United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 02-1780

___________

Gas Aggregation Services, Inc., *

doing business as Gas Services, Inc., *

*

Plaintiff-Appellant, *

*

v. *

* Appeal from the United States

Howard Avista Energy, LLC, * District Court for the

Howard Energy Marketing, Inc., * District of Minnesota.

*

Defendants Third Party *

Plaintiffs-Appellees, *

*

Manjit Bajwa, *

*

Third Party Defendant. *

___________

Submitted: November 7, 2002

Filed: February 24, 2003

___________

Before WOLLMAN, LAY, and LOKEN, Circuit Judges.

___________

LAY, Circuit Judge.
1

The Honorable David S. Doty, United States District Judge for the District of

Minnesota.

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Gas Aggregation Services, Inc. (“GSI”) appeals from an order of the district

court1

 vacating portions of an arbitration panel’s award. We affirm in part and

reverse in part.

I. BACKGROUND

GSI is a Minnesota corporation that operates as a natural gas marketing

company, specializing in providing natural gas needs of utilities in Minnesota and

elsewhere. GSI contracts for the purchase and sale of gas and for transfer and storage

from the producers or owners of the gas to purchasers. Howard Avista Energy LLC,

and Howard Energy Marketing, Inc. (“Howard”) are Delaware corporations with their

principal place of business in Michigan. Howard is a full service gas trading

company which buys and sells large quantities of natural gas as a commodity and also

provides gas supply services to utilities, marketers, and industrial customers in

Michigan and elsewhere.

In 1998, GSI and Howard entered into a series of four joint venture

transactions, combining GSI’s expertise in natural gas storage and transportation with

Howard’s ability to provide credit and act as guarantor for these transactions. Natural

gas volumes to service the joint ventures were to come from GSI or from Howard as

circumstances required and availability dictated. GSI and Howard frequently

transferred natural gas between themselves from one to the other to service the joint

ventures. In addition, GSI and Howard also engaged in several isolated sales of

natural gas between each other that were unrelated to the joint ventures. 
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In the course of carrying out these joint ventures, disputes arose between GSI

and Howard concerning responsibilities of each of the parties, and concerning the

sales price of natural gas transfers between the parties. 

In April 1999, GSI filed suit against Howard in district court claiming breach

of contract, fraud, violation of the Minnesota Consumer Fraud Act, tortious

interference with prospective economic advantage and contractual relations, breach

of fiduciary duty, conversion of partnership business opportunities, conversion,

demand for accounting, and unjust enrichment. GSI and Howard subsequently

entered into an agreement to submit the dispute to binding arbitration. The agreement

provided: “All claims in this action and among the parties shall be arbitrated by a

three-person panel.” Pursuant to this agreement, each party chose a selected

representative arbitrator, and by agreement selected a third neutral member who was

an expert in natural gas sales and transportation. 

The parties presented evidence and arguments to the arbitration panel through

briefs and five days of hearings. The panel issued an award and dissent on July 10,

2001. A Supplemental Award and Dissent for Attorneys’ Fees, Costs, and Interest

was issued on September 19, 2001, finding in favor of GSI on all issues. The panel

awarded GSI $466,945.25 as its share of profits for the parties’ joint ventures;

$679,000.00 as the proper balance on its trading account; $959,447.00 as

consequential damages for the loss of GSI’s business; $142,196.00 as interest on an

NSP receivable; $250,725.00 in reasonable attorneys’ fees; $97,646.15 in costs of

arbitration; $25,885.15 for miscellaneous costs; and prejudgment interest of

$242,120.11. 

GSI moved the district court to confirm the arbitration award. Howard filed

a motion to vacate four specific portions of the arbitration award relating to: (1) the

general trading account; (2) the loss of business damages; (3) attorneys’ fees, costs,

and interest, and (4) an NSP receivable. Howard argued that the award “failed to
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draw its essence” from the subject contracts, exhibited a manifest disregard of the

law, failed to make a final and complete resolution of the dispute, and wholly lacked

support in the record.

