Aspic Engineering and Constr. v. Ecc Centcom Constructors LLC
913 F.3d 1162
| 9th Cir. | 2019Background
- ECC (prime contractor to USACE) awarded two Afghanistan construction subcontracts to Aspic; the subcontracts incorporated FAR clauses (including termination-for-convenience provisions) and a pass-through clause making Aspic subject to the same obligations ECC owed the government.
- USACE terminated ECC’s prime contracts for convenience; ECC terminated the two subcontracts and Aspic submitted termination settlement proposals but lacked many required FAR-style supporting materials and translations.
- USACE refused to pay ECC for subcontractor termination costs after an audit and later executed a no-cost settlement with ECC; ECC likewise refused Aspic’s settlement demands, prompting Aspic to arbitrate.
- The arbitrator awarded Aspic about $1,072,520, concluding Aspic need not meet the FAR requirements because (the arbitrator found) there was no true meeting of the minds and Aspic was a less-sophisticated Afghan subcontractor with different practices.
- California superior court confirmed and modified the award (awarding attorneys’ fees); ECC removed to federal court and the district court vacated the arbitration award as conflicting with the subcontract text; the Ninth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitrator exceeded his powers by relieving Aspic of FAR compliance incorporated in the subcontracts | Arbitrator lawfully interpreted contract and parties’ conduct showed they did not expect Aspic to meet strict FAR procedures | Arbitrator ignored clear contract text and pass-through FAR obligations, exceeding authority | Held: Arbitrator exceeded powers; vacatur affirmed — award did not draw its essence from the contract |
| Whether parties’ past practices justified modifying or waiving FAR requirements | Aspic: informal Afghan practices and submitted handwritten receipts show de facto waiver or modification | ECC: no evidence of any past practice deviating from FAR; parties briefed FAR applicability | Held: No past-practice evidence supported departure; arbitrator relied on perceived unfairness rather than demonstrated practice |
| Whether an arbitrator may disregard explicit contract provisions to avoid an unjust result | Aspic: arbitrator may correct contractual unfairness based on context and parties’ intent | ECC: arbitrator cannot dispense his own brand of justice by ignoring express terms | Held: Arbitrator impermissibly disregarded explicit provisions to reach a result he deemed fair; that is irrational |
| Whether the fee award issue requires review given vacatur | Aspic: argued arbitrator erred in denying attorneys’ fees and arbitration costs | ECC: vacatur moots Aspic’s fee arguments | Held: Fee issue moot because Award vacated |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (Sup. Ct.) (standard of de novo review for arbitrability and role of courts in arbitration review)
- Bosack v. Soward, 586 F.3d 1096 (9th Cir.) (award must draw its essence from the contract; limits on judicial review)
- Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277 (9th Cir.) (arbitral review is limited and highly deferential; irrational awards vacatable)
- Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987 (9th Cir.) (arbitrator exceeds powers when award is completely irrational or shows manifest disregard)
- Pacific Motor Trucking Co. v. Automotive Machinists Union, 702 F.2d 176 (9th Cir.) (arbitrator may not disregard explicit contract provisions to correct perceived injustices)
- United Steelworkers of Am. v. Enterprise Wheel & Car Corp., 363 U.S. 593 (Sup. Ct.) (arbitrator cannot dispense his own brand of industrial justice)