Case: 11-30669 Document: 00511783222 Page: 1 Date Filed: 03/09/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 9, 2012
No. 11-30669 Lyle W. Cayce
Clerk
RAIN CII CARBON, LLC,
Plaintiff - Appellee
v.
CONOCOPHILLIPS COMPANY,
Defendant - Appellant
Appeals from the United States District Court
of the Eastern District of Louisiana
Before STEWART, CLEMENT, and GRAVES, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Defendant-Appellant ConocoPhillips Company (“Conoco” or “COP”)
appeals the district court’s judgment confirming an arbitration award favorable
to Plaintiff-Appellee Rain CII Carbon, LLC (“Rain”). We AFFIRM.
I.
Conoco and Rain are parties to a long-term supply agreement, whereby
Conoco agreed to sell all green anode coke produced at its Alliance refinery from
August 2005 to December 2015 to Rain. The 2005 agreement includes a complex
formula for capturing the market price of green coke. The agreement further
provides that if a party reasonably concludes that the contract formula no longer
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No. 11-30669
yields market price, the party may reopen price negotiations. If such
negotiations prove unfruitful, the matter would be submitted to a “baseball”
arbitration, whereby each party submits a proposal and the arbitrator selects
one of the two.
In 2008, Conoco reopened market price negotiations. After being unable
to reach an agreement, Conoco submitted the matter to arbitration. The parties
requested a “reasoned” award in their joint proposed scheduling order. An
evidentiary hearing was held in September 2010, and each party submitted a
price formula proposal. In December 2010, the arbitrator requested that the
parties submit draft awards, which were submitted on February 3, 2011.
On March 7, 2011, the arbitrator awarded $17,702,585.33 to Rain. In the
eight-page award, the arbitrator set forth the contentions of the parties before
adopting Rain’s price formula, which was the formula contained in the initial
agreement. The award stated:
Based upon the testimony, exhibits, arguments, and
submissions presented to me in this matter, I find that the price
formula contained in Section 4 of the Green Anode Coke Sales
Agreement dated August 23, 2005, as amended January, 2007, and
July, 2008, shall remain in effect for the balance of the term as
stated in the contract.
The arbitrator used Conoco’s draft award as the template for his award.
Two brief paragraphs from Conoco’s draft award were included in the
arbitrator’s award:
Applying the replacement formula from April 1, 2008 until
March 31, 2009 results in an increased payment by Rain CII to COP
of $6,920,234.07. Offsetting the amount of the true up COP owes
Rain CII results in a net payment owed by Rain CII to COP in the
amount of $1,357,480.82.
and
Applying the contractual rate of interest to the outstanding
amount for the number from April 1, 2009 to February 3, 2011
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results in the sum of $214,984.96.
On March 25, 2011, Rain filed a motion requesting that the arbitrator
correct these two inconsistencies. On April 18, 2011, the arbitrator granted
Rain’s motion, identified the “inadvertently included sentences” as clerical
errors, and removed them from the final award.
In the district court, Conoco moved to vacate the award. On June 27,
2011, the district court denied the motion to vacate the award, and granted
Rain’s motion to confirm the award. This appeal followed.
II.
“In light of the strong federal policy favoring arbitration, judicial review
of an arbitration award is extraordinarily narrow.” Brook v. Peak Int’l, Ltd., 294
F.3d 668, 672 (5th Cir. 2002) (internal quotation marks omitted). “We review a
district court’s confirmation of an award de novo, but the review of the
underlying award is exceedingly deferential.” Apache Bohai Corp. LDC v.
Texaco China BV, 480 F.3d 397, 401 (5th Cir. 2007) (internal quotation marks
omitted). This court’s de novo review “is intended to reinforce the strong
deference due an arbitrative tribunal.” Brook, 294 F.3d at 672 (internal
quotation marks omitted). “An award may not be set aside for a mere mistake
of fact or law.” Apache, 480 F.3d at 401.
“Section 10 of the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (‘FAA’),
provides ‘the only grounds upon which a reviewing court may vacate an
arbitrative award.’” Brook, 294 F.3d at 672 (quoting McIlroy v. PaineWebber,
Inc., 989 F.2d 817, 820 (5th Cir. 1993)). “Section 10 allows vacatur, inter alia,
‘[w]here the arbitrators exceeded their powers . . . .’” Id. (quoting 9 U.S.C. §
10(a)(4)).
