FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ASPIC ENGINEERING AND 

CONSTRUCTION COMPANY,

Plaintiff-Appellant,

v.

ECC CENTCOM CONSTRUCTORS 

LLC; ECC INTERNATIONAL LLC,

Defendants-Appellees.

No. 17-16510

D.C. No.

4:17-cv-00224-

YGR

OPINION

Appeal from the United States District Court

for the Northern District of California

Yvonne Gonzalez Rogers, District Judge, Presiding

Argued and Submitted December 17, 2018

San Francisco, California

Filed January 28, 2019

Before: MILAN D. SMITH, JR. and JACQUELINE H. 

NGUYEN, Circuit Judges, and JANE A. RESTANI,*

Judge.

Opinion by Judge Milan D. Smith, Jr.

 * The Honorable Jane A. Restani, Judge for the United States Court 

of International Trade, sitting by designation.
2 ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS

SUMMARY**

Arbitration

The panel affirmed the district court’s order vacating 

under the Federal Arbitration Act an arbitration award 

concerning the termination for convenience of two 

subcontracts for the construction of buildings and facilities 

in Afghanistan.

The subcontracts were in support of defendants’ prime 

contracts with the U.S. Army Corps of Engineers. The 

subcontracts incorporated by reference Federal Acquisition 

Regulation (“FAR”) clauses governing termination for 

convenience, and they contained a clause mandating that 

plaintiff, a local company, owed to defendants the same 

obligations that defendants owed to the U.S. government. 

Voiding parts of the subcontracts, the arbitrator awarded 

plaintiff some of its claimed costs despite plaintiff’s failure 

to comply with FAR requirements.

The panel held that, in finding that plaintiff need not 

comply with the FAR provisions, the arbitrator exceeded his 

powers and failed to draw the essence of the award from the 

subcontracts. The arbitrator’s award was “irrational” 

because he improperly based his conclusion not on past 

practices, but on his rationalization that to enforce the FAR 

clauses on plaintiff would be unjust.

 ** This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS 3

COUNSEL

Walt Pennington (argued), Pennington Law Firm, San 

Diego, California, for Plaintiff-Appellant.

Joseph G. Martinez (argued), Dentons US LLP, Denver, 

Colorado; Andrew S. Azarmi, Dentons US LLP, San 

Francisco, California; for Defendants-Appellees.

OPINION

M. SMITH, Circuit Judge: 

In this opinion, we review the award to Aspic 

Engineering and Construction Company (Aspic) following 

arbitration between Aspic and ECC Centcom Constructors, 

LLC and ECC International, LLC (together, ECC). ECC and 

Aspic entered into arbitration to resolve how much money 

ECC owed Aspic after ECC terminated for convenience two 

subcontracts it had awarded to Aspic. The arbitrator 

awarded Aspic just over $1 million, but ECC sought 

successfully to vacate the award in the district court. We 

affirm the district court’s vacation of the arbitration award. 

FACTUAL AND PROCEDURAL BACKGROUND

I. The Subcontracts

In support of its prime contracts with the United States 

Army Corps of Engineers (USACE), ECC awarded Aspic 

two subcontracts for the construction of various buildings 

and facilities in Afghanistan. The first was to be performed 

in Badghis province (the Badghis Subcontract). The second 

required the construction of a training facility in Sheberghan 

province (Sheberghan Subcontract).
4 ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS

The Badghis Subcontract and the Shebergan Subcontract 

(together, the Subcontracts) contained terms and conditions 

“applicable to all U.S. Government subcontracts.” 

Specifically, the Subcontracts incorporated many Federal 

Acquisition Regulation (FAR)1 clauses by reference, or in 

haec verba. These clauses included FAR 49.2 through 49.6, 

which govern termination for convenience. The 

Subcontracts also contained the following clause mandating 

that Aspic owe to ECC the same obligations that ECC owed 

to the United States government, as set forth in the FAR 

clauses: “The obligations of [ECC] to the Government as 

provided in said clauses shall be deemed to be the 

obligations of Subcontractor to [ECC].”

