JACADA (EUROPE), LTD. f/k/a CLIENT/SERVER TECHNOLOGY (EUROPE), LTD., Plaintiff-Appellant, v. INTERNATIONAL MARKETING STRATEGIES, INC., Defendant-Appellee.
No. 03-2521
United States Court of Appeals, Sixth Circuit
Argued: Nov. 30, 2004. Decided and Filed: March 18, 2005.
401 F.3d 701
Before: BOGGS, Chief Judge; CLAY, Circuit Judge; and WALTER, District Judge.*
* The Honorable Donald E. Walter, United States District Judge for the Western District
BOGGS, Chief Judge.
This case concerns an arbitration award arising from an agreement between a Michigan corporation and a foreign corporation to distribute software overseas. Plaintiff appeals the district court‘s decision to uphold an arbitration award entered in favor of the Defendant. To resolve Plaintiff‘s appeal, however, we must first resolve two preliminary questions that present complicated and, within our court at least, novel questions of law. We must first determine the scope of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Because we conclude that this arbitration award falls under the Convention, Plaintiff‘s case was properly removed to the district court. Our second inquiry is whether the federal or state standard for vacating an arbitration award should apply when the parties’ agreement contains both an arbitration clause and a general choice-of-law provision requiring the application of a particular state‘s law. After deciding that the federal standard applies, we analyze the arbitrators’ award under that deferential standard. We ultimately conclude that the arbitrators’ decision in favor of Defendant drew its essence from the agreement and did not manifestly disregard the law. In reaching all these conclusions, we agree with the district court and we therefore affirm.
I
Jacada (Europe), Ltd. (Jacada) is a software development company incorporated in the United Kingdom that created a software package referred to as Jacada/400. International Marketing Strategies (IMS) is a marketing firm incorporated in Michigan that offered expertise in attracting possible customers for software such as Jacada‘s. The two companies signed a Distribution Agreement, under which IMS received the right to market and distribute Jacada/400 throughout Europe, the Middle East, and Africa. Three provisions of this contract are crucial to this appeal. The parties agreed to a general choice-of-law provision stating, in its entirety, [t]his Agreement will be governed by the laws of the State of Michigan. J.A. 103. The Distribution Agreement also contained an arbitration clause specifying that all disputes under the agreement would be resolved in Kalamazoo, Michigan, and exclusively by arbitration by the American Arbitration Association in accordance with its commercial arbitration rules. Ibid. Finally, the parties agreed to a limited liability provision, which included the following:
Notwithstanding anything herein to the contrary, the maximum aggregate amount of money damages for which [Jacada] may be liable to IMS under this Agreement, resulting from any cause whatsoever other than for a breach by [Jacada] of any of its representations and warranties under paragraph 5(a), shall be limited to the amounts actually paid by IMS to [Jacada] under this agreement.
During the term of the agreement, both Jacada and IMS attempted to sell the Jacada/400 software package to another British company, JBA. When that company eventually purchased the product, Jacada failed to compensate IMS for its efforts in securing the sale. The parties were un-
An American Arbitration Association panel conducted a five-day hearing concerning the sale to JBA. Following the hearing, the arbitrators issued an award for IMS consisting of one lump sum of $401,299 to be paid within thirty days and then 50% of JBA‘s nine remaining quarterly payments to Jacada, each of which was for £208,333.1 In reaching this decision, the arbitrators expressly disregarded the limited liability provision excerpted above. They did so because they found that the provision is unreasonable and unconscionable and ... that it fails of its essential purpose.
Shortly thereafter, Jacada filed an action to vacate the arbitration award in Oakland County Circuit Court in Michigan. On the same day, IMS filed an action to enforce the award in the United States District Court for the Western District of Michigan. Because the state court action was filed first, albeit by only a few hours, the district court stayed the federal action. The state court suit was eventually transferred to Kalamazoo County Circuit Court, where IMS sought removal of the case on the sole ground that the case fell under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (Convention).
With both cases then before it, the federal district court consolidated the two actions, naming the first-filed suit, to vacate the arbitration award, as the lead case.2 The district court subsequently issued two opinions. In the first, it determined that the arbitration fell under the Convention and that the Federal Arbitration Act (FAA) therefore provided the correct standard of review. In the second decision, the court applied the FAA‘s standard of review and upheld the arbitrators’ award. Jacada has timely appealed both decisions.
