Opposition Brief — Nordell International Resources, Ltd. v. Triton Indonesia, Inc.
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_In THE.
Supreme Court of the United Btates
OCTOBER TERM, 1993
NORDELL INTERNATIONAL RESOURCES LTD.,
v Petitioner,
TRITON INDONESIA INC., TRITON ENERGY
CORPORATION, AND TRITON OIL (NZ) LIMITED,
Respondents.
On Petition for a Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit
RESPONDENTS’ BRIEF IN OPPOSITION
-
Jim L. FLEGLE
BRACEWELL & PATTERSON,
LLP.
[Counsel of Record]
4000 Lincoln Plaza
Dallas, Texas 75201-3320
(214) 740-4000
Fax: (214) 740-4010
Counsel for Respondents
OF COUNSEL:
MARTY A. MORRIS ROBERT B, HOLLAND, III
Bracewell & Patterson, L.L.P. Senior Vice President &
4000 Lincoln Plaza General Counsel
ss Dallas, Texas 75201-3320 BELLANNE M. TOREN
(214) 740-4000 Associate General Counsel
Fax: (214) 740-4010 Triton Energy Corporation
6688 N. Central Expwy.
Suite 1400
Dallas, Texas 75206
(214) 691-5200
Fax: (214) 691-0198
' BEST AVAILABLE COPY|
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RESTATED QUESTIONS PRESESZED
The questions presented in the Petition for a Writ of Certio-
rari to the United States Court of Appeals for the Ninth Circuit
should be resta*sd as follows:
1. In the context of a commercial arbitration, does this
Court have special and important reasons to make findings of
fact of “fraud” and “corruption,” which are contrary to findings
of fact made by an American Arbitration Association Arbitra-
tion Panel and ths United States District Court for the Central
District of California, and which findings of fact were unani-
mously affirmed by a panel of the United States Court of
Appeals for the Ninth Circuit, on factual matters which were
thoroughly and completely submitted to the Arbitration Panel,
properly confirmed by the District Court, and unanimously
affirmed by the Ninth Circuit, where the findings of fact by the
Arbitration Panel are clearly within the scope of a commercial
arbitration clause and the relief requested by Petitioner?
2. In the context of a commercial arbitration, does this
Court have special and important reasons to make findings of
fact of “unclean hands,” which are contrary to findings of fact
made by an American Arbitration Association Arbitration Panel
and the United States District Court for the Central District of
California, and which findings of fact were unanimously affirmed
by a panei of tha United States Court of Appeals for the Ninth
Circuit, on facrual matters which were thoroughly and com-
pletely submitted to the Arbitration Panel, properly confirmed
by the District Court, and unanimously affirmed by the Ninth
Circuit, in order to create a possibility that such new findings of
fact by this Court would justify the application of the “unclean
hands doctrine,” justify the creation of the “unclean hands doc-
trine” as an explicit, well-defined and dominant federal public
policy by which to review commercial arbitration proceedings,
and justify a finding that the Arbitration Award, confirmed by
the decisions below, violated this newly created public policy?
ii
PARTIES AND RULE 29.1 STATEMENT
Respondents concur with the Rule 29.1 Statement of Petitioner
except in the following respects:
Triton Energy Corporation has issued shares to the public. Triton
Indonesia is a wholly-owned subsidiary of Triton Energy
Corporation. .
Triton Oil (N.Z.) Limited is a wholly-owned subsidiary of New
Zealand Petroleum Company Limited, a company which has
issued shares to the public. The Arbitration Panel determined
that Triton Oil (N.Z.) Limited was “not an independent partici-
pant in the Enim Project, and therefore cannot be considered as
a separate party in this case.” It has therefore not been consid-
ered as a separate party in this case by either Petitioner or
Respondents in their arguments, motions and briefing.
Further, Triton Energy Corporation identifies the following
additional parent companies, subsidiaries or affiliates that have
issued shares to the public:
Crusader Limited
Triton Europe, plc
Triton Canada Resources Ltd.
Australian Hydrocarbons N.L.
Aero Services International, Inc.
Allied Queensland Coalfields Ltd.
TABLE OF CONTENTS
RESTATED QUESTIONS PRESENTED .........
PARTIES AND RULE 29.1 STATEMENT ........
eo Ee eee eee
OBJECTION TO JURISDICTIONAL
A. The decision below does not decide a federal
question in a way that conflicts with
applicable decisions of this Court.........
B. 9 U.S.C. §16 does not confer independent
jurisdiction for this Court to review the
Wc cn gi cee eb he verse eeee
REVISIONS, CORRECTIONS AND ADDITIONS
TO PETITIONER’S STATEMENT OF THE CASE .
B. Revisions, Corrections and Additions to
Petitioner’s Factual Overview ............
1.
Nordell’s loosely asserted “fraud” claim ..
The Arbitration Panel implicitly found that
Triton did not commit fraud..........
The basis of the arbitration award ......
The testimony supporting an award against
Nordell and in favor of Triton ........
C. Revisions, Corrections and Additions to
Petitioner’s Procedural Discussions ........
1.
tN
The Arbitration Panel’s request for further
RGD ban wo égh ess eeeece
The Arbitration Panel’s factual finding that
Nordell, not Triton, acted in bad faith...
a nde obs aes ebes tees
The unrelated Janacek Case ..........
| PTET CUTE CP TET TEE CTT EEE
A. The WR. Grace and Misco decisions are not in
conflict with the decision below ..........
B. Neither the decision below nor the Arbitration
Award nor the District Court’s Final
Judgment found that Triton committed
violations of the Foreign Corrupt Practices
Act; moreover, these issues were not properly
preserved by Petitioner on appeai.........
C. Neither the decision below nor the record
supports the application of the unclean hands
doctrine against Triton as an explicit, well-
defined and dominant federal public policy
exception to the enforcement of commercial
PE oo owe 4 od bub ees ore ea
GREENS Se Ce keds pe viwineeeen de cenes
27
30
Vv
TABLE OF AUTHORITIES
Cases
American Postal Workers Union AFL-CIO v.
U.S. Postal Service, 682 F.2d 1280 (9th
Cir. 1982), cert. denied, 459 U.S. 1200, 103 S.Ct.
1183,. 73 LSUG.26 S31 CISGS) ~ 6 obvi bc wtieve’
Board of County Com’rs of Lawrence County,
Ohio v. L. Robert Kimball and Associates,
860 F.2d 683 (6th Cir. 1988), cert. denied, 494
U.S. 1030, 110 S.Ct. 1480, 108 L.Ed.2d 617
| PPPOE PET Cee TT TCC TE TREE EE
Buck v. Dahlgren, 100 Cal. Rptr. 462 (Cal.
PR, © EE, Be EPA 6c tc cece rte eelns
Campbell v. Dominick & Dominick, Inc., 872
ep set fs eS eee eee roe
Chrysler Motors Corp. v. International Union,
Allied Indus. Workers of America, AFL-CIO,
748 F. Supp. 1352 (E.D. Wis. 1990) .........
Delta Air Lines, Inc. v. Air Line Pilots Ass’n,
Intern., 861 F.2d 665 (11th Cir. 1988), cert.
denied, 493 U.S. 871, 110 S.Ct. 201, 107 L-Ed.2d
Se CH v0 oe Kb 00 4100 8 heh Ore oe ©
Hurd v. Hodge, 334 U.S. 24, 68 S.Ct. 847, 92
9 ng ece'y aoe aoe
International Union, Allied Industrial Workers v.
Local Union No. 589, 693 F.2d 666 (7th
pe Pe a ne eee
Iowa Elec. Light and Power Co. v. Local
Union 204 of the Int’] Bhd. of Elec. Workers,
834 F2d 1424 (8th Cir. 1987) .............
PAGE
24
29
19
24
Jenkins v. Prudential-Bache Securities, Inc.,
ee Foes: fe Ao. | ere
Maggio v. Local 1199, 702 F. Supp. 989
(E.D.N.Y. 1989), affd, 880 F.2d 1319 (2nd
Cir. 1989), cert. denied, 493 U.S. 936, 110 S.Ct.