The district court vacated the portions of the award dealing with the general

trading account, the loss of business damages, and the attorneys’ fees, costs and

interest, on the grounds that the award failed to draw its essence from the contract,

manifested a disregard of the applicable law, and did not make a final determination

of the issues with respect to attorneys’ fees, costs, and interest. 

GSI timely appealed the district court’s order. We have jurisdiction pursuant

to 28 U.S.C. § 1291 (2000). We review a district court’s decision to vacate an

arbitration award de novo. Executive Life Ins. Co. of New York v. Alexander Ins.

Ltd., 999 F.2d 318, 320 (8th Cir. 1993).

II. DISCUSSION

The district court vacated significant portions of the arbitration panel’s award,

finding that the panel ignored “unambiguous terms of the underlying contract.” The

central issue before this court is the determination of what contract, if any, governs

the parties’ dispute. In its findings, the district court cites one of Howard’s general

provisions documents as containing the controlling contractual language as to the

issues concerning the general trading account and loss of business damages. GSI

argues that the issues regarding the parties’ general trading account balance and the

loss of business damages flowed from Howard’s behavior within the parties’ joint

venture activities, and were not connected to a single gas transaction, for which the

transaction confirmations were generated. Accordingly, GSI disagrees that these

documents controlled any of the issues that flowed from their joint venture

relationship, and, in addition, contends these documents were inaccurate. 
2

This case has been clouded by Howard’s striking change of strategy and focus,

which occurred contemporaneously with their change in counsel between the

arbitration hearing, and their motion in district court for vacation of the arbitration

award. For the first time before the district court Howard vigorously asserted that the

contract which was controlling as to the parties’ trading account and limitation of

damages was the boilerplate general exclusions contract which allegedly was

generated with each transfer of gas between the parties, and which, by its

unambiguous language, applied if at all, only to the single gas trade for which it was

generated. We are satisfied from the record that the issue of whether this general

provisions controlled the parties’ joint venture behavior was not raised before the

arbitration panel. To raise this issue as the primary and controlling issue before the

district court when it was not properly raised for the arbitration panel’s consideration

necessarily precludes it from review by the district court. The district court’s review

is limited to those issues that were raised before the arbitration panel. 

3

Howard General Provisions Natural Gas Purchase/Sale Contract and

Confirmation, at ¶ 14. 

Arbitration. Any dispute between the parties relating to the

interpretation of this Agreement and not resolved by agreement shall be

determined by a sole arbitrator upon notice given by either party, which

shall identify a representative. Within 10 days of receipt of notice, the

other party shall name a representative. The two representatives shall

select as the sole arbitrator an individual having expertise in natural gas

sales and transportation, or failing to do so in 30 days, the arbitrator

shall be selected by the senior judge of the U.S. District Court for the

district in which the party noticing arbitration is located. The rules of

civil procedure for such district shall govern the arbitration. The

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GSI argues that the arbitration panel did not address this issue in their award

because it was not raised during the arbitration.2

 It is significant that the panel did not

identify this as an issue for arbitration. That omission supports GSI’s assertion that

this was not identified as an issue or argued before the arbitration panel.

Further, the general provisions document which Howard cites as being

controlling, contains an arbitration clause.3

 This clause provides for binding
arbitrator shall promptly hear the question(s) submitted and shall render

a written decision within 120 days of appointment with such decision

being binding on the parties.

4

For purposes of determining the correct standard of review, this circuit has not

distinguished between cases in which pre-dispute arbitration agreements exist versus

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arbitration of any dispute concerning the interpretation of the general provisions

document by a sole arbitrator, and requires an arbitrator to hear the case and render

a decision within 120 days of appointment. Significantly, this clause was not

invoked. Instead, after GSI filed suit in district court, the parties voluntarily

stipulated to arbitration of all issues by a panel of three, which took greater than 120

days to hear the case and render its decision. This further supports GSI’s assertion

that prior to their motion to vacate the award, Howard did not argue that the general

provisions contract was controlling as to the general trade account or the issue of

limitation of damages for loss of business.

A. Standard of Review of Arbitrators’ Awards

A court’s review of an arbitration award is very limited. Lee v. Chica, 983 F.2d

883, 885 (8th Cir. 1993). Where parties agree to arbitrate, a court cannot substitute

a judicial determination for the arbitrator’s decision. United Paperworkers Int’l

Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 40-41 n.10, 108 S. Ct. 364, 371 (1987).

