F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
OCT 22 1998
TENTH CIRCUIT
PATRICK FISHER
Clerk
U.S. ENERGY CORP., a Wyoming
corporation and CRESTED
CORPORATION, d/b/a USECC, a
Colorado corporation,
Plaintiffs-Appellees,
v. Nos. 96-1532 & 97-1332
(D.C. No. 91-B-1153)
(D. Colo.)
NUKEM, INC., a New York corporation
and CYCLE RESOURCE INVESTMENT
CORP., a Delaware corporation,
Defendants-Appellants.
ORDER AND JUDGMENT*
Before ANDERSON, TACHA, and BALDOCK, Circuit Judges
Defendants Nukem, Inc. (hereafter “Nukem”) and Cycle Resource Investment
Corp. (hereafter “CRIC”) appeal the district court’s June 27, 1997, second amended
judgment confirming the arbitration panel’s order and award. Defendants argue that the
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
second amended judgment (1) contains an award which was not granted by the arbitration
panel and is, in the alternative, vague and ambiguous, and (2) contains a monetary award
with an “evident material mistake.” Our jurisdiction arises under 28 U.S.C. § 1291. We
affirm.
I.
Plaintiff USECC is a joint venture comprised of two uranium mining companies,
Plaintiffs U.S. Energy Corp. and Crested Corp., which held several mining claims in
Wyoming and a number of long-term contracts to supply uranium to utility companies.
CRIC is a wholly-owned subsidiary of Nukem formed specifically to enter into the
agreements at issue in this case. On December 21, 1988, USECC and CRIC entered into
a transaction for the purpose of mining uranium in Wyoming and selling it to domestic
utilities. In an asset purchase agreement, USECC agreed to sell a 50% interest in its
mining claims and long-term supply contracts to CRIC. In a separate partnership
agreement, USECC and CRIC each agreed to make capital contributions of their one-half
interest in the mining claims and supply contracts to the new partnership, Sheep Mountain
Partners (hereafter “SMP”). The partnership agreement contained an arbitration clause
and required SMP to enter into independent contractor agreements with USECC to
operate the mines and with CRIC to market the uranium produced. CRIC subsequently
assigned its rights and duties under the marketing agreement to Nukem.
After USECC and CRIC entered into their partnership agreement, Nukem
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negotiated uranium importation contracts with the Commonwealth of Independent States
(herafter “CIS”), whose members include Uzbekistan, Kazakhstan and Kirgizstan. In
order to prevent members of the CIS from dumping uranium in the United States at prices
below fair market value, the United States had imposed a tariff in excess of 100% of the
value of the imported CIS uranium. The United States, however, agreed to permit some
shipment of CIS uranium into the United States without tariff if the purchaser had a long-
term utility supply contract executed prior to March 5, 1992. If a supply contract met this
requirement, the contract was considered “grandfathered.” Acting in its own right,
Nukem subsequently submitted utility supply contracts to the U.S. Department of
Commerce for grandfathering. These contracts included five supply contracts1 owned by
SMP. The grandfathering of the contracts allowed Nukem to purchase CIS uranium in
amounts necessary to meet the delivery requirements of those utility supply contracts.
Nukem did not, however, supply the CIS uranium to SMP to satisfy the five utility supply
contracts’ requirements, but instead sold the uranium to other buyers. As a result, SMP
purchased uranium from other suppliers at higher prices to meet its contractual
obligations.
From these and other transactions, numerous disputes arose among the parties. In
1991, Plaintiffs filed this action in the district court. In 1994, the parties stipulated to
1
These contracts were with Duke Power Company, Illinois Power Company, Texas
Utilities Electric Company, Boston Edison, and Public Service Electric & Gas Company.
3
binding arbitration. The parties raised more than 33 claims before the arbitration panel.2
One of those claims involved the CIS uranium contracts. Plaintiffs argued that by
entering into CIS contracts on its own account, Nukem violated the marketing and
partnership agreements. Plaintiffs also argued that Nukem improperly used the five SMP
utility supply contracts to avoid the tariff on the CIS uranium.
