Revere Copper and Brass Inc. v. Overseas Private Inv. Corp.

• Decision Date: 02 June 1980
• Docket Number: No. 79-1159,79-1159
• Citation: 202 U.S. App. D.C. 81,628 F.2d 81
• Parties: REVERE COPPER AND BRASS INCORPORATED, Appellant, v. OVERSEAS PRIVATE INVESTMENT CORPORATION, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 81

628 F.2d 81

202 U.S.App.D.C. 81

REVERE COPPER AND BRASS INCORPORATED, Appellant, v. OVERSEAS PRIVATE INVESTMENT CORPORATION, Appellee.

No. 79-1159.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 25, 1979.

Decided Feb. 26, 1980.

Certiorari Denied June 2, 1980. See 100 S.Ct. 2964.

Appeal from the United States District Court for the District of Columbia (Misc. No. 78-0296).

William E. Hegarty, New York City, for appellant.

Michael B. Sheppard, with whom E. Donald Elliott, Washington, D. C., was on the brief, for appellee.

Before J. EDWARD LUMBARD, ^* U. S. Senior Circuit Judge for the Second Circuit, and TAMM and MIKVA, Circuit Judges.

Opinion Per Curiam.

PER CURIAM:

Appellant, Revere Copper and Brass Incorporated (Revere), seeks reversal of the district court's denial of Revere's motion to correct or vacate in part an arbitration award. The origin of the arbitration award in question is an insurance contract under which the appellee, Overseas Private Investment Corporation (OPIC), an agency of the United States, insured Revere against losses incurred by expropriation of Revere's investment in its wholly-owned subsidiary's aluminum mining and refinery complex in Jamaica. Section 10.01 of the contract provides that any disputes thereon "shall be settled by arbitration . . . (and) . . . (t)he award rendered by the arbitrator shall be final and binding upon the parties . . . ."

Following a change in administration of the Jamaican government, Revere made claim upon OPIC for compensation, alleging that actions by the new government constituted an expropriation of Revere's property. When OPIC denied the claim, Revere submitted the dispute to arbitration. The arbitrators determined that there was expropriatory action but awarded Revere $1,131,144, instead of the $64,131,000 that Revere had claimed.

Revere then filed its motion in the district court, seeking to correct or vacate the portions of the arbitrators' award in which the amount of the award was determined. Judge Charles R. Richey concluded that "Revere's claims amount to no more than the contention that the arbitrators misconstrued the contract. . . . (which) 'is not open to judicial review.' Bernhardt v. Polygraphic Co. of America, Inc., 350 U.S. 198, 203 n.4 (76 S.Ct. 273, 100 L.Ed. 199) (1956)." Revere Copper & Brass, Inc. v. Overseas Private Investment Corp., No. 78-0296, Order at 2-3 (D.D.C. Dec. 8, 1978), reprinted in Joint Appendix (J.A.) at 447a, 448a-49a. Judge Richey rejected Revere's claim that the award must be set aside for public policy reasons because it violates the rule of contra proferentem. Id. at 3, reprinted in J.A. at 449a. Contra proferentem is "the rule of construction that ambiguities in insurance contracts are resolved favorably to the insured." Continental Casualty Co. v. Beelar, 132 U.S.App.D.C. 1, 2 405 F.2d 377, 378 (1968). The rule developed in recognition that insurance policies are usually written by the insurer, and the insurer ought not be allowed to benefit from any ambiguities in the language which it chose. 13 J. Appleman, Insurance Law & Practice § 7401 (rev. ed. 1976). After questioning whether any ambiguity in the Revere-OPIC insurance contract had been shown, Judge Richey declared that "(p)ublic policy is involved in this case, but not in the manner the petitioner (Revere) contends. There is a strong public policy behind judicial enforcement of binding arbitration clauses." Order at 3, reprinted in J.A. at 449a. From this ruling Revere appeals. We affirm.