Sho, UE! EAM SIP CLOUD io Ve deveivves
McMullen v. Hoffman, 174 U.S. 639, 19 S.Ct.
Goo, SD Eteee BEEF GARGS) oi ccc dee eess
Misco, Inc. v. United Paperworkers Intern.
Union, 768 F.2d 739 (Sth Cir. 1985), rev'd,
484 U.S. 29, 108 S.Ct. 364, 98 L.Ed.2d
rR) Ue or eran er ater ee
Muschany v. United-States, 324 U.S. 49, 65 S.Ct.
Se, SP Rate, FOO CRIME ccd es cecsesecess
O.R. Securities, Inc. v. Professional Planning
Associates, Inc., 857 F.2d 742 (11th Cir. 1988). .
Osceola County Rural Water System, Inc. v.
Subsurfco, Inc., 914 F.2d 1072 (8th Cir. 1990) ..
Precision Instrument Mfg. Co. v. Automotive
Maintenance Machinery, 324 U.S. 806, 65 S.Ct.
Fea, GO halt Boek CEN) «eee seseccces
Raytheon Co. v. Automated Business Systems,
imc., GE2 £26 6 (ist Cie, 19G9). wc cece
Revere Copper and Brass Inc. v. Overseas
Private Inv. Corp., 628 F.2d 81 (D.C. Cir. 1980),
cert. denied, 446 U.S. 983, 100 S.Ct. 2964,
OF EEE vi ccccsbeececccees
Richman v. Bank of Perris, 282 P. 801 (Cal.
es I cc S hs oo oa 6 doe «00-6
San Martine Compania De Navegacion, S.A. v.
Saguenay Terminals Ltd., 293 F.2d 796 (9th Cir.
EN, Wes 65a CRA Ode CREE OE es
PAGE
19
at
21
20
23
19
29
Service Employees Intern. Union Local 36, AFL-
CIO v. City Cleaning Co., 982 F.2d 89 (3rd
oe a ery See ee
Seymour v. Blue Cross/Blue Shield, 988 F.2d
1020 (10th Cir. 1993) ...... eee eee eeees
Taylor v. Freeland & Kronz, __ U.S. __,
112 S.Ct. 1644, 118 L.Ed.2d 280 (1992) ......
Todd Shipyards Corp. v. Cunard Line, Ltd.,
943 F.2d 1056 (9th Cir. 1991) ..........---.
Turboff v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 867 F.2d 1518 (Sth Cir. 1989).....
Union Pacific Railway Co. v. United
Transportation Union, 3 F.3d 255
(2° a ee
United Paperworkers International Union, AFL-
CIO v. Misco, Inc., 484 U.S. 29, 108 S.Ct. 364,
96 L.Ed.2d 206 (1967) ....cccccccccceees
United States Postal Service v. National
Association of Letter Carriers AFL-CIO,
839 F.2d 146 (3rd Cir. 1988) ...........--.
WR. Grace & Co. v. Local Union 759, 461 U.S.
757, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983) ....
Statutes
9 U.S.C.A. § 16 (West Supp. 1993) ..........
15 U.S.C.A. § 78 dd-1 (West Supp. 1993)......
28 U.S.C.A. § 1254(1) (West 1993) ..........
§ 3517 California Civil Code...............
PAGE
22
2,19,21,22,
24,27
22
2,19,20,21
—_————
IN THE
Supreme Court of the United States
OCTOBER TERM, 1993
NORDELL INTERNATIONAL RESOURCES LTD.,
¥ Petitioner,
TRITON INDONESIA INC., TRITON ENERGY
CORPORATION, AND TRITON OIL (NZ) LIMITED,
Respondents.
On Petition for a Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit
RESPONDENTS’ BRIEF IN OPPOSITION
Jim L. FLEGLE
BRACEWELL & PATTERSON,
LLP
[Counsel of Record]
4000 Lincoln Plaza
Dallas, Texas 75201-3320
(214) 740-4000
Fax: (214) 740-4010
Counsel for Respondents
The Respondents, Triton Indonesia Inc. and Triton Energy
Corporation (collectively referenced as “Triton”), respectfully
request that this Court deny the petition for writ of certiorari,
seeking review of the Ninth Circuit’s Memorandum Opinion in
this case. That opinion, and subsequent decisions, are attached
as part of the Appendix to the petition for writ of certiorari.
2
OPINIONS BELOW
The Opinion of the Ninth Circuit is properly reprinted at
Nordell Appendix A, APP-1-23.! The Final Judgment Confirm-
ing Arbitration Award of the United States District Court for the
Central District of California, (E. Rafeedie, District Judge) is
properly reprinted at Nordell Appendix B, APP-24-25. The Arbi-
tration Award is properly reprinted at Nordell Appendix B,
APP-25-33.
OBJECTION TO JURISDICTIONAL STATEMENT
Pursuant to Supreme Court Rule 15.4, Triton objects to the
jurisdiction of the Court to grant a writ of certiorari based on the
arguments set forth by Nordell Resources Ltd. (“Nordell”),
which jurisdiction, Nordell contends, is based on 28 U.S.C.
§ 1254(1) and 9 U.S.C. §§ 16(a)(1)(D)-(E), 16(a)(3).
A. The decision below does not decide a federal question in
a way that conflicts with applicable decisions of this
Court.
Nordell argues that the Ninth Circuit’s Memorandum
Opinion “ignores” this Court’s prior decisions of United
Paperworkers International Union, AFL-CIO, v. Misco, Inc., 484
US. 29, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987) and WR. Grace and
Co. v. Local Union, 759, 461 U.S. 767, 103 S.Ct. 2177, 76 L.Ed.2d
298 (1983). Nordell’s Petition for Writ of Certiorari,? p. 14.
Supreme Court Rule 10 sets forth the character of reasons to be
considered for the exercise of this Court’s discretion to grant a
1 References to documents included in the Appendix to Nordell’s Peti-
tion will be referenced as the “Nordell Appendix.” References to docu-
ments in the Appendix to this Brief will be referenced as the “Appendix.”
Specific page references to both will be cited as “APP-__.
2 Hereafter, Nordell’s Petition for Writ of Certiorari will be referenced
as the “Petition.”
3
petition for writ of certiorari. Nordell apparently argues that this
Court should exercise its jurisdiction because the Ninth Circuit’s
opinion allegedly decides “a federal question in a way that con-
flicts with applicable decisions of this Court.” Supreme Court
Rule 10(c). This factor is not remotely present here. As Nordell
concedes, in Misco and WR. Grace, this Court refused to over-
turn arbitration awards on grounds that they violated public
policy. Petition, pp. 15-16. Similarly, t! + Ninth Circuit below
refused to overturn the award at issue here. (Nordell Appen-
dix A, APP-8-11.) Thus, the Court’s decisions in Misco and
W.R. Grace support, rather than conflict with, the Ninth Circuit’s
decision below. The Petition should be denied on this basis
alone.
B. 9 U.S.C. § 16 does not confer independent jurisdiction
for this Court to review the decision below.
Title 9, Section 16 of the United States Code is not an
independent ground to be used by this Court to exercise jurisdic-
tion. This provision was recently enacted to provide certain lim-
ited rights of appeal for parties involved in arbitrations (for
example, where a trial court rejects a party’s contention that a
dispute is arbitrable). The rights of appeal provided by Sec-
tion 16 refer to rights to appeal certain orders impacting arbitra-
tion or arbitration awards, themselves, to the federal courts of
appeal, not to this Court. See, e.g. Campbell v. Dominick &
Dominick, Inc., 872 F.2d 358, 361 (11th Cir. 1989); Turboff v.
