638 F.3d 150
2d Cir.2011Background
- UEGA entered into four related contracts with Bechtel for a Brazil power plant, each containing an ICC arbitration clause and New York law for arbitration procedure and contract interpretation.
- The site contracts are the Site Construction Contract, Equipment Supply Contract, Services Contract, and Umbrella Agreement, with identical arbitration provisions and governing NY law.
- Bechtel notified completion of mechanical work on Sept. 16, 2002; testing occurred Sept. 18–26, 2002, and UEGA accepted the plant the next day.
- UEGA operated the plant only in Dec. 2006, more than four years after delivery; in Jan. 2008, the steam-turbine failed, prompting UEGA’s claims.
- UEGA initiated ICC arbitration on Sept. 29, 2008 alleging breach, negligence, and fraud; Bechtel filed for a permanent stay arguing timeliness under both NY and Brazilian law.
- The district court held that timeliness issues were not for arbitration and granted a permanent stay; Bechtel appealed seeking timeliness to be decided by arbitrator.
- The Second Circuit reversed, holding timeliness is an arbitrability issue under the contracts, remanding for arbitration in line with this opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides timeliness—arbitrator or court | Bechtel argues timeliness is court-decided under CPLR 7502(b) | UEGA contends timeliness is arbitrator-determined per contract | Timeliness is for the arbitrator to decide. |
| Contract language on arbitration scope vs. court intervention | Arbitration clause and NY law modification imply court involvement only for timetable | Pro-arbitration reading ensures timeliness disputes are arbitrable | Contract ambiguous; arbitration governs timeliness. |
| Effect of NY law provisions on timeliness | NY procedural law governs arbitration; could permit court stay | Choice-of-law clauses do not unambiguously grant court power over timeliness | Not clearly dispositive; timeliness remains arbitrable. |
Key Cases Cited
- Pa ineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (broad arbitration clause can allocate timeliness to arbitrator)
- Volt Information Sciences v. Board of Trustees, 489 U.S. 468 (Supreme Court 1989) (preemption by FAA; arbitral scope and enforcement considerations)
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995) (choice-of-law + arbitrability; interpret contract generously for arbitrability)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal law favors arbitration and resolves ambiguities in favor of arbitrability)
- Shaw Group Inc. v. Triplefine International Corp., 322 F.3d 115 (2d Cir. 2003) (ICC Rule 6.2; arbitrability questions handled by arbitrator)
- Diamond Waterproofing Sys. v. 55 Liberty Owners Corp., 4 N.Y.3d 247 (N.Y. 2005) (choice-of-law language about enforcement; not determinative here)