The arbitration panel conducted a 73-day hearing and issued a written “Arbitration
Order and Award” on April 18, 1996. The arbitration panel rejected the claim that
Nukem violated the marketing and partnership agreements by entering into the CIS
contracts. In regard to the five SMP utility supply contracts, the arbitration panel
concluded that “Nukem without authority and without SMP’s permission or consent used
the SMP uranium supply contracts, which were partnership assets, to obtain purchase
rights for CIS” uranium. The panel further found that “the uranium should have been
made available to SMP to meet deliveries required by SMP’s grandfathered supply
contracts.” As a result of Nukem’s conduct, the panel impressed a constructive trust in
favor of SMP over “those purchase rights, the uranium acquired pursuant to those rights
and the profits therefrom . . . .” The panel also determined that as a result of Nukem’s
conduct regarding the five utility supply contracts, SMP suffered damages in the amount
of $31,355,070 and awarded Plaintiffs, as holders of a 50% interest in SMP, half that
amount or $15,677,535 plus interest.
On appeal, Defendants allege errors pertaining only to the CIS claims.
2
4
On July 3, 1996, in response to motions by Defendants, the panel amended the
arbitration award to clarify the order and correct errors. On November 4, 1996, the
district court entered an order and judgment confirming the arbitration award. The
district court subsequently amended the order and judgment on March 11, 1997 and June
27, 1997.
II.
We review the district court’s confirmation of an arbitration award de novo.
Denver & Rio Grande Western R.R. Co. v. Union Pacific R.R. Co., 119 F.3d 847, 849
(10th Cir. 1997). We review for clear error any factual findings that the district court may
have made regarding its reasons for confirming, modifying or vacating the arbitration
award. Id. Our review is greatly limited, however, by the deference owed to the
arbitrator’s decision. See ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1462 (10th
Cir. 1995). The review of an arbitrator’s award “is among the narrowest known to the
law.” Litvak Packing v. United Food & Comm. Workers Local 7, 886 F.2d 275, 276
(10th Cir. 1989). Arbitrators need not explain the reasons for the award or provide a
complete record of the proceedings. See Wilko v. Swan, 346 U.S. 427, 436 (1953),
overruled on other grounds by Rodriguez de Quijas v. Shearson/American Express, Inc.,
490 U.S. 477 (1989); Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1254 (7th Cir.
1994). If the court can find any “argument that is legally persuasive and supports the
award,” then it must confirm the award. Merrill Lynch, Pierce, Fenner & Smith v. Jaros,
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70 F.3d 418, 421 (6th Cir. 1995).
In reviewing an arbitration award, we look solely to statutory requirements and a
handful of judicially created requirements. See Denver & Rio Grande, 119 F.3d at 849.
The Federal Arbitration Act allows a court to vacate an arbitration award in very limited
circumstances including “where the award was procured by corruption, fraud, or undue
means” or “where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a). The Act also
permits a district court to modify or correct an “evident material” miscalculation or
mistake in an arbitration award. See 9 U.S.C. § 11(a). In addition, we have held that
errors in the arbitrator’s “interpretation of the law or findings of fact do not merit
reversal” unless they rise to a “manifest disregard of the law.” Bowles Financial Group,
Inc. v. Stifel, Nicolaus & Co., Inc., 22 F.3d 1010, 1012 (10th Cir. 1994). Manifest
disregard means “willful inattentiveness to the governing law,” and clearly requires more
than mere error or misunderstanding of the law. ARW Exploration, 45 F.3d at 1463.
With these limitations in mind, we proceed to the merits of the appeal.
A.
Defendants argue that the district court erred in imposing a constructive trust as
part of the second amended order and judgment. Defendants do not attack the arbitrator’s
award directly, but instead argue that the district court should not have included this relief
in the second amended order and judgment because it was not authorized by the
arbitration panel’s award. In other words, Defendants assert that the relief ordered by the
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district court exceeded the relief granted by the arbitration panel.