Courts may not review the merits of an arbitration award “even though the parties

may allege that the award rests on errors of fact or on misinterpretation of the

contract.” Bureau of Engraving, Inc. v. Graphic Communication Int’l Union, Local

1B, 284 F.3d 821, 824 (8th Cir. 2002)(quoting Misco, 484 U.S. at 36). Even if the

court is convinced that the arbitrator committed serious error, so “long as the

arbitrator is even arguably construing or applying the contract and acting within the

scope of his authority,” arbitration awards must be confirmed. Bureau of Engraving,

284 F.3d at 824 (quoting Misco, 484 U.S. at 38).4

 
those in which the parties stipulate to arbitrate disputes during litigation. However,

we endorse the view of the Second Circuit, which has held that when parties agreed

during litigation to arbitrate certain disputes, the arbitrators have discretion to rule on

each legal question and fact necessary to resolve the disputes. See Fed. Commerce

& Navigation Co., v. Kanematsu-Gosho, Ltd., 457 F.2d 387 (2nd Cir. 1972) (holding

“[a]n arbitrator is entitled to pass on every question of law or fact necessary to the

disposition of the issue submitted to him.”)

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Although limited, arbitration awards are not entirely free from judicial review.

The Federal Arbitration Act (“FAA”) provides limited grounds on which an

arbitration award may be vacated. 9 U.S.C. §§ 1-16 (2000). The FAA requires that

an arbitration award be upheld unless it is obtained by “corruption, fraud, or undue

means;” where there is “evident partiality or corruption in the arbitrators;” where

there was misconduct by the arbitrators; or where the arbitrators exceeded their

powers. 9 U.S.C. § 10(a)(1)(2). 

This court has held that beyond the grounds provided in the FAA, an

arbitration award will be vacated only where it is “completely irrational or evidences

a manifest disregard for the law.” Hoffman v. Cargill Inc., 236 F.3d 458, 461(8th Cir.

2001)(citing Val-U Constr. Co. of S.D. v. Rosebud Sioux Tribe, 146 F.3d 573, 578

(8th Cir. 1998)). 

An arbitrator is not free to ignore or abandon the plain language of the parties’

agreement. Boise Cascade Corp. v. Paper Allied-Industrial, Chemical and Energy

Workers (PACE), Local 7-0159, 309 F.3d 1075, 1081 (8th Cir. 2002). An arbitration

award has been held to be irrational where it fails to draw its essence from the

agreement. Hoffman, 236 F.3d at 462. “An arbitrator’s award draws its essence from

the [parties’ agreement] as long as it is derived from the agreement, viewed in light

of its language, its context, and any other indicia of the parties’ intention.” Boise,

309 F.3d at 1080 (quoting Johnson Controls, Inc., Sys. & Servs. Div. v. United Ass’n

of Journeymen, 39 F.3d 821, 825 (7th Cir. 1994).
5

The arbitration panel granted the award of $600,000 in accounts receivable

from NSP to GSI. The district court affirmed this portion of the arbitration award.

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But where there is no clear and unambiguous agreement, the arbitrator must

utilize other sources to determine the parties’ intent. As this court has previously

held, “[d]etermining the intent of the parties is the essential inquiry; if the written

agreement is silent, the arbitrator may consider past practices and bargaining history

to fill gaps.” Boise, 309 F.3d at 1081-82 (internal quotation marks and citation

omitted). “On the other hand, where the plain language of the parties’ agreement is

silent or ambiguous with respect to a disputed issue, an arbitrator is obliged to

consider other relevant sources of the parties’ intent.” Id. 

B. Arbitration

Based on arguments and evidence, the arbitration panel organized the issues

for arbitration into the following categories: (1) The nature of the parties’ business

relationship; (2) accounting for profit and loss from the parties’ joint venture

activities; (3) accounting for GSI’s general trading account with Howard; (4) GSI’s

claim for loss of business; (5) GSI’s claim for attorneys’ fees; (6) prejudgment

interest; (7) arbitration costs and fees; (8) disposition of the NSP receivable assigned

by GSI to Howard; and (9) other claims and issues. 