Mermill Lynch, Pierce, Fenner & Smith, Inc., 867 F.2d 1518 (Sth Cir.
1989).
REVISIONS, CORRECTIONS AND ADDITIONS TO
PETITIONER’S STATEMENT OF THE CASE
Petitioner, Nordell, lost a commercial arbitration which
Nordell commenced in January 1990. The Arbitration Proceed-
ings included three weeks of testimony on hotly contested factual
4
issues in Singapore in October 1990. Nordell was allowed to
present evidence, arguments, and authorities to the Arbitration
Panel. After it lost the Arbitration Proceedings, Nordell moved
to vacate the Arbitration Award in the United States District
Court for the Central District of California. Nordell lost again.
Nordell appealed to the Ninth Circuit. By a unanimous decision,
it lost again.
Nordell presents many chailenges to facts found by the
Arbitration Panel and by the District Court, all of which were
unanimously affirmed by the Ninth Circuit. There is no reason
for this Court to grant the Petition to review fact findings which
were correct when made, confirmed, and affirmed, in a commer-
cial arbitration involving an Indonesian oil concession.
A. Summary Overview
In October 1988, Respondent, Triton Indonesia Inc.
(“TII’”), entered a commercial contract with Petitioner, Nordell,
which involved oil and gas operations in Indonesia and which
required arbitration of any disputes in Singapore. Respondent,
Triton Energy Corporation (“Triton Energy”), executed a writ-
ten limited guaranty agreement as part of the commercial trans-
action. Veronex Resources Ltd. (“Veronex’”), the parent of
Nordell, was also involved in the transaction. The arbitration
clause in the contract was broad and unrestricted. (Appendix 1;
Nordell Appendix A, APP-12-13.) The arbitration clause
invoked the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”). Id.
In January 1990, Nordell “c/o Veronex Resources Ltd.”
demanded arbitration against both TII and Triton Energy. A
distinguished three-member panel of arbitrators was selected by
the parties and by the Los Angeles office of the AAA (the
“Arbitration Panel” or “Panel”). The Panel held several pre-
hearing conferences and entered an interim order prior to com-
mencement of the Arbitration Proceedings.
2
The Arbitration Panel heard three weeks of testimony in
October 1990 in Singapore. The Panel heard closing arguments
in Los Angeles in November 1990. The Panel issued its arbitra-
tion award (the “Arbitration Award” or “Award”) on Decem-
ber 13, 1990.
Nordell requested a “divorce” -- equitable relief -- as well
as damages and punitive damages from Triton. (Appendix 4,
APP-8-9.) Nordell was allowed to present all of its evidence to
the Arbitration Panel, including evidence which Nordell con-
tended supported its claims of fraud, corruption, and unclean
hands, against Triton. (Appendices 4 and 5, APP-8-14.) The
Panel granted Nordell a “divorce”. The Panel granted damages
to Triton and realigned the parties’ interests in the ENIM Pro-
ject. The District Court confirmed the Arbitration Award. The
Ninth Circuit unanimously affirmed the District Court’s Final
Judgment as it related to Nordell. TII and Triton Energy are
proceeding with the remanded issues involving Veronex before
Judge Rafeedie at this time.
B. Revisions, Corrections and Additions to Petitioner’s
Factual Overview
Throughout its Petition, Nordell misstates and mis-
characterizes the proceedings below concerning: (i) the issue of
fraud and the manner in which Nordell presented the issue of
fraud during the Arbitration Proceedings; (ii) the complete
absence of findings by the Panel that Triton committed fraud,
that Triton in any way violated the Foreign Corrupt Practices Act
(“FCPA”), that Triton violated any public policy, or that Triton
had “unclean hands;” (iii) the substantial evidence on which the
Panel properly relied in issuing the Arbitration Award; and
(iv) the testimony of the arbitration witnesses supporting the
Arbitration Award.
1. Nordell’s loosely asserted “fraud” claim.
During the middle of the Arbitration Proceedings, Nordell
asserted a claim against Triton based on purported fraudulent
6
accounting practices by Triton in the ENIM Project. Nordell
used its fraud claim very loosely, much in the fashion it loosely
asserts “fraud” throughout its Petition. Nordell presented evi-
dence that it alleged supported its fraud claim to the Arbitration
Panel. Because the fraud claims were so vague, Mr. Armour, the
head of the Arbitration Panel, instructed Nordell to clarify its
claims of fraud. Instead of amending its claims, Nordell stated
that it withdrew the fraud issue, contending that “the same evi-
dence [presented by Nordell] that goes to fraud goes to the issues
of breaches of contract, breach of fiduciary duty. The same evi-
dence is a basis for the remedy that we’re goingtoaskfor... ”
(Appendix 13, APP-59-60.)
Nordell, although it claimed to withdraw its fraud claim,
continued to argue fraud throughout the Arbitration Proceed-
ings. (ER 141,? Exh. R, Tr. 327-28, 475, 790, 1065, 1143, 1183,
1281). Nordell even supplied to the Arbitration Panel a brief on
the elements of fraud. (Appendix 11, APP-43.) The Arbitration
Panel unanimously rejected each of Nordell’s arguments.
2. The Arbitration Panel implicitly found that Triton
did not commit fraud.
As the Arbitration Award reflects, the Arbitration Panel
found in favor of Triton and against Nordell on every issue
submitted for decision. (Nordell Appendix B, APP-24-33.) The
Arbitration Panel did not find that Triton committed fraud --
whether common law fraud, securities fraud, or any other type of
fraud. Jd. The Arbitration Panel did not find that Triton commit-
ted a violation of the FCPA. Jd. The Arbitration Panel did not
find that Triton violated public policy of any kind, nor did it find
that Triton was guilty of “unclean hands.” Jd. As the Ninth
3 Citations to Record below not included in Appendix: “CR” refers to
items on the District Court’s Docket Sheet which were not included in the
Excerpts of Record filed with the Ninth Circuit. “ER” refers to items
included in the Excerpts of Record and corresponds to item numbers on
the District Courts’ Docket Sheet.
eRe alae
SEES | OTA OS CEERI LIL A. ED
7
Circuit correctly found: “The reliability of Triton’s data was a
hotly contested factual issue during the proceedings. By relying
on the data in the face of allegation of fraud, the Arbitration
Panel implicitly made a factual finding that the data were relia-
ble.” (Nordell Appendix A, APP-9.) Moreover, Nordell -- at no
time -- argued to the District Court below or to the Ninth Circuit
that alleged securities fraud or alleged violations of the FCPA by
Triton were grounds to vacate the Award.
3. The basis of the arbitration award.
The Arbitration Award is completely supported by compe-
tent testimony and evidence admitted and reviewed by the Arbi-
tration Panel below. This was more fully described by Triton in
correspondence dated July 29, 1991 to the Arbitration Panel.
(Appendix 7.)
The Arbitration Award is supported by calculations from
(i) cash-based exhibits prepared by Michael Calloway ¢ -- Triton’s
Arbitration Exhibits VVV and ZZZ (Appendix 3; ER 141,
Exh. E), (ii) the KPMG Report of October 11, 1990 -- Nordell’s
Arbitration Exhibit 54 (Appendix 2; ER 141, Exh. F), and
(iii) calculations by Nordell itself -- Nordell’s Arbitration
Exhibit 33 (ER 141, Exh. G). Mr. Calloway took the cash basis
required by Nordell, reviewed the source documents concerning
the cash receipts and cash payments, and constructed Triton’s
Arbitration Exhibit VVV. He included Triton’s administrative
* Calloway was an internal auditor for Triton. The so-called “Calloway
Report,” about which Nordell makes such ado, was an internal memoran-
dum prepared by Calloway after being employed by Triton for only approx-
imately three months. It contains no admissions of fraud, corruption, or
unclean hands, as claimed by Nordell. As the following evidence will show,
the matters contained in the Calloway memorandum had no effect on the
documents and calculations which ultimately supported the Arbitration
Award. For example, Calloway’s calculations for presentation at the Arbi-
tration Proceedings were prepared long after the Calloway memorandum
was prepared. Indeed, the Calloway memorandum -- mischaracterized by
Nordell as a “Report” -- is Nordell’s ultimate red herring.
