Alstom et al v. General Electric Company

Filing 64

OPINION AND ORDER re: 38 CROSS MOTION for Summary Judgment filed by General Electric Company, 62 LETTER MOTION for Oral Argument addressed to Judge Jesse M. Furman from Stephen L. Ascher dated July 22, 2016 filed by General Electric Company, 48 MOTION to Stay Proceedings and/or Compel Arbitration filed by General Electric Company, 26 MOTION for Summary Judgment filed by Alstom Transport Holdings B.V., Alstom. In s hort, given the language of the Agreement and the undisputed facts, the Court concludes that the parties' disputes must be submitted in the first instance to the IAF, not the ICC. See 9 U.S.C. § 4 ("[U]pon being satisfied that th e making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." (emphasis added)); se e also Severstal U.S. Holdings, LLC v. RG Steel, LLC, 865 F. Sup. 2d 430, 438 (S.D.N.Y. 2012) (noting there is "no place for the exercise of discretion by a district court" in enforcing this mandatory remedy). Accordingly, Alstom' s motion for summary judgment and to compel submission to the IAF is GRANTED, and GE's cross-motions-which, in one way or another, seek to compel arbitration before the ICC-are DENIED. One final question remains: whether the Court should ent er judgment and close the case or stay proceedings pending arbitration before the IAF. Section 3 of the Federal Arbitration Act requires a district court to stay proceedings where an issue before it requires arbitration, see 9 U.S.C.
67; 3, but a district court has discretion to dismiss, rather than stay, an action where, as here, all of the issues in the case must be arbitrated, see Salim Oleochemicals v. M/V Shropshire, 278 F.3d 90, 92-93 (2d Cir. 2002). The Second Circuit h as urged district courts to be "be mindful of the fact that a dismissal is appealable whereas a granting of a stay is not, and '[u]nnecessary delay of the arbital process through appellate review is disfavored.'" HBC Solutions , 2014 WL 6982921, at *9 (quoting Salim Oleochemicals, 278 F.3d at 93). The Court will therefore stay the proceedings pending arbitration of Alstom's claims by the IAF. The Clerk of Court is directed to terminate Docket Nos. 26, 38, 48, and 62. Further, as there is no reason to keep the case open pending the arbitration, the Clerk is directed to administratively close the case without prejudice to either party moving by letter motion to reopen the case within thirty days of the conclusion of the arbitration proceedings. (As further set forth in this Opinion and Order.) (Signed by Judge Jesse M. Furman on 1/10/2017) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ALSTOM, et al.,
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Plaintiffs,
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-v:
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GENERAL ELECTRIC COMPANY,
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Defendant.
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01/10/2017

16-CV-3568 (JMF)
OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:
In 2014, Plaintiffs Alstom and Alstom Transport Holdings B.V. (collectively, “Alstom”)
agreed to purchase a rail-signaling business from Defendant General Electric Company (“GE”)
for $800 million, subject to a post-closing purchase price adjustment process. The ultimate
question in this case, teed up by cross-motions for summary judgment and cross-motions to
compel arbitration, is whether a dispute over the purchase price adjustment should be decided by
an independent accounting firm or arbitrators from the International Chamber of Commerce
(“ICC”). In light of the plain language of the parties’ agreement, the Court agrees with Alstom
that the dispute must be submitted, in the first instance at least, to the independent accounting
firm. Accordingly, Alstom’s motions for summary judgment and to compel submission of the
parties’ dispute to the independent accounting firm are GRANTED, and GE’s cross-motions for
summary judgment and to compel arbitration before the ICC are DENIED.
BACKGROUND
The following facts are taken from the pleadings and the declarations submitted in
connection with the parties’ cross-motions. See, e.g., Bansadoun v. Jobe-Riat, 316 F.3d 171, 175

