IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________________________

No. 01-20377

_______________________________

BETTIS GROUP, INC.; ROYAL HOLT BETTIS, JR.;

TARPON BENIN II, INC.; BAHAMAS W.A. LDC;

WEST AFRICA, LDC,

Plaintiffs-Counter Defendants-Appellants,

versus

TRANSATLANTIC PETROLEUM CORP.; ET AL,

Defendants,

TRANSATLANTIC PETROLEUM CORP., formerly

known as PROFCO RESOURCES, LTD.,

Defendant-Counter Claimant-Appellee.

Consolidated with

_______________________________

No. 01-20379

_______________________________

BETTIS GROUP INC.; ROYAL HOLT BETTIS, JR.;

TARPON BENIN II, INC.; BAHAMAS W.A. LDC;

WEST AFRICA LDC,

Plaintiffs-Counter Defendants-Appellants,

versus

SOGW BENIN, LTD; TIFAND, INC.;

TARPON BENIN LDC; BBFI BENIN LTD.;

CANDELA RESOURCES, LTD.,

Defendants-Counter Claimants-Appellees.

_________________________________________________* Pursuant to 5 T H Cir. R. 47.5, the court has determined that

this opinion should not be published and is not precedent except

under the limited circumstances set forth in 5 TH Cir. R. 47.5.4.

2 Appeals from the United States District Court

for the Southern District of Texas

(H-00-CV-3310)

_________________________________________________ December 23, 2002

Before KING, Chief Judge, and REAVLEY and WIENER, Circuit Judges.

PER CURIAM * :

Plaintiffs/Counter-Defendants/Appellants (collectively,

“Plaintiffs”) fil ed the two captioned lawsuits, which are

consolidated for purposes of this appeal , seeking enforcement of

the arbitration award that they had obtained against the

Defendants/Counter-Claim ants/Appellees. In the first case

(hereafter, the “Guarantor Lawsuit”), the district court sustained

the counterclaim of TransAtlantic Petroleum Corp. (“TransAtlantic”)

which asserted that, as guarantor only, it was not subject to the

arbitration provision that led to th e award in question. In the

second case (hereafter the “Affiliates Lawsuit”), the district

court concluded that the arbitrator’s award to the Plaintiffs was

grounded in damages that were too speculative to support the award,

thereby constituting “manifest disregard of the l aw,” which the

court equated with misconduct by the arbitrator. As a result of

these rulings, the district court vacated the arbitration award in

its entirety a s to all parties previously found liable by the

arbitrator (collectively, “Defen dants”), whether as obligors or

guarantor, and dismissed both actions.1 The laws of Benin require seven shareholders, at least one

of whom must be a natural person.

3 The Plaintiffs appeal all rulings of the district c ourt in

both suits, principal among which are (1) the court’s determination

that the arbitrator erred in finding that TransAtlantic was bound

to arbitrate, and (2) the court’s vacatur of the arbitration award

as to all Defendants. We reverse these rulings of the district

court and remand with instructions to enforce the arbitrator’s

award as rendered.

I. Facts and Proceedings

Tarpon-Benin, S.A., a company that is not a party to this

l itigation, was incorporated pursuant to the laws of the Wes t

African Republic of Benin (“Benin”) by corporate and individual

assoc iates of one of the Plaintiffs, Bettis Group, Inc. (“Bettis

Group”). 1 The initial shareholders of Tarpon-Benin were those

affiliates of Bettis Group (collectively “the Bettis Affili a tes”)

but not Bettis Group itself. The government of Benin granted

Tarpon-Benin a petroleum drilling concession (the “Concession

Contract”), under which Tarpon-Benin assumed various contractual

obligations and acquired drilling rights, in particular the right

to drill offshore in an area designated as Block 2.

Presumably to obtain additional capital for explo itation of

the Concession Contract, Tarpon-Benin brou ght Profco Resources,

Ltd. (subsequently renamed TransAtlantic and referred to throughout

this opinion as such) into the venture through the sale of Tarpon-2 Section 6.7 of the Agreement mirrors section 6.5, specifying

which obligations of which shareholders among th e Bettis Group

Affiliates were guaranteed by Bettis Group: “ 6 .7 Guarantee of West

Africa’s Obligations

. The Bettis Group agrees to guarantee (i) any

and all obligations of West Africa to [Tarpon-Benin] and (ii) any

4 Benin stock to individual and corporate affiliat es of

Trans Atlantic, but not to TransAtlantic itself. At all times

relevant to this appeal, the shareholders of Tarpon-Benin consisted

of (1) the Bettis A ffiliates and (2) all captioned DefendantsCounter Claimants-Appellees other than TransAtlantic (collectively

“t he TransAtlantic Affiliates”). Together, the TransAtlantic

Affiliates owned 75% of Tarpon-Benin’s issued a nd outstanding

stock, controlli ng its board of directors and its principal

committees, and held the presidency.

