# Opposition Brief — MSW Investments v. Chevron U.S.A. Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1998
- **Citation:** 525 U.S. 823

## Text

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No. 97-2007 Chae
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In THE

Supreme Court of the United States
OcTOBER TERM, 1997

MSW INVESTMENTS, A TEXAS JOINT VENTURE,
. Petitioner,
CHEVRON U.S.A. INC.,
Respondent.

On Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Fifth Circuit

RESPONDENT'S BRIEF IN OPPOSITION

DANIEL JOSEPH
Counsel of Record

AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.

1333 New Hampshire Ave., N.W.

Suite 400

Washington, D.C. 20036

(202) 887-4000

PAULA W. HINTON

THOMAS M. BEVILACQUA

AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.

1900 Pennzoil Place

South Tower

711 Louisiana Street

Houston, Texas 77002

(713) 220-5800

Counsel for Respondent

WILSON - Epes PRINTING Co., Inc. - 789-O096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

Did the court of appeals properly affirm the award of
an arbitrator who ruled that Petitioner had failed to
Properly exercise a right of first refusal it possessed in
property owned by Respondent and that Respondent’s
refusal to sell the property was justified?

(i)

ii
PARTIES TO THE PROCEEDING

Pursuant to Rule 29.6, Respondent Chevron U.S.A.
Inc. hereby lists the corporate entities related to it. The
following is the parent company of Respondent Chevron
U.S.A. Inc.: Chevron Corporation. The following are the
non wholly-owned subsidiaries of Chevron U.S.A. Inc.:
Chevron Credit Bank, N.A.; Chevron do Brasil Ltda.;
Chevron Oil Congo S.A.R.L.; Compania Minera Chevron
Dominicana, S.A.; Felix Oil Company; Midstream Barge
Company, L.L.C.; NGC Corporation; Pembroke Capital
Company Inc.; and TBA Supply Company.

TABLE OF CONTENTS

Pag

En. i

PARTIES TO THE PROCEEDING .....................000...... i

e nee Rr iv

SLATEMENT OF THE CASE... oo. c.cccccc cc ccccec nes. 1

Nee nh wcsvntacencacs, 1

B. Proceedings Below ........... dina pibdsdaegdadighinassceubcuias case: 2

REASONS FOR DENYING THE WRIT .................. 3
I. THE FEDERAL ARBITRATION ACT ESTAB-
LISHES A FEDERAL POLICY FAVORING
ARBITRATION AND PROVIDING FOR EX-
TREMELY LIMITED JUDICIAL REVIEW

OF ARBITRATORS’ DECISIONS _..... 3

Il. IN CONFORMITY WITH THESE PRINCI-
PLES, REVIEWING COURTS HAVE ONLY
VERY RARELY VACATED ARBITRATORS’
SUI boat thc ssssiccstnivis istucichanionbcese Siteinlebincgthra les tage 6

Ill. REGARDLESS OF PRECISE TERMINOL-
OGY, COURTS OF APPEALS APPLY THE
STANDARDS OF REVIEW DICTATED BY

THE FEDERAL ARBITRATION ACT ....... 7
IV. THE ARBITRATOR’S AWARD IN THIS
CASE WAS IN ANY EVENT PROPERLY
CONFIRMED, BECAUSE IT WAS CORRECT
UNDER ANY STANDARD ........000000 200s. 11
NIN his thicket dacehiletissicchataSedlcaninlnasovssk-noicmcssdehon 12

(ili)

iv

TABLE OF AUTHORITIES

CASES CITED Page

Advest, Inc. v. McCarthy, 914 F.2d 6 (1st Cir.