(2d Cir. 2003) (“In the context of motions to compel arbitration . . . , the court applies a standard
similar to that applicable for a motion for summary judgment.”). The relevant facts are largely,
if not entirely, undisputed — but, in any event, all inferences are drawn in GE’s favor. See, e.g.,
Russell v. Mimeo, Inc., No. 08-CV-5354 (RJS), 2008 WL 6559743, at *1 (S.D.N.Y. Oct. 29,
2008) (noting that, where a motion to compel is opposed on the ground that the parties did not
agree to arbitrate, the court “should give the opposing party the benefit of all reasonable doubts
and inferences that may arise”).
A. The Master Purchase Agreement
On November 4, 2014, GE and Alstom entered into a Master Purchase Agreement (the
“Agreement”) governing the sale of GE’s rail-signaling business to Alstom for $800 million, to
be paid at closing. (Docket No. 42 (“Ascher Decl.”), Ex. C (“GE Req. for Arbit.”) ¶ 15; see also
id., Ex. A (“Agmt.”)). Because GE was to continue operating the business until closing, the
Agreement also provided for a post-closing purchase price adjustment, defined as the “Final
Positive (or Negative) Working Capital Adjustment.” (GE Req. for Arbit. ¶ 17; Agmt. § 3.05).
Specifically, under Section 3.05 of the Agreement, GE was to provide Alstom a “Proposed
Working Capital Statement” and “Proposed Net Debt Statement” within sixty days of the closing
date (Agmt. § 3.05(a)), to be prepared in accordance with the “Transaction Accounting
Principles” (“TAPs”), agreed-upon principles that were memorialized as an exhibit to the
Agreement (Agmt. § 3.07; Docket No. 29 (“Petrovic Decl.”), Ex. 2 (“TAPs”) at 15-16). Alstom
then had ninety days to review GE’s proposed statements. (Agmt. § 3.05(b)). If Alstom
disputed any item set forth in the proposed statements, Alstom was required to “deliver written
notice . . . of the same” to GE — defined as “the Dispute Notice” — “specifying in reasonable

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detail the basis for such dispute” and its proposed modifications. (Id. § 3.05(c)). Upon receipt of
the Dispute Notice, the parties had thirty days — defined as the “Resolution Period” — during
which to “negotiate in good faith to reach an agreement as to any matters identified” in the
dispute notice. (Id.).
Most relevant here, Section 3.05(d) of the Agreement provides that if the parties “fail to
resolve all such matters in dispute within the Resolution Period, then . . . any matters identified
in such Dispute Notice that remain in dispute following the expiration of the Resolution Period
shall be finally and conclusively determined by” Deloitte Touche Tohmatsu Limited (“Deloitte”)
(or, if Deloitte is unable or unwilling to serve in such capacity, another globally recognized
accounting firm), defined as the “Independent Accounting Firm” (“IAF”). (Id. § 3.05(d)).
Section 3.05(e) of the Agreement further provides that the parties “shall instruct” the IAF “to
promptly, but no later than forty (40) days after its acceptance of its appointment, determine (it
being understood that in making such determination, the [IAF] shall be functioning as an expert
and not as an arbitrator), based solely on written presentations of [the parties] . . . and not by
independent review, only those matters in dispute.” (Id. § 3.05(e)). Like the parties, the IAF is
bound to decide any disputed items in accordance with the TAPs. (Id. § 3.07). The Agreement
provides that the IAF’s “written report setting forth its determination as to the disputed matters
and the resulting calculation . . . will be conclusive and binding upon all [p]arties absent manifest
error or gross negligence.” (Id. § 3.05(e)).
Complicating matters, however, the Agreement contains a separate section providing for
arbitration by the ICC of any dispute not committed to the IAF. Specifically, Section 15.13 of
the Agreement states, in relevant part, as follows: “Except as set forth in Section 3.05 with

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respect to any disputes to be resolved by the [IAF], . . . any Transaction Dispute shall be finally
resolved under Rules of Arbitration of the [ICC] (the “Rules”) by three (3) arbitrators appointed
in accordance with the Rules.” (Id. § 15.13). Section 15.12 of the Agreement defines a
“Transaction Dispute” broadly to include “any Action arising out of or relating in any way to
[the Agreement], whether in contract, tort, common law, statutory law, equity, or otherwise,
including any question regarding its existence, validity, or scope.” (Id. § 15.12).
B. Procedural History
On January 4, 2016, approximately two months after the closing date, GE delivered its
Proposed Working Capital and Proposed Net Debt Statements to Alstom. (Petrovic Decl. ¶ 4).
Each statement was a single page in length. (Petrovic Decl., Ex. 3 (“Dispute Notice”), Ann. III). On April 4, 2016 — within the ninety-day review period — Alstom delivered to GE a 112page Dispute Notice taking issue with thirty-eight items. (Petrovic Decl. ¶ 5; Dispute Notice).
(For present purposes, the specifics of the parties’ positions on the purchase price adjustment —
which are subject to a confidentiality agreement between the parties — are irrelevant; it suffices
to say that there is a substantial difference between the parties with respect to the size of the
adjustment.)
After some back and forth, including negotiations over extending the Resolution Period,
GE notified Alstom in writing that it did not believe many of the issues in the Dispute Notice
were appropriate for resolution by the IAF. (Docket No. 30 ¶ 4; id., Ex. 1). Specifically,
although GE conceded that half of the thirty-eight items were within the scope of Section 3.05
and for the IAF to decide, it asserted that the other half challenged its business and engineering
judgments rather than its application of accounting principles and were for the ICC to resolve