8
charges conservatively at one times actual salary, which was 1/3
of what Triton normally charged (it was also 1/3 of what was
customary in the industry). He included the payments for rigs
based on evidence showing when cash payments were made --
cash, not so-called inflated purchase orders. His calculations did
not include the alleged “bribes”, which were never proven by
Nordell.
The result of these admitted documents and testimony lead
to the following calculation supporting the Arbitration Award:
KPMG October 11, 1990 Report --
Nordell’s Exhibit 54 -- showing
Nordell deficit as of September 30,
Vo Pewee rere ser es eee $663,402.00
Overpayment to Nordell due to
recalculation on cash basis by
Calloway in Triton’s Exhibits VVV
ORE GD + 4. 00:0:0 UNS Y Whresess 329,053.00
Less Excess Joint Interest Billing for
25 days of November 1989 per
Nordell’s Exhibit 33 (25/30ths of
Ore ere oe re ee (483,741.00)
508,714.00
This is precisely the amount of adjustments in favor of Triton
contained in the Arbitration Award. (Nordell Appendix B,
APP-26-28.) There is no evidence before this Court -- and
Nordell can point to none -- that alleged improper payments to
Pertamina or inflated invoice amounts affected the calculations
made by Calloway or KPMG.
4. The testimony supporting an award against Nordell
and in favor of Triton.
In its Petition, Nordell relies on misleading and materially
incomplete portions of the arbitration testimony of
9
Messrs. Calloway, McDonough, Murphy, Poulton and Maupin
to urge this Court to review the Arbitration Panel’s implicit fact
finding against Nordell on the so-called fraud issue, which was
confirmed by the District Court and affirmed by the Ninth Cir-
cuit. All of the testimony Nordell urges in its Petition was heard
and considered by the Arbitration Panel. In fact, each of the
issues now raised by Nordell was hotly contested by Nordell and
Triton. After considering such testimony, the Arbitration Panel
found against Nordell.
Further, should this Court undertake a review of the factual
testimony offered by Nordell, the entire context of the testimony
of these witnesses reveals sufficient support in the record for the
factual findings made by the Arbitration Panel. (Nordell Appen-
dix A, APP-10.)°
The testimony of Calloway, McDonough, McAdoo,
Poulton, Murphy, Maupin and Holdoway, when taken as a
whole, clearly support the decision below.
Calloway Testimony
Nordell admitted in discussions with the Arbitration Panel
off the record that the matters discussed in the Calloway memo-
randum and testimony did not harm Nordell. Moreover, the
matters had no effect on Calloway’s calculations on Triton’s
Arbitration Exhibit VVV -- which ultimately supported the Arbi-
tration Award by the Arbitration Panel. (CR 68, Keever Declara-
tion 9/12/91, 1 11.) Mr. Calloway explained the impact of
* In its Petition, Nordell continually confuses two distinct accounting
concepts for the ENIM Project: net project investment and cost recover-
able amounts. “Net project investment” involved Triton’s relationship with
Nordell, and Veronex. “Cost recoverable amounts” involved accounting
procedures with Pertamina, the state oil agency of Indonesia. The formula
for determining net project investment by Triton ($21 million invested) was
different from the annual calculation of matters that could go into the cost
pool for ultimate cost recovery from Pertamina. Pertamina purchased the
oil produced from the ENIM Project.
10
Nordell’s Arbitration Exhibit 90, the so-called “Calloway
Report”:
“To my understanding, it did not affect either one on
the carry, or on the project investment [the $21 million
Triton obligation which was satisfied on November 25,
1989 according to the Arbitration Award].”®
(Nordell Appendix G, APP-66.) Did Mr. Calloway or anyone
working with him have the intent of fooling around with the
project records?
“Absolutely not.”
Did Mr. Calloway or anyone working with him alter or modify
the books and records of the project?
“We did not.”
(Appendix 8, APP-24.) Calloway’s testimony also indicates that
he detected nothing of significance that affected Triton’s rela-
tionship with Nordell. If Nordell’s allegations that Triton paid
Pertamina auditors were true -- and there was no testimony by a
person with first-hand knowledge that this happened -- the pay-
ments were no more than facilitating payments to establish that
certain items were cost recoverable and to be paid by Pertamina.
(Nordell Appendix G, APP-58.) These determinations would
benefit Nordell, not harm it. Calloway described the payments, if
any, in his testimony as “facilitating payments.” Jd. He also
testified that:
6 Nordell’s alleged motives for Triton’s conduct defy logic. If Triton were
so bent on defrauding Nordell, why would Triton have sent Calloway back
to Indonesia to audit the records and to prepare reports for the Arbitration
Proceedings? If Triton were truly intent on pursuing corrupt practices,
Calloway would be the /ast person, not the first, whom Triton would send
back to the ENIM Project.
A A ae ene,
11
“There was an attempt to make things cost recover-
able, in a foreign environment where that was neces-
Sary sometimes.”
(Appendix G, APP-60.) As explained in footnote 5, “cost recov-
erable” deals with the cost pool for purposes of Pertamina pay-
ments, and is not a part of the net project investment equation
relating to Triton’s $21 million relationship with Nordell under
the Farmout Agreement.
McDonough Testimony
Jim McDonough was a Triton Energy employee. He
assisted in the purchase of three drilling rigs in the United States
for the ENIM Project. He testified that he was instructed by
Mr. Rich McAdoo, a TII employee -- who was employed by
Nordell during the Arbitration Proceedings -- on procedures
involving purchase orders for three drilling rigs. The rigs were
bought at an auction in the United States in July 1989. McDon-
ough testified “he had no idea” whether the purchase orders
were even used by Triton management for any purpose. (ER 141,
Exh. R, Tr. 1610.) He further testified that he did not know if the
joint interest account (in which Nordell participated) was
charged for the rigs. (Appendix 9, APP-30.) Nordell never intro-
duced any evidence, nor did its auditors find, that any improper
purchase order was used by Triton for anything, much less in its
accounting of the ENIM joint interest account.
McAdoo Testimony
Rich McAdoo was the general manager of the TII office in
Jakarta until December 1989. Just before the Arbitration Pro-
ceedings, he left TII and became an employee of Nordell, or its
parent, Veronex (the record was unclear). The alleged rig over-
statements about which Nordell argues occurred, if at all, while
McAdoo was in charge of the TII Jakarta office. McAdoo was
under Nordell’s control during the Arbitration Proceedings.
12
McAdoo denied any wrongdoing in his testimony before the
Arbitration Panel. (Appendix 10, APP-35-38.) McAdoo denied
that rig purchase orders were used to charge the net project
investment account to the detriment of Nordell. In fact, McAdoo
stated that McDonough had saved the ENIM Project, and there-
fore, Nordell, $3 million. Jd.
Poulton Testimony
Rick Poulton was a TII employee for several months in
Jakarta. He was hired by TII to review certain ENIM Project
accounts. He was not employed by TII or Triton Energy by the
time the Arbitration Proceedings commenced in October 1990.
He did not complete his work before he left TII. He was called as
a witness by Nordell.
Poulton testified that he attempted to establish an “inven-
tory-in-transit” account while conducting his work at Triton. His
failure to complete this task required Triton to engage KPMG,
the international accounting firm, to complete the job in early
1990. Moreover, Poulton actually confirmed that Triton was not
conducting illegal or fraudulent accounting practices:
Flegle: “And you also said that Mr Jones refused to
implement the [allegedly unlawful] procedures.
