Memorandum Opinion and Order - Page 1

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

S&B ENGINEERS AND §

CONSTRUCTORS, LTD., §

§

Plaintiff, §

§

v. § Civil Action No. 3:04-CV-0150-L

§

ALSTOM POWER, INC., §

§

Defendant. §

MEMORANDUM ORDER AND OPINION

Before the court are S&B Engineers and Constructors, Ltd.’s Motion to Vacate Arbitration

Award, filed January 27, 2004; and Movant’s Motion and Notice of Motion Requesting Status

Conference, filed September 19, 2006. After careful consideration of the motions, briefs, record,

appendix and applicable law, the court denies S&B Engineers and Constructors, Ltd.’s Motion to

Vacate Arbitration Award, and denies as moot Movant’s Motion and Notice of Motion Requesting

Status Conference.

I. Background

This case was initially filed by S&B Engineers and Constructors, Ltd. (“S&B”) against

Alstom Power, Inc. (“Alstom”) on January 27, 2004, as an action to vacate an arbitration award

brought pursuant to the Federal Arbitration Act (“FAA” or “Act”). The underlying dispute stems

from the performance of a subcontract agreement (“Agreement”) between Alstom and S&B for the

installation and erection of mechanical and piping components at the Midlothian Extension Project,

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 1 of 17 PageID 218
Memorandum Opinion and Order - Page 2

located in Midlothian, Texas. Alstom served as the general contractor, and S&B served as one of

its subcontractors on this project.

During the project, a contract dispute arose between the parties, and on November 9, 2001,

S&B initiated an arbitration under Article 48(b) of the parties’ Agreement by filing a Demand for

Arbitration with the American Arbitration Association. The arbitration was conducted in

Washington, D.C., during the weeks of June 2, June 9, and June 16, 2003, before a three-member

panel of arbitrators. The members of the panel were Alan H. Kent, Chairman; Howard G. Goldberg,

and George C. Martin, Jr. On October 30, 2003, the panel issued its Award of Arbitrators

(“Award”), providing for a net principal payment to S&B in the amount of $1,364,405. 

On January 27, 2004, S&B filed this action to vacate the arbitration award, pursuant to 9

U.S.C. §§ 6 and 10, in the United States District Court, Northern District of Texas, Dallas Division.

Two days later, on January 29, 2004, Alstom filed an Application to Confirm Arbitration Award

(“Virginia action”) in the United States District Court for the Eastern District of Virginia,

Alexandria Division (“Virginia court”). On February 6, 2004, S&B filed an Application for

Preliminary Injunction, seeking to enjoin Alstom from further proceeding in the Virginia action

pending resolution of S&B’s motion to vacate the arbitration award in this action. 

On February 11, 2004, the court issued an order denying S&B’s Application for Preliminary

Injunction on mootness grounds, as the Virginia court had issued a stay order on February 9, 2004.

This court also questioned sua sponte whether venue was proper in this district in light of certain

language contained in the parties’ Agreement, and directed the parties to brief the issue. The court,

on October 19, 2004, held that venue in this judicial district was appropriate. As a result of this

order, the Honorable James C. Cacheris transferred the Virginia action involving the parties to this

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 2 of 17 PageID 219
1

The court apologizes for the delay in ruling on this motion. Administratively, this case was not

initially listed, as it should have been, on certain reports that inform the court of pending motions and matters.

Second, the Appendix in this case is quite voluminous, well over 5,000 pages. Although S&B suggests that

“an exhaustive review of the record” is not necessary, see Movant’s Brief in Support of Motion to Vacate

Arbitration Award ¶ 61, the court did not accept this suggestion, as it had to be assured that nothing was

overlooked; thus, the court has spent considerable time reviewing the record because of the nature and

complexity of the case and the issues raised. It turns out that much of the information in the record is not

necessary for the court to reach its decision. Accordingly, the court “cuts to the chase” in this opinion, rather

than engage in an esoteric and erudite discussion of the legal issues.

Memorandum Opinion and Order - Page 3

district on October 21, 2004. The case filed in Virginia was received in this district on

November 3, 2004, and was designated as a separate action, Civil Action No. 3:04-CV-2370-L.

