they made it a limitation on his powers not merely a substantive rule about liability notwithstanding that limitation the arbitrator awarded fifty five million dollars in damages some eighty million dollars including interest that were consequential as a matter of new york law the magistrate however held that she could not independently review that issue even if he awarded consequential damages that decision was wrong i have two main points to cover st under the f a a and established precedent of this court the court should review the arbitration award independently meaning without deference that's what the parties actually agreed to that's necessary to give meaning to their contract that's what if a section ten a four requires which is to review to see whether or not the or greater exceeded his powers nd on independent review each of those categories of damages were consequential as a matter of clear new york law and should be me begin with the st point which is the review that the court should apply here it's undisputed that the prohibition on awarding consequential damages in the parties agreement here a limitation on his power again not merely a rule about liability it was a separate provision in a separate section of the contract which is labeled as the parties arbitration agreement this opus didn't averted too much let me ask you how whether these are consequential damages or not how did you object or did you to the arbitrator resolving this so there was no issue your honor as to whether the arbitrator had the within his authority or not to make a father terminations off he had to make some determination yes or to move forward and that's how we would view it is really the issue before us so how was this issue presented to the jury that whatever was decided there was argue that the arbitrator should award only direct damages damages were front and center obviously once we got through liability the central question of the case was once lively was found what should the damages be we had to address when they argued for certain damages to say no those are not direct you only have the power to award direct images those are not direct and therefore don't award them the way kemper wants to argue this is that it would've been a catch twenty two for us if we went ahead and argued that no those are not directed therefore they're not appropriate then we're somehow conceding that the arbitrator have the final authority to decide them on the other hand if we didn't argue them and said no well you know this is we're not going to say anything about this then at that point that would have been construed as a waiver it can't be what the supreme court has held in situations like this take for example the st options case what the supreme court held is in a situation where the parties one of the parties is opposing an issue that these before the arbitrator it's not understood that that is any kind of a concession that the order is to decide that issue in st off and itself the question was whether or not a certain part of the contract was not and one of the party said it's not which will and the supreme court justice prior said that shouldn't be understood to mean that we're conceding somehow that the arbitrator should decide issue we're saying it's not our magickal same thing here we had to argue that these are not appropriate to award don't award direct damages we had to argue that that's not a concession that he had the final say over it and it couldn't be  is that under the under the agreement itself this was specified it was understood by everybody there is no contest as i understand it that this was a limitation on the arbitrators power the magistrate below found that most of the time i think what the court sees is parties him before and they don't like the way an issue has been decided which was submitted to the court the added it to the arbitrator it was asked to decide some issue a party doesn't like the way it came out and says well you didn't decide it right you didn't apply the fact by the walker actually you didn't do your job right and therefore ready we're going to now claim that you exceeded your powers and what this court all the court say in that situation is you submitted the issue to the arbitrator you can't complain that they were didn't do his job well that's not this case this is a case where we specifically in clear letters exempted in issue a category of remedy and said the arbitrator shall not issued this type of remedy is off the table now what we're saying is he went ahead and did that anyway it's not an attack on the way he  decided his what was before him it's not an attack on the on whether he applied the law correctly the argument is that he decided he did something he issued a remedial order of a type which was off the table and i'm not going to back to that question the judge southwick asked you because it sure sounds that way it persists presented to the orbital tribunal looks like the category of cases you just described as being off the table in an f a a review because the way i understand c s c is pushed hearing brief you say section only permits computer claim direct images these are not direct images so there's no actual dispute about can the arbitrator described emissary of a word consequential damages the only question is are these  expenditures wholly unrelated to the alleged failure to make a job a version of the exits off or generally bill by january nd two thousand and eleven originator said yes those are direct that's not consequential they just disagreed with you on the question that i'm sure with your client they disagreed with what c the heartland says you can't just disagree with the way that the arbitrator categorized the damages right but what we're not your honor what we're saying again is that he issued a type of order a category of award that he doesn't have the power to issue let me get this court has done this and