additional submissions, other than post-hearing briefs, which in Clarendon's instance addressed its damage theories, without requesting any further submissions.
Clarendon did not address TIG's claim for damages before the Panel ruled on liability, apparently relying on its denial of liability for the Frontier termination payment. After the Panel rejected that position, Clarendon sought to reopen the proceedings as to TIG's damages.
The Panel denied this request. Courts have held that, "'only the most egregious error which adversely affects the rights of a party' constitutes misconduct and 'erroneous exclusion of evidence does not in itself provide a basis for vacating an award absent substantial harm to the moving party.'" A. S. Seateam v. Texaco Panama, Inc., 1997 U.S. Dist. LEXIS 6869, No. 97 Civ. 0214, 1997 WL 256949, *7 (S.D.N.Y. May 16, 1997). Further, such misconduct "'must amount to a denial of fundamental fairness of the arbitration proceeding.'" Areca, Inc. v. Oppenheimer & Co., Inc., 960 F. Supp. 52, 54-55 (S.D.N.Y. 1997).
Here, the Panel afforded Clarendon a full opportunity to address every issue before taking the case under submission. Thus, the Panel plainly did not deprive Clarendon of a fundamentally fair hearing. Cf. Kaplan v. Alfred Dunhill of London, Inc., 1996 U.S. Dist. LEXIS 16455, No. 96 Civ. 0258, 1996 WL 640901 (S.D.N.Y. Nov. 4, 1996) (hearing was fundamentally unfair where one side did not appear at all).
The Damages Award Relating to Issue I Will Be Affirmed
Clarendon challenges the amount of damages awarded as to termination of the Frontier Agreement on the grounds that the amount of damages is based on a mistaken calculation submitted to the Panel by TIG. Going into the hearing both sides had believed that TIG's payment upon termination of the Frontier Treaty was $ 15,299,000. However, it was discovered that the payment was overstated by $ 363,000 and this correction was explained to the Panel. The Panel did not explicitly take the $ 363,000 correction into account in reaching its ruling, and there is no way to discern whether it included the correction or not.
Section 10 of the FAA defines several narrow grounds on which a court may vacate rather than confirm an arbitration award. Accepting erroneous evidence is not one of them, even if that is what did occur. Court have confirmed arbitration awards they believed to be wrong. See, e.g., Andros Compania Maritima, S.A. v. Marc Rich & Co., A.G., 579 F.2d 691, 703 (2d Cir. 1978) (confirming although grounds for award "do not command our heartfelt concurrence"); I/S Stavborg v. National Metal Converters, Inc., 500 F.2d 424 (2d Cir. 1974) (affirming award although it was based on "clearly erroneous" interpretation of the contract).
Indeed, even where arbitrators have miscalculated damages, this is not a ground for judicial alteration of the award. For example, in B.V.D. Licensing Corp. v. Maro Hosiery Corp., 1990 U.S. Dist. LEXIS 16238, No. 88 Civ. 2459, 1990 WL 200648 (S.D.N.Y. Dec. 4, 1990), this Court confirmed an award despite an alleged miscalculation of damages, noting that such miscalculation "does not rise to the level of error which is required to vacate the award." See also Cole Publishing Co., Inc. v. John Wiley & Sons, Inc., 1994 U.S. Dist. LEXIS 13786, No. 93 Civ. 3641, 1994 WL 532898, *2 (S.D.N.Y. Sept. 29 1994) (upholding award slightly higher than damages claimed in post-hearing memorandum, and noting that "it is not for this court to reconsider" damages evidence).
Collins & Aikman Floor Coverings Corp. v. Froehlich, 736 F. Supp. 480 (S.D.N.Y. 1990) does not support Clarendon's position. In Collins & Aikman, this Court vacated an arbitration award that set damages many times higher than any amount supported by the relevant evidence. By contrast, this Panel's award on Issue I, the Frontier termination payment, is less than half of what the Panel's liability ruling could have supported. In short, the Panel's ruling was well within its authority and there is no basis for vacating the award.
Issue II is Remanded to the Arbitrators
As to Issue II, the Damage Award required TIG to pay Clarendon $ 2,335,520, "inclusive of interest (i.e. in lieu of the interest agreed by the parties to be applicable to awards issued pursuant to this arbitration)." The MOU expressly described how the parties would calculate interest with respect to any arbitration award. Thus the award must be remanded.
The MOU stated that "any payments due the other party . . . shall be payable with interest within thirty (30) days of an award of an arbitration panel . . . [and] shall be calculated at the rate of ten percent (10%), compounded quarterly, from the date of entitlement as per the transaction documents to the date of payment." MOU, § 1.3. Thus, the parties agreed that interest would be calculated based on the MOU as opposed to through the Damage Award.
Because the arbitrators ignored the MOU and nevertheless ruled that interest would be included in the Damage Award in favor of Clarendon, the arbitrators exceeded their authority. Therefore, the Damage Award in this case should be vacated for the same reasons the award was vacated. See Collins & Aikman Floor Coverings Corp., 736 F. Supp. at 484. In Collins, the court found that the arbitrator had exceeded her authority as established in the arbitration provision in the contract between the parties. The provision limited any arbitral award of commissions to those arising from sales prior to termination of the defendant. The arbitrator awarded an amount which could only have been reached by including commissions from sales which occurred after the defendant's termination.
The Court also found that the award was imperfectly executed because there was no determination on which of the accounts commissions were appropriate and that under these circumstances, the award was so imperfectly executed that it could not be reviewed. Because clarification was the proper remedy, the Court remanded the proceedings for further arbitration and clarification in accordance with the opinion. See also Davis v. Chevy Chase Financial, Ltd., 215 U.S. App. D.C. 117, 667 F.2d 160 (D.C. Cir. 1981) (where the court vacated an arbitration award because the arbitrator exceeded its authority by ruling that the employee was obligated to sell its stock to the employer rather than limiting its ruling to the value of the stock as was required by the arbitration agreement).
In the instant case, the arbitrators did not explain what portion of the Damage Award as regards Issue II was principal and which part was interest. Without this information, this Court is unable to modify the Damage Award to exclude the interest calculation. Therefore, the award will be remanded, and the Panel is directed to exclude the interest which was improperly added to the principal in contradiction of the MOU.
Issue III is Remanded to the Arbitrators
The Panel's award on the contingent commission issue cannot be confirmed because it does not specify the amount of damages. On this issue only, the Panel did not render a "mutual, final, and definite award." 9 U.S.C. § 10(a) (4). See Conntech Development Co. v. University of Connecticut Education Properties Inc., 102 F.3d 677, 686 (2d Cir. 1996) ("An award is mutual, definite and final if it 'resolve[s] all issues submitted to arbitration, and determine[s] each issue fully so that no further litigation is necessary to finalize the obligations of the parties'"). Issue III will be remanded to the Panel pursuant to 9 U.S.C. § 10(a)(5) for a ruling as to the amount of damages.
It is so ordered.
New York, N. Y.
January 12, 1998
ROBERT W. SWEET
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