II
This case arrived before the district court in an unusual procedural posture that required the court to examine whether the dispute was properly before it. Because IMS is a Michigan corporation and Jacada is a British corporation, IMS could have removed the case on the basis of diversity jurisdiction. See
The language relevant to this appeal was drafted with this disagreement in mind. Article I(1) of the Convention states:
This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.
Convention, art. I(1), 21 U.S.T. at 2519 (emphasis added). As written, the provision allows both approaches. Countries that preferred the territorial approach, such as the United States and the United Kingdom, are accommodated in the first sentence of Article I(1). The second sentence appeases the civil law countries’ concern and leaves the question of defining a domestic award up to the signatory countries. A strictly territorial approach is not barred by the second sentence; a signato-
In the present dispute, the issue is whether the award granted to IMS is governed by the Convention. The award could only fall under Article I(1)‘s second sentence as an award not considered as domestic to this country.4 Ibid. Therefore, stated more specifically, the issue before this court is the proper standard under federal law for determining whether an award is not considered as domestic .... Ibid. After resolving this issue, we will then determine whether that standard renders the present arbitration award not domestic. Upon review of the statutory language and relevant sister circuit precedent, we conclude that
We begin by examining the statutory language. When Congress ratified the Convention in 1970, it also passed implementing legislation, found at
An arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract, or agreement described in section 2 of this title, falls under the Convention. An agreement or award arising out of such a relationship which is entirely between citizens of the United States shall be deemed not to fall under the Convention unless that relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states. For the purpose of this section a corporation is a citizen of the United States if it is incorporated or has its principal place of business in the United States.
Several aspects of
is the only section of the implementing legislation that deals with any restrictions on which arbitral awards fall under the Convention. See
Article I(1) states that an arbitration award will fall under the Convention if either the award was made in a country different than the country where enforcement is being sought, or the award is not considered as domestic in the country where enforcement is being sought. See Convention, art. I(1), 21 U.S.T. at 2519. Given that it is a simple factual inquiry to determine the country in which an arbitration award was made, we can divine no purpose for the second sentence of
Arguing that Congress is well-acquainted with drafting definitions, Jacada contends that
Our confidence in our conclusion is buttressed by the fact that each of our sister circuits to examine
More to the point, all of our sister circuits that have considered this issue agree that
Based on our reading of the statute and supported by these precedents, we conclude that
III
We now turn to Appellant‘s claim that the arbitrators’ award should be vacated. Because the Convention applies to this dispute, we begin with the remedies it makes available. The Convention provides that an award may not be enforced when the award has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. Convention, art. V(1)(e), 21 U.S.T. at 2520. Because this award was made in the United States, we can apply domestic law, found in the FAA, to vacate the award.8 See Yusuf Ahmed Alghanim & Sons v. Toys R Us, Inc., 126 F.3d 15, 19-23 (2d Cir.1997) (collecting cases and academic commentary in reaching the same conclusion). This dispute falls under the FAA because the parties’ Distribution Agreement, containing the arbitration clause, is a contract evidencing a transaction involving commerce.9
Though the award falls under the FAA, we must still decide what standard
Our sister circuits that have considered this question have decided that a generic choice-of-law provision does not displace the federal standard for vacating an arbitration award. See Action Indus., Inc. v. U.S. Fid. & Guar. Co., 358 F.3d 337, 341-43 (5th Cir.2004) (we hold that the Agreement‘s choice-of-law provision does not express the parties’ clear intent to depart from the FAA‘s vacatur standard.); Roadway Package Sys. v. Kayser, 257 F.3d 287, 293-300 (3d Cir.) (we need to establish a default rule, and the one we adopt is that a generic choice-of-law clause, standing alone, is insufficient to support a finding that contracting parties intended to opt out of the FAA‘s default standards.), cert. denied, 534 U.S. 1020 (2001). However, we need not look only to other courts in analyzing the issue because our previous opinion in Ferro provides considerable guidance. In that case, we were confronted with the question of whether an agreement including both an arbitration clause and a general choice-of-law clause should be interpreted to require the application of Ohio or federal law to the issue of fraudulent inducement. Ferro, 142 F.3d at 931. This question mattered a great deal because Ohio law arguably dictated that a claim of fraudulent inducement cannot be submitted to an arbitrator, whereas the Supreme Court has held that, under the FAA, a claim of fraudulent inducement is ordinarily decided by an arbitrator. See ibid. (quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403 (1967) (deciding issue under the FAA)). Applying Mastrobuono, we held that the parties did not intend to displace the federal approach to the issue because the choice-of-law clause was not an ‘unequivocal inclusion’ of the Ohio rule .... Id. at 937.
