Wonderland Greyhound Park, Inc. v. Autotote Systems, Inc.

          United States Court of Appeals
                      For the First Circuit


Nos. 01-1849, 01-1911


    WONDERLAND GREYHOUND PARK, INC.; WESTWOOD GROUP, INC.,

            Plaintiffs, Appellees/Cross-Appellants,

                                v.

          AUTOTOTE SYSTEMS, INC., f/k/a AUTOTOTE LTD.,

              Defendant, Appellant/Cross-Appellee.



         APPEALS FROM THE UNITED STATES DISTRICT COURT
               FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Joseph L. Tauro, U.S. District Judge]


                              Before

                       Selya, Circuit Judge,
                  Stahl, Senior Circuit Judge,
                    and Lynch, Circuit Judge.




          David M. Olasov with whom Baer Marks & Upham LLP, Scott A.
Roberts, A. Lauren Carpenter, and Sullivan, Weinstein & McQuay, P.C.
were on brief for appellant/cross-appellee.
          Kevin M. Considine with whom James W. Stetson was on brief
for appellees/cross-appellants.
                           December 19, 2001




         LYNCH, Circuit Judge.        This case comes to us on cross

appeals from the district court opinion vacating an arbitral

award as manifestly in disregard of the law.             On August 28,

2000, Wonderland Greyhound Park, Inc. and Westwood Group, Inc.

(collectively, "Wonderland") had been ordered by the arbitrator

to pay Autotote Systems, Inc. $456,043.84 due on a million

dollars advanced by Autotote to Wonderland in 1992.                     The

arbitrator   had,   however,   also     found   that   Autotote   was   in

violation of a divisible contractual obligation to provide

Wonderland   with   some    additional    equipment,     which    thereby

permitted Wonderland to terminate the contract.            The district

court found these two conclusions to be internally inconsistent

and so vacated the award and remanded to the arbitrator for

proceedings consistent with its opinion.          Wonderland Greyhound

Park, Inc. v. Autotote Sys., Inc., 144 F. Supp. 2d 25, 29 (D.

Mass. 2001).   Autotote appeals from that decision.          Wonderland




                                  -2-
appeals the district court's decision to remand the case to the

arbitrator.1

         Our review of the district court's ruling on an

arbitration award is de novo.         Bull HN Info. Sys., Inc. v.

Hutson, 229 F.3d 321, 330 (1st Cir. 2000).      Judicial review of

the arbitrator's decision is "extremely narrow and exceedingly

deferential."     Id. (quoting Wheelabrator Envirotech Operating

Servs. v. Mass. Laborers Dist. Council Local 1144, 88 F.3d 40,

43 (1st Cir. 1996)). An arbitrator's award must be enforced "if

it is in any way plausible, even if we think [he] committed

serious error."    Gupta v. Cisco Sys., Inc., No. 01-1122, 2001 WL

1504671, at *2 (1st Cir. Dec. 3, 2001).     A court may only vacate

an arbitrator's award in very rare circumstances, such as where

there was misconduct by the arbitrator, where the arbitrator

exceeded the scope of his arbitral authority, or when the award

was made in manifest disregard of the law.      Bull HN Info. Sys.

Inc., 229 F.3d at 330-31; see 9 U.S.C. § 10 (2000).       Although

the district court articulated the appropriate standard of

review, we believe it misunderstood the arbitrator’s opinion and


    1     Our disposition of this case makes this cross-appeal
irrelevant.

                                -3-
accordingly     did   not    properly    apply   the   principles.         The

arbitrator’s opinion was far from being in manifest disregard of

the law and the district court was required to affirm it.

           We   start       with   a   preliminary     argument     made   by

Wonderland.     Wonderland says that the arbitral award exceeded

the arbitrator’s authority as to remedy, even if the arbitrator

was correct that the contract was divisible.                   However, the

arbitral   clause     in    the    agreement   contains   no    limitations

whatsoever on the arbitrator's power, but simply requires the

parties to arbitrate all grievances between them:

           Any controversy or claim not settled by the parties
           arising out of or relating to this contract, or the
           breach thereof, shall be settled by arbitration in
           accordance with the Rules of the American Arbitration
           Association, and judgement upon the award rendered by
           the Arbitrator(s) may be entered in any Court having
           jurisdiction thereof.

Wonderland’s argument is based entirely on clauses within the

contract as to remedies for breach of contract.                   One clause

states:

           In the event that [Wonderland] shall default in the
           performance of any provisions of this Agreement on its
           part to be performed . . . and such default shall not
           be cured within a period of ten (10) days after notice
           shall have been given by AUTOTOTE to [Wonderland]
           specifying such default, then AUTOTOTE may terminate
           this Agreement by delivering to [Wonderland] written

                                       -4-
           notice of such termination prior to the expiration of
           thirty (30) days after the expiration of said ten (10)
           day period; and in the event of any such termination
           AUTOTOTE shall remove its personnel, materials and
           equipment from the RACETRACK, and the cost of such
           removal shall be paid for by [Wonderland].

There is an identical clause for when Autotote defaults in the

performance of the contract.            There is also a clause in the

contract that states:

           The remedies expressly provided in this Agreement for
           breach thereof by AUTOTOTE or [Wonderland] shall
           constitute the sole and exclusive remedies to the
           aggrieved party, and all other remedies which might be
           otherwise available under the law of any jurisdiction
           are hereby waived by both AUTOTOTE and [Wonderland].

