Fifth Circuit Interprets the Meaning of a Reasoned Arbitral Award


In Rain CII Carbon, LLC v. ConocoPhillips Co. No. 11-30669 (5th Cir. March 9, 2012) ConocoPhillips Company (“Conoco”) appeals the district court’s judgment confirming an arbitration award favorable to Rain CII Carbon, LLC (“Rain”).

Since 2005, Conoco and Rain were parties to a long-term supply contract which includes a complex formula for capturing the market price of green coke. The contract provides that if a party believed the formula no longer yielded market price, negotiations could be reopened, and if that failed, a “baseball” arbitration would ensue whereby each party submitted a proposal and the arbitrator selected one.

In 2008 Conoco reopened market price negotiations. The parties were unable to reach and agreement and the dispute was submitted to arbitration. In 2011 the arbitrator awarded $17,702,585.33 to Rain and Conoco moved to vacate the award. The district court refused to vacate and Conoco now appeals.

Conoco asserts that the arbitrator exceeded his powers in two ways: failing to select only one proposal, per the parties’ baseball arbitration agreement; and failing to render a reasoned award.

  1. Failing to select only one proposal. Conoco asserts that the arbitrator used parts of both proposals in his award, rather than selecting only one as required by the contract. However, because the arbitrator removed the two provisions derived from Conoco’s proposed draft award from his final award, identifying them as clerical errors, the Fifth Circuit concluded that Conoco’s argument failed.
  2. Failing to render a reasoned award. Conoco disputes that the award was a “reasoned award.” First, the Fifth Circuit stated that according to Fifth Circuit jurisprudence, “a reasoned award is something short of findings and conclusions but more than a simple result.” Then the court outlined decisions from the Eleventh, Sixth and Ninth Circuits. Finally, the court concluded that the eight-page award is more than a simple result.

Accordingly, the Fifth Circuit denied vacatur and affirmed the district court’s judgement.

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Victoria VanBuren
Victoria VanBuren is the voice of the acclaimed “Disputing” blog. She assists Karl Bayer with his publications. Prior to becoming the blogmaster, Victoria obtained a law degree from UT Law and worked as an attorney for a boutique intellectual property firm.