As discussed in our post from last year, on August 30, 2018, the Eleventh Circuit Court of Appeals reversed a lower court decision to compel arbitration between an Alabama steel plant owner, Outokumpu Stainless USA, LLC (“OS”), and a French division of General Electric Co, GE Energy Power Conversion France SAS (formerly Converteam SAS). In so ruling, the Eleventh Circuit held that a non-signatory to a contract could not compel arbitration under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), as incorporated in Chapter 2 of the Federal Arbitration Act (“FAA”), through the doctrine of equitable estoppel. Dissatisfied with the Eleventh Circuit’s decision, on February 7, 2019, GE filed a petition for a writ of certiorari with the Supreme Court of the United States to review the Eleventh Circuit’s decision and on June 28, 2019, the Court granted the GE’s petition. In the field of international construction arbitration, where multi-party disputes between owners, contractors, and subcontractors are common and where the rights of non-signatories to compel arbitration are regularly debated, the Supreme Court is slated to provide important guidance.
Continue Reading UPDATE: GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC: U.S. Supreme Court Grants Writ of Certiorari to Decide the Question of Whether the New York Convention Permits Non-Signatories to Compel Arbitration Under the Doctrine of Equitable Estoppel
World Bank Debars Chinese Engineering Company for Fraudulent Bidding Practices in Connection With Liberian Infrastructure Project
On June 12, 2019, the World Bank announced that China-based Dongfang Electronics Co. Ltd. (“Dongfang”) would be debarred for fifteen (15) months for fraudulently bidding on a $60 million electrical expansion project in Liberia. The debarment renders Dongfang, a state-owned enterprise specializing in manufacturing and installing electrical equipment in connection with energy and infrastructure projects, ineligible to participate in any projects financed by the World Bank. Dongfang’s debarment by the World Bank highlights the compliance risks contractors and subcontractors face when pursuing contracts associated with foreign projects financed by institutions such as the World Bank.
Continue Reading World Bank Debars Chinese Engineering Company for Fraudulent Bidding Practices in Connection With Liberian Infrastructure Project
The Lessor of Two Evils: Iowa Supreme Court Holds That Mechanic’s Liens Will Not Attach to the Property of a Lessor for Work Authorized by a Lessee
Winger Contr. Co. v. Cargill, Inc., No. 17-1169, 2019 BL 132092 (Iowa Apr. 12, 2019).
On April 12, 2019, the Iowa Supreme Court affirmed a lower court ruling which held that, inter alia, the Iowa mechanic’s lien statute would not permit the attachment of mechanic’s liens to the property of a lessor in connection with a contract to supply materials and labor to a lessee.Continue Reading The Lessor of Two Evils: Iowa Supreme Court Holds That Mechanic’s Liens Will Not Attach to the Property of a Lessor for Work Authorized by a Lessee
A Pivotal Ruling for Appellate Arbitration Award Enforcement
This article was published in Law360 on March 11, 2019. © Copyright 2019, Portfolio Media, Inc., publisher of Law360. It is republished here with permission.
In 2008, the U.S. Supreme Court in Hall Street Associates LLC v. Mattel Inc. determined that parties may not contractually agree to expand judicial review of arbitral awards beyond
Federal Court Clarifies When Idle Equipment Costs Are Recoverable Under the Miller Act
United States ex rel. Am. Civ. Constr., LLC v. Hirani Eng’g & Land Surveying, P.C., 2018 U.S. Dist. LEXIS 200829 (D.D.C. Nov 28, 2018).
The case involved the construction of a levee wall on the National Mall in Washington, D.C. In September 2010, the Army Corps of Engineers awarded Hirani Engineering & Land Surveying, P.C. (“Hirani”) the prime contract for the project. Hirani’s surety was Colonial Surety Company (“Colonial”). Hirani subcontracted the majority of the work to American Civil Construction, LLC (“ACC”). Following a series of disputes and project delays, the Army Corps terminated Hirani. ACC then filed suit in the United States District Court for the District of Columbia seeking over $2 million in damages under the Miller Act as well as state law for breach of contract. After a bench trial, the court entered judgment in favor of ACC.