           It was within the province of the arbitrator to

construe the contract, including these remedial provisions, in

the first instance.     Id. at 330 ("[I]t is the arbitrator's view

. . . of the meaning of the contract that [the parties] have

agreed to accept.") (quoting United Paperworkers Int'l Union v.

Misco, Inc., 484 U.S. 29, 37-38 (1987)).                 Accordingly, it was

within   the   power   of   the   arbitrator        to   conclude    that   the

contractual remedial clause here did not limit the remedy for

Wonderland's    failure     to     meet      its    installment      repayment

obligation.    The arbitrator did not exceed the scope of his

arbitral   authority    and      the    award      can   therefore   only   be

                                       -5-
challenged for manifest disregard of the law.             An award is in

manifest disregard of the law if either "the award is contrary

to the plain language of the contract," or "it is clear from the

record that the arbitrator recognized the applicable law, but

ignored it."   Gupta, 2001 WL 1504671, at *2.

         To    understand       why   the   arbitral   award,    which   the

district court found to be internally inconsistent, is neither

inconsistent nor in manifest disregard of the law, it is

necessary to review some of the factual determinations made by

the arbitrator.   An arbitrator's factual findings are generally

"not open to judicial challenge," El Dorado Technical Servs.,

Inc. v. Union General De Trabajadores De Puerto Rico, 961 F.2d

317, 320 (1st Cir. 1992), and "[w]e accept the facts as the

arbitrator found them."          Boston Med. Ctr. v. Serv. Employees

Int'l Union, Local 285, 260 F.3d 16, 18 (1st Cir. 2001).

         Autotote    is     a    provider     of   pari-mutuel    wagering

totalizer machines and services.2            In 1991 it entered into a

contract with Wonderland, a greyhound race track.                  In 1992



    2     A totalizer machine, also known as a totalisator
machine or tote machine, is a machine that registers bets and
divides the total amount bet among those who won.

                                      -6-
Wonderland asked Autotote for a one million dollar loan.               As

part of the consideration for this loan, the 1991 contract was

extended to 1997, and Wonderland agreed that it would repay the

million dollar loan at the rate of $4,944.08 weekly, totaling

$257,092.16 annually. Autotote in fact forwarded Wonderland the

million dollars as agreed.         In addition, Autotote provided

totalizer services to Wonderland and was entitled to fees for

these services.     In 1993, Autotote made another advance of

$325,000 to Wonderland.

          In 1995 the parties executed an extension of the 1991

contract, which further extended the contract to 1998, and

Wonderland reaffirmed its burden to pay weekly installments of

$4,944,   above   and   beyond   the    weekly   payment   of   fees   for

totalizer services.     Wonderland did not in fact pay for all of

the totalizer services and there is a stipulation that the sum

owed on that account was $21,747.

          In 1999, the parties again extended their contract.

This extended the contract retroactively from 1998 for a seven-

year term.   This amendment reduced the installment payments due

to Autotote from weekly payments of $4,944.08 to weekly payments

of $1,373.63 for a seven-year period, for a total sum of

                                  -7-
$500,000.    The 1999 amendment also required Autotote to supply

Wonderland with a specified array of new equipment, including

hardware and software.    The arbitrator found that Autotote had

failed to supply the new equipment and that this failure was a

material breach of that portion of the 1991 contract as extended

and amended in 1999.    That breach, according to the arbitrator,

justified Wonderland in terminating the contract.    The question

then became whether the termination of the contract excused

Wonderland from repaying the monies advanced to it earlier by

Autotote.

            The arbitrator found that while Autotote’s failure to

provide the new equipment justified Wonderland’s termination of

the contract, that did not absolve Wonderland from liability to

Autotote for the weekly fee of $1,373.63 for the seven-year

term, for a total payment of $500,000.      The arbitrator found

that Autotote had fulfilled its obligation in 1992 to provide a

million dollars and that it was entitled to the benefit of the

bargain as renegotiated in 1999 with respect to the installment

payment contract.    The arbitrator found that the contract was

divisible and that the effect of the termination was to mature

Autotote’s executory rights for a total payment of $500,000,

                                -8-
less the installments paid.       The arbitrator found that only 32

payments of $1,373.63 had been made, thus entitling Autotote to

an award of $456,043.84 for that portion of the contract.

            On those facts, the arbitrator’s award cannot be said

to be in manifest disregard of the law.         While the arbitrator

did not use the specific magic words that Wonderland was "in

breach"   of    the   divisible   obligation   with   respect   to   the

installment payment stream, he did find that Wonderland failed

to make installment payments and he rejected the reasons given

by Wonderland to excuse its non-payment.       This is sufficient to

establish breach of contract.

            As to the acceleration of payments, we have already

disposed of the argument that the arbitrator was limited in his

remedies.      In fact, Autotote had loaned Wonderland a million

dollars in 1992.      There was an agreement to repay the loan on an

installment basis, but very few payments had been made over the

years. The arbitrator’s decision that the payments long overdue

should now be paid in full cannot be said to be in manifest

disregard of the law.




                                   -9-
         Accordingly, we vacate the judgment and remand to the

district court with instructions to enter an order enforcing the

arbitral award in full.3   Costs are awarded to Autotote.




    3     This includes the award to Autotote of the stipulated
sum of $21,747 for totalizer services fee arrearages due from
Wonderland, which was inexplicably omitted from the district
court's order.

                              -10-