626 F. App'x 303
2d Cir.2015Background
- Offshore sold a subsidiary under a Stock Purchase Agreement (SPA) to Korea National Oil Corp. and Ecopetrol S.A. et al. and an Indemnification Escrow Agreement governed the escrowed funds.
- Morgan Stanley Trust, N.A. administers the escrow as security for indemnification claims under the SPA.
- Offshore sought declaratory relief to require $75 million release from escrow to satisfy the Purchasers’ indemnification claim relating to a Peruvian tax assessment.
- The district court stayed the case pending arbitration, finding arbitrability questions fell under the SPA’s arbitration clause.
- Arbitrators ruled (i) Offshore must advance $75 million from non-escrowed funds; (ii) arbitrability of using escrowed funds was within the SPA; (iii) escrow funds would be used only if the Purchasers’ award warranted it, given their withdrawal of escrow demand.
- The district court confirmed two arbitration awards; Offshore appealed challenging arbitrability, finality, and completeness of the awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitrability of the escrow-release dispute is for arbitrators to decide. | Offshore contends arbitrability is a court issue, not arbitrator. | Morgan Stanley and Purchasers argue arbitrability falls under SPA via broad arbitration clause. | Arbitrability is for the arbitrators to decide. |
| Whether the Escrow Agreement’s forum and supremacy clauses affect the SPA arbitration. | Escrow forum clause conflicts with SPA arbitration; supremacy clause forecloses arbitration. | Clauses do not preclude arbitration; SPA and Escrow are not in conflict. | Escrow provisions are complementary; arbitration remains intact. |
| Whether the arbitration awards are sufficiently final and complete for judicial confirmation. | Awards are not final because indemnification may be adjusted after Peru dispute. | Awards resolve the SPA obligations during the interim period and are effectively final for purposes of enforcement. | Awards are sufficiently final and complete to be confirmed. |
Key Cases Cited
- Contec Corp. v. Remote Solution, Co., 398 F.3d 205 (2d Cir. 2005) (clear and unmistakable evidence of arbitrator for arbitrability if agreement so provides)
- PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (arbitrability implied by comprehensive arbitration clause)
- Goldman, Sachs & Co. v. Golden Empire Sch. Fin. Auth., 764 F.3d 210 (2d Cir. 2014) (forum clause read as complementary to arbitration when not all-inclusive)
- Bank Julius Baer & Co. v. Waxfield Ltd., 424 F.3d 278 (2d Cir. 2005) (distinguishes permissive forum selection vs. mandatory preclusion of arbitration)
- Applied Energetics, Inc. v. NewOak Capital Mkts., LLC, 645 F.3d 522 (2d Cir. 2011) (forum clause reading in context of arbitration agreements)
- Rocket Jewelry Box, Inc. v. Noble Gift Packaging, Inc., 157 F.3d 174 (2d Cir. 1998) (arbitration awards must resolve issues submitted to arbitration)
- S. Seas Navigation Ltd. of Monrovia v. Petróleos Mexicanos, 606 F. Supp. 692 (S.D.N.Y. 1985) (interim awards can resolve rights during pendency of underlying action)
- Rich v. Spartis, 516 F.3d 75 (2d Cir. 2008) (enforcement scope without requiring further rulings)