The district court’s original and first amended judgments did not contain a
constructive trust. On June 26, 1997, the district court entered an order granting
USECC’s motion to correct clerical omissions in the March 11, 1997 amended judgment.
The order stated that “through an oversight, the March 3, 1997 Order and Amended
Judgment entered on March 11, 1997, did not contain the equitable award contained in
paragraph 163.” As a result, on June 27, 1997, the district court entered a second
amended judgment which included the constructive trust described in Paragraph 163 of
the arbitration award.
Paragraph 163 of the original arbitration award provided as follows:
“Since the rights to purchase CIS uranium were obtained through the use of SMP
contracts (partnership assets), those purchase rights, the uranium acquired pursuant
to those rights and the profits therefrom are impressed with a constructive trust in
favor of SMP. The uranium should have been made available to SMP to meet
deliveries required by SMP’s grandfathered supply contracts. We enter awards for
those profits denied to the partnership, together with statutory interest at 8% per
annum. . . . Total: $31,355,070.”
Discounting the explicit language in this paragraph impressing a constructive trust,
Defendants argue that the panel did not mean to impress a constructive trust. Instead,
they argue that the panel merely used equitable principles to explain its analysis. Thus,
according to Defendants, after the panel concluded that SMP held the contracts for the
equitable benefit of the partnership, the panel reduced the award to $31,355,070 in
damages and did not establish a constructive trust over the proceeds of the five
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grandfathered supply contracts.
Prior to the district court’s entry of the second amended judgment, Defendants
argued before the arbitration panel, in a motion to correct inconsistency and error, that the
imposition of a constructive trust coupled with the $31,355,070 award of damages for lost
profits was inconsistent. The arbitration panel rejected this argument, and on July 3,
1996, clarified Paragraph 163 as follows:
Since the rights to purchase CIS uranium were obtained through the
use of SMP contracts (partnership assets), those purchase rights, the
uranium acquired pursuant to those rights and the profits therefrom
are impressed with a constructive trust in favor of SMP, and we
conclude that SMP is entitled to damages in the amount of
$31,355,070 to compensate it for its past and future lost profits. The
uranium should have been made available to SMP to meet deliveries
required by SMP’s grandfathered supply contracts. We enter awards
for those past and future profits denied to the partnership, together
with statutory interest at 8% per annum. The relevant amounts are as
follows:
Contract Present Value to June 30, 1995
Duke Power $ 5,543,433
IPC $11,834,232
TUCO $ 2,779,727
BECO $ 2,298,050
PSF&G $ 8,899,628
Total: $31,355,070
Amended Paragraph 163 clearly retains both a constructive trust and a damage award.3
3
Although Defendants argue in their opening brief that the panel, in the amended
arbitration award, “explained . . . that there was no constructive trust, only a monetary
award [in paragraph 163]” we find no such statements in the July 3, 1996, arbitration
8
Assuming that the arbitration panel erred by impressing a constructive trust and awarding
damages, we cannot reverse an arbitration panel’s “erroneous interpretations or
applications of law.” ARW Exploration, 45 F.3d at 1463. We may only reverse the
panel’s award if it evidences a “manifest disregard” of the law. Id. The arbitration
panel’s decision to impress a constructive trust and award damages is not “willful
inattentiveness to the governing law.” See Id. at 1463 (holding that neither incorrect
application of statute of limitations nor incorrect classification of joint venture interests as
“securities” under federal law rise to a manifest disregard of the law). Thus, we will not
disturb the arbitration award on this ground.
B.
Alternatively, Defendants argue that the district court’s judgment imposing the
constructive trust is vague and ambiguous. The second amended judgment provides that
“pursuant to paragraph 163 of Arbitrators’ Order No. 1, as modified by Arbitrators’ Order
No. 2, the rights to purchase CIS uranium, the uranium acquired pursuant to those rights,
and the profits therefrom are IMPRESSED WITH A CONSTRUCTIVE TRUST in favor
of SMP . . . .” Defendants argue that this language creates a trust of “indeterminable
corpus” and must be set aside. We disagree. Amended paragraph 163 explains that the
purchase rights, uranium, and profits acquired through Nukem’s use of SMP’s five utility
supply contracts were impressed with a constructive trust. Paragraphs 160 and 163 of the
order.
