F ILED U.S. COURT O F APP EALS EL EV EN TH C IRC UIT February28 , 2 006 T HOMA S K. KA HN CLERK [PUBLIS H] IN THE UN ITED STATES COURT OF APPEALS FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ ____ ____ ____ N o. 05- 1115 3

____ ____ ____ ____ ____ ____ D. C. Docket N o. 04-03255 -CV -H S-S B.L. HARBERT INTERNATIONAL, LLC, Pl ai nt iff -Ap pe ll an t, ve rs us HERCULES STEEL COMPANY, Defen da nt -Ap pe ll ee.

____ ____ ____ ____ ____ ____ Appeal f rom the United State s District Court f o r t h e N o rt h e rn D i s t r i c to f

A l ab a ma

____ ____ ____ ____ ____ ____ _ (F eb ru ar y 28 , 200 6) Befo re ANDERSON, BLACK an d C ARNES, Cir cu it Ju dg es . CAR NE S, Circuit Judge:2

The F ederal A rbitration Act ( FA A) liberally endorses and encourages ar bitratio n a s an a lte rn at ive to lit iga tio n. Moses H. Cone Mem ’ l Hosp. v. Merc ury Constr. Corp. , 460 U. S. 1, 24, 103 S. Ct. 927, 941 (198 3); Caley v. G ulfstream Aero sp ace C or

p., 4 28 F.3d 13 59 , 13 67 (11 th Cir . 20 05 ); Hi ll v. Re nt -A-Ct r., Inc ., 398 F.3d 128 6, 1288 (11th Cir. 2005 ). T he r ea sons f or thi s stro ng, pr o- ar

bitratio n policy are “ to relieve congestion in the courts and to prov ide parties with an alternative m ethod for disp ute resolution that is speedier and less costlythan li ti ga ti on .” Cal ey , 42 8 F .3d at 1 36 7 (q uo ti ng Ind us . Ris k In su rers v. M.A.N. Gutehoffnungsh utte Gm

bH, 141 F.3d 1434 , 1440 (11th Cir. 1998)) (internal quot ation m arks om itted)); see a lso Circuit City Stores, Inc. v. A dam s, 532 U. S. 105, 125 n. 2, 121 S . Ct . 130 2, 131 4 n. 2 ( 2001 ) (“ It w as ne ed ed

to ‘ en ab le bus ine ss m ento se ttl e the ir

dis put es e xpe dit iou sly

a nd e co nom ic al ly , a nd w ill r ed uc e the co nge sti on i n th e Fe de ra l and S ta te c ourts. ’ ”) ( em pha sis om itt ed ) (quot ing H eari ng o n S . 4 2 1 3 a n dS . 4 2 1 4 B e f o r e aS ub c o mm . o f

t h e S e n a t e C o mm . o n t h e J u d i c i a ry, 67th Cong., 4th Sess., 2 (1923)); Allied-Br uce T erm inix Cos. v. D obso n, 513 U. S. 265, 280 , 115 S . Ct . 834 , 842 –43 (1 995) ( “ [T ] he A ct , by a voi din g th e de lay

a nd ex pe ns e o f li ti ga ti on , wil l ap pe al to bi g b us in es s an d l it tl e b us in es s al ik e, . . . co rp or at e int er es ts [ an d] . . . ind ivi dua ls. ”) ( quot ing S . Re p. N o. 68– 536, a t 3 (1 92 4) (in te rn al qu ot at io n m ark s o m it te d a nd fir st alt erat io n a dd ed ).3

The la udatory goals of the FAAwill be a chieved onlyto the extent that co urts e nsur e ar

bitratio n is a n a lte rn at ive to lit iga tio n, not a n a ddi tio na l l ay er

in a pr otr ac te d c ont es t. I f w e pe rm it pa rt ie s w ho l ose in ar bitratio n to f

re el y r el iti ga te their cases in court, arbitration will do nothi ng to reduce congestio n in the judicial sy stem ; dispu te resolution will be slower instead of fa ster; and rea ching a final de ci sio n w ill c ost

m or e ins te ad

of le ss. T his c as e is a

goo d e xa m

ple of the poo r loser problem

and it provid es us with an opportu nity to discus s a potential sol uti on. I. B. L . H ar be rt I nte rn at ion al , L L C, is a D el aw ar e co rp or at ionba se d in Bi rm ing ha m , A la

ba m a, w hic h m ak es m one y in larg e co nstru ct ionpr oj ec ts inc lud ing som e done f

or the gov er

nm en t. H er cu le s S te el Co m pany is a N orth Carolina corporation based in Fay etteville, N orth Carolina, that m anufactures steel use d inc onstru ct ion . On Augus t 25, 2000, the United States A rm y Corp of E ngin eers, Savannah District, aw arded H arbert a contract to construct an office com plex for the Special Ope rat io ns Fo rces at F or t Br ag g, No rth Caro li na . Harbert, in turn, aw arded H er cu le s a$1, 197, 000 ste el f ab ri catio n and e re ct ionsub co ntr ac t onS ep te m be r 21, 2000 .4

