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Case 2:13-mc-00100-JD Document 9 Filed 06/04/13 Page 1 of 7

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA



MISCELLANEOUS ACTION




NO. 13-100

HET-JV, HUNG-YI CONSTRUCTION
CO., LTD., EVERGREEN
INTERNATIONAL ENGINEERING
CORP., and TA CHEN CONSTRUCTION
& ENGINEERING CORP.,
Movants,

v.

WESTON SOLUTIONS, INC.,

Respondent.








DuBois, J.










M E M O R A N D U M





June 3, 2013

I.



INTRODUCTION

This is a breach of contract case. Movants HET-JV, Hung-Yi Construction, Evergreen

International Engineering Corp., and TA Chen Construction & Engineering Corp. (collectively

“HET”) were engaged as subcontractors by respondent Weston Solutions, Inc. (“Weston”) in a

construction project for the United States government in Taipei, Taiwan, at the American Institute

in Taiwan. Due to numerous problems that affected construction, Weston first declared HET in

default and later formally terminated the contract with HET for default. The parties participated

in arbitration before the International Center for Disputes Resolution (“ICDR”), in which the

proceedings were bifurcated into liability and damages phases. In deciding issues of liability, the

tribunal ruled, inter alia, that Weston was entitled to damages incurred as a result of HET’s default.

HET now moves to vacate the arbitration award on the grounds that the arbitrators imperfectly

executed their powers and manifestly disregarded the law. Weston has filed a Counter-Motion



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for Confirmation of the Arbitration Award. For the reasons that follow, the Court denies both

HET’s Motion and Weston’s Counter-Motion.

II.

BACKGROUND

The facts of this case are set forth in detail in the arbitration panel’s Interim Decision.

(See Counter-Mot. Ex. A.) In addition, because the Court declines to review the Interim Decision

at this stage of the proceedings, the Court will only recite those facts necessary to explain its

rulings on the instant motions.

The following facts are not materially in dispute. In 2009, Weston was awarded a prime

contract to design and build a new office building project at the American Institute in Taiwan.

Weston then subcontracted most of the required construction to HET. During the course of the

project, “disagreements developed” between Weston and HET concerning HET’s performance of

the subcontract, and Weston declared HET in default on October 20, 2010. (Counter-Mot. at 3);

(Mot. at 7.) Weston later formally terminated the contract with HET by reason of the default on

March 8, 2011.

The subcontract required the parties to submit any disputes to binding arbitration before the

ICDR, and in September of 2011 Weston filed a Notice of Arbitration, seeking damages in excess

of $39,500,000. HET filed a Statement of Defense and Counterclaim, seeking damages between

$8 million and $11 million. The parties and the tribunal agreed that the proceedings should be

bifurcated, with Phase One proceedings addressing liability and Phase Two addressing damages.

In the Phase One proceedings, the parties submitted lengthy witness statements and engaged in

seventeen days of evidentiary hearings. The tribunal issued its Interim Decision as to liability on

January 9, 2013, ruling, inter alia, that “Weston is entitled to seek recovery of any damages it may



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have incurred resulting from HET’s default and the termination of HET’s performance, and HET

is entitled to seek a set-off for the Subcontract Work actually performed . . . . ” (Counter-Mot. Ex.

A at 42.)

HET then moved pursuant to Rule 30 of the ICDR Arbitration Rules for an interpretation of

the Interim Decision. HET sought a more “explicit ruling on whether Weston’s March 8, 2011

default termination of HET was valid . . . . ” (Mot. at 20.) The tribunal dismissed HET’s motion.

HET then filed the instant Motion to vacate the liability award in this Court, and Weston filed its

Counter-Motion to Confirm the Arbitration Award.

III. LEGAL STANDARD

The party moving to vacate an arbitration award bears the burden of proof. Grosso v.

Salomon Smith Barney, Inc., 2003 U.S. Dist. Lexis 20208 (E.D. Pa. Oct. 24, 2003). Where a party

has agreed to arbitrate a dispute, the court will set the arbitration decision aside “only in very

unusual circumstances.” First Options v. Kaplan, 514 U.S. 938, 942 (1995).

The parties agree that the Federal Arbitration Act (“FAA”) applies to this case. Under the

FAA, a district court may vacate an arbitration award only:

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing,

upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the

controversy; 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



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mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S.C. § 10(a).

IV. DISCUSSION

As a threshold matter, Weston argues that the Court should not review the Interim Decision

at this time. Specifically, Weston claims that because the Interim Decision determines only the

liability of the parties and not damages, it does not constitute a final award reviewable by the

Court.

District courts may only vacate or confirm arbitration decisions which involve a final

award. See Travelers Insurance Co. v. Davis, 490 F.2d 536, 541-42 n. 12 (3d Cir. 1974);

Michaels v. Mariforum Shipping, S. A., 624 F.2d 411, 414 (2d Cir. 1980) (“Under the Federal

Arbitration Act, 9 U.S.C. § 1 et seq., a district court does not have the power to review an

interlocutory ruling by an arbitration panel. . . . it is only after an award has been made by the

arbitrators that a party can seek to attack any of the arbitrators’ determinations in court . . . . ”).

