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When arbitrating parties submit an incomplete and unclear stipulation seeking a bifurcated proceeding, an arbitration panel does not exceed its authority by operating under its interpretation of the stipulation, according to the United States District Court for the Southern District of New York.
In Oxbow Carbon and Minerals LLC v. Votorantim Cimentos Ltda, No. 06 Civ. 7763(LBS), 2007 WL 120692 (S.D.N.Y. Jan. 17, 2007), Oxbow and Votorantim submitted a commercial dispute to arbitration. Oxbow requested bifurcation to expedite the dispute's resolution. The panel requested a joint letter from both parties confirming their decision to bifurcate and limit the panel's authority.
However, the panel never received the letter and ruled, pursuant to its authority under the original arbitration clause, that both parties had breached the contract. Oxbow challenged the ruling alleging the panel exceeded its authority under the parties' bifurcation agreement limiting the panel's authority.
The Court found the panel acted within its power. The parties contracted to resolve all disputes by arbitration. When the parties subsequently agreed to limit the scope of the arbitral proceedings, the panel clearly stated that the agreement would only take effect after the parties submitted a joint letter to the panel. The panel never received the letter. Finally, the panel reexamined its decision upon Oxbow's request and reached the same conclusion.
In upholding the panel's ruling the Court applied the deferential "barely colorable justification standard," which arises from the "exceeding their power" ground for vacatur contained in the Federal Arbitration Act. Under this standard, a court must uphold a panel's ruling so long as there is a "barely colorable justification for the outcome reached."
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