In its motion to vacate, S&B contends that the Panel severely restricted the presentation of

its case and, in the end, denied S&B any recovery on its principal claim for an equitable adjustment

of the contract price. S&B asserts the award should be vacated on specific statutory grounds,

namely: (1) the arbitrators “were guilty of misconduct . . . in refusing to hear evidence pertinent and

material to the controversy”; and (2) the award was “procured by . . . undue means” and was a

product of “evident partiality.” Motion to Vacate at 3 (citing 9 U.S.C. §§ 10(a)(1) and (3)). The

specific factual grounds asserted by S&B in its motion are: (1) the Panel refused to permit S&B to

introduce evidence that was critically necessary to the proof of its claim; and (2) the chairman of the

panel had a personal financial stake in the panel’s ruling excluding this evidence.

While S&B quotes from subparts 1, 2, and 3 of the FAA, it cites only to subparts 1 and 3.

The quoted language with respect to “evident partiality” is part of the ground stated in subpart 2.

See 9 U.S.C. § 10(a)(2). Accordingly, from what the court can ascertain, S&B seeks vacatur of the

award on the first, second, and third grounds of the section 10(a) of the FAA, and it will address all

three bases.1

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 3 of 17 PageID 220
Memorandum Opinion and Order - Page 4

II. Legal Standard

Under the FAA, “[j]udicial review of an arbitration award is extraordinarily narrow and [a

court] should defer to the arbitrator’s decision when possible.” Antwine v. Prudential Bache Secs.

Inc., 899 F.2d 410, 413 (5th Cir. 1990); see also Gateway Techs. v. MCI Telecomms. Corp., 64 F.3d

993, 996 (5th Cir. 1995). A court may not vacate an arbitration award based on mere errors in

interpretation or application of the law, or mistakes in factfinding. See United Paperworkers, Int’l

Union AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987); Kergosien v. Ocean Energy, Inc., 390 F.3d

346, 356 (5th Cir. 2004). A party may move to vacate an arbitration award in the following

instances:

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or

either of them;

(3) where the arbitrators were guilty of misconduct in refusing to

postpone the hearing, upon sufficient cause shown, or in refusing to

hear evidence pertinent and material to the controversy; or of any

other misbehavior by which the rights of any party have been

prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly

executed them that a mutual, final, and definite award upon the

subject matter submitted was not made.

9 U.S.C. § 10(a). 

As S&B appears to seek vacatur on grounds 1, 2, and 3, the court sets forth the legal standard

as it relates to each. For the actions of an arbitrator

[t]o constitute misconduct requiring vacation of an award, an error in

the arbitrator’s determination must be one that is not simply an error

of law, but which so affects the rights of a party that it may be said

that [the party] was deprived of a fair hearing. Under Federal law,

misconduct apart from corruption, fraud, or partiality in the

arbitrators justifies reversal only if it so prejudices the rights of a

party that it denies the party a fundamentally fair hearing.

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 4 of 17 PageID 221
Memorandum Opinion and Order - Page 5

Laws v. Morgan Stanley Dean Witter, 452 F.3d 398, 399 (5th Cir. 2006) (internal quotation marks

and citations omitted). For one urging vacatur on the ground of evident partiality, the party bears

an “onerous burden,” and must produce specific facts to show that the alleged partiality is “direct,

definite, and capable of demonstration rather than remote, uncertain, or speculative.” Mantle v.

Upper Deck Co., 956 F.Supp. 719, 729 (N.D. Tex. 1997) (citation omitted). In a nondisclosure case,

however, “an arbitrator selected by the parties displays evident partiality by the very failure to

disclose facts that might create a reasonable impression of the arbitrator’s partiality. The evident

partiality is demonstrated from the nondisclosure, regardless of whether actual bias exists.” Positive

Software Solutions, Inc. v. New Century Mort. Corp., 436 F.3d 495, 502 (5th Cir.), reh’g en banc

granted, 449 F.3d 616 (2006). Finally, with respect to “undue means,” this term “connotes behavior

that is immoral if not illegal[,] or otherwise in bad faith.” Matter of Arbitration Between Trans

Chem. Ltd. and China Nat’l Mach. Imp. and Exp. Corp., 978 F.Supp. 266, 304 (S.D. Tex. 1997)

(citations omitted), aff’d, 161 F.3d 314 (5th Cir. 1998). Moreover, a party asserting this ground to

set aside an award “must demonstrate that the improper behavior was (1) not discoverable by due

diligence, (2) materially related to an issue in the arbitration, and (3) established by clear and

convincing evidence.” Id.

