In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 06-3910

ENVIRONMENTAL BARRIER CO., LLC,

Plaintiff-Appellee,

v.

SLURRY SYSTEMS, INC.,

Defendant-Appellant.

____________

Appeal from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 06 C 0212—Rebecca R. Pallmeyer, Judge.

____________

ARGUED SEPTEMBER 17, 2007—DECIDED AUGUST 29, 2008

____________

Before FLAUM, RIPPLE, and WOOD, Circuit Judges.

WOOD, Circuit Judge. After an arbitration hearing to

resolve a construction contract dispute between Environmental Barrier Company (“EBC”) and Slurry Systems, Inc.

(“SSI”), Arbitrator Franklin I. Kral issued an award in

favor of EBC in the amount of $388,919.88. When SSI did

not pay, EBC filed suit in Illinois court to confirm the

award, and SSI responded by removing the case to the

U.S. District Court for the Northern District of Illinois. SSI
2 No. 06-3910

urged the district court to vacate the arbitral award, or

in the alternative, to modify it. The district court did

neither: instead, it confirmed the award entered by Arbitrator Kral. In the course of doing so, the court held that EBC

had “standing” to enforce the arbitration clause in the

contract and that the arbitrator had not exceeded his

powers. On appeal, SSI is now urging us to find that EBC

never obtained the right to enforce the contract’s arbitration clause. SSI’s appellate briefs present this argument

as a challenge to arbitrability, based on the fact that SSI

agreed to arbitrate only with EBC’s predecessor-in-interest,

not with EBC itself. This is a major shift from the way

SSI presented its case first to the arbitrator and later to

the district court, where it framed the issue in terms of

EBC’s standing to pursue this arbitration. The difference

is crucial—indeed, on these facts, fatal—to SSI’s claim.

I

On February 29, 2000, the U.S. Army Corps of Engineers

entered into a contract with SSI for work on a project to

reduce flooding during heavy rains. The McCook Reservoir

Project, as it was called, involved the construction of a

multibillion-gallon reservoir; SSI won the right to build

the overburden cutoff wall. SSI in turn subcontracted part

of its work to an entity called Geo-Con, Inc., using a form

contract that the parties signed in April 2000. The parties’

briefs recount in detail the progress of SSI’s and Geo-Con’s

work from 2000 to 2003; we include only the facts pertinent

to this appeal.
No. 06-3910 3

Attachment A to the SSI/Geo-Con subcontract elaborated

on Article 8.1 of the text, specifying that “Contractor and

Subcontractor shall jointly work together to perform all of

the work together [sic] to minimize the overall cost of the

work.” Attachment A also included a longer version of

Article 10.1, which described how the parties would

allocate revenues, costs, profits, and loss and gave guidance for a final settling-up based on the actual distribution

of costs. The subcontract also contained an exclusivity

clause, Article 1.3; a broad arbitration clause covering

“[a]ny claim arising out of or related to this Subcontract,”Article 6.2; and a clause restricting assignment or

sub-subcontracting, Article 7.4.2.

The project’s scope and methodology changed as the

work proceeded, requiring the Corps at one point to

suspend operations while it figured out an alternative

way to finish the project. Once the modifications to the

Prime Contract were in place, SSI and Geo-Con resumed

their joint effort to complete their portion of the work. By

April 2003, they were finished with their construction

work. What remained to be done was the final reckoning

of who owed whom how much; this proved to be more

difficult. There were, for instance, several pending change

orders, and it was unclear how costs and profits would

be shifted among the parties. To the extent that these

financial details are relevant, we return to them later.

