,

dissenting:

Neither 11 U.S.C. § 1123(d) nor any. other provision of the Bankruptcy Code provides a definition of “cure” contrary to the one this Court announced in Great Western Bank & Trust v. Entz-White Lumber & Supply, Inc. (In re Entz-White Lumber & Supply, Inc.), 850 F.2d 1338, 1340 (9th Cir. 1988). We are therefore bound by this Court’s precedent, according to which New Investments may, in curing its default, pay the pre-default interest rate contained in the promissory note.

Instead of abiding by our longstanding case law, the majority concludes that Congress displaced Entz-White when it passed § 1123(d). Because neither the text of the statute nor the legislative history of § 1123(d) support the majority’s departure, I dissent.

I.

Chapter 11 requires that a debtor’s plan of reorganization “provide adequate means for the plan’s implementation, such as ... curing or waiving of any default.” 11 U.S.C. § 1123(a)(5). In the absence of any statutory definition, this Court held in Entz-White that “[cjuring a default” means “returning to pre-default conditions,” such that any consequences of the default are “nullified.” 850 F.2d at 1340 (quoting Di Pierro v. Taddeo (In re Taddeo), 685 F.2d 24, 26-27 (2d Cir. 1982)). Because curing a default returns the debt- or to the status quo ante, we concluded, “the power to cure under the Bankruptcy Code authorizes a plan to nullify all consequences of default, including avoidance of default penalties such as higher interest.” Id. at 1342.

After this Court decided Entz-White, Congress enacted 11 U.S.C. § 1123(d). Section 1123(d), part of the 1994 amendments to the Bankruptcy Code, provides:

Notwithstanding subsection (a) of this section and sections 506(b), 1129(a)(7), . and 1129(b) of this title, if it is proposed in a plan to cure a default the amount necessary to cure the default shall be determined in accordance with the underlying agreement and applicable non-bankruptcy law.

Pacifica maintains—and the majority agrees—that this provision overruled Entz-White’s holding that a debtor who cures a default, thus “nullifyting] all consequences of’ that default, may repay ar-rearages at the pre-default interest rate. See 850 F.3d at 1342.

Pacifica bears the burden of showing that Congress, in passing § 1123(d), intended to change settled law. Tome v. United States, 513 U.S. 150, 163, 115 S.Ct. 696, 130 L.Ed.2d 574 (1995) (quoting Green v. Bock Laundry Mach. Co., 490 U.S. 504, 521, 109 S.Ct. 1981, 104 L.Ed.2d 557 (1989)). In determining whether Pacifica has met this burden, we “will not read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress, intended such a departure.” Hamilton v. Canning, 560 U.S. 505, 517, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010) (citations and internal quotation marks omitted).

Pacifica has not carried this burden, as both the statutory text and the legislative history of § 1123(d) support the continuing viability of Entz-White’s holding. The majority opinion errs in concluding otherwise, and, in doing so, wrongly imposes a severe penalty on debtors in New Investments’ situation.

II.

The Bankruptcy Reform Act of 1994, among other things, added nearly identical language regarding how one cures a default to Chapters 11, 12, and 13 of the Bankruptcy Code. Pub. L. No. 103-394, § 305, 108 Stat. 4106 (1994). Like the subsection here at issue, 11 U.S.C. §§ 1222(d) and 1322(e) provide that, notwithstanding other provisions of the Bankruptcy Code not relevant here, “if it is proposed in a plan to cure a default, the amount necessary to cure the default, shall be determined in accordance with the underlying agreement and applicable nonbankruptcy law.”

Nowhere did the 1994 amendments define “cure a default” or suggest that this Circuit’s then-operative definition of “cure” was incorrect. Rather, § 1123(d) indicates which materials the parties may consult in determining how to cure a default. Accordingly, as a result of the 1994 amendments, the terms of a cure are circumscribed by the underlying agreement and applicable nonbankruptcy law.

Neither § 1123(d) nor any other provision of the Bankruptcy Code explains where in the underlying agreement to look for the provisions that apply in the event of a cure. If, as Entz-White held, “[cjuring a default” means “returning to pre-default conditions,” 850 F.2d at 1340, the provisions of the agreement setting out thé pre-default interest rate provide the relevant information. If “curing a default” means paying a penalty triggered by the default, the provisions of the agreement addressing higher post-default interest rates establish the relevant requirements. But in Entz-White, we decisively rejected this alternative definition of “cure.” Id. at 1342. We called the creditor’s argument in favor of this reading “spurious,” as it “amountfed] to saying, once more, that the higher rate of interest is not a consequence of default that can be cured.” Id.

In short, the text of § 1123(d) makes clear that New Investments’ cure will be based on the terms of the promissory note, but offers no guidance on which of the note’s provisions governs here. Entz-White provides that guidance, by specifying that a “cure” permits the debtor to “avoid all consequences of the default.” Id. Applying that understanding, it is the pre-default interest provisions of the underlying agreement that govern.. The majority’s conclusion that § 1123(d) overruled. 15⅛-White has no basis in the text of the statute.

III.

The legislative history of § 1123(d) confirms that Congress did not mean to disturb this Court’s holding in Entz-White. In adding § 1123(d), Congress focused on addressing an entirely separate matter— the Supreme Court’s holding in Rake v. Wade, 508 U.S. 464, 113 S.Ct. 2187, 124 L.Ed.2d 424 (1993). H.R. Rep. No. 103-835, at 55 (1994); see also S. Rep. No. 103-168, at 53 (1993) (discussing the parallel provision included in the Senate bill).