4

under Sections 15.12 and 15.13. (Docket No. 41 (“GE Opp’n”) at 3).
A few days later, on May 9, 2016, GE informed Alstom via letter that it had requested
arbitration before the ICC pursuant to Section 15.13 of the Agreement. (Petrovic Decl. ¶ 17; id.,
Ex. 13 (“May 9, 2016 Letter”)). In particular, GE sought arbitration on two issues: first, that
nineteen of Alstom’s disputed items were “outside the scope of the working capital adjustment
process” and so the IAF was without authority to decide those items; and second, that Alstom’s
Dispute Notice did not provide “reasonable detail” for the disputed items, rendering it
inadequate. (May 9, 2016 Letter). On May 13, 2016, Alstom initiated the instant action.
(Docket No. 14). Alstom now moves for summary judgment and to compel GE to submit the
dispute to the IAF (Docket No. 26); GE cross-moves for summary judgment and moves either to
stay the proceedings pending arbitration before the ICC or to compel such arbitration. (Docket
Nos. 38 & 48).
DISCUSSION
The parties’ ultimate disagreement is over who should decide their purchase price
adjustment dispute. GE concedes that nineteen of the thirty-eight issues raised by Alstom in its
Dispute Notice should be decided by the IAF under Section 3.05 of the Agreement, but contends
that the other nineteen issues should be submitted to the ICC pursuant to Section 15.13. By
contrast, Alstom argues that all of the issues raised in its Dispute Notice should be submitted to
the IAF. But the threshold question is not who should decide the purchase price adjustment
dispute itself. The threshold (that is, logically prior) question is who should decide the very
question of who decides — sometimes called the “the question of arbitrability.” Howsam v.
Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2000) (internal quotation marks omitted). GE

5

argues that the ICC should decide whether it or the IAF should resolve the disputed items in
Alstom’s Dispute Notice because Section 15.13 of the Agreement provides that “any Transaction
Dispute shall be” resolved by the ICC and Section 15.12 defines “Transaction Dispute” to
include “any question regarding” the Agreement’s “scope.” (See Docket No. 49 (“GE Mtn. to
Stay”) at 12-15). By contrast, Alstom argues that the question of arbitrability is one for the
Court to decide. (See Docket No. 54 (“Alstom Reply”) at 3-7).
Alstom plainly has the better of this threshold argument. It is well established that “[t]he
question whether the parties have submitted a particular dispute to arbitration, i.e., the ‘question
of arbitrability,’ is an issue for judicial determination unless the parties clearly and unmistakably
provide otherwise.” Howsam, 537 U.S. at 83 (internal quotation marks, brackets, and emphasis
omitted). The presence of a broadly worded arbitration clause along the lines of Section 15.13
would normally satisfy this “clear and unmistakable” standard. See, e.g., PaineWebber, Inc. v.
Bybyk, 81 F.3d 1193, 1199 (2d Cir. 1996). But Section 3.05, the purchase price adjustment
dispute-resolution provision, is itself an arbitration clause. See, e.g., Talegen Holdings, Inc. v.
Fremont General Corp., 98-CIV-366 (DC), 1998 WL 513066, at *3 (S.D.N.Y. Aug. 19, 1998)
(noting that “[c]ourts have consistently found that purchase price adjustment dispute resolution
provisions . . . constitute enforceable arbitration agreements”). And where, as here, “a single
agreement contains both a broadly worded arbitration clause and a specific clause assigning a
certain decision to an independent accountant,” it “cannot” be said “that the parties’ intention to
arbitrate questions of arbitrability under the broad clause remains clear.” Katz v. Feinberg, 290
F.3d 95, 97 (2d Cir. 2002). Instead, “the presence of both these clauses creates an ambiguity,”
which, in turn, requires that “questions of arbitrability” be decided by a court, not by an