We hesitate, however, to reach the same conclusion automatically in this case because, as Jacada correctly argues, the issue in Ferro strongly implicated the longstanding federal policy that ambiguities as to the scope of the arbitration clause itself [should be] resolved in favor of arbitration. Volt, 489 U.S. at 476 (quoting Moses H. Cone Mem‘l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). Applying Ohio‘s rule would essentially
However, as the Supreme Court made clear in Mastrobuono, when interpreting an agreement covered by the FAA, due regard must be given not only to the federal policy favoring arbitrability, but also the federal policy favoring arbitrator discretion. See 514 U.S. at 62. Therefore, the Court decided that
the best way to harmonize the choice-of-law provision with the arbitration provision is to read ‘the laws of the State of New York’ to encompass substantive principles that New York courts would apply, but not to include special rules limiting the authority of arbitrators. Thus the choice-of-law provision covers the rights and duties of the parties, while the arbitration clause covers the arbitration.
Id. at 63-64 (emphasis added). This federal policy favoring protection of arbitrator authority is implicated by standards of vacatur. While we hesitate to characterize Michigan‘s standard for vacatur as a special rule, applying that standard instead of the more liberal federal standard limits the authority of arbitrators by applying greater judicial scrutiny to their decisions. We must therefore interpret the present agreement giving due regard to this policy.
With this consideration in mind, we return to the agreement before us. The Distribution Agreement contains a generic choice-of-law provision and an equally generic arbitration clause. Faced with similarly generic provisions, see id. at 58-59, the Court in Mastrobuono focused its attention on the generality of the choice-of-law provision, see id. at 59-62 (stating sections of arbitration agreement and analyzing both the choice-of-law and arbitration provisions), see also Roadway Package Sys., 257 F.3d at 293 (summarizing Mastrobuono‘s reasoning). Just as in Mastrobuono, the choice-of-law clause could be read as only specifying what state contract law the parties wished to use. See Mastrobuono, 514 U.S. at 59 (the choice-of-law provision may reasonably be read as merely a substitute for the conflict-of-laws analysis that otherwise would determine what law to apply to disputes arising out of a contractual relationship.); see also Roadway Package Sys., 257 F.3d at 293 (discussing the ubiquity of such provisions in commercial agreements and the need for them as a method of resolving horizontal choice-of-law questions). Also, just as in Mastrobuono, the parties here entered into an agreement in which, without the choice-of-law provision, the FAA rule would apply. See Mastrobuono, 514 U.S. at 59 (in the absence of contractual intent to the contrary, the FAA would pre-empt the [New York state] rule.). Finally, also as in Mastrobuono, the clause does not unequivocally suggest an intent to displace the default federal standard. See id. at 62 (At most, the choice-of-law provision introduces an ambiguity into an arbitration agreement that would otherwise allow punitive damages awards.); see also Roadway Package Sys., 257 F.3d at 294-95 (drawing the same conclusion about the
Considering the federal policy in favor of arbitration, and after interpreting the agreement‘s choice-of-law provision in light of the Supreme Court‘s reading of a similar agreement in Mastrobuono, we reach the same conclusion as our sister circuits. We do not believe that the parties intended to displace the federal standard for vacatur when the only evidence of such intent is a generic choice-of-law provision. The arbitration award is to be reviewed according to the federal standard for vacatur.