The owners of all T arpon-Benin stock signed a Shareholders

Agreement (the “Agreement”). Although not shareholders themselves,

the t wo primary corporate players in the venture —— Bettis Group

and TransAtlant ic —— signed the Agreement to guarantee some

obligations of some of their respective affiliates that were

shareholders, as expressly set forth in the body of the Agreement.

Specifically, section 6.5 of the Agree ment identifies which

obligations of which shareholders among the Tra nsAtlantic

Associates are guaranteed by TransAtlantic:

6.5 Guaranty of SOG W Benin’s Obligations

[TransAtlantic] hereby agrees to guarantee (i)

any and all obligations o f SOGW Benin to

[Tarpon-Benin] and (ii) any and all obligations

of SCL, Tifand, and LDC in their capacities as

Shareholders of [Tarpon-Benin]. 2and all obligations of Tarpon II and RHB in their capacities as

Shareholders of [Tarpon-Benin].”

3 The transfer to Dallas occurred after TransAtlantic

boycotted the proceedings, although the arbitrator stated that the

proceedings would be moved back to Denver if TransAtlantic decided

to participate and insisted on a Denver situs.

4 In its appellate brief, TransAtlantic states that the award

against it is in “the total sum of $1,848,359.32.”

5 After Tarpon-Benin drilled a dry hole in Block 2, differences

developed between the Plaintiffs and the Defendants about the

future of the venture. The Concession Contract with Benin was

eventually lost. When the dispute between the two factions could

not be resolved amicably, the P laintiffs invoked the arbitration

clause of the Agreeme nt, instituting arbitration proceedings

against the Defendants for breach of the Agreemen t. These

proceedings, which began in Denver and were transferred to Dallas

by unanimous consent of the participants, 3 culmin ated in an award

of $1.35 million, plus fees and interest, against the Defendants. 4

To enforce their arbitration award, the Plaintiffs filed the

capti oned lawsuits in federal district court in Houston.

TransAtlantic counterclaimed in the Guarantor Lawsuit, seeking (1)

reversal of the arbitrator’s preliminary ruling that TransAtlantic

was subject to arbitration and (2) vacatu r of the arbitration

a ward. The TransAtlantic Affiliates counterclaimed in t h e

Affilia tes Lawsuit, also seeking vacatur of that award but

contesting neither the validity of the agreement to arbitrate nor

their susceptibility to arbitration. Following the filing of the6

Defendants’ cross-motions for summary judgment, the district court

entered orders in both lawsuits.

As an initial mat ter in the Guarantor Lawsuit, the district

court reversed the arbitrator’s preliminary ruling that

TransAtlantic was bound to arbitrate, crediting TransAtlantic’s

contention that it did not consent to arbitrate when it signed the

Agreement as guarantor of t he obligations of the TransAtlantic

Affiliates, as expressly spelled out in the body of the Agreement.

The court went on to vacate the arbitration award as to

TransAtlantic.

In the Affiliates Lawsuit, the distric t court vacated the

arbitrator’s award, crediti ng the TransAtlantic Affiliates’

characterizatio n of the arbitrator’s ruling as constituting

“manifest disregard for the law” and therefore “misconduct” by the

arbitrator. In so doing, the court rejected the Plaintiffs’

contentions that (1) the shareholders’ express waiver of appeal in

the Agreement precluded the court’s appellate review of the award,

(2) manifest disregard of the law is not a valid basis for vacating

the arbitrator’s award anyway, and (3) in fact and in law, the

arbitrator had not manifestly disregarded the law applicable to the

instant dispute. The district court was of the opinion that under

the s ubstantive law of Texas (which is the law selected by the

parties in the Agreement), the damages were too s peculative to

support an award, so that the arbitrator’s award of such damages

constituted m anifest disregard for the law and thus arbitrator5 Six Flags Over Texas, Inc. v. Int’l Brotherhood of Elec.

Workers, Local No. 116 , 143 F.3d 213, 214 (5th Cir. 1998).

6 Brook v. Peak Int’l, Ltd.

, 294 F.3d 668, 672 (5th Cir.

2002)(noting that the de novo standard of review is “intended to

reinforce the strong deference due an arbitrative

tribunal”)(quoting McIlroy v. Paine Webber, Inc.

, 989 F.2d 817, 820

(5th Cir. 1993)).

7 misconduct. In the end, the district court vacated the arbitration

award in toto and dismissed both lawsuits , after which the

Plaintiffs timely filed notices of appeal.