Significantly, the arbitration panel did not identify the issue of what contract

controls the issues of the general trading account or loss of business damages as an

issue to be determined. 

C. General Trading Account Award

The district court granted Howard’s motion to vacate three of the four

specifically identified awards.5

 First, the district court vacated the portion of the
The district court’s decision regarding this award is not challenged on appeal, and

accordingly we do not address it. 

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award related to parties’ general trading account, finding that the panel majority

ignored the unambiguous terms of the underlying contracts. 

GSI contends that the issues regarding the general trading account flow from

the parties’ joint venture relationship, for which there is no written contract. GSI and

Howard engaged in multiple varied business transactions. The panel’s award

indicated that the written documentation for the joint ventures consisted of letters of

agreement dated: April 22, 1998; June 8, 1998; and June 10, 1998, and transaction

confirmation documents. 

The panel majority described the dispute concerning the general trading

account as focusing on four (4) accounting issues: 

(1) the correct beginning balance of the account (2) whether any price

adjustments should be made for prices accounted for by Howard on the

agreed volumes of gas bought and sold, (3) whether GSI is responsible

for hedge activity accounted for by Howard for its account after

November 1, 1998, and (4) the appropriate accounting reconciliation for

payments and receipts of the parties in, and net profit from, their joint

venture activities with general trading account. 

Arbitrator’s Award And Dissent at 23.

First, GSI contended that the October 31, 1998 beginning balance of the

account did not include profit from three hedge transactions, and the trading account

beginning balance should have reflected a credit of $112,654.02 to GSI. Howard

contended that the profits from the hedge transactions were credited to GSI in

determining the final balance. The panel determined that GSI’s beginning balance

should be adjusted to reflect the profit of the three hedge transactions. 
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Second, Howard argued that sales prices of physical gas sales should not be

adjusted because the prices were documented by its business records. The accuracy

of Howard’s business records was disputed by GSI, with GSI contending that these

transaction confirmations were at least inaccurate and possibly fraudulent. GSI

argued that the prices documented on Howard’s business records should be adjusted

to market prices or seasonal averages. The panel concluded that the price adjustments

sought by GSI for its gas purchases should be made, but not those proposed for its

sales to Howard. The panel majority found that the amount of the price adjustment

(reduction) for the cost of physical gas should be $234,000 to GSI, based upon its

conclusion that Howard imposed prices higher than market on GSI for Farwell gas

purchases, when the above market cost of the Farwell gas was a joint venture

responsibility. 

Third, GSI contended that it did not authorize hedge transactions with Howard

after November 1, 1998, and therefore the associated losses are not collectible from

it. The panel agreed and credited GSI.

Fourth, the panel concluded that the final balance of GSI’s trading account with

Howard should be a credit of $679,000.

The court did not address each component of this trading account award

individually, but held generally that the transaction confirmation documents,

generated by Howard for each natural gas transaction, exclusively determined the

rights and obligations of the parties concerning GSI’s trading account. The district

court stated:

According to defendants, contracts evidenced by the transaction

confirmations generated and maintained by defendants for each

transaction exclusively determined the rights and obligations of the

parties concerning GSI’s Trading Account. Because the court finds that
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the arbitration panel ignored those contractual terms, the court vacates

that portion of the arbitration award.

Dist. Ct. Order at 6 (internal citation omitted).

The district court held that by determining that a monthly average market price

should be substituted for the price term listed on the trade confirmation, the panel

ignored an unambiguous contract term, and exceeded their authority. 

The district court erred. There was no unambiguous contract term to which the

panel could look to determine the parties’ intent. As the panel majority indicated, the

trading account dispute involved transactions between GSI and Howard that went

beyond one-time transfers of gas between the parties, and touched on hedge

transactions as well as joint venture net profit. The clear language of the transaction

confirmation general provisions document provides that the contractual terms set

forth in the document are controlling only as to that gas transaction, and applies only

in the absence of another agreement. The general provisions contract was limited to

the transaction for which it was generated, and then only if there was no other

agreement in existence between the parties. It is clear that any award based on a

breach of the parties’ joint venture relationship could not be controlled by a general

provisions document with application limited to a one-time sale of gas between the

parties.