USACE eventually terminated ECC’s prime contract for 

convenience on the Badghis project. Days later, ECC 

notified Aspic that it was terminating the Badghis 

Subcontract for convenience. Understandably, Aspic sought 

payment for its expenses. On February 9, 2014, Aspic 

submitted its termination settlement proposal for the 

Badghis project to ECC. After review, ECC informed Aspic 

that the corroborative documents it had submitted in support 

of its settlement proposal were inadequate, and Aspic 

admitted it did not have many of the required materials. 

Nevertheless, ECC eventually submitted its termination 

settlement proposal to USACE, and included Aspic’s claim 

for $229,915 in termination costs within that proposal.

Upon receipt of the termination settlement proposal, 

USACE notified ECC that it would not pay any of ECC’s 

subcontractor termination costs—including the money 

Aspic claimed it was owed—until the Defense Contract 

 1 Title 48 of the Code of Federal Regulations contains the FAR 

regulations.
ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS 5

Audit Agency had conducted an audit. Following that audit, 

USACE informed ECC that it had overpaid Aspic for its 

performance under the Badghis Subcontract. In light of that 

determination, USACE refused to pay any of Aspic’s 

claimed termination costs.

USACE also terminated ECC’s contract for the 

Sheberghan project for convenience. Two days later, ECC 

terminated the Sheberghan Subcontract for convenience.

Aspic again submitted a termination settlement proposal 

to ECC, this time requesting $1,032,462. ECC, however, did 

not present these claimed costs to the USACE. USACE 

eventually issued a no-cost termination settlement between 

USACE and ECC—a settlement in which USACE claimed 

that the money previously paid to ECC and its 

subcontractors, including Aspic, constituted adequate 

compensation.

II. Prior Proceedings

Aspic believed it deserved more money for its efforts 

under the Subcontracts. In August 2015, it submitted a 

settlement demand for $652,000 on the Sheberghan 

Subcontract. ECC refused to pay, so Aspic filed for 

arbitration. Aspic again tried to settle the dispute—issuing 

settlement offers of $830,000 to ECC Centcom Constructors 

and $150,000 to ECC International—but ECC did not accept 

either of these offers.

In accordance with the Subcontracts, the parties 

proceeded to arbitration.2 The Arbitrator issued a Partial 

 2 Part A “General Terms and Conditions” of the Subcontracts 

contained provisions requiring arbitration for disputes arising from the 

contracts and the application of California law.
6 ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS

Final Award, awarding Aspic $1,072,520.90 and holding 

ECC Centcom Constructors and ECC International jointly 

and severally liable for the total amount. Aspic then sought 

attorneys’ fees and costs. Contemporaneously, ECC moved 

to reduce the Partial Final Award by Aspic’s waived 

damages, and opposed Aspic’s request by arguing that each 

party ought to bear its own attorneys’ fees. The Arbitrator’s 

Final Award (the Award) incorporated the Partial Final 

Award, denied attorneys’ fees and costs, and awarded Aspic 

half of the administrative fees and expenses.

Aspic filed a petition in the Superior Court for San Mateo 

County, California seeking to confirm the Award. Aspic 

also sought to reverse the Arbitrator’s determination that it 

was not entitled to attorneys’ fees. The Superior Court 

affirmed the Award and modified it to award Aspic 

attorneys’ fees of $435,840, plus all of its arbitration costs. 

The Superior Court then denied ECC’s ex parte application 

to vacate its prior order.

ECC removed the case to the Northern District of 

California. Before the district court, ECC renewed its effort 

to vacate the Award and the Superior Court’s judgment. 

Aspic did not oppose ECC’s motion to vacate the Superior 

Court’s judgment, and the district court granted that motion.