II. Analysis

A. Standard of Review

In the Affiliates Lawsuit, we review de n ovo the court’s

denial of the Plaintiffs’ motion for summary judgme nt to enforce

t heir award in arbitration and the court’s grant of t h e

TransAtlantic Affiliates’ summ ary judgment motion to vacate the

arbitration award and dismiss the case. Thus, our review of each

appellate issue in the Affiliates Lawsuit is plenary. 5

In the Guarantor Lawsuit, the Plaintiffs and TransAtlantic

filed cross-motions for summary judgment. The district court

denied the Plaintiffs’ motion and granted TransAtlantic’s. Again,

our rev iew of the grant or the denial of a summary judgment is

plenary. Our standard of review of the district court’s rulings

should not, however, be confused or equated with the extremely

restricted and deferential standard to which federal courts are

held when reviewing arbitration proceedings themselves, including

the conduct of the arbitrator and the arbitration award. 67 FAA § 16 authorizes our review of the district court’s order

vacating the arbitration award. See 9 U.S.C. § 16(a)(1)(E);

Atlantic Aviation, Inc. v. EBM Group, Inc. 11 F.3d 1276, 1280 (5th

Cir. 1994); Bull HN Info. Sys., Inc. v. Hutson , 229 F.3d 321, 327

(1st Cir. 2000); Jays Foods, L.L.C. v. Chem. & Allied Prod. Workers

Union , 208 F.3d 610, 613 (7th Cir. 2000).

8 B. The Affiliates Lawsuit

The TransAtlantic Affiliates partic ipated fully in the

arbitration proceedings, never objecting to their being subject to

arbitration or to any other aspect of the proceedings except for

the results reached by the arbitrator in making his award, which,

on appeal, the TransAtlantic Affiliates, like the district court,

label as manifest disregard for the law by the arbitrator. On

appeal to us, the Plaintiffs assert two independent and alternative

bases for reversing the district court: (1) the parties’ waiver of

the right to appeal the legal rulings and award of an arbitrator;

and (2) the district court’s legal erro r in (a) applying an

imper missible standard to justify reviewing the substance of the

dispute and t he arbitrator’s award, and, alternatively, (b) the

district court’s holding that the arbitrator manifestly disregarded

the law of Texa s governing contractual damages and that this

constitutes arbitrator misconduct. 7

1. Waiver of Appeal

As a prelimina ry contention, the Plaintiffs insist that the

TransAtlantic Affiliates violated an e xpress provision of the

Agreement when they filed a counterclaim seeking vacatur of the

award, and that the district court erred reversibly by entertaining9

that counterclaim which unquestionably constitutes an appeal of the

arbitration proceedings and the arbitrator’s award. The Plaintiffs

rely on the fifth paragraph of § 17.2.2, which contains the

arbitration provision of the Agreement:

The decision of the arbitrator shall be final

and binding on all Shareholders and shall be

enforceable in any court of competent

jurisdiction. T he Shareholders ag ree to

exclude any right of application or a p peal to

the courts of any jurisdiction in co nnection

with any question of law arising in the course

of arb itration or with respect to any award

made

, except for enforcement purposes as stated

above. (emphasis added)

In their district court counterclaim, the TransAtlantic Affiliates

do not a ssert any vice in the making of the Agreement or their

joinder therein; neither do they contest the general applicability

of the above-quoted waiver of appeal . Rather, they take the

position that, despite its unambiguous and unco n ditional wording,

the contractual waiver of the right to appeal in any court anywhere

regarding any question of law or a ny award is inapplicable to an

ap peal based on a claim that an award was made in manifest

disregard for the law. This is so, they argue, because that

constitutes “misconduct” by the arbitrator. We perceive this

argument as advocating a policy that a general waive r of appeal

that does not expressly state that the waiver applies even to the

four grounds listed in § 10(a) of the FAA, does not preclude the

seeking of vacatur on one or more of those grounds.

Even assuming arguendo that the Agreement’s broa d and10

unconditional waiver of judicial appeal would not prohibit an

appeal gr ounded in one or more of § 10(a)’s grounds, the

Tra nsAtlantic Affiliates were not entitled to appeal the

arbi trator’s award here by asserting manifest disregard for the

law. First, we have never reversed our rejection of the “manifest

disregard for the law” standard of review of arbitration awards in

commercial contract cases. We must, therefore, reject the

TransAtlantic Affiliates position (which was successful in the

district court) equating manifest disre gard for the law with

“misconduct by the arbitrator,” the latter being one of the four

exclusive grounds listed in § 10(a) of the FAA for vacating an

arbitration award. Consequently, even when we assume without

granting that the TransAtlantic Affiliates’ waiver of appeal does

not apply to a claim of arbitrator misconduct, such an appeal

cannot be based on manifest disregar d of the law as a proxy for

such misconduct.

As signatories to the Agreement, which contains the

arbitration clause that includes the quoted waiver of appeal, the

TransAtlantic Affil iates are held to knowledge of the law of

arbitration, including the extremely narrow and chary approach of

the federal courts to an appeal of the mer its of an arbitration

award, especially when appeal has been wa ived unconditionally in

the contract. This deemed knowledge includes, i nter alia

, that the

list of grounds for review contained in § 10(a) of the FAA is

exclusive and , more importantly, that in this circuit manifest11

disregard for the law is not equated with arbitrator’s misconduct.

Thus, the district court erred as a matter of law in hearing the

appeal, which the TransAtlantic Affiliates dressed in the garb of

a counterclaim, grounded in manifest disregard of the law.

