Minera San Cristobal, S.A. et al v. Washington Group Bolivia S.R.L. et al

Filing 54

ORDER granting 1 Petition to Confirm Arbitration Award, denying 25 Cross-Motion to Partially Vacate Arbitration Award, denying as moot 26 Motion to Stay Confirmation of Arbitration Award Pending Resolution of the Cross-Motion to Partially Vacate, and confirming the Arbitration Award, by Judge William J. Martinez on 1/31/14. The Clerk shall enter judgment in favor of Petitioners, and Petitioners shall be awarded their costs.(dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 13-cv-2418-WJM-KMT
MINERA SAN CRISTOBAL, S.A., and
SUMITOMO CORPORATION,
Petitioners,
v.
WASHINGTON GROUP BOLIVIA S.R.L.,
URS ENERGY & CONSTRUCTION, INC., f/k/a WASHINGTON GROUP INTERNATIONAL,
INC.,
Respondents.

ORDER GRANTING PETITION TO CONFIRM ARBITRATION AWARD AND
DENYING MOTION TO PARTIALLY VACATE ARBITRATION AWARD

Petitioners Minera San Cristóbal, S.A. and Sumitomo Corporation (together
“Petitioners”) bring this action against Respondents Washington Group Bolivia S.R.L. and
URS Energy and Construction, Inc., formerly known as Washington Group International, Inc.
(together “Respondents”), seeking to confirm an arbitration award. Before the Court are
Petitioners’ Petition to Confirm Arbitration Award (“Petition”) (ECF No. 1) and
Respondents’ Cross-Motion to Partially Vacate Arbitration Award (“Cross-Motion”) (ECF
No. 25). For the reasons set forth below, the Petition is granted and the Cross-Motion is
denied. The August 9, 2013 arbitration award of the International Chamber of Commerce
(“ICC”) International Court of Arbitration is affirmed.

I. FACTUAL AND PROCEDURAL BACKGROUND
Minera San Cristóbal, S.A. (“MSC”), a subsidiary of Sumitomo Corporation, owns
the development and mining rights to the San Cristóbal Mine located in Bolivia. (ECF No.
1 at 2.) Beginning in 2005, MSC entered into a series of agreements with Washington
Group Bolivia, S.R.L. (“WGB”) to provide mining services for the Mine, including the 2005
Open Pit Mining Services Agreement (the “MSA”) and the 2006 Engineering, Procurement
and Construction Agreement (the “EPC”). (Id.) URS Energy and Construction (“URS”), a
parent company of WGB, entered into a guaranty of WGB’s obligations under the MSA
and EPC agreements. (Id.) All of the agreements, including the MSA, the EPC, and the
Guaranty, include a provision that any disputes involving interpretation or application of the
agreements would be finally resolved through binding international arbitration under the
ICC Rules of Arbitration. (ECF Nos. 3-3 § 18.5; 3-4 § 18.5; 3-6 ¶ 10.) The agreements
provide that they be governed and interpreted in accordance with New York law. (ECF
Nos. 3-3 § 21.1; 3-4 § 21.1; 3-6 ¶ 9.) The MSA also contains provisions permitting
termination of the agreement for convenience or for default. (ECF No. 3-3 § 17.1 & 17.2.)
On October 15, 2008, after disputes arose, the parties entered into an agreement
modifying parts of the MSA (“2008 Agreement”). (ECF No. 25 at 6.) However, when
disputes persisted, in 2009 MSC elected to terminate WGB’s services for convenience.
(Id. at 7; ECF No. 1 at 2.) In 2011, Petitioners initiated arbitration proceedings against
Respondents, alleging breach of contract and related claims. (ECF No. 1 at 3.)
Respondents asserted a counterclaim for wrongful termination. (Id.)
In December 2012, the parties held an arbitration administered by the ICC
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International Court of Arbitration before a panel of three arbitrators: Gerald Aksen, Patrick
J. Garver, and A.H. Gaede, Jr. (collectively the “Tribunal”). (ECF No. 3-2 (“Award”) at 2.)
Petitioners argued, among other things, that Respondents violated the MSA by performing
deficiently, causing damages in the form of cost overruns and production shortfalls. (Id. at
8.) Respondents asserted a counterclaim contending that Petitioners were barred from
seeking damages for default because Petitioners terminated WGB for convenience, and
that Petitioners’ action was in fact a termination for default, which termination was wrongful.
(Id. at 12, 65-66.)
In a 69-page Final Award, the Tribunal evaluated in detail each claim made by both
sides. (See Award at 14-67.) With respect to Petitioners’ claim that WGB had breached
the MSA, the Tribunal found Respondents liable for production shortfalls and cost overruns
occurring on or after October 15, 2008, the date of the 2008 Agreement. (Award at 48.)
The Tribunal also awarded Petitioners credits for improper charges under the MSA, and a
fraction of Petitioners’ other damages claims, but rejected the remainder of Petitioners’
claims, and rejected Respondents’ counterclaims in their entirety. (Id. at 65-67.)
Ultimately, the Tribunal awarded Petitioners $8,739,338.00 for breach of contract
damages under the MSA post October 15, 2008 (the “$8.7M Award”), and $1,633,919.96
in damages from other sources, for a total award of $10,373,257.96. (Id. at 67-68.) Of
this amount, the Tribunal ordered that $741,600.96, plus any interest earned in escrow, be
released to Petitioners from Respondents’ escrow account; that the $8.7M Award and an
award of $123,231.00 be paid without interest; and that the remaining $769,088.00 be