BD: Saeccthaia onic ch a eae ad ee 9,10
Amicizia Societa Navegazione v. Chilean Nitrate

& Iodine Sales Corp., 274 F.2d 805 (2d Cir.),

cert. denied, 363 U.S. 848 (1960) ......................... 9
Board of County Comm’rs v. L. Robert Kimball &

Assocs., 860 F.2d 683 (6th Cir. 1988), cert.

denied, 494 U.S. 1030 (1990) _.........- 5
Coast Trading Co., Inc. v. Pacific Molasses Co., 681

F.2d 1195 (9th Cir. 1982) . ‘ 6
Dean Witter Reynolds Inc. v. Byrd, 470 US. 213

fi} Saeeait aes a ec ors Mia Ne een Tones Geant eRe ae ot POON 4.5
Elier Mfa., Inc. v. Kowin Dev. Corp., 14 F.3d 1250

(7th Cir.), cert. denied, 512 U.S. 1205 (1994)_ 5
Federated Den’t Stores, Inc. v. J.V.B. Indus., Inc.,

604 F'.28 O62. (6th Cir: 1900) 8 .. 9,10
First Options of Chicago, Inc. v. Kaplan, 514 U. S.

Oe Te ie 6
Forsythe Int'l, S.A. v. Gibbs Oil Co., 915 F.2d 1017

CO Rey OES csccsiatida ka erana eanaa ak ek 7
Gilmer v. Interstate Johnson/Lane Corp., 500 U.S.

Se RR ss rekia sada atiaucmabincecie uae tans 4
Inter-City Gas Corp. v. Boise Cascade Corp., 845

me ae Re Re 6,10
Jenkins v. Prudential-Bache Securities, Inc., 847

Fon Gon Ciue Ce ieee hehe. 10, 11
Kelley v. Michaels, 59 F.3d 1050 (10th Cir. 1995). 10
LaFarge Conseils et Etudes, S.A. v. Kaiser Cement

& Gypsum Corp., 791 F.2d 1334 (9th Cir. 1986). 7
Merrill Lynch, Pierce, Fenner & Smith, Ine. v.

Bobker, 808 F.2d 930 (2d Cir. 1986) 9
Mitsubishi Motors Corn. v. Soler Crusler-Plymouth,

te., 7a Ge Oe THe 6k ie 4,5,9
Montes v. Shearson Lehman Bros., 128 F.3d 1456

CE IGS Se Det hacen te 6, 10
Moselen. Hallaarten, Estabrook & Weeden v. Ellis,

Ba} oe: 28 ety een ne a 7

<A Ae mNNeRRRER NAIF: ee

v

TABLE OF AUTHORITIES—Continued
Page
Moses H. Cone Memorial Hosp. v. Mercury Constr.
Co., 460 U.S. 1 (1988) ........ ee ERP Ot ELAS 3
National Wrecking Co. v. International Bhd. of
Teamsters, Local 731, 990 F.2d 957 (7th Cir.

BIDOPIID noacsnlidhi < wokeca tana ries ce err eee aioe a 5
Raiford v. Merrill Lynch, Pieres, Fenner & Smith,
Inc., 903 F.2d 1410 (11th Cir. 1990). 7

Remmey v. PaineWebber, Inc., 32 F.3d 143 (4th

Cir. 1994), cert. denied, 513 U.S. 1112 (1995)_.
Richmond, Fredericksburg & Potomac R.R. Co. v.

Transportation Communications Int'l Union,

973 F.2d 276 (4th Cir. 1992), cert. denied, 513

Rosai RA MEY cooisicntb el ales. 8
R.M. Perez & Assocs. v. Welch, 960 F.2d 534 (5th

Cans ED cc cas 7
Robbins v. Day, 954 F.2d 679 (11th ‘Cir.), cert.

denied sub nom. Robbins v. PaineWebber, Inc.,

506 U.S. 870 (1992) .. ae pre ae ee a
Rodriquez de Quijas v. “Shearson/ ‘American Ex-

press, Inc., 490 U.S. 477 (1989) A
Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974)... $.5
Service Employees Int’l Union, AFL-CIO, CLC v.

Local 1199 N.E., SEIU, AFL-CIO, CLC, 70 F.3d

ol
io 2)

Or (106 Ct: tee? ck ie ara ae ee 11
Shearson/American Express, Inc. v. McMahon,

Se Gla eee ee 3,4
Southland Corp. v. Keating, 465 U.S. 1 (1984) 3
Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d

1125 (3d Cir. 1972) ......... 10
Ultracashmere House, Ltd. v. Meyer. 664 F. od 1176

(11th Cir. 1981) . nae 5
United Panerworkers Intl Union, AFL-CIO v.