EBC entered the picture in September 2003, when GeoCon, for reasons unrelated to the McCook project, filed

for bankruptcy in the U.S. Bankruptcy Court for the

Southern District of New York. During Geo-Con’s reorga-
4 No. 06-3910

nization, EBC (through two intermediary entities) acquired

substantially all of Geo-Con’s assets for a purchase price

of $2.1 million. The bankruptcy court found that EBC was

the only qualified purchaser of Geo-Con’s assets. In an

order dated April 16, 2004, the court approved the sale

in accordance with the terms set forth in a letter from

the intermediaries. Part II of the offer letter addressed the

Geo-Con acquisition and set forth a list of “excluded

assets.” The exclusions included “[a]ll contracts for services

to be performed by Geo-Con, except . . . P90099 McCook,

IL” (emphasis added). In other words, the McCook contract

was acquired by the intermediary, and then passed along

to EBC. There was a Schedule A to the offer letter that

listed equipment loans and leases. This was the “Schedule

A” to which the bankruptcy court referred when it said

in its order that the contracts listed in Schedules A and C

were executory.

The sale of the McCook contract was later reflected on

Schedule D to the April 29, 2004, bill of sale between GeoCon and EBC that carried out the bankruptcy court’s

order. The bill of sale provided that Geo-Con was selling

“all of Seller’s accounts receivable (including without

limitation the accounts set forth on Schedule A hereto),”

and “contracts” specified as the “Assumed Contracts.” This

was a different “Schedule A” than the one attached to

the offer letter mentioned in the bankruptcy court’s

April 16 order. Schedule A to the bill of sale lists accounts

receivable and contracts that EBC was acquiring, and it

includes the McCook project. Thus, the fact that the

bankruptcy court had described the contracts listed in

Schedules A and C as executory has little bearing on this

case.
No. 06-3910 5

SSI asserts that it was not aware of Geo-Con’s bankruptcy proceedings as they were taking place. It learned

about them, however, no later than June 17, 2004, when

EBC notified SSI by letter that EBC had succeeded to GeoCon’s rights under the subcontract. The letter contained a

demand that SSI pay EBC the balance due to Geo-Con

for the work that Geo-Con had performed under the

subcontract. At the time, EBC believed that this balance

was $711,000. (It later found out that SSI had received two

additional payments from the Corps that it had not

disclosed, totaling $425,951.38; the discrepancy is immaterial for our purposes.)

EBC’s June 2004 letter also noted that the “subcontract

between Geo-Con and Slurry Systems calls for mediation

and arbitration of disputes,” but it added that 

EBC’s preference is to resolve its claim against Slurry

Systems amicably, if possible, without the expenditure

of mediation fees and expenses which, pursuant to the

contract, are to be shared equally by the parties.

Accordingly, we request an opportunity to meet with

you within the next two weeks to discuss and hopefully resolve EBC’s claim. If you are unwilling to meet

with us within that time, EBC will commence mediation and arbitration proceedings.

SSI did not respond positively to EBC’s letter. On July 7,

2004, SSI’s attorneys sent a letter to EBC’s counsel, expressing the opinion that “all disputes between Geo-Con and

Slurry Systems have been resolved,” and adding that, “[a]s

a matter of fact, Geo-Con actually owes Slurry Systems, but

because of Geo-Con’s liquidation, there is no point in
6 No. 06-3910

Slurry pursuing the matter.” SSI’s letter noted EBC’s

statement that the subcontract between Geo-Con and

SSI “calls for the mediation and arbitration of disputes,”

and requested that EBC provide SSI “with a copy of the

subcontract if you still plan to pursue this matter[.]”

EBC did pursue the matter. After mediation efforts

failed, EBC’s counsel called SSI’s counsel to discuss

arbitration. The following week, in a letter dated March 16,

2005, counsel for SSI wrote the following note to EBC’s

attorney: 

As I stated on the phone, while I am pleased to resolve

potential procedural issues by agreement, the first

order of business is to determine whether your client,

[EBC,] has any standing to arbitrate its claim against

our client, [SSI]. 

You have agreed that invoking the arbitration

clause in [Geo-Con’s] subcontract with SSI goes handin-hand with EBC fully assuming that subcontract.

That requires EBC to perform fully all obligations

imposed upon Geo-Con by the subcontract, which it

has not yet done. Additionally, SSI has not even

consented to EBC’s assumption of the subcontract, and

is unaware of EBC’s technical expertise or level of

capitalization, or its ability to perform work under

the subcontract. Under these circumstances, SSI may

be excused from accepting performances from EBC

under 11 U.S.C. § 365(c) and other applicable laws.

