Nitram, Inc. v. Industrial Risk

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 94-2982

D.C. Docket No. 85-1770-CIV-T-17

INDUSTRIAL RISK INSURERS, BARNARD

& BURK GROUP, INC., BARNARD AND

BURK ENGINEERS AND CONSTRUCTORS, INC.,

ISI, INC, AMERICAN HOME ASSURANCE CO.,

Defendants--Third-Party-Plaintiffs--Appellants,

versus

M.A.N. GUTEHOFFNUNGSHÜTTE GmbH,

Third-Party-Defendant--Appellee--Cross-Appellant.

No. 94-2530

D.C. Docket No. 85-1770-CIV-T-17

HOLLAND & KNIGHT, MARK E. GRANTHAM,

Appellants,

versus

INDUSTRIAL RISK INSURERS, BARNARD

& BURK GROUP, INC., BARNARD AND

BURK ENGINEERS AND CONSTRUCTORS, INC.,

ISI, INC, AMERICAN HOME ASSURANCE CO.,

Defendants--Third-Party-Plaintiffs--Appellees.

Appeals from the United States District Court

for the Middle District of Florida

(May 22, 1998)

Before TJOFLAT and EDMONDSON, Circuit Judges, and NANGLE*, Senior

District Judge.

_____________________________________________

*Honorable John F. Nangle, Senior U.S. District Judge for the

Eastern District of Missouri, sitting by designation.

TJOFLAT, Circuit Judge:

Industrial Risk Insurers, Barnard and Burk Group, Inc.,

Barnard and Burk Engineers and Constructors, Inc., ISI, Inc., and

American Home Assurance Company1 appeal from the district court’s

denial of their motion to vacate an international commercial

arbitration award. On cross-appeal, respondent M.A.N.

Gutehoffnungshütte GmbH (“MAN GHH”) challenges the district

court’s denial of pre-judgment interest. In a separate appeal,

MAN GHH challenges the district court’s imposition of sanctions

under Federal Rule of Civil Procedure 11. We affirm the district

court’s denial of the motion to vacate the award. We vacate the

district court’s denial of prejudgment interest, however, and

remand for reconsideration of that issue. We also reverse the

district court’s imposition of Rule 11 sanctions.

I.

This complex commercial litigation began over a decade ago,

in 1985.2 Nitram, Inc., a Florida nitric acid manufacturer,

contracted with Barnard and Burk Group, Inc., a Texas

corporation, for the provision and installation of a tail gas

expander in Nitram's Tampa, Florida nitric acid manufacturing

1

The only interest of American Home Assurance in this

appeal is that it is among the parties against whom costs were

imposed by the arbitral panel. As stated infra part I.C, we

affirm that costs award. We omit any further reference to

American Home Assurance for clarity’s sake.

2

We recite only those facts and prior proceedings

necessary to an understanding of the issues raised on appeal.

3

plant.3 Barnard and Burk Group then engaged Barnard and Burk

Engineers and Constructors, Inc., a Louisiana corporation, to

perform the design engineering work for the installation, and

engaged ISI, a Louisiana corporation, to perform the construction

work.4 (We refer hereinafter to the Barnard and Burk Group,

Barnard and Burk Engineers and Constructors, and ISI,

collectively, as “Barnard and Burk”). Barnard and Burk Group in

turn contracted to purchase the tail gas expander from M.A.N.

Maschinenfabrik Augsburg-Nürnberg AG, a German turbine

manufacturer. MAN GHH, the Appellee/Cross-Appellant in this

appeal, is a spin-off corporation of, and the successor-in-

interest to, M.A.N. Maschinenfabrik Augsburg-Nürnberg AG.

MAN GHH was responsible for designing, manufacturing, and

delivering a functional tail gas expander and for providing

technical guidance regarding its installation; Barnard and Burk

was responsible for the piping required to put the expander into

service.

The tail gas expander was installed in the Tampa plant in

late 1984 and early 1985. On January 16, 1985, during start-up

procedures, moving and stationary components of the expander came

in contact with each other. This caused a "wreck" of the

3

A tail gas expander is essentially a turbine which generates

electricity from waste gasses given off in the nitric acid

manufacturing process.

4

Barnard and Burk Engineers and Constructors, Inc., and

ISI, Inc., are both wholly-owned subsidiaries of Barnard and Burk

Group.

4

machine, deforming its rotor, scarring its stator casing and

destroying seals. Parts of the expander were returned to Germany

for repair and the piping was modified. On March 23, 1985,

during a second attempt to start the turbine, the expander

suffered a second wreck. See Nitram, Inc. v. Industrial Risk

Insurers et al., 848 F.Supp. 162, 164 (M.D. Fla. 1994). The

machine was rebuilt again and after further piping modifications,

it ran successfully; the two wrecks, however, had resulted in

months of down time and millions of dollars in damages.

Nitram had purchased business risk insurance from Industrial

Risk Insurers (“IRI”), a Hartford, Connecticut, consortium of

insurance companies that provides business risk insurance to

certain large manufacturing, processing, and industrial

concerns.5 IRI refused to pay Nitram for the losses caused by

the first wreck under Nitram's business risk policy with IRI,

arguing that the wrecks were caused by Barnard and Burk's poor

design and defective piping, and that the losses due to the

wrecks therefore were not covered by the policy. IRI

acknowledged that the policy did cover some of the losses due to

the March wreck and made payment for those losses under the

policy. In October of 1985, Nitram sued both IRI and Barnard and

Burk in Florida state court, arguing inter alia that one of them

5

Several other companies were parties to the litigation in

the district court in various capacities, but were not parties to

the arbitral proceeding that gives rise to this appeal, and are

consequently not parties to this appeal. We omit reference to

them for clarity’s sake.

5

had to pay for the remaining losses: if Barnard and Burk was at

fault for the wrecks, Nitram argued, then Barnard and Burk was

liable; if Barnard and Burk was not at fault, then the loss due

the wrecks was covered by Nitram’s policy with IRI. IRI, as

Nitram's subrogee, cross-claimed against Barnard and Burk for the

amount of the partial payment IRI had made to Nitram under its

policy. Defendants IRI and Barnard and Burk then removed the

case to the district court on grounds of diversity, and Barnard

and Burk counterclaimed against Nitram, alleging various breaches

of contract by Nitram.

Barnard and Burk proceeded to file a third-party claim

against MAN GHH, asserting that MAN GHH's faulty expander, and

not Barnard and Burk’s design or piping, caused the two wrecks,

and that MAN GHH was therefore required to indemnify Barnard and

Burk for various costs and for lost business. Nitram then

settled with IRI, and its claims against IRI were dismissed. As

a result, IRI was subrogated to Nitram's claims against Barnard

and Burk.

In April of 1987, MAN GHH moved to compel arbitration of

Barnard and Burk's third-party claim against it, pursuant to an

arbitration provision in its contract with Barnard and Burk for

the design, manufacture, and purchase of the expander. That

provision, as amended, provided for binding arbitration in Tampa

under the rules of the American Arbitration Association and under

Florida law. The district court ordered arbitration pursuant to

this provision in July of 1987.