In addition, the plain language of the transaction confirmation indicates that it

is not binding on the other party if challenged within ten days: “this confirmation

shall be final and binding, whether or not signed or confirmed by counterpart, unless

counterpart advises Howard Energy of any inaccuracy within ten days.” There was

evidence presented to the panel by GSI that once received, they immediately disputed

the terms and challenged at least one of these documents as being fraudulent. 

In addition, GSI contends that it did not receive transaction confirmations on

all of its gas transfers with Howard in a timely manner despite repeated requests. GSI
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argued that it requested an accounting from Howard multiple times, but that no

accounting was forthcoming from Howard until just prior to the arbitration.

Consequently, the contractual language in these general provisions documents may

not have been controlling even as to the individual transactions for which they were

generated.

In the absence of clear and unambiguous contractual language, an arbitration

panel must look to other sources to determine the parties’ intent. Here, the arbitration

panel accepted briefs and conducted five days of hearings. 

Due to the conflicting evidence regarding these transactions, the determination

of the existence of any agreement between the parties was ultimately a credibility

determination, on which there is no judicial review of the arbitration panel’s finding.

The panel’s award stated that all of the evidence was considered and carefully

weighed. 

In determining the issues regarding the parties’ joint venture and hedge

activities, the arbitration panel looked to other relevant sources of the parties’ intent,

past practice and bargaining history, as well as industry practice to fill the gaps. This

is precisely what our opinion in Boise required in the absence of clear and

unambiguous contractual language. Boise, 309 F.3d at 1081-82. Here, there was no

controlling contractual language. The panel was required to weigh the evidence in

order to discern the parties’ intended agreement, and they did not exceed their powers

in doing so. Accordingly, the panel’s award must be confirmed. 

D. Loss of Business Award

The district court also vacated the panel’s award in favor of GSI for loss of

business damages, finding that the transaction confirmation contracts contained an

unambiguous limitation of damages provision which did not provide for loss of

business damages. The district court held that the award failed to draw its essence
6

Two disputes between GSI and Howard arose out of a joint venture involving

ProGas. First, the parties disagreed as to the delivery point, which was significant to

the value of the gas. Evidence presented to the arbitration panel indicated that gas

located at Dawn, Ontario, is more valuable than gas located at Farwell, Michigan, due

to Dawn’s superior pipeline access to greater markets, and its inherently lower

transportation costs. Second, the parties disagreed on the price for the natural gas.

These disputes put the joint venture at risk, and set off a series of conflicts between

the parties. 

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from unambiguous contract language found in Howard’s general provisions

documents. As we stated earlier, the general provisions document is not controlling

as to the joint venture activities between the parties. The panel’s award was based on

the parties’ joint venture relationship, and therefore the limitation on damages

contractual language as cited by the district court did not control. The panel’s award

found that the only written documentation between Howard and GSI consisted of four

letters of agreement detailing their joint venture transactions. These letters of

agreement set forth the terms of joint venture transactions between GSI/Howard and

the third-party business, i.e. ProGas, Minnegasco, and Union Gas. These letters

stated in part, “GSI and Howard Avista agree to be jointly and severally liable for the

obligations of GSI.” The letters did not contain any contractual language regarding

limitation of liability. 

The panel concluded that Howard’s actions in the course of the parties’ joint

ventures caused GSI loss of viability and credibility as a natural gas broker with its

preexisting and ongoing customers. The panel cited specific instances: Howard’s

failure to agree to let the Farwell gas move to Dawn in November, 1998 to satisfy the

Minnegasco Peaking Contract;6

 the increased security demands Howard made on GSI

for the purchase of gas after November 1, 1998; and Howard’s curtailment of gas

deliveries to GSI in January and March, 1999, which the panel found to result in the

loss of GSI’s business viability. The panel’s award indicated that it based its
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evaluation on the entirety of the evidence, and found that the loss of GSI’s business

viability was a natural and foreseeable consequence of Howard’s activities. 