The letter went on to state that it was “therefore essential

that EBC provide SSI with adequate assurances that it

can perform its obligations under the subcontract before
No. 06-3910 7

EBC can assume the subcontract.” Specifically, it demanded (1) that EBC confirm that it “is in the construction business and can handle any remedial work necessary under the subcontract”; (2) that EBC “provide SSI

with the insurance and performance bond required by

the subcontract”; and (3) that EBC give SSI its “financial

data and biographical information,” so that SSI could

“make an informed decision regarding whether or not

to withhold SSI’s consent from the proposed assumption.”

It added that “[t]hese issues need to be resolved now,

and not in the context of an arbitration.” The letter closed

by warning that if it should turn out that Geo-Con’s

work was “defective in any way, SSI will hold EBC accountable.”

The issues were not resolved, and instead EBC filed its

demand for arbitration a month later, on April 20, 2005.

The demand briefly explained the background of the

parties’ dispute and the basis for EBC’s claim against SSI.

EBC argued that SSI owed EBC “at least $657,273.50” and

that SSI had “breached the Subcontract by failing to pay

that amount.”

At that critical juncture, SSI said nothing about the basic

arbitrability of the dispute. Instead, it filed an Answering

Statement on May 9, 2005. In the box on the Answering

Statement form labeled “RESPONDENT ANSWERS

CLAIMANT DEMAND FOR ARBITRATION AS FOLLOWS,” SSI wrote: “EBC seeks additional moneys under

a subcontract which has been paid in full; Respondent

[SSI] denies any money is due and seeks return of

overpayments and declaratory relief.” The “DOLLAR
8 No. 06-3910

AMOUNT OF CLAIM” was listed as “To be determined,”

and in the box labeled “OTHER RELIEF SOUGHT,” SSI

stated its claim for “A declaration that EBC assumed the

subcontract and is in breach of its non-monetary terms;

an accounting of money to be paid under the subcontract and a return of any over payments.” Notably, SSI did

not merely answer EBC’s claim; it also filed a counterclaim.

SSI elaborated on its position in a supplementary letter to

Arbitrator Kral on June 20, 2005. The letter, which SSI sent

“[i]n order to facilitate our June 21, 2005 preliminary

hearing,” first explained that the disputes “center around

a construction subcontract” between SSI and Geo-Con to

build a slurry wall for the Corps. It then launched directly

into the dispute over payment, providing Arbitrator Kral

with SSI’s version of how the parties had agreed to

allocate the costs and profits. Next, the letter stated that

“Geo-Con abandoned the Project before it was over,” and

so while “EBC now seeks an additional $657,274 . . ., strict

application of the payment terms does not require SSI

to pay the unearned windfall EBC seeks. Instead, it requires EBC to pay SSI several hundred thousand dollars

in overpayments.” The remaining three paragraphs

expanded on why EBC owed money to SSI. There is not

even a passing reference to a defense of lack of

arbitrability.

Three days after the preliminary hearing, on June 24,

2005, SSI wrote another letter to Arbitrator Kral, this time

to “follow up on the subject of ‘non-monetary breaches.’ ”

SSI reiterated its position that “Geo-Con left the job before

it was finished” and noted that by virtue of the April 16,
No. 06-3910 9

2004, bankruptcy order, “EBC was allowed to assume GeoCon’s Subcontract with SSI.” SSI then argued that the

bankruptcy court directed EBC, as the purchaser of GeoCon’s asserts, “to make such cure payments as are required by Section 365 of the [Bankruptcy] Code and

agreed to among the Debtors and respective contracting

parties.” SSI and Geo-Con had not agreed to EBC’s assumption of the contract, SSI continued, nor had Geo-Con

even informed SSI of its bankruptcy. “Nevertheless,” the

letter contended, “section 365 required Geo-Con/EBC to

do the following in orderto assume the contract” (referring

to the list of three items in SSI’s letter of March 16, 2005,

to EBC). Until EBC satisfied those conditions, SSI concluded, “EBC cannot have assumed the contract, and

lacks standing to pursue this arbitration case.”

