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Cessna Aircraft Company v. Avcorp Industries, Inc.

United States District Court, Tenth Circuit

May 1, 2013

CESSNA AIRCRAFT COMPANY, Plaintiff,
v.
AVCORP INDUSTRIES, INC., Defendant.

MEMORANDUM AND ORDER

CARLOS MURGUIA, District Judge.

This matter is before the court on two motions relating to a November 16, 2012 arbitration award. Plaintiff moves to vacate the award (Doc. 1), [1] and defendant moves to affirm it (Doc. 12). For the following reasons, the court affirms the arbitration award and enters judgment accordingly.

I. Factual Background

In February 2001, the parties entered into a Strategic Alliance Agreement ("SAA"). Under this agreement, plaintiff agreed to produce specific aircraft components for defendant. The SAA also included an arbitration clause for disputes arising in connection with the SAA.

In December 2010, plaintiff notified defendant that it would be transitioning all components manufactured by defendant under the SAA to alternate sources. Defendant contended that this notification constituted a material breach of the SAA and initiated arbitration against plaintiff on June 7, 2011. The three-arbitrator panel conducted a two-week evidentiary hearing in August 2012. At the hearing, the panel heard testimony from nineteen witnesses and admitted over 200 exhibits. The panel also accepted post-hearing briefs.

On November 16, 2012, the panel issued a final award in favor of defendant. In reaching this award, the panel concluded that the SAA was ambiguous but the extrinsic evidence indicated that the SAA was an exclusive contract between plaintiff and defendant. This meant that plaintiff could not transition work to other suppliers absent a breach or unless defendant failed to materially satisfy the requirements of the SAA. A majority of the panel determined that defendant neither breached nor materially failed to satisfy the requirements of the SAA and, therefore, plaintiff breached the SAA by transitioning work. The panel concluded plaintiff's breach resulted in damage to defendant in the amount of $27, 391, 372.00.[2]

On November 26, 2012, plaintiff filed a complaint alleging that the arbitration award should be vacated because the panel acted in manifest disregard of the law and because the award violates public policy. Defendant subsequently filed a motion to affirm the arbitration award and to dismiss plaintiff's complaint. Defendant also requests that the court award prejudgment interest on the confirmed award and defendant's attorney's fees and costs incurred in this action.

II. The Federal Arbitration Act

The Federal Arbitration Act ("FAA") governs this proceeding. This act expresses the federal policy favoring arbitration. Bowen v. Amoco Pipeline Co., 254 F.3d 925, 932 (10th Cir. 2001). A party to an arbitration may ask the court to affirm an arbitration award if the parties have agreed that a judgment of the court shall be entered upon the award being made. 9 U.S.C. § 9. The court must affirm the award unless the award has been vacated, modified, or corrected. Id.

An award may be vacated by the court only on limited grounds. Dominion Video Satellite, Inc. v. Echostar Satellite L.L.C., 430 F.3d 1269, 1275 (10th Cir. 2005). Section 10 of the FAA provides four circumstances for vacating an award. 9 U.S.C. § 10. In addition to these statutory reasons, the Tenth Circuit allows an award to be vacated when the arbitrators acted in manifest disregard of the law or when the award violates public policy.[3] See Sheldon v. Vermonty, 269 F.3d 1202, 1206 (10th Cir. 2001) (listing judicially created reasons for overturning an award).

III. The Court Considers Plaintiff's Complaint As A Motion To Vacate

The initial matter before this court is the proper procedure for resolving the issues raised by the parties. Plaintiff contends that its complaint is subject to the regular rules of notice pleading. Plaintiff argues that, absent defendant showing that plaintiff failed to state a claim, this proceeding to vacate the arbitration award should progress to discovery. Plaintiff also claims that defendant's motion to confirm the arbitration award is improper because defendant has not filed an answer and "does not have an affirmative pleading on file" in this case. (Doc. 17 at 9 n.1.)

Plaintiff misconstrues the procedure for resolving requests to vacate or affirm an arbitration award. Under the FAA, a party to the arbitration may apply to a district court for an order affirming or vacating an arbitration award. 9 U.S.C. §§ 9-10. The application to affirm or vacate "shall be made and heard in the manner provided by law for the making and hearing of motions...." Id. at § 6. This section makes clear that a request to vacate or affirm an arbitration award shall be made in the form of a motion-not in the form of a complaint or other pleading. See Abbott v. Law Office of Patrick Mulligan, 440 F.Appx. 612, 616 (10th Cir. 2011) (explaining that an application to vacate an award will be treated as a motion).

Plaintiff's position also demonstrates a misunderstanding of the role of the Federal Rules of Civil Procedure in this proceeding. The Federal Rules apply to this proceeding to the extent that the FAA does not provide its own procedure. Fed.R.Civ.P. 81(a)(6)(B). As just explained, the FAA instructs that applications to vacate or affirm arbitration awards should be treated as motions. Because the FAA provides this procedure, the requirements of Rule 8(a) and the protections of Rule 12(b)(6) have no impact on the court's resolution of the current issues. See O.R. Sec., Inc. v. Prof'l Planning Assocs., Inc., 857 F.2d 742, 745-46 (11th Cir. 1988) (discussing the interplay of the FAA and the ...


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