Right?
Poulton: That’s correct.
Flegle: And so, to your knowledge, the procedure was
never implemented. Is that correct?
Poulton: Yes, to my knowledge, it was not
implemented. To my knowledge, Mr Jones
refused to cooperate with it and at that point
it was abandoned.
Flegle: So, you’re not here today to tell the panel that
documents that were sent to Nordell were based
on an illegal procedure, are you?
Poulton: No.”
,
13
(ER 141, Exh.R, Tr. 735-736.) (emphasis supplied). While
Nordell paints the picture that the “inventory-in-transit” account
created by Poulton somehow reflected inventory never received
by Triton, Poulton testified that the amounts in the account could
have reflected legitimate materials that were received. (Appen-
dix 11, APP-40-41.) Poulton further did not have any personal
knowledge of any payments that could be construed as violations
of the Foreign Corrupt Practices Act. (Appendix 11, APP-42.)
He could not even testify concerning how his purported “inven-
tory-in-transit account” might affect the damage issues to be
decided by the Arbitration Panel. (Appendix 11, APP-40.)
Finally, any alleged “findings” of Poulton were premature in
light of the fact that he never completed his work. (Appendix 11,
APP-41.)
Murphy Testimony
Pat Murphy, a Triton employee, was asked about fraudulent
accounting practices, or the possibility of fraudulent accounting
practices. His response?
“I think Bill [McClure] was confused. Bill .. .
makes rash statements in [Nordell’s] Exhibit “7.” The
way I recall this conversation . . . this is taken out of
context... there was additional conversation. My
conclusion was Bill was confused.”
(ER 141, Exh. R, Tr. 2103-04),
Maupin Testimony
Paul Maupin was Nordell’s own auditor. He was hired by
Nordell’s parent, Veronex. He conducted a “defalcation” audit
of ENIM Project records in early 1990. This audit was after
Nordell demanded arbitration. Maupin could find no evidence of
14
fraud by Triton. (ER 141, Exh. R, Tr. 980, 1017-18).” Maupin
failed to properly request information which he later alleged was
crucial, failed to notify Triton of any problems concerning access
to the information, and failed to discuss his findings with Triton
upon his departure or anytime thereafter, as he was required to
do. (ER 141, Exh. R, Tr. 974, 997) (Appendix 13, APP-57-58.)
After Maupin departed, Triton received no information from
him concerning his so-called audit exceptions. /d.
Holdoway Testimony
Graham Holdoway was an accountant employed by KPMG
Hanadi Sudjendro & Rekan (KPMG) in Jakarta. KPMG was
hired by TII to advise regarding the internal recordkeeping of
the ENIM Project. KPMG’s help was needed because Nordell
admittedly left the ENIM Project records in complete disarray in
1988. TII, as operator, had to organize the mess. Mr. Holdoway
testified at Nordell’s request during Nordell’s case-in-chief.
(Appendix 12.) After KPMG performed its work, and as part of
its work, KPMG issued its report of October 11, 1990. In the
report, KPMG found that Nordell had a deficit, or cash obliga-
tion owed to Triton, in the amount of $663,402.00. (Appendix 12,
APP-47-48.) This was one of the numbers used by the Arbitra-
tion Panel in calculating the Arbitration Award. Among other
things, Holdoway testified that, in his review of the accounting
records, he found no evidence of fraud committed against
Nordell. (Appendix 12, APP-46-48-49.)
C. Revisions, Corrections and Additions to Petitioner’s
Procedural Discussions
Throughout the Petition, Nordell makes erroneous obser-
vations about the procedural development of the Arbitration
7 Nordell’s statement that “Calloway never even ordered a fraud audit,”
therefore, is irrelevant since Nordell itself conducted a fraud audit. Peti-
tion, p. 21. Nordell could find no evidence of fraud by Triton.
a
a RS ee Me le oe
15
Proceedings and other matters unrelated to this Court’s decision
regarding certiorari. Triton will briefly discuss these matters
here.
1. The Arbitration Panel’s request for further
information.
Nordell mischaracterizes the Arbitration Panel’s supple-
mental request for information in November 1990. The request
concerned a damage calculation prepared by Calloway. Nordell
further misrepresents the nature of the circumstances surround-
ing the Panel’s request. From the beginning to the end of the
Arbitration Proceedings, the chief arbitrator, Mr. Armour, con-
tinually emphasized the Panel’s desire to allow and consider any
evidence any of the parties wished to submit. For example, dur-
ing the proceedings, he stated:
We intend to permit any testimony or evidence to
come into this case from the time it started till the time
it ends. And whether its oral or written, we’ve permit-
ted it to come in and we think that we shouldn’t vary
from that procedure. There are a lot of accusations
back and forth -- you didn’t do it, you didn’t do this, or
you said this or you said that. But I think we want to
hear everything and see everything that pertains to the
issues here and its important. Now what weight we give
to it, is another matter . . . We think it’s important to
hear what every party has to say.
(Appendix 13, APP-61.)
On November 15, 1990, the Arbitration Panel forwarded a
letter to both Triton and Nordell requesting additional informa-
tion relating to three exhibits presented in the Arbitration Pro-
ceedings concerning, primarily, certain damage calculations
prepared by Calloway. (Nordell Appendix I, APP-98-99.)
Nordell, on November 16, responded to the Arbitration Panel’s
letter with its own explanation and interpretation of the exhibits
16
referenced. In fact, Nordell referred the Arbitration Panel to its
explanation of the exhibits “in significant detail” in its “Arbitra-
tion Brief Re: Testimony of Michael Calloway.” (CR 14, Ex. I.)
Despite the fact that Nordell had already responded to the Arbi-
tration Panel’s letter, Nordell sent a further letter requesting an
opportunity to respond (“if it so desires”) to any submissions
Triton would make “concerning the exhibits or otherwise.” Jd.
On November 19, 1990, pursuant to the Arbitration Panel’s
request, Triton forwarded correspondence to the Arbitration
Panel further explaining the referenced exhibits and the calcula-
tions contained therein. The letter contained attachments of
Calloway’s testimony during the Arbitration Proceedings relat-
ing to the exhibits and his written explanation thereto. (Nordell
Appendix J, APP-100-114.) On November 20, 1990, the Arbitra-
tion Panel requested Nordell to respond immediately, if it so
desired. (Appendix 6.) Triton never received a further response
from Nordell. (ER 141, 141.) The record additionally does not
reflect that the AAA ever received a further response from
Nordell. Jd.8
During this same time period Nordell submitted almost
daily letters to the Arbitration Panel from November 16, 1990
through December 3, 1990, requesting “interim injunctive
relief.” (ER 141, 140-41, Exh. M1-7.) The letters contained wild
and unsupported allegations concerning TII’s employees in
Indonesia and Triton’s financial condition. These letters caused
serious morale problems in the TII office in Jakarta.
5 Nordell contends it submitted a further response letter on Novem-
ber 30, 1990, ten days after the “immediate” request by the Arbitration
Panel. Ms. Pelo, the AAA administrator, typically would acknowledge
receipt of letters via confirmation correspondence to all parties. No such
correspondence was ever sent to the parties confirming receipt of a
November 30 letter from Nordell. In fact, Nordell did not send the Novem-
ber 30 letter. (ER 141, 141.)
:
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17
As a result of this paper barrage sent by Nordell and the
Arbitration Panel’s finding that the allegations were untimely
and without merit, the Arbitration Panel, on December 3, 1990,
issued an order that it would not consider or rule on any “alleged
factual information contained in these letters” and further
ordered that no such future submissions occur. (Nordell Appen-
dix L, APP-136-138.) .
2. The Arbitration Panel’s factual finding that Nordell,
not Triton, acted in bad faith.