In Rake, the Supreme Court held that an oversecured creditor was entitled to pre- and post-confirmation interest on mortgage arrearages paid to cure a default under a Chapter 13 plan. 508 U.S. at 471-75, 113 S.Ct. 2187. This reading of the relevant provisions of the Bankruptcy Code, §§ 506(b), 1322(b), and 1325(a)(5), permitted secured creditors to collect interest on top of the interest payments paid by debtors under their mortgages. Id. at 470-75, 113 S.Ct. 2187.

Congress overtly rejected this result in enacting § 1123(d). H.R. Rep. No. 103— 835, at 55. The amendments to § 1123 were contained in § 305 of the Bankruptcy Reform Act of 1994, which is entitled “Interest on Interest.” Pub. L. No. 103-394, § 305, 108 Stat. 4106, 4134 (1994). The relevant House Report states that the amendments “will have the effect of overruling the decision of the Supreme Court in Rake v. Wade,” because Rake “had the effect of providing a windfall to secured creditors” by. giving them “interest on interest payments, and interest on the late charges and other fees, even where applicable laws prohibit[] such interest and even when it was something that was not contemplated by either party in the original transaction.” H.R. Rep. No. 103-835, at 55.

Far from repudiating Entz-White ⅛ holding, the House Report reiterated Entz-White ⅛ interpretation of “cure,” stating, “[i]t is the Committee’s intention that a cure pursuant to a plan should operate to put the debtor in the same position as if the default had never occurred.” Id. The legislative history thus indicates, at the very least, that the new provision was not meant sub silentio to enact a definition of “cure” conflicting with that adopted in Entz-White. It also suggests that the relevant provisions of the “underlying agreement” for a “cure” are those that would have applied “if the default had never occurred.” See id.

In sum, the pertinent 1994 amendments eliminated the possibility of a “court contrived windfall” for secured creditors. Id. Pacifica’s challenge to the Bankruptcy Court’s confirmation order does not implicate the concern that animated Congress. Like the text of the statute, the legislative history in no way suggests that Entz-White ’s definition of “cure” is incorrect or was overruled.

Here, the underlying agreement provides both pre- and post-default interest rates. As the statute requires, we look to that agreement in determining which rates may apply. And in selecting which provision of the contract governs, we rely on our precedent and use the pre-default rate. New Investments therefore could cure the default by paying interest on the debt at the pre-default rate.

IV.

Notwithstanding its recitation of the relevant text and legislative history, the majority somehow concludes that Entz-White is no longer controlling. Relying on an incorrect interpretation of § 1123(d), the majority’s opinion mistakenly upsets this Circuit’s binding precedent.

A three judge panel of this Court' is “bound by decisions of prior panels unless an en banc decision, Supreme Court decision or subsequent legislation undermines those decisions.” Gen. Const. Co. v. Castro, 401 F.3d 963, 975 (9th Cir. 2005) (quoting Benny v. U.S. Parole Comm’n, 295 F.3d 977, 983 (9th Cir. 2002)). No act of Congress or intervening higher authority justifies the panel’s departure from our precedent here.

As discussed, Congress has not defined “cure the default” in the years since we decided Entz-White. There is thus no “clear indication that Congress intended .., a departure,” Hamilton, 560 U.S. at 517, 130 S.Ct. 2464, from this Court’s past practice. The interpretation of the , statute best supported by the legislative record favors continuity. No intervening case law from the Supreme Court or the Ninth Circuit calls Entz-White into doubt. On the contrary, this Court has continued to rely on Entz-White’s holding. See Platinum Capital, Inc. v. Sylmar Plaza, L.P. (In re Sylmar Plaza, L.P.), 314 F.3d 1070, 1075 (9th Cir. 2002) (concluding Entz-White precluded a creditor’s argument “that a plan intended to nullify the consequences of a default (thereby avoiding the higher post-default interest rate) does not meet the purposes of the • Bankruptcy Code"); cf. Gen. Elec. Capital Corp., v. Future Media Prods. Inc., 547 F.3d 956, 960-61 (9th Cir. 2008) (treating Entz-White as good law, but concluding it did not apply to a claim paid in full as a result of asset sales outside of a Chapter 11 plan).

Stare decisis thus requires us to apply Entz-White and hold that New Investments “is entitled' to’ avoid all consequences of the default—including higher post-default interest rates.” 850 F.2d at 1342. I would affirm the Bankruptcy Court order confirming New Investments’ plan of reorganization, which reflects the pre-de-fault interest rate included in the promissory note.

      . We reject New Investments's argument that Washington's deed of trust law cannot constitute "applicable nonbankruptcy law” under § 1123(d) because the Bankruptcy Code’s automatic stay would prevent foreclosure under Washington law. See . 11 U.S.C. § 362(a); Wash. Rev. Code Ann. § 61.24.040. This reading would render the phrase "applicable non-bankruptcy law” meaningless because the automatic stay would always trump state law foreclosure provisions, contrary to the statutory text and intent.


author: LYNN, Chief District Judge: GRABER, Circuit Judge,

text:
    James Flavy Coy BROWN, on behalf of himself and those similarly situated, Plaintiff-Appellant, v. RAWSON-NEAL PSYCHIATRIC HOSPITAL; Leon Ravin, M.D., individually and in his official capacity as Associate Medical Director; Anurag Gupta, M.D., individually; Southern Nevada Adult Mental Health Services; Chelsea Szklany, individually and in her official capacity as Administrator; Nevada Bureau of Health Care Quality and Compliance; Nevada Division of Health, Division of Mental Health and Developmental Services; Richard Whitley, in his official capacity as Administrator of the Nevada Division of Public and Behavioral Health, formerly Nevada Division of Health and the Nevada Division of Mental Health & Developmental Services; Nevada Department of Health and Human Services; Mike Willden, in his official capacity as Director; Linda J. White M.D., individually and in her official capacity as Statewide Psychiatric Medical Director of the State of Nevada; Kyle Devine, in his official capacity as Bureau Chief of the Nevada Bureau of Health Care Quality and Compliance, Defendants-Appellees.
    No. 14-16458
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted August 8, 2016—San Francisco, California
    Filed November 4, 2016

