Arma, S.R.O. v. Bae Systems Overseas, Inc.
961 F. Supp. 2d 245
D.D.C.2013Background
- ARMA (Slovak firm) and BAE Systems had an International Representative Agreement (IRA) under which ARMA would be paid commissions on “Compensable Sales.” BAES won a Slovak MOD tender (MOKYS) and entered into an AFDW with the MOD and subsequent Contracts of Work (C‑1 to C‑4).
- The IRA was extended to March 31, 2008 and then allowed to expire; BAES paid commissions on C‑1–C‑3 but refused commission on C‑4, prompting ARMA to seek arbitration at the ICDR.
- The parties agreed the core legal question was whether the AFDW constituted a “Compensable Sale” under IRA §4.C (i.e., an unconditional sales contract binding during the IRA term).
- BAES moved for summary judgment in arbitration; the three‑member Tribunal granted summary judgment for BAES and dismissed ARMA’s claims. The Tribunal apportioned costs equally and denied fees.
- ARMA petitioned to vacate the Final Award under FAA §10(a) (fraud/undue means, arbitrator misconduct, and exceeding powers) and argued manifest disregard of law; BAES moved to confirm and sought leave to move for fees in district court.
- The D.C. District Court denied vacatur on all statutory and common‑law grounds, confirmed the award, and granted BAES leave to file a motion for attorney fees for this federal litigation due to ARMA’s misleading and frivolous submissions.
Issues
| Issue | Plaintiff's Argument (ARMA) | Defendant's Argument (BAES) | Held |
|---|---|---|---|
| Vacatur under FAA §10(a)(1) — award procured by fraud/undue means | BAES made fraudulent misrepresentations in briefs, at oral argument, and via a post‑closing letter; BAES’s bad‑faith summary judgment motion deprived ARMA of a fair hearing | Statements were at most advocacy/opinion, discoverable or actually discovered during arbitration; no showing of nefarious intent or causal nexus to award | Denied: ARMA failed to meet clear‑and‑convincing, non‑discoverability, and nexus requirements for fraud/undue means |
| Vacatur under FAA §10(a)(3) — arbitrator misconduct | Tribunal allowed summary‑judgment procedure, limited discovery, accepted BAES’s statements as testimony, and permitted post‑hearing submissions, prejudicing ARMA | Tribunal acted within broad procedural discretion under ICDR rules, granted substantial discovery, and provided opportunity to respond — proceedings were fundamentally fair | Denied: procedural choices did not amount to misconduct or denial of a fundamentally fair hearing |
| Vacatur under FAA §10(a)(4) — arbitrators exceeded powers | Tribunal applied wrong choice of law (allegedly used New York law for AFDW) and thus exceeded authority | Tribunal applied and discussed Slovak law and relevant provisions; even a choice‑of‑law error would not justify vacatur absent departure from contract interpretation | Denied: no evidence arbitrators exceeded powers; award draws its essence from the contract |
| Manifest disregard of law (common‑law) | Tribunal ignored controlling New York and Slovak law and misapplied summary‑judgment standards and contract interpretation rules to reach an adverse result | Tribunal applied legally plausible interpretations, considered Slovak law and tender documents, and followed appropriate standards under arbitration rules | Denied: ARMA did not show arbitrators knew and willfully ignored a clearly applicable legal rule; manifest‑disregard standard not met |
Key Cases Cited
- Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (clarifies FAA §10 is exclusive vacatur grounds)
- Stolt‑Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (arbitral error is not alone a basis for vacatur; arbitrators must not dispense their own brand of justice)
- Kurke v. Oscar Gruss & Son, Inc., 454 F.3d 350 (manifest‑disregard is narrow; confirm if award draws essence from contract)
- United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29 (courts do not sit to hear claims of factual or legal error by an arbitrator)
- Revere Copper & Brass Inc. v. Overseas Private Inv. Corp., 628 F.2d 81 (strong federal policy favoring arbitration; limited judicial review)
- Lessin v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 481 F.3d 813 (arbitrators have broad procedural discretion; requirement is a fundamentally fair hearing)
- Bonar v. Dean Witter Reynolds, Inc., 835 F.2d 1378 (fraud vacatur requires clear‑and‑convincing proof and nexus)
- Lafarge Conseils et Etudes, S.A. v. Kaiser Cement & Gypsum Corp., 791 F.2d 1334 (fraud must be undiscoverable by reasonable diligence)
- Dogherra v. Safeway Stores, Inc., 679 F.2d 1293 (movant must show fraud materially related to award)