At the end of the letter, SSI noted its concern that should

the Corps raise a future claim involving Geo-Con’s work,

EBC might try to evade its responsibility by “contending

it is not Geo-Con. Part of SSI’s relief sought in this arbitration is a declaration that EBC has in fact assumed all of

Geo-Con’s obligations under the Subcontract.” Thus, in

the same letter, SSI both argued that EBC had not

properly assumed the subcontract (through its reference

to alleged outstanding duties under Bankruptcy Code

§ 365 that prevented assumption) and argued that EBC

had assumed the contract. Perhaps unsure of the

latter point, SSI asked in its Answering Statement for a

declaration that EBC had assumed the contract. It seems

that what SSI was looking for was a ruling from the

arbitrator that before EBC should be permitted to enforce

Geo-Con’s rights under the subcontract, it had to assure
10 No. 06-3910

that it also would fulfill Geo-Con’s remaining contractual

obligations. Once again, this was not a challenge to

arbitrability; it was a position premised on a procedural

question of standing and on the merits of the dispute.

Each party to the arbitration filed a position paper on

July 18, 2005. In response to SSI’s argument that it had

never consented to the assignment of Geo-Con’s rights

to EBC, EBC argued that the subcontract did not

require SSI’s consent under these circumstances. Article

7.4.2 of the subcontract provides:

[1] The Subcontractor shall not assign the Work of this

Subcontract without the written consent of the Contractor, nor [2] subcontract the whole of this Subcontract without the written consent of the Contractor,

nor [3] further subcontract portions of this Subcontract without written notification to the Contractor

when such notification is requested by the Contractor.

Only the first clause restricts assignment; the second and

third restrict further subcontracting. Moreover, the restriction on assignment only requires the subcontractor to

obtain the contractor’s written consent before assigning

“the Work” of the subcontract. The work was completed

by April 2003, a full year before the bankruptcy court

issued its order approving EBC’s assumption of Geo-Con’s

assets. The arbitrator took note of that timing in an

express finding that “the Work” of the subcontract was

complete before Geo-Con assigned the contract to EBC.

In its position paper, SSI reiterated its belief that GeoCon had “repudiated” the parties’ agreement, and that it

“had continuing obligations to SSI to maintain insurance
No. 06-3910 11

coverage, provide a warranty for its work, and provide

SSI with a performance bond to cover those obligations.”

SSI maintained its position that EBC must “comply with

its outstanding obligations under the Contract,” and that

SSI therefore “seeks: (1) declaratory judgment confirming

that EBC has assumed the contract; (2) a declaratory

judgment that EBC is in breach on non-monetary terms

of the Subcontract (e.g., insurance), and that EBC cure

those defaults as previously ordered by the courts; (3) an

accounting of the moneys to be paid between the parties

on the Subcontract; and (4) an order requiring EBC to

return to SSI the overpayments made to Geo-Con, believed

to be in excess of $500,000” (footnotes omitted). SSI’s

argument further stated that according to the bill of sale

attached to the bankruptcy order, “EBC did, in fact,

assume the Subcontract.” SSI added that “[w]hat Geo-Con

could not do, and therefore what EBC cannot do, is to

selectively accept the benefits of the Subcontract while

rejecting the obligations.” Until EBC fulfilled those obligations (as required by § 365), the argument concluded, “EBC

lacks standing to invoke the Arbitration Clause in the

Subcontract.” The rest of the argument explained why

and to what extent Geo-Con was overpaid for its work

and concluded by stating that “EBC must cure all nonmonetary defaults before getting anything from SSI. But

applying the Subcontract, Geo-Con/EBC was vastly

overpaid, and that money must be returned.”