      Mark E. Merin (argued) and Paul H. Masuhara, Law Office of Mark E. Merin, Sacramento, California; Staci J. Pratt and Allen Lichtenstein, Allen Lichtenstein, Attorney at Law Ltd., Las Vegas, Nevada; for Plaintiff-Appellant.
    Linda C. Anderson (argued), Chief Deputy Attorney General, Office of the Attorney General, Las Vegas, Nevada, for State Defendants-Appellees.
    David P. Pruett (argued),-Carroll Kelly Trotter Franzen McKenna- & Peabody, Long Beach, California, for Defendant-Ap-pellee Linda J. White, M.D.
    Before: J. CLIFFORD WALLACE and SUSAN P. GRABER, Circuit Judges, and BARBARA M. G. LYNN, Chief District Judge.

       The Honorable Barbara M. G. Lynn, Chief District Judge for the U.S. District Court for the Northern District of Texas, sitting by designation.

   Dissent by Judge GRABER

OPINION

LYNN, Chief District Judge:

Appellant James Flavy Coy Brown appeals from the district court’s judgment dismissing his state and federal claims against Southern Nevada Adult Mental Health Services, Chelsea Szklany, Mike Willden, Richard Whitely, Leon Ravin, M.D., Anurag Gupta, M.D., and Kyle De-vine (the “State Defendants”), arising out of his February 11, 2013 discharge from the Rawson-Neal Psychiatric Hospital in Las Vegas, Nevada.and subsequent transportation to Sacramento, California. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

I.

The district court initially dismissed Brown’s federal constitutional and statutory claims without prejudice under Fed. R. Civ. P. 12(b)(6), including his claims under 42 U.S.C. § 1983 for alleged violations of his rights under the Eighth, Fourth, and Fourteenth Amendments to the United States Constitution; alleged violations of the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq.; and alleged violations of the Emergency Medical Treatment and Active Labor Act, 42 U.S.C. § 1395dd, et seq. The district court also granted Brown leave to amend his complaint, but Brown, who was and is represented by counsel, instead moved for reconsideration. The district court denied that motion and, again, granted Brown leave to amend his complaint. After Brown did not timely file an amended complaint, the district court extended the deadline and warned Brown that his failure to file an amended complaint within the time prescribed may result in dismissal of his constitutional and federal statutory claims with prejudice. When Brown did not timely file an amended complaint or otherwise respond to the court’s order, the district court dismissed Brown’s federal claims with prejudice, as a sanction under Fed. R. Civ. P. 41(b). The district court further dismissed Brown’s supplemental state law claims without prejudice.

Notwithstanding the dismissal under Rule 41(b), Brown filed this appeal, seeking judicial review of the district court’s orders dismissing his complaint under Rule 12(b)(6) and denying his motion for reconsideration, ignoring the fact that the case was dismissed as a sanction under Rule 41(b), and that in light of that, the Rule 12(b)(6) orders were not reviewable. See Al-Torki v. Kaempen, 78 F.3d 1381, 1386 (9th Cir. 1996); see also Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065 (9th Cir. 2004).

Brown did not raise in his opening brief the issue of whether the district court abused its-discretion in dismissing the case as a sanction under Rule 41(b). Indeed, in outlining the procedural history of the case in his opening brief, Brown mentioned neither the Order warning him of an impending dismissal with prejudice if he failed to amend, nor the Order dismissing his federal claims with prejudice under Rule 41(b).

II.

We generally do not consider issues that are not raised in the appellant’s opening brief. See, e,g., McKay v. Ingleson, 558 F.3d 888, 891 n. 5 (9th Cir. 2009). However, although the court has discretion under these circumstances to consider an argument not raised in the opening brief, it is not obligated to do so. In re Riverside-Linden Inv. Co., 945 F.2d 320, 324 (9th Cir. 1991).

We decline to exercise our discretion in Brown’s favor. His failure to mention in his opening brief the final Order of Dismissal under Rule 41(b) was either grossly negligent or disingenuous. We hold that Brown waived the argument that the district court abused its discretion in dismissing his federal claims under Rule 41(b). In the absence of a showing that the district court abused its discretion, because the prior interlocutory order of dismissal under Rule 12(b)(6) is not reviewable, there would be no basis to appeal. Having failed to make in his opening brief the abuse of discretion argument as to Rule 41(b), Brown waived it.

The dissent asserts that we should exercise our discretion in Brown’s favor because the State Defendants raised the Rule 41(b) issue in their answering brief and thus did not suffer any prejudice. We disagree for three reasons. First, we do not agree that the State Defendants were not prejudiced by Brown’s failure to raise the Rule 41(b) issue. Although the State Defendants did address the issue in their answering brief, they did so without the benefit of anything to argue against. They had to address what arguments Brown might have made, had he addressed the issue, and then refute them." Brown, on the other hand, discussed the issue at length in his reply brief and the State Defendants were not given an opportunity to respond to those arguments. Accordingly, we do not assume that the State Defendants did not suffer any prejudice, simply because they had the foresight to attempt to address the issue unprompted.