IV
Having determined that the federal standard of vacatur applies, our final inquiry is whether the arbitrators’ award should be affirmed. Because the arbitrators drew the essence of their award from the agreement and did not manifestly disregard the law, we affirm the district court‘s decision to enforce the arbitrators’ decision. We review the district court‘s decision to uphold an arbitration award for clear error on findings of fact and de novo on questions of law. Dawahare v. Spencer, 210 F.3d 666, 669 (6th Cir.2000). In contrast, our review of an arbitration award itself is strikingly deferential. See Nationwide Mut. Ins. Co. v. Home Ins. Co., 330 F.3d 843, 846 (6th Cir.2003). Under
After the arbitrators decided that IMS deserved payment from Jacada for its role in securing the sale to JBA, the arbitrators were faced with determining the size of IMS‘s award. In this case, the parties agreed to a limited liability provision, which stated,
[n]otwithstanding anything herein to the contrary, the maximum aggregate amount of money damages for which [Jacada] may be liable to IMS under this Agreement, resulting from any cause whatsoever other than for a breach by [Jacada] of any of its representations and warranties under paragraph 5(a), shall be limited to the amounts actually paid by IMS to [Jacada] under this Agreement.
The arbitrators did not apply the provision in determining the amount of IMS‘s award because they found that the provision is unreasonable and unconscionable and ... that it fails of its essential purpose.
We believe the arbitrators’ award draws its essence from the agreement. Though the arbitrators disregarded the limited liability provision, deciding not to apply such
Still, we must determine whether the arbitrators’ decision displays manifest disregard of law. Merrill Lynch, 70 F.3d at 421. This too is a highly deferential standard. To merit reversal, the award must fly in the face of clearly established legal precedent. Ibid. Arbitrators act in manifest disregard if (1) the applicable legal principle is clearly defined and not subject to reasonable debate; and (2) the arbitrators refused to heed that legal principle. Nationwide Mut. Ins. Co., 330 F.3d at 847 (quoting Dawahare, 210 F.3d at 669). Upon review, we cannot say that the arbitrators’ conclusions that the limited liability provision was unconscionable or fails of its essential purpose displayed manifest disregard of Michigan law, the substantive contract law to which the parties agreed. Cf. part III, supra.
The landmark case for unconscionability under Michigan law is Allen v. Mich. Bell Tel. Co., 18 Mich.App. 632, 171 N.W.2d 689 (1969). Under that case, a court investigating whether a provision is unconscionable asks two questions: (1) What is the relative bargaining power of the parties, their relative economic strength, the alternative sources of supply, in a word, what are their options?; (2) Is the challenged term substantively reasonable? Id. at 692. The first question relates to procedural unconscionability; the second substantive. Often courts take a balancing approach to this question, requiring a certain amount of both procedural and substantive unconscionability. Citizens Ins. Co. v. Proctor & Schwartz, 802 F.Supp. 133, 144 (W.D.Mich.1992); overruled on other grounds by Detroit Edison Co. v. NABCO, Inc., 35 F.3d 236, 242 (6th Cir.1994). Though there are obviously cases with outcomes adverse to IMS‘s position, see, e.g., WXON-TV, Inc. v. A.C. Nielsen Co., 740 F.Supp. 1261 (E.D.Mich.1990), no case eliminates the arbitrators’ decision from reasonable debate.
The arbitrators did not disregard clearly established legal precedent in determining
Similarly, there exists no clearly established principle barring a finding of procedural unconscionability. Jacada emphasizes that both it and IMS were commercial entities, but Michigan law does not preclude finding a provision unconscionable in such a circumstance. In fact, the plaintiff in Allen, the leading Michigan case on this issue, was an independent insurance agent, who was buying advertising for his business. See Allen, 171 N.W.2d at 690. Instead, the essential inquiry under Michigan law is the comparative bargaining power of the two parties. See id. at 692. There is little law preventing arbitrators from considering that IMS‘s smaller size coupled with the unique features of the Jacada/400 software package rendered the bargaining power between the two sides sufficiently unequal as to allow a conclusion of unconscionability.