6

In December of 1987, Nitram amended its complaint to state

claims directly against MAN GHH. Nitram brought tort and breach-

of-warranty claims alleging that the expander was defectively

designed and manufactured by MAN GHH, and demanding

indemnification in case Nitram was held liable to Barnard and

Burk. IRI, as Nitram’s subrogee, added a cross-claim against MAN

GHH for good measure. In August of 1988, MAN GHH moved for, and

the district court ordered, arbitration of these claims as well.

Barnard and Burk then settled with Nitram, and with IRI,

leaving the arbitrators to determine:

1. Barnard and Burk's third-party complaint against MAN GHH;

2. Nitram's complaint against MAN GHH; and

3. IRI's cross-claim against MAN GHH as Nitram's subrogee.

All of these claims turned on whether the two wrecks were caused

by MAN GHH's expander or by Barnard and Burk's design and piping.

The arbitration panel heard testimony in January and March of

1993.

Also in March of 1993, while the arbitration proceedings

were pending, Barnard and Burk moved for Rule 11 sanctions

against MAN GHH, arguing that MAN GHH had improperly attempted to

relitigate the issue of the arbitral venue, which had already

been decided by the district court. The district court agreed

and imposed sanctions upon MAN GHH’s counsel in July of 1993.

See Nitram, Inc. v. Industrial Risk Insurers, 149 F.R.D. 662

(M.D. Fla. 1993).

In May of 1993, the arbitrators returned an award in favor

7

of MAN GHH, concluding that Barnard and Burk's design and piping,

not MAN GHH's tail gas expander, had caused the two wrecks. The

panel also awarded MAN GHH costs and conversion rate

compensation.

Barnard and Burk then moved the district court to vacate the

arbitration awards, on grounds that the prinicipal arbitral award

was “arbitrary and capricious” and that the arbitration panel

improperly and prejudicially admitted certain testimony and

evidence, and that the costs award and conversion rate

compensation award should be vacated along with the principal

award. The district court denied the motion and confirmed the

panel’s awards. See Nitram, 848 F.Supp. 162. Barnard and Burk

now appeals the denial of that motion, asking four questions:

1. Whether the arbitrators' failure to conduct the

arbitration in strict conformity with the agreement of the

parties required the district court to vacate the principal

arbitral award;

2. Whether the award should be vacated because of the

panel's admission of 1) a technical report that was proffered at

a relatively late date in the proceedings, and 2) the testimony

of an expert who had been previously retained by IRI and who

provided opinions against Barnard and Burk's interests;

3. Whether the district court abused its discretion in

determining that the arbitration awards were not “arbitrary and

capricious;” and

4. Whether the conversion rate and costs awards should be

8

vacated along with the principal award.

On cross-appeal, MAN GHH challenges the district court’s

refusal to award to MAN GHH prejudgment interest from the date of

the last arbitral award through the date of the district court’s

judgment confirming the arbitral award. MAN GHH also brings a

separate appeal challenging the district court’s imposition of

Rule 11 sanctions.

I.

As a threshold matter, we must determine the source of our

jurisdiction. We must inquire sua sponte into the source of our

jurisdiction whenever it might be in question. See Miscott Corp.

v. Zaremba Walden Co., 848 F.2d 1190, 1192 (11th Cir. 1988). The

district court proceeded in the belief that its jurisdiction was

grounded in diversity, and that its treatment of the arbitral

proceedings was therefore controlled by Chapter 1 of the Federal

Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16 (1994), which covers

domestic arbitral proceedings. We conclude that the district

court was in error, and hold that the case is controlled by

Chapter 2 of the FAA, 9 U.S.C. §§ 201-208, which covers

international arbitral proceedings.

The instant case presents an issue of first impression in

this court: Do the New York Convention on the Recognition and

Enforcement of Foreign Arbitral Awards (the “New York

Convention”), and thus the provisions of Chapter 2 of the FAA,

govern an arbitral award granted to a foreign corporation by an

9

arbitral panel sitting in the United States and applying American

federal or state law? We hold that they do.

The New York Convention was drafted in 1958 under the

auspices of the United Nations. See Convention on the

Recognition and Enforcement of Foreign Arbitral Awards,

opened for signature June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No.

6997, 330 U.N.T.S. 3. The United States acceded to the treaty in

1970, and Chapter 2 of the FAA was passed that same year. The

purpose of the New York Convention, and of the United States'

accession to the convention, is to “encourage the recognition and

enforcement of international arbitral awards,” Bergesen v. Joseph

Muller Corp., 710 F.2d 928, 932 (2d Cir. 1983), to “relieve

congestion in the courts and to provide parties with an

alternative method for dispute resolution that [is] speedier and

less costly than litigation.” Ultracashmere House, Ltd. v.

Meyer, 664 F.2d 1176, 1179 (11th Cir. 1981). See also generally

Leonard V. Quigley, “Accession by the United States to the United

Nations Convention on the Recognition and Enforcement of Foreign

Arbitral Awards,” 70 Yale L.J. 1049 (1961) (recounting the

deliberations of the New York Convention and describing

accession’s benefits for the U.S.). The Convention, and American

enforcement of it through the FAA, “provide[] businesses with a

widely used system through which to obtain domestic enforcement

of international commercial arbitration awards resolving contract

and other transactional disputes, subject only to minimal

standards of domestic judicial review for basic fairness and

10

consistency with national public policy.” G. Richard Shell,

“Trade Legalism and International Relations Theory: An Analysis

of the World Trade Organization,” 44 Duke L.J. 829, 888 (1995).

The New York Convention is incorporated into federal law by

the FAA, which governs the enforcement of arbitration agreements,

and of arbitral awards made pursuant to such agreements, in

federal and state courts. See Allied-Bruce Terminix Cos., Inc.

v. Dobson, 513 U.S. 265, 269-73, 115 S.Ct. 834, 837-39, 130

L.Ed.2d 753 (1995). Chapter 2 of the Act, 9 U.S.C. §§ 201-208,

mandates the enforcement of the New York Convention in United

States courts. See 9 U.S.C. § 201. Chapter 2 generally

establishes a strong presumption in favor of arbitration of

international commercial disputes, see Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 638-40, 105 S.Ct.

3346, 3359-61, 87 L.Ed.2d 444 (1985), and creates original

federal subject-matter jurisdiction over any action arising under

the Convention. See 9 U.S.C. § 203; H.R. Rep. No. 91-1181, at 2

(1970), reprinted in 1970 U.S.C.C.A.N. 3601, 3602 (“Section 203

gives original jurisdiction over any action or proceeding falling

under the Convention to the district courts of the United States

regardless of the amount in controversy.”). As an exercise of

the Congress’ treaty power and as federal law, “[t]he Convention

must be enforced according to its terms over all prior

inconsistent rules of law.” Sedco, Inc. v. Petroleos Mexicanos

Mexican Nat’l. Oil Co. (Pemex), 767 F.2d 1140, 1145 (5th Cir.