Second, the decision the dissent relies on in its waiver discussion, United States v. Ullah, 976 F.2d 509 (9th Cir. 1992), is distinguishable. Ullah is a criminal ease in which one defendant-raised an issue in his opening brief, while the co-defendant (Ul-lah) did not. Thus, we concluded that “it is manifestly unjust to reverse the conviction of one co-defendant but to uphold the conviction of another, co-defendant when the same error affected both defendants.” Id. at 514. Correspondingly, we exercised our discretion to consider the argument that was unraised by only one defendant, but was before the court. The present case does nót involve a criminal defendant who will lose his liberty if we do not exercise our discretion. Rather, our case involves a civil appellant who tiptoed around a central issue in his opening brief. Whether the omission was intentional or merely negligent, it was a significant error. Unlike in Ullah, there is no reason to “deviate from our usual practice in this case.” E.E.O.C. v. Peabody Western Coal Co., 773 F.3d 977, 990 (9th Cir. 2014).

Third, we dispute the dissent’s characterization of our decision as “a tri.umph of procedural rigidity” that serves no other purpose. We understand that our rules about preserving issues can sometimes seem -academic and formalistic, rather than practical. There are, however, important reasons for holding that an appellant waives an issue if it fails to provide argument about the issue in its opening brief. Rules are enforced to deter the type of improper, or inattentive, conduct that occurred here. Moreover, “appellate courts do not sit as self-directed boards of legal inquiry and research, but essentially as arbiters .of- legal questions presented and argued by the parties before them.” United States v. Mageno, 762 F.3d 933, 954-55 (9th Cir. 2014) (Wallace, J., dissenting) (vacated on other grounds), quoting Nat’l Aeronautics & Space Admin. v. Nelson, 562 U.S. 134, 131 S.Ct. 746, 756 n. 10, 178 L.Ed.2d 667 (2011). We thus reasonably require parties to preserve valid issues in order to conserve judicial resources and to assist our review. Greenwood v. F.A.A., 28 F.3d 971, 977 (9th Cir. 1994), citing United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991) (“Judges are not like pigs, hunting for truffles buried in briefs.”). That principle dictates finding waiver on these facts.

AFFIRMED.

GRABER, Circuit Judge,

dissenting:

I respectfully dissent. In my view, we should exercise discretion to consider the Rule 41(b) issue; the- district court abused its discretion by dismissing the case as a 'sanction under Rule 41(b), rather- than on the merits under Rule 12(b)(6); and on the merits the district court erred in ruling that Plaintiff failed to state a federal claim. Accordingly, I would reverse and remand for further proceedings.

1. We have discretion to address Rule 41(b).

As the majority recognizes, we have discretion to consider the Rule 41(b) issue. United States v. Ullah, 976 F.2d 509, 514 (9th Cir. 1992). At least two of the reasons that motivated us to reach the unraised issue in Ullah also are present here. First, the Rule 41(b) issue was raised—and discussed at length—in the Defendants’ answering brief. Id. Second, Plaintiffs failure to raise the issue has not prejudiced Defendants’ defense; in their brief, Defendants both responded to the substance of Plaintiffs opening brief and put forth an argument concerning the Rule 41(b) issue. Id. Plaintiff, for his part, responded to the Rule 41(b) argument in his reply brief.

The majority correctly points out that, unlike Ullah, this case does not involve a criminal defendant who “will lose his liberty if we do not exercise our discretion.” (Maj. op. at page 1149.) But that distinction is relevant only to the “manifest injustice” ground for reaching an unraised issue, not to the other two grounds, each of which is independently adequate. Here, as in Ullah, “the discussion of the [unraised] issue in th[e] briefs is sufficient to permit an informed resolution of the dispute.” 976 F.2d at 514. Failing to address the Rule 41(b) issue in these circumstances is a triumph of procedural rigidity but serves no other purpose.

2. The district court abused its discretion under Rule 41 (b).

Dismissal as a sanction is a harsh penalty to be imposed only in extreme circumstances. In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d 1217 (9th Cir. 2006). The district court granted Plaintiff leave to amend the complaint. He did not do so. The district court then promptly dismissed Plaintiffs federal law claims with prejudice under Rule 41(b) as a sanction for failing to comply with a court order. That decision was an abuse of discretion for the simple reason that, under our precedents, Plaintiff did not fail to comply with a court order.

When a district court requires a plaintiff to file an amended complaint, the court may dismiss the case under Rule -41(b) if the plaintiff fails to follow the requirement. See Yourish v. Cal. Amplifier, 191 F.3d 983, 986 n.2 (9th Cir. 1999) (noting that the order stated that an “[a]mended complaint shall be filed within 60 days” (emphasis added)); Ferdik v. Bonzelet, 963 F.2d 1258, 1260 (9th Cir. 1992) (stating that the court “ordered” and “required” the filing of a second amended complaint); Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065 (9th Cir. 2004) (“Yourish and Ferdik both arose when plaintiffs, given the opportunity to amend, or be' dismissed, did nothing.... The failure of the plaintiff eventually to respond to the court’s ultimatum—either by amending the complaint or by indicating to the court that it will not do so—is properly met with the sanction of a Rule 41(b) dismissal.” (second emphasis added)).

But here, the district court did not require Plaintiff to file an amended complaint, nor did the court require in the alternative that Plaintiff file an amended complaint or some other specified document. The court’s order denying Plaintiffs motion for reconsideration merely granted leave to amend, with permissive text allowing Plaintiff to amend or not: The “plaintiff, if he chooses to amend his complaint, [must] file a motion to amend within fourteen (14) days.” (Emphasis added.) Later, the court warned, without citation to Rule 41(b), that “failure to file an amended complaint within this time may result in dismissal.” (Emphasis added.) Given the court’s failure to cite Rule 41(b), the permissive wording of its orders, and Plaintiffs desire to obtain appellate review of the Rule 12(b)(6) dismissal as discussed in the motion for reconsideration, he understandably hoped for a dismissal, which he reasonably thought would be under Rule 12(b)(6). After all, the district court never ordered Plaintiff to file an amended complaint, as the courts had in Yourish or Ferdik. Leave to amend was granted; failure to amend did not constitute noncompliance with a court order. Simply put, there was no “ultimatum” within the meaning of our precedents, and so the district court abused its discretion in dismissing Plaintiffs federal claims under Rule 41(b).

