Arma v. Bae Sys. Overseas, Inc.

• Decision Date: 21 August 2013
• Docket Number: Civil Action No. 13–494 (JEB).
• Citation: 961 F.Supp.2d 245
• Parties: ARMA, S.R.O., Petitioner, v. BAE SYSTEMS OVERSEAS, INC., Respondent.
• Court: U.S. District Court — District of Columbia

961 F.Supp.2d 245

ARMA, S.R.O., Petitioner,

v.BAE SYSTEMS OVERSEAS, INC., Respondent.

Civil Action No. 13–494 (JEB).

United States District Court, District of Columbia.

Aug. 21, 2013.

Andrew P. Cooper, Jonathan M. Cader, Davidoff, Hutcher & Citron, LLP, Garden City, NY, Eric B. Meyer, Joshua D. Wolson, Dilworth Paxson, LLP, Philadelphia, PA, for Petitioner.

Alan Scott Bolden, Lawrence S. Sher, Reed Smith LLP, Washington, DC, Tarek F. Abdalla, Thomas M. Pohl, Reed Smith, LLP, Pittsburgh, PA, for Respondent.

MEMORANDUM OPINION

JAMES E. BOASBERG, District Judge.

This case derives from a contract dispute between Petitioner ARMA, S.R.O., a Slovak Company, and Respondent BAE Systems (BAES), an American defense contractor. An arbitral Tribunal, convened here in Washington to resolve the disagreement, ruled in favor of BAES. ARMA then filed this action under the Federal Arbitration Act, 9 U.S.C. § 1 et seq., seeking vacatur of the final award. ARMA argues that the integrity of the award has been marred by numerous acts of fraud on Respondent's part, as well as misconduct and legal overreach by the members of the Tribunal that issued the award. BAES objects to all of these claims and asks the Court to confirm the award under Section 9 of the FAA.

After devoting considerable time to an extensive review of the factual record and the parties' submissions, the Court finds that Petitioner has failed to make even a passable case for vacatur. In its dogged efforts to delay confirmation of the award, ARMA has made a series of untenable arguments and, even worse, has submitted pleadings rife with misleading statements, significant omissions, and, occasionally, outright misrepresentations. Disagreeing with Petitioner on all fronts, this Court will deny its petition for vacatur and grant Respondent's request that the award be confirmed. Given ARMA's egregious behavior, moreover, the Court will also grant BAES leave to file a motion requesting an award of reasonable attorney fees.

I. Background

According to the Petition, for more than a decade international defense contractor BAES relied upon ARMA, a family-owned Slovak relationship-management firm, to promote its reputation in Eastern Europe and to secure inroads with various government ministries. See ARMA Petition to Vacate (ECF No. 1), ¶¶ 3–4. In mid–2005, the Slovak Ministry of Defense (MOD) announced a sizable international public tender for the development of a mobile communications system (MOKYS) for its armed forces. See id., ¶ 5. ARMA agreed to assist BAES in its efforts to win the MOKYS tender, and on October 14, 2005, the parties concluded an International Representative Agreement (IRA) to reflect this arrangement. See id., ¶ 6; BAES Answer (ECF No. 11) at 3.

The IRA stipulated that if BAES succeeded in securing the MOKYS tender, it would pay ARMA commissions for all “Compensable Sale[s]” obtained in connection with the project during the lifetime of the IRA. See Pet., Exh. T(IRA), § 4.A; Answer at 3. The IRA had an initial term of two years, see Pet., ¶ 6; IRA App'x. A, § 1, and provided that after its expiration, BAES would continue to pay commissions on any qualifying “Compensable Sales.” See IRA, § 6. BAES was ultimately selected as the winning bidder in the MOKYS tender. See Pet., ¶ 8. In December 2005, BAES and the Slovak MOD entered into an “Agreement for Future Delivery of Work” (AFDW) to design and implement the MOKYS, see id., ¶ 8, which had an initial term of four years. See Pet., Exh. A (Final Award), ¶ 19. Following the signing of the AFDW, BAES and the MOD entered into a succession of “Contracts of Work” to deliver specific elements of the MOKYS program, see Pet., ¶ 9, concluding contracts C–1 and C–2 in May of 2006, and contract C–3 in December of 2006. See Award, ¶ 21.

BAES paid ARMA commissions on all three of these Contracts of Work, see Pet., ¶ 10, and also extended the term of the IRA until March 31, 2008, at which time it expired. See Award, ¶ 22. ARMA contends that BAES allowed the IRA to expire and terminated all of its other similar international representation agreements in response to a high-profile corruption investigation. See Pet., ¶ 10. Whatever the reason for its decision, BAES took the position that it did not owe ARMA any commissions on Contracts for Work concluded after March of 2008. See id.; Award, ¶ 25. In December of 2009, BAES and the MOD extended the term of the AFDW for a further four years and continued to enter into Contracts of Work for products and services related to the MOKYS program. See Award, ¶¶ 24–25. When BAES refused to pay ARMA a commission on Contract for Work C–4, ARMA commenced the arbitration at issue in this matter. See Pet., ¶ 11; Award, ¶ 25.

