SPX Corp. v. Garda USA, Inc.
2014 Del. LEXIS 285
| Del. | 2014Background
- SPX sold Vance to Garda; SPA amended Jan 13, 2006 with price adjustment based on Pre-Closing and Effective Date Balance Sheets.
- Working Capital calculated per SPA Section 1.3 with IBNR treatment; IBNR related to workers’ compensation included in current liabilities per 1.3(a)(v).
- Section 1.3(c) requires reserves to be calculated using the interim methodology but updated for changes through Closing Date based on most current information.
- SPX consistently reported a workers’ compensation reserve of $1.4 million; Effective Date Balance Sheet reduced reserve to $1.366 million; IBNR not included.
- Garda challenged SPX’s calculation; EY arbitator instructed to rely on the parties’ presentations and not conduct independent legal review; award found no adjustment.
- Court of Chancery vacated the award for manifest disregard; on appeal, the Delaware Supreme Court reversed and reinstated the award, remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitrator manifestly disregarded the law by excluding IBNR. | Garda argues IBNR must be included per 1.3(a)(v). | SPX contends inclusion would violate 1.3(c) and that historical data supports the reserve. | No manifest disregard; award reinstated. |
| Whether the arbitrator’s interpretation of the SPA was a permissible contract reading. | Garda contends only Garda’s reading complies with the SPA. | SPX argues its reading is supported by contract language and submissions to the arbitrator. | Yes; interpretation within scope of authority; not vacatable. |
Key Cases Cited
- Reserves Mgmt. Corp. v. R.T. Props., LLC, 80 A.3d 952 (Del.2013) ()
- TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Sec., Inc., 953 A.2d 726 (Del.Ch.2008) ((Del. Ch. 2008) (quoting standard for summary judgment-style review of arbitral awards))
- Travelers Ins. Co. v. Nationwide Mut. Ins. Co., 886 A.2d 46 (Del.Ch.2005) ((Del. Ch. 2005) (arbitration review principles))
- Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir.2003) (manifest disregard standard defined and applied)
- Travelers Ins. Co. v. Nationwide Mut. Ins. Co. (duplicate entry for emphasis), 886 A.2d 46 (Del.Ch.2005) ()
- Misco, United Workers Int’l Union v. Enterprise Wheel & Car Corp., 484 U.S. 29 (1987) (contract interpretation limits of court review of arbitration awards)
- Wilko v. Swan, 346 U.S. 427 (1953) (federal arbitration act background on enforceability)