“Arbitration is a matter of contract.” Id. “Where arbitrators act ‘contrary
to express contractual provisions,’ they have exceeded their powers.” Apache,
480 F.3d at 401 (quoting Delta Queen Steamboat Co. v. AFL-CIO, 889 F.2d 599,
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604 (5th Cir. 1989)). “If the contract creates a plain limitation on the authority
of an arbitrator, we will vacate an award that ignores the limitation.” Id.
“[L]imitations on an arbitrator’s authority must be plain and unambiguous . . .
.” Id. at 404. “A reviewing court examining whether arbitrators exceeded their
powers must resolve all doubts in favor of arbitration.” Brook, 294 F.3d at 672.
III.
In this case, Conoco asserts that the arbitrator exceeded his powers in two
ways: failing to select only one proposal, per the parties’ baseball arbitration
agreement; and failing to render a reasoned award. These matters will be
addressed in turn.
A.
The parties’ “Green Anode Coke Sales Agreement” provided that if a
dispute arose regarding the proper formula to yield market price for green coke,
the dispute would be resolved by baseball arbitration:
[U]pon declaration of an impasse by either party, the matter shall
be submitted to arbitration as provided in section 19, provided that
each party shall submit to the arbitrator one replacement
mechanism for determining the price of Green Anode Coke to be
supplied under this Agreement and the arbitrator shall be required
to select from the two proposed mechanisms that one which, in the
judgment of the arbitrator, is more likely to yield a market level
price for Green Anode Coke to be supplied under this Agreement for
the balance of the term then in effect.
Section 19 of the agreement clarified the arbitration procedure:
Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association under its
Commercial Arbitration Rules in effect at the time such arbitration
is commenced, and judgment on the Award rendered by the
arbitration may be entered in any court having jurisdiction thereof.
Conoco asserts that the arbitrator exceeded his powers by using parts of
both proposals in his award, rather than selecting only one proposed mechanism
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as required by the contract. As evidenced above, the AAA Commercial Rules
were incorporated into the 2005 agreement. Commercial Arbitration Rule 46
provides: “Within 20 days after the transmittal of an award, any party, upon
notice to the other parties, may request the arbitrator, through the AAA, to
correct any clerical, typographical, or computational errors in the award. The
arbitrator is not empowered to redetermine the merits of any claim already
decided.” AAA Commercial Arbitration Rule 46, available at
http://www.adr.org/sp.asp?id=22440.
In the instant case, the arbitrator, upon motion by Rain, removed the two
provisions derived from Conoco’s proposed draft award from his final award,
identifying the inadvertently included sentences as clerical errors. However,
despite the arbitrator’s correction and reason given, Conoco insists that the
arbitrator did not choose one proposal as required by the contract, and that the
inclusion of the paragraphs was not a clerical error. Conoco has cited to no case
holding that an arbitrator’s correction of an award for clerical errors was not
genuine or credible. Given the considerable deference afforded arbitration
awards, Conoco’s argument that the arbitrator exceeded his powers by failing to
select only one proposal, which relies on paragraphs stricken from the final
award in accordance with the Commercial Rules, must fail.
B.
Conoco disputes that the award rendered by the arbitrator was a
“reasoned” award. The only description of a reasoned award in this circuit was
rendered in a footnote. See Sarofim v. Trust Co. of the W., 440 F.3d 213, 215 n.1
(5th Cir. 2006) (“‘[A] reasoned award is something short of findings and
conclusions but more than a simple result.’” (quoting Holden v. Deloitte &
Touche LLP, 390 F. Supp. 2d 752, 780 (N. D. Ill. 2005))).
In Cat Charter, LLC v. Schurtenberger, 646 F.3d 836 (11th Cir. 2011), the
Eleventh Circuit reversed a district court’s vacatur of an arbitration award on
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the ground that the award was not reasoned. The court acknowledged that
courts have generally been reluctant to vacate awards challenged on the grounds
that their form was improper. Cat Charter, 646 F.3d at 842 n.12. The court
reasoned:
Generally, an arbitrator need not explain her decision; thus, in a
typical arbitration where no specific form of award is requested,
arbitrators may provide a “standard award” and simply announce
a result. . . . At the other end of the spectrum, the Arbitration Rules
allow parties to request that the arbitrators make “findings of fact
and conclusions of law,” a relatively exacting standard familiar to
the federal courts.
