966 F.3d 361
5th Cir.2020Background
- Vantage (Cayman/Delaware companies) contracted with Petrobras Venezuela under a 2009 DSA; Petróleo Brasileiro executed a separate payment/performance guaranty.
- A 2014 Third Novation amended the DSA, added an AAA arbitration clause (Houston) and an appeal-waiver provision, and preserved arbitrators’ power to decide contract validity.
- Brazilian Lava Jato investigations revealed bribery by Vantage’s principal and others; Petrobras investigated and later terminated the DSA in 2015, alleging bribery and material breach.
- Vantage initiated AAA arbitration seeking >$450M (expectancy) and >$800M (reliance); a three-arbitrator tribunal awarded Vantage ~ $622M (majority), with a strong dissent by arbitrator Gaitis alleging fundamental unfairness.
- The district court denied Petrobras’s discovery requests (to depose Gaitis and subpoena the AAA), denied vacatur, confirmed the award (including against Petróleo Brasileiro), and entered judgment; Petrobras appealed to the Fifth Circuit.
Issues
| Issue | Vantage’s Argument | Petrobras’s Argument | Held |
|---|---|---|---|
| Enforceability of appellate-waiver in Third Novation | Waiver bars appellate review of the district-court confirmation judgment; enforceable under contract law | Waiver cannot divest federal courts of statutory review under the Panama Convention/FAA; not clear and unequivocal | Court declined to resolve waiver question and affirmed on the merits instead |
| Public-policy defense under Panama Convention (bribery) | Arbitrators found Petrobras ratified the DSA and that Vantage was not proven to have bribed; those factual findings defeat public-policy defense | Enforcement would violate U.S. public policy because DSA was procured by bribery and is void/unenforceable | Defer to arbitrators’ factual findings; ratification and arbitral findings preclude a public-policy bar; award enforceable |
| Discovery of arbitrator/AAA (bias/evidentiary issues) | Contract incorporated AAA rules (bar on arbitrator testimony); discovery unnecessary | Needed to develop record of evident partiality and due-process violations; depo/subpoena essential | District court did not abuse discretion denying deposition of dissenting arbitrator and subpoena to AAA; enforcement of Rules and delay concerns justified denial |
| Vacatur under FAA §10(a)(4) — reasoned award as to Petróleo Brasileiro (guarantor) | Award contains tribunal analysis that Petróleo Brasileiro was primary obligor; satisfies the “reasoned award” requirement | Award insufficiently reasoned as to immediate liability of Petróleo Brasileiro; warrants vacatur | Award provided more than mere result as to guarantor; not grounds for vacatur; §10(a)(4) challenge denied |
Key Cases Cited
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (federal policy favors arbitration and courts must enforce arbitration agreements)
- Manville Forest Prods. Corp. v. United Paperworkers Int’l Union, 831 F.2d 72 (5th Cir. 1987) (courts defer to arbitrator’s findings on merits)
- Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Karaha Bodas II), 364 F.3d 274 (5th Cir. 2004) (public-policy defense under New York Convention construed narrowly; discovery in confirmation weighed cautiously)
- Europcar Italia S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310 (2d Cir. 1998) (distinguishing fraud in formation of arbitration agreement from fraud on the merits — validity of underlying contract is for arbitrators)
- United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29 (1987) (courts must accept facts as found by arbitrator; limited role in reviewing awards)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (arbitral deference principles and role of courts)
- Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) (arbitral decisions construing contracts stand unless arbitrator exceeded powers)
- YPF S.A. v. Apache Overseas, Inc., 924 F.3d 815 (5th Cir. 2019) (explaining the “reasoned award” standard continuum)
- MACTEC, Inc. v. Gorelick, 427 F.3d 821 (10th Cir. 2005) (contractual waivers of appellate review may be enforceable if clear and limited to appeals)
- Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft mbH & Cie KG, 783 F.3d 1010 (5th Cir. 2015) (burden on party asserting public-policy defense under Panama Convention)