United States District Court, S.D. Texas, Houston Division
Honorable Alfred H. Bennett, United States District Judge.
the Court are Vantage's Petition to Confirm Arbitration
Award (Doc. #1), Petrobras's Opposition (Doc. #46 &
65), and Vantage's Reply (Doc. #69). Also, before the
Court are Petrobras's Motion to Vacate (Doc. #34 &
53), Vantage's Opposition (Doc. #69), and Petrobras's
Reply (Doc. #77 & 78). Additionally, the Court heard oral
argument from the parties and received post-hearing briefing
(Doc. #138, Doc. #137 & 139). After reviewing the
parties' arguments and applicable legal authority, the
Court denies Petrobras's Motion to Vacate and grants
Vantage's Petition to Confirm.
Petition arises out of the arbitration proceedings between
Petitioners Vantage Deepwater Company and Vantage Deepwater
Drilling, Inc. (together, "Vantage") and
Respondents Petrobras America Inc., Petrobras Venezuela
Investments & Services, BV, and Petroleo Brasileiro S.A.
- Petrobras (together, "Petrobras"), concerning an
Agreement for the Provision of Drilling Services
("DSA"). In addition to the DSA, Vantage and
Petrobras entered into a Form of Payment and Performance
Guaranty ("Guaranty"), which guaranteed
Petrobras's obligations under the DSA.
eight-year term of the DSA for the performance of offshore
drilling services commenced on December 2, 2012, upon
delivery of the ultra-deepwater drilling rig, the Titanium
Explorer. On October 27, 2014, Vantage and Petrobras executed
the Third Novation and Amendment Agreement to the DSA
("Third Novation") to perform drilling services in
the Gulf of Mexico. The parties agreed under the Third
Novation that all disputes were to be resolved before the
International Centre for Dispute Resolution
("ICDR") of the American Arbitration Association
("AAA") in Houston, Texas. Doc. #1, Ex. D at ¶
August 31, 2015, Petrobras attempted to terminate the DSA. It
was this termination that led Vantage to commence the
arbitration proceeding in this case, captioned Vantage
Deep-water Co. et al. v. Petrobras America Inc., et al,
No. 01-15-0004-8503 (the "Arbitration"), conducted
under the auspices of the ICDR of the AAA. Vantage requested
that the Arbitration Tribunal (the "Tribunal")
award expectancy damages for the remaining portion of the
DSA's term wrongfully cancelled by Petrobras. In
response, Petrobras argued that the cancellation of the DSA
was due to operational failures by Vantage and that the DSA
was void or unenforceable for allegedly being procured
Arbitration merits hearing took place in Houston, Texas, from
May 16 through June 1, 2017. Pursuant to the Third Novation,
the Tribunal consisted of three arbitrators-the Chairperson,
Professor William Park ("Chairman Park"), and one
arbitrator appointed by each party. See Doc. #1 at 6
¶; Ex. D at ¶ 24.2. Judge Charles N. Brower
("Judge Brower") was appointed by Vantage and Mr.
James Gaitis ("Mr. Gaitis") was appointed by
the conclusion of the Arbitration, the Tribunal issued its
ruling (the "Final Award") on June 29, 2018. Doc.
#1, Ex. A. The majority (Chairman Park and Judge Brower)
found Petrobras "liable for US$ 615.62 million by reason
of early termination of the DSA without justification or
payment of the amount due for the rest of the Contract
term." Id. at ¶ 531. The Final Award
further determined that the damages would accrue as of
"1 April 2018, to bear interest compounded monthly at a
rate of 15.2% and running" through the final payment of
the award. Id. at ¶ 534. Mr. Gaitis did not
join the majority decision and issued a dissent.
Id., Ex. E.
6, 2018, following receipt of the Final Award and the
dissent, Petrobras applied to the ICDR for the withdrawal of
the Final Award and removal of its authors. Doc. #34, Ex. 57.
The ICDR denied this request. Id., Ex. 104.
8, 2018, Vantage petitioned this Court under 9 U.S.C.
§§ 301-307 ("Chapter 3 of the Federal
Arbitration Act") to Confirm the Final Award.
See Doc. #1, Ex.1. Subsequently, Petrobras filed a
Motion to Vacate the Final Award and a Response opposing
confirmation of the Final Award. Doc. #34 & Doc. #46.
