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Keywords

contractdamagesarbitrationprecedentappealcorporationcondition precedentarbitrator
contractdamagesarbitrationprecedentappealcorporationcondition precedentarbitrator

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Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200

Facts

Issue

Did the district court err in vacating the arbitration award on the grounds of manifest disregard of New York law regarding damages?

Did the district court err in vacating the arbitration award on the grounds of manifest disregard of New York law regarding damages?

Rule

An arbitration award may be vacated if the arbitrator exhibits a manifest disregard of the law, which requires a showing that the arbitrator knew of a governing legal principle but chose to ignore it. The party seeking vacatur bears the burden of proving this manifest disregard. The court applies a two-pronged test to determine if the law was well defined and if the arbitrator appreciated its applicability.

An arbitration award may be vacated if the arbitrator exhibits a manifest disregard of the law, which requires a showing that the arbitrator knew of a governing legal principle but chose to ignore it.

Analysis

The court found that the district court did not give proper deference to the arbitrator's factual determinations and misapplied the law regarding the nature of the CSA. The arbitrator's interpretation of the CSA as a contract with a condition precedent was deemed valid, and the court concluded that Daihatsu failed to demonstrate that the arbitrator acted in manifest disregard of the law. The legal principles cited by Daihatsu were not clearly applicable to the facts as determined by the arbitrator.

We hold that the district court did not accord the proper deference to the arbitrator's factual determinations and improperly set aside his interpretation of the sales agreement as a contract with a condition precedent, rather than as a preliminary agreement.

Conclusion

The Court of Appeals reversed the district court's decision, holding that the arbitration award should be confirmed as the arbitrator did not manifestly disregard the law.

We reverse the judgment of the district court and remand with instructions for the district court to confirm the arbitral award.

Who won?

Westerbeke Corporation prevailed in this case as the Court of Appeals reversed the district court's decision to vacate the arbitration award. The court emphasized that the arbitrator's interpretation of the CSA was reasonable and that Daihatsu failed to meet its burden of proving that the arbitrator acted with manifest disregard of the law. The court's ruling reinstated the $4 million award to Westerbeke, affirming the arbitrator's findings and the legitimacy of the damages awarded.

Westerbeke Corporation prevailed in this case as the Court of Appeals reversed the district court's decision to vacate the arbitration award.

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