1985).

11

The Convention by its terms applies to only two sorts of

arbitral awards: 1) awards made in a country other than that in

which enforcement of the award is sought, and 2) awards “not

considered as domestic awards in” the country where enforcement

of the award is sought. It is apparent that the arbitral award

at issue in the instant case does not fall within the first

category. We hold, however, that it does fall within the second

category. Section 202 of the FAA provides that all arbitral

awards arising out of commercial relationships fall under the

Convention, except for those awards that “aris[e] out of . . . a

[commercial] relationship which is entirely between citizens of

the United States . . . .” 9 U.S.C. § 202.6 We read this

provision to define all arbitral awards not “entirely between

citizens of the United States” as “non-domestic” for purposes of

Article I of the Convention. We join the First, Second, Seventh,

6

The entire section reads:

An arbitration agreement or arbitral award arising out

of a legal relationship, whether contractual or not,

which is considered as commercial, including a

transaction, contract, or agreement described in

section 2 of this title, falls under the Convention.

An agreement or award arising out of such a

relationship which is entirely between citizens of the

United States shall be deemed not to fall under the

Convention unless that relationship involves property

located abroad, envisages performance or enforcement

abroad, or has some other reasonable relation with one

or more foreign states. For the purpose of this

section a corporation is a citizen of the United States

if it is incorporated or has its principal place of

business in the United States.

9 U.S.C. § 202.

12

and Ninth Circuits in holding that arbitration agreements and

awards “not considered as domestic” in the United States are

those agreements and awards

which are subject to the Convention not because [they

were] made abroad, but because [they were] made within

the legal framework of another country, e.g.,

pronounced in accordance with foreign law or involving

parties domiciled or having their principal place of

business outside the enforcing jurisdiction. We prefer

this broad[] construction because it is more in line

with the intended purpose of the treaty, which was

entered into to encourage the recognition and

enforcement of international arbitration awards.

Bergesen, 710 F.2d at 932 (emphasis added) (internal citation

omitted); see also Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys

“R” US, Inc., 126 F.3d 15, 18-19 (2d Cir. 1997); Jain v. de Méré,

51 F.3d 686, 689 (7th Cir. 1995) (stating that the New York

Convention and § 202 “mandate[] that any commercial arbitral

agreement, unless it is between two United States citizens,

involves property located in the United States, and has no

reasonable relationship with one or more foreign states, falls

within the Convention”); Ministry of Defense of the Islamic

Republic of Iran v. Gould Inc., 887 F.2d 1357, 1362 (9th Cir.

1989) (holding that New York Convention applies when arbitral

“award (1) . . . arise[s] out of a legal relationship (2) which

is commercial in nature and (3) which is not entirely domestic in

scope”, and that the award at issue was “obviously not domestic

in nature because Iran [was] one of the parties to the

agreement”); Ledee v. Ceramiche Ragno, 684 F.2d 184, 186-87 (1st

Cir. 1982) (stating that Chapter 2 mandates enforcement of a

13

written commercial arbitral agreement when one of the parties to

the agreement is not an American citizen). Specifically for

purposes of the case sub judice, we hold that an arbitral award

made in the United States, under American law, falls within the

purview of the New York Convention--and is thus governed by

Chapter 2 of the FAA--when one of the parties to the arbitration

is domiciled or has its principal place of business outside of

the United States.

MAN GHH is a German corporation. The arbitral award granted

to it by the Tampa panel is therefore non-domestic within the

meaning of § 202 of the FAA and article 1 of the New York

Convention.7 We therefore hold federal subject-matter

jurisdiction over this appeal.

II.

Having established the source of our jurisdiction, we move

to address the appeal on the merits. The Tampa panel’s arbitral

award must be confirmed unless appellants can successfully assert

one of the seven defenses against enforcement of the award

enumerated in Article V of the New York Convention.8 See

7

The appellants argue that the award at issue does not fall

under the Convention because MAN GHH's American subsidiary was

also a party to the arbitration. The presence of the subsidiary

does not, however, take the award out of the purview of the

Convention, so long as the foreign parent was a party to the

proceeding.

8

Article V reads:

1. Recognition and enforcement of the award may be

14

refused, at the request of the party against whom it is

invoked, only if that party furnishes to the competent

authority where the recognition and enforcement is

sought, proof that:

(a) The parties to the agreement . . . were, under

the law applicable to them, under some incapacity, or

the said agreement is not valid under the law to which

the parties have subjected it or, failing any

indication thereon, under the law of the country where

the award was made; or

(b) The party against whom the award is invoked

was not given proper notice of the appointment of the

arbitrator or of the arbitration proceedings or was

otherwise unable to present his case; or

(c) The award deals with a difference not

contemplated by or not falling within the terms of the

submission to arbitration, or it contains decisions on

matters beyond the scope of the submission to

arbitration, provided that, if the decisions on matters

submitted to arbitration can be separated from those

not so submitted, that part of the award which contains

decisions on matters submitted to arbitration may be

recognized and enforced; or

(d) The composition of the arbitral authority or

the arbitral procedure was not in accordance with the

agreement of the parties, or, failing such agreement,

was not in accordance with the law of the country where

the arbitration took place; or

(e) The award has not yet become binding on the

parties, or has been set aside or suspended by a

competent authority of the country in which, or under

the law of which, that award was made.

2. Recognition and enforcement of an arbitral award

may also be refused if the competent authority in the

country where recognition and enforcement is sought

finds that:

(a) The subject matter of the difference is not

capable of settlement by arbitration under the law of

that country; or

(b) The recognition or enforcement of the award

would be contrary to the public policy of that country.

15

Imperial Ethiopian Gov't v. Baruch-Foster Corp., 535 F.2d 334,

335-36 (5th Cir. 1976);9 see also National Oil Corp. v. Libyan

Sun Oil Co., 733 F. Supp. 800, 813 (D. Del. 1990). The

appellants bear the burden of proving that any of these seven

defenses is applicable. See Imperial Ethiopian Gov't, 535 F.2d

at 336.

Only two of the seven enumerated defenses might apply to the

instant case. The first is that found in Article V(1)(d), which

provides that a court may refuse to confirm an international

arbitral award if “the arbitral procedure was not in accordance

with the agreement of the parties.” The second is that found in

Article V(2)(b), which provides that a court may refuse to

enforce an arbitral award if “the recognition or enforcement of

the award would be contrary to the public policy of” the country

where enforcement is sought.

The appellants argue that the procedures of the Tampa panel

were not in accordance with the parties' arbitration agreement,10

Convention on the Recognition and Enforcement of Foreign Arbitral

Awards, art. 5, opened for signature June 10, 1958, 21 U.S.T.

