159 So. 3d 437
La.2015Background
- Mack Energy (several related owners) and ExPert Oil & Gas entered Participation and Operating Agreements for development of a field; the Operating Agreement incorporated COPAS accounting procedures and allowed audits of the joint account.
- Mack commissioned a COPAS audit (Dan Huey) covering ~ $37 million of charges; auditor identified gross exceptions ~ $1.44 million, with ~ $977,598 remaining unresolved after mediation.
- Mack invoked arbitration per the agreements. The parties jointly selected an arbitrator who was an accountant and COPAS member.
- During arbitration the arbitrator ordered ExPert to produce employment/payroll records from an affiliated entity (ExPert E & P Consultants) after ExPert had withheld them; arbitrator reviewed those records (not admitted as formal exhibits) and awarded Mack credits totaling ~$1.6 million.
- ExPert moved in district court to vacate the award, arguing (1) the arbitrator exceeded authority because the arbitration scope was limited to the auditor’s unresolved exceptions (~ $978k), and (2) the arbitrator improperly ordered and relied on employment documents not properly introduced as exhibits. Trial court and court of appeal confirmed the award; Supreme Court granted writ and affirmed.
Issues
| Issue | Mack Energy's Argument | ExPert's Argument | Held |
|---|---|---|---|
| Whether the arbitrator exceeded his authority by awarding credits greater than the unresolved audit exceptions (i.e., limited to ~$978k) | Arbitration claim submitted both (i) resolution of audit exceptions and (ii) payment of credits "based on evidence to be submitted in the arbitration," enabling independent factfinding and credits beyond auditor tallies | Arbitration scope was limited to the unresolved audit exceptions and their auditor-assigned dollar amounts; award exceeded submission | Held: Arbitrator acted within submission. The Arbitration Claim expressly included resolution of credits based on evidence presented, permitting the arbitrator to determine permissible charges and award credits (~$1.6M). |
| Whether the arbitrator exceeded authority by ordering production of employment/payroll records and considering them when they were not admitted as exhibits | Arbitrator had statutory authority (La. R.S. 9:4206) and contractual power under the Procedural Agreement to order production and accept evidence informally; introduction into the record—not formal exhibit designation—was sufficient | Production was untimely and procedurally improper; documents were not on exhibit lists and were produced only to the arbitrator (not made exhibits), so they should not have been considered | Held: Arbitrator had authority to order production and to consider documents without formal exhibit designation. The Procedural Agreement and statute allow informal evidence procedures; confidentiality measures and the arbitrator’s control over the process were permissible. |
Key Cases Cited
- National Tea Co. v. Richmond, 548 So.2d 930 (La. 1989) (arbitration awards presumed valid; courts defer to arbitrators)
- Firmin v. Garber, 353 So.2d 975 (La. 1977) (burden on party attacking award; errors of law/fact do not invalidate fair arbitration)
- Housing Authority of New Orleans v. Henry Ericsson Co., 2 So.2d 195 (La. 1941) (arbitration intended to resolve disputes speedily and informally)
- AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (U.S. 1986) (arbitrators derive authority only from the parties’ submission)
- Louisiana Physician Corp. v. Larrison Family Health Center, 870 So.2d 575 (La. Ct. App. 2004) (courts will not revisit arbitrator’s damage calculations)
- First Bank & Trust v. Tedesco, 106 So.3d 653 (La. Ct. App. 2012) (trial tribunals have discretion to admit evidence produced after discovery deadlines)