It is truly amazing that Nordell argues the purported appli-
cation of the doctrine of unclean hands against Triton. The Arbi-
tration Panel found that Nordell, not Triton, was guilty of bad
faith and harassment in its acts committed against Triton. The
Arbitration Panel awarded equitable relief in favor of Triton and
against Nordell based on these factual findings and the requests
of the parties for equitable relief. As the Arbitration Award
clearly sets forth, the Arbitration Panel redistributed the parties’
interests in favor of Triton “in view of both parties’ request for an
adjustment of interest of each in the [ENIM] Project and in view
of Nordell’s demonstration of bad faith in not paying cash calls and
incessant harassment of Triton’s operations.” (Nordell Appen-
dix B, APP-28-29.) (emphasis supplied)
3. Confidentiality.
Nordell paints a completely misleading picture concerning
purported issues of secrecy. The focus of Nordell’s complaint is
the sealing of the Calloway testimony as it related to the Callo-
way memorandum. What Nordell fails to tell this Court is that
(i) the contract at issue contained a confidentiality agreement
between Nordell and Triton (CR 68); (ii) confidentiality was
extremely important to the parties’ working relationship with
Pertamina, the Indonesian national oil agency, as well as the
safety and well-being of Indonesian nationals and ex-patriates
18
working on the ENIM Project (CR 68); (iii) Nordell agreed dur-
ing the Arbitration Proceedings that the testimony regarding the
Calloway memorandum and the document itself would be sealed
and not copied (Appendix 13, APP-60-61.); (iv) Nordell assured
the parties and the Arbitration Panel that the materials would
not be used outside the Arbitration Proceedings (Jd.); and
(v) the Ninth Circuit entered an order of seal regarding one of
the several appeals in this case. Thus, the sealing of the Calloway
testimony was not any type of “cover-up” or conspiring act;
rather, it was an order carried out by the Arbitration Panel
pursuant to the terms of the contract and Nordell’s agreement.?
4. The unrelated Janacek Case.
The Janacek litigation is not relevant to the Questions
Presented by Petitioner. See Petition, p. i. The issues in Janacek
involved state law wrongful termination claims by a former
employee against Triton Energy in a Texas state court. (See
Triton’s Response in Opposition to Nordell’s Request for Judi-
cial Notice filed with the Ninth Circuit on December 7, 1992.)
The accounting documents at issue were completely separate
from any introduced in the Arbitration Proceedings. Addition-
ally, no final judgment was entered on the jury findings in
Janacek. Thus, no accounting fraud was “proven” in the case as
alleged by Nordell. Jd.
REASONS WHY THE PETITION SHOULD BE DENIED
The Ninth Circuit decision is not in conflict with WR. Grace
and Misco, both of which affirmed arbitration awards. The mat-
ters raised by Petitioner are matters of fact which have been
properly found, repeatedly, in favor of Triton. Moreover, there is
no overriding question of such significance here that justifies the
9 Before Nordell received the Arbitration Award, it did not find the
need for confidentiality of the Arbitration Proceedings to be offensive.
" ;
19
exercise of this Court’s discretion to grant a writ of certiorari. In
fact, the matters at issue here are matters that affect only the
parties involved and do not rise to the level of national or prece-
dential significance.
A. The WR. Grace and Misco decisions are not in conflict
with the decision below.
As previously discussed, this Court’s decisions in
WR. Grace and Misco do not conflict with the Ninth Circuit’s
decision below. See Supreme Court Rule 10.1(c). For this reason
alone, this Court need go no further in the analysis of Nordell’s
Petition.
However, even if it is assumed that there is some conflict —
which Triton vigorously denies — the policy concerns expressed
in WR. Grace and Misco are satisfied by the Ninth Circuit's
decision below.!°
This Court first outlined the public policy exception to
enforcement of arbitration awards in WR. Grace & Co. v. Local
10 It should be noted that WR. Grace and Misco involved review by the
district court of labor arbitration awards. The policy concerns inherent in
reviewing labor awards are different from the concerns in reviewing com-
mercial arbitration awards, as here. In fact, the proper policy articulated in
the Ninth Circuit is that labor arbitration cases “are not relevant in the
commercial arbitration context.” Todd Shipyards Corp. v. Cunard Line, Lid.,
943 F.2d 1056, 1062 (9th Cir. 1991); see also Raytheon Co. v. Automated
Business Sys., Inc., 882 F.2d 6, 10-11 (1st Cir. 1989) (“the concerns which
may warrant such a rule in a labor arbitration field are not present in the
commercial arbitration context”). Other federal courts have suggested that
the public policy exception to enforcement of arbitration awards
announced in WR. Grace and Misco apply only to labor arbitration awards.
See, ¢.g., Service Employees Intern. v. City Cleaning Co., 982 F.2d 89, 91
(3rd Cir. 1992); Chrysler Motors Corp. v. Internat’! Union, 748 F. Supp. 1352,
1359 (E.D. Wis. 1990); Maggio v. Local 1199, 702 F. Supp. 989, 991
(E.D.N.Y. 1989), aff'd, 880 F.2d 1319 (2nd Cir. 1989), cert. denied, 493 U.S.
936, 110 S.Ct. 329, 107 L.Ed.2d 319 (1989). At any rate, these distinctions
are not important for this Court’s purpose. The decision below does not
conflict with the Court’s prior decisions.
20
Union 759, 461 U.S. 757, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983).
In WR. Grace, the Court reviewed a conflict concerning a collec-
tive bargaining agreement, which gave seniority to certain male
employees, and a consent decree between the employer and the
EEOC designed to settle a sex discrimination suit under
Title VII. When the male employees lost their seniority because
of implementation of the consent decree, they requested arbitra-
tion. An arbitrator held that, irrespective of the consent decree,
the employer had breached the seniority provisions of the agree-
ment and ruled in favor of the employees. 461 U.S. at 759-64.
In the course of confirming enforcement of the arbitration
award, this Court discussed the public policy exception. Begin-
ning with the proposition that, “[a]s with any contract... a
court may not enforce a collective-bargaining agreement that is
contrary to public policy,” the Court ruled that questions of
public policy were properly answered in the courts and that, if a
court found that an arbitral award violated public policy, it would
be “obliged to refrain from enforcing it.” Jd. at 766.
The Court then sought to define “public policy.” For an
asserted public policy to be sufficient to preclude enforcement of
an arbitrator’s award, it had to be “explicit;” furthermore, it had
to be “well defined and dominant.” Jd. Finally, such a policy
could be satisfactorily demonstrated only “ ‘by reference to the
laws and legal precedents’ ” and could not be the product of the
parties’ or the courts’ “ ‘general considerations of supposed pub-
lic interests’.” Id. (quoting Muschany v. United States, 324 U.S.
49, 66, 65 S.Ct. 442, 451, 89 L.Ed. 744 (1945)).
The Court clarified the narrow scope of the public policy
exception in United Paperworkers International Union, AFL-
CIO v. Misco, Inc., 484 U.S. 29, 108 S.Ct. 364, 98 L.Ed.2d 286
(1987). In Misco, an employee was discharged after marijuana
was found by police in his home and a lighted marijuana ciga-
rette was seen in his car with marijuana smoke in the air. The
21
employee’s job duties included operating hazardous machinery.
The arbitrator ordered reinstatement “in his old job or an equiv-
alent one for which he was qualified” with backpay, finding that
the employer had failed to prove that the employee had actually
possessed or used illegal substances while on company property
and thus that he had violated any company rule. 484 U.S. at 34,
45.
The district court vacated the award. The Fifth Circuit
affirmed the district court’s decision vacating the award. The
Fifth Circuit reasoned that reinstatement would violate the pub-
lic policy “against the operation of dangerous machinery by per-
sons under the influence of drugs or alcohol.” Misco, Inc. v.