2517, 2520, 330 U.N.T.S. 3, reprinted in 9 U.S.C.A. § 201 note

(West supp. 1997). The New York Convention’s enumeration of

defenses against enforcement is exclusive. See part II.C, infra.

9

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th

Cir. 1981) (en banc), this court adopted as binding precedent all

decisions of the former Fifth Circuit handed down prior to

October 1, 1981.

10

The appellants make this assertion in support of their

argument that the arbitration proceedings did not conform to the

requirements of Chapter 1 the FAA. The nonconformity of arbitral

procedures to the agreement of the parties “is a defense under

both the [FAA] and the New York Convention. The wording is

16

and that the award therefore should not have been confirmed.

They argue that the panel should not have considered the contents

of a technical report on the wrecks provided by the German

technical institute Rheinisch-Westfälischer Technischer

Überwachung Verein (the “TÜV report”), because that report was

provided to the appellants at a relatively late date, very

shortly before the proceedings began. In considering that

report, the appellants argue, the arbitration panel violated the

rules of the American Arbitration Association, which were the

agreed-upon rules of procedure for the arbitration. The

appellants also assert that the panel should not have heard the

testimony of Donald Hansen, a piping expert who had previously

been retained by Respondent IRI to inspect the tail gas expander

onsite at the Tampa plant after the first wreck and who was

directly involved in the redesign of the expander before the

second wreck. Allowing this testimony, the appellants argue,

violated “the well-established public policy protecting . . .

fundamental principles of fairness and professional conduct.”

The appellants also assert a defense that is not enumerated by

the New York Convention: that the arbitral award should be

slightly different but there is no reason to think the meaning

different.” Lander Co. v. MMP Invs., Inc., 107 F.3d 476, 481

(7th Cir. 1997) (internal citation omitted). We therefore treat

the appellants' argument that the nonconformity of the arbitral

procedures to the agreement of the parties violated Chapter 1 of

the FAA as an argument that that nonconformity was a violation of

the New York Convention and Chapter 2. Likewise, we treat the

appellants’ argument that the admission of Hansen’s testimony was

a violation of public policy warranting vacatur of the award

under Chapter 1 as an argument for vacatur under Chapter 2.

17

vacated on the ground that it is “arbitrary and capricious.”

We review de novo the district court's determinations that

the procedures observed by the arbitrators were in accordance

with the agreement of the parties, that the admission of Hansen's

testimony was not violative of public policy, and that the award

was not “arbitrary and capricious.” See First Options of

Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-49, 115 S.Ct. 1920,

1926, 131 L.Ed.2d 985 (1995) (requiring de novo review of

questions of law involved in a district court’s refusal to vacate

an arbitral award). We hold that the admission of the TÜV report

was in accordance with the AAA rules and therefore with the

agreement of the parties. We also hold that the admission of

Hansen's testimony was not a violation of public policy of the

sort required to sustain a defense under the New York Convention.

We further hold that no defense against enforcement of an

international arbitral award under Chapter 2 of the FAA is

available on the ground that the award is “arbitrary and

capricious,” or on any other grounds not specified by the

Convention.

A.

Rule 3 of the AAA's Supplementary Procedures for

International Commercial Arbitration provides that

[a]t the request of any party, the AAA will make

arrangements for the exchange of documentary evidence

or lists of witnesses between the parties. In

international cases, it is important that parties be

able to anticipate what will transpire at the hearing.

18

By cooperating in an exchange of relevant information,

the parties can avoid unnecessary delays.

The TÜV report was provided to the appellants on Jan. 8, 1993--

the Friday before the Monday when the arbitration proceedings

began--and was not admitted into evidence by the arbitrators

until March 26, 1993. The appellants objected to its admission

at that time and were allowed to cross-examine Hansen about the

institute's report and about his conclusions based on it. The

appellants also rebutted Hansen’s testimony with testimony from

experts of their own.

MAN GHH did produce the TÜV report very shortly before the

commencement of the arbitration proceedings. But arbitration

proceedings “need not follow all the ‘niceties’ of the federal

courts; [they] need provide only a fundamentally fair hearing.”11

11

The appellants rely on this language from Grovner as an

independent ground for their argument that the arbitral award

should not be enforced: they argue that, because the TÜV report

was admitted into the arbitral proceedings on such short notice,

and because Hansen’s testimony was admitted, the proceedings were

fundamentally unfair, and the awards arising from that proceeding

should be vacated. As a threshold matter, we note that this

argument assumes that a defense against enforcement of an

international arbitral award is available on the ground that the

arbitral proceeding is “fundamentally unfair.” This is an open

question. See infra part I.C (discussing exclusivity of the New

York Convention’s enumeration of defenses against enforcement).

We need not decide this question, however, because it is apparent

that the admission of Hansen’s testimony and the relatively late

provision of the TÜV report did not render the proceedings

fundamentally unfair. The appellants had ample opportunity to

rebut the report and Hansen’s testimony, and in fact did so with

expert witnesses of their own. Any undue prejudice caused by the

admission of Hansen’s testimony and of the TÜV report was

therefore cured sufficiently to ensure that the proceedings were

not rendered fundamentally unfair by the admission of these

materials.

19

Grovner v. Georgia-Pacific, 625 F.2d 1289, 1290 (5th Cir. Unit B

1980).12 “An arbitrator enjoys wide latitude in conducting an

arbitration hearing. Arbitration proceedings are not constrained

by formal rules of procedure or evidence.” Robbins v. Day, 954

F.2d 679, 685 (11th Cir. 1992), overruled on other grounds,

Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985.

Arbitration rules, such as those of the AAA, are intentionally

written loosely, in order to allow arbitrators to resolve

disputes without the many procedural requirements of litigation.

The AAA's Rule 3 is a prime example. It does not require

parties to provide all documents by any certain deadline; rather,

it notes the importance of predictability in the proceedings and

of the efficient exchange of relevant information, and provides

only that “the AAA will make arrangements for the exchange of

documentary evidence.” There is thus no notice requirement in

Rule 3 that MAN GHH could have violated; instead, arbitrators are

left wide discretion to require the exchange of evidence, and to

admit or exclude evidence, how and when they see fit. This is

the rule to which the parties agreed, and we therefore cannot say

that the relatively late provision of the TÜV report, and its

admission by the panel, constituted a failure of the panel to

12

In Stein v. Reynolds Securities, Inc., 667 F.2d 33 (11th

Cir. 1982), this court adopted as binding precedent all decisions

of Unit B of the former Fifth Circuit handed down after September

30, 1981.

20

adhere to the parties' agreement.13

B.

The appellants also argue that the award should be vacated

on the ground that the arbitration panel improperly heard

testimony from Hansen, a piping expert who was retained by

appellant IRI to inspect the tail gas expander casing onsite at

the Tampa plant after the first wreck and who was directly

involved in the redesign of the expander casing before the second

wreck. The arbitration panel called Hansen to testify sua

sponte, after the appellants objected to MAN GHH's attempt to

call him.

