Norfolk Southern Railway v. Sprint Communications
883 F.3d 417
4th Cir.2018Background
- Sprint and Norfolk Southern had a 1987 License Agreement granting Sprint use of railroad rights-of-way; Sprint exercised a 25-year renewal in 2012 and the parties disputed the renewal payment amount.
- Section 2.2.2 required appraisal procedures: each party’s appraiser proposes a value; if they disagree, a third appraiser is chosen to broker a compromise or, if unsuccessful, to perform an independent appraisal.
- The two appraisers appointed Charles Argianas as the third appraiser; the parties told Argianas to seek compromise first and only perform an independent appraisal if compromise failed.
- Argianas issued a "Majority Decision" listing $6,100,000 (interpreted as an annual payment) but expressly reserved his assent “without prejudice or time limitation” pending two "extraordinary appraisal assumptions" (marketable title and reasonableness of ATF value), reserving the right to withdraw if those assumptions proved false.
- Norfolk Southern treated the Majority Decision as final, sought district-court confirmation under the FAA; Sprint sought AAA arbitration and later sought to vacate the award in district court. The AAA panel held the Majority Decision was an arbitration award and challenges belong in court.
- The Fourth Circuit reversed the district court, holding the Majority Decision was not a “final” arbitration award under 9 U.S.C. § 10(a)(4) because Argianas’s open reservation to withdraw defeated finality; remanded with instruction to vacate the Majority Decision.
Issues
| Issue | Plaintiff's Argument (Sprint) | Defendant's Argument (Norfolk Southern) | Held |
|---|---|---|---|
| Whether the Majority Decision is a “final” arbitration award under the FAA | The award is not final because Argianas expressly reserved the right to withdraw assent if his assumptions proved false | The reservations do not defeat finality because the assumptions concern matters outside the scope submitted to the appraiser | Held: Not final — reservations to withdraw assent conditioned on future events defeat finality under § 10(a)(4) |
| Whether the Majority Decision is ambiguous (payment period) | The decision is ambiguous because it does not state whether $6,100,000 is annual or total for 25 years | The context (agreement language and appraisers’ proposals) shows the figure is an annual payment | Held: Not ambiguous — context supports annual-payment interpretation |
| Whether the arbitrator exceeded authority by resolving rate based on defendability concerns | Argianas chose Norfolk Southern’s approach because he doubted Sprint’s approach would survive judicial scrutiny, reflecting improper personal policy judgments | Norfolk Southern: Even if Argianas considered defendability, his decision interpreted Section 2.2.2 and addressed the rental rate within his authority | Held: No vacatur on this ground — award did not merely reflect the arbitrator’s notions of economic justice |
| Proper forum to decide challenges to the Majority Decision | Sprint: AAA arbitrators under § 20.5 should decide applicability of arbitration clause and disputes related to the Majority Decision | Norfolk Southern: District court should decide whether the Majority Decision is an arbitration award and confirm it under the FAA | Held: AAA panel concluded it had no jurisdiction to rule on challenges to the Majority Decision; court treated confirmation/vacatur as for district court (appeal addressed finality) |
Key Cases Cited
- Wachovia Sec., LLC v. Brand, 671 F.3d 472 (4th Cir. 2012) (describing deferential, narrow judicial review of arbitration awards)
- Richmond, Fredericksburg & Potomac R.R. Co. v. Transp. Commc’ns Int’l Union, 973 F.2d 276 (4th Cir. 1992) (arbitrator’s interpretation of scope of submission entitled to deference)
- Rocket Jewelry Box, Inc. v. Noble Gift Packaging, Inc., 157 F.3d 174 (2d Cir. 1998) (award is final if it resolves all issues submitted to arbitration)
- Gas Aggregation Servs., Inc. v. Howard Avista Energy, LLC, 319 F.3d 1060 (8th Cir. 2003) (award not final if conditioned on outcome of future court proceedings)
- Remmey v. PaineWebber, Inc., 32 F.3d 143 (4th Cir. 1994) (example of an award deemed final and definite)
- Raymond James Fin. Servs., Inc. v. Bishop, 596 F.3d 183 (4th Cir. 2010) (award may be vacated if so ambiguous court cannot meaningfully review)
- Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) (arbitrator may be vacated for acting outside contractually delegated authority)
- Eastern Assoc. Coal Corp. v. United Mine Workers, 531 U.S. 57 (2000) (arbitrator must not issue awards reflecting personal notions of economic justice)
- Sunshine Mining Co. v. United Steelworkers, 823 F.2d 1289 (9th Cir. 1987) (award not final when conditioned on results of future examination)