mien, fae. 434 OS BS t0ST) 5, 6
United Steelworkers of Am. v. Enterprise Wheel

& Car Corn., 868 U.S. 598 (1960) ......................... 9
Wilko v. Swan, 346 U.S. 427 (19538) ....................... 4, 5,9

STATUTES CITED
ERR OF elictsicnnilna-cahokiaeeninabniee aes 7, 8,9, 10

vi
TABLE OF AUTHORITIES—Continued

OTHER AUTHORITIES CITED Page

Brad A. Galbraith, Note, Vacatur of Commercial
Arbitration Awards in Federal Court: Contem-
plating the Use and Utility of the “Manifest Dis-
regard” of the Law Standard, 27 IND. L. REV.
RE pares cicccrsnc ator nailaanedieehared amet comcetilos: sn 6,9

Bret F. Randall, Comment, The History, Applica-
tion, and Policy of the Judicially Created Stand-
ards of Review for Arbitration Awards, 1992

Si as nis I: I a a hs ie et 11
Phillip C. Essig, U.S. Supreme Court Tackles Arbi-
tration Issues, N.Y.L.J., Feb. 14, 1995, at 1........ 4

Stephen L. Hayford & Scott B. Kerrigan, Vacatur:
The Non-Statutory Grounds for Judicial Review
of Commercial Arbitration Awards, DISPUTE
mepetwrmon J., Oct. 1996, at 22 ................. 2... 9
Stephen L. Hayford, Law in Disarray: Judicial
Standards for Vacatur of Commercial Arbitra-
tion Awards, 30 GA. L. REV. 731 (1996) ............ 6

In THE
Supreme Court of the United States

OCTOBER TERM, 1997

No. 97-2007

MSW INVESTMENTS, A TEXAS JOINT VENTURE,
Petitioner,
Vv.
CHEVRON U.S.A. INC.,
Respondent.

On Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Fifth Circuit

RESPONDENT'S BRIEF IN OPPOSITION

STATEMENT OF THE CASE
A. Underlying Facts

Pursuant to the terms of a 1993 Compromise and
Settlement Agreement [the “Agreement”] (R. 042) be-
tween Petitioner MSW Investments and Respondent Chev-
ron U.S.A. Inc. in unrelated litigation, Chevron purchased
an approximately one-acre parcel of land in Dallas, Texas
[the “Property”], and granted “to MSW (and not to
MSW’s partners individually) a right of first refusal-to
repurchase the property” in the event of future sale by
Chevron, on the same terms and conditions as offered
by a potential buyer and accepted by Chevron. (R. 043).
After a third party presented a written offer to Chevron
to purchase the Property which Chevron found accept-

2

able, Chevron advised MSW of the third-party offer pur-
suant to the terms of the Agreement (R. 507), and
forwarded a copy of that third-party offer. (R. 457).
Lawrence Steinberg, purporting to act on behalf of MSW
as Managing partner, attempted to exercise the right of
first refusal (R. 508), but without submitting documen-
tation that he had the authority to so bind MSW or that
MSW stil existed. (R. 510; S.R.1 0027, 0029, 0031).
The documents forwarded by Steinberg in response re-
vealed that he, in fact, was not authorized to bind the
partnership, and they also called into question whether
MSW still existed. Steinberg refused to provide the re-
quested proof of authority and other requested documen-
tation in response to further requests, even though Chev-
ron on multiple occasions extended the time during which
MSW could exercise the right of first refusal. (S.R. 0027,
0029, 0031). Instead, MSW filed a lawsuit against Chev-
ron in Texas state court, and filed a lis pendens on the
Property. (R. 008, 014).

B. Proceedings Below

Following removal by Chevron of MSW’s action against
it to the United States District Court for the Northern
District of Texas on July 27, 1995, that court, on July
24, 1996, ordered the parties to arbitrate their disputes
before an arbitrator mutually selected by the parties. On
February 21, 1997, the arbitrator entered an award that
concluded, in pertinent part, that MSW had not properly
exercised the right of first refusal it possessed relating to
the Property and that Chevron was justified in refusing
to sell the Property. (R. 446).? Following the filing of a

1“S.R.” references are to the Supplemental Record which Chevron
filed in the United States Court of Appeals for the Fifth Circuit.