Our long-standing rejection o f that ground for vacatur in

commercial contract cases pretermits its being considered under the

aegis of any of the four gr ounds under § 10(a) e ven if appeals

based on § 10(a) are not prohibited by the waiver of appeal in the

Agreement. We must, therefore, reverse the district court’s

vacatur of the arbitration award as it applies to the TransAtlantic

Affiliates.

2. Alternative Ground for Reversal: Merits of Appeal

Furthermore, even if we assume without granting that the

waiver of appeal is inapplicable here, and assume further that, in

thi s commercial contract case governed by Texas substantive law,

manifest disregard of the law could somehow constitute misconduct

by the arbitrator, our review of the district court’s vacatur of

the award vis-à-vis the TransAtlantic Affiliates on those grounds

ultimately leads to reversal.

a. Governing Law; the Arbitration Provision

Article XVII of the Agreement contains § 17.2, which is styled

Governing Law and Dispute Resolution

. Subsection 17.2.1 specifies

that the “Agreement shall be governed and interpreted according to

the substantive law of the State of Texas.” That is followed by

subsection 17.2.2, which is the six-paragraph arbitration provision12

o f the Agreement. The first sentence of the first paragraph of

17.2.2 states:

Any and all disputes or differences relating

to, arising out of or in connection with this

Agreement which cannot be settl ed amicably

shall be finall y settled by arbitration

pursuant to this Section 17.2.2. (emphasis

added).

....

The second paragraph of 17.2.2 then reiterates:

The substantive law of Texas shall be applied

without re ference or regard to any rules and

procedures regar ding conflicts of law which

would refer the matter to the laws of another

jurisdiction.

b. The Dispute

At this juncture, the detai ls of the controversy underlying

the dispute between the two shareholder groups and their respective

guarantors are not import ant. It is sufficient unto this appeal

tha t the controversy involved accusations by the Plaintiffs that

the Defendants breached the Agreement in such a manner as to cause

the Concession Contract to be lost, thereby damaging Tarpon-Benin

and its shareholders. The dispute is a stereotypical breach of

contract controversy, and the Plaintiffs instigated arbitration in

an effort to resolve their breach of contract claims.

At the end of the day, the arbitrator ruled in favor of the

Plaintiffs, concluding that the Defendants had brea ched their

obligations under t he Agreement, causing Tarpon-Benin to violate

express obligations under the Concession Cont ract following the

initial drilling of a dry hole in Block 2, including specifically8 See supra n.3.

13

the obligations to provide a training program for the citizens of

Benin and to conduct extensive geophysical operations. This,

according to the arbitrator, resulted in the corporation’s loss of

the Concession Contract. In the arbitration proceedings, the

Plaintiffs asserted that the lo ss of the Concession Contract was

caused at least in part by TransAtlantic’s unilateral notification

to the government of Benin that TransAtlantic was “relinquishing”

its interest in Tarpon-Benin

—— a step that the Plaintiffs insisted

neither TransAtlantic nor its affiliates had the legal right to

take. This in turn prompted the Plaintiffs to refuse to accept

TransAtlantic’s “declarations of transfer.” Based on all oral and

written submiss ions, the arbitrator concluded that the

TransAtlantic Affiliates had breached the Agree ment, causing the

Pla intiffs to suffer damage of $1.35 million, plus fees and

interest. 8

c. Vacatur of Arbitration Award to Affiliates

In the Affiliates’ Lawsuit, the district court ignored the

waiver of appeal, ignored our long-standing rejection of manifest

disregard of the law as grounds for vacatur in commercial contract

cases, and proceeded to consider the meri ts of the arbitration

award against the TransAtlantic Affiliates under the manifest error

doctrine, ultimately reversing the arbitration ruling and vacating

the award. It is anything but clear, however, that we have e ver9 989 F.2d 817, 820 n.2 (5th Cir. 1993)(noting this circuit’s

refusal to adopt manifest disregard for the law as a ground for

vacatur).

10 960 F.2d 534, 539 (5th Cir. 1992)(“[T]his circuit never has

employed a ‘manifest disregard of the law’ standard in reviewing

arbitration awards”).

11 See id. at 540 (quoting Forsyth Int’l, S.A. v. Gibbs Oil Co.

of Texas , 915 F.2d 1017, 1020 (5th Cir. 1990)).

12 197 F.3d 752, 759 (5th Cir. 1999).

14 accepted the manifest error doctrine as a ground for vacating

arbitration award s in commercial contract cases in which the

sub stantive law of Texas is applicable under the Federal

Arbitration Act (“FAA”). Indeed, we expressly r e jected that

doctrine in McIlroy v. PaineWebber, Inc. 9 and R.M. Perez &

Associates., Inc. v. Welch

. 10 Those precedents not only recognize

the exclusivity of the list of four grounds for vacatur expressly

set forth in § 10 of the FAA, to wit, (1) The award was procured by

corr uption, fraud, or undue means; (2) there is evidence of

partiality or corruption among the arbitrators; (3) the arbitrators

were guilty of misconduct which prejudiced the rights of one of the

parties; or (4) the arbitrators exceeded their powers. 11 They also

eschew manifest disregard as either an addi tional ground for

vacatur or a manifestation of arbitrator misconduct.