III. Analysis

A. Misconduct in Refusing to Hear Evidence Pertinent and Material

 to the Controversy

The crux of S&B’s argument regarding this ground revolves around the alleged exclusion

of Exhibit C261 at the arbitration hearing. Although the court usually does not cite in extended

detail from a party’s brief, especially given the repetitive nature of the quoted language, it does so

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 5 of 17 PageID 222
Memorandum Opinion and Order - Page 6

in this instance to capture the complete essence of S&B’s arguments regarding Exhibit C261and

testimony “related to” or that “tracks” the exhibit:

21. In preparing to prove its case, the difficulty faced by S&B

from the outset was the extremely fragmented nature of its claim.

The damage it had suffered on this project had consisted of “death by

a thousand cuts.” There were hundreds of instances of delayed

drawings, tardy or deficient deliveries of equipment and material,

“repossessions” of equipment and belated responses to RFI’s

[Requests for Information], each of which had had a distinct impact

on a discrete aspect of S&B’s work. To prove all of this in a

comprehensible and convincing manner was a daunting challenge.

22. The person whom S&B planned to call upon to meet this

challenge was David Taylor, S&B’s project manager and principal

fact witness, who had personally participated in the events that had

disrupted S&B’s work and had personally directed the costly

adjustments by which S&B had attempted to deal with these

problems. Plainly, however, it would have been impossible for

Mr. Taylor to present such testimony in an intelligible or convincing

manner without some kind of written or graphic summary of these

myriad events which would serve both to assist his own recollection

and to aid the panel in remembering and organizing the testimony he

was to give.

23. In advance of the hearing, therefore, Mr. Taylor

personally prepared, with the help of two other S&B personnel, a

complete list, in the form of abbreviated descriptions, of all the

numerous separate problems occurring on the project that might have

had an effect on S&B’s performance of its work. In order to give this

list a semblance of organization, he chose to superimpose these

notations on an as-built version of the project schedule which showed

the planned and actual duration of each of the discrete activities

comprising the project. A version of this latter document, which

differed from the version used by Mr. Taylor only insofar as the

several project activities were listed in a different order, had been

prepared by S&B and presented to Alstom approximately two years

earlier in connection with negotiation of possible change orders.

Later, at the arbitration hearing, this previously produced document

was received in evidence without any objection on the first day of the

hearing and marked as Exhibit C137. The document prepared by Mr.

Taylor, which was to become the center of so much controversy,

consisted of nothing more than a slightly reordered copy of Exhibit

C137 on which he had added, along the right-hand margin, his notes

referring to each of the events about which he planned to testify. 

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 6 of 17 PageID 223
Memorandum Opinion and Order - Page 7

24. Both Exhibit C137, which had been furnished to Alstom

years earlier and was received without objection at the hearing, and

the document prepared by Mr. Taylor, which eventually became

known as Exhibit C261 for identification, are set out in the Appendix

to this brief. As the court will see, the only difference between them,

other than the different order in which the project activities are listed,

consists of the notes on the right-hand margin which were added by

Mr. Taylor. At the bottom of the first page, for example, it can be

seen that, alongside the activity listed as “Install CCW Coolers,” Mr.

Taylor has placed the notations “RFI 39 - 4 days,” “OS&D 2 - 75

days,” “Impact to Schedule item 2 - Coolers repossessed and returned

4-28-01,” “Recv. [drawing] Books 11/29/00 to 12/04/01,” and “Recv.

Book Revisions 1/20/01 to 3/1/01."

25. Although all these notations were understandable to

anyone who had been involved in the project and had witnessed the

steady stream of “RFI’s,” “OS&D’s [Overage, Shortage and

Damage]” and “Impacts to the Schedule” reports which S&B had

furnished to Alstom, such cryptic phrases obviously would not have

been understandable to the panel without an explanation of their

meaning by Mr. Taylor. The purpose of placing these notations on

Exhibit C261, therefore, was not to offer these as evidence or indeed

to prove anything. Rather, they were meant to serve only as an

outline of the evidence that would be presented through the testimony

of Mr. Taylor – in other words, to give some order to that testimony,

to remind Mr. Taylor and his counsel of what his testimony should

cover, and to remind the panel of what had been established by that

testimony. It was, in other words, a classic example of a purely

demonstrative exhibit illustrating a witness’s testimony.