The subcontract betw een the parties includes a provision that dispu tes be tw ee n th em

w ill be sub m itt ed

to bin din g arb itr at ionund er the auspi ce s of

the A m er ic anA rb itr at ionA sso ci at ion , usi ng the Co nstru ct ionI ndus tr y A rb itr at ion Ru le s. La ter, the parties executed a separate A greem ent to Arbitrate, which re co gni ze s th at

the F ed er al A rb itr at ionA ct , 9 U . S. C. § 1, w oul d c ontro l arb itr at ion pr oc ee din gs. T he sub co ntr ac t f

urthe r pr ovi de s th at

H ar be rt w ill iss ue a“ Pr ogr es s Sch edul e” fo r th e p ro

ject a nd wil l p ro vi de a co py to e ach su bc on tra ct or . It states tha t the sub co ntr ac tor

m ust pe rf orm a ll w ork “ in a cc or da nc e w ithP ro gr es s Sc he dul e as pr ep ar ed

by [ H ar be rt ] a nd a s it

m ay be r ev ise d f

ro m ti m e to t im e w ith the Subcontractor’ s inpu t.” T he sub co ntr ac t a lso pr ovi de s th at the sub co ntr ac tor

is l i ab l e f o r d a ma g e s c au s e db y i t s f

a i l u r e t o c o mp l e t e i t s w o rkw i t h i n t h e t i me provided in the “ Proj ect Sc hedule.” T he term s “ Progress Sc hedule” and “ Proj ect Sch edul e” ar e n ot de fin ed . Harbert’ s failure to define those term s m ight h ave gone unno ticed if it had cr eate d on ly

one sc he dul e fo r the pr oj ec t, but H ar be rt de ve lop ed

tw o, w hic h it refe rred to as t he 20 00 an d 3 00 0 s ch edul es . H ar be rt c la im s th at

it c re at ed the 300 0 sc he dul e to u

pda te the Co rp s of

E ngi ne er s a

bout the pr ogr es s of

the pr oj ec t, a nd th e 2 00 0 s ch edul e to m an ag e th e wor k o f it s s ub co nt ract or s, i nc lu di ng Hercu le s.The parties selec ted th e H onora ble F rank H . McF adden

as arbitrator. J udg e McF adden serv ed 1 as a j udg e in the United States District Court for the N orthern District of A labam a from 19 69 to 19 82, actingas Chie f Judg e for the las t nine y ears o f his tenure. He then serv ed a s g eneral coun sel for one of Alab am a’s larg est co nstruction com panies from

19 82 to 19 95. 5 In an y ev en t, n ei th er s ch edul e is m en ti on edin th e su bc on tra ct . The dispute-generating problem is that the 200 0 schedule contain ed ear lier co m pl et io n d at es th an th e 3 00 0 o ne . Ac cording to th e 2000 schedu le, He rcules was to be gi n wo rkon Marc h 5 , 20 01 , and fin is h i t b y Ju ne 6, 2 00 1. T ha t di d no t happen. H ercules began w ork in April of 2001, and did no t finish it un til January of 200 2. T ha t c om

ple tio n of the w ork w as , how ev er , w ith in the m or e le nie nt deadlines of the 300 0 schedule. D iss at isf ie d w iththe ti m el ine ss o f H er cu le s’ w ork, H ar be rt sto ppe d m ak ing pa ym en ts t o H er cu le s and d em an de d th at it pay de lay da m ag es e xc ee din g th e am ou nt du e Hercu le s o n t he su bc on tra ct . Inr es pons e, on J anua ry 21, 200 3, H er cu le s f

ile d ade m an d f

or a rb itr at ionw iththe A m er ic anA rb itr at ionA sso ci at ion , se ek ing to re co ve r the ba lanc e due on the sub co ntr ac t, oth er da m ag es , int er es t, a nd at to rn ey ’s fees . H ar

be rt c ount er cl ai m ed

f or de lay da m ag es , a cc el er at ionc ost s, m isc el lane ous ba ck

c ha rg es , int er es t, a nd a tto rn ey ’ s f ee s. The arbitration proceedings to ok place on seven day s in February and May 2004 . A s is custom ary

in constructio n indu stry

arbitrations, the parties dec ided 16

no t t o h av e a co ur t re po rte r ta ke do wn t he pro ceed in gs . W e can, how ev er , te ll from the parties’ briefs and statem ents during oral ar gum ent in this Court what the ir pr inc ipa l po sit ion s and arg um en ts w er e in those pr oc ee din gs. W e knowthat the m ai n di sa gr ee m en t of the part ie s w as about

w hic h of the two pro gr es s s ch edul es th atHarb ert is su edap pl ie d t o Her cu le s. H er cu le s to ok the posi tio n th at

the onl y one that a

ppl ie d to it

w as the 300 0 S ch ed

ule , w hose de ad lin es it

ha d m et . T he se ve ra l arg um en ts H er cu le s m ad e in s uppo rt of thi s posi tio n in cl ude d on e tha t the sub co ntr ac t l an gua ge w as a m big uous be ca

use it re fe rr ed to both a“ Pr ogr es s S ch ed ule ” an d “ Pr oj ec t S ch ed

ule , ” but did not de fi ne ei th er t erm . He rcules ar gued that th e subcontract provisio ns had to b e interpreted in li gh t o f an im