We acknowledge that the subsequent statement in Wi lliams v.

Cigna Financial Advisers, Inc.

, 12 to the effect that “clear approval

of the ‘manifest disreg ard’ of the law standard in the review of

arbitration awa rds under the FAA” was signified by the Supreme13 First Options of Chicago, Inc. v. Kaplan

, 517 U.S. 938, 942

(1995).

14 See Smith v. Penrod Drilling Corp.

, 960 F.2d 456, 459 n. 2

(5th Cir. 1992)(acknowledging that the earlier of prior conflicting

panel decisions control).

15 Forsythe Int’l, S.A. v. Gibbs Oil Co. of Texas , 915 F.2d

1017, 1020-21 (5th Cir. 1990).

15 C ourt in F irst Options

, 13 sent a somewhat conflicting signal by

referring to dicta included in the parenthet ical citation to an

earlier case. The above-quoted statement from W illiams is likewise

dicta

, as the controversy there involved employment discrimination,

to which a different standard might apply. Furthermore, the

arbitration award in that case was affirmed, not vacated. But even

if the subject pronouncemen t in Williams were not dicta and no

distinction could be drawn on the basis of that being an employment

case, we would remain bound to follow the pronouncements in Perez

and McIlroy as earlier precedents, 14 in the ab sence of an

unequivocal and unambiguous reversal by the Supreme Court —— and,

we cannot read First Options to qualify as such for issues such as

those under consideration here.

It is no longer necessary to repeat the jurisprudential

author ity for the universally recognized proposition that

arbitration is favored. When it comes to an order of the district

court that vacates an arbitration award, our review is plenary. 1 5

And, in conducting our plenary review, we defer to the arbitrator’s16 Anderman/Smith Operating Co. v. Tennessee Gas Pipeline Co.

,

918 F.2d 1215, 1218 (5th Cir. 1990).

16 resolution of the dispute whenever possible. 16 But even if we were

to assume arguendo that the district court did not err in applying

the manifest error standard (or that we could affirm for other

reasons by applying, de novo

, one of the four standards of § 10 of

the FAA), we would reverse that court’s vacatur in the Affiliates

Lawsuit.

As noted, the Agreement specifies that the substantive law of

Texas is controlling. Without reiterating the extensive case law

cited by the parties in their respective appellate briefs, we are

convinced that the arbitrator’s award against the TransAtlantic

Affiliates cannot be reversed and vacated on the basis of manifest

disregard of Texas law. If we were authorized to review the

substance of the arbitrator’s award under a less deferential

standard, we, like the district court, might find the damages too

specula tive; but we have no such authority and neither did the

district court. Furthermore, even if we were to conclude that,

under the evidence here, the damages awarded by the arbitrator were

indeed speculative, we would not view this putative error as rising

to the level of man ifest disregard of the law. A difference of

opinion between courts as to the degree of speculation required to

cross that line does not even approach the level of egregiousness

required to constitute manifest disregard ; it amounts to nothing

more than a difference of opinion among jurists of reason.17 See

, e.g.

, Patton v. Nicholas

, 279 S.W.2d 848 (Tex. 1955);

Davis v. Sheerin , 754 S.W.2d 375 (Tex. App.——Houston [ISD Dist.]

1988, writ denied); Duncan v. Lichtenberger , 671 S.W.2d 948 (Tex.

App.——Fort Worth 1984, writ ref’d n.r.e.).

17 But the boundaries of federal courts’ latitude in this respect

are far too narrow to permit such a review and ruling by a court

that is considering enforcement of an arbitrator’s award under

circumstances such as these. Moreover, there is a surfeit of Texas

common law to the effect that majority shareholders may owe a

fiduciary-like duty to minority shareholders, casting si gnificant

doubt on the clarity and certainty of the Texas law applicable to

this issue. 17 As Texas law is, at a minimum, unclear on the

underlying contractual cause of action asserted by the Plaintiffs

in the instant arbitration proceedings, neither we nor the district

court are legally positioned to say that the arbitrator was guilty

of prejudicial misconduct, exceeded his powers, or otherwise opened

his award to the possibility of reversal by the court. We repeat

for emphasis t hat, even though we might disagree with the

arbitrator’s analysis and even though we might judge the damages to

be speculative, the acts of the arbitrator in this case fall well

short of the kind of misconduct required to constitute grounds for

vacatur. There is no hint of arbitrariness, caprice, or reckless

disregard for the provisions of Texas law g overning this matter.

As such, the district court erred as a matter of law in vacating

the ar bitration award against the TransAtlantic Affiliates on

grounds of arbitrator misconduct.18

In summary, on the basis of the parties’ waiver of the right

to appeal any aspect of an arbitration award and, alternatively, on

the basis of the court’s legal errors, first in applying the

manifest-disregard-of-the-law standard and then in misapplying it

to the instant facts, we reverse the court’s vacatur, reinstate the

award to the Bettis Affiliates, and remand for enforcement by the

court after conducting any ministerial proceedings, consistent

herewith, that might be needed to effectuate enfor cement of the

award.