3. Plaintiff stated a claim for relief.

In view of the erroneous Rule 41(b) dismissal, I would reach the merits of the district court’s dismissal under Rule 12(b)(6). We review de novo. Edwards, 356 F.3d at 1061,1065.

The operative complaint contains seven federal law claims, though many of them may be viewed as alternative theories of liability rather than as distinct claims for relief. Each claim rests on the following set of alleged facts. A state-run psychiatric hospital and numerous individual doctors and state health officials engaged in, or approved of, a practice of “Greyhound therapy,” in which patients were involuntarily discharged from the hospital and ordered to board (or tricked into boarding) buses bound for out-of-state destinations. No arrangements were made for the patients’ care in the destination cities, nor were the cities chosen because the patients had ties to them. Plaintiff was sent to Sacramento, “a city with which he had no prior contact, and where he knew no one.”

At the time he was sent to Sacramento, Plaintiff had been in the hospital for only a few days. He had been admitted “with a diagnosis of psychosis, hearing voices, and thinking of suicide” and was given various “psychotropic medications which affect thinking and judgment” during his short stay. He was released “without money, identification or Medicaid card” and in a delusional and suicidal state. In short, Plaintiff alleges that a state-run psychiatric hospital decided to ship him to another state—without regard for what kind of care, if any, he might receive upon arrival—rather than to provide him treatment.

It should be plain enough even from this abridged version of the facts that Plaintiffs complaint states a plausible claim for relief under a substantive due process theory. “[T]he state’s failure to protect án individual against private violence ... can [violate the guarantee of due process] where the state action ‘affirmatively places the plaintiff in a position of danger,’ that is, where state action creates or exposes an individual to a danger which he or she would not have otherwise faced.” Kennedy v. City of Ridgefield, 439 F.3d 1055, 1061 (9th Cir. 2006) (brackets omitted) (quoting Wood v. Ostrander, 879 F.2d 583, 589-90 (9th Cir. 1989)); see also Pauluk v. Savage, 836 F.3d 1117, 1121-24 (9th Cir. 2016) (discussing “state-created danger” doctrine).

The district court rejected Plaintiffs substantive due process theory because he made “no allegation that [the] defendants caused [him] to be in a dangerous situation. Indeed, before [P]laintiff was admitted to [the hospital] he was homeless and in need of psychiatric care..., [T]he complaint makes it very clear that [P]laintiff faced these dangers prior to any interaction with [the] defendants.” But Plaintiff faced quite different dangers in Sacramento, an unfamiliar city to which he had no ties, than he had faced in Las Vegas, the city where he resided. And even if Plaintiff faced the same kinds of dangers in both places, he has-plausibly alleged that Defendants’ affirmative acts exposed him to a greater danger than he otherwise would have faced, which is sufficient to state a due process claim. See Kennedy, 439 F.3d at 1063 n.4 (noting that “this court has already specifically rejected the ‘danger creation’- versus ‘danger enhancement’ distinction”).

If even one theory supporting a claim for relief is plausible, the -claim cannot be dismissed under Rule 12(b)(6). See Haddock v. Bd. of Dental Exam’rs of Cal., 777 F.2d 462, 464 (9th Cir. 1985) (stating that “a complaint should not be dismissed if it states a claim under any legal theory, even if the plaintiff erroneously relies on a different legal theory”); see also Fed. R. Civ. P. 8(d)(2) (“A party may set out 2 or more statements of a claim or defense alternatively or hypothetically, either in a single count or defense or in separate ones. If a party makes alternative statements, the pleading is sufficient if any one of them is sufficient.”). Because Plaintiff pleaded a plausible claim for relief on a substantive due process theory, his federal claims should not have been dismissed under Rule 12(b)(6).

For all these reasons, I dissent.

      . The majority notes that Defendants did not file (and they did not ask to file) another brief concerning Rule 41(b), following Plaintiff's reply brief. But we held oral argument at which Defendants had a full opportunity to discuss the issue. Thus it is not entirely correct to state that Defendants "were not given an opportunity to respond.” (Maj. op. at page 1149.)

      . Given the errors here, both procedural and substantive, the manifest injustice exception also may apply, just as it did in Ullah. Plaintiffs claim—that notwithstanding his delusional and suicidal state, Defendants placed him on a bus against his will and sent him, without money or identification, to a distant city where he lacked any ties—describes a situation that, if proved, may be as onerous as being incarcerated.

      .The district court did not rely on an alleged failure to prosecute. See Omstead v. Dell, Inc., 594 F.3d 1081, 1084 (9th Cir. 2010) (holding that a dismissal for failure to prosecute must be supported by a showing of unreasonable delay). The dismissal with prejudice occurred less than 30 days after leave to amend was granted.

      . By focusing only on one theory I do not mean to suggest that none of Plaintiff's other theories states'a claim.


author: D.W. NELSON, Senior Circuit Judge:

text:
    MOVE, INC., Plaintiff-Appellant, v. CITIGROUP GLOBAL MARKETS, INC., Defendant-Appellee.
    No. 14-56650
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted October 4, 2016 Pasadena, California
    Filed November 4, 2016

      Susan J. Williams (argued), Hennelly & Grossfeld LLP, Marina del Rey, California, for Plaintiff-Appellant.
    Fred Anthony Rowley, Jr. (argued) and Marc T.G. Dworsky, Munger Tolies & Olson LLP, Los Angeles, California; Achyut J. Phadke, Munger Tolies & Olson LLP, San Francisco, California; for Defendant-Appellee.
    Before: DOROTHY W. NELSON and RICHARD A. PAEZ, Circuit Judges, and ELAINE E. BUCKLO, Senior District Judge.