pl ie d e le m en t o f rea so na bl en es s. It also argued that Harbert had ab an done d th e 2000 sc he dul e the re by auth or iz ing H er cu le s to pe rf orm in acco rd an ce wi th th e 3 00 0 S ch edul e. Additionally , H ercules prese nted evidence tha t i t di d no t have not ic e of the 200 0 S ch ed

ule a t the ti m e it be ga n w ork onthe pr ojec t. H ar be rt , on the oth er

hand, c ont en de d th at

the sub co ntr ac t l an gua ge unam bigu ouslygave it com

plete authority

to set the schedule which would m ean th atHercu le s was bo un d b y th e 2 00 0 s ch edul e. H ar

be rt a sse rt ed that the 200 0 schedule was the “ Progress Sc hedule” refe rred to in the subcont ract bec ause it wa s7

th e o nl y sch edul e Harb ert is su edto all of i ts su bc on tra ct or s. A ft er c onsi de ri ng the part ie s’ opp osi ng arg um en ts and a vol um ino us r ec or d, th e arb it rat oris su edhi s “ Awardof Arb it rat or ” o n S ep te m be r 8, 2 00 4. That award de nie d H er cu le s’ de lay

da m ag es c la im , de nie d a ll of H ar be rt ’ s c ount er cl ai m s, de nie d bo th p ar

tie s’ c la im s f

or a tto rn ey ’ s f

ee s, a nd aw ar de d H er cu le s $3 69, 775, rep res en ti ng th e su bc on tra ctba la nc e an d t he in te res t o n t ha t s um . Be ca use the aw ard, not coun ting in terest, wa s nearly $100 ,000 less than the am ount the parties had agreed w as the subcont ract balance, He rcules believed that the arbitrator had m ad e a s cri ve ne r’s orm at he m at ic al erro r. It sub m itt ed

ar eque st f

or c lari fi catio n whi ch po in te d o ut th e p ro bl em . H ar be rt m ove d f or c lari fi catio n and m odi fi catio n of the a w ar d bu t on dif fe re nt g ro unds . H ar

be rt ’ s m oti on p oin te d ou t tha t the a w ar d di d no t c ont ai n th e spe ci fi ci ty

the part ie s ha d a gr ee d th ey ne ed ed , a nd i t r eque ste d th at the a rb itr at or m odi fy it to pr ovi de “ en oughdis cu ssi on” on e ac h of the six “ Is sue s f

or D ec isi on” tha t ha d be enide nti fi ed

by the part ie s to e nable the m to unde rs tand the r es ult

a nd the a rb itr at or ’ s r ea sons f

or gr an tin g or

de ny ing a ny

spe ci fi c ite m

of da m ag es . T he first of those six iss ues was: “ What was the schedule to w hich Her cules wa s boun d und er its subcontract with H arbert?” O n O ct obe r 18, 200 4, the a rb itr at or iss ue d hi s “ D isp osi tio n f or Appl ic at ion8

of Modification/Clarification of the Aw ard, ” a dec ision docum ent which corr ected th e sc riv en er’s err orby inc reas in g t he awardfro m $3 69 ,77 5 t o $ 46 9,7 75 . T he doc um en t a lso r ev ea le d th e ar bitrator ’ s f

ind ing s onthe six iss ue s, statin g in an sw er to the f ir st o ne that H er cu le s w as c ontra ct ua lly bound t o th e m or e ge ne ro us

“ pr oj ec t sc he dul e subm itt ed to the Co rp s of

E ngi ne er s w hic h w as use d to bui ld the pr oj ec t [ the 300 0 sc he dul e] . . . not the six te enw ee k sc he dul e uni la te ra lly se t by Harbert [ the 2000 schedule] .” T he a rb itr at or state d ina nsw er

to an oth er

of the six iss ue s th at

H ar be rt w as not e nti tle d to a ny

da m ag es be ca

use “ [t ] he de lay

a nd ac ce le ratio n dam ag es a re ne ce ssari ly de pe nde nt o n th e cl ai m ed pr oj ec t sc he dul e which has been found not applicable.” O n N ove m

be r 18, 200 4, H ar

be rt f ile d inthe dis tr ic t c ourt a m oti on t o va cate the a rb itr at iona w ar d, c ont en din g th at the a rb itr at or ’ s r at ion al e re fl ec te d am an if es t di sr eg ardof t he ap pl ic ab le law. He rcules oppo se d H ar be rt ’ s m oti on w ithone of it s o wn, as ki ng th e co ur t t o c on fir m th e award pu rs ua nt to 9 U.S.C. § 9. On Fe b ru ar y 7 , 2 0 0 5 , t h e d i s t ri ct co u rt en t er ed an o rd erd en yin g Ha rb er t ’s m ot io n t o v acat e th e award an d g ran ti ng Hercu le s’ m ot io n t o c on fir m it . Whil e the re w as no transc ri pt o f the a rb itr at ionhe ar ing , the dis tr ic t c ourt ha d be fo re it the pr e- a nd p ost -h eari ng b ri ef s th at both part ie s ha d su

bm itt ed to the a rb itr at or , a nd an aff idavit from

Harbert’ s lead attorney

during th e ar

bitration proceeding . (A9

co py of that a ff idavit is not in the r ec or d onappe al , a nd H ar be rt ha s m ad e no effort to inform