The appellants assert that “[f]ederal and Florida cases

uniformly prohibit 'side-switching,'” that is, testimony against

a party's interest by an expert witness formerly retained by that

13

Respondents also argue that the admission of the TÜV report

at a relatively late date violated the panel's own prehearing

order. That order provided that

[e]ach side shall submit its expert witnesses' reports,

witness depositions, or excerpts, to be relied upon,

and expert witness summaries/affidavits, which shall

include the experts' backgrounds and history, in

quadruplicate, to the Association, for transmittal to

the Arbitrators, by June 12, 1992.

The admission of such documents after June 12, 1992, in

contravention of the panel’s order, might or might not violate

the agreement of the parties. We need not reach that question,

however, because the TÜV report was an exhibit, not an “expert

witness[]' report[], witness deposition[] . . . excerpt[] . . .

expert witness summar[y,] [or] affidavit[].” Its production was

therefore not required by the prehearing order, and that order

was not violated by its late production.

21

party.14 Such testimony, they argue, violates “the well-

established public policy protecting . . . fundamental principles

of fairness and professional conduct.” The appellants cite no

rule of procedure or of evidence, and not a single case,

establishing the purported “rule against side-switching.”

Rather, the appellants cite cases prohibiting attorneys from, or

disqualifying attorneys for, contacting counterparties' experts

in violation of: 1) Fed. R. Civ. P. 26,15 see Durflinger v.

Artiles, 727 F.2d 888 (10th Cir. 1984); 2) attorney-client

privilege, see Rentclub, Inc. v. Transamerica Rental Fin. Corp.,

14

As an initial matter, we doubt whether Hansen was in fact

an “expert witness” for IRI, and not merely a professional

consultant who in this case happened to be a fact witness.

Hansen never had an exclusivity or confidentiality agreement with

IRI and was never asked to serve as an expert witness in the

litigation in district court. These facts alone suffice to

distinguish the instant case from the Middle District of

Florida's holding in Rentclub, Inc. v. Transamerica Rental Fin.

Corp., 811 F.Supp. 651 (M.D. Fla. 1992), upon which the

appellants rely. Most important, however, Hansen directly

observed the redesign and reconstruction of the expander after

the first wreck, and consulted with the parties during that

process; in this regard his status in the arbitration proceeding

was much the same as that of a consulting physician in a medical

malpractice case. Nevertheless, we assume arguendo that Hansen's

consulting work for IRI qualifies him as IRI's “expert witness”

for purposes of this discussion.

15

Rule 26(b)(4)(B) provides:

A party may, through interrogatories or by deposition,

discover facts known or opinions held by an expert who

has been retained or specially employed by another

party in anticipation of litigation or preparation for

trial and who is not expected to be called as a witness

at trial, only as provided in Rule 35(b) or upon a

showing of exceptional circumstances under which it is

impracticable for the party seeking discovery to obtain

facts or opinions on the same subject by other means.

22

811 F.Supp. 651 (M.D. Fla. 1992); or 3) the confidentiality of

work product or litigation strategy, see MMR/Wallace Power &

Indus., Inc. v. Thames Assocs., 764 F.Supp. 712 (D. Conn. 1991);

Geralnes B.V. v. City of Greenwood Village, 609 F.Supp. 191 (D.

Colo. 1985). The effect of these rules, taken together, is that

parties will rarely be able to avail themselves of the services

of the other side's expert witnesses--but that is merely the

effect of these rules and not a rule unto itself. In the absence

of any precedent, we decline to recognize any blanket rule or

policy against “side-switching.”

Moreover, none of the concerns in the cases cited by

respondents are implicated by the arbitration panel's admission

of Hansen's testimony. Rule 26 does not independently apply to

arbitration proceedings, and attorney-client privilege is not a

concern because there is no allegation that Hansen divulged any

information properly protected by the privilege. Concerns about

the confidentiality of work product and litigation strategy are

not implicated because Hansen was called by the panel, not by MAN

GHH, and because his testimony before the panel neither relied

upon any confidential work product of IRI's attorneys nor

included any information about the respondents' litigation

strategy.

Finally, even if such concerns were implicated by the

admission of Hansen's testimony, we could not consider vacatur of

the district court's order confirming the award unless that

admission fell within one of the New York Convention's seven

23

grounds for refusal to enforce an award. See M & C Corp. v.

Erwin Behr GmbH & Co., KG, 87 F.3d 844, 851 (6th Cir. 1996)

(“[T]he Convention lists the exclusive grounds justifying refusal

to recognize an [international] arbitral award.”). Even if the

purported “rule against side-switching” did exist, for instance,

it would not control arbitration proceedings unless the parties

agreed to be controlled by it. See Szuts v. Dean Witter Reynolds,

Inc., 931 F.2d 830, 831 (11th Cir. 1991) (noting that power and

authority of arbitrator at arbitration proceeding is dependent

upon the provisions of the arbitration agreement under which he

was appointed). Nor have the appellants established that the

admission of Hansen's testimony was a violation of public policy

of the sort required to sustain a defense under article V(b)(2)

of the New York Convention. We have held that domestic arbitral

awards are unenforceable on grounds that they are violative of

public policy only when the award violates some “explicit public

policy” that is “well-defined and dominant. . . [and is]

ascertained 'by reference to the laws and legal precedents and

not from general consideration of supposed public interests.'”

Drummond Coal Co. v. United Mine Workers, District 20, 748 F.2d

1495, 1499 (11th Cir. 1984) (quoting W.R. Grace & Co. v. Local

Union 759, Int'l Union of the United Rubber, Cork, Linoleum &

Plastic Workers, 461 U.S. 757, 766, 103 S.Ct. 217 2183, 2183, 76

L.Ed.2d 298 (1983)). We believe that rule applies with equal

force in the context of international arbitral awards. See

Parsons & Whittemore Overseas Co., Inc. v. Societe Generale de

24

l'Industrie du Papier (RAKTA), 508 F.2d 969, 974 (2d Cir. 1974)

(holding that “the Convention’s public policy defense should be

construed narrowly”). The appellants cite no laws or precedents

in support of their invocation of “the well-established public

policy protecting. . . fundamental principles of fairness and

professional conduct.” We therefore hold that the appellants

have not established a violation of public policy sufficiently to

sustain a defense under article V(b)(2) of the New York

Convention.

C.

Finally, the appellants also argue that the arbitral award

should be vacated on the ground that it is “arbitrary and

capricious.” See, e.g., Ainsworth v. Skurnick, 960 F.2d 939, 941

(11th Cir.1992), cert. denied, 507 U.S. 915, 113 S.Ct. 1269, 122

L.Ed.2d 665 (1993). We reject this argument as well. Under the

law of this circuit, domestic arbitral awards may be vacated for

six different reasons; four are enumerated by the FAA and two are

non-statutory defenses against enforcement, derived by the courts

from the statutory list. See Raiford v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 903 F.2d 1410, 1412 (11th Cir. 1990). The

two non-statutory defenses against enforcement of a domestic

award are 1) that the award is “arbitrary and capricious”16 and

16

A domestic arbitral award may be vacated as “arbitrary

and capricious” if it “exhibits a wholesale departure from the

law [or] if the reasoning is so palpably faulty that no judge, or

group of judges, could ever conceivably have made such a ruling.”