Petrobras argues that vacatur is appropriate on three grounds
under 9 U.S.C. § 10(a). Doc. #34 at 24. Furthermore,
Petrobras opposes confirmation of the Final Award arguing
that it should be set-aside under two provisions of Article V
of the Inter- American Convention on International Commercial
Arbitration of January 30, 1975 (the "Inter-American
Convention"). Doc. #46 at 9.
Motion to Vacate the Final Award
Federal Arbitration Act ("FAA") reflects a national
policy favoring arbitration. Cooper v. WestEnd Capital
Mgmt., L.L.C., 832 F.3d 534, 543 (5th Cir. 2016).
"In light of the strong federal policy favoring
arbitration, judicial review of an arbitration award is
extraordinarily narrow" and "exceedingly
deferential." Id. at 543-14 (citing Rain
CII Carbon, L.L.C. v. ConocoPhillips Co., 674 F.3d 469,
471-72 (5th Cir. 2012)). Courts may vacate an arbitration
award "only in very unusual circumstances."
Oxford Health Plans L.L.C. v. Sutler, 569 U.S. 564,
is available only for the limited statutory reasons outlined
in Section 10 of the FAA. 9 U.S.C. § 10; See
Citigroup Global Mkts. Inc. v. Bacon, 562 F.3d 349, 358
(5th Cir. 2009) (overruling previous non-statutory grounds
for vacatur of an arbitration award and holding that
arbitration awards under the FAA may be vacated only for the
reasons provided in Section 10). Under Section 10(a), an
arbitration award may be vacated: (1) "where the award
was procured by corruption, fraud, or undue means;" (2)
"where there was evident partiality or corruption in the
arbitrators;" (3) "where the arbitrators were
guilty of misconduct or of any other misbehavior by which the
rights of any party have been prejudiced;" or (4)
"where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made." 9
U.S.C. § 10(a)(l-4). The Court does not "conduct a
review of an arbitrator's decision on the merits,"
therefore "arguments concerning the merits are
irrelevant" to the Court's "determination of
whether there are statutory grounds within Section 10(a)
under which the arbitration award should be vacated."
Householder Grp. v. Caughran, 354 Fed.Appx. 848, 851
(5th Cir. 2009) (citations omitted). An arbitration award
"may not be set aside for a mere mistake of fact or
law." Cooper, 832 F.3d at 546 (quoting Rain
CII Carbon, L.L.C, 674 F.3d at 472). "The burden of
proof is on the party seeking to vacate the award, and any
doubts or uncertainties must be resolved in favor of
upholding it." Id. at 544 (citing Brabham
v. A.G. Edwards & Sons, Inc., 376 F.3d 377, 385
& n.9 (5th Cir. 2004)).
moves to Vacate the Final Award based upon 9 U.S.C. §
10(a)(2), (3), and (4). Although Petrobras's briefing
discusses at great length the iniquity of the alleged bribery
scheme, which it also argued during the Arbitration,
Petrobras's arguments concerning the merits of the
dispute are irrelevant to the Court's determination of
whether there are statutory grounds for vacatur under Section
10(a). See Caughran, 354 Fed.Appx. at 851 (citation
omitted) ("Section 10(a) does not provide for vacatur of
an arbitration award based on the merits of a party's
claim" nor does the Court "have the authority to
conduct a review of an arbitrator's decision on the
the specific statutory grounds, Petrobras puts forth three
arguments for vacatur under 9 U.S.C. § 10(a). Doc. #34
at 9-10. Under Section 10(a)(2), Petrobras argues that Judge
Brower "refused to act on serious conflicts of
interest" and that his tendentious conduct during the
Arbitration proceeding revealed actual bias against
Petrobras. Id. at 9. Under Section 10(a)(3),
Petrobras argues that it was "repeatedly denied the
ability to adduce evidence showing that the contract at issue
was obtained through bribery," and under 10(a)(4)
"that the Majority rendered an incomplete award, which
failed to address a key defense." Id.
9 U.S.C. § 10(a)(2)
contends that Judge Brower exhibited evident partiality which
requires vacatur under Section 10(a)(2). Under the FAA,
courts may vacate an arbitration award "where there was
evident partiality or corruption in the arbitrators."
