Petrofac, Inc. v. DynMcDermott Petroleum Operations Co.
2012 U.S. App. LEXIS 14610
| 5th Cir. | 2012Background
- DM operates the Strategic Petroleum Reserve and subcontracted with Petrofac to design and install a transportable degas plant.
- The subcontract provided binding arbitration for any claim, with AAA Construction Industry Rules.
- In May 2004, Petrofac served a multi-volume REA asserting damages for delays, site conditions, and related costs.
- On December 6, 2005, Petrofac released DM from all but preserved claims, including REA as may be amended or supplemented.
- By July 2006, the parties submitted the REA and related disputes to binding arbitration under an Agreement for Arbitration and for Location and Methodology of Arbitration.
- The arbitration panel awarded Petrofac damages; the district court confirmed the award and later addressed prejudgment interest after DM failed to pay within 30 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the panel exceeded its powers by addressing damages outside the arbitration scope | DM contends Adams-damages were outside the agreement. | Petrofac argues arbitrability was decided by the panel under AAA Rules. | No; arbitrability and damages fell within the arbitration agreement. |
| Whether Petrofac procured the award by fraud or undue means | DM alleges bait-and-switch between claims, implying fraud. | Petrofac adequately presented distinct claims and argued merits; record supports no fraud. | Not proven; no reversible error. |
| Whether prejudgment interest was properly awarded | DM disputes the district court’s handling of interest after the 30-day payable period. | Texas law supports prejudgment interest and the panel’s timing; DM delayed payment. | Yes; district court properly reinstated the award of prejudgment interest. |
Key Cases Cited
- Apache Bohai Corp. LDC v. Texaco China BV, 480 F.3d 397 (5th Cir. 2007) (de novo review of confirmation; highly deferential to underlying award)
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (who decides arbitrability depends on the agreement)
- AT&T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643 (U.S. 1986) (clear and unmistakable evidence required for arbitrator to decide arbitrability)
- Fallo v. High-Tech Inst., 559 F.3d 874 (8th Cir. 2009) (incorporation of AAA Rules indicates arbitrability decided by arbitrator)
- Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366 (Fed. Cir. 2006) (same rationale on arbitrability when AAA Rules incorporated)
- Terminix Int’l Co., LP v. Palmer Ranch Ltd. P’ship, 432 F.3d 1327 (11th Cir. 2005) (arbitrability under incorporated rules)
- Contec Corp. v. Remote Solution Co., 398 F.3d 205 (2d Cir. 2005) (arbitrability and scope decisions under arbitration agreement)
- Apollo Computer, Inc. v. Berg, 886 F.2d 469 (1st Cir. 1989) (arbitrability and scope discussed under arbitration rules)
- Forsythe Int’l, S.A. v. Gibbs Oil Co. of Tex., 915 F.2d 1017 (5th Cir. 1990) (arbitration panel hears fraud evidence; materiality matters)