does this frequently this happen in the brightest case this happened in a smith case in the delta queen case those are all cases where the arbitrator issued a type of award let's take delta queen for as a nd delta plane was an issue was a case where the issue was whether or not certain workers had been discharged properly and what the arbitrator did was say well i have remedial power here so i'm going to decide that the employee should be reinstated and what the court said was this court said was no where the arbitrator exceeds these are the words of the court where the arbitrator exceeds the expressed limitations of his contractual mandate judicial deference is at an end what the court did was say that remedy was taken off the table in fact is a little bit more complicated what the court really said was given the findings that the arbitrator already come to namely that this employee exercise gross carelessness that this remedy is off the table that's what the court did it reviewed it reviewed the remedy  same thing happened in brightest in brightest the court reviewed whether or not independently punitive damages had been awarded because the parties took punitive damages off the table and really this is going back to st principles this has to be the way that works because as the supreme court has said and this court has said many times arbitration is a matter of consent it's not a matter of course the parties have the power to decide what matters they are afraid it will take up what who they are pretty will be how they appear to will what the rules are we are betrayed who arbitrate with and remedies our core example of that which remedies which type of remedies are acceptable and unacceptable that's what the parties did to give meaning to their contract to give meaning to section one dollar the only way to do it is to say that the that the court that was left for the court to judge whether or not there ward complied the worthy or predicted complied gave complied of the world here is that they say what happened was the parties agreed that the arbitrator should not award consequential damages and there would be review by the courts only in the situation where the arbitrator awarded consequential damages anyway labelled them as consequential basically said i don't care what this contract says i'm going to do it anyway that's their position that's explicitly their position again their position is that the arbitrator would have to find that the agreement exempting consequential damages punitive damages all for a situation where the arbitrator just defies what his what the rules are that apply to him it doesn't make any sense and i don't have an answer for that going back to the to the we have to is decide then whether or not that limitation was violated it can't be that the or we could just decide for himself whether or not they took the power away from him whether or not he complied with the rules  contract that's what happened again for example in the smith case that's the that's this court's two thousand and four decision in that case the orbital panels interpreted the contract and interpreted the contract to say that they were allowed to modify their reward within thirty days it was interpretation of the contract that's how they viewed it this court said you don't have that power the court looked at looked at the contract for itself and said again these are the words of the court we view the real question as one for the courts since it involves the question of the arbitrators authority where it goes to authority and not simply to application of something that is already within their authority but where there's a core group from authority the court can simply differ of damages word fact consequential not direct the st category is obviously the easiest to see campers internal costs and intrinsic they play to their paid to their own employees it's almost  quintessential case of what is consequential damages because consequential direct damages are defined under new york law as being the damages that are associated with the day good performance by the by one of the produce a software product and the measure of the damage that was associated with not doing that was how much camper paid for a product that the arbitrator found they never got it can't be that the cost whatever they paid to their  employees it cannot be that those are direct costs those are again almost by definition what consequential costs are the arbitrator gave really no reasons why he called those consequential he said i looked at the law and this is what it is that's clearly what the parties meant to do when they said we're telling the arbitrary you don't have the power to go to go issue that type of award the nd category was a category concerning damages after generous nd two thousand and eleven again for the same reason those can't be direct images the courts in new york i believe the texas courts actually hold the same way is that direct damages are measured by the moment of the breach after the breach than anything else it may be recoverable in an ordinary kind of case where there's no limitation on consequential damages but they're clearly not direct any of the payments were made after that obviously couldn't have been the measure of how much was paid by the deadline to produce the product and the last group of damages were damages that were  to the contract that the parties provided for and they keep those damages and living with the answer and what happened here was the parties and this is agreed this is all over their reply everybody agrees that the arbitrator had to answer the question how should we characterize these three categories of damages the same questions they want you to answer has already been answered by the arbitrator was submitted to the arbitrator and he had to do it had to answer it pursuant to the terms of the contract in order to do his job and of the agreement