C. The Guarantor Lawsuit

1. Amenability of TransAtlantic to Arbitration Unde r the

Agreement

After the Plaintiffs invoked the arbitration clause of the

Agreem ent and commenced proceedings, TransAtlantic asserted that,

as a non-shareholder, guarantor-only, signatory to the Agreement,

i t was not bound by the arbitration provisions of the Ag reement.

TransAtlantic formalized this contention in its Statem ent of

Objections filed ear ly in the arbitration proceedings. The

arbitrator rendered a preliminary decision, ho lding that both

TransAtlantic and Bettis Group were proper parties to the

arbitration, regardless of the fact that they had signed the

Agreement as guarantors only. Thereafter, however, TransAtlantic

refused to participate in the arbitration proceedings.

When, following completion of arbitration, the G uarantor

Lawsuit was instituted by the Plaintiffs to enforc e their award,19

TransAtlantic repeated its contention that it was not s ubject to

the binding arbitration provision of the Agreement. TransAtlantic

adv anced this position in the district court by filing a

count erclaim in which it reiterated the contention that the

arbitrator had rejected in his preliminary ruling, i.e., that

TransAtlantic was not subject to arbitration.

a. Waiver

As an initial content ion, the Plaintiffs insist that

TransAtlantic waived any right it might have had to challenge the

arbitrator’s preliminary ruling that TransAtlanti c is subject to

the instant arbitration. They ground this waiver claim not in the

wording of the Agreement but in Tex. Civ. Prac. & Rem. § 172.082(f)

(hereafter “82(f)”), which states:

If the arbitration tribunal rules as a

preliminary question that it has jurisdiction,

a party waives objection to th e ruling unless

the party, not later than the 30th day after

the date the party receives notice of that

ruling, requ ests the district court of the

coun ty in which the place of arbitration is

located to decide the matter.

Keepin g in mind that this enforcement action was instituted in

federal court and that TransAtlantic filed its counterclaim there,

asserting that it is not subject to arbitration, we must examine

the applicabil ity of 82(f) in the framework of the FAA and the

International Rules of the AAA, as well as the Agreement’s clauses

addressing arbitration and the choice of Texas substantive law.

First, the FAA contains no mechanism for a party in20

T ransAtlantic’s position to bring an interlocutory appeal of an

arbitrator’s ruling that such party is subject to arbit ration.

Under the FAA, a party seeking to compel arbitration can seek court

relief under § 4; a successful party can seek enforce ment of the

arbitration award under § 9; a party against which an award is made

can seek to vacate such an award under § 10 b y filing a motion

pursuant to § 12 within three months after the award is rendered.

But we have been referred to nothing in the FAA or in the AAA’s

International Rules (and have found not hing on our own) that

authorizes a party to seek an interlocutory federal court review of

a preliminary ruling by the arbitrator to the effect that the party

is subject to arbitration.

It follows, then, that if we were to view 82(f) as being

substantive in nature, pa rties situated like TransAtlantic would

have no r emedy in federal court: They could not bring

interlocutory ap peals to the district courts under the FAA; and

attempts to bring post-award petitions to vacate arbitration awards

would be thwarted as time-barred by 82( f). We conclude for two

r easons, therefore, that 82(f) does not block judicial

consideration of TransAtlantic’s challenge to its susceptibility to

arbitration on the basis of waiver.

First, we are satisfied that this provision of the Texas Civil

Practice and Remedies Code is procedural rather than substantive;

and, second, that e ven if it were substantive, 82(f) would be

preempted because it would be in direct conflict with the FAA. We18 See Asplundh Tree Expert Co. v. Bates

, 71 F.3d 592, 595 (6th

Cir. 1995).

21 conclude, therefore, that TransAtlantic did not waive its right to

challenge the arbitrator’s prelim inary determination that it was

subject to arbitration in this case. (Neither did TransAtlantic

waiv e or forfeit its right to contest the preliminary ruling by

filing objections with the arbitrator: Such limited appearances to

contest jurisdiction are not general appearan ces that have the

effect of submitting to the jurisdiction of the tribunal.)

