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A federal district court in Colorado confirmed a telecommunications company’s arbitration award, determining that the adverse party’s manifest disregard and public policy arguments were not applicable to the arbitrator’s decision.
In DMA International, Inc. v. Qwest Commcations International, No. 08-CV-00358-WDM-BNB, 2008 WL 4216261 (D. Colo. Sept. 12, 2008), DMA entered into a contract with Qwest to provide consulting services for circuits within Qwest’s telecommunications system. The contract contained an agreement to arbitrate under the provisions of the Federal Arbitration Act (FAA).
The portion of the contract dealing with payment was ambiguous. The contract noted that DMA would be paid $25.20 per circuit satisfactorily completed, but in other places noted that the contract price was based on $45 per hour. DMA billed Qwest eight times; however, notwithstanding the invoice totals, DMA maintained that it was owed more money because it was completing more work than was reflected in the invoices.
Qwest decided not to renew the contract with DMA. DMA sent Qwest an invoice representing the number of circuits that DMA completed during the course of the contract, but had not been invoiced. Qwest disputed the invoice, and DMA initiated arbitration proceedings seeking compensation.
The arbitrator determined that the payment section of the contract was ambiguous, and extrinsic evidence showed that the parties intended the contract to be based on a $45 per hour rate. The arbitrator concluded based on this rate that the contract had been paid in full and Qwest did not owe any additional compensation to DMA.
Following, DMA filed a motion to vacate the arbitration award arguing that the arbitrator acted in manifest disregard of the law when he looked to extrinsic evidence to define the payment section. DMA further argued that the award must be vacated as a violation of public policy because it did not give effect to the parties’ written contract.
In response, Qwest argued that after the Supreme Court’s decision in Hall St. Assocs., LLC v. Mattel, Inc., 128 S.Ct. 1396 (2008), the only grounds that an arbitration award can be vacated on are those specifically enumerated in the FAA. The Court noted that there is some question as to whether Hall Street did indeed eliminate all judicially-created grounds for vacatur. The Court found it unnecessary to determine the precise impact of Hall Street because, in any event, DMA’s challenge failed under the manifest disregard standard.
The Court stated that the record must show that an arbitrator knew of a law and explicitly disregarded it to constitute manifest disregard. In this case the Court determined that the arbitrator stated and applied the correct law governing the interpretation of contracts. DMA clearly disagreed with the arbitrator’s conclusion; however, this did not demonstrate that the arbitrator acted with manifest disregard of the law.
DMA also argued that the award violated public policy because it did not give effect to the parties’ written contract. The Court noted that this contention rested on the false premise that the arbitrator was wrong to conclude that the parties intended the contract to be based on a $45 per hour rate. However, since the arbitrator’s decision was not in manifest disregard of the law, the Court found concluded that no public policy violation issue existed. Accordingly, the Court granted Qwest’s motion to confirm the arbitration award.
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