United Paperworkers Intern. Union, AFL-CIO, 768 F.2d 739, 743
(Sth Cir. 1985). This Court unanimously reversed. The Court
held that the circuit court had failed to follow the dictates of
W.R. Grace with respect to the articulation and application of a
public policy necessitating the invalidation of the arbitrator’s
award.
The Court began by reaffirming the “explicit” and “well
defined and dominant” requirements expressed in WR. Grace, -
saying that the result in that case had “turned on [the Court’s]
examination of whether the award created any explicit conflict
with other ‘laws and legal precedents’ rather than an assessment
of ‘general considerations of supposed public interests.’ ” 484
U.S. at 43 (quoting WR. Grace, 461 U.S. at 766). “At the very
least,” Justice White continued for the Court, “an alleged public
policy must be properly framed under the approach set out in
WR. Grace, and the violation of such a policy must be clearly
shown if an award is not to be enforced.” 484 U.S. at 43. The
Court stated that, for the public policy exception to apply, the
enforcement of the award must violate public policy.
The Court concluded that the Fifth Circuit’s articulation of
a general “public policy” against drug use by employees violated
22
the strict requirements of the WR. Grace formulation; that no
violation of the public policy it articulated had been “clearly
shown” in any case; and that the Fifth Circuit had, in its public
policy analysis, improperly drawn an inference at odds with the
arbitrator’s finding. 484 U.S. at 44-45. The Court stated:
The parties did not bargain for the facts to be found by
a court, but by an arbitrator chosen by them ... Nor
does the fact that it is inquiring into a possible violation
of public policy excuse a court for doing the arbitrator’s
task.
Id. at 45. The Court noted that it was not the function of the
reviewing court to upset an arbitration award merely because of
the court’s own view that a particular public policy was
threatened. Jd. The Court further made clear its decision did not
announce an expansive interpretation of the public policy excep-
tion. The Court announced that: “{[W.R. Grace} does not sanction
a broad judicial power to set aside arbitration awards-as against
public policy.” 484 U.S. at 43.
First, in this case, the Arbitration Panel did not find that
Triton violated any public policy. As a result, Nordell’s attempt
to use the public-policy exception is wholly improper. See Misco,
484 U.S. at 44-45 (because the arbitrator made no findings of a
public policy violation, the court of appeals had no authority to
vacate the award on public policy grounds). See also Union
Pacific Railway Co. v. United Transportation Union, 3 F.3d 255,
261, 264 (8th Cir. 1993) (reviewing courts are not allowed to
make factual findings when setting aside arbitration awards on
public policy grounds); United States Postal Service v. National
Association of Letter Carriers, AFL-CIO, 839 F.2d 146, 148
(3rd Cir. 1988) (reviewing court cannot second-guess an arbitra-
tor’s fact finding where alleged violation “depends on drawing
factual inferences not made by the arbitrator’). For example, to
accept Nordell’s argument, this Court would be required to
make factual findings that Triton committed fraud or violated the
23
FCPA, when the Arbitration Panel made exactly contrary factual
findings.
Second, even if the Arbitration Panel erroneously applied
the public policy exception in the Arbitration Award — an event
Triton vigorously argues did not occur, this would not support
Nordell’s position that the Ninth Circuit acted contrary to the
W.R. Grace and Misco decisions. See Seymour v. Blue Cross/Blue
Shield, 988 F.2d 1020 (10th Cir. 1993) (refusing to vacate award
on public policy grounds because of arbitrator’s error in inter-
preting the law); Board of County Com’rs of Lawrence County,
Ohio v. L. Robert Kimball and Associates, 860 F.2d 683, 688
(6th Cir. 1988), cert. denied, 494 U.S. 1030, 110 S.Ct. 1480,
108 L.Ed.2d 617 (1990).
Third, an enforcement of the Arbitration Award does not
violate public policy. Typically, the public policy exception is
addressed by courts when enforcement of the award itself com-
pels one of the parties to take action which directly conflicts with
public policy. Revere Copper and Brass Inc. v. Overseas Private Inv.
Corp., 628 F.2d 81, 83 (D.C. Cir. 1980), cert. denied, 446 U.S. 983,
100 S.Ct. 2964, 64 L.Ed.2d 839 (1980). See, €.g., Delta Air Lines,
Inc. v. Air Line Pilots Ass’n, Intern., 861 F.2d 665, 671 (11th Cir.
1988), cert. denied, 493 U.S. 871, 110 S.Ct. 201, 107 L.Ed.2d
154 (1989) (enforcement of award violated public policy because
it required reinstatement of pilot who had piloted aircraft while
drunk); Iowa Elec. Light and Power Co. v. Local Union 204 of the
Int'l Bhd. of Elec. Workers, 834 F.2d 1424, 1428 (8th Cir. 1987)
'! Any argument by Nordell that the arbitrators acted in manifest disre-
gard of the public policy exception also fails. See O.R. Securities, Inc. v.
Professional Planning Assocs., 857 F.2d 742, 747 (11th Cir. 1988) (to vacate
an award on this ground, “there must be a showing in the record, other
than the result obtained, that the arbitrators knew the law and expressly
disregarded it”); see also San Martine Compania De Navegacion, S.A. v.
Saguenay Terminals Lid, 293 F.2d 796, 801 (9th Cir. 1961); Jenkins v.
Prudential-Bache Sec., Inc., 847 F.2d 631, 634 (10th Cir. 1988).
24
(enforcement of award violated public policy because it required
reinstatement of nuclear power plant machinist who had deliber-
ately pulled fuse on containment area door in violation of NRC
rules); American Postal Workers Union AFL-CIO v. U.S. Postal
Service, 682 F.2d 1280, 1286 (9th Cir. 1982), cert. denied, 459 U.S.
1200, 103 S.Ct. 1183, 75 L.Ed.2d 431 (1983) (arbitration award
will not be enforced if it forces a party to perform a manifestly
illegal act).
The public policy exception is inapplicable here because the
award does not compel either party to take action which conflicts
with public policy. There is no manifestly illegal act which
Nordell is forced to perform. Rather, the Arbitration Award
requires a readjustment of contractual interests between the
parties as well as monetary damages. This is relief which was
expressly requested by Nordell. (Appendices 4-5.) Thus,
Nordell’s remaining authorities --neither of which involve arbi-
tration -- are inapplicable. See, e.g., Hurd v. Hodge, 334 U.S. 24,
68 S.Ct. 847, 92 L.Ed. 1187 (1948) (enforcement of final judg-
ment would violate federal and constitutional restriction against
racial discrimination); and McMullen v. Hoffman, 174 U.S. 639,
19 S.Ct. 839, 43 L.Ed. 1117 (1899) (contract provisions required
performance of illegal acts).
Moreover, in examining the enforcement of the terms of
the Award itself, Nordell’s arguments fail. This Court held in
Misco that, once the public policy is identified, the party seeking
to vacate the award must demonstrate a sufficient link between
enforcement of the award and a violation of the policy. 484 U.S.
at 44. Here, no such link exists. Enforcement of the Award will
not--by any stretch of the imagination--perpetrate a fraud or
cause an FCPA violation.
Nordell’s argument completely misses the mark. It argues,
at most, that its allegations of fraud--which the Arbitration Panel
rejected--are sufficient to show that enforcement of the Award is
25
an endorsement of “fraud,” even though such “fraud” was never
proven. Unproven allegations of fraud are not sufficient to over-
turn an arbitration award based on supposed considerations of
public policy. The Ninth Circuit reached the same conclusion,
basing its decision in part on Osceola County Rural Water System,
Inc. v. Subsurfco, Inc., 914 F.2d 1072 (8th Cir. 1990). (Nordell
Appendix A, APP-10-11.)