he had to answer it because the parties vigorously litigated the question in front of him and so the question is what happens when the arbitrator issues the insert their view their view is that you can get a noble review depending on the answer and i want this to be absolutely clear if the arbitrator had agreed with them about the answer we wouldn't we couldn't be here arguing de novo review so their position is depending on the answer to a question submitted to the arbitrator review changes and that would be a revolution in arbitration basically from the from its most from its inception arbitrate the one principle that has always been in place is that when the parties agree to submit a question to the arbitrator they live with it you can't square their position when oxford health which says you live with it whether the decision is good bad or ugly you live with it whether there is grave or you can't square their position even if you take seriously their view that somehow everything changes because the limitation on awarding consequential damages appears in section nine stead of just in section seven you know across references section seven in section if you take that seriously there's some difference intended there i don't you can't square with all street two thousand a decision the supreme court which said in no uncertain terms when the party submitted questions to the arbitrator they're stuck with that result subject only to the very very limited review provided by the f a a and they cannot agree by contract to a different standard of review what they're saying is that the parties here did agree to do that in fact we know that they tried to agree to do that it's actually a just a couple of clauses away from the very provision they're relying on here and that's void is a matter of law so the really ask dramatically to on rather basic arbitration law and they're doing it through a very liability the amount spent by kemper internally on the implementation project are not losses that were a natural and probable consequence of the breach that's their position and so that's what they've submitted to the arbitrator and what presumably if we agree with you on the st point the f from deciding to novo or otherwise allowing really begin of in federal court is there any amount of the fifty five million dollars that the arbitrator awarded that does not constitute amount spent by camper internally on the implementation project well i mean amounts there is both salaries and there's a small portion of that that are capital expenditures and if you if you'd like i'm happy to shift to the new york law questions here because i think we're i want to return before i before my time is up to the th circuit cases on this that they discussed but just to just to make clear st of all the arbitrator got this right you don't have to decide it you shouldn't look into it but if you do want to look at new york law is remember even if you got new york law wrong errors the law are not reviewed by a federal court but go ahead look at buy buy a tronic it's a new york court of appeals case it's two thousand and fourteen we cited in our brief they didn't say anything about it in the reply and what didn't what that decision demonstrates is that they have new york global consequence when parties write the word no consequential damages into an agreement they're not they're not adopting some hornbook definition that absolutely applies to just pull it off the shelf and say and insert it into the contract what that decision demonstrates is that new york courts are supposed to look at the agreement understand the parties arrangement and read the contract read that term consequence of damages in light of that in light of the arrangement and in that case court of appeals determine that lost profits can be under appropriate circumstances and circumstances that prevailed in that case can be outside the scope and hence recoverable of a bar on consequential damages and if anything is hornbook law consequential damages it's lost profits right so it's much more flexible than they make it seem and the arbitrator understood that and the arbitrator also understood this agreement much better than see a seed egremont wasn't just pay go hire somebody update our software give us our new software and we go about our business this was a collaborative they were the we were going to spend a huge amount of money spent a lot of resources they were going to we would be paying them huge amount of money and they were going to update not  just update our software but they were going to create a whole new software system that was going to be marketable industry wide and the parties were going to share in the world he's from and kemper says hey we're going to solve a company that's pretty hard to do we know it's hard to do but if we're going to put a lot of money into this and you're not going to deliver we want protection back section three point four the and what section three dollars the a denim says is if we do that and this is exactly what the arbitrator gave us if we do that we put in money into this project that's going to be marketable industry wide and you don't deliver we get our money back it's really that simple what could be more direct when we get our money back one kind of our money back is money we paid to see c that's what it says will be entitled to all payments pursuing the agreement but without any limitation when such payments were made so much for after january two thousand and eleven because it's right there in the contract that's what the arbitrator determine to what else we get all the additional proven direct damages additional is actually kind of an important word that payments to c s c is one kind of direct damages and payments that we've made to our employees for the same project and this was all meticulously accounted for that's all we're getting we're just getting the money back we paid some