We similarly conclude that the arbitrators did not manifestly disregard the law in concluding that the limited liability provision failed of its essential purpose. Jacada argues that failure of its essential purpose is exclusively a principle derived from the Uniform Commercial Code and therefore has no applicability outside that context. Courts, however, have analyzed whether a contractual provision fails of its essential purpose in cases not governed by the U.C.C. See WXON-TV, 740 F.Supp. at 1262, 1266-67 (though noting that the U.C.C. has no application to [the disputed] contract, still discussing and rejecting claim that the limited liability provision fails of its essential purpose under Michigan law); Networktwo Communications Group, Inc. v. Spring Valley Mktg. Group & Communityisp, Inc., 2003 WL 1119763, at *4 (E.D.Mich. Feb. 13, 2003) (unpublished opinion) (citing WXON-TV and analogizing to its reasoning) aff‘d, 372 F.3d 842 (6th Cir.2004). These cases also demonstrate that courts are not limited to discussing whether a remedy fails of its essential purpose only because of changed circumstances. In WXON-TV and Networktwo Communications Group, both courts, employing Michigan law, analyzed and rejected plaintiffs’ arguments that limited liability provisions failed of their essential purposes. In neither case did the court limit itself to not having found changed circumstances; in fact, neither opinion mentions whether the circumstances surrounding the parties’ relationship changed. Instead, both courts rejected plaintiffs’ arguments based on a direct examination of the terms of the disputed contracts. See WXON-TV, 740 F.Supp. at 1266-67; Networktwo Communications Group, 2003 WL 1119763 at *4. Though the arbitrators in our case reached a different outcome, these cases show that the arbitrators’ consideration of the doctrine did not contradict clearly established legal
V
For the reasons stated above, we AFFIRM the judgment of the district court.
CLAY, Circuit Judge, concurring in part and dissenting in part.
I fully concur in parts I-III of the Court‘s opinion; however, I write separately with respect to part IV of the Court‘s opinion, because I believe that the arbitration award manifestly disregards applicable law. Notwithstanding our narrow standard of review, in my view this is the rare case where the award amounts to the arbitrators’ own notions of industrial justice. United Paperworkers Int‘l Union v. Misco, Inc., 484 U.S. 29, 38 (1987); Beacon Journal Publ‘g Co. v. Akron Newspaper Guild, 114 F.3d 596 (6th Cir.1997).
The arbitrators voided the limitation of damages clause in the parties’ agreement because they found it to be unreasonable and unconscionable, and further found that it fails of its essential purpose. (J.A. at 74.) The majority is correct that under Michigan law an arbitrator may refuse to apply a limitation of damages provision for unconscionability, and this Court may not reject [the arbitrator‘s] findings simply because it disagrees with them. United Paperworkers Int‘l Union, 484 U.S. at 38; cf. Anaconda Co. v. District Lodge No. 27 of the Int‘l Ass‘n of Machinists and Aerospace Workers, 693 F.2d 35, 37-8 (6th Cir.1982) (‘Manifest disregard of the law’ means more than a mere error in interpretation or application of the law.). However, the majority limits its review of the arbitration award to a recitation of permissible outcomes under Michigan law, failing to examine whether the arbitrators actually applied the law, and ignoring the fact that a blatant disregard of the applicable rule of law will not be tolerated. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir.1995). Where the applicable legal principle is clearly defined and not subject to reasonable debate and the arbitrators refused to heed that legal principle, we must set the arbitration award aside as being in manifest disregard of the law. Id. (quoting Wilko v. Swan, 346 U.S. 427 (1953)).
Michigan law is guided by the general principle that individuals are fully competent to enter into any contract which they wish to enter into and may obligate themselves to perform in any manner provided the contract is not in violation of any penal laws or public policy of the state. Michigan Ass‘n of Psychotherapy Clinics v. Blue Cross and Blue Shield of Michigan, 101 Mich.App. 559, 301 N.W.2d 33, 40 (1981). The leading Michigan case regarding unconscionability in a commercial setting, Allen v. Michigan Bell Telephone Co., makes clear that in order to void a limitation of damages clause for unconscionability, there must be a finding of both substantive and procedural unconscionability. 18 Mich.App. 632, 171 N.W.2d 689, 692 (1969) (There are then two inquiries in a case such as this: (1) What is the relative bargaining power of the parties, their relative economic strength, the alternative sources of supply, in a word, what are their options?; (2) Is the challenged term substantively reasonable?). Allen narrowly defines unconscionability as an absence of meaningful choice on the part of one of the parties
Thus, merely because the parties have different options or bargaining power, unequal or wholly out of proportion to each other, does not mean that the agreement of one of the parties to a term of a contract will not be enforced against him; if the term is substantively reasonable it will be enforced. By like token, if the provision is substantively unreasonable, it may not be enforced without regard to the relative bargaining power of the contracting parties. Allen involved a contract between a plaintiff who wanted to advertise in the yellow pages and the phone company that printed the telephone book. The Michigan Court of Appeals found that the limitation of damages clause in the parties’ contract was procedurally unconscionable because the parties were not in positions of equal bargaining power; since the defendant printed the only telephone book in the geographic area, the plaintiff was either forced to accept the contract or forego advertising in the yellow pages. Id. at 639-40. The limitation of damages clause was also found to be substantively unconscionable because it completely absolved the phone company from any liability in the event of a breach of contract. Id. at 640.
