Opinion ID: 780894
Heading Depth: 2
Heading Rank: 3

Heading: General Trading Account Award

Text: 21 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 award related to parties' general trading account, finding that the panel majority ignored the unambiguous terms of the underlying contracts. 22 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. 23 The panel majority described the dispute concerning the general trading account as focusing on four (4) accounting issues: 24 (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. 25 Arbitrator's Award And Dissent at 23. 26 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. 27 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. 28 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. 29 Fourth, the panel concluded that the final balance of GSI's trading account with Howard should be a credit of $679,000. 30 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: 31 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 the arbitration panel ignored those contractual terms, the court vacates that portion of the arbitration award. 32 Dist. Ct. Order at 6 (internal citation omitted). 33 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. 34 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. 35 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. 36 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 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. 37 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. 38 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. 39 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.