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paid with simple interest at a rate of 9% per annum from June 9, 2011 until the date of the
Award. (Id. at 68.) One of the three members of the Tribunal, A.H. Gaede, Jr., dissented
from the part of the decision granting Petitioners the $8.7M Award, noting that “in my
opinion the amount awarded is not consistent with or properly based upon the evidence in
the record and the applicable law.” (Id. at 69.)
On September 5, 2013, Petitioners filed the Petition requesting confirmation of the
Award in its entirety. (ECF No. 1.) Respondents filed a Response (ECF No. 32) and
Petitioners a Reply (ECF No. 43). On October 1, 2013, Respondents filed their CrossMotion requesting vacatur of the $8.7M Award, and a Motion to Stay Confirmation of the
Arbitration Award Pending Resolution of the Cross-Motion. (ECF Nos. 30 & 31.)
Petitioners filed Responses opposing both the Cross-Motion (ECF No. 44) and the Motion
to Stay (ECF No. 38), and Respondents filed Replies (ECF Nos. 39 & 52). All three
motions are now ripe for resolution. As the instant Order resolves both the Petition and the
Cross-Motion, Respondents’ Motion to Stay is now moot.
II. ANALYSIS
Petitioners ask the Court to confirm the Tribunal’s Award. (ECF No. 1.)
Respondents’ Cross-Motion requests that the $8.7M Award be vacated, but does not
dispute that the remainder of the Award should be confirmed. (ECF No. 25 at 1-4.) Thus,
the only issue before the Court is whether the $8.7M Award should be vacated or
confirmed.
The standard of review of arbitral awards is among the narrowest in the law. See
Litvak Packing Co. v. United Food & Commercial Workers, Local Union No. 7, 886 F.2d
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275, 276 (10th Cir. 1989); see also Int’l Bhd. of Elec. Workers, Local Union No. 611,
AFL-CIO v. Pub. Serv. Co. of N.M., 980 F.2d 616, 618 (10th Cir. 1992). The arbitrator’s
decision will be enforced if it draws its essence from the parties’ agreements and is not
merely the arbitrator’s own brand of industrial justice. United Steelworkers of Am. v. Enter.
Wheel & Car Corp., 363 U.S. 593, 597 (1960). Courts may not reconsider the merits of
an award even where the award may rest on errors of fact or misinterpretations of the
parties’ agreement. United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S.
29, 36 (1987); Cal-Circuit ABCO, Inc. v. Solbourne Computer, Inc., 848 F. Supp. 1506,
1510 (D. Colo. 1994). As a result, “as long as the arbitrator is even arguably construing or
applying the contract and acting within the scope of his authority, that a court is convinced
he committed serious error does not suffice to overturn his decision.” Misco, 484 U.S. at
38.
Confirmation of a commercial arbitration award involving international parties is
generally governed by the Federal Arbitration Act (“FAA”), which requires that “[t]he court
shall confirm the award unless it finds one of the grounds for refusal or deferral of
recognition or enforcement of the award . . . .” 9 U.S.C. § 207. However, the applicable
contracts here provide that the binding decision of the arbitral tribunal is “reviewable only in
accordance with the provisions of the Uniform Arbitration Act, as adopted by the State of
Colorado.” (ECF Nos. 3-3 § 18.5(f); 3-4 § 18.5(f); 3-5 § 5.1; 3-6 ¶ 10.) Accordingly, the
Court’s review for purposes of considering partial vacatur is governed by the Colorado
Uniform Arbitration Act (“CUAA”). Colo. Rev. Stat. § 13-22-201, et seq.