Cooper, 832 F.3d at 545 (citing Bacon, 562
F.3d at 352 (quoting 9 U.S.C. § 10(a)(2)). "A party
can establish evident partiality by demonstrating that the
arbitrator failed to disclose relevant facts or that he
displayed actual bias during the arbitration." Weber
v. Merrill Lynch Pierce Fenner & Smith, Inc., 455
F.Supp.2d 545, 549 (N.D. Tex. 2006).
argues that "Judge Brower's close personal
relationship with Vantage's counsel is evidence of
partiality necessitating vacatur" and that Judge
Brower's conduct during the Arbitration proceedings
displayed "actual bias favoring Vantage." Doc. #34
at 30, 35.
Relationship with Vantage's Counsel
challenging an arbitration award based upon disclosure of an
arbitrator's relationship with the parties, it must be
shown that the arbitrator had a "significant
compromising connection to the parties." Ameser v.
Nordstrom, Inc., 442 Fed.Appx. 967, 970 (5th Cir. 2011).
"[A]n award may not be vacated because of a trivial or
insubstantial prior relationship between the arbitrator and
the parties to the proceeding." Positive Software
Sols., Inc. v. New Century Mortg. Corp., 476 F.3d 278,
283 (5th Cir. 2007) (en banc).
have found that a reasonable impression of partiality is
established when the arbitrator has had a direct business or
professional relationship with one of the parties to the
arbitration." Weber, 455 F.Supp.2d at 552;
see also Olson v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 51 F.3d 157, 159 (8th Cir. 1995) (finding a
reasonable impression of partiality where the arbitrator
failed to disclose that his employer did a "substantial
amount of business with" a party to arbitration
proceedings); Middlesex Mut. Ins. Co. v. Levine, 675
F.2d 1197, 1202 (11th Cir. 1982) (vacatur was appropriate
where the arbitrator had "'repeated' and
'significant' business dealings involving thousands
of dollars with one of the parties to the arbitration over a
period of four or five years"); Thomas Kinkade Co.
v. White, 711 F.3d 719, 724 (6th Cir. 2013)
("[w]hen the neutral arbitrator engages in or attempts
to engage in mid-arbitration business relationships with
non-neutral participants, it jeopardizes what is supposed to
be a party-structured dispute resolution process.").
there are no alleged undisclosed business or financial
relationships between Judge Brower and Vantage. Rather, upon
his appointment to the Tribunal, Judge Brower disclosed that
one of his former law clerks from the Iran-United States
Claims Tribunal was a partner at the law firm representing
Vantage. Doc. #34, Ex. 44. Petrobras timely objected to Judge
Brower's appointment and, after due consideration, the
ICDR denied Petrobras's challenge to Judge Brower's
appointment. Id., Ex. 49.
now argues that Judge Brower's friendship with his former
law clerk created evident partiality which merits vacatur,
suggesting that the relationship created an "appearance
of bias." Doc. #34 at 31. However, the standard for
assessing evident partiality is not the mere appearance of
bias. See Positive Software Sols., 476 F.3d at 285
("[T]he 'mere appearance' standard would make it
easier for a losing party to challenge an arbitration award
for nondisclosure than for actual bias . . ." and
"hold arbitrators to a higher ethical standard than
federal Article III judges"). "Evident partiality
is a 'stern standard'" and requires
"upholding arbitration awards unless bias is clearly
evident in the decisionmakers." Id. at 281.
Here, Judge Brower's former law clerk was not an advocate
representing Vantage during the Arbitration proceeding. But,
even if the former law clerk were an advocate in the
Arbitration proceeding, this would not be a significant
compromising relationship that establishes clear bias in an
arbitrator. It is common knowledge in the legal profession
that former law clerks regularly practice before judges for
whom they once clerked. In re Martinez-Catala, 129
F.3d 213, 221 (1st Cir. 1997). Certainly, the relationship
between a judge and his former law clerk is not the type of
relationship that would merit vacatur under Section 10(a).
the case that Petrobras relies upon to argue vacatur under
Section 10(a)(2), Thomas Kinkade Co. v. White, 711
F.3d 719, 724 (6th Cir. 2013), involved a substantial
business relationship between the arbitrator and one of the
parties. The facts of Kinkade are not applicable to
this case. Petrobras points to no case, nor has the Court
found one, where an arbitration award was vacated for
non-business or non-financial relationships (i.e., mere
friendships). Doc. #133 at 99. Accordingly, Petrobras has ...