of that to see a c we paid some of it to our employees but it was all flushed essentially away by c f c s breach and then finally there's the statements of work thirty five  nine of the record but those workers were quote in furtherance of the exceed project in other words it was work done to help implement a developer building software in tested and implement so this was all opinion should touch any of that quite honestly i want to return to the cases right so all of the cases that they rely on delta queen smith they're all about questions right smith can't that it doesn't matter the arbitrary that was beyond the arbitrary power because the because the agreement barred here everybody agrees the question what are these damages are they direct and hence recoverable are they consequential and not was before the  delta queen that was the case about i'm disciplined after a good cause because the arbitrator had the authority to determine whether there was good cause but when it came to discipline he went too far because that was specifically reserved to the employer doesn't matter what he said he could have agreed with the employer he wasn't supposed to speak to it at all that's what occurred and their reading of breidis is rather remarkable because breidis is exactly the opposite bride's shows that this trick has been additional under the general standards for arbitration review they said this was manifest disregard of the law that was understood by this court at that time to be general arbitration with you it's not anymore but that's neither here or and the court says this is st of all there's no express punitive damages provision here so it's not exceeds authority and so at the very end of the opinion no express punitive damage award and no manifest disregard they don't let them change the standard of review that's what this court did you don't get to change it just by recasting and all of this really spins on kind of a play on the word power they say that we agree that the arbitrator yours i think what i'm hearing from kemper is that there's no way to have it damages limitation on power there's no way to do it because what happens is if the parties say the arbitrator she will not award con will not award  contracts i don't award contra consequential damages the parties say ok we want to make sure that that never happens we're going to take on quickly damages off the table which is what they did one point three they can't do it in other words they're stuck there's no way for them to decide as they would with which issues to give to the arbitrator they can't decide which outputs the arbitrator can come up with there's no way to do it their view of the world is that the two different provisions three dollars seven cents mean the same thing which it can't be this court has never ever held before in a situation where there's a limitation on power this court has never held any defense you review it deferentially courts never help it they don't have any cases that say that if they want to take consequential damages off the table they want to take punitive damages off this table and say those won't get awarded not just what the arbitrator calls consequential or calls to do but we don't want there to be punitive damages we don't want that to ever happen they can't do that apparently they can't tell the arbitrator what limitations on the output of his award he should he should enforce there's no way to do that that's a pretty remarkable proposition it's the court has never said that before and this contract certainly doesn't say anything like that so there are other argument is that somehow well maybe you could do it but we essentially waived that again the contract said no power they agree they use the words themselves no power but we sort of gave that up when we participated in arbitration again that's a catch twenty two that can't be right by participating in the arbitration the damages phase what we're supposed to do they say you sort of run the court the minute they started arguing to the arbitrator we want you to go definition of if you look at twenty four dollars it's as exceeding powers the premise of exceeding power is is that you get review when the arbitrator has done something which exceeded his promise he did something st and then you go to court and say no he didn't have the power to do that it's always a situation where the arbitrator acted st did something he wasn't authorized to do and then you go protest it and there's no argument well you should in the participate you should have just left the room you can't power of the arbitration who had the very purpose of categorizing damages and deciding how much should be awarded and that's exactly what the arbitrator did so it seems to me whether it was done consistently or in consistently with with one size interpretation consequential doubters or not they still was in his power and did his obligation to assess the category of damages so why isn't that i figured it was will house or something else that you and my friend to my left were talking about why isn't that exactly what arbitrators have the authority to do and he did it and here we are in the normal review not power but maybe used it and with legal conclusions or improper or some other bases but still within his power this is the power that was given to him was a power to award direct damages that's what it said he had the power to award direct images it said he did not of how to award the consequential damages he may have had in trying really in order to work out what was direct images he may have had to come to his own view about what was it was consequential we did not say to him please go classify damages that was never submitted to him they took the position these damages are direct we took the position no they're not don't award that they think now that what we effectively conceded was court will take a brief recess before hearing the next ca