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As under the FAA, the CUAA provides that upon motion for confirmation of an
arbitration award, the presiding court shall issue a confirming order unless the award is
modified, corrected, or vacated. Id. § 13-22-222(1). Under the CUAA, vacatur is limited
to five exclusive grounds, one of which is where the “arbitrator exceeded the arbitrator’s
powers”. Id. § 13-22-223(d). Colorado courts have interpreted this provision such that “an
arbitrator can exceed such power only when the award goes beyond the scope of the
arbitration agreement.” Coors Brewing Co. v. Cabo, 114 P.3d 60, 64 (Colo. Ct. App.
2004). Thus, even where an arbitrator misinterprets the law or the contract at issue, “[t]o
say that an arbitrator who manifestly disregards the law exceeds his authority is not
consistent with this provision [of the CUAA].” Id.
Respondents contend that the Tribunal’s decisions exceeded its authority because
it refused to apply controlling New York case law. (ECF No. 25 at 14-24.) Specifically,
Respondents argue that the Tribunal ignored five requirements under New York law: (1)
the MSA obligated Petitioners to provide a notice and opportunity to cure prior to
termination, and New York law requires that parties follow contractual procedures “to the
letter” in order to terminate a contractor; (2) New York law prohibits an award of default
damages when a contractor is terminated for convenience; (3) to find damages for a cost
overrun in this type of contract, New York law requires proof that the costs were in reckless
disregard of the obligations of reasonableness and good faith; (4) New York law requires
proof of causation and damages and prohibits the “total cost” damage model; and (5) the
2008 Agreement waived all damages for cost overruns and production shortfalls in the
entire year of 2008, and New York law prohibits recovering damages on a waived claim.
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(Id. at 12-25.) In response, Petitioners contend that each of these arguments seeks to
relitigate the merits of the Award and, due to the narrow standard of review, none of
Respondents’ arguments can be considered. (ECF No. 41 at 5-15.)
In support of the contention that the Tribunal’s alleged legal errors all constitute an
excess of authority, Respondents cite Colorado precedent holding that “an arbitrator
exceeds his authority when he ‘refuses to apply or ignores the legal standard agreed upon
by the parties for resolution of the dispute.’” Coors Brewing, 114 P.3d at 64 (quoting
Giraldi v. Morell, 892 P.2d 422, 424 (Colo. App. 1994)) (brackets omitted). However,
Respondents fail to note the Coors Brewing Court’s subsequent statements, clarifying that
“Giraldi does not posit that an arbitrator’s misapplication of the law constitutes an excess
of authority. Rather, Giraldi states that an arbitrators refusal to apply the agreed upon
legal standard constitutes an excess of authority.” Id. (emphasis in original).
It is undisputed that the Tribunal purported to apply New York law—the “agreed
upon legal standard” for the purposes of these contracts. Respondents’ argument, in
essence, asserts that the Tribunal misapplied or misinterpreted that law, which is not a
basis to vacate an arbitration award under the CUAA.
The Court has reviewed the Award and the Tribunal’s analysis of each of the issues
to which Respondents assign error. The Award discusses each of the five arguments
Respondents make here, as the same arguments were raised before the Tribunal, and
explicitly references the provisions of the applicable contracts and the New York case law
that Respondents cited. (See, e.g., Award at 16-17; 27-48.) Thus, even if the Court were