       The Honorable Elaine E. Bucklo, Senior United States District Judge for the Northern District of Illinois, sitting by designation.

   OPINION

D.W. NELSON, Senior Circuit Judge:

Move, Inc. (Move) appeals the district court’s order dismissing its action and denying its motion to vacate an arbitration award pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. We have jurisdiction pursuant to 9 U.S.C. § 16(a)(3) and 28 U.S.C. § 1291. We hold that Move’s motion was not untimely because the FAA is subject to equitable tolling. We also hold that Move’s right to a fundamentally fair hearing was prejudiced by the fraudulent misrepresentations of the arbitration panel’s chairperson, resulting in proceedings led by an arbitrator who should have been disqualified from the dispute under the rules and regulations of the Financial Industry Regulatory Authority (FINRA). Accordingly, we REVERSE the district court’s judgment in part and REMAND the case for entry of judgment in favor of Move.

BACKGROUND

Move maintained an investment account with Citigroup Global Markets, Inc. (Citigroup). In connection with its investments, Move entered into a “Client Agreement” with Citigroup stating, in relevant part, that “all claims or controversies ... shall be determined by arbitration before, and only before, any self-regulatory organization or exchange of which [Citigroup] is a member.”

On September 16, 2008, Move commenced arbitration proceedings before a three-member FINRA panel, alleging that Citigroup mismanaged $131 million of Move’s funds by investing in speculative auction rate securities. Before initiating the proceedings, FINRA required Move and Citigroup to sign a “Uniform Submission Agreement,” which stated that the dispute was submitted to arbitration “in accordance with the Constitution, ByLaws, Rules, Regulations, and/or Code of Arbitration Procedure of [FINRA].” FIN-RA’s Code of Arbitration Procedure for Customer Disputes, found in FINRA Rules 12000-12905, includes Rule 12401(c), which required Move’s claims to be arbitrated by a panel of three arbitrators.

Pursuant to Rule 12403, FINRA provided the parties with a list of thirty proposed arbitrators and their employment histories, including ten proposed arbitrators from FINRA’s chairperson roster. Because the dispute involved a complex securities issue, it was important to Move that the person selected as chairperson be an experienced attorney. Move ranked “James H. Frank” first who, according to the FINRA Arbitrator Disclosure Report (ADR), received a law degree from Southwestern University in 1975 and was licensed to practice law in California, New York, and Florida. Pursuant to FINRA rules and regulations, arbitrators must affirm that their ADR is accurate and up to date. FINRA also informs arbitrators that a failure to disclose material information in the arbitrator profile may result in permanent disqualification.

Mr. Frank subsequently served as the chairperson of the panel along with Arthur T. Berggren, a licensed attorney, and Daniel R. Brush, a Certified Public Accountant and Certified Financial Planner. On December 8, 2009, after conducting six pre-hearing conferences and twenty hearing sessions, the FINRA panel issued a unanimous award denying Move’s claims.

Over four years later, on March 26, 2014, Move learned from an article in The AmLaw Litigation Daily that Mr. Frank had lied about being a licensed attorney. It is now undisputed that Mr. Frank, who is “James Hamilton Hardy Frank,” was impersonating retired California attorney “James Hamilton Frank.” FINRA later confirmed that Mr. Frank lied about his qualifications in his ADR and subsequently removed him from all cases and from its roster.

Move filed a complaint on' June 9, 2014, and a motion to vacate the arbitration award on June 17, 2014. Move argued that vacatur was warranted under 9 U.S.C. § 10(a)(3) and (4) of the FAA because of Mr. Frank’s misrepresentations. Although 9 U.S.C. § 12 provides that notice of a motion to vacate an arbitration award must be served within three months after the award is delivered, Move argued the deadline should be equitably tolled. Citigroup moved to dismiss, arguing that equitable tolling is unavailable under the FAA and that, even if it were, Move failed to demonstrate tolling was justified. Citigroup further argued that, even if the limitations period were tolled, vacatur was unjustified on the merits.

The district court denied Move’s motion to vacate and granted Citigroup’s motion to dismiss. Noting that equitable tolling under the FAA presented an “unsettled question of law” in this circuit, the court ruled that equitable tolling is available, but that Move failed to demonstrate an adequate ground for vacatur under the FAA. Specifically, the court explained that (1) Mr. Frank’s misbehavior did not prejudice Move’s rights to a fundamentally fair hearing as required by § 10(a)(3); and (2) the panel did not exceed its powers in violation of § 10(a)(4) because Mr. Frank’s deceit, if cognizable at all under that section, did not violate Move’s contractual rights under its Client Agreement with Citigroup. Move timely appealed.

STANDARD OF REVIEW

We review de novo a district court’s denial of a. motion to vacate an arbitration award. See, e.g., United States v. Park Place Assocs., 563 F.3d 907, 918 (9th Cir. 2009). Wé also review de novo a district -court’s dismissal of a complaint' for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). See, e.g., N.M. State Inv. Council v. Ernst & Young LLP, 641 F.3d 1089, 1094 (9th Cir. 2011).

ANALYSIS

The FAA requires that notice of a motion to vacate an- arbitration award must be- served within three months after the award is filed or delivered. 10 U.S.C. § 12. Because Move’s motion to vacate was filed over four years after the three month statutory window closed, we must first determine whether the doctrine of equitable tolling applies to the FAA, such that the motion is not time-barred. We hold that it does. We also hold that Move’s right to a fundamentally fair hearing under § 10(a)(3) was prejudiced by the arbitral misconduct of the panel’s chairperson, Mr. Frank. The district court therefore erred in denying Move’s motion to vacate the award.

