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A federal court in Virginia upheld an international arbitration award despite claims of arbitrator misconduct and manifest disregard of the law; and entertained a novel argument that allowing too much evidence into a hearing resulted in misconduct.
In Al-Haddad Commodities Corp. v. Toepfer Intern. Asia Pte., Ltd., No. 2:07CV7, 2007 WL 1175598 (E.D. Va. Apr. 19, 2007), ACC and Toepfer, two international corporations, entered into a contract for the shipment of rice. When problems arose regarding performance of the contract, ACC demanded arbitration pursuant to the parties' agreement. When an award was issued in ACC's favor, Toepfer moved to vacate the award because of arbitrator misconduct.
Specifically, Toepfer alleged that the panel's refusal to reschedule a hearing, exclusion of expert testimony, and limitation on its oral argument amounted to misconduct. The Court rejected Toepfer's arguments, and addressed each in turn. First, the Court found that there was no evidence that the panel's refusal to reschedule the hearing was arbitrary, in bad faith, or resulted in the exclusion of evidence.
Second, the Court found that no evidence was excluded, but in fact evidence was included when the panel allowed ACC to present expert testimony. Because the Federal Arbitration Act makes only the refusal to hear pertinent and material evidence grounds for vacating the award, no misconduct occurred when the panel allowed the testimony.
Finally, the Court noted that the time limit for oral argument was equally imposed on both parties and was not prejudicial to Toepfer. While there were certain procedural decisions "in disregard of its own rules" made by the panel which caused the Court some concern, the Court ultimately found that Toepfer failed to show any prejudice caused by these procedural decisions.
The Court further rejected Toepfer's additional argument that the award should be vacated for manifest disregard of the law. Toepfer presented no evidence to indicate that the arbitrators had an understanding of the law and chose not to apply it, which is required to mount a successful manifest disregard challenge. Thus, Toepfer did not meet its burden of proof.
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