2In terms of measuring the extent of the controversy between
the parties, it bears mention that the arbitrater concluded that the
right of first refusal was not extinguished as a result of the improp-
erly attempted exercise. Rather, the right retained its vilelity in
the event Chevron should subsequently receive an offer on the
property which it desired to accept.

3

Motion to Confirm by Chevron (R. 440) and a Motion
to Vacate by MSW (R. 485), the district court confirmed
the award, and entered a Judgment on May 19, 1987.
(R. 724). MSW appealed to the Fifth Circuit, arguing
in its November 18, 1997 brief that the arbitral award
Should be vacated on the basis of the “essence” test and
that the arbitrator manifestly disregarded the law. Finding
such standards impermissible on a motion to vacate, the
Fifth Circuit affirmed in a brief per curiam opinion.

REASONS FOR DENYING THE WRIT

The arbitrator’s decision here under review was a work-
aday interpretation of a contract between MSW and
Chevron. There is, moreover, no substantive disagree-
ment among the courts of appeals as to when they may
vacate an arbitrator’s award. Virtually all of the assert-
edy conflicting language cited by Petitioner is dictum.
The results reached by the courts of appeals are all in
harmony, and neither the court below nor any other court
decision cited in the Petition, has departed from the
standard of review set by the Federal Arbitration Act
itself. There is, therefore, nothing deserving this Court’s
attention.

I. THE FEDERAL ARBITRATION ACT ESTAB-
LISHES A FEDERAL POLICY FAVORTNG ARP?-
TRATION AND PROVIDING FOR EXTREMELY
LIMITED JUDICIAL REVIEW OF ARBITRATOR’
DECISIONS.

The Federal Arbitration Act established a “federal
policy favoring arbitration,” Moses H. Cone Memorial
Hosp. v. Mercury Constr. Co., 460 U.S. 1, 24 (1983);
Southland Corp. v. Keating, 465 U.S. 1. 10 (1984), and
“was intended to ‘revers[e] centuries of judicial hostility
to arbitration agreements,’ ” Shearson/American Express,
Inc. v. McMahon, 482 U.S. 220, 225 (1987) (quoting
Scherk v. Alberto-Culver Co., 417 U.S. 506. 510 (1974));

4

Gilmer v. Interstate Johnson/ Lane Corp., 500 U.S. 20, 24
(1991). This Court has instructed that the judiciary must
respect parties’ conscious choice for the ease and conveni-
ence of arbitration over formal, full-scale, costly litigation.
In Mitsuibishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 626-27 (1985), for example, this
Court observed that “we are well past the time when
judicial suspicion of the desirability of arbitration and of
the competence of arbitral tribunals inhibited the develop-
ment of arbitration as an alterantive means of dispute
resolution.” See also Gilmer, 500 U.S. at 34 n.5. And
the Court’s decision in Shearson/ American Express, Inc.
v. McMahon, 482 U.S. 220 (1987), has been character-
ized as “an unequivocal rejection of the belief that a
judicial forum is needed to protect the substantive rights
of parties and a clear statement that judicial hostility
to arbitration would no longer be countenanced.” Phillip
C. Essig, U.S. Supreme Court Tackles Arbitration Issues,
N.Y.L.J., Feb. 14, 1995, at 1; see also Rodriguez de
Quijas v. Shearson/ American Express, Inc., 490 U.S. 477,
481 (1989) (“To the extent that Wilko [v. Swan, 346
U.S. 427 (1953)] rested on suspicion of arbitration as a
method of weakening the protections afforded in the
substantive law to would-be complainants, it has fallen
far out of step with our current strong endorsement
of the federal statutes favoring this method of resolving
disputes.”’) .*

The primary concern of Congress in passing the Fed-
eral Arbitration Act “was to enforce private agreements
into which parties had entered.” Dean Witter Reynolds
Inc. v. Byrd, 470 U.S. 213, 221 (1985); see also Shear-
son/ American Express, Inc., 482 U.S. at 225-26. Con-
gress further recognized the additional potential benefit

3In view of this criticism of Wilko, the Petitioner misplaces its
extensive reliance on that case as the purported source of authoriza-
tion of broad judicial review. See Petition, at 5, 8.

