An arbitration award that found no “meeting of the minds” and contract cancellation as to unperformed contract obligations was vacated by a federal district court for the Northern District of Texas on “exceeded powers” ground of 9 U.S.C. §20(a)(4). The Fifth Circuit reversed the trial court and instructed the court to confirm the award.

The Fifth Circuit noted that if OMG did not believe the arbitrator had the authority to decide the meeting of the minds and contract formation issues, it should have refused to arbitrate the issues and allowed the court to determine the arbitrator’s authority. Instead, OMG responded to the issues throughout the arbitration proceedings. “OMG simply cannot wait until it receives a decision with which it disagrees before challenging the arbitrator’s authority.”

OBSERVATIONS

1. The parties entered into a clear and unmistakable delegation of arbitrability to the arbitrator.
2. The parties granted unlimited equitable powers to the arbitrator, much broader than the equitable powers granted by R-47(a) of the AAA Commercial Arbitration Rules (2013).
3. Consent to arbitrator authority can occur by conduct of the arbitration parties.
4. Footnote 5 to the Fifth Circuit’s opinion in this case recognizes the importance of the arbitrator’s “informed judgment” in formulating remedies.
5. In footnote 3 the Fifth Circuit chose not to decide two questions: (i) whether a court only could decide “meeting of the minds” issues when faced with “a contested motion to compel arbitration based on a potentially non-existent contract” (citing U.S. Supreme Court cases); and (ii) whether the “clear and unmistakable evidence” standard should be applied in review of whether the parties agreed to submit arbitrability to the arbitrator.
6. Although this is a no precedent case under the Fifth Circuit R.47.5.4, it offers helpful procedural and practice guidance to arbitration practitioners.

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