26. This is not to say that [Exhibit C261] was insignificant or

unimportant to S&B. Mr. Taylor’s testimony was intended to

provide the principal support for S&B’s entire claim. The role

contemplated for the document that became Exhibit C261 was to

make that testimony understandable, convincing and memorable – in

other words, to transform what would otherwise seem a disconnected

stream of random complaints and anecdotes into a coherent account

of continuous malfeasance by Alstom and resulting losses to S&B.

It was in this sense crucial to the proper presentation of S&B’s

claims. As Alstom’s counsel himself would later observe during the

argument over his demand that S&B be forbidden to use this exhibit,

it would have been “the heart of their case.”

27. Exhibit C261 was produced to Alstom’s counsel three

days before the start of the hearing and a week before Mr. Taylor

would be called to testify. This was done pursuant to paragraph IV

of the original pre-hearing order of April 23, 2002, which, as noted

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 7 of 17 PageID 224
Memorandum Opinion and Order - Page 8

above, required production of demonstrative exhibits “at least three

business days in advance of their use at the hearing.”

. . .

29. On the first day of the hearings, the panel announced that

it did not want the proceeding “to get bogged down by technical

objections” and reminded the parties of its earlier ruling to the effect

that the normal “evidentiary rules and procedural rules of the court

are not applicable here.” With one very prominent exception,

objections to evidence were thereafter consistently overruled by the

Chairman, with the observation that valid objections would simply be

taken into account in assessing the weight of the evidence. The sole

exception made by the Chairman and the panel to this permissive

approach would be S&B’s proposed Exhibit C261, the critical exhibit

whose exclusion is now the subject of this petition.

30. This exhibit was introduced by S&B on the third day of

the hearings and the first day of Mr. Taylor’s testimony. The

document was offered initially only as a demonstrative exhibit,

although later, after the Chairman had suggested it might also be

treated as a summary of project records, S&B’s counsel alternatively

offered to introduce it into evidence. Alstom’s counsel, however,

immediately announced that he would “object to either use.”

Reiterating his characterization of the document as an expert

“scheduling analysis” that supposedly should have been disclosed by

S&B with its experts’ reports, he renewed his demand that S&B’s

claim be dismissed or, in the alternative, that he be given two weeks

additional time to prepare and undertake his cross-examination of

Mr. Taylor and to present whatever rebuttal witnesses he might wish

to present in response to Mr. Taylor’s testimony.

31. S&B’s counsel of course pointed out that this document

was in no sense a “scheduling analysis” or any other kind of expert

analysis; nor did it contain any information that was in any way new

to Alstom. It was simply a copy of a document, Exhibit C137, which

had already been admitted in evidence and which had been in

Alstom’s possession for over two years, on which a percipient

witness, Mr. Taylor, had made notations referring to a series of other

documents, such as “OS&D’s,” “RFI’s,” and “Impacts to the

Schedule” reports, all of which had also been in Alstom’s possession

since at least the conclusion of the project.

32. These arguments, however, were rejected by the panel.

Accepting Alstom’s characterization of this exhibit and ignoring its

own previous ruling that all proffered evidence would be admitted,

the panel ruled that S&B would not be allowed to use the exhibit

unless Alstom’s counsel was given at least two weeks additional time

to prepare to cross-examine Mr. Taylor and present rebuttal witnesses

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 8 of 17 PageID 225
Memorandum Opinion and Order - Page 9

with respect to any matter covered by Mr. Taylor’s testimony

concerning the exhibit. There ensued much further argument and

discussion of exactly what such a delay would entail and whether,

because of scheduling problems, such a two-week delay might

actually turn into a lengthy adjournment of the hearings. S&B’s

counsel mentioned that, in that event, S&B might consider

withdrawing the exhibit if this were the only way to avoid such an

adjournment. During the course of this discussion, the Chairman

clarified the panel’s ruling by stating it was meant to apply, not only

to the exhibit itself, but also to any examination or testimony which

would “track” Mr. Taylor’s notations on the exhibit or which would

attempt in any other way to introduce into evidence “essentially what

is on Exhibit 261." Thus faced with a Hobson’s choice between a

drastic limitation on the presentation of S&B’s case and yet another

potentially lengthy delay in the resolution of its claim, S&B’s counsel

“temporarily” withdrew the exhibit and agreed to try to muddle

through the examination of Mr. Taylor without it. The panel then

decided to hold its ruling in abeyance until it had heard more of the

testimony.