As part of its claim, ACC sought damages for costs related to idle equipment at the project site. Although the claim was only a small part of ACC’s overall claim, the court’s approach was noteworthy. ACC asserted that all of the costs were recoverable under the Miller Act. Conversely, Hirani and Colonial argued that standby equipment expenses were per se unavailable under the Act. The court disagreed with both parties and held that, although the Miller Act permitted a contractor to recover for idle equipment, it could not do so in all instances.
Continue Reading Federal Court Clarifies When Idle Equipment Costs Are Recoverable Under the Miller Act
Boring Through the Details: U.S. District Court Declares Boring Company Dispute Not Covered by Insurance Policies
Maxum Indemnity Co. v. Robbins Co., P.C., No. 1:17-CV-01968, 2018 U.S. Dist. LEXIS 57729 (N.D. Ohio Mar. 28, 2018)
On March 21, 2018, the United States District Court for the Northern District of Ohio granted a motion for judgment on the pleadings in favor of Maxum Indemnity Co. and declared that Maxum has no duty to defend or indemnify The Robbins Company in an international arbitration initiated by a third-party, JCM Northlink, LLC.
Robbins is a designer, manufacturer, and supplier of tunnel-boring machines (“TBMs”) and was engaged by JCM to supply a TBM for Seattle’s Northgate Link Extension project to add additional light rail lines to the city’s existing public transportation system. Maxum insured Robbins under two commercial general liability policies in connection with the Northgate Link Extension project.Continue Reading Boring Through the Details: U.S. District Court Declares Boring Company Dispute Not Covered by Insurance Policies
Deciding Arbitrability and Arbitration Agreements: Eleventh Circuit Refines Its Interpretation of the Federal Arbitration Act and United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Outokumpu Stainless USA, LLC v. Converteam SAS, 2018 U.S. App. LEXIS 24671 (11th Cir. Aug. 30, 2018)
On August 30, 2018, the Eleventh Circuit Court of Appeals reversed a lower court decision to compel arbitration between an Alabama steel plant owner and a French division of General Electric Co. The case is noteworthy because the Court settled two questions of law within the Eleventh Circuit about the interpretation of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”) and the Federal Arbitration Act (“FAA”). The first question concerned the interpretation the FAA’s grant of removal jurisdiction to the federal courts. The second concerned whether an entity could compel arbitration under the Convention despite the lack of a signed arbitration agreement.
Outokumpu Stainless, LLC (“OS”) operates a steel plant in Calver, Alabama that contains three cold rolling mills. In 2007, OS entered into three separate agreements with an entity known as Fives for the purchase of the mills. The Agreements each contained an arbitration clause which required all disputes be resolved via arbitration in Germany under the Rules of Arbitration of the ICC. The Agreements also provided that Fives, and all of its subcontractors, would be treated as one and the same under the contracts.
Fives subcontracted with GE Energy (“GE”) to produce motors for the mills. The motors were installed between 2011 and 2012. By June 2014 they began to fail.
Continue Reading Deciding Arbitrability and Arbitration Agreements: Eleventh Circuit Refines Its Interpretation of the Federal Arbitration Act and United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards
When a Flow Down Provision Doesn’t Flow Up: Oregon Appellate Court Holds That a Flow Down Provision From a Prime Contract With an Arbitration Clause Does Not Grant Subcontractors a Right to Compel Arbitration With Owner
Eugene Water & Elec. Bd. v. MWH Americas, Inc., 2018 Ore. App. LEXIS 879 (July 25, 2018)
On July 25, 2018, an Oregon appellate court concluded that a pair of subcontractors could not compel an owner to arbitrate its claims against them by virtue of a “flow-down” provision in a prime construction contract which also contained an arbitration clause. The case is a reminder that principles of contract interpretation govern the enforcement of arbitration agreements and that courts will not compel arbitration where both parties have not expressly consented to arbitrate their disputes.