25

2) that enforcement of the award would be contrary to public

policy. See Montes v. Shearson Lehman Bros., Inc., 128 F.3d

1456, 1458 (11th Cir. 1997).

As discussed supra, the seven defenses against enforcement

of an international arbitral award that are enumerated in the New

York Convention include a public policy defense. The Convention

does not, however, include a defense against enforcement of an

award on the ground that the award is “arbitrary and capricious.”

The omission is decisive. Section 207 of Chapter 2 of the FAA

explicitly requires that a federal court “shall confirm [an

international arbitral] award unless it finds one of the grounds

for refusal or deferral of . . . enforcement of the award

specified in the [New York] Convention.” 9 U.S.C. § 207 (1997

supp.). The Convention itself provides that “enforcement of [an]

award may be refused, at the request of the party against whom it

is invoked, only if that party furnishes . . . proof that” one of

the enumerated defenses is applicable. Convention on the

Recognition and Enforcement of Foreign Arbitral Awards, opened

for signature June 10, 1958, 21 U.S.T. 2517, 2520, T.I.A.S. No.

6997, 330 U.N.T.S. 3 (reprinted in 9 U.S.C.A. § 201 note (West

supp. 1997)) (emphasis added). In short, the Convention’s

enumeration of defenses is exclusive. See Yusuf Ahmed Alghanim &

Sons, 126 F.3d at 20 (holding that “the grounds for relief

enumerated in Article V of the Convention are the only grounds

Brown v. Rauscher Pierce Refsnes, Inc., 994 F.2d 775, 781 (11th

Cir. 1993).

26

available for setting aside an arbitral award”); M & C Corp. v.

Erwin Behr, 87 F.3d 844, 851 (6th Cir. 1996) (same). We

therefore hold that no defense against enforcement of an

international arbitral award under Chapter 2 of the FAA is

available on the ground that the award is “arbitrary and

capricious,” or on any other grounds not specified by the

Convention. The appellants’ attempt to invoke such a defense

thus fails.

We therefore decline to vacate the arbitral award granted to

MAN GHH by the Tampa panel. Because we affirm the award, we also

decline to vacate the derivative awards of costs and conversion

rate compensation.

II.

On cross-appeal, MAN GHH complains of the district court’s

refusal to award to MAN GHH post-arbitral-award, prejudgment

interest. MAN GHH moved the court to enter judgment on the

arbitral award and to grant prejudgment interest from the date

the last arbitral award was made through the date of the Court's

entry of the amended final judgment. The court entered judgment

on the award but declined to award such interest. The court held

that its jurisdiction was grounded in diversity, and that state

law therefore would control the award of prejudgment interest.

The court then concluded that Florida law does not authorize the

granting of post-arbitral-award, prejudgment interest. Because

we hold that the district court held federal question

27

jurisdiction over the case pursuant to Chapter 2 of the FAA, see

part I, supra, and that federal law allows awards of post-

arbitral-award, prejudgment interest, we remand for a

determination whether, in the court's discretion, the

circumstances of the instant case warrant such an award.

Unlike most other countries, the United States has no

federal statute governing awards of prejudgment interest on

international arbitral awards. See John Y. Gotanda, “Awarding

Interest in International Arbitration,” 90 Am. J. Int'l L. 40, 45

(1996). Instead, awards of prejudgment interest are equitable

remedies, to be awarded or not awarded in the district court's

sound discretion. See Osterneck v. E.T. Barwick Ind., Inc., 825

F.2d 1521, 1536 (11th Cir. 1987); Waterside Ocean Navigation Co.

v. International Navigation Ltd., 737 F.2d 150, 153 (2d Cir.

1984). Under the law of this circuit, “[p]re-judgment interest

is not a penalty, but compensation to the plaintiff for the use

of funds that were rightfully his,” see Insurance Co. of N. Am.

v. M/V Ocean Lynx, 901 F.2d 934, 942 (11th Cir. 1990), and absent

any reason to the contrary, it should normally be awarded when

damages have been liquidated by an international arbitral award.

See Waterside Ocean Navigation, 737 F.2d at 153-54 (“Absent

persuasive reasons to the contrary, we do not see why

pre-judgment interest should not be available in actions brought

under the [New York] Convention.”); see also Fort Hill Builders,

Inc. v. National Grange Mut. Ins. Co., 866 F.2d 11, 14 (1st Cir.

1989) (holding that, under either federal or Rhode Island law,

28

post-award, prejudgment interest should be awarded on domestic

arbitral award); Sun Ship, Inc. v. Matson Navigation Co., 785

F.2d 59 (3d Cir. 1986) (holding that confirmed domestic arbitral

award bears interest from date of award, not from date of

judgment confirming award).17

In the absence of a controlling statute, federal courts'

choice of a rate at which to determine the amount of prejudgment

interest to be awarded is also a matter for their discretion.

That choice is usually guided by principles of reasonableness and

fairness, by relevant state law, and by the relevant fifty-two

week United States Treasury bond rate, which is the rate that

federal courts must use in awarding post-judgment interest. See

28 U.S.C. § 1961; Gotanda, supra, at 45 and n. 63 (citing cases).

Because the district court below held federal subject-matter

jurisdiction under 9 U.S.C. § 203, the decision whether to grant

prejudgment interest was a matter for the court's discretion and

was not controlled by state law. The district court declined to

award post-arbitral-award, prejudgment interest on the grounds

that it held only diversity jurisdiction, that state law

therefore controlled, and that Florida law prohibited such an

award under the circumstances. Because we hold that federal law

controls both the entitlement to and the rate of post-arbitral-

17

We note that international arbitrators often award post-

arbitral-award interest. See, e.g., Bergesen v. Joseph Muller

Corp., 548 F.Supp. 650, 651 (S.D. N.Y. 1982); Laminoirs-

Trefileries-Cableries de Lens, S.A. v. Southwire Co., 484 F.Supp.

1063, 1069 (N.D. Ga. 1980).

29

award, prejudgment interest, we find that the district court

failed to exercise its discretion.18 We therefore remand for a

determination whether, under the circumstances, MAN GHH is

entitled to post-arbitral-award, prejudgment interest.

III.

In a separate appeal, MAN GHH’s counsel challenge the

district court’s imposition of Rule 11 sanctions.19 The decision

18

We also note that, while the district court may choose to

be guided by Florida law in determining whether to grant post-

award, prejudgment interest, it appears to have misread Pharmacy

Management Servs., Inc. v. Perchon, 622 So.2d 75 (Fla. 2d Dist.