33. After trying for several hours to elicit Mr. Taylor’s

account of the relevant events without using [Exhibit C261] or

referring to the items listed therein, S&B’s counsel concluded that it

was impossible to present S&B’s case under these restrictions and

again requested that he be allowed to use the exhibit in conducting

the rest of the examination. Alstom’s counsel renewed his objection,

and the panel thereupon reaffirmed its ruling that neither the exhibit

nor any testimony relating to its content could be introduced except

on the condition that Alstom be permitted at least two weeks to

prepare its cross-examination and rebuttal. S&B’s counsel then

attempted to explore with the panel whether there might be some way

to accommodate such a two-week delay in Alstom’s presentation of

part of its case within the current hearing schedule by reshuffling the

other witnesses so that even with such a delay, the proceedings might

be able to finish by the scheduled end date of June 19. The Chairman

rebuffed this suggestion, however, pointing out that, under the

panel’s ruling and because of the importance of the material covered

by Exhibit C261, the major portion of Alstom’s cross-examination

and rebuttal testimony would have to be postponed, thus creating “a

likelihood it is going to exceed the current end date for this

arbitration.” The Chairman also made clear that he intended to be

very liberal in permitting Alstom’s counsel to decide exactly which

parts of his cross-examination and rebuttal evidence would be

deferred.

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 9 of 17 PageID 226
Memorandum Opinion and Order - Page 10

34. These comments of the Chairman made it clear to all

parties that the two-week postponement granted to Alstom for the

presentation of its case would necessarily preclude finishing the

hearings within the currently allotted time period. By now it had also

become obvious that, because of other commitments of both counsel

and the members of the panel, any continuation of the hearings

beyond that time would require an adjournment until at least

November, and that the minimum condition being imposed by the

panel on the use of [Exhibit C261] was therefore a five-month

continuance of the hearings. Faced with this prospect, and having

already endured one previous lengthy continuance, S&B’s counsel

refused this condition and withdrew the exhibit.

35. S&B then proceeded to present the remainder of Mr.

Taylor’s testimony within the constraints imposed by the panel.

Attempting to provide some sort of description of what had occurred

on the project without seeming to “track” the content of Exhibit

C261, they [sic] inevitably produced a disjointed account which

lacked any real structure or organization and inevitably exhibited

many gaps and omissions, particularly with respect to showing the

precise impact of each of Alstom’s misdeeds on S&B’s work.

Although only the panel itself can say, much of the persuasive force

of the testimony was also undoubtedly lost. As one of the arbitrators

himself observed, Exhibit C261 and Mr. Taylor’s accompanying

testimony would have been “a powerful weapon” in S&B’s

presentation of its case, and S&B was effectively disarmed by its

exclusion.

36. After concluding Mr. Taylor’s account of events on the

project, S&B presented the testimony of its three damage experts

without any serious objection by Alstom’s counsel. The witnesses

offered three alternative methods of damage estimation, all of which

reached similar conclusions to the effect that S&B had suffered

damages ranging between $6,183,031 and $6,209,253. Alstom

presented a single damage expert who estimated S&B’s damage to be

$4,321,603.

37. Alstom’s fact witnesses then testified, among other

things, that none of Alstom’s derelictions – late drawings,

“repossessed” equipment, etc. – had actually had any adverse impact

on S&B’s productivity or caused it any harm. The Chairman

indicated, at one point during this testimony, that he was in

agreement with this assessment, stating that “the arbitrators have

never seen a single schedule . . . reflecting any of these various

impacts.” In rebuttal, S&B recalled Mr. Taylor in the hope of now

introducing some of the evidence on this issue that it had been

precluded from introducing earlier in the proceedings. Using Exhibit

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 10 of 17 PageID 227
Memorandum Opinion and Order - Page 11

C137, the as-built schedule already received in evidence which was

identical to the excluded Exhibit C261 except for the order of the

listed activities and the notes of Mr. Taylor, counsel again tried to

examine him about the impact of Alstom’s breaches of the

subcontract on S&B’s performance.