The district court then held a hearing on the parties’ 

motions to vacate the Award and to confirm and correct the 

Award. Following the hearing, the district court vacated the 

Award. The court held that the Award conflicted with the 

contract because the arbitrator “voided and reconstructed 

parts of the Subcontracts based on a belief that the 

Subcontracts did not reflect a ‘true meetings [sic] of the 

minds.’” Aspic moved for reconsideration, which the court 

denied. Aspic then timely appealed.
ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS 7

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction pursuant to 9 U.S.C. § 16 and 

28 U.S.C. § 1291. The Supreme Court has held that review 

of a district court’s decision confirming an arbitration award 

“should proceed like review of any other district court 

decision finding an agreement between two parties, e.g., 

accepting findings of fact that are not ‘clearly erroneous’ but 

deciding questions of law de novo.” First Options of 

Chicago, Inc. v. Kaplan, 514 U.S. 938, 948 (1995). We 

apply the same standard of review where the district court 

vacates an arbitration award. See Aramark Facility Servs. v. 

Serv. Emp’s Int’l Union, Local 1877, AFL CIO, 530 F.3d 

817, 822 (9th Cir. 2008) (applying de novo review for legal 

rulings and clear error for findings of fact).

ANALYSIS

Aspic offers a litany of reasons why the Arbitrator’s 

Award was rational. However, that argument ignores our 

limited powers when reviewing arbitrated cases. Pursuant to 

the Federal Arbitration Act (FAA), we “must” confirm an 

arbitration award unless we vacate, modify, or correct the 

award as prescribed in 9 U.S.C. §§ 10 and 11. Bosack v. 

Soward, 586 F.3d 1096, 1102 (9th Cir. 2009). “Neither 

erroneous legal conclusions nor unsubstantiated factual 

findings justify federal court review” of an arbitral award 

under the FAA. Id. Review of an arbitration award is “both 

limited and highly deferential.” Comedy Club, Inc. v. 

Improv W. Assocs., 553 F.3d 1277, 1288 (9th Cir. 2009) 

(quoting Poweragent Inc. v. Elec. Data Sys. Corp., 358 F.3d 

1187, 1193 (9th Cir. 2004)).

We may vacate an arbitration award where, among other 

reasons, “the arbitrators exceeded their powers, or so 

imperfectly executed them that a mutual, final, and definite 
8 ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS

award upon the subject matter submitted was not made.” 

9 U.S.C. § 10. We have held that arbitrators “exceed their 

powers” when the award is “completely irrational” or 

exhibits a “manifest disregard of the law.” Kyocera Corp. v. 

Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 997 (9th 

Cir. 2003) (internal citations omitted).

An award is completely irrational “only where the 

arbitration decision fails to draw its essence from the 

agreement.” Comedy Club, 553 F.3d at 1288 (quoting 

Hoffman v. Cargill Inc., 236 F.3d 458, 461–62 (8th Cir. 

2001)). An arbitration award “draws its essence from the 

agreement” if the award is derived from the agreement, 

viewed “in light of the agreement’s language and context, as 

well as other indications of the parties’ intentions.” Bosack, 

586 F.3d at 1106 (quoting McGrann v. First Albany Corp., 

424 F.3d 743, 749 (8th Cir. 2005)). Under this standard of 

review, we decide “only whether the [arbitrator’s] decision 

‘draws its essence’ from the contract,” not the “rightness or 

wrongness” of the arbitrator’s contract interpretation. Id.

(quoting Pacific Reinsurance Mgmt. Corp. v. Ohio 

Reinsurance Corp., 935 F.2d 1019, 1024 (9th Cir. 1991)).

The question in this appeal, therefore, is not whether the 

Arbitrator’s Award was reasonable overall, but whether the 

Arbitrator exceeded his powers in finding that Aspic need 

not comply with the FAR provisions. We hold that he did.

In this case, the Arbitrator held, in relevant part:

The parties entered into two lengthy 

subcontract agreements for the two projects 

which were prepared by ECC and presented 

to ASPIC. Each subcontract included very 

detailed provisions relating to Federal 

regulations governing the work as well as 
ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS 9

pass through and ‘Pay when/if Paid’ clauses.

