and the AAA's administrative fees. (Def. Reply 5-10)
Contrary to the thrust of this argument, the question before me is not whether I concur in the arbitration panel's decision or even whether the panel committed serious error under the License Agreement. The question is whether the arbitration panel "even arguably" complied with the terms of the agreement. Misco, 484 U.S. at 38. I conclude that it did. It is at least arguable that the phrase "their own costs" refers to those expenses that each party would incur separately during arbitration, such as attorney's fees or compensation for expert witnesses. Likewise, it is at least arguable that "their own costs" does not refer to expenses that the parties would incur together, such as compensation for arbitrators or administrative fees.
The court's recent decision in Soft Drink & Brewery Workers Union Local 812 v. Forest Glen Distrib., Inc., 1996 U.S. Dist. LEXIS 8740, No. 95-8071, 1996 WL 346459 (S.D.N.Y. June 25, 1996) is not to the contrary. There, I held that the arbitrator improperly awarded attorney's fees to the plaintiff where the labor contract did not authorize such an award. Id. at *1. The contract in Forest Glen provided that "the administrative costs of arbitration, including the arbitrator's fees and expenses, are to be shared equally by the [parties]. All other costs of arbitration shall be borne by the party who incurred such costs." Id. This contract language contemplated two distinct types of costs: administrative costs, which were to be shared, and "other costs of arbitration," which were to be paid separately. In no case could one party be required to pay the full amount of either type of cost. Based on this clear language, I determined that the arbitrator did not have the authority to require the defendant to pay the plaintiff's attorney's fees. Id.
The specific language at issue in Forest Glen stands in contrast to the general language in the License Agreement in this case. The License Agreement states only that the parties shall bear "their own costs of arbitration," without explaining what the term "costs" means or indicating whether there were some expenses that could not be assigned to one party. Contrary to Noble's argument (Def. Reply at 7-10), this potential ambiguity does not furnish grounds for vacating the arbitration award. Rather, it raises a question of contract interpretation that properly fell to the arbitrators. As discussed above, the arbitrators arguably resolved this question correctly. Accordingly, I find that the arbitrators did not exceed their powers in requiring Noble to bear the cost of their compensation and the administrative fees.
C. The Arbitration Panel Did Not Engage in Manifest Disregard of the Law
Noble's final argument for vacatur is based on the doctrine of "manifest disregard of the law." This judicially created doctrine permits a court to vacate an arbitration award if the arbitrators understood and ignored a clearly governing legal principle. See Standard Microsystems, 103 F.3d at 12; Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986). Manifest disregard "means more than error or misunderstanding with respect to the law. . . . The error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator." Bobker, 808 F.2d at 933 (citations omitted). Accordingly, "the reach of the manifest disregard doctrine is severely limited." Dirussa v. Dean Witter Reynolds, Inc., 121 F.3d 818, 821 (2d Cir.) (quotations omitted), petition for cert. filed, 139 L. Ed. 2d 639, 118 S. Ct. 695 (U.S. 1997).
Noble argues that the arbitration panel manifestly disregarded the law by failing to consider a clearly governing legal principle: waiver. (Def. Mem. at 12-13) In their stipulation, the parties asked: "If Noble breached the License Agreement, was such breach waived by Rocket?" (Def. Mem. Ex. 14) Noble contends that the arbitration panel disregarded this issue in two respects: first, by refusing to allow its attorney, Lesh, to question Rocket's attorney, Eslinger, about their telephone conversation; and second, by failing to mention the issue of waiver in the arbitration award.
The first argument fails because the arbitrators did not commit any discernible -- must less "obvious" -- legal error in not requiring Eslinger to testify. Lesh himself testified extensively regarding the issue of waiver and his understanding of the telephone conversation he had had with Eslinger. (Tr. at 104) The arbitrators also permitted Lesh to argue why he should be allowed to call Eslinger to testify (id. at 115-22) and denied his request only after recessing to discuss the matter. (Id. at 123-24) In denying the request, the arbitrators indicated that they understood the thrust of Lesh's argument and needed no further testimony on the issue.
Under these circumstances, it cannot be said that the arbitrators' manifestly disregarded the law or ignored an obvious legal principle in refusing to allow Eslinger to testify.
Noble's second argument -- that the arbitrators manifestly disregarded the law by not addressing the issue of waiver in their award -- also fails. Noble assumes that, because the parties submitted six substantive issues for arbitration, the arbitrators had an obligation to make six separate findings in their award. However, the six submitted issues were not independent of one another but were steps on the way to the larger question at arbitration, namely, whether Noble breached the License Agreement such that Rocket was entitled to an audit and royalties. Thus, a finding that Rocket had not waived Noble's breach was necessarily subsumed in the arbitrators' award. The arbitrators were not required to make explicit this implicit finding. Standard Microsystems, 103 F.3d at 12 (arbitrators are not required to provide an explanation for their decision).
* * *
For the reasons stated above, Noble has failed to make the showing necessary to avoid summary confirmation of the arbitration award. Accordingly, Noble's cross-petition for vacatur is denied, and Rocket's petition for confirmation is granted.
Michael B. Mukasey,
U.S. District Judge
Dated: New York, New York
November 20, 1997