38. Alstom’s counsel immediately objected, observing that

this testimony had a “striking similarity” to the testimony on Exhibit

C261 which the panel had previously excluded. The Chairman

chimed in with the comment that the testimony was also “getting into

an area that perhaps should have been covered by someone who was

qualified as a scheduling expert.” Alstom’s counsel then offered the

additional objection that, if this testimony were allowed, he would be

required to recall one of his witnesses from France and for that

purpose would need another continuance. The panel finally ruled

that “it would be prejudicial to the respondent to allow Mr. Taylor to

testify” to any matters not already covered on direct examination, and

on that basis, once again violating its own initial ruling that all

relevant evidence would be admitted, ordered an end to this line of

questioning. S&B made no further attempts to introduce evidence of

the impact of Alstom’s wrongdoing.

Movant’s Brief in Support of Motion to Vacate Arbitration Award ¶¶ 21-27, 29-38 (citations to

Record omitted).

By the plain and unequivocal language of the statute, to prevail on this ground, a party must

establish that the panel refused to hear evidence pertinent and material to the controversy.

Notwithstanding S&B’s characterization of the panel’s ruling regarding Exhibit C261, the panel did

not refuse to hear pertinent and material evidence, and it did not exclude such, as S&B contends.

The evidence did not come in because of a choice S&B made. After much “to and fro” between the

parties, the panel ruled that it would allow Alstom a continuance to prepare for or respond to Exhibit

C261, or S&B could proceed without the use of Exhibit C261. S&B chose to proceed because a

continuance, due to conflicts in schedules, may have well resulted in a five-month delay in

resumption of the hearing, and S&B believed such a delay would legally prejudice it. S&B, as the

record plainly reveals, ultimately withdrew Exhibit C261. The decisions to first proceed with

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 11 of 17 PageID 228
2

According to Greek mythology, Scylla was originally a beautiful nymph who was turned into a

monster by Circe, an enchantress. Glaucus, a sea god, fell in love with Scylla; however, the feelings were

not mutual, and she wanted no part of him. When Scylla rebuffed Glaucus’s efforts to spark her, he enlisted

the aid of Circe to persuade Scylla that she should love him. Circe, however, had ideas of her own and tried

Memorandum Opinion and Order - Page 12

Exhibit C261 and later withdraw it were strategic choices made by S&B. S&B asserts that it was

faced with a Hobson’s choice between a severe restriction on the presentation of its case and “a

potentially lengthy delay in the resolution of its claim.” The court does believe that S&B was faced

with a Hobson’s choice. While the choice S&B made had risks or disadvantages, of which S&B was

obviously aware, the court cannot say that S&B had no meaningful choice. Litigation, by its nature,

requires litigants to make strategic decisions that affect their interests. S&B made a choice, and that

choice ultimately did not allow it to obtain the result it desired. 

This court cannot understand why S&B did not opt for a continuance in light of the

importance it attaches to Exhibit C261, and the critical factual testimony that would “relate to” or

“track” Exhibit C261. S&B argues that reports about the financial instability and possible

insolvency of Alstom or its parent company played a significant role in its decision that a

continuance would be highly prejudicial to its interests. The court has no way of knowing whether

this was in fact the case, or a mere afterthought, as the record of the arbitration hearing does not

reflect this. Further, the affidavit of Mr. John B. Clark, S&B’s lead trial counsel throughout the

course of arbitration, states that S&B was persuaded to go forward in part because of persistent

predictions or reports that Alstom or its parent company were on the brink of insolvency or

bankruptcy. This affidavit, however, was not executed until January 22, 2004, well after the

arbitration hearing had concluded and just in time for the filing of S&B’s motion to vacate. S&B

made a choice that failed to produce the desired result; however, it was not faced with a Scylla and

Charybdis situation.2

 In such a situation, the only result is certain death, regardless of the choice

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 12 of 17 PageID 229
to convince Glaucus to love her instead of Scylla. When Glaucus spurned Circe’s amorous efforts, she

became enraged and turned Scylla into a monster to spite Glaucus.