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to agree with Respondents and the dissenting arbitrator that in granting the $8.7M Award,
the majority members of the Tribunal misinterpreted the evidence and the governing New
York law, the Court could not, consistent with either the FAA or the CUAA, vacate the
Award. See Coors Brewing, 114 P.3d at 64 (permitting vacatur for a refusal to apply the
appropriate legal standard, but not for a manifest disregard or misapplication of the law);
see also Misco, 484 U.S. at 36. Under the highly deferential standard that applies to the
Court’s review of an arbitration award, the Court cannot say that the Tribunal’s decision
with respect to the $8.7M Award should be vacated. Accordingly, the Cross-Motion to
partially vacate the Award is denied.
Finally, Petitioners request that the Tribunal’s Award be augmented with
prejudgment interest at a rate of 9% per annum from the date of the Award until the date
judgment is entered. (ECF Nos. 1 at 7; 3-1 at 10-11.) Pursuant to the New York Civil
Practice Law and Rules, interest may be recovered from the date of the decision to the
date of entry of final judgment at a rate of 9% per annum unless otherwise provided by
statute. N.Y. C.P.L.R. §§ 5002, 5004. Respondents do not contest this interest
calculation. (ECF No. 27.) Accordingly, the Court finds that, in addition to the sums
awarded by the Tribunal, Petitioners are entitled to simple interest on all portions of the
Award at a rate of 9% per annum from August 9, 2013, up to and including the date of the
entry of judgment.

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III. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.

Petitioners’ Petition to Confirm Arbitration Award (ECF No. 1) is GRANTED;

2.

Respondents’ Cross-Motion to Partially Vacate Arbitration Award (ECF No. 25) is
DENIED;

3.

Respondents’ Motion to Stay Confirmation of Arbitration Award Pending Resolution
of the Cross-Motion to Partially Vacate (ECF No. 26) is DENIED AS MOOT;

4.

The Tribunal’s August 9, 2013 Arbitration Award (ECF No. 3-2) is CONFIRMED in
its entirety;

5.

The Clerk shall enter judgment in favor of Petitioners as specified in the Award, with
the addition of simple interest at 9% per annum from the date of the Award up to
and including the date of entry of judgment, as follows:
a.

Respondents shall pay to Petitioners the sums of $8,739,338.00 and
$123,231.00 with simple interest at 9% per annum ($2,185.29 per
diem) from August 9, 2013 to the date of entry of judgment;

b.

Respondents shall pay to Petitioners the sums of $570,268.00,
$179,000.00, and $19,820.00 with simple interest at 9% per annum
($189.64 per diem) from June 9, 2011 to the date of entry of
judgment;

c.

The sum of $741,600.69 plus escrow interest shall be released to
Petitioners from Respondents’ Escrow Account, with the remaining
balance of the Escrow Account to be returned to Respondents;
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d.
6.

Post-judgment interest shall accrue at the applicable federal rate; and

Petitioners shall be awarded their costs incurred in this action.

Dated this 31st day of January, 2014.
BY THE COURT:

William J. Martínez
United States District Judge

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