“We may not set an award aside simply because we might have interpreted the

agreement differently or because the arbitrators erred in interpreting the law or in

determining the facts.” Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 751

(8th Cir. 1986). In the absence of unambiguous contractual language, the arbitration

panel considered the entirety of the evidence in making its determination and award.

Because we find that the panel’s award was not irrational, nor did the panel exceed

their authority, the panel’s arbitration award must be confirmed. 

E. Attorneys’ Fees, Costs and Interest

Finally, GSI sought and was awarded attorneys’ fees under the Minnesota

Consumer Fraud Act. The district court vacated the panel’s award for attorneys’ fees,

costs and prejudgment interest, finding that the award manifested a disregard of

applicable Minnesota law, and failed to make a final determination of the issues. 

A district court has the authority to vacate a panel’s award when it “evidences

a manifest disregard for the law.” Missouri River Servs., Inc. v. Omaha Tribe of

Nebraska, 267 F.3d 848, 854 (8th Cir. 2001). An arbitration decision evidences a

manifest disregard for the law where the arbitrators clearly identify the applicable,

governing law and then proceed to ignore it. Hoffman, 236 F.3d at 462. 

The panel’s award of attorneys’ fees is troubling. The panel majority states,

“Howard’s Reply Brief presented the panel with a decision of the Minnesota Supreme

Court holding that the Consumer Fraud Act does not apply to GSI’s dispute with
7

In Ly v. Nystrom, 615 N.W.2d 302, 314 (Min. 2000), the Minnesota Supreme

Court held that claims for attorneys’ fees under the Minnesota Consumer Fraud Act

are not available for private causes of action which do not benefit the public.

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Howard.”7

 The Minnesota Consumer Fraud Act permits private parties to recover

attorneys’ fees for violations of Minn. Stat. § 325F.69. We agree with the arbitration

panel dissent which states: “As a matter of law, the transactions between the parties

are not consumer transactions at all. Rather they are transactions between

sophisticated gas traders in the wholesale, commercial gas market.” 

Despite acknowledging the rule as set forth by the Minnesota Supreme Court

in Ly which precludes a cause of action under the Consumer Fraud Act by a

commercial trader, the panel majority ultimately awarded GSI attorneys’ fees. This

ruling ignores the relevant law. Where an arbitration panel cites relevant law, then

proceeds to ignore it, it is said to evidence a manifest disregard for the law. Hoffman,

236 F.3d at 462 (citing Stroh, 783 F.2d at 749-50). We find that the award evidenced

a manifest disregard for Minnesota law, and therefore affirm the district court’s

decision to vacate the award of attorneys’ fees.

We also agree with the district court’s analysis regarding prejudgment interest.

A court can vacate an arbitrator’s award where the arbitrators fail to make a “mutual,

final, and definite award upon the subject matter submitted.” 9 U.S.C. § 10(a)(4).

The arbitrator must “resolve all issues submitted to the arbitration, and determine

each issue fully so that no further litigation is necessary to finalize the obligations of

the parties under the award.” Dighello v. Busconi, 673 F. Supp. 85, 90 (D. Conn.

1987). 

Here, the panel’s award indicates that the panel did not fully decide the issue

of prejudgment interest:
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The panel further recognizes that the entitlement to an amount of

prejudgment interest . . . may also be specifically governed by

Minnesota or federal statute, court rule, and/or case law. The panel has

not sought to make purely legal rulings with respect to those two (2)

issues. The panel emphasizes that, should a Minnesota or federal court

of competent jurisdiction determine that GSI is not legally entitled to

Attorneys Fees and Prejudgment Interest, such a determination should

not and does not affect the other findings, conclusions, or awards made

by the panel herein.

Arbitrator’s Award And Dissent at 27-28. 

By expressly leaving this award open for judicial determination, the panel

failed to make a final determination. Accordingly, we affirm the district court’s

decision to vacate the award of prejudgment interest.

The judgment of the district court is REVERSED and the arbitration panel’s

decision CONFIRMED as to the awards for loss of business damages and general

trading account (“Sale Price in Contract”). The district court is AFFIRMED as to the

attorneys’ fees, costs and interest award. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.