us of its contents .) T he dis tr ic t c ourt i nte rp re te d th e ar bitrator ’ s aw ar d and h is d isp osi tio n of H ar be rt ’ s po st- aw ar d m oti on a s c onc lud ing that the r ea son H er cu le s’ c ondu ct did not br ea chthe sub co ntr ac t i s th at it w as bound b y

the 300 0 sc he dul e not

the 200 0 sc he du le . T he c ourt no te d th at the a rb itr at or

ha d be fo re him

e vid en ce of

the 200 0 sc he dul e an d so m e ev ide nc e tha t i t ha d be ense nt t o H er cu le s be fo re the su bc on tra ctwas s ig ne d. Fi nd in g n o e vi de nc e o f m an ife st di sr eg ardforth e la w, the court on that basis distin guish ed this case from Montes v. Shear son Lehm an Bro s., In c., 12 8 F .3d 14 56 , 14 61 (11 th Cir . 19 97 ). As a result, the court e ntered j udgm en t e nf

or ci ng the a rb itr at iona w ar d. U nha ppy w iththe dis tr ic t c ourt’ s j udgm en t, a s it ha d be enw iththe ar bitrator ’ s de ci sio n, H ar

be rt f ile d anot ic e of

appe al a nd a

m oti on f or stay of the jud gm en t p en di ng ap pe al . T he dis tr ic t c ourt gr an te d th e stay , a nd w e nowde ci de th e ap pe al . II . Judicial review of com

m ercia l arbitration awards is narrowly lim ited und er the F ed er al A rb itr at ionA ct . S ee 9 U . S. C. § 10 –11. T he F A A pr es um es the co nf irm at ionof

a rb itr at iona w ar ds, se e D av is v . P ru de nti al S ec . , I nc . , 59 F . 3dThe four statutory g rounds for va catingan ar bitration decision ar e: 2 (1 ) whe re the awa

rd wa s p ro c ur e d b y

c or ru pti on , f ra ud , o r u nd ue me ans ; (2) whe re the re w as evide nt partiality or cor ruption in the arbitrators, or either of the m; (3) whe re the arbitrators wer e guilty of misconduct in re fusingto postpone the hear ing, upon suf

ficient c ause shown, or

in refusingto hear

evidenc e per

tinent and materia l to the controver sy ; or of any other misbehavior

by which the r ights of a

ny party may have be en pre

judiced; or (4) whe re the arbitrators exceede d their powe rs, or so imperf ectly executed them that a mutual, final, a

nd definite a

war d upon the subject matter submitt ed wa s not made. 9 U.S.C. § 10(a). 10 1186 , 119 0 ( 11th C ir . 199 5) ; L if ec ar e In t’ l, I nc . v. CD Me d. , I nc . , 68 F . 3d 4 29, 433 (1 1thCi r. 199 5) , a nd f ed er al c ourts s houl d de fe r to an arb itr at or ’ s de ci sio n whe ne ve r po ss ib le , Rob bi ns v. Day, 95 4 F .2d 67 9, 6 82 (11 th Cir . 19 92 ). The FAA se ts o ut f our narr owba se s f

or va catin g an aw ar d, non e of w hic h are e ve n r em ote ly applicable in this case. 2 In addition to thos e four statutory grounds for vacatur, w e have said that there ar e three non-statu tory grounds . An aw ard m ay be vacated if it is arbitrary an d c ap ri ci ous, A ins w orth v . S kur nic k, 960 F . 2d 9 39, 941 ( 11th C ir . 199 2) , if en fo rc em en t of

the a w ar d is c ontrary

to publ ic pol ic y , D el taA ir L ine s, I nc . , v. A ir Line P ilots Ass’ n, Int’ l, 861 F. 2d 66 5, 671 (11th Cir. 1988), or if the aw ard w as m ad e in m an if

es t di sr eg ar d f

or the law , Mo nte s, 128 F . 3d a t 14 64. H ar be rt ’ s c ha lle nge to the a rb itr at or ’ s aw ar d r es ts s ole ly on i ts c ont en tio n11

th atth e arb it rat oract edin m an ife st di sr eg ardof t he law. T his gr ound f or va catin g ana rb itr at iona w ar d r equir es c le ar e vid en ce that the a rb itr at or w as “ co nsc iou s of the law and deliberately

ignore[d] it.” Montes, 128 F.3d at 1461. Ashowing that the a rb itr at or

m er el y m isi nte rp re te d, m iss ta te d, or m isa ppl ie d th e lawis insufficient. Id. at 1461– 62. W e re view de novo the dist rict court’ s legal co nc lu si on s o n t hi s i ss ue . Peeb le s v . Merr il l Lync h, Pi erce , Fen ne r & Sm it h In c., 43 1 F .3d 13 20 , 13 24 (11 th Cir . 20 05 ). T his Co urt f

ir st a dopt ed

m an if es t di sr eg ar d f

or the lawa s aba sis f

or ch al le ngi ng an arb itr at iona w ar d inthe Mo nte s c as e. 128 F . 3d a t 14 61. I t r em ai ns the onlycase in w hich we have e ver found the exceptional circum stances that sa tis fy the e xa ct ing r equir em en ts o f thi s e xc ep tio n. S ee , e . g. , U niv . Co m m onsU rb an a, L td. v. U niv er sa l C onstru ct or s, I nc . , 304 F . 3d 1 331, 133 8 ( 11th C ir . 200 2) (“ [W ] e ha ve no i ndi catio n of the a rb itr at or s’ r ea sons f or [ the ir a w ar d] , a nd thus, w e ha ve no r ea son to b el ie ve that the y dis re gard ed