Allen‘s result is atypical, and was later recognized as such by the Michigan Court of Appeals. See Michigan Ass‘n of Psychotherapy Clinics, 301 N.W.2d at 40 (highlighting that court‘s primary concern in Allen was that plaintiff was contracting with a public utility which, in essence, had a monopoly on the type of advertising sought); see also Northwest Acceptance Corp. v. Almont Gravel, Inc., 162 Mich.App. 294, 412 N.W.2d 719, 723-24 (1987) (emphasizing that a finding of unconscionability requires lack of realistic choice for one party coupled with contract terms that are unreasonably favorable to the other party). Whether a contractual provision is substantively unreasonable or unconscionable depends on the commercial setting, purpose and effect of the provision. Id. at 41, 412 N.W.2d 719. Other courts that have interpreted Michigan law, including this Court, have noted that unconscionability is rarely found to exist in a commercial setting. Citizens Ins. Co. of Am. v. Proctor & Schwartz, Inc., 802 F.Supp. 133, 143 (W.D.Mich.1992), overruled on other grounds by Detroit Edison Co. v. NABCO, Inc., 35 F.3d 236, 242 (6th Cir.1994); accord U.S. Fibres v. Proctor & Schwartz, Inc., 509 F.2d 1043, 1048 (6th Cir.1975); WXON-TV, Inc. v. A.C. Nielsen Co., 740 F.Supp. 1261, 1264 (E.D.Mich.1990).
I recite the applicable Michigan law relating to unconscionability to emphasize that in voiding the limitation of damages provision in the instant case, the arbitrators completely failed to follow that law. The majority claims that [t]here is little law preventing arbitrators from considering that IMS‘s smaller size coupled with the unique features of the Jacada/400 software package rendered the bargaining power between the two sides sufficiently unequal as to allow a conclusion of unconscionability. Maj. Op. at 713-15. Whatever merit that statement may have in the abstract, it is clear that the arbitrators made no such findings regarding IMS‘s size in relation to Jacada‘s, or the unique features of Jacada/400. The arbitration award contains no inquiry into, and no discussion of, the relative bargaining strength of the parties, nor does the award discuss or recite any evidence indicating that IMS was faced with a lack of meaningful choice in entering into the contract
Additionally, although the arbitrators alternatively employed a hypothetical calculation to find that the limitation of damages provision fails of its essential purpose, the arbitrators made no argument that the provision failed of its essential purpose in light of Jacada‘s actual breach. The arbitrators found that application of the limitation of damages provision here would limit IMS to $125,937.91 in damages, but then the arbitrators went on to discuss the potential effect of the limitation of damages provision using completely hypothetical figures. Id. This reasoning completely ignores Michigan law, under which failure of essential purpose is a default remedy under the Uniform Commercial Code (UCC), and is applied in cases where a limitation of damages clause actually fails of its essential purpose. See
In the current case, the arbitrators made absolutely no finding that there were unanticipated circumstances which caused the limited remedy bargained for by the parties to be unavailable. Furthermore, the arbitrators ignored the fact that the parties are two businesses that engaged in an arm‘s length transaction supported by consideration. The law presumes that business people are fully competent to enter into contracts and obligate themselves to perform in any manner they wish, WXON-TV, 740 F.Supp. at 1264, and nothing in the arbitration award suggests that the limitation of damages clause bargained for by the parties failed to operate in exactly the manner contemplated at the time the agreement was entered into. Thus, the conception of the failure of essential purpose doctrine contemplated by the arbitrators’ award has no basis whatsoever in Michigan law.
Although I concur in parts I-III of the Court‘s opinion, I respectfully dissent from part IV. I would vacate the arbitration award‘s calculation of damages and remand to the arbitrators for further findings in light of clearly established Michigan law.
Victor TURNER, Petitioner-Appellant, v. Margaret BAGLEY, Respondent-Appellee.
No. 03-3130.
United States Court of Appeals, Sixth Circuit.
Argued: Dec. 7, 2004. Decided and Filed: March 21, 2005.