University of Notre Dame (USA) in England v. TJAC Waterloo, LLC
2017 U.S. App. LEXIS 11596
| 1st Cir. | 2017Background
- The University of Notre Dame (Buyer) agreed to purchase a UK building from TJAC Waterloo, LLC (Seller) contingent on renovation work to be performed by ZVI Construction Co., LLC (Contractor).
- The Purchase & Sale Agreement (P&S) named TJAC, ZVI, and Notre Dame and contained an arbitration clause covering disputes "between the parties" and disputes "arising out of or in connection with the subject matter" of the agreement.
- The parties agreed to bifurcate arbitration into a first stage addressing liability and a later stage addressing "quantum" (damages).
- An English arbitrator issued an 81-page binding determination holding TJAC and ZVI jointly liable for deficient renovation work; damages were reserved for the later phase.
- Concerned the defendants might dissipate assets before damages were assessed, Notre Dame sought (and the district court granted) confirmation of the arbitrator's liability determination under the New York Convention and attachment of assets as security.
- TJAC and ZVI appealed, arguing (1) the liability determination was not "final/binding" for Convention confirmation because damages remained to be determined, and (2) ZVI was not a party to the arbitration clause.
Issues
| Issue | Plaintiff's Argument (Notre Dame) | Defendant's Argument (TJAC/ZVI) | Held |
|---|---|---|---|
| Whether a bifurcated liability-only arbitral determination can be "final/binding" for confirmation under the New York Convention | Bifurcated liability awards are final when parties agreed to separate stages; domestic precedent allows confirmation of liability phase | The liability determination is not final because damages remain to be determined and language in an earlier draft suggested nonfinality | Court: A liability determination can satisfy the Convention's finality/binding requirement when parties agreed to bifurcate; the award here was final despite earlier draft language |
| Whether the arbitrator’s language in a preliminary draft prevented the liability award from being final | The draft language was superseded by the later titled and described "Determination" and the arbitrator and parties treated liability as binding | Defendants point to draft language: "None of the answers are the final answers" to argue nonfinality | Court: The draft was a preliminary document; the final 81-page Award and subsequent statements established finality; confirmation appropriate |
| Whether ZVI was bound by the P&S arbitration clause (i.e., is an arbitration party) | ZVI signed the P&S as "Contractor," joined in selecting the arbitrator, participated in arbitration without timely objection, and the clause covered disputes "between the parties" and "arising out of" the agreement | ZVI said it was only a nominal party, its obligations were via separate contracts, and certain agreements provided English-court jurisdiction, not arbitration | Court: ZVI was subject to arbitration — its signature, conduct (selection, participation, silence), and contract language bind it; English court reached similar conclusion under English law |
| Whether the district court properly confirmed the foreign arbitral liability award and authorized attachment for security | Confirmation and attachment are permitted under the Convention where an award is binding/final; security was warranted given defendants’ failure to assure insurance/ability to pay | Defendants challenged confirmation due to alleged nonfinality and ZVI's nonparty status | Court: Affirmed confirmation and attachment; defendants failed to show grounds to refuse enforcement |
Key Cases Cited
- Hart Surgical, Inc. v. Ultracision, Inc., 244 F.3d 231 (1st Cir. 2001) (recognizes that a bifurcated liability award can be final when parties agreed to separate stages)
- Providence Journal Co. v. Providence Newspaper Guild, 271 F.3d 16 (1st Cir. 2001) (informal agreement to bifurcate arbitration may suffice for finality)
- Fradella v. Petricca, 183 F.3d 17 (1st Cir. 1999) (standard that an award is final if it evidences intent to resolve submitted claims)
- Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (Sup. Ct.) (arbitration procedures may be contractually tailored; parties cannot expand judicial vacatur grounds)
- Publicis Commcn's v. True North Comm'ns, Inc., 206 F.3d 725 (7th Cir. 2000) (Convention complements FAA; FAA decisions inform Convention interpretation)
- Cytyc Corp. v. DEKA Prods. Ltd. P'ship, 439 F.3d 27 (1st Cir. 2006) (courts defer to arbitrators so long as they are arguably construing/applying the contract)
- JCI Commc'ns, Inc. v. Int'l Bhd. of Elec. Workers, 324 F.3d 42 (1st Cir. 2003) (party that submits issue to arbitration without reservation cannot later challenge arbitrator's authority)