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SPERRY INTL. TRADE v. GOVERNMENT OF ISRAEL

March 1, 1985

SPERRY INTERNATIONAL TRADE, INC., Petitioner,
v.
GOVERNMENT OF ISRAEL, Respondent



The opinion of the court was delivered by: POLLACK

POLLACK, Senior District Judge

DECISION AND OPINION

 The petitioner, Sperry International, Inc. ("Sperry"), moves to vacate an Award rendered in favor of respondent, Government of Israel, by arbitrators appointed by the American Arbitration Association ("AAA"), on the grounds that the Award allegedly resulted from arbitrator misconduct and/or was so imperfectly executed as to be invalid; or alternatively for an order modifying or correcting the Award to show that it was not unanimous. In furtherance of either alternative, Sperry seeks an order permitting it to take oral depositions of the arbitrators, all of whom signed the Award.

 The respondent has moved for an order confirming the Award and opposed petitioner's motion and seeks an award of attorney's fees and costs.

 For the reasons shown hereafter, the respondent's motion to confirm the Award will be granted and the petitioner's motions will be denied.

 The arbitration arose out of a contract dispute between Sperry and the Government of Israel. The contract required Sperry, together with its subcontractors and with the cooperation of the Government of Israel, to furnish a modern ground-to-ground communications system for the Israeli Air Force.

 After a dispute concerning Sperry's contractual performance arose, Sperry sought and obtained an order from this Court directing arbitration to be held in New York under the Rules of the AAA. Thereafter, the matter was duly submitted to a panel of three neutral arbitrators selected by the Association: Two Canadians with construction contract backgrounds and the New York resident partner of a firm of English solicitors, the latter becoming the Chairman.

 The evidentiary hearings, which consumed 212 hearing days, produced over 40,000 pages of transcript. Lengthy post-hearing briefs were submitted by each side. Four days of final oral arguments by counsel followed. On December 12, 1984, a written Award, signed by each of the three arbitrators, was rendered. The Award is complete in all respects and conforms to the Rules of the AAA. It calls for Sperry to pay the Government of Israel $16,413,000 in United States currency with interest at twelve percent until paid. The Award also prescribes the terms for the release of an escrow account which previously had been established by the parties. The Award further provides for Sperry, or failing such re-delivery, for Sperry to destroy the material. The Award requires Sperry to bear certain bank charges; the parties to pay equally the AAA administrative fees, charges, and expenses, and the arbitrators' and reporting agency's compensation and expenses; and, each party to bear its own attorney's fees and costs and those expenses of and incidental to the arbitration.

 The Award states "this Order and Award is in full and final settlement of all claims and counterclaims and counterclaims submitted in this arbitration." The Award is then signed manually by each of the three arbitrators and each acknowledged to a Notary Public that he executed the same.

 Criticisms of the Award

 Shortly after the Award was rendered, an attorney for Sperry phoned one of the arbitrators and reportedly told him that the outcome was totally unexpected and a complete shock to Sperry. Since no reasons were expressed in the Award, the attorney asked the arbitrator for any "expression" he felt he could make. The arbitrator declined to discuss the matter on the telephone, so the attorney suggested that they meet. The arbitrator responded that he wanted first to consult a legal advisor to an arbitration association in Canada of which he was a member. Ultimately, the arbitrator declined to meet Sperry's attorney.

 During the course of their talk, when the Sperry attorney mentioned to the arbitrator that the decision was unanimous, he was allegedly corrected by the arbitrator; the arbitrator stated that the Award was not animous since it did not so state expressly. In any event, neither a provision of the agreement to arbitrate nor any rule of the AAA required the arbitrators to render a unanimous award. Rule 28 of the AAA provides:

 
Whenever there is more than one Arbitrator, all decisions of the Arbitrators must be by at least a majority. The Award must also be made by at least a majority unless the concurrence of all is expressly required by the Arbitration Agreement or by Law."

 A few days after the talk with the arbitrator mentioned above, the same Sperry attorney unexpectedly encountered the Chairman of the Arbitration Panel and reiterated that Sperry was interested in gaining an insight into how the Award was to be interpreted and what lessons were to be drawn from it. The Chairman allegedly replied that there "may be a way" but that this would have to be taken up through the AAA. The AAA Tribunal Administrator later told Sperry's attorney that, after the time for challenging the award had ...


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