Discovery ensued, followed by a two-day arbitration

hearing on August 23-24, 2005. The transcripts from the

hearing reveal that the only issues addressed were who

owed what and to whom. There was no discussion of
12 No. 06-3910

standing or of arbitrability. Even so, in a post-hearing

brief filed by EBC on October 19, 2005 (SSI did not file a

post-hearing brief), EBC addressed the “standing” defense

presented in SSI’s position paper:

SSI claims that EBC lacks standing to compel SSI to

arbitrate EBC’s claim because SSI did not agree to the

assignment of the Subcontract to EBC, and because

certain alleged “cure” payments were not made.

Generally speaking, issues of standing are for the

arbitrator to decide in the first instance.

Arbitrator Kral’s award was issued on November 21,

2005. He recognized that “a threshold issue was raised

by SSI as to the standing of EBC to arbitrate this dispute

under Subcontract Article 6.2 [the arbitration clause]. EBC

agreed that it had assumed the Subcontract as evidenced

by the Bankruptcy Court filings.” He also noted that

SSI’s standing defense was premised on its position that

EBC had not assumed the subcontract properly. EBC’s

response was that “GEO’s performance of its work on

the Project ended in December, 2002 and thereby the

consent of SSI to the assumption is not required.” The

arbitrator resolved the standing question by stating that

he “agree[d] with EBC’s position.” He went on to reject

the entirety of SSI’s counterclaim and awarded a total

recovery, including contract interest, of $388,919.86 to EBC.

II

On January 6, 2006, EBC filed an action to confirm its

award in the Circuit Court of Cook County; SSI promptly
No. 06-3910 13

removed the case to federal court. As the district court

described SSI’s position, SSI argued “first, that the arbitrator exceeded his powers by entering an award in favor

of EBC, who was not a party to the original Agreement.

Further, SSI contends, even if EBC were a party to the

Agreement, it lacks standing to invoke the arbitration

clause because it was in default of the contract.” We

comment first on the standing argument, and then turn

to the more troublesome arbitrability point.

We begin with a word about terminology. We are

reminded of Justice Scalia’s observation in Steel Co. v.

Citizens for a Better Environment, 523 U.S. 83 (1998), that

“[j]urisdiction . . . is a word of many, too many, meanings[.]” Id. at 90 (internal quotation marks omitted). The

same, unfortunately, can be said for “standing.” Everything from the fundamental requirement imposed by

Article III that there must be a “case or controversy”

between the parties seeking relief in federal court, to

various prudential doctrines such as the restrictions on

invoking the rights of third parties, to the inquiry

whether a statute is designed to protect the rights of the

person before the court, has been swept into the word

“standing.” There is no reason to suppose that arbitrators

are bound to the case-or-controversy requirement that

circumscribes the judicial power of the United States.

Indeed, some state courts are authorized to give advisory

opinions. See, e.g., MASS. CONST. pt. II, ch. 3, art. 2; R.I.

CONST. art. 10, § 3. See generally Jonathan D. Persky,

“Ghosts That Slay”: A Contemporary Look at State Advisory

Opinions, 37 CONN. L. REV. 1155 (2005). In the context of

arbitration, the term “standing” addresses the entitle-
14 No. 06-3910

ment of the party to raise a given point before the arbitrator. This is more like the concept of standing described

by the Supreme Court in Associated General Contractors of

California, Inc. v. California State Council of Carpenters,

459 U.S. 519 (1983), in which the Court considered the

question whether a union was a proper party to sue for

treble damages under the antitrust laws when it was

neither a consumer nor a competitor in the market in

which trade was restrained. In the course of rejecting the

union’s right to sue, the Court commented that “[h]arm

to the antitrust plaintiff is sufficient to satisfy the constitutional standing requirement of injury in fact, but the

court must make a further determination whether the

plaintiff is a proper party to bring a private antitrust

action.” Id. at 535 n.31.