5

to parties of resolving disputes quickly and more cheaply.
Dean Witter Reynolds Inc., 470 U.S. at 221; Alberto-
Culver Co., 417 U.S. at 510-11; Wilko v. Swan, 346
U.S. 427, 431, 438 (1953).* By freely agreeing to arbi-
trate potential claims, parties “trade[] the procedures and
opportunity for review of the courtroom for the simplicity,
informality, and expedition of arbitration.” Mitsubishi
Motors Corp., 473 U.S. at 628. One consequence of that
decision is that the parties to an arbitration agreement
have consented to accept the facts and the law as the
arbitrator or arbitrators find them; like the courts, the
parties are equally bound to respect those arbitral deter-
minations. Were parties guaranteed significant substan-
tive judicial review upon receipt of an unfavorable arbi-
tral award, much of the FAA’s supporting logic would be
lost. Misco, 484 U.S. at 38. “[A]rbitrators do not act as
junior varsity trial courts where subsequent appellate
review is readily available to the losing party.” National
Wrecking Co. v. International Bhd. of Teamsters, Local
731, 990 F.2d 957, 960 (7th Cir. 1993); Remmey v.
PaineWebber, Inc., 32 F.3d 143, 146 (4th Cir. 1994),
cert. denied, 513 U.S. 1112 (1995).

To effectuate this policy, courts must accept arbitrators’
findings of fact and conclusions of law in nearly all cases.
United Paperworkers Int'l Union, AFL-CIO v. Misco,
Inc., 484 U.S. 29, 37-38 (1987); see also, e.g., Eljer
Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1254
(7th Cir.), cert. denied, 512 U.S. 1205 (1994); Board
of County Comm'rs v. L. Robert Kimball & Assocs.,
860 F.2d 683, 685 (6th Cir. 1988), cert. denied, 494
U.S. 1030 (1990). “[C]Jourts are not authorized to re-
consider the merits of an award even though the parties

4There are additional reasons for a uniform national policy
favoring arbitration. E.g., Ultracashmere House, Ltd. v. Meyer,
664 F.2d 1176, 1170-80 (llth Cir. 1981) (reduction in congestion
in courts to the benefit of othe: litigants).

6

may allege that the award rests on errors of fact or on
misinterpretation of the contract.” Misco, 484 U.S. at 36;
see also id. at 37-38. Courts may set aside arbitral rulings
“only in very unusual circumstances.” First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 940, 942 (1995).

II. IN CONFORMITY WITH THESE PRINCIPLES, RE-
VIEWING COURTS HAVE ONLY VERY RARELY
VACATED ARBITRATORS’ DECISIONS.

Despite all of the Petitioner’s attempts to find incon-
sistency in discussion in the case law and the secondary
literature, it is exceptionally rare that a reviewing court
vacates the decision of an arbitrator under the Federal
Arbitration Act. In fact. as the numerous opinions cited
in MSW’s Petition and additional research readily reveal,
in only a handful of cases have commercial arbitration
awards ultimately been vacatea at the appellate level.
See, e.g., Inter-City Gas Corp. v. Boise Cascade Corp.,
845 F.2d 184 (8th Cir. 1988): Cuoast Trading Co., Inc. v.
Pacific Molasses Co., 681 F.2d 1195 (9th Cir. 1982).
Standards such as the “essence of the contract” test and
“manifest disregard” of the law do not betoken any sub-
stantive difference in the scope of the review provided
but remain, in the words of one commentator, “theoretical
construct[s].”* The fact is that the courts of appeals apply
a narrow standard of judicial review entirely consistently.®

5 Stephen L. Hayford, Laew-in Disarray: Judicial Standarcs for
roy

Vacatur of Commercial Arbitration Awards, 30 Ga. L. REv. 7
776 (1996).

6 To illustrate, of the numerous cases cited by Petitioner, in
only one was a commercial arbitration award on the merits ulti-

1

mately vacated by a circuit court of appeals on the basis of ‘mani
fest disregard” of the law. Montes v. Shearson Lehman Bros., 128
F.3d 1456 (11th Cir. 1997). As recently as 1996, one comment
noted that no commercial arbitration had even been vacated on ‘
basis of “manifest disregard” of the law. Havyford, supre, at CG
777; see also Brad A. Galbraith, Note, Vaectur of Commercicl

7

Ill. REGARDLESS OF PRECISE TERMINOLOGY,
COURTS OF APPEALS APPLY THE STANDARDS
OF REVIEW DICTATED BY THE FEDERAL ARBI-
TRATION ACT.