In Subsurfco, an arbitration was conducted between Osce-
ola, the operator of a rural water system, and Subsurfco, a con-
tractor. The contract between the parties provided that
Subsurfco would construct a 680-mile system primarily by use of
the “open trench method.” After difficulties arose, the parties
modified their agreement to permit Subsurfco to use the “plow-
in” method. This procedure required the pipe sections to be
glued rather than sealed with rubber gaskets. Osceola termi-
nated the contract, and Subsurfco demanded arbitration. Osce-
ola’s primary complaint concerned excessive leakage in the
system. The Arbitration Panel found that Subsurfco substantially
completed the work under the contract and had performed in
accordance with Osceola’s design specifications.
Osceola brought suit to vacate the award because the award
allegedly “violated public policy because the Arbitration Panel
ignored the testimony of two of Subsurfco’s former employees
that they had been ordered . . . to falsify the results of pres-
sure testing.” The district court agreed and vacated the award.
26
The Court of Appeals overruled the district court, stating:
The arbitrators heard testimony from some twenty
witnesses over a six-week period, receiving in evidence
several thousand documents. Each of the arbitrators
had lengthy experience in the construction indus-
try . . . [W]e conclude that the district court erred in
holding that the award violated public policy because it
in effect rewarded Subsurfco for falsifying the results of
pressure testing. As the district court recognized, arbi-
trators are not required to elaborate on the reasoning
in support of an award. There is nothing in the record
to suggest that the arbitrators accepted as true the
testimony of the former employees (both of whom
were employed by Osceola at the time of their testi-
mony before the arbitrators) regarding the falsification
of test results. The arbitrators brought their collective
experience to bear on the extensive testimony and volu-
minous documentary evidence received and then
entered an award in accordance with their understand-
ing of the meaning of the contract provisions. That was
their prerogative and duty, and we see no justification
for setting aside their award.
914 F.2d at 1075.
Similarly, here, the Arbitration Panel brought their collec-
tive experience to bear and rejected the claims of fraud raised
time and time again by Nordell. There is nothing to suggest that
the Arbitration Panel accepted as true any testimony elicited by
Nordell regarding alleged falsification of the books and records
of the ENIM Project. In fact, they rejected it. The Court’s opin-
ions in WR. Grace and Misco are not in conflict with the Ninth
Circuit’s decision below.
27
B. Neither the decision below nor the Arbitration Award
nor the District Court’s Final Judgment found that
Triton committed violations of the Foreign Corrupt
Practices Act; moreover, these issues were not properly
preserved by Petitioner on appeal.
Nordell alleges that Triton violated the Foreign Corrupt
Practices Act, that the Arbitration Panel ignored such alleged
violations, and that, as a result, the Award violates public policy.
Nordell never argued alleged violations of the FCPA to the
District Court or the Ninth Circuit as a reason to vacate the
Award. To raise this issue for the first time before this Court is
improper and should not be considered by the Court. See Tay-
lor v. Freeland & Kronz, __ U.S. __, 112 S.Ct. 1644,
118 L.Ed.2d 280 (1992) (this Court would not consider argument
raised for first time in opening brief on merits, which had not
been raised or resolved in lower courts).
In the alternative, even if the Court considers the merits of
this argument, the argument does not support granting a writ of
certiorari. First, the Arbitration Panel did not make a factual
finding that Triton committed a violation of the FCPA. To the
contrary, the terms of the Award do not reflect any such viola-
tion. Second, it is not the reviewing court’s function to decide
independently whether the conduct of the prevailing party vio-
lated the FCPA, or any similar statute. Misco, 484 U.S. at 45.
Third, even by Nordell’s own arguments, it has failed to show
that such a violation has occurred. Triton has not committed any
acts which could be characterized as done in order to obtain or
retain “business for or with, or directing any business to, any
person” within the parameters of the statute at issue and the case
law. See 15 U.S.C.A. § 78 dd-1(a)(1) (West Supp. 1993).
Nordell’s arguments that such unproven allegations preclude
enforcement of the Award as against public policy, should be
rejected.
28
C. Neither the decision below nor the record supports the
application of the unclean hands doctrine against Triton
as an explicit, well-defined and dominant federal public
policy exception to the enforcement of commercial
arbitration awards.
Nordell finally argues that the Ninth Circuit’s Memoran-
dum purportedly conflicts with the Misco decision because, alleg-
edly, enforcement of the Award would violate the “unclean
hands doctrine.” Petition, p. 27. Nordell relies on California
state law to support its arguments. This is insufficient as a matter
of law to invoke this Court’s jurisdiction. See Objection to Juris-
dictional Statement.
Additionally and alternatively, the unclean hands doctrine
does not conflict with the decision of the Ninth Circuit below.
Nordell first argues that the Arbitration Panel ignored the
doctrine of unclean hands. Appellants rely on Section 3517 of
the California Civil Code that states, “no one can take advantage
of his own wrong.” The Arbitration Panel did not find that Triton
committed any “wrong.” Moreover, the Arbitration Panel did
not find that Triton “took advantage” of its “own wrong.” Addi-
tionally, the record does not reflect that the Arbitration Panel
recognized this maxim and chose to ignore it.
The loosely articulated unclean hands doctrine applies
against a party in a civil judicial proceeding who is found, as a
matter of fact, to have committed acts of fraud, unconscionabil-
ity or bad faith towards the party against whom it has proceeded.
Precision Instrument Mfg. Co. v. Automotive Maintenance Machin-
ery, 324 U.S. 806, 814, 65 S.Ct. 993, 997, 89 L.Ed. 1381 (1945);
International Union, Allied Industrial Workers v. Local Union
No. 589, 693 F.2d 666, 672 (7th Cir. 1982). Nothing in the record
before this Court shows that the Arbitration Panel found that
Triton committed acts of fraud, unconscionability or bad faith
29
towards Nordell. There is no indication that the Panel recog-
nized this maxim but chose to ignore it. The record reflects fact
findings that Nordell committed “bad faith acts toward the party
it has proceeded against”--Triton. If anyone is guilty of unclean
hands, it is Nordell.
The California cases cited by Nordell do not support its
argument. See, ¢.g., Buck v. Dahlgren, 100 Cal. Rptr. 462 (Cal.
App. - 4th Dist. 1972) (non-arbitration case in which the court
applied unclean hands to prelude recovery by party participating
in usury transaction); Richman v. Bank of Perris, 282 P. 801 (Cal.
App. - 4th Dist. 1929) (non-arbitration case in which party was
barred from equitable relief where he “stepped into shoes” of
debtor who “robbed the bank” and committed a criminal act).
Moreover, these cases address California state doctrines, not
federal laws or policy. Triton has found no case in which a federal
court has vacated an arbitration award based on the unclean
hands doctrine under the public policy exception. Triton suggests
that there are none and for good reason. The “unclean hands
doctrine” does not rise to the level of explicit, well-defined and
dominant federal public policy sufficient to satisfy the Misco test.
30
CONCLUSION
For the reasons set forth herein, Triton requests that the
Court deny Nordell’s Petition for Writ of Certiorari. Nordell has
shown this Court no valid basis to exercise its jurisdiction to hear
this case. The decisions and policy concerns expressed by this
Court in Misco and WR. Grace are not in conflict with the
opinion below. The factual findings by the Arbitration Panel do
not support Nordell’s requested relief. It would be contrary to
the well-established decisions of this Court to make findings of
fact which are contrary to those found by the proper finder of
fact in this case: the Arbitration Panel.
DATED: January 19, 1994.
Respectfully submitted,
JIM L. FLEGLE
BRACEWELL & PATTERSON,
LLP.
[Counsel of Record]
4000 Lincoln Plaza
North Akard Street
Dallas, Texas 75201-3320
(214) 740-4000
Fax: (214) 740-4010
Counsel for Respondents, Triton
Indonesia Inc., and Triton Energy
Corporation
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