That is the sense in which standing to arbitrate should

be understood: is the petitioner a proper party to raise a

particular claim in the arbitration? This explains why

courts have not hesitated to hold that standing is a matter

for the arbitrator to resolve, even though (as we note in a

moment) arbitrability is usually an issue for the court. John

Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557-58 (1964);

Chi. Typographical Union No. 16 v. Chi. Sun-Times, Inc., 860

F.2d 1420, 1424 (7th Cir. 1988) (“Procedural issues, including the standing of a party to the arbitration, . . . are

for the arbitrator, so long as the subject matter of the

dispute is within the arbitration clause.”) (emphasis

omitted); United Steelworkers of Am., AFL-CIO-CLC v.

Smoke-Craft, Inc., 652 F.2d 1356, 1360 (9th Cir. 1981)

(“Whether the Steelworkers had standing as a party to

the arbitration to proceed with that arbitration, which
No. 06-3910 15

had been properly commenced, was a procedural matter

for the determination of the arbitrator.”). SSI submitted

the standing question to the arbitrator on its own

initiative, and it was proper for the arbitrator to decide it.

Focusing particularly on standing, the district court noted

that “SSI’s . . . objection to EBC’s standing to enforce the

arbitration clause relates to EBC’s alleged breach of other

contract provisions.” Reiterating that this kind of issue

is for the arbitrator, the court found that “[t]he arbitrator’s

conclusion . . . is thus subject to deferential review,

which it easily survives.”

The harder question is whether an agreement to

arbitrate existed between the parties. It is difficult, however, not for the reasons the district court identified, but

instead for a more fundamental reason. There is not a hint

in the record that SSI ever called this issue to the arbitrator’s attention or sought to enjoin the arbitration on the

ground that there was no agreement to arbitrate. Thus,

even though the ordinary rule is that the question whether

an agreement to arbitrate exists is one for the court, see

AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643,

649 (1986); Flender Corp. v. Techna-Quip Co., 953 F.2d 273,

277 (7th Cir. 1992), the right to a judicial determination

of arbitrability is, like many rights, one that can be waived.

As our detailed explanation above of the arbitration

proceedings in this case demonstrates, SSI never told the

arbitrator that it thought this dispute was nonarbitrable.

To the contrary, it voluntarily submitted to the

arbitrator’s authority, filed a counterclaim, and confined

its objections to EBC’s standing to arbitrate. Only after
16 No. 06-3910

the arbitrator issued an award unfavorable to SSI and the

case wound up in court did SSI raise an objection to

the arbitrator’s authority to decide the dispute. SSI has

stressed before this court that “[f]rom the outset, SSI

contended that no agreement to arbitrate existed (and no

contract of any kind existed) unless and until EBC complied with the requirements imposed by 11 U.S.C. § 365

for assignment and assumption of executory contracts.”

The problem is that SSI never said anything of the sort

to the arbitrator. Not until it reached the district court

did it recast its prior argument about standing as a challenge to arbitrability.

This is not a tactic we can accept, for sound policy

reasons. It is terribly wasteful of the arbitrator’s time, the

parties’ time, and the court’s time. Anyone who wants

to object to arbitrability is entitled to make her position

known to the arbitrator and the other party; the other

party may then, if it wishes, respond with a petition for

an order to compel arbitration under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 4, and obtain a judicial determination on arbitrability. See, e.g., Moses H. Cone Hosp. v.

Mercury Constr. Corp., 460 U.S. 1 (1983). In addition,

keeping the arbitrability card close to the chest would

allow a party like SSI to take a wait-and-see approach: if

it had liked Arbitrator Kral’s decision, it would have

remained silent, but since it did not, it is now complaining about arbitrability.

This court has already disapproved this method of

proceeding. In AGCO Corp. v. Anglin, 216 F.3d 589 (7th Cir.

2000), for example, we stated:
No. 06-3910 17

We first consider whether the Anglins waived any

objection to the arbitrability of the Retail Obligations

when they consented to arbitration and agreed to

participate in the arbitration hearing. If a party willingly and without reservation allows an issue to be

submitted to arbitration, he cannot await the outcome and then later argue that the arbitrator lacked

authority to decide the matter. See Jones Dairy Farm

v. Local No. P-1236, United Food & Commercial Workers

Int’l Union, AFL-CIO, 760 F.2d 173, 175-76 (7th Cir.

