YPF S.A. v. Apache Overseas, Incorporated, 924 F.3d 815

Background

Apache (seller) and YPF (buyer) contracted in an SPA that appointed KPMG as the “Independent Accountant” to issue a binding “Determination” adjusting the sales price and to “include the reasoning supporting the determination.”
An Engagement Letter specified the Determination would be a joint decision by KPMG partners Ginger Menown and Diego Bleger and likewise required KPMG to include reasoning; it also created a five-day window for either party to call any "patent arithmetical inaccuracy" to KPMG’s attention (but barred substantive submissions during that window).
Menown and Bleger issued a Determination awarding YPF about $9.8 million; Apache objected within five days, claiming KPMG failed to provide sufficient calculation detail to permit identification of any patent arithmetic error.
During the five-day review, Menown left KPMG and KPMG responded to Apache’s objection in a letter signed by Bleger and another partner (Bryan Jones); Apache challenged (1) the substitution of partners for the five-day review and (2) the sufficiency of KPMG’s “reasoning” (arguing it required detailed arithmetic).
The district court confirmed the award; the Fifth Circuit reviewed under the Federal Arbitration Act’s narrow standard and affirmed, rejecting both challenges.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether KPMG violated the engagement by substituting partners during the five-day review	Engagement requires Menown and Bleger to conduct not only the Determination but also the five-day review; substitution was impermissible	Engagement text separately names Menown and Bleger for the Determination; the five-day review refers to KPMG generally, allowing substitution	Court held substitution did not exceed KPMG’s authority; Apache failed to show a clear contractual prohibition on substitution
Whether KPMG’s Determination lacked required “reasoning” because it omitted arithmetic calculations	"Reasoning" requires detailed arithmetic computations to enable detection of patent arithmetic errors	Contract requires a reasoned award but does not mandate detailed mathematical calculations; Engagement Letter’s five-day error-only review implies no initial numeric disclosure obligation	Court held KPMG provided a “reasoned award” (methodology, factual basis, and analysis) and was not required to supply the detailed arithmetic Apache sought

Key Cases Cited

Beaird Indus., Inc. v. Local 2297, Int’l Union, 404 F.3d 942 (5th Cir. 2005) (arbitrators exceed powers by acting contrary to express contract provisions)
Delta Queen Steamboat Co. v. Dist. 2 Marine Eng’rs Beneficial Ass’n, 889 F.2d 599 (5th Cir. 1989) (same principle on arbitrator power limits)
Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469 (5th Cir. 2012) (resolve doubts in favor of arbitration; form-of-award standards)
Brook v. Peak Int’l, Ltd., 294 F.3d 668 (5th Cir. 2002) (arbitration as a matter of contract; look to agreement text)
Action Indus., Inc. v. U.S. Fid. & Guar. Co., 358 F.3d 337 (5th Cir. 2004) (limitations on arbitrator power construed narrowly)
Antwine v. Prudential Bache Sec., Inc., 899 F.2d 410 (5th Cir. 1990) (judicial review of arbitration awards is extraordinarily narrow)
Timegate Studios, Inc. v. Southpeak Interactive, L.L.C., 713 F.3d 797 (5th Cir. 2013) (deferential review to arbitrator’s merits)
Executone Info. Sys., Inc. v. Davis, 26 F.3d 1314 (5th Cir. 1994) (supporting deference to arbitration rulings)
Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274 (5th Cir. 2004) (burden on party resisting enforcement)
Imperial Ethiopian Gov’t v. Baruch-Foster Corp., 535 F.2d 334 (5th Cir. 1976) (same burden principle)
Sarofim v. Trust Co. of the W., 440 F.3d 213 (5th Cir. 2006) (a reasoned award requires more than a simple result but less than full findings and conclusions)
Cat Charter, LLC v. Shurtenberger, 646 F.3d 836 (11th Cir. 2011) (distinguishing standard award from reasoned/finding-and-conclusions awards)