Ct. App. 1993). That case held that a court may not grant pre-

award interest on a final arbitral award that states that it is

in full settlement of all claims. Perchon did not hold that a

court may not grant post-award, pre-judgment interest on such an

award.

19

Rule 11 provides in relevant part:

(b) Representations to Court. By presenting to the

court (whether by signing, filing, submitting, or later

advocating) a pleading, written motion, or other

paper, an attorney or unrepresented party is certifying

that to the best of the person's knowledge,

information, and belief, formed after an inquiry

reasonable under the circumstances--

(1) it is not being presented for any improper

purpose, such as to harass or to cause unnecessary

delay or needless increase in the cost of

litigation;

(2) the claims, defenses, and other legal

contentions therein are warranted by existing law

or by a nonfrivolous argument for the extension,

modification, or reversal of existing law or the

establishment of new law;

(3) the allegations and other factual contentions

have evidentiary support or, if specifically so

identified, are likely to have evidentiary support

after a reasonable opportunity for further

investigation or discovery; and

30

whether to impose Rule 11 sanctions is left to the district

court’s sound discretion. See Worldwide Primates, Inc. v.

McGreal, 87 F.3d 1252, 1254 (11th Cir. 1996). An abuse of

discretion occurs when the court makes a clear error of law or

fact in determining whether to impose sanctions. See Cooter &

Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 2461,

110 L.Ed.2d 359 (1990).

Sanctions may be imposed under Rule 11 for filings that are

presented to the court “for any improper purpose, such as to

harass or to cause unnecessary delay or needless increase in the

cost of litigation.” Fed. R. Civ. P. 11(b)(1); see also

Pelletier v. Zwiefel, 921 F.2d 1465, 1514 (11th Cir. 1991).

“Improper purpose may be shown by excessive persistence in

pursuing a claim or defense in the face of repeated adverse

rulings . . . . Rule 11 is intended to reduce frivolous claims

and to deter costly meritless maneuvers, thereby eliminating

delay, and reducing the cost of litigation.” Pierce v.

Commercial Warehouse, 142 F.R.D. 687, 690-91 (M.D. Fla. 1992).

(4) the denials of factual contentions are

warranted on the evidence or, if specifically so

identified, are reasonably based on a lack of

information or belief.

(c) Sanctions. If, after notice and a reasonable

opportunity to respond, the court determines that

subdivision (b) has been violated, the court may,

subject to the conditions stated below, impose an

appropriate sanction upon the attorneys, law firms, or

parties that have violated subdivision (b) or are

responsible for the violation.

Fed. R. Civ. P. 11.

31

In order for sanctions to be appropriate, however, the filing for

which sanctions are imposed must be frivolous, that is, it must

enjoy no factual and legal support in the record. See Davis v.

Carl, 906 F.2d 533, 538 (11th Cir. 1990) (“Rule 11 is intended to

deter claims with no factual or legal basis at all; creative

claims, coupled even with ambiguous or inconsequential facts, may

merit dismissal, but not punishment.” (emphasis in original)).

In order for sanctions to be imposed for excessive relitigation

of an issue already decided by the court, the disputed issue must

have been clearly decided by the court’s earlier orders, and

counsel’s relitigation of the issue must clearly offer no

meritorious new arguments. See, e.g., Mariani v. Doctors

Assoc’s, Inc., 983 F.2d 5, 8 (1st Cir. 1993) (imposing sanctions

for “virtually verbatim” reargumentation of an issue--dismissal

of the action--clearly already decided by the court) (emphasis in

original).

The facts underlying the instant sanctions order are as

follows. MAN GHH provided the expander and various services to

Barnard and Burk pursuant to one contract for the design,

manufacture, and sale of the expander (“the design contract”) and

one service contract; MAN GHH also provided spare parts and

services to Nitram under two separate service contracts.20 The

20

Specifically, MAN GHH 1) provided the expander to Barnard

and Burk Group under the design contract; 2) provided engineering

services to Barnard and Burk Engineers and Constructors under a

second contract; 3) provided engineering services to Nitram under

a third contract; and 3) provided a spare rotor to Nitram under a

fourth contract. We refer to these latter three contracts as

32

transactions between MAN GHH, Nitram, and Barnard and Burk that

were the subject of the arbitral proceeding thus arose out of

four separate contracts. In the district court, MAN GHH first

moved for arbitration of the third-party claims asserted against

it by Barnard and Burk, and later, after Nitram and IRI had filed

tort and breach-of-warranty claims against MAN GHH, moved for

arbitration of those claims as well.21 At the time that MAN GHH

moved for arbitration of Nitram’s and IRI’s claims against it,

only one contract--the design contract--had been entered into the

record below. Nitram and IRI were not parties to this contract

and argued that they therefore ought not to be ordered to submit

their claims to the arbitrators. MAN GHH contended--and the

district court concluded--that all of the claims involved in the

case at that time were so closely related that they all should be

submitted to the Tampa panel. The district court referred to the

arbitration clause in the design contract and ordered

arbitration, in Tampa, of Nitram’s and IRI’s claims against MAN

“the service contracts” for brevity’s sake.

21

As the district court noted, Nitram’s and IRI’s claims

against MAN GHH were arbitrable even though they were cast as

tort and breach-of-warranty claims, rather than contract claims.

See Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 846

(2d Cir. 1987) (holding that, in determining whether particular

claim falls within scope of arbitration agreement, court focuses

on factual allegations in complaint rather than legal causes of

action asserted, and if allegations underlying claims “touch

matters” covered by parties' arbitration agreement, then claims

must be arbitrated, whatever legal labels are attached to them).

33

GHH, along with those of Barnard and Burk.22

Before the Tampa arbitration began, MAN GHH returned to the

district court and moved for 1) a preliminary injunction limiting

the scope of the Tampa arbitration and, in the alternative, 2) an

order compelling arbitration, in Europe, of some claims that

Nitram and Barnard and Burk intended to raise in the Tampa

arbitral proceeding.23 MAN GHH argued that Barnard and Burk and

Nitram were raising new contract claims before the Tampa panel,

claims arising from the three service contracts not referred to

by the district court in its earlier orders compelling

arbitration. These new claims, MAN GHH argued, were due to be

arbitrated in Paris and Zurich pursuant to arbitration clauses in

the service contracts. Barnard and Burk and Nitram contended

that they had made clear to the court that claims under those

contracts might well arise during the arbitral proceedings, and

22

In 1990, while the arbitral proceedings were still

pending, the district judge who had presided over the case, the

Hon. George C. Carr, passed away. All subsequent district court

proceedings referred to in this opinion were presided over by the

Hon. Elizabeth A. Kovachevich.