1985). If, however, a party clearly and explicitly reserves the right to object to arbitrability, his participation in the arbitration does not preclude him from

challenging the arbitrator’s authority in court. Int’l

Ass’n of Machinists & Aerospace Workers, Lodge No. 1777

v. Fansteel, Inc., 900 F.2d 1005, 1009 (7th Cir. 1990). The

record suggests that the Anglins have followed the

latter course.

216 F.3d at 593. It was “undisputed that counsel for the

Anglins objected to arbitration” of the parties’ dispute, id.,

on the ground that “the Anglins could not have contemplated that their arbitration clause with AGCO would

encompass a dispute with a nonsignatory party,” id. at 596.

We accordingly reversed the district court’s confirmation of AGCO’s award.

Unlike the Anglins, SSI failed at any time during the

arbitration proceedings to raise or reserve an objection

to arbitrability. Instead, it freely accepted the arbitrator’s

authority to decide the dispute and, indeed, submitted

its own counterclaim for resolution. Only after the arbitration outcome displeased SSI did it restyle its “standing”
18 No. 06-3910

and “executory contract” arguments as encompassing

a challenge to the existence of an agreement to arbitrate

between SSI and the nonsignatory EBC. As we noted

in Jones Dairy Farm:

Jones Dairy Farm did not make [arbitrability] an issue.

It did not, while agreeing to participate in the arbitration, challenge the arbitrator’s jurisdiction, and make

clear that it was preserving its challenge for eventual

presentation to a court if the arbitrator ruled in the

union’s favor . . . . The company never questioned

the arbitrator’s authority.

760 F.2d at 175. “If a party voluntarily and unreservedly

submits an issue to arbitration, he cannot later argue that

the arbitrator had no authority to resolve it.” Id. (citing

cases from the Ninth, Fifth, and Second Circuits); see

also CUNA Mut. Ins. Soc’y v. Office and Prof’l Employees

Int’l Union, Local 39, 443 F.3d 556, 563 (2006) (“[T]here was

not a true question of arbitrability in this case. Instead,

CUNA dresses up its arguments about the scope of the

arbitrator’s authority in arbitrability clothing.” (internal

quotation marks omitted)); cf. Flender, 953 F.2d at 278 (“We

reiterate ‘this circuit’s caution against allowing a party

to use issues of the arbitrator’s authority as a ruse to

obtain judicial review of the merits of an arbitral

award.’ ” (quoting Burkart Randall v. Lodge No. 1076, 648

F.2d 462, 467 (7th Cir. 1981))). SSI’s professed challenge

to arbitrability comes too late. By freely submitting to

the arbitration of its claims without preserving a challenge to the arbitrator’s authority, SSI missed the chance

to come back later, before a court, and deny that an agreement to arbitrate existed.
No. 06-3910 19

III

With SSI’s challenge to arbitrability off the table, we have

no trouble rejecting its remaining arguments. First, it is

clear that Arbitrator Kral based his award on the contract and that he did not exceed his powers in any other

respect when fashioning his award. The district court’s

opinion contains a thorough analysis of these points, see

No. 06 C 212, 2006 WL 2853830 (N.D. Ill. Sept. 29, 2006).

We see no need to repeat everything it said here, particularly given the level of deference that we apply to an

arbitrator’s award. See IDS Life Ins. Co. v. Royal Alliance

Assocs., Inc., 266 F.3d 645, 650-51 (7th Cir. 2001) (“[N]either

error nor clear error nor even gross error is a ground for

vacating an award[;] if the district judge is satisfied that

the arbitrators resolved the entire dispute and can figure

out what that resolution is, he must confirm the award.”);

Baravati v. Josephthal, Lyon & Ross, Inc., 28 F.3d 704, 706

(7th Cir. 1994) (“Judicial review of arbitration awards is

tightly limited; perhaps it ought not be called ‘review’

at all.”).

Nor did the district court abuse its discretion in denying

SSI’s motion for reconsideration under FED. R. CIV. P. 59.