After being turned into a monster, Scylla lived in a cave overlooking the Strait of Messina, which

separates the island of Sicily from Italy. Immediately opposite the cave where Scylla lived was the whirlpool

Charybdis. When mariners navigated the Strait of Messina, they were faced with the equally repugnant

alternatives of either (1) being devoured by Scylla, or (2) being sucked into and drowned by the deadly waters

of the whirlpool Charybdis.

Memorandum Opinion and Order - Page 13

made; there is no other alternative. This was not the case with S&B. The court is convinced that,

in light of the panel’s ruling, or intended ruling regarding Exhibit C261 and testimony that “tracked”

or “related to” it, S&B should have opted for a continuance. It rejected a continuance, which was

its right to do; however, it has no right now “to cry foul” in light of its actions.

Determinations by the panel regarding pre-arbitration disclosures, whether Exhibit C261 was

a “scheduling analysis” or rose to the level of an “expert analysis,” the decision to allow Alstom a

continuance to prepare for and respond to Exhibit C261 if S&B was going to use it, and the rulings

made by the panel to ensure, in its view, that all evidence was presented in an orderly fashion and

in a way to ensure fairness all related to interpretations or applications of the law. The arbitrators

were in a better position than this court to address these matters. Moreover, the court cannot vacate

an award based on incorrect legal or factual rulings. A court, however, may vacate an award if there

is a manifest disregard of the law by an arbitrator. Kergosien, 390 F.3d at 355. As formulated by

the Fifth Circuit:

[M]anifest disregard for the law means more than error or

misunderstanding with respect to the law. The error must have been

obvious and capable of being readily and instantly perceived by the

average person qualified to serve as an arbitrator. Moreover, the term

“disregard” implies that the arbitrator appreciates the existence of a

clearly governing principle but decides to ignore or pay no attention

to it.

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 13 of 17 PageID 230
Memorandum Opinion and Order - Page 14

Id. (external quotation marks and citation omitted). Evidence in this case does not establish a

manifest disregard of the law. Moreover, S&B did not assert this ground as one to vacate the

Award.

S&B repeatedly contends that C261 and C137 are the same exhibit except for the order of

the listed activities and Mr. Taylor’s notes on C261. S&B minimizes the importance of these

differences. Obviously, the “insignificant changes” in the two exhibits had a profound effect on the

testimony of Mr. Taylor, who was to present critical testimony in support of S&B’s claim, was

rendered ineffective without the use of Exhibit C261, at which time counsel for S&B renewed his

request to use Exhibit C261. If Exhibits C137 and C261 were identical, except in a minor way, the

court cannot understand why Mr. Taylor could not have used Exhibit C137 to aid and develop his

testimony. That he could not do this convinces the court of the effect of C261 and why the panel

ruled as it did with respect to C261. Contrary to S&B’s contention, the differences between the

exhibits are not nearly as innocuous as it would have this court believe. Moreover, the court has

reviewed the notes made on Exhibit C261. The notes range from minor to quite extensive, at least

insofar as the testimony that would be elicited related to the notes. In light of the importance

attributed to Exhibit C261 by S&B, this court cannot even say that the panel misapplied the law with

respect to the conditions it placed on the use and testimony that “related to” or “tracked” Exhibit

C261. In any event, the court is convinced that the panel is not guilty of misconduct in refusing to

hear evidence pertinent and material to the controversy between S&B and Alstom.

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 14 of 17 PageID 231
Memorandum Opinion and Order - Page 15

B. Evident Impartiality

S&B contends that Chairman Kent had a personal financial stake in his rulings because of

his cancellation fee policy, and that such policy established “evident partiality” in the arbitration

within the meaning of the statute. The court disagrees.

The resume of Chairman Kent contained a “Compensation” section that included his

cancellation fee policy. According to such policy, if an arbitration hearing was canceled less than

thirty days prior to the date the hearing was to commence, he was entitled to receive one-half of his

daily fee for each day of the hearing that was canceled. For example, if a hearing was scheduled to

last ten days, Chairman Kent was to receive $825 (1⁄2 of his daily rate) per each day of cancellation

of the scheduled hearing if the requisite thirty-day notice was not provided. That Chairman Kent

had such a cancellation fee is simply too slender of a reed to support S&B’s contention that evident

partiality existed.

First, the cancellation fee was a categorical requirement; it applied to all parties to an

arbitration. Obviously, if this fee applied to one party only, the court would have serious concerns

about the policy. There is no evidence that the cancellation fee would not also apply to Alstom.