b. Guarantors’ Agreement to Arbitrate

TransAtlantic insists that, by signing the Agreement “for the

sole purpose of g uaranteeing certain obligations” of the

TransAtlantic Affiliates as shareholders, and then on ly “to the

extent specifically provided in t his Agreement,” neither it nor

Bettis Group agreed to arbitrate, irrespective of the commitment to

arbitrate of those other signatories whose obligations under the

Agreement they guarantee. We note at the outset that, despite the

expressly limited substantive purpose of TransAtlantic’s joinder in

the Agreement, i.e., as guarantor only, its position is different

from a purely non -signatory guarantor ( one who signs a separate

guaranty) seeking to avoid arbitration. Generally, a non-signatory

guarantor to an agree ment containing an arbitration provision is

not bound by that provision; the opposite is frequently true for

signatory guarantors. 18

We also note that the posture of this case —— a signatory’s22

unilateral refusal to participate in an arbitration proceeding that

eventually produces an award against such signatory, followed by a

suit to enforce the award, in which suit the signatory counters by

asserting an affirmative defense of not having been s ubject to a

broad form arbitration clause

—— differs signif icantly from the

more common posture of a guarantor (1) as serting such an

affirmative defense in a suit to compel arbitration or (2) seeking

a declaratory judgment that i t is not subject to such an

arbitration clause. Here, the district court’s standard of review

of a ruling by the arbitrator that a signatory party is subject to

arbitration under a broad form arbitration provision is decidedly

more limited in scope and deferen tial to the arbitrator than in

either of the more familiar settings of a suit to compel

arb itration or a declaratory action, in either of which the

dis trict court, rather than the arbitrator, would have the first

bite at the apple and the arbitrator basically would have none.

Irrespective of context, however, the law is settled that, to

answer the que stion whether a signatory party has agreed to

arbitrate a dispute, two considerations must be addressed:

(1) Whether there is a valid agreement to

arbitrate between the parties; and (2) whether

the dispute in question falls within the scope

o f that arbitration agreement. When deciding

whether the partie s agreed to arbitrate the

dispute in questio n, “courts generally

...should apply ordinary state-law principles

that govern the formation of contracts.” In

applying state law, however, “due regar d must

be given to the federal polic y favoring

arbitration, and ambiguities as to the scope of19 Webb v. Investacorp., Inc.

, 89 F.3d 252, 257-58 (5th Cir.

1996)(internal citations omitted).

20 S ee American Arbitration Association, International

Arbitration Rules art. 15 (“The tribunal shall have the power to

rule on its own jurisdiction, including any objections with respect

t o the existence, scope or validity of the arbitrati o n

agreement.”); see also Tex. Civ. Prac. & Rem. § 172.082(a).

23 the arbitration clause itself must be resolved

in favor of arbitration.” The second step is

to determine “whether legal constraints

external t o the parties’ agreement foreclosed

the arbitration of those claims.” 19

It is axiomatic that, unless an arbitration agre e ment

expressly provides otherwise, the arbitrator is empowered to rule

on his own jurisdiction. 20 This includes subject matter

jurisdi ction, i.e., w hich issues are subject to arbitration and

which are outside its scope; and personal jurisdiction, i.e., who

is or is not bound to arbitra te. Here, none challenge the

jurisdiction of the arbitrator to d ecide the basic contractual

issues submitted by the Plaintiffs, but the Defendants continue to

challenge the arbitrator’s jurisdiction to decide the liability of

Bettis Group and TransAtlantic as guarantors of any award against

those whose obligations they have guaranteed under the Agreement.

Likewise, none challenge the existence or validity of the Agreement

or the arbitration provisions in it, but do challenge the

susceptibility of the two guarantors to mandatory arbitration,

relying on the express limitations of their joinder in the

Agreement to eschew amenability to arbitration.

The Agreement contains no express statement t hat the21 The instant situation is significantly different from that

in Grundstad v. Ritt

, 10 6 F.3d 201 (7th Cir. 1997), in which

neither the guara ntee nor the guarantor was mentioned in the

agreement and the arbitration clause expressly referred to the two

principals.

24 guarantors are bound to arbitrate; but neither does it contain an

express statement that the guarantors are exempt from arbitration.

Thus, in applying the rules and maxims of contract interpretation,

the arbitrator was bound to consider all facially applicable

provisions in the context of the Agreement as a whole when

determining whether subject matter jurisdiction included the power

to deci de personal jurisdiction over the guarantors and subject

matter jurisdiction over their liability as guarantors to the

claimants on any amount awarded against those whose obligations are

guaranteed. In this case, the arbitrator went the extra mile by

looking bey ond the four corners of the Agreement and hearing

extrinsic evidence affecting the jurisdictional issues.

Our examination of the Agreement as a whole, the preliminary

ruling by the arbitrator and his award, and other matters in the

record, satisfies us that the arbitrator was empowered to determine

his own jurisdiction (including jurisdiction over the guarantors),

that he exercised discr etion in making those determinations, and

that his determinations are supported by the Agreement as a whole

and the circumstances of its execution. 21

We have already noted that TransAtlantic and Bettis Group are

signatories to the Agreement, and that they expressly guarantee the25

o bligations undertaken by other parties to the Agreement, which

parties and objections are indisputably subj ect to arbitration.

Structurally, Article XVII of the Agreement addressing applicab l e

law and dispute resolution, first designates substantive law of

Texas as applicable and then, i n the first sentence of § 17.2.2,

states unequivocally and unconditionally that “ [ a]ny and all

disputes or d ifferences r elating to, arising out of or in

connection with this Agreement...shall be finally set tled by

arbitration pursuant to this Section 17.2.2” (emphasis added).

