2009 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-20-2009

Oberwager v. McKechnie Ltd

Precedential or Non-Precedential: Non-Precedential

Docket No. 08-1117

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Recommended Citation

"Oberwager v. McKechnie Ltd" (2009). 2009 Decisions. Paper 419.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_________

No. 08-1117

_________

WASHBURN S. OBERWAGER; DINESH R. DESAI; FIRST BRITANNIA

MEZZANINE CAPITAL BV; FIRST BRITANNIA MEZZANINE NV;

INTERNATIONAL MEZZANINE CAPITAL BV; and INTERNATIONAL

MEZZANINE INVESTMENT NV;

(collectively, the “Sellers”)

 Appellants

v.

McKECHNIE LTD, formerly McKechnie PLC; WESTERN SKY INDUSTRIES, LLC,

successor to McKechnie US Holdings, Inc. 

(collectively the “Buyers”)

 

___________________

Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

Case No. 06-cv-02685

(Honorable William H. Yohn)

___________________

Submitted Pursuant to Third Circuit LAR 34.1(a)

June 11, 2009

Before: McKEE, HARDIMAN, and VAN ANTWERPEN, Circuit Judges

(Filed October 20, 2009)

OPINION OF THE COURT
 The district court had jurisdiction pursuant to 28 U.S.C. § 1332. We have jurisdiction 1

pursuant to 28 U.S.C. § 1291. Our review of a motion to vacate a commercial arbitration award

is de novo. Dluhos v. Strasberg, 321 F.3d 365, 369 (3d Cir. 2003).

2

McKEE, Circuit Judge

Plaintiffs appeal the district court’s order granting summary judgment in favor of

the Defendants based on that court’s conclusion that Plaintiffs’ motion to vacate was

untimely. Plaintiffs argue that the district court erroneously relied on our decision in

Roadway Package System, Inc. v. Kayser, 257 F.3d 287 (3d Cir. 2001), because Roadway

Package is no longer viable following the Supreme Court’s decision in Hall Street

Associates v. Mattel, Inc., 128 S.Ct. 1396 (2008). For the reasons that follow, we will

affirm the decision of the district court.1

I.

As we write primarily for the parties, we need not recite the facts or procedural

background except insofar as they are helpful to our discussion. 

This case arises from a stock purchase agreement (“SPA”) entered into by the

parties in 1999, providing for arbitration of any dispute arising from the agreement. The

SPA also contained a generic choice-of-law provision which stated that the agreement

was to be “governed by and construed in accordance with the laws of the State of

Delaware without regard to choice of law principles . . . .”

In 2004, the parties entered into arbitration to resolve a dispute that had arisen

under the SPA. The arbitrator resolved that dispute in Defendants’ favor, and Plaintiffs
 Plaintiffs initiated this action by filing a complaint and subsequently amending that 2

complaint rather than by filing a motion to vacate the arbitration award as is required under the

FAA. However, the district court appropriately exercised its discretion to consider the amended

complaint as a motion to vacate the arbitration award, see O.R. Sec., Inc. v. Prof’l Planning

Assocs., 857 F.2d 742, 745 (11th Cir. 1988), and we will therefore proceed as if Plaintiffs had

initiated this action as a motion to vacate.

 Plaintiffs also argue that the district court erred by failing to consider whether 3

application of the FAA was inappropriate in light of Guaranty Trust Co. v. York, 326 U.S. 99,

111 (1945), and its policy against forum shopping. As Defendants note, this argument is not

relevant to the issues before us and we will therefore not address it.

3

then initiated this action under the Delaware Uniform Arbitration Act (“DUAA”) in the

Eastern District of Pennsylvania in an attempt to vacate the arbitration award.2

Defendants moved for summary judgment on the grounds that the action was

untimely under § 12 of the FAA, which requires that a motion to vacate an arbitration

award be served upon the adverse party within three months of the filing of the award. In

response, Plaintiffs argued that because of the choice-of-law provision in the SPA, the

DUAA, rather than the FAA, applied, and that the action was timely under Delaware law

as set forth in the DUAA.

II.

Plaintiffs argue that the district court erred in concluding that the FAA, rather than

the DUAA, governed their motion to vacate. They argue that the Supreme Court’s

decision in Hall Street makes Roadway inapposite by clarifying that parties may seek

judicial review of arbitration decisions under any applicable law, so long as the law is not

preempted by the FAA. Plaintiffs’ argument is without merit. 3
 Hall Street resolved a split of authority among the Circuit Courts of Appeals as to 4

whether parties to agreements subject to the FAA could supplement by contract the standards for

vacatur and modification of arbitration awards set forth in §§ 9, 10, and 11 of the FAA. The

Court concluded that they could not. It is therefore uncontested that Hall Street abrogates one

holding of Roadway, that parties to agreements subject to the FAA can specifically contract out

of the FAA standards of review. Plaintiffs argue, however, that certain dicta in Hall Street also

abrogate the second holding of Roadway, that a generic choice-of-law clause is insufficient to

demonstrate an intent to contract around the FAA entirely. We disagree.

4

As the district court noted, it is uncontested that the SPA falls within the broad

reach of the FAA. However, as we explained in Roadway Package, parties can contract

out of the FAA and select alternate rules to govern arbitration proceedings between them. 

To do so, parties must “manifest[] a clear intent,” 257 F.3d at 293, and a generic choiceof-law provision, standing alone, is not sufficient evidence of such intent, id. at 289. 

As noted at the outset, Plaintiffs argue that Roadway has been undermined by the

Supreme Court’s intervening decision in Hall Street. According to Plaintiffs, Hall Street

effectively overruled Roadway under the circumstances here, and now allows review of 4

an arbitration award pursuant to any applicable law, so long as that law is not preempted

by the FAA. Plaintiffs base this argument on the following language which they pluck

from Hall Street: “[t]he FAA is not the only way into court for parties wanting review of

arbitration awards: they may contemplate enforcement under state statutory or common

law, for example, where judicial review of different scope is arguable.” Hall Street, 128

S.Ct. at 1406.

According to Plaintiffs, these few sentences undermine the contractual intent

framework elucidated in Roadway, and usher in a new regime in which a plaintiff may
 In their Reply brief, Plaintiffs change their argument substantially, and argue that 5

Roadway is inapplicable here, not because of Hall Street, but because our decision in Roadway

concerned preemption, rather than contract construction. It is, of course, inappropriate to raise an

argument for the first time in a Reply brief. Moreover, the argument is belied by our clear

assertion in Roadway that the question before us was “not one of choice-of-law or preemption”

but “simply a matter of contract construction.” 257 F.3d at 294. 

5

select any cause of action, so long as it is not preempted by the FAA. Plaintiffs insist

that, after Hall Street, the essential inquiry in determining the applicable law in situations

such as these is not the parties’ intent beforehand as expressed in the arbitration

agreement. Rather, it is the plaintiff’s subsequent intent as set forth in the action to vacate

an arbitration award. Because Plaintiffs only assert claims under the DUAA, they argue

that the district court erred in relying on time limitations established in the FAA. The

argument is meritless. 

The few sentences cited by Plaintiffs merely reiterate the long-standing rule that,

under certain circumstances, parties may choose to opt-out of the FAA. This language

does not, however, change the fundamental mechanism through which parties actually

express that choice. They still must express it beforehand in the applicable provisions of

their arbitration agreement. In Roadway, we held that a generic choice-of-law provision

is insufficient to evidence the clear intent necessary to opt out of the FAA’s default

regime. Hall Street does not alter that holding. 

5

IV.

For the reasons stated above, we will affirm the decision of the District Court.