The subcontracts were somewhat onerous as 

to ASPIC and were clearly drafted to give 

every advantage to ECC. In light of the fact 

that the ASPIC was a local Afghanistan 

subcontractor that had some experience with 

government contracting but not nearly as 

extensive as that of ECC, and in view of the 

fact that the normal business practices and 

customs of subcontractors in Afghanistan 

were more ‘primitive’ than those of U.S[.] 

subcontractors experienced with U.S[.] 

Government work, it was not reasonable to 

expect that Afghanistan subcontractors 

would be able to conform to the strict and 

detailed requirements of general contractors 

on U.S. Federal projects. Notwithstanding 

that expectation, ECC prepared its 

subcontract agreements to require the same 

level of precision and adherence to Federal 

procedures from ASPIC as ECC had toward 

the USACE through the pass through 

provisions of the agreements.

It was not reasonable that when the parties 

entered into the subcontract agreements, they 

both had the same expectations as to the 

performance of the agreements. ECC could 

not expect that ASPIC would be capable of 

modifying their local business practices to 

completely and strictly conform to the US 

governmental contracting practices that were 

normal to ECC. There was not a true meeting 

of the minds when the subcontract 

agreements were entered. Hence, ASPIC was 
10 ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS

not held to the strict provisions of the 

subcontract agreements that ECC had to the 

USACE. This arbitration demonstrated that 

ASPIC conducted its business practices in a 

manner normal to Afghanistan which was 

clearly not the same as a U[.]S[.] 

subcontractor working on a Federal project in 

the U.S. (emphasis added).

Aspic contends that vacatur of the Award is not 

warranted because the Arbitrator did not exceed his powers 

in holding that ECC never intended for Aspic to conform 

fully to the Subcontracts’ terms. Conversely, ECC argues 

that the Arbitrator erred by explicitly disregarding the 

Subcontracts’ requirements. The crux of this dispute, 

therefore, is whether the Arbitrator improperly strayed from 

the plain text of the contract.

An arbitrator may interpret the contract “in light of . . .

indications of the parties’ intentions” and find that the 

parties’ conduct modified the text of a contract. See Bosack, 

586 F.3d at 1106. In Metzler Contracting Co. v. Stephens, 

for example, we held that an arbitrator acted within his 

powers when he concluded that the parties, “through their 

acts and conduct,” had waived a portion of the underlying 

cost-plus contract. 479 F. App’x 783, 784 (9th Cir. 2012). 

We found “plausible” the arbitrator’s interpretation of the 

contract despite the contract’s provision limiting the parties’ 

ability to waive contract provisions. Id. at 784–85.

What an arbitrator may not do, however, is disregard 

contract provisions to achieve a desired result. In Pacific 

Motor Trucking Co. v. Automotive Machinists Union, the 

arbitrator ruled that the company could not demote an 

employee from the Working Foreman position 
ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS 11

notwithstanding the fact that the contract granted the 

company discretion over the position. 702 F.2d 176, 177 

(9th Cir. 1983). We noted that while the arbitrator attempted 

to “justify the award on the basis of past practice . . . there 

was no practice indicating that the employer lacked 

discretion over maintaining the [Working Foreman] 

position.” Id. Thus, we held that the district court properly 

vacated the award because the arbitrator “dispense[d] his 

own brand of industrial justice” by “disregard[ing] a specific 

contract provision to correct what he perceived as an 

injustice.” Id. (quoting United Steelworkers of Am. v. 

Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960)).

Here, the Subcontracts incorporate numerous FAR 

provisions, including those that govern termination for 

convenience and the settlement procedure. FAR § 52.249-2 

sets forth the procedure to be used in the event of termination 

for convenience. 48 C.F.R. § 52.249-2. FAR § 49.108-3 

requires that each settlement be “supported by accounting 

data and other information sufficient for adequate review by 

the Government,” and “in general conformity with the 

policies and principles . . . in this subpart and subparts 49.2 

or 49.3.” 48 C.F.R. § 49.108-3.

