Gulfstream Aerospace Corporation v. Oceltip Aviation 1 PTY LTD
31f4th1323
| 11th Cir. | 2022Background
- Gulfstream (U.S. corp.) contracted to sell a G550 business jet to Oceltip (Australian LLC); buyer failed to pay the $27.15M balance after paying about $7M, and Gulfstream terminated the contract.
- The Agreement’s arbitration section: (1) requires AAA arbitration under its Commercial Arbitration Rules and (2) states the contract is governed by Georgia law and excludes the CISG.
- Oceltip demanded arbitration in Savannah, seeking damages and arguing the contract’s $8M liquidated‑damages clause was an unenforceable penalty; the three‑panel AAA award granted Gulfstream $8M plus fees and costs.
- Gulfstream moved in federal court to confirm the award; Oceltip filed to vacate in Georgia state court; Gulfstream removed and the district court consolidated the matters.
- The district court held it had federal jurisdiction under Chapter 2 of the FAA (the New York Convention), applied federal vacatur standards, denied vacatur, and confirmed the award.
- On appeal the Eleventh Circuit affirmed: federal (Chapter 2/FAA) review standards govern because the contract did not clearly and unmistakably adopt state vacatur standards, and Oceltip waived any Chapter 2 vacatur arguments.
Issues
| Issue | Plaintiff's Argument (Gulfstream) | Defendant's Argument (Oceltip) | Held |
|---|---|---|---|
| Federal jurisdiction over removed vacatur/confirmation actions | Chapter 2 of the FAA (New York Convention) supplies original federal jurisdiction because the dispute involves a non‑U.S. party | Choice‑of‑law clause incorporates Georgia law and Georgia Arbitration Code, which grants exclusive jurisdiction to state superior courts | Federal jurisdiction exists under Chapter 2; state law cannot oust federal jurisdiction |
| Which law governs judicial review of the award (FAA/Convention standards vs Georgia Arbitration Code) | The parties’ Georgia choice‑of‑law clause governs the contract merits; the AAA rules and federal Convention standards govern post‑award review | The contract’s statement that it “shall be governed by the laws of the State of Georgia” (in the Arbitration section) shows intent to apply Georgia Arbitration Code standards (including manifest‑disregard ground) | Federal (Chapter 2/FAA) vacatur standards govern; parties did not clearly and unmistakably adopt Georgia’s vacatur standard |
| Whether the award should be vacated for manifest disregard of law | Oceltip failed to invoke any of the Convention’s enumerated vacatur grounds in prior proceedings; and on the merits, the district court’s application of law was proper | Arbitrators manifestly disregarded law by treating the $8M liquidated amount as valid when it was allegedly a penalty | Arbitration award confirmed: Oceltip waived Convention grounds by not raising them and, even assuming Georgia standard, failed to show manifest disregard |
Key Cases Cited
- Indus. Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434 (11th Cir. 1998) (explains incorporation of the New York Convention into U.S. law)
- Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte Int’l GmbH, 921 F.3d 1291 (11th Cir. 2019) (Chapter 2 jurisdiction over removed vacatur actions)
- Escobar Celebration Cruise Operator, Inc. v. M/V Celebration, 805 F.3d 1279 (11th Cir. 2015) (federal jurisdiction to confirm awards under §207)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favoring arbitration)
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468 (1989) (parties may incorporate state arbitration procedures by contract; context matters)
- Mastrobuono v. Shearson Lehman Hutton, 514 U.S. 52 (1995) (choice‑of‑law clauses construe substantive law but do not necessarily alter arbitrators’ remedial authority)
- Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678 (11th Cir. 2014) (issues not raised in briefing are abandoned)
- Barrow S.S. Co. v. Kane, 170 U.S. 100 (1898) (state statutes cannot divest federal jurisdiction)
- Bamberger Rosenheim, Ltd. v. OA Dev., Inc., 862 F.3d 1284 (11th Cir. 2017) (standards of review for district court decisions on arbitration matters)