See Zivitz v. Greenberg, 279 F.3d 536, 539 (7th Cir. 2002). The

motion argued that EBC had concealed an affidavit that

contradicted the testimony of EBC’s sole witness at the

arbitration hearing, and that this “newly discovered

evidence” tended to show that EBC’s award had been

“procured by fraud, corruption or other means,” which

is one ground for vacating or amending an award under

the FAA. See 9 U.S.C. § 10(a)(1).
20 No. 06-3910

To succeed on a motion under Rule 59, a party must

show that: (1) it has evidence that was discovered posttrial; (2) it had exercised due diligence to discover the

new evidence; (3) the evidence is not merely cumulative

or impeaching; (4) the evidence is material; and (5) the

evidence is such that a new trial would probably produce

a new result. See Matter of Chi., Milwaukee, St. Paul & Pac.

R.R. Co., 78 F.3d 285, 293-94 (7th Cir. 1996). SSI argues that

in this case, however, the court should not have relied on

the normal criteria for a Rule 59 motion, because the

FAA “provides the exclusive grounds for challenging an

arbitration award within its purview,” LaFarge Conseils

et Etudes, S.A. v. Kaiser Cement & Gypsum Corp., 791 F.2d

1334, 1338 (9th Cir. 1986). Section 10(a)(1) of the FAA calls

for the court to consider whether EBC’s alleged fraud

was (1) not discoverable upon the exercise of due

diligence prior to the arbitration; (2) materially related to

an issue in the arbitration; and (3) established by clear

and convincing evidence. Gingiss Int’l, Inc. v. Bormet, 58

F.3d 328, 333 (7th Cir. 1995).

We need not decide which was the proper standard to

apply in this case, because we do not think the district

court abused its discretion under either of them. Under

both Rule 59 and 9 U.S.C. § 10(a)(1), the materiality of the

evidence is critical. At the hearing on SSI’s Rule 59 motion,

the district court concluded that “nothing in the so-called

newly discovered document . . . bears any relationship to

the award, and it’s simply not material or outcome determinative.” SSI argues that under the FAA standard, the

evidence must be material not necessarily to the outcome

of the arbitration, but simply to some issue in the arbitra-
No. 06-3910 21

tion. SSI cites only Gingiss International, supra, in support

of this distinction, but Gingiss drew no such line. The

question there was whether a district court erred by

refusing to set aside an arbitration award under 9 U.S.C.

§ 10(a)(1); it had nothing to do with the standard of

review that applies to a post-trial motion in a case to

confirm an arbitral award. Moreover, Gingiss does not

stand for the odd proposition that something might be

material to an issue in an arbitration, but immaterial to

the outcome. Without stronger support for this notion,

we decline to adopt it. Finally, as EBC points out, § 10(a)(1)

provides for vacatur only if the award itself was procured

by “corruption, fraud, or undue means.” In other

words, even if SSI is correct and we should be relying

exclusively on the FAA, we must find a nexus between

the purported fraud and the arbitrator’s final decision.

The district court found no such nexus, nor do we.

We mention briefly several other reasons why SSI cannot

meet even the FAA standard. It is debatable at best

whether the affidavit in question was concealed fraudulently; indeed, EBC denied that it withheld the document intentionally, and SSI offers no evidence to the

contrary. The FAA also requires that the complaining

party act with due diligence, yet the district court expressed doubt that SSI had done so, since it had been

aware of the issue for at least a month before the

district court’s initial decision. Finally, even assuming

that SSI had acted with due diligence and that the evidence of fraudulent withholding was clear and convincing, the fact remains that the district court found the

“so-called newly discovered evidence” to be both cumula-
22 No. 06-3910

tive and immaterial. Both the district judge and the arbitrator were already aware of everything contained in the

supposedly concealed document when they made their

respective decisions. Under either Rule 59 or §10(a)(1), this

finding supports a denial of SSI’s motion.

IV 

The district court’s judgment confirming the arbitrator’s

award is AFFIRMED.

8-29-08