On November 8, 2011, pursuant to the arbitration clause in the parties' IRA, see IRA § 18, ARMA submitted a demand for arbitration to the International Center for Dispute Resolution (ICDR), a division of the American Arbitration Association. See Pet.,¶ 21; Answer at 3; Award, ¶¶ 3–4. The parties jointly selected the members of a three-person Tribunal, all experts in the field of arbitration, to preside over the dispute. See Answer at 4. At the outset, both parties agreed that the dispute essentially boiled down to a single issue: how to interpret the term “Compensable Sale” in § 4.C of the IRA and whether the AFDW fit that definition, thereby requiring BAES to pay ARMA commissions on all transactions with the Slovak MOD throughout the lifetime of the AFDW. See Award, ¶¶ 29–31; Pet., Exh. K (ARMA Cross–Motion for Summary Judgment) at 2. As defined in the IRA, a “Compensable Sale” is “a transaction ... formalized in an unconditional sales contract,” IRA, § 4.C, that must become binding on the parties during the term of the IRA and involves the “sale [of] Products or Services to a Customer.” Id., § 4.C(3). ARMA argued that the AFDW satisfied these criteria and BAES disagreed, submitting that the AFDW was akin to a framework agreement that did not automatically obligate the Slovak MOD to buy any products or services. See Award, ¶¶ 30–31. Both parties asserted that the dispute could be resolved within the “four corners” and “unambiguous language” of the IRA, without resort to extrinsic evidence of the parties' intent. See id., ¶ 33; Pet., Exh. B (ARMA Demand for Arbitration) at 12; see also Pet., Exh. I (ARMA Letter of June 21, 2012) at 1.

At a preliminary meeting in March of 2012, BAES requested that the dispute be resolved on summary judgment. See Pet., ¶ 26. Following the exchange of various briefings and motions, and the resolution of a number of discovery-related issues, the three-person arbitral Tribunal convened in Washington, D.C., to hear oral argument on BAES's motion for summary judgment. See id., ¶¶ 25–36; Award, ¶¶ 5–12. While the Tribunal set out five questions for the parties to address at oral argument, it agreed to hear any other arguments the parties wished to present. See Award, ¶ 11. After a further exchange of post-hearing briefings and letters, the Tribunal issued a Final Award on January 11, 2013, granting summary judgment to BAES and dismissing ARMA's claims. See Pet., ¶¶ 37–40. The Tribunal determined that each party would bear its own costs and attorney fees, and that the costs of the arbitration would be apportioned equally. See Award, ¶¶ 52–53.

In its Petition, ARMA invokes the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and requests that the Court vacate the award on various grounds set out in FAA § 10(a). See Pet., ¶¶ 17, 114. Respondent BAES opposes all of ARMA's claims and moves to have the Final Award confirmed pursuant to 9 U.S.C. § 9. See BAES Motion to Confirm (ECF No. 12), ¶ 8.

II. Standard of Review

The Federal Arbitration Act, 9 U.S.C. § 1 et seq., provides for “expedited judicial review to confirm, vacate, or modify arbitration awards,” Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 578, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008), thereby “establish[ing] an alternative to the complications of litigation.” Revere Copper & Brass Inc. v. Overseas Private Inv. Corp., 628 F.2d 81, 83 (D.C.Cir.1980) (internal quotation marks omitted). As the D.C. Circuit has repeatedly emphasized: “[J]udicial review of arbitral awards is extremely limited,” and the courts “do not sit to hear claims of factual or legal error by an arbitrator.” Teamsters Local Union No. 61 v. United Parcel Serv., Inc., 272 F.3d 600, 604 (D.C.Cir.2001) (internal quotation marks omitted); Kurke v. Oscar Gruss & Son, Inc., 454 F.3d 350, 354 (D.C.Cir.2006). As a consequence, a party seeking to challenge an arbitrator's award under any of the FAA's limited grounds, see9 U.S.C. § 10(a), “must clear a high hurdle.” Stolt–Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 130 S.Ct. 1758, 1767, 176 L.Ed.2d 605 (2010). Even a serious legal or factual error on the part of the arbitral Tribunal will not, standing alone, justify vacatur of an award. Id.; see also United Paperworkers Int'l Union, AFL–CIO v. Misco, Inc., 484 U.S. 29, 37–38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987). Rather, “ ‘[i]t is only when [an] arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice that his decision may be unenforceable.’ ” Stolt–Nielsen S.A., 130 S.Ct. at 1767 (quoting Major League Baseball Players Assn. v. Garvey, 532 U.S. 504, 509, 121 S.Ct. 1724, 149 L.Ed.2d 740 (2001) ( per curiam )) (internal quotation marks omitted). An arbitral award “must be upheld so long as it draws its essence from the [arbitration] agreement.” Nat'l Postal Mail Handlers Union v. Am. Postal Workers Union, 589 F.3d 437, 441 (D.C.Cir.2009) (internal quotation marks omitted). Even if the arbitrators offered no explanation for their decision, the reviewing court must confirm the award so long as “any justification can be gleaned from the record.” Kurke, 454 F.3d at 354–55 (internal quotation marks omitted).

Against the...