6

arbitrator. Id.; accord SOHC, Inc. v. Zentis Food Sols. N. Am., LLC, No. 14-CV-2270 (JMF),
2014 WL 6603951, at *1 & n.1 (S.D.N.Y. Nov. 20, 2014).
GE’s arguments to the contrary are meritless. First, GE asserts that “scope” questions are
explicitly committed to the ICC under Sections 15.12 and 15.13 of the Agreement. (See GE
Mtn. to Stay 14-15). But that argument conspicuously ignores the opening phrase of Section
15.13, which expressly carves out from ICC arbitration “any disputes to be resolved” by the IAF
under Section 3.05. Put simply, GE “cannot carry [its] burden” of identifying “a clear and
unmistakable expression of the parties’ intent to submit arbitrability disputes to arbitration . . . .
by pointing to a broad arbitration clause that the parties subjected to a carve-out provision.”
NASDAQ OMX Grp., Inc. v. UBS Sec., LLC, 770 F.3d 1010, 1032 (2d Cir. 2014). Additionally,
GE contends that Section 15.13 “incorporates the ICC Rules, which expressly grant arbitrators
authority to decide the scope of their jurisdiction,” and that such “‘incorporation serves as clear
and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator.’” (GE
Mtn. to Stay 12-14 (quoting Contec Corp. v. Remote Solution Co., 398 F.3d 205, 208 (2d Cir.
2005)). As in NASDAQ OMX Grp., Inc., however, the Agreement “does not clearly and
unmistakably direct that questions of arbitrability be decided by [ICC] rules; rather, it provides
for [ICC] rules to apply to such arbitrations as may arise under the Agreement.” 770 F.3d at
1032. Under the plain terms of Section 15.13, the carve out for disputes to be resolved by the
IAF under Section 3.05 “delays application of [ICC] rules until a decision is made as to whether
a question does or does not fall within the intended scope of arbitration, in short, until
arbitrability is decided.” Id. 1
1

GE also suggests that this case is distinguishable from Katz because it involves an
international agreement (See GE Mtn. to Stay 14), but that suggestion is unpersuasive. See, e.g.,
7

The Court turns, then, to the parties’ central disagreement: whether all or only some of
the issues raised in Alstom’s Dispute Notice should be submitted to the IAF. When an
agreement, such as the one at issue here, “includes two dispute resolution provisions, one
specific (a valuation provision) and one general (a broad arbitration clause), the specific
provision will govern those claims that fall within it.” Katz, 290 F.3d at 97. To determine
whether the claims at issue here “fall within” the scope of Section 3.05, the IAF provision, the
Court must conduct a three-part inquiry. See, e.g., Louis Dreyfus Negoce S.A. v. Blystad
Shipping & Trading, Inc., 252 F.3d 218, 224 (2d Cir. 2001). First, the Court must determine
whether the clause is broad or narrow. See id. Second, if reviewing a narrow clause, it must
determine whether the dispute “is over an issue that is on its face within the purview of the
clause, or over a collateral issue that is somehow connected to the main agreement that contains
the arbitration clause.” Id. (internal quotation marks omitted). And third, for narrow arbitration
clauses, the Court should generally find a collateral issue to fall outside of the clause, while for
broad clauses there is a presumption of arbitrability. See id. But see Chevron U.S.A. Inc. v.
Consol. Edison Co. of N.Y., Inc., 872 F.2d 534, 537-38 (2d Cir. 1989) (stating that “even a
narrow arbitration clause must be construed in light of the presumption in favor of arbitration,”
although “the court is not free to disregard the explicit boundaries set by the agreement”).
At the first step, there are no “fixed rules” governing the determination of whether an
arbitration clause is broad or narrow. Louis Dreyfus Negoce S.A., 252 F.3d at 225. Instead, the
Court “must determine whether, on the one hand, the language of the clause, taken as a whole,