the lawin doi ng i t” ); Br ow n v. IT T Co nsum er

F in. Co rp . , 211 F . 3d 1 217, 122 3 ( 11th C ir . 200 0) ( ev enif the ar bitrator appl ie d th e w ro ng l eg al standard , appe llant d id n ot s howthat “ tha t this al le ge d e rr or

w as int en tio na l or

that the a rb itr at or

m ad e a co nsc iou s de ci sio n no t t o fo llo wthe appr opr ia te le ga l st an da rd ”) ; S co tt v. P ru de nti al S ec . , I nc . , 141 F . 3d 1007 , 101 7 n. 21 ( 11th C ir . 199 8) ( ap pe llant’ s arg um en ts d id n ot “ ap pr oa chthe12

ty pe of disregard for the law that we found in Montes” and the record and briefs show ed “ nothin g m or e than a

dis ag re em en t ov er

the appl ic at ionof

the lawnot

it s m an ife st di sr eg ard ”). T he Mo nte s li tig at iona ro se out of a dis put e be tw ee n an e m

plo y er a nd em plo y ee about

ove rt im e pa y . S ee Mo nte s, 128 F . 3d a t 14 58. T he c ontro lli ng law , the F ai r L ab or

S tandard s A ct , w as a ga ins t the e m plo y er ’ s po sit ion , a nd d

ur ing the a rb itr at ionpr oc ee din gs i ts atto rn ey r ep eate dly

ur ge d th e ar

bitrator s to dis re ga rd the r equir em en ts o f the A ct a nd r ule f or the e m plo y er on the ba sis of equitable consi derations. Id. at 1459. H e told the arbitrators that: “ y ou as an ar bitrator a re not gui de d stri ct ly

to fo llo wc as e lawpr ec ed en t . . . y ou c ana lso do w ha t’ s f ai r an d j ust

a nd e qui ta

ble a nd tha t i s w ha t [ m

y c lie nt] is as kin g y ou t o do in this c as e. ” I d. I nst ea d of c ont en din g th at

the lawc oul d be appl ie d f av or ab ly to his c lie nt’ s po sit ion , the a tto rn ey a rg ue d th e ar

bitrator s th at

“ in this c as e thi s lawis not r igh t, ” an d “ [t ] he lawsay s on e thi ng. Wha t e qui ty de m an ds and r equir es a nd is sayin g i s an ot he r.” Id . He exp li ci tl y ask edth e arb it rat or s n ot to fol lo w th e la w. Id . ( “ T hus, a s I sa id i n m

y A nsw er , a s I sa id b ef

or e in m y O pe nin g, a nd I nowa sk y ou in my

Closing, not to follow the FL SAif y ou determ ine that she’ s not an exem pt em ploy ee. ”) The arbitrators in Montes foun d in favor of the em ploy er, and in their award13

they repea ted the plea of the em ploy er’ s attorney

that they disregard the law . Id. at 1461 . T he re w as nothin g inthe tr an sc ri pt o f the pr oc ee din gs o r the a w ar d it se lf to ind ic at e tha t the a rb itr at or s ha d no t he ed ed that pl ea , a nd the e vid en ce a nd l awdid not sup port the a w ar d. I d. a t 14 61–6 2. Inhol din g th at

the a rb itr at or s ha d a ct ed

in m an if es t di sr eg ar d of

the lawin Montes, w e disavowed any notio n that an arbitrator’ s decision “ can be re viewed on the ba sis that i ts c onc lus ionor r ea soni ng i s le ga lly

e rr one ous. ” Id . a t 14 61; accord id. at 1460 (“ This does not m ean that arbitrators c an be rever sed for er rors or m isi nte rp re ta tio ns o f law . ”) . A nd w e em pha siz ed the r ar e na tur e of

the circum stances in that case. Id. at 1461– 62. Four f acts cam e together in Montes and will seldom

rec ur: Those fa cts are that: 1) the party who obtained the favorable aw ard ha d c onc ed ed

to the a rb itr at ionpane l tha t i ts p osi tio n w as not supp orted by

the law , which required a diffe rent result, and had urged the pane l no t t o f

oll owthe law ; 2) that bl at an t a ppe al to dis re ga rd

the laww as e xpl ic itl y

not ed in the a rb itr at ionpane l’ s aw ar d; 3 ) ne ith er in the a w ar d it se lf

nor a ny w he re e lse in the r ec or d is the re a ny ind ic at ion tha t the pane l di sa

ppr ove d or

r ej ec te d th e sugg es tio n th at it r ule co ntr ar y to law ; and 4 ) the e vid en ce to supp ort the a w ar d is a t be st m arg in al . Id . at 1 46 4 (C arn es , J., co nc ur rin g) . Whil e Mon te s sh ow s th e ex ce pti on, the r ule is shown ine ve ry

oth er c as e14

wher e w e have decided if the arbitration loser had establish ed m anifest disregard of the law . I n a ll of