Under S&B’s approach, an arbitrator would have to be disqualified merely because of such

cancellation fee policy. The cancellation fee policy simply does not establish, or even suggest,

evident imparitality. The court is aware through its experience that some arbitrators charge a

cancellation fee, as do many other professionals. That Arbitrators Martin and Goldberg did not

charge such a fee is of no moment, and does nothing to establish evident partiality.

Second, this was not a case of “hide the ball.” Chairman Kent’s resume, which set forth the

cancellation fee policy, was provided to the parties at the time the arbitrators were selected in early

2002. S&B was aware of the fee cancellation policy, initially; however, the record does not reflect

that S&B raised any objection at that time regarding the policy, which is when it should have

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 15 of 17 PageID 232
3

S&B contends that it objected “very early in the proceedings” regarding the cancellation fee policy.

S&B did arguably raise this issue in November 2002. It was raised only after the chairman made a ruling to

which S&B disagreed. If a potential for bias existed, it existed when the arbitrators were selected in March

2002. As the cancellation fee policy applied to all parties, an adverse ruling against S&B does not suddenly

transform the matter into a situation that establishes evident partiality on the part of the arbitrator. Frankly,

the court believes this issue to be a red herring and more of an afterthought on S&B’s part.

Memorandum Opinion and Order - Page 16

objected to the policy. A party “cannot stand by during arbitration, withholding certain arguments,

then, upon losing the arbitration, raise such arguments in federal court.” Gateway Techs., 64 F.3d

at 998 (quoting Nat’l Wrecking Co. v. Int’l Bhd. of Teamsters, Local 731, 990 F.2d 957, 960 (7th Cir.

1993)); Wellman v. Writers Guild of Am., West, Inc., 146 F.3d 666, 673 (9th Cir. 1998) (“It is well

settled that a party may not sit idly through an arbitration proceeding and then collaterally attack that

procedure on grounds not raised before the arbitrators when the result turns out to be adverse.”).3

S&B has thus waived its right to assert bias on the part of Chairman Kent as a ground to set aside

the Award.

Third, this was not a nondisclosure case, that is, one in which the arbitrator failed to disclose

any facts that might create a reasonable impression of his partiality. In a case where the parties

select the arbitrator and the arbitrator fails to disclose such facts, evident partiality exists. See

Positive Software Solutions, 436 F.3d at 505. Positive Software, however, does not apply to this

case, as there was not a failure to disclose. S&B’s contention of bias is based on speculation and

uncertainty, at best, and is therefore insufficient to establish evident partiality. Mantle, 956 F.Supp.

at 729.

C. Undue Means

Although an oblique reference is asserted regarding “undue means,” S&B produces no

evidence that Alstom procured the Award through immoral or illegal behavior, or in bad faith, see

Trans Chem., 978 F.Supp. at 304, or that the arbitrators used undue means to make the award it did.

At most, S&B establishes that the arbitration panel made some rulings that it did not like, or that the

panel may have incorrectly applied the law. Assuming such errors were made in interpreting and

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 16 of 17 PageID 233
Memorandum Opinion and Order - Page 17

applying the law, such errors fall well below the necessary threshold to constitute undue means.

S&B’s contention that the Award was procured by undue means is without merit and cannot serve

as a basis for vacatur of the Award.

IV. Miscellaneous

Before the court is Movant’s Motion and Notice of Motion Requesting Status Conference,

filed September 19, 2006. In light of the court’s ruling on S&B Engineers and Constructors, Ltd.’s

Motion to Vacate Arbitration Award, Movant’s Motion and Notice of Motion Requesting Status

Conference is moot, and the court denies the motion.

V. Conclusion

For the reasons stated herein, S&B has failed to establish that the Award should be vacated

on any of the grounds it asserts. Accordingly, the court denies S&B Engineers and Constructors,

Ltd.’s Motion to Vacate Arbitration Award, and denies as moot Movant’s Motion and Notice of

Motion Requesting Status Conference.

It is so ordered this 2nd day of October, 2006.

_________________________________

Sam A. Lindsay

United States District Judge

 

 Case 3:04-cv-00150-L Document 43 Filed 10/02/06 Page 17 of 17 PageID 234