As the district court determined, the Award “conflicts 

directly with the [Sub]contract[s].” The Arbitrator 

recognized that the Subcontracts’ pass-through provisions 

obligated Aspic to meet the FAR requirements, yet he found 

that Aspic “was not held to the[se] strict provisions” based 

on Aspic “conduct[ing] its business practices in a manner 

normal to Afghanistan.” This finding alone—if based on 

past practice—would be insufficient for us to vacate an 

arbitral award.

In arriving at that conclusion, however, the Arbitrator 

evaded the pass-through provisions by determining that 
12 ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS

there was not a true “meeting of the minds” when the parties 

formed the Subcontracts because “the normal business 

practices and customs of subcontractors in Afghanistan were 

more ‘primitive’ than those of U.S. subcontractors,” and 

ECC could not expect Aspic to “strictly conform” to United 

States governmental contracting regulations. The Arbitrator 

then alluded to Aspic’s hand-written receipts written in the 

“native language” and the use of dates from the Islamic 

calendar. The Arbitrator found that rejecting Aspic’s 

supporting materials because they were not translated into 

English and the Gregorian calendar “would result in a 

forfeiture and unfairness in the resolution of the Aspic 

claims.”

These facts demonstrate that despite finding that the 

Subcontracts plainly required Aspic to comply with the FAR 

sections, the Arbitrator reasoned that the expectation of a 

seemingly less sophisticated contractor complying with 

these regulations was unreasonable. Thus, the Arbitrator did 

not base his conclusion upon Aspic and ECC’s actual past 

procedures, but upon his rationalization that to enforce the 

FAR clauses on Aspic would be unjust. This an arbitrator 

may not do.

By concluding that Aspic need not comply with the FAR 

requirements, the Arbitrator exceeded his authority and 

failed to draw the essence of the Award from the 

Subcontracts. The Award disregarded specific provisions of 

the plain text in an effort to prevent what the Arbitrator 

deemed an unfair result. Such an award is “irrational.”

Our conclusion is further supported by the fact that 

neither party argued that the FAR provisions did not apply 

in their arbitration briefs. To the contrary, substantial 

portions of the parties’ briefs emphasize the other’s failure 

to comply with certain FAR sections: Aspic decried ECC’s 
ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS 13

violation of its duty to settle set forth in FAR § 49.108-3, and 

ECC contended that Aspic failed to properly present its 

settlement costs to ECC pursuant to FAR § 52.249-2.

We observe that it is a serious matter when an arbitral 

award determines that a (sub)contractor need not comply 

with the federal contracting regulations when no past 

practices demonstrate variation from those requirements. 

These regulations, while undoubtedly extensive, permit the 

government to maintain fairly uniform contracting standards 

in the many contracts it enters into with parties located in the 

United States and around the world. See 48 C.F.R. § 1.101 

(“The [FAR] System is established for the codification and 

publication of uniform policies and procedures for 

acquisition by all executive agencies.”). To allow 

contractors and subcontractors, foreign or domestic, to evade 

the FAR provisions because a subcontractor was too 

unsophisticated or inexperienced to fully understand them 

would potentially cripple the government’s ability to 

contract with private entities, and would violate controlling 

federal law.

CONCLUSION

We have become an arbitration nation. An increasing 

number of private disputes are resolved not by courts, but by 

arbitrators. Although courts play a limited role in reviewing 

arbitral awards, our duty remains an important one. When 

an arbitrator disregards the plain text of a contract without 

legal justification simply to reach a result that he believes is 

just, we must intervene.

The Arbitrator’s Award in this case was “irrational” 

because it directly conflicted with the Subcontracts’ FARrelated provisions, without evidence of the parties’ past 

practices deviating from them, in order to achieve a desired 
14 ASPIC ENG’G & CONSTR. V. ECC CENTCOM CONSTRUCTORS

outcome. We therefore affirm the district court’s vacatur of 

the Award. Because we affirm the district court, we also 

conclude that Aspic’s argument that the Arbitrator erred in

failing to award it attorneys’ fees and arbitral costs is moot.

AFFIRMED.