Logically, the varying forms of awards may be considered
along a “spectrum of increasingly reasoned awards,” with a
“standard award” requiring the least explanation and “findings of
fact and conclusions of law” requiring the most. . . . [T]herefore, a
“reasoned award is something short of findings and conclusions but
more than a simple result.” Sarofim[, 440 F.3d at 215 n. 1]
(citations and internal quotation marks omitted).
Id. at 844 (internal citations omitted). The court concluded:
We decline to narrowly interpret what constitutes a reasoned award
to overturn an otherwise apparently seamless proceeding. The
parties received precisely what they bargained for- a speedy, fair
resolution of a discrete controversy by an impartial panel of
arbitrators skilled in the relevant areas of the law. To vacate the
Award and remand for an entirely new proceeding would
insufficiently respect the value of arbitration and inject the courts
further into the arbitration process than Congress has mandated.
Id. at 846.
Likewise, in Green v. Ameritech Corp., 200 F.3d 967 (6th Cir. 2000), the
Sixth Circuit reversed a district court’s vacatur of a six-page arbitration award,
which the district court had determined failed to comply with a provision of the
arbitration agreement requiring that the arbitrator “explain” his decision. The
court reasoned that “although the arbitrator’s opinion was minimal, it was
nevertheless adequate to satisfy the terms of the agreement.” Green, 200 F.3d
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at 970. “If parties to an arbitration agreement wish a more detailed arbitral
opinion, they should clearly state in the agreement the degree of specificity
required.” Id. at 976.
Conoco largely relies on a Ninth Circuit opinion vacating an arbitration
award. See W. Employers Ins. Co. v. Jefferies & Co., 958 F.2d 258 (9th Cir.
1992). That case, however, is factually distinguishable from the present case.
In Jefferies, the parties had agreed that a statement of findings of fact and
conclusions of law would accompany the arbitration award. The final award
included no such findings of fact or conclusions of law. Accordingly, the court
concluded that “[b]y failing to provide Western with findings of fact and
conclusions of law, the [] panel clearly failed to arbitrate the dispute according
to the terms of the arbitration agreement.” Id. at 262.
In contrast, the parties in the present case did not request findings of fact
and conclusions of law, an exhaustive standard familiar to the courts; rather,
they agreed to a reasoned award, without further elaboration. Additionally, it
is clear that, in eight pages, the arbitrator rendered more than a standard
award, which would be a mere announcement of his decision. Thus, the
remaining question is whether the arbitrator’s award is sufficiently more than
a standard award so as to be a reasoned award.
Given the deference employed when evaluating arbitral awards, and as all
doubts implicated by an award must be resolved in favor of the arbitration, the
award in this case is sufficient to withstand Conoco’s request for vacatur.
Conoco’s argument against the award hinges on the summary nature of the
arbitrator’s statement that, based upon all of the evidence, he found that the
initial price formula should remain in effect. Conoco ignores that the preceding
paragraph thoroughly delineates Rain’s contention that Conoco had failed to
show that the initial formula failed to yield market price, a contention that the
arbitrator obviously accepted. Conoco would have this court vacate the
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arbitration award merely because the arbitrator did not reiterate this reason in
the following paragraph. Such a narrow approach is inconsistent with the
deference owed to arbitral awards and the congressional policy favoring
arbitration of commercial disputes, and is also contrary to the interest of finality.
As stated in Green, if Conoco wanted a more thorough discussion of why
the arbitrator reached the decision he did, it could have contracted for an award
to include findings of fact and conclusions of law. Instead, the parties agreed to
a reasoned award, which, according to our case law, is more than a simple result.
In eight pages, the arbitrator laid out the facts, described the contentions of the
parties, and decided which of the two proposals should prevail. It is, at the very
least, doubtful that the award is not more than a simple result. Accordingly,
vacatur is not appropriate and the award must be enforced.
IV.
For the foregoing reasons, we AFFIRM the district court’s judgment.
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