As part of an improvement project for the Leaburg Dam near Eugene, Oregon, the Eugene Water and Electric Board (“EWEB”) entered into a prime contract with Advanced American Construction (“AAC”) as the general contractor for the project. AAC subsequently entered into subcontracts with MacTaggart, Scott & Company Limited (“MacTaggart”) and Olsson Industrial Electric, Inc. (“Olsson”). When the improvements to the Leaburg Dam failed, EWEB filed a complaint in Oregon state court against AAC and, shortly thereafter, asserted claims against the two subcontractors in an amended complaint.
During the proceedings, AAC sought to compel arbitration of EWEB’s claims against AAC because the prime contract contained an arbitration clause. As litigation proceeded, both MacTaggart and Olsson also sought to compel arbitration of EWEB’s claims against them. Problematically, however, because MacTaggart and Olson, as subcontractors, were only in direct privity with AAC, and not EWEB, no express agreement to arbitrate existed between EWEB and the two subcontractors.
Continue Reading When a Flow Down Provision Doesn’t Flow Up: Oregon Appellate Court Holds That a Flow Down Provision From a Prime Contract With an Arbitration Clause Does Not Grant Subcontractors a Right to Compel Arbitration With Owner
Massachusetts Supreme Court Declares That State Contract Principles, Not Federal Precedent, Govern the Interpretation of Termination for Convenience Clauses
A.L. Prime Energy Consultant, Inc. v. Mass. Bay Transport Auth., 479 Mass. 419 (May 2, 2018)
In a case of first impression, the Massachusetts Supreme Court held that general contract principles, and not federal case law, govern the treatment of termination for convenience clauses in state procurement contracts.
In January 2015, the Massachusetts Bay Transportation Authority (“MBTA”) issued an invitation for bids for the supply of ultra-low sulfur diesel fuel for a two year term. Following bidding, the MBTA awarded the contract to A.L. Prime Energy Consultant, Inc. (“Prime”) in July 2015. The contract included a termination for convenience clause that provided:
The [MBTA] may, in its sole discretion, terminate all or any portion of this Agreement . . . at any time for its convenience and/or for any reason by giving written notice to the Contractor thirty (30) calendar days prior to the effective date of termination. . . . (emphasis added).
Approximately a year later, the MBTA determined that it could acquire its fuel supply from a different supplier at a lower price. Accordingly, the MBTA notified Prime of its intent to terminate the contract for convenience.Continue Reading Massachusetts Supreme Court Declares That State Contract Principles, Not Federal Precedent, Govern the Interpretation of Termination for Convenience Clauses
Are Consent Awards Under the New York Convention Enforceable in U.S. Courts? Federal Court in Texas Says Yes
Transocean Offshore Gulf of Guinea VII Ltd. v. Erin Energy Corp., 2018 U.S. Dist. LEXIS 39494 (S.D. Tex. Mar. 12, 2018)
On March 12, 2018, in Transocean Offshore Gulf of Guinea VII Ltd. v. Erin Energy Corp., the U.S. District Court for the Southern District of Texas became the second U.S. court to recently determine that the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), as codified in the Federal Arbitration Act (“FAA”), applies to consent awards. Although seemingly inconsequential at first glance, the question of whether consent awards—i.e., settlement agreements recorded by arbitral tribunals as awards—are subject to the New York Convention, has remained the subject of much debate within the field of international arbitration for many years.
In Transocean, the petitioners, Transocean Offshore Gulf of Guinea VII Limited and Indigo Drilling Limited, entered into an agreement to provide drilling equipment, personnel, and services in the waters off the coast of Nigeria to the respondent, Erin Energy Corporation. Prior to the completion of the contract, a dispute arose and, pursuant to an arbitration clause, the petitioners initiated an arbitration under the rules of the London Court of International Arbitration (“LCIA”). Before the tribunal made a decision on the merits, the parties reached a settlement and, at the parties’ request, the tribunal issued a consent award setting forth the terms of the parties’ settlement.Continue Reading Are Consent Awards Under the New York Convention Enforceable in U.S. Courts? Federal Court in Texas Says Yes