The Fifth Circuit and other courts have looked exclu-
sively to the literal terms of the review provisions found
in 9 U.S.C. § 10(a) in resolving motions to confirm or
vacate arbitral awards. The statement of the Fifth Circuit
in Forsythe Int'l, S.A. v. Gibbs Oil Co. is typical:

judicial review of a commercial arbitration award is
limited to Sections 10 and 11 of the Federal Arbitra-
tion Act. 9 U.S.C. § 1 et seg. Accordingly, a dis-
trict court has no authority to vacate an arbitration
award unless: (1) the award was procured by cor-
ruption, fraud, or undue means; (2) there is evidence

partiality or corruption among the arbitrators; (3)
the arbitrators were guilty of misconduct which prej-
udiced the rights of one of the parties; or (4) the arbi-
trators exceeded their powers. 9 U.S.C. § 10(a)-(d).

915 F.2d 1017, 1020 (Sth Cir. 1990) (citation omitted);
see also, e.g., Raiford v. Merrill Lynch, Pierce, Fenner
& Smith, Inc., 903 F.2d 1410, 1412 (11th Cir. 1990)
(“[T he Supreme Court has held that the grounds for
vacating an arbitrator’s award are limited to [the]

statutory categories [contained in 9 U.S.C. § 10].”).?
By their very terms, the four grounds set forth in the
Federal Arbitration Act all relate to the conduct of the

Arbitration Awards in Federal Court; Contemplating the Use and
Utility of the “Manifest Disregard” of the Law Standard, 27 IND.
L. Pry. 241, 252 (1993). Independent research by Respondent re-
veals no court of appeals decision other than Montes in the period
from 1996 to 1998 in which a commercial arbitration award was
vacated for “manifest disregard” of the law.

7 See also, c.g., R.M. Perez & Assocs. v. Welch, 960 F.2d 534 (5th
Cir. 1992): Moseley, Hallgarten, Estabrook & Weeden v. Ellis. 849
F.2d 264 (7th Cir. 1988); LaFarge Conseils et Etudes, S.A. v.
Kaiser Cement & Gypsum Cor. 791 F.2d 1334 (9th Cir. 1986).

8

arbitrator during the arbitral process, or to the rendering
of an award which is outside the scope of the matter sub-
mitted to the arbitrator. They do not relate to the merits
of arbitral determinations of fact or law, unless those
determinations evidence misconduct on the part of the
arbitral decision maker. Remmey v. PaineWebber, Inc.,
32 F.3d 143, 146 (4th Cir. 1994), cert. denied, 513 U.S.
1112 (1995).8

In the Petition, MSW suggests that two formulations
of the standard of review mentioned by some courts—
“manifest disregard of the law” and the “essence test”—
are distinct from the standard oi review set forth in the
Federal Arbitration Act and that they, accordingly, sub-
stantively supplement the Federal Arbitration Act.

First, as stressed above, however, the Petitioner does
not and cannot point to any change in the outcome of a
case based upon application of the “manifest disregard”
standard. Moreover, that standard, even as a theoretical
construct, does not express a standard of review any differ-
ent from the statute. Although the Petition (at 4, 5 n.1)
refers to the “manifest disregard” standard as “judicially
created” and “non-statutory,” several courts have found it
to be based on 9 U.S.C. § 10(a)(4), which allows a court
to overturn decisions of arbitrators that “exceed[! their
powers.” ® This is consistent with this Court’s dictum

8 As stated by the Fourth Circuit, “in reviewing arbitral awards,
a district or appellate court is limited to determining ‘whetKer the
arbitrators did the job they were told to do not whether they did
it well, or correctly, or reasonably, but simply whether they did it.’ ”
Remmey v. PaineWebber, Inc., 32 F.3d 148, 146 (4th Cir. 1994)
(quoting Richmond, Fredericksburg & Potomac R.R. Co. v. Trane-
portation Communications Int’l Union, 973 F.2d 276. 281 (At
1992) (internal quotation omitted)), cert. denied, 513 U.S. 1112
(1995).

h Cir.