tho se oth er

c as es the los er

in ar bitratio n w as the los er

in our de ci sio n. S ee P ee ble s, 431 F . 3d a t 13 27 ( 11th C ir . 200 5) ; U niv . Co m m ons, 304 F.3 d a t 1 33 8; Bro wn, 2 11 F.3d at 1 22 3; Sco tt , 14 1 F .3d at 1 01 7 n .21 . The f acts of this case do not com e w ithin shout ing di stance of the Montes ex ce pti on. T his is a ty

pic al c ontra ct

ua l di sput e in whic h th e pa rt ie s di sa gr ee about the m eanin g of

te rm s of the ir a gr ee m en t. T he re a re a rg um en ts t o be m ad e on b oth sid es of the c ontra ct

ua l i nte rp re ta tio n is sue , a nd the y w er e m ad e to the a rb itr at or before being m ade to the district court and then to us. E ven if we we re c onvi nced tha t w e w oul d have de ci de d th is c ontra ct ua l di sput e dif

fe re ntl y , that w oul d no t be ne ar ly e noug h to se t a sid e the a w ar d. S ee P ee ble s, 431 F . 3d a t 13 26 ( “ [A ] li tig an t ar gui ng tha t an arb itr at or a ct ed in m an if es t di sr eg ar d of

the lawm

ust sho w som ethin g m or e than am isi nte rp re ta tio n, m iss ta te m en t, or m isa ppl ic at ionof

the law . ”) ; B ro w n, 211 F . 3d a t 12 23 ( “ A rb itr at iona w ar ds w ill not be r ev er se d du e to ane rr one ous int er

pr et at ionof

lawby the a rb itr at or . ”) ; M ont es , 128 F . 3d a t 14 61 (“ A n arb itr at ionboard

that i nc or

re ct ly int er pr et s th e lawha s no t m an if es tly disregarded it. I t has sim ply m ade a legal m istake.”) . H ar be rt ’ s arg um en t tha t the a rb itr at iona w ar d c le ar ly c ontra dic ts an e xpr es s te rm of the c ontra ct

is sim ply a nothe r w ay

of say ing that the a rb itr at or c le ar ly15

er re d, a nd e ve n asho w ing of ac le ar e rr or on the part

of the a rb itr at or

is not en ough . T he a rb itr at ionlos er m ust e sta bli sh m or e than th at

in or de r to h av e the aw ar d se t a sid e, the m or e be ing that the a rb itr at or a ct ua lly r ec ogni ze d ac le ar

r ule of lawa nd d el ibe rate ly

c hose to ign or e it. P ee ble s, 431 F . 3d a t 13 26 ( “ A m an if es t dis re ga rd f or the lawinv olv es ac onsc iou s and d el ibe rate de ci sio n to ign or e the ap pli ca ble law . ”) ; i d. a t 13 27 ( “ A t m ost , the a rb itr at ionpane l m ay ha ve m is un de rs to od th e eff

ect an d wei gh t t o b e g iv en to cas es cit edby the pa rti es . On the record bef

ore us, w e cannot find proof that the arbitrators rec ogni zed a c lear rule of lawand chose to ign ore it. Ther efore, we cannot find that th e ar bitrators ac te d inm an if

es t di sr eg ar d f

or the law . ”) ; U niv . Co m

m ons, 304 F . 3d a t 13 38 (“ [W ] e cannot

f ind pr oof that the a rb itr at or s r ec ogni ze d ac le ar r ule of lawa nd, furtherm ore, chose to igno re it. Ther efore, we cannot find that th e ar bitrators acted in m anifest disregard for the law . . . . ”); Br own, 211 F.3d at 1223 (“ Brow n argues t h a tt h e a r

b i t r a t o r ap p l i e dt h e w r o n g l e g a l t e s ti n a s s e s s i n g h i s r e t a l i a t i o n c l a i m, but doe s no t a sse rt

that this a lle ge d e rr or

w as int en tio na l or

that the a rb itr at or m ad e a co nsc iou s de ci sio n no t t o f oll owthe appr opr ia te le ga l st an da rd . E ve n if the a rb itr at or

appl ie d th e w ro ng s tandard , w hic h w e ne ed not de ci de , no m an if

es t di sr eg ardforth e la w has be en sh own , and Bro wn’s ar gu m en t fa il s.”) . H ar be rt ’ s un co nvi nc ing pos iti on t o th e co ntr ar y ha s tw o le gs, ne ith er

of16

w hic h w ill sup port i t. O ne is H ar be rt ’ s in sis te nc e tha t the c ontra ct is pa rt of the lawthe a rb itr at or

m ust appl y , so tha t any

m isa ppl ic at ionof

the c ontra ct

is a m isa ppl ic at ionof

the law . T he c ontra ct

is not part of the appl ic ab le law , but

the ag re em en t of

the part ie s to w hic h th e lawis ap pli ed . I n any e ve nt, a s w e ha ve alrea dy explained, er

rors of laware not enou gh to justify setting asid e an arb it rat io n a ward . T he oth er le g of H ar be rt ’ s po sit ionis dic taf

ro m our U niv er sity

Co m m ons op in io n. Inthat c as e a de ve lop er a nd c onstru ct ionc om

pa ny a rb itr at ed

the ir dis put e ove r the c om

pa ny ’ s a lle ge d f

ai lur e to m ee t i ts c ontra ct ua l de ad lin es . 304 F. 3d a t 13 33–3 4. T he a rb itr at or s f ound in favor of the de ve lop er , a w ar din g it los t rental incom e for a