A. Equitable Tolling

Although this Court has not yet decided whether equitable tolling applies to the FAA, the district court held that it does. We agree.

The closest we have come to deciding this issue was in Lafarge Conseils et Etudes, S.A. v. Kaiser Cement &Gypsum Corp., 791 F.2d 1334 (9th Cir. 1986). There, we were presented with the narrow question of whether Kaiser could revive an unsuccessful motion to vacate an arbitration award “by way of a Rule 60(b) motion with a claim of newly discovered evidence.” Id. at 1338. In affirming the denial of Kaiser’s motion, we observed that “the three-month notice requirement of section 12 ... would be meaningless if a party to the arbitration proceeding could bring an independent action asserting such claims outside of the statutory time period provided in section 12.” Id. (emphasis added) (internal citations, brackets, and quotation marks omitted). However, equitable tolling was neither raised nor specifically addressed in that case. Accordingly, Lafarge does not govern the outcome of the case now before us.

Furthermore, as the district court noted, the case law from other circuits is conflicting and most circuits—including this circuit—have declined to definitively rule on whether equitable tolling applies to the FAA. See Garrett v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 882, 883 n.1 (9th Cir. 1993) (“[Petitioner] asks that we permit his late petition under the doctrine of equitable tolling. Because we find that the district court correctly dismissed the petition on a jurisdictional basis, we need not reach this issue.”); see also Fradella v. Petricca, 183 F.3d 17, 21 (1st Cir. 1999); Taylor v. Nelson, 788 F.2d 220, 225-26 (4th Cir. 1986); Piccolo v. Dain, Kalman & Quail, Inc., 641 F.2d 598, 601 (8th Cir. 1981) (declining to decide if equitable tolling applies to the FAA); Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155, 1158 (10th Cir. 2007) (stating that equitable tolling suspends the running of a statute, unless Congress provides to the contrary, but finding equitable tolling inapplicable under the facts of the case); but see Cigna Ins. Co. v. Huddleston, No. 92-1252, 1993 WL 58742, at *11 (5th Cir. Feb. 16, 1993) (per curiam) (unpublished) (holding that equitable tolling does not apply to the FAA). Deciding this question as a matter of first impression in this circuit, we now hold that the FAA is subject to equitable tolling.

“It is hornbook law that limitations periods are customarily subject to equitable tolling ... unless tolling would be inconsistent with the text of the relevant statute.” Young v. United States, 535 U.S. 43, 49, 122 S.Ct. 1036, 152 L.Ed.2d 79 (2002) (internal citations and quotation marks omitted). Accordingly, “Congress must be presumed to draft limitations periods in light of this background principle,” id. at 49-50, 122 S.Ct. 1036, and the rebut-table presumption that limitations periods are subject to equitable tolling must be overcome by the text or purpose of a statute, see, e.g., Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 95-96, 111 S.Ct. 453, 112 L.Ed.2d 435 (1990); John R. Sand & Gravel Co. v. United States, 552 U.S. 130, 138, 128 S.Ct. 750, 169 L.Ed.2d 591 (2008). We agree with the district court and conclude that neither the text, nor the structure, nor the purpose of the FAA is inconsistent with equitable tolling.

First, the Supreme Court has instructed lower courts to consider several textual factors to determine whether Congress intended for tolling not to apply to a given statute. This includes whether a limitations period is set forth in “unusually emphatic form,” is “unusually generous,” or uses “highly detailed” and “technical” language, and whether the statute “reiterat[ed] the limitations period several times in several different ways.” Holland v. Florida, 560 U.S. 631, 646-47, 130 S.Ct. 2549, 177 L.Ed.2d 130 (2010) (internal quotation marks omitted). None of these factors weigh in favor of foreclosing equitable tolling under the FAA.

Here, the FAA’s instruction that notice of a motion to vacate “must be served” within three months is neither “unusually generous” nor “unusually emphatic.” See Socop-Gonzalez v. I.N.S., 272 F.3d 1176, 1191 (9th Cir. 2001) (recognizing that 8 C.F.R. § 3.2(c)(2) requiring a motion to reopen immigration proceedings “be filed no later than 90 days” after a rendered decision is not unusually generous or emphatic); Kwai Fun Wong v. Beebe, 732 F.3d 1030, 1038 (9th Cir. 2013) (holding that the phrase “forever barred” is not “unusually emphatic”); cf. United States v. Beggerly, 524 U.S. 38, 48-49, 118 S.Ct. 1862, 141 L.Ed.2d 32 (1998) (holding that a twelve-year limitations period is unusually generous). Furthérmore, the FAA’s limitations period is neither detailed nor technical and is not reiterated elsewhere in the statute. Accordingly, the text of the statute does not preclude- equitable tolling.

Second, the 'FAA’s structure is not incompatible with equitable tolling. Citigroup argues that the “interlocking structure” of the FAA precludes tolling, pointing to § 9 of the FAA, which provides one year for a party to file a motion to confirm an award. According to Citigroup, allowing vacatur more than a year after an award is issued would upset the statutory scheme by overturning a court’s decision to confirm that award. However, as the district court emphasized, a moving party would still need to meet the heavy burden of establishing its entitlement to equitable tolling for a court to vacate an award, and it would only be the rare case in which the three-month deadline for.a motion to vacate would not apply. We therefore find that the structure of the FAA is compatible with equitable tolling.