9 See, e.g., Robbins v. Day, 954 F.2d 679, 683 (11th Cir.), cert.
denied sub nom. Robbins v. PainWebber, Inc., 506 U.S. 870 (1992) :

9

regarding “manifest disregard” in Wilko, the opinion to
which the appellate courts have invariably pointed as the
genesis of the manifest disregard of the law theory. This
Court’s discussion in Wilko commences, “Power to vacate
an award is limited.” Adjoined to this statement is a foot-
note which quotes 9 U.S.C. § 10 without further comment,
and the immediately following remarks in the main text
set forth the “manifest disregard” language. Wilko, 346
U.S. at 436-37 & 436 n.22.

The other basis for vacatur which Petitioner MSW
asserted at the court of appeals is the so-called “essence
test.” 1° The essence test stems from several labor arbitra-
tion decisions of this Court, most notably United Steel-
workers of Am. v. Enterprise Wheel & Car C orp., 363
Federated Dep't Stores, Inc. v. J.V.B. Indus., Inc., 894 F.2d 862,
866 (6th Cir. 1990); Amicizia Societa Nave gazione v. Chilean
Nitrate & Iodine Sales Corp., 274 F.2d 805, 808 (2d Cir.), cert.
denied, 363 U.S. 843 (1960): see also Soler Chrysler-Plymouth,
473 U.S. at 656 (Stevens, J.. dissenting) (“Arbitration awards are
only reviewable for manifest disregard of the law, 9 U.S.C. § 10.”).
Several prominent commentators have also concluded that this test
is an illustration of § 10(a), not an additional ground for vacatur
independent of the FAA. Brad A. Galbraith, Note, Vacatur of
Commercial Arbitration Awards in Federal Court: Contemplating
the Use ond Utility of the “Manifest Disregard” of the Law Stand-
ard, 27 IND. L. REV. 241, 257-58 (1993) (illustration of § 10(a)(4))
Stephen L. Hayford & Scott B. Kerrigan, Vaectur: The Non-
Statutory Grounds for Judicial Review of Commercial Arbitration
Awards, DISPUTE RESOLUTION J., Oct. 1996, at 22, 80-81 (most
plausible reading of the Wilko dictum “is one whereby its oblique
reference to ‘manifest disregard’ is viewed as identifying a type of
arbitral misconduct or misbehavior of the nature addressed in
§ 10(a)(3) of the FAA which can trigger vacatur under that pro-
vision”). Compare Advest, Inc. v. McCarthy, 914 F.2d 6, 9 n.5 (1st
Cir. 1990), and Merrill Lynch, Pierce, Fenner & Smith, Ine. v.
Bobker, 808 F.2d 930, 933 (2d Cir. 1986) (manifest disregard ave-
nue of review is judicially-created and not derived from 9 U.S.C.
§ 10).

10 This ground was not presented in Petitioner’s district court
Motion to Vacate the Arbitration Award (R. 485).

10

U.S. 593, 597 (1960). Of-course those decisions are
not precedent for commercial arbitration, which (unlike
labor arbitration) is governed by the Federal Arbitration
Act. As applied in the commercial arbitration context,
the standard has been properly understood to be derived
from 9 U.S.C. §$ 10(a)(4). Robbins v. Day, 954 F.2d
679, 683 (11th Cir.), cert. denied sub nom. Robbins v.
PaineWebber, Inc., 506 U.S. 870 (1992); Swift Indus.,
Inc. v. Botany Indus., Inc., 466 F.2d 1125, 1130 n.11
(3d Cir. 1972); see Kelley v. Michaels, 59 F.3d 1050,
1053 (10th Cir. 1995); Federated Dep’t. Stores, Inc. v.
J.V.B. Indus., Inc., 894 F.2d 862, 866 (6th Cir. 1990);
Inter-City Gas Corp. v. Boise Cascade Corp., 845 F.2d
184, 187 (8th Cir. 1988). Otherwise there is no warrant
for its application.