particular tim e period even thoug h the projec t had been co m ple te d be fo re that pe ri od b eg an . S ee id. a t 13 36–3 7. T he c onstru ct ion co m pa ny a rg ue d th at

w as e rr or

w hic h e sta

bli she d th e ar

bitrator s ha d a ct ed

in m an if es t di sr eg ar d f

or the lawa nd o n th at

ba sis the c om

pa ny m ove d to se t a sid e the a w ar d. I d. T he dis tr ic t c ourt i nst ea d e nte re d an or de r co nf irm ing the a rb itr at or s’ a w ar d, an d w e re fu se d to r ev er se it s or de r on the gr ound that the a rb itr at or s ha d a ct ed in m an if es t di sr eg ar d of

the law . U niv . Co m

m ons, 304 F . 3d a t 13 45 ( va catin g th e di st ric t co ur t’s o rd er an d re m an di ng forfin di ng s wi th res pe ctto an ot he r gr ou nd ).17

Indoi ng s o, w e em

pha siz ed that the re w as no s how ing in the r ec or d of the arb it rat or s’ th in ki ng ot he r th an th e award it se lf. Id . at 1 33 7. We exp la in edth atwe co uld not a sc er ta in f ro m the “ ba re -b one s st at em en t of the a w ar d” w ha t pr inc ipl e of lawthe a rb itr at or s a lle ge dly c hose to ign or e. I d. B ec au se the re w as no transc ri pt of the pr oc ee din gs, w e co uld not e xa m ine the a rb itr at or s’ que sti ons or r em ar ks f or poss ibl e ev ide nc e of

the ir le ga l r at ion al e. I d. T he re a lso did not appe ar to be a ny clear rule of lawthat the arbitrators m ight h ave broken. I d. at 1338. W e re iterated in U niv er sity

Co m m ons the hol din g of

our de ci sio ns tha t “ [t ] o m an if es tly dis re ga rd the law , one m

ust be c onsc iou s of

the lawa nd d el ibe rate ly

ign or e it. ” I d. at 133 7 ( quot ing Br ow n, 211 F . 3d a t 12 23 ( al te ratio n inor igi na l) ). T he a rb itr at ion loser having failed to establis h a m anifest disregard for the law, we rej ected that attack on the award, holding: “ W e cannot find proof that the arbitrators reco gn iz eda cl ear rul e o f la w and , fur th erm or e, ch os e to ig no re i t. The refo re, we can no t fi nd th e arb it rat or s ac te d i n m an ife st di sr eg ardof t he law.” I d. at 13 38 . Face d with that result and reasoning in University Com m ons, Harbert fo cu se s o n a sen te nc e o f di ct a fro m th e o pi ni on in th atcas e: “ The or et ic al ly, we supp ose, the ar

bitrators’ approach to the award of dam ages could be in di sregard of the lawaltogether, if

it differe d from

the provisio ns of the contract.” Se e id. a t 13 38 n . 7. T his one se nte nc e of spe cu la tiv e dic tain one f ootnot e of

one18

opin ion cannot plausibl y

be construed as setting o ut a rule of law —that m is in te rp ret at io n o f a co nt ract m ay co ns ti tu te a m an ife st di sr eg ardof t he law. T ha t i s e spe ci al ly

tr ue sin ce suc h ar

ule w oul d be c ontrary

not onl y to the hol din g an d e xpr es s r at ion al e of

U niv er sity

Co m m ons, but a lso to the se ttl ed

E le ve nth Ci rc uit pr ec ed en t w hic h go ve rn ed that de ci sio n. U nde r the w el l- es ta bli she d lawof t h i s ci rc u i t , wh i ch we h av e a l re ad y d i s cu s s ed , i f w e b el i ev e t h at t h e a rb i t ra t o r’s approach differ ed from

the provisio ns of the contract, at m ost that on ly establishes the a rb itr at or

e rr ed , w hic h is not

e noug h to c onc lud e the re w as am an if es t dis re ga rd of the law . S ee Mo nte s, 128 F . 3d a t 14 61. T he re is no e vid en ce that the a tto rn ey f or H er cu le s ur ge d th e ar

bitrator to dis re ga rd the law , a nd H ar

be rt doe s no t e ve n su gge st tha t ha ppe ne d. T he re is no evidence that the arbitrator dec ided the disp ute on the basis of anything other than his be st j udgm en t—

w he the r ri ght

or w ro ng— of

howthe lawappl ie s to the f ac ts o f the case. T here is, in short, no evidence that the arbitrator m anifestly disregarded t h e l aw . Th e o n l y m an i fe s td i s re g ar do f t h e l aw ev i d en ti n t h i s ca s e i s Ha rb er t ’s refusal to ac cept the lawof this circuit which narr owly circum scribes j udicial re vie wof a rb itr at iona w ar ds. B y

a tta ck ing the a rb itr at iona w ar d inthi s c as e H ar be rt ha s sh ow n a t be st an in dif fe re nc e to t

he lawof our c ir cu it gove rn ing the subj ec t. H ar

be rt ’ s r ef usa l t o a cc ep t tha t the re is no b as is i n th e lawf or a tta ck ing19