9
arbitration award list the five grandfathered supply contracts: Duke, IPC, TUCO, BECO,
and PSF&G. When read in conjunction with the arbitration order and award, the district
court’s judgment is clear and unambiguous. The judgment impresses the trust “pursuant
to paragraph 163" of the arbitration order, incorporating language identifying the
proceeds from the five grandfathered SMP supply contracts as the corpus of the
constructive trust.
C.
Defendants also assert that the district court failed to correct an “evident material
mistake” in the arbitration award. Defendants argue that the arbitration panel should
have offset the $31,355,070 in lost profits by the amount of actual profits earned and
received by SMP on the grandfathered contracts. The arbitration panel’s award
compensated SMP for the profits it lost when Nukem wrongfully failed to provide it with
the lower-cost CIS uranium. Defendants contend that the panel arrived at the
$31,355,070 damage award by taking the projected CIS price at the time of delivery and
subtracting it from the actual price paid by the utilities to determine the profit denied to
SMP. According to Defendants, SMP made substantial profits when it delivered non-CIS
uranium to the grandfathered suppliers. These profits, Defendants assert, were not
deducted from the damage award. Without this offset, Defendants argue that the
monetary award contains an impermissible double recovery.
The Federal Arbitration Act authorizes a district court to modify or correct an
10
“evident material miscalculation of figures or an evident material mistake in the
description of any person, thing, or property referred to” in an arbitration award. See 9
U.S.C. § 11(a). A court may not modify or correct an award pursuant to § 11 if it would
affect the merits of the controversy. See 9 U.S.C. § 11(c).
The arbitration panel considered and rejected the exact argument Defendants now
assert, concluding in the July 3, 1996, arbitration order that there was “no double recovery
and no subtraction that ought to be made from the profits already realized by the
Partnership [SMP] under those [supply] contracts.” The panel explained that “[a]ny
profits already received by [Plaintiffs and Defendants] from the five contracts belong to
them as partners. Any profits past or future derived from the importation of uranium
from the Commonwealth of Independent States (CIS) based on the grandfathering of
these five contracts belong to [Plaintiffs and Defendants] as partners. The profits do not
belong to Nukem alone.” Thus, it appears that the panel did not deduct the previously
obtained profits that SMP received on the five supply contracts from the damage award
because Nukem, along with Plaintiffs, shared in those profits as partners in SMP. The
panel also emphasized that the damage award was premised upon Nukem’s wrongdoing
and in their judgment, Nukem “ought not to be permitted to profit from that wrongful
conduct.”
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We find no evident material miscalculation4 on the face of the arbitrators’ award.
The arbitration panel, after considering Defendants’ arguments, clearly stated that there
was no mistake. In other words, the panel meant what it said. Moreover, even if the
panel’s logic for using gross profits is flawed, the arbitrators’ damages calculation does
not evince a “manifest disregard of the law.” A mistake of fact or misinterpretation of
law is not enough to warrant reversal. See Bowles, 22 F.3d at 1012. We may not
substitute our judgment for that of the arbitrators, see Foster v. Turley, 808 F.2d 38, 42
(10th Cir. 1986), nor may we “instruct the arbitrator as to the correct computation of
damages.” ARW Exploration, 45 F.3d at 1463. Consequently, we will not disturb the
arbitrators’ award of damages.5
AFFIRMED.
Entered for the Court,
Bobby R. Baldock
Circuit Judge
4
Although Defendants disingenuously assert that they do not challenge the panel’s
calculation of damages, we fail to see how Defendants’ argument that the amount of
damages is incorrect does not constitute such a challenge.
Plaintiffs’ motion for sanctions is denied.
5
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