Although it is true, as strenuously insisted by TransAtlantic, that

the subsequ ent sentences of that paragraph and the remaining

parag raphs of Section 17.2.2 contain multiple references to “the

Shareholders” and none to the guarantors, the a bove-quoted first

sentence contains no limitation

—— no reference to shareholders, or

to guarantors, or to anything other than unqualified applicability

t o any and all disputes. Indeed, rather than supporting the

inference that the comm itment to settle “any and all disputes or

differences relating to, arising out of or in connection with” the

Agreement should not apply to the guarantors, the omission of the

limiting reference to shareholders from the initial sentence of

Section 17.2.2 provides support for the arbitrator’s determination

that the guarantors are subject to arbitration: I nclusio unius est

ex clusio a lterius

. And, like the position of the guarantors as

signatories to the Agreement, the statement appearing on page 2,

immediately preceding “ RECITALS ,” confirms that the guarantors “are22 See generally First Options

, 514 U.S. 938 (1995); Kona Tech.

Corp. v. S. Pac. Transp. Co. , 225 F.3d 595 (5th Cir. 2000).

23 See Personal Se curity & Safety Systems Inc. v. Motorola

Inc.

, 297 F.3d 388, 394 (5th Cir. 2002); see also Neal v. Hardee’s

Sys., Inc.

, 918 F.2d 34, 38 (5th Cir. 1990)(“We hold that when the

parties included a broad arbitration clause in the essential

[contracts] covering ‘any and all disputes,’ they intended the

clause to reach all aspects of the parties’ relationship....”).

26 entering into this Agreement,” albeit for the limited p urpose of

guaranteeing certain obligations.

Irrespective, then, of our standard of review —— whether,

pursuant to FAA, one that is extremel y deferential to the

arbitrator, or completely de novo

, 22 or somewhere in between (such

as abu se of discretion) —— we ultimately agree with the

arbitrator’s conclusion that (1) he has the power to determine his

own jurisdiction , including the substantive question of the

responsibility of the guarantor for any award in arbitration

against those whose commitments were guaranteed, an d the i n

personam amenability of the guarantors to arbitration; (2) that,

when the Agreement is read as a whole, both guarantors are bound to

arbitrate; and (3) as guarantor, TransAtlantic is bound jointly and

severally with those shareholders of Tarpon-Benin against whom the

award in arbitration was rendered. These conclusions comport with

t he frequently repeated maxims that (1) “[W]here the parties

include a broad arbitration provision in an agreement that is

‘essential’ to the overall transaction, we will presume that they

intended the clause to reach all aspects of the transaction” 23 and24 See

, e.g.

, Penzoil Exploration and Prod. Co. v. Ramco Energy

Ltd. , 139 F.3d 1061, 1068 (5th Cir. 1998).

27 (2) that arbitration clauses are to be liberally read to implement

congressional policy expressed in the Federal Arbitration Act. 24

Given the totally broad form arbitration prov ision of the

Agreement, the reco gnition of the guarantors as parties to the

Agreement for the limited purpose of guaranteeing obligations

created in the Agreement, and the joinder of the guarantors as

signatories to the Agreement, we are convinced that the arbitrator

had and correctly exercised the power to determine his jurisdiction

over TransAtlantic as guarantor and over the extent of

TransAtlantic’s obligation as guarantor. But even if our review is

de novo

, we would agree with the arbitrator’s jurisdictional

ruling. The fact that TransA tlantic boycotted the arbitration

proceedings after the arbitrator ruled preliminarily that

TransAtlantic was subject to arbitration is of no moment. The

arbitrator restricted his award vis-à-vis TransAtlantic to its role

as guarantor, so TransAtlantic has no basis f or complaining that

the arbitrator exceeded hi s authority in that regard. And,

inasmuch as we have concluded earlier t hat the district court’s

va catur of the arbitrator’s award against the TransAtlantic

Affiliates must be reversed and the award enforced, our conclusion

that the arbitrator was correct in holding TransAtlantic subject to

arbit ration not only requires reversal of the district court’s

jurisdictional ruling to the contrary, but also requires reversal28

of that court’s vacatur of the award against TransAt lantic as

guarantor.

III. Recap

For the foregoing reasons, we reverse the distric t court’s

vacatur of the arbitra tor’s award as having been granted in

manifest disregard of Texas law governing contractual damages,

thereby constituting misconduct by the arbitrator. And although we

agree that TransAtlantic did not waive its right to challenge the

arbitrator’s preliminary ruling on jurisd iction, we also reverse

the court’s reversal of the arbitrator’s ruling that TransAtlantic

is subject to arbitration. We reverse as well the court’s vacatur

of the arbitrator’s award against TransAtlantic as guarantor. We

therefore reinstate the award of the arbitrator in all respects and

remand this case to the district court with instructions to enforce

the award of the arbitrator in favor of the Plaintiffs in both of

the cases that are consolidated in this appeal, doing so against

the several Defendants-Appellees in the Affiliates Lawsuit, No. 01-

20379, and jointly and severally ag ainst TransAtlantic Petroleum

Corp., Defendant-Appellee in the Guarantor Lawsuit, No. 01-20377.

REVERSED and REMANDED with instructions.