the a w ar d ha s c om e at

ac ost to the party

w ithw hom

H ar be rt e nte re d in to the arb it rat io n a gr eem en t an d t o t he jud ic ia l s y st em . I n li tig at ing thi s c as e w ith out goo d ba sis thr oughthe dis tr ic t c ourt and n ow thr oughthi s C ourt, H ar

be rt ha s de pr ive d H er cu le s and the j udi ci al sy ste m it se lf of the pr inc ipa l be ne fi ts o f ar bitratio n. I nst ea d of

c ost ing le ss, the r es olu tio n of th is di sp ut e h as co st m or e th an it wou ld ha ve ha d t he re b een no arb it rat io n a gr eem en t. In ste ad of be ing de ci de d so one r, it

ha s take n lo nge r than it

w oul d have to de ci de the m atte r w ith out

a rb itr at ion . I nst ea d of

be ing r es olv ed

out sid e the c ourts, thi s dis put e ha s r equir ed

the ti m e an d e ff

ort of the dis tr ic t c ourt and this Co urt. Whe n aparty

w ho l ose s an arb itr at iona w ar d a ssu m es ane ve r- say -d ie attit ude a nd dra gs the dis put e thr oughthe c our t sy ste m w ith out a n ob j ec tiv el y re as o n ab l e b el i ef

i twi l l p re v ai l , t h e p ro m i s e o f a rb i t ra t i o n i s b ro k en . Ar b i t ra t i o n ’s al lur e is d ep en de nt u

pon the a rb itr at or

be ing the la st d ec isi on m ak er in al l bu t the m ost unu sua l c as es . T he m or e ca se s th er e ar e, li ke thi s on e, in w hic h th e ar bitrator is o nly the f ir st s top a lon g th e w ay , the le ss arb itr at ionthe re w ill be . I f ar bitratio n is to be a m eaningful alternative to litig ation, the parties m ust be able to trust th at th e arb it rat or ’s dec is io n wi ll be ho no redso on er i ns te adof l at er. Co urts c an not

pr ev en t part ie s f

ro m tr y ing to co nve rt

a rb itr at ionlos se s in to co urt vi ct or ie s, but

it m ay be that w e can and s houl d in sis t tha t i f a pa rty on the20

short end of an arbitration awar d attacks that award in court without any rea l legal ba sis f or doi ng s o, that party

sho uld pay sanc tio ns. Ar ea lis tic thr eat of sanc tio ns m ay dis co ur ag e ba se le ss l iti ga tio n ov er a rb itr at iona w ar ds and h el p f ulf ill the pur pose s of the pr o- ar

bitratio n po lic y

c ont ai ne d inthe F A A . I t i s an id ea w orth co ns id eri ng . W e ha ve c onsi de re d or de ri ng H ar be rt a nd i ts c ouns el to showc au se w hy sa nc ti on s s ho ul d n ot be im po se d i n t hi s ca se , bu t h av e d eci de d a ga in st do in g s o. T ha t de ci sio n is the pr oduc t of the c om bin ed f or ce of thr ee r ea sons , w hic h w e lis t in r ev er se or de r of

w ei ght . F ir st, the re is spe cu la tiv e dic tain the U niv er sity Co m m ons opi nio n th at

pr ovi de d H ar

be rt w ithali ttl e co ve r fo r its a ct ion s, althoug h this factor alone does not carry m uch weight. The r

ule that prior panel pr eced en t t ru m

ps lat er d eci si on s, t o s ay

no th in g o f la te r di ct a, is so well kn own an d w el l e sta

bli she d th at

law y er s and the ir

c lie nts sho uld

be he ld r es pons ibl e fo r know ing that r

ule a nd a ct ing a cc or din gly . S ec ond, H er cu le s di d no t m ove f or sanctions against Har

bert in either the district court or in this Court. While we can raise and consider the issue of sanctions on our own, af ter giving th e parties notice an d an op portun ity

to be he ar d, the la ck

of int er es t i n sanc tio ns s how n by the party to who m an y m on et ary sa nc ti on s wo ul d b e p ai d i s a f act orto co ns id er. T hir d, a nd m ost

im portantl y , w he n H ar

be rt too k it s arb itr at ionlos s in to the21

district court and then pu rsued this app eal, it did no t have the benefit of the notice an d w ar nin g th is o pin ionpr ovi de s. T he not ic e it pr ovi de s, hop ef ull y to ev enthe le as t a stu te r ea de r, is tha t this Co urt i s e xa spe rate d by tho se w ho a tte m

pt t o salvage arbitration losses th rough lit igation that has no so und b asis in the law ap pli ca ble to ar bitratio n aw ar ds. T he w ar nin g th is o pin ionpr ovi de s is that i n or de r to fur th er t he pu rp os es of t he FAA and to pro te ctarb it rat io n a s a r em ed y we are r ead y , wil li ng , and ab le to co ns id er i m po si ng san ct io ns in ap pr op ria te cas es . Whil e H ar

be rt a nd i ts c ouns el did

not ha ve the be ne fi t of

thi s no tic e an d w ar

nin g, th os e who pu rs ue si m il ar l it ig at io n p os it io ns in th e fu tu re wi ll . AFFIRM ED.