Finally, equitable tolling would not undermine the basic purpose of the FAA, which was enacted' to make “valid and enforceable written provisions or agreements for arbitration of disputes.” 68 Cong. Ch. 213, 43 Stat. 883 (1925). While the FAA reflects the “national policy favoring arbitration with just the limited review” necessary to maintain finality in ar-bitral proceedings, Hall Street, 552 U.S. at 581, 128 S.Ct. 1396, “[t]he general pro-arbitration policy relies on the assumption that the forum is fair, and therefore cannot justify special deference to arbitration outcomes in the face of a colorable claim that the forum was unfair in a particular case.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Berry, 92 Fed.Appx. 243, 246 (6th Cir. 2004) (unpublished). Thus, although Citigroup argues that equitable tolling would undermine the FAA’s goal of finality, § 10’s limited grounds for review were still “designed to preserve due process,” Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir. 2003). Balancing the needs for both finality and due process, the arbitral process will not be disrupted if parties are permitted to satisfy the high bar of equitable tolling in limited circumstances. More importantly, permitting equitable tolling will enhance both the accuracy and fairness of arbitral outcomes.

Accordingly, we hold that the FAA is subject to the established doctrine of equitable tolling. Because neither Move nor Citigroup addressed on appeal the separate question of whether Move- satisfied the substantive requirements • of equitable tolling, that issue has been waived. See, e.g., Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004) (issue waived if not addressed in opening briefs). Regardless, we agree with the district court’s findings that (1) Move acted with due diligence in pursuing its claim, as it justifiably relied on the information provided by FINRA; and that (2) tolling would not prejudice Citigroup under the circumstances. We therefore conclude that Move is entitled to equitable tolling.

B. Vacatur Under the FAA

Because' we find that Move’s motion is not time-barred, we turn to the merits of Move’s vacatur claim. Under § 10(a)(3) of the FAA, courts may vacate an arbitration award upon finding that “the arbitrators were guilty of ... any ... misbehavior by which the rights of any party have been prejudiced.” The district court held that Move failed to demonstrate its rights were prejudiced as a result of Mr. Frank’s deceit. We disagree.

In determining whether an arbitrator’s misbehavior or misconduct prejudiced the rights of the parties, we ask whether the parties received a fundamentally fair hearing. See, e.g., U.S. Life Ins. Co. v. Superior Nat. Ins. Co., 591 F.3d 1167, 1177 (9th Cir. 2010) (“In short, perhaps [U.S. Life] did not enjoy a perfect hearing; but it did receive a fair hearing. It had notice, it had the opportunity to be heard and to present relevant and material evidence, and the decisionmakers were not infected with bias.”) (internal quotation marks omitted). For example, vacatur may be proper under § 10(a)(3) where an arbitrator’s ex parte receipt of evidence affected the outcome of the proceedings, Totem Marine Tug &Barge, Inc. v. N. Am. Towing, Inc., 607 F.2d 649, 653 (5th Cir. 1979), or where an arbitrator’s post-hearing consultation with an outside expert “tainted” the panel’s decision, M & A Elec. Power Co-op. v. Local Union No. 702, Int’l Bhd. of Elec. Workers, AFL-CIO, 977 F.2d 1235, 1237-38 (8th Cir. 1992). Although neither this Court nor our sister circuits have addressed whether vacatur is proper where an arbitrator’s purposeful and material deception resulted in his selection as chairperson of a panel, we agree with Move that such misbehavior constitutes grounds for vacatur under § 10(a)(3). Based on the facts,of the case before us, we simply cannot conclude that Move received a fundamentally fair hearing.

Upon submitting its claim to arbitration before a FINRA panel, Move made clear throughout the panel selection process that it was critical for an attorney to chair the proceedings. Specifically, Move believed that arbitration of a complex securities claim required a chairperson with the requisite experience to understand and interpret sophisticated legal concepts. As a result, Move struck FINRA candidates from the proposed roster who were not experienced attorneys. Move then ranked Mr. Frank first on its chairperson list, relying on the ADR in which Mr. Frank falsified his credentials.

Citigroup argues that there is no evidence that Mr. Frank influenced other members of the panel or that the outcome of the arbitration was affected by his participation. But there is simply no way to determine whether that was the case. Cf. Stivers v. Pierce, 71 F.3d 732, 747 (9th Cir. 1995) (“Particularly on a small board, ... it is difficult if not impossible to measure the impact that one member’s views have on the process of collective deliberation. Each.member contributes not only his vote but also his voice to the deliberative process.”) (citation omitted). In any event, Mr. Frank’s participation was itself prejudicial to Move. Under FINRA rules and regulations, such deceit would have permanently disqualified Mr. Frank from serving as a FINRA arbitrator. Indeed, once Mr. Frank’s lies were revealed, FIN-RA immediately removed him from its roster. However, because Mr. Frank’s fraudulent conduct was revealed only after the arbitration panel issued its award in favor of Citigroup, the parties received a hearing chaired by an imposter. Because Move and Citigroup agreed to arbitrate their multi-million dollar dispute before ’a panel of three qualified arbitrators as provided by FINRA’s rules and regulations, the parties’ rights to such a proceeding were prejudiced by the inclusion of an arbitrator as chairperson who should have been disqualified from arbitrating the dispute in the first place.

Accordingly, under the unique set of facts of this case, we hold that Move was deprived of a fundamentally fair hearing and therefore was prejudiced by the fraudulent conduct of the panel’s chairperson, Mr. Frank. Because Move is entitled to vacatur under § 10(a)(3), we need not address the second question of whether vaca-tur is also warranted under § 10(a)(4).

CONCLUSION

We REVERSE the district court’s judgment in part and REMAND the case for entry of judgment in favor of Move.

      . Citigroup makes an inapposite comparison to Hall Street Associates v. Mattel, Inc., where the Supreme Court explained that § 9 of the FAA—which states that a court "must grant” a motion to confirm an award within one year after the award is made—"carries no hint of flexibility.” 552 U.S. 576, 587, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008). However, the equitable tolling of a limitations period was not at issue in that case. The Court only decided whether a confirming court has the discretion to set aside an award for grounds outside of those enumerated in § 10 or § 11. .