Revere's motion in the district court was made pursuant to sections 10 and 11 of the Federal Arbitration Act, 9 U.S.C. §§ 10-11 (1976). The Act was originally passed in 1925. Pub.L. No. 68-401, 43 Stat. 883. As stated in the Act's preamble, Congress intended it to be "An Act To make valid and enforceable written provisions or agreements for arbitration of disputes arising out of contracts, maritime transactions, or commerce among the States or Territories or with foreign nations." Id. In the ensuing years, "(t)he federal courts have recognized a strong federal policy in favor of voluntary commercial arbitration, as embodied in the (Act) . . . ." Hanes Corp. v. Millard, 174 U.S.App.D.C. 253, 265, 531 F.2d 585, 597 (1976). The goal of Congress in passing the Act was to establish an alternative to the complications of litigation. See Wilko v. Swan, 346 U.S. 427, 431, 74 S.Ct. 182, 184, 98 L.Ed. 168 (1953) (citing House and Senate reports). As a result, judicial review of an arbitration award has been narrowly limited. Amicizia Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 808 (2d Cir.), cert. denied, 363 U.S. 843, 80 S.Ct. 1612, 4 L.Ed.2d 1727 (1960). This court has acknowledged its restricted function in that capacity. See Washington-Baltimore Newspaper Guild, Local 35 v. Washington Post Co., 143 U.S.App.D.C. 210, 215, 442 F.2d 1234, 1239 (1971).

Seeking to avoid the restrictions upon our review of the award in question, Revere points to the rule that enforcement of arbitration awards is subject to public policy considerations. Revere misperceives the nature of the public policy exception to the enforcement of arbitration awards. It is not available for every party who manages to find some generally accepted principle which is transgressed by the award. Rather, the award must be so misconceived that it "compels the violation of law or conduct contrary to accepted public policy." Union Employers Division of Printing Industry, Inc. v. Columbia Typographical Union No. 101, 353 F.Supp. 1348, 1349 (D.D.C.1973), aff'd mem., 160 U.S.App.D.C. 403, 492 F.2d 669 (1974). ¹ A proper description of the limits of the public policy exception is provided in Interinsurance Exchange of Automobile Club v. Bailes, 219 Cal.App.2d 830, 33 Cal.Rptr. 533, 538 (1963):

While, in one sense, all rules of adjective and substantive law set forth the "public policy" of the state, there is a vast difference between the enforcement of a void contract and the mere misunderstanding or misapplication of rules of law involved in the application to a particular dispute of a (valid) contract . . . .

There being no question as to the validity of the insurance contract between Revere and OPIC, or the legitimacy of the parties' bargained-for performances, the public policy exception is inapplicable here. ²

Revere argues that arbitration clauses are entitled to varying degrees of enforcement depending upon the subject matter of the contract in question. The Federal Arbitration Act provides no basis for this view. Section 9 of the Act expressly provides for the confirmation of arbitration awards which arise out of the kind of binding arbitration clause which is present in Revere's contract with OPIC. See 9 U.S.C. § 9 (1976). If indeed there are particular considerations that lead parties to different types of contracts to favor or disfavor arbitration, that is for the parties to determine when they decide whether to include an arbitration clause in their contract. It has nothing to do with the judicial enforcement of arbitration clauses pursuant to the Federal Arbitration Act. The strong federal policy in favor of voluntary commercial arbitration would be undermined if the courts had the final say on the merits of the award. See Note, Judicial Review of Arbitration Awards on the Merits, 63 Harv.L.Rev. 681 (1950).

If Congress wanted to exempt insurance contracts from the purview of the Federal Arbitration Act in the manner suggested by Revere, Congress could do so. In fact, the cases cited by Revere to demonstrate that arbitration of disputes between customer and broker is disfavored, Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953) and Ames v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 567 F.2d 1174 (2d Cir. 1977), stand for the proposition that Congress can abrogate an arbitration procedure...