In sum, there exist a number of shorthand terms of art
that some courts employ to denominate the tests and
standards they are applying in determining motions to
vacate arbitral awards. But as Petitioner essentially con-
cedes (Petition, at 5 n.1), there is no difference in the
review standard set forth in these various formulations.
Following an extensive discussion of the “various hues and
colorations” of the formulations of the standard of judicial
review of an arbitration, the First Circuit concluded that

the standard of review undergirding these various
formulations [is] identical, no matter how pleochroic
their shadings and what “terms of art have been
employed to ensure that the arbitrator’s decision relies
on his interpretation of the contract as contrasted
with his own beliefs of fairness and justice.” Jenkins
v. Prudential-Bache Securities, Inc., 847 F.2d 631,
634 (10th Cir. 1988). However nattily wrapped, the
packages are fungible.

Advest, Inc. v. McCarthy, 914 F.2d 6, 9 (1st Cir. 1990)
(emphasis added)."' Nor, as urged above, is there any

11 See also Montes v. Shearson Lehman Bros., 128 F.3d 1456.
1459 n.5 (11th Cir. 1997) (noting that each of the three rubrics

11

substantive difference in the review available under the
Federal Arbitration Act and the review sought by Peti-
tioner under the “tests” urged.

IV. THE ARBITRATOR’S AWARD IN THIS CASE WAS
IN ANY EVENT PROPERLY CONFIRMED, BE-
CAUSE IT WAS CORRECT UNDER ANY STAND-
ARD.

The point urged by Petitioner is that it made a valid
acceptance when presented the opportunity pursuant to
the contractual right of first refusal contained in the Agree-
ment. This contention is incorrect. The right of first
refusal was expressly granted only to MSW, and it ex-
plicitly stated that it did not apply to MSW’s individual
partners. (R. 0430). Chevron accordingly requested a
copy of the MSW partnership agreement, evidence of
MSW’s continuing existence, and evidence of Steinberg’s
authority. Even though Chevron extended the time on
several occasions, ultimately the documents which were
forwarded reinforced concerns about whether MSW con-
tinued to exist and about whether Steinberg possessed the
requisite authority. (S.R. 0004-05). For example, MSW’s
Joint Venture Agreement required that Steinberg, as man-

of review of arbitral awards there at issue “could conceivably be
encompassed in the other’’); Jenkins v. Prudential Bache Sec., Inc.
847 F.2d 631, 634 (10th Cir. 1988) (suggesting that the various
principles for review of arbitration awards embody “a sort of
‘abuse of discretion’ standard”); Service Employees Int'l Union,
AFL-CIO, CLC v. Local 1199 N.E., SEIU, AFL-CIO. CLC. 70 F.2d
647, 651 (1st Cir. 1995) (reiterating the principle of Advest that
the dierent articulations of the standard of review of an arbitral
award are “in essence ‘identical’”); Bret F. Randall, Comment,
The History, Apnlication, and Policy of the Judicielly Created
Standards of Review for Arbitration Awards. 1992 B.Y1'. L. Rev.
759, 752-63 (“The lower courts have developed numerous variations
of the essence of the contract standard. These variations sct aside
*n award if it is ‘completely irrational,’ ‘unfounded in reason and

‘arbitrary and capricious,’ ‘palpably faulty,’ not ‘plausible,’
.

Cnt 9
n
:

or in ‘[mlanifect disregard of the law.’ Whatever label applied,
the vast majority of disputed arbitration awards are affirmed under
the essence of the contract standard.” (footnotes omitted) ).

12

ager of venture property, obtain written authorization for
any action beyond those limited ministerial duties of the
manager of venture property set forth therein. (S.R.
0005). On these facts, it cannot be suggested that the
arbitrator disregarded the law in concluding that MSW
did not properly exercise the right of first refusal and
that Chevron’s refusal to sell the property was justified.

CONCLUSION

For all of the reasons given above, the Petition should
be denied.
Respectfully submitted,

DANIEL JOSEPH
Counsel of Record
AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.
1333 New Hampshire Ave., N.W.
Suite 400
Washington, D.C. 20036
(202) 887-4000

PAULA W. HINTON

THOMAS M. BEVILACQUA

AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.

1900 Pennzoil Place

South Tower

711 Louisiana Street

Houston, Texas 77002

(713) 220-5800

Counsel for Respondent

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_1693%3A2. Public record. Not legal advice.