23

This motion was legally proper; the district court had

the power to enjoin the arbitration of the newly-asserted

contract claims. See Kelly v. Merrill Lynch, Pierce, Fenner &

Smith, Inc., 985 F.2d 1067, 1068-69 (11th Cir. 1993) (holding

that federal courts have power to enjoin arbitration of state

common law claims in cases in federal court); see also Societe

Generale de Surveillance, S.A. v. Raytheon European Management

and Sys. Co., 643 F.2d 863, 868 (1st Cir. 1981) (“To allow a

federal court to enjoin an arbitration proceeding which is not

called for by the contract interferes with neither the letter nor

the spirit of this law. Rather, to enjoin a party from

arbitrating where an agreement to arbitrate is absent is the

concomitant of the power to compel arbitration where it is

present.”) (emphasis in original).

34

that the court, in anticipation, included those potential claims

in its orders compelling arbitration in Tampa. The district

court agreed, and held that its earlier orders compelling

arbitration had considered the venue of claims arising under the

three service contracts and had mandated that arbitration of

those claims proceed in Tampa.24 The court therefore denied the

preliminary injunction.

Barnard and Burk then moved for sanctions pursuant to Rule

11, arguing that MAN GHH’s motion for preliminary injunction

constituted an improper attempt to relitigate an issue--the venue

of the arbitral proceeding--already decided by the court. The

court agreed, and awarded sanctions. See Nitram, Inc. v.

Industrial Risk Insurers, 149 F.R.D. 662 (M.D. Fla. 1993).

Enforcement of the sanctions order was stayed pending this

appeal.

MAN GHH’s counsel now argue that the district court clearly

erred in holding that there was no support in the record for MAN

GHH’s assertion that the claims asserted by Nitram and Barnard

24

The district court’s order denying the preliminary

injunction merely stated that a preliminary injunction would be

“inappropriate” under the facts of the case; it also incorporated

by reference, however, the opposition to the motion for

preliminary injunction filed by Nitram, IRI, and Barnard and

Burk. That opposition argued that the earlier order compelling

arbitration of Nitram’s and IRI’s claims against MAN GHH included

the claims arising under the three service contracts. In its

later order imposing sanctions, the district court specifically

verified its intention to incorporate that particular argument

into the court’s denial of the motion for preliminary injunction.

We note in this context that the judge who reviewed the earlier

orders compelling arbitration and, we believe, misread them, was

not the same judge who entered those orders. See supra note 22.

35

and Burk under the three service contracts were not covered by

the district court’s earlier orders compelling arbitration, and

that those claims were due to be arbitrated in Europe. Thus,

counsel argue, the district court abused its discretion, and the

sanctions order should be vacated. We agree.

The initial suit brought by Nitram against IRI and Barnard

and Burk was a suit in contract, based on the contract between

Nitram and Barnard and Burk for the installation of the expander.

Barnard and Burk’s third-party complaint against MAN GHH sought

indemnification on the basis of the design contract between MAN

GHH and Barnard and Burk. Furthermore, the court’s order

compelling arbitration of Barnard and Burk’s third-party claims

against MAN GHH was wholly pursuant to the design contract; the

order compelling arbitration of those claims mentioned and cited

only the arbitration clause contained in the design contract.

Indeed, the three service contracts had never even been entered

into the record at the time that the court entered its orders

compelling arbitration. When the court later ordered arbitration

of Nitram’s and IRI’s tort and breach-of-warranty claims against

MAN GHH, it did so on the ground that those claims were

intertwined with and grounded in the design contract between MAN

GHH and Barnard and Burk, and on the ground that Nitram and IRI

were third-party beneficiaries of that contract. In short, the

district court’s orders compelling arbitration committed to

arbitration only the arbitrable claims that were before the court

at the time: Barnard and Burk’s third-party claims against MAN

36

GHH and the tort and breach-of-warranty claims brought by Nitram

and IRI against MAN GHH.

The court could not have done more. There had been no

contract claims brought on the three service contracts; there

were thus no arbitration clauses before the court mandating

arbitration of any such claims, and the court therefore had no

jurisdiction to compel arbitration of those claims. Chapter 2 of

the FAA, like Chapter 1, “does not require parties to arbitrate

when they have not agreed to do so, . . . nor does it prevent

parties who do agree to arbitrate from excluding certain claims

from the scope of their arbitration agreement." Volt Info.

Sciences, Inc. v. Board of Trustees of Leland Stanford Junior

Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488

(1989) (citations omitted). “It simply requires courts to

enforce privately negotiated agreements to arbitrate, like other

contracts, in accordance with their terms.” Id. Like other

contracts, an agreement to arbitrate disputes may not be enforced

by the courts until the agreement has been brought before the

court by a proper pleading. See Prima Paint Corp. v. Flood &

Conklin Mfg. Co., 388 U.S. 395, 404 n. 12, 87 S.Ct. 1801, 1806 n.

12, 18 L.Ed.2d 1270 (1967) (stating that the FAA was designed "to

make arbitration agreements as enforceable as other contracts,

but not more so"). In the instant case, the parties had placed

contract claims arising from the three service contracts under

37

the purview of the arbitration clauses in those contracts25--not

under the arbitration clause in the design contract--and no

contract claims arising from the service contracts had been pled

to the district court. The court therefore could not have

ordered arbitration of those claims.26

Therefore, when the arbitrators agreed to hear claims

arising out of the three collateral service contracts, they did

so outside of their charge by the district court.27

Consequently, MAN GHH’s counsel’s motion for a preliminary

injunction limiting the scope of the Tampa arbitration and for an

order moving arbitration of these claims to Europe clearly

enjoyed support in the record. The district court’s

determination that the motion did not enjoy any such support was

25

Specifically, claims arising under MAN GHH’s contract

with Barnard and Burk Engineers and Constructors (see supra note

20) were due to be arbitrated in Zurich, and claims arising under

MAN GHH’s spare rotor contract with Nitram were due to be

arbitrated in Paris. MAN GHH’s contract with Nitram for

engineering services contained no arbitration clause, and the

district court therefore very likely could not properly have

compelled arbitration of claims arising thereunder at all.

Consequently, it certainly may not be said that claims arising

under these contracts were clearly due to be arbitrated in Tampa.

26

As noted supra, we conclude that the court’s orders

compelling arbitration did not purport to commit to arbitration

any contract claims arising out of the three service contracts.

27

It also seems that they did so outside of the agreement

of the parties to the arbitration, since MAN GHH did not agree to

have those claims arbitrated in Tampa. As noted supra, however,

MAN GHH prevailed on those claims at arbitration and therefore

did not make this argument to the district court, and does not

make this argument on appeal. The appellants do not attempt to

make this argument either. We therefore deem the argument

waived.

38

therefore clearly erroneous, and its imposition of sanctions was

an abuse of discretion. Accordingly, we reverse the order

imposing Rule 11 sanctions upon MAN GHH’s counsel.

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s

denial of the motion to vacate the arbitral award, but VACATE the

district court’s denial of prejudgment interest and REMAND the

case for resolution of that issue. We also REVERSE the district

court’s imposition of Rule 11 sanctions against MAN GHH’s

counsel. SO ORDERED.

39