Telenor Mobile Comms. AS v. Storm LLC, 584 F.3d 396, 406 (2d Cir. 2009) (“The presumption
that the court should decide arbitrability questions also applies when a party seeks to compel
arbitration [pursuant to an international agreement] under the New York Convention.”).
8

evidences the parties’ intent to have arbitration serve as the primary recourse for disputes
connected to the agreement containing the clause, or if, on the other hand, arbitration was
designed to play a more limited role in any future dispute.” Id. Meanwhile, at the second step
— determining whether a narrow arbitration clause covers a particular agreement — a court
looks to “the factual allegations in the complaint rather than the legal causes of action asserted.”
Smith/Enron Cogeneration Ltd. P’ship v. Smith Cogeneration Int’l, Inc., 198 F.3d 88, 99 (2d Cir.
1999); see S. New England Tel. Co. v. Global Naps, Inc., No. 04-CV-2075 (JCH), 2006 WL
1169805, at * 7 (D. Conn. Apr. 28, 2006) (applying Smith/Enron in the context of a narrow
arbitration clause). An issue is collateral — and therefore not covered by a narrow arbitration
clause — only if it is “a separate, side agreement, connected with the principal contract which
contains the arbitration clause.” Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 64 (2d Cir.
1983). If, however, a dispute “arises under the main agreement but requires determination of a
sub-issue,” it is “inextricably tied up with the merits of the underlying dispute” and, therefore,
arbitrable even under a narrow clause. Id.
Section 3.05 of the Agreement is a narrow clause. Rather than applying generally to
disputes “arising out of” or “in connection with” the Agreement, it is limited to disputes over the
Proposed Working Capital Statement and Proposed Net Debt Statement. See Seed Holdings, Inc.
v. Jiffy Int’l AS, 5 F. Supp. 3d 565, 583 (S.D.N.Y. 2014) (citing cases). But cf. Gestetner
Holdings, PLC v. Nashua Corp., 784 F. Supp. 78, 81 (S.D.N.Y. 1992) (describing a clause
similar to the one at issue here as “technically a ‘narrow’ one in that it does not provide for
arbitration of all disputes between the parties,” but also “‘broad’ insofar as it does not restrict the
scope of objections to the Closing Net Book Value that may be brought before [the independent

9

accountant]”). Nevertheless, the plain language of the clause compels the Court to conclude that
the issues raised by Alstom in its Dispute Notice must be submitted to the IAF in the first
instance. See, e.g., Feifer v. Prudential Ins. Co. of Am., 306 F.3d 1202, 1210 (2d Cir. 2002) (“It
is axiomatic that where the language of a contract is unambiguous, the parties' intent is
determined within the four corners of the contract, without reference to external evidence.”).
Critically, Section 3.05(d) expressly provides — “without exception or limitation,” HBC
Solutions, Inc. v. Harris Corp., 13-CIV-6327 (JMF), 2014 WL 6982921, at *5 (S.D.N.Y. Dec.
10, 2014) — that “any matters identified in [the] Dispute Notice that remain in dispute . . . shall
be finally and conclusively determined by” the IAF. (Agmt. § 3.05(d) (emphasis added)).
Courts in this Circuit have consistently held that broad and unqualified language of that sort
means what it says and encompasses “any” — or, at a minimum, virtually “any” — dispute. See,
e.g., Seed Holdings, 5 F. Supp. 3d at 583-84 (holding that a “dispute over the propriety of
adjustments for non-compliance” with accounting principles fell “within the scope of the
arbitration clause” because the agreement set “no explicit limits on the type of objections to the
calculation of working capital that may be raised before the arbitrators”); Talegen Holdings,
1998 WL 513066, at *4 (finding significant the fact that “no language in [the accounting
provision] expressly exclude[ed] any particular type of Acquisition Audit or purchase price
dispute from arbitration”). There is no basis to reach a different conclusion here.
The unqualified language of Section 3.05 stands in sharp contrast to the language at issue
in XL Capital, Ltd. v. Kronenberg, No. 04-CV-5496 (JSR), 2004 WL 2101952 (S.D.N.Y. Sept.
20, 2004), aff’d, 145 F. App’x 384 (2d Cir. 2005) (summary order), upon which GE places heavy
reliance. (See GE Opp’n 21-23). Similar to the parties here, the parties there broadly agreed to

10

arbitrate “all questions, issues or disputes” arising under their agreement before the American
Arbitration Association (“AAA”), but carved out a subset of disputes