Gulfstream Aerospace Corp. v. Oceltip Aviation 1 Pty Ltd.

• Decision Date: 18 April 2022
• Docket Number: 20-11080
• Citation: 31 F.4th 1323
• Parties: GULFSTREAM AEROSPACE CORPORATION, Plaintiff-Appellee, v. OCELTIP AVIATION 1 PTY LTD., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

31 F.4th 1323

GULFSTREAM AEROSPACE CORPORATION, Plaintiff-Appellee,

v.OCELTIP AVIATION 1 PTY LTD., Defendant-Appellant.

No. 20-11080

United States Court of Appeals, Eleventh Circuit.

Filed: April 18, 2022

Michael A. Doornweerd, Jenner & Block, LLP, Chicago, IL, Matthew S. Hellman, Jenner & Block, LLP, Washington, DC, Elizabeth Edmondson, Jenner & Block, LLP, New York, NY, Shawn A. Kachmar, Hunter Maclean Exley & Dunn, PC, Savannah, GA, for Plaintiff-Appellee.

Rex E. Reese, Rex E. Reese, Attorney at Law, Las Vegas, NV, William Andrew Bowen, Law Office of William Andrew Bowen, Savannah, GA, Paul Wain Painter, III, Bowen Painter, LLC, Savannah, GA, for Defendant-Appellant,

Before Wilson, Rosenbaum, and Ed Carnes, Circuit Judges.

PER CURIAM:

Long story, short: if you want certain rules to apply to the handling of your arbitration, the contract must say so clearly and unmistakably. Otherwise, the Federal Arbitration Act ("FAA") will apply.

The parties here did not do that. So the FAA's arbitral-award standards for review govern. And because Defendant-Appellant Oceltip Aviation 1 Pty Ltd. waived any argument under the FAA's arbitral-award standards that the arbitral award here should be vacated, the district court properly denied Oceltip's application to vacate the award and granted Plaintiff-Appellee Gulfstream Aerospace Corporation's application to confirm the award. We therefore affirm the judgment of the district court.

I.

Gulfstream is a Georgia corporation based in Savannah, and Oceltip is an Australian limited liability company. They entered into a sales agreement ("Agreement"). Under that Agreement, Gulfstream was to manufacture and sell a new G550 business jet aircraft to Tinkler Gulfstream 650 Pty Ltd, Oceltip's former name. The Agreement, as amended, required Oceltip to pay $27.15 million by January 15, 2013.

Though Oceltip paid Gulfstream about $7 million, it failed to make the full $27.15 million payment on time. Nor did it pay the required amount within the ten-day cure period allowed under the Agreement. So Gulfstream terminated the Agreement.

Not pleased with this result, Oceltip considered its options under the Agreement. Within that contract, under the subheading "Arbitration," two clauses relevant to this appeal appear. The first—Section 4.3.1—requires arbitration "by the American Arbitration Association ("AAA") in accordance with the provisions of its Commercial Arbitration Rules ...." and specifies that "judgment on the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof." The second—Section 4.3.3—directs that the contract "shall be governed by the laws of the State of Georgia, and the U.N. Convention on Contracts for the International Sale of Goods ... shall not apply, without reference to rules regarding conflicts of law."

In accordance with Section 4.3.1, Oceltip submitted a demand for arbitration to the AAA. It sought a finding that Gulfstream had anticipatorily repudiated the Agreement, and that this conduct suspended Oceltip's duties, allowed Oceltip to recoup the $7 million it had paid, and entitled Oceltip to damages. Oceltip also sought a finding that the contract's liquidated-damages provision—Section 3.3.2—was a penalty and therefore unenforceable.

The liquidated-damages provision states that "[i]n the Event of Default by [Oceltip], Gulfstream shall be entitled to [as relevant here] ... retain or collect, as liquidated damages and not as a penalty," $8 million. The amended Agreement reaffirms this understanding, specifying that "Gulfstream's damages in the Event of Default by Buyer will be difficult to ascertain, that the amounts agreed to as liquidated damages are a reasonable pre-estimate of the probable loss, and that the Parties intend to provide for reasonable liquidated damages and not a penalty."

For its part, Gulfstream sought $8 million in liquidated damages under that provision, plus attorney's fees and costs, from the arbitration.

The arbitration hearing occurred in Savannah, Georgia. Following it, the three-member arbitration tribunal awarded Gulfstream liquidated damages totaling $8 million, plus attorney's fees, costs, and unreimbursed arbitration expenses. The panel denied relief to Oceltip.

Gulfstream applied in the United States District Court for the Southern District of Georgia to confirm the arbitration award. Meanwhile, in the Superior Court of Chatham County, Georgia, Oceltip sought to vacate the arbitration award.

Gulfstream removed Oceltip's state-court proceeding to the Southern District of Georgia. On Gulfstream's motion, the district court ordered the two cases consolidated.

Oceltip moved to remand, challenging the district court's subject-matter jurisdiction. It argued that, based on the choice-of-law clause in Section 4.3.3, the Agreement incorporated the Georgia Arbitration Code, and that provided for exclusive jurisdiction in the Georgia state courts. In opposition, Gulfstream contended that the FAA authorized federal jurisdiction.

The parties also briefed their respective applications to confirm and vacate the arbitration award. In their briefing, the parties disputed whether federal law (the FAA) or state law (the Georgia Arbitration Code) supplied the standards governing whether the arbitrators’ decision should be vacated or confirmed. And if the Georgia Arbitration Code governed the standards, the parties disagreed over whether the arbitrators had manifestly disregarded the law.

The district court denied Oceltip's motion to remand, granted Gulfstream's application to confirm the arbitration award, and denied Oceltip's application to vacate it. After holding that it had jurisdiction over the dispute, the court determined that the FAA's standards for vacatur applied to its decision. But even assuming the Georgia Arbitration Code's standards applied, the court concluded, Oceltip had not shown that the arbitrators manifestly disregarded the law.

Oceltip timely appealed.¹ On appeal, Oceltip again asserts that federal jurisdiction is lacking. It also argues that the district court erred in confirming the arbitration award and denying vacatur because, in Oceltip's view, the Georgia Arbitration Code's standards for vacatur—not the FAA's—govern, and the arbitrators manifestly disregarded the law.

II.

We begin with jurisdiction—because if we lack that, of course, we cannot consider the merits and must dismiss the appeal. We review our subject-matter jurisdiction de novo. Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte Int'l GmbH , 921 F.3d 1291, 1298 n.8 (11th Cir. 2019).

On appeal, Oceltip does not suggest that this matter does not satisfy the requirements for federal-court jurisdiction. Nor could it do so successfully. As we describe below, we have jurisdiction under Chapter 2 of the FAA.

To explain our jurisdiction, we start with a little background. In 1970, the United States acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also called the "New York Convention." Indus. Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH , 141 F.3d 1434, 1440 (11th Cir. 1998). The Convention's purpose "is to encourage the recognition and enforcement of international arbitral awards to relieve congestion in the courts and to provide parties with an alternative method for dispute resolution that is speedier and less costly than litigation." Id. (cleaned up).

The same year that the United States acceded to the Convention, Congress enacted Chapter 2 of the FAA, codified at 9 U.S.C. §§ 201 – 208. That chapter incorporates the Convention into federal law, "mandat[ing] the enforcement of the New York Convention in United States courts." Indus. Risk , 141 F.3d at 1440. To facilitate that, Chapter 2 creates "original subject-matter jurisdiction over any action arising under the Convention." Id. Indeed, 9 U.S.C. § 203 states that "[a]n action or proceeding falling under the convention shall be deemed to arise under the laws and treaties of the United States." And it directs that "[t]he district courts of the United States ... shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy." 9 U.S.C. § 203.

We have construed Chapter 2 as extending to all arbitral awards not "entirely between citizens of the United States." Indus. Risk , 141 F.3d at 1440–41 ; see also 9 U.S.C. § 202 (stating that arbitral awards "arising out of [a commercial] relationship which is entirely between citizens of the United States" fall outside the Convention). The arbitral award here—which concerns a contract for the sale of an aircraft—arises out of the commercial relationship between Gulfstream and Oceltip. As we have mentioned, Oceltip is an Australian company, and Gulfstream is a United States corporation. So their relationship is not "entirely between citizens of the United States," and the exception to Convention jurisdiction does not apply.

We have also held that §§ 203 and 205 confer subject-matter jurisdiction over arbitration vacatur actions removed from state court, Inversiones , 921 F.3d at 1299–1300, and § 203 endows federal courts with jurisdiction over actions to confirm an arbitral award, see Escobar Celebration Cruise Operator, Inc. , 805 F.3d 1279, 1286 (11th Cir. 2015) ; see also 9 U.S.C. § 207. So there's really no dispute that federal law provides for jurisdiction over this action.

Perhaps for that reason, Oceltip argues instead that the Agreement's choice-of-law provision eradicates our otherwise-existing jurisdiction. Oceltip relies on Sections 4.3.1 and 4.3.3 of the Agreement in support of this position. As a reminder, Section 4.3.1 states that "judgment on the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof." And Section 4.3.3 provides that "[t]his contract shall be governed by the laws of the State of Georgia, ... without reference to rules regarding conflicts of law." Oceltip reads these two provisions together to deprive...