The Third Circuit adheres to the “complete arbitration” rule, which precludes review of

arbitration until all issues are finally decided by the arbitrators. For example, Pub. Serv. Elec. &

Gas Co. v. Sys. Council U-2, Int’l Bhd. of Elec. Workers, AFL-CIO, 703 F.2d 68 (3d Cir. 1983)

concerned whether a district court had jurisdiction to vacate a liability determination by an

arbitration panel in bifurcated proceedings under the Labor Management Relations Act

(“LMRA”). The Third Circuit held that, “[r]eview of the decision at this stage would disrupt and

delay the arbitration process and could result in piecemeal litigation.” Id. at 70. That is, if the

court upheld the arbitrators’ liability ruling, “and the parties did not thereafter agree upon a

remedy, the panel would be required to impose one. The company could then repetition the



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district court to review that remedy. We see no legitimate reason for allowing such piecemeal

litigation.” Id. The Court accordingly ruled that the district court was without jurisdiction to

vacate the liability determination. Id.

The Third Circuit revisited this issue in Union Switch & Signal Div. Am. Standard Inc. v.

United Elec., Radio & Mach. Workers of Am., Local 610, 900 F.2d 608, 609 (3d Cir. 1990) and

affirmed the policy considerations underlying System Council U-2. Specifically, the Third

Circuit cited System Council U-2 in reiterating that failure to apply the “complete arbitration” rule

precluded the court from being in a “position to resolve the entire dispute and put an end to this

controversy. This is, indeed, precisely the type of ‘fragmented litigation’ the district court should

have been vigilant to avoid.” Id. at 611. The Third Circuit found that many arbitrators “defer

determination of the remedy,” and that “[i]n principle, there is nothing wrong with this practice.”

Id. However, that court went on to state that “we must take care to ensure that parties do not use

these ‘time outs’ as an opportunity to rush to court, either to preserve what they have just won, or

(more often) to forestall a process that is not turning out as they might have wished.” Id.

In accordance with such considerations, district courts in this circuit have continued to

follow System Council U-2 and Union Switch, precluding review of arbitration in situations

analogous to this case. See e.g., Ernest Disabatino & Sons, Inc. v. Metro. Reg’l Council of

Carpenters, 2005 WL 885165, at *3 (D. Del. Feb. 28, 2005) (citing System Council U-2 and Union

Switch to hold that “the arbitration decision is not a final and binding order . . . because the

arbitrator has yet to consider the issue of damages.”).

HET contends that the above cases are distinguishable because they dealt with arbitration

under the LMRA rather than the FAA. The Court disagrees. First, the Third Circuit’s statements



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in System Council U-2 and Union Switch describe policy goals pertaining to arbitration in general,

rather than labor arbitration only. Such holdings are therefore equally applicable to this case

under the FAA. See also Lloyd v. HOVENSA, LLC., 369 F.3d 263, 270 (3d Cir. 2004) (“The

legislative scheme of the FAA thus reflects a policy decision that, if a district court determines that

arbitration of a claim is called for, the judicial system’s interference with the arbitral process

should end unless and until there is a final award.”)

Second, “[b]oth the LMRA and the FAA generally require an arbitrator’s decision to be

‘final’ for a litigant to be entitled to judicial review.” New United Motor Mfg., Inc. v. United

Auto Workers Local 2244, 617 F. Supp. 2d 948, 954 (N.D. Cal. 2008). Courts have addressed

questions of finality for judicial review purposes under the LMRA by reference to the similar

requirement under the FAA. See e.g., McKinney Restoration, Co., Inc. v. Illinois Dist. Council

No. 1 of Int’l Union of Bricklayers & Allied Craftworkers, 392 F.3d 867, 871 (7th Cir. 2004)

(noting “complete arbitration” rule, and analyzing finality of LMRA arbitration by analogizing to

case discussing the FAA).

Third and finally, courts have noted the general similarity in the standard of review and

guiding legal principles under the LMRA and the FAA. See e.g., United Paperworkers Int’l

Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 41, n.9 (1987) (noting that “federal courts have often

looked to the [FAA] for guidance in labor arbitration cases . . . . ”); Int’l Chem. Workers Union v.

Columbian Chemicals Co., 331 F.3d 491, 495 (5th Cir. 2003) (“Review of an arbitration award

under both the LMRA and the FAA remains extraordinarily narrow.”); International Union of

Operating Engineers v. Murphy Co., 82 F.3d 185, 188-89 (7th Cir. 1996) (citing case for the

proposition that the FAA and the LMRA establish the same governing principles and that courts



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routinely cite decisions under one statute as authority for decisions under the other).

This Court follows System Council U-2 and Union Switch in declining to review the

Interim Decision on the current state of the record. The Court is mindful of the Third Circuit’s

repeated admonition to avoid the “pitfalls” of “fragmented litigation” that may result from review

of an incomplete arbitration decision. See Union Switch, 900 F.2d at 611; see also John Hancock

Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 136 (3d Cir. 1998) (“[W]e have consistently admonished

the courts to exercise the utmost restraint and to tread gingerly before intruding upon the arbitral

process.”) (internal quotations omitted). Just as in System Council U-2, a ruling upholding the

tribunal’s liability determination at this stage could lead to a later remedy determination, and the

parties “could then repetition the [Court] to review that remedy.” 703 F.2d at 70. In accordance

with the law of this circuit, the Court will not permit such piecemeal litigation. The Court

declines to review the Interim Decision at this time.

V.

CONCLUSION

For the foregoing reasons, the Court denies both HET’s Motion to Vacate the Award and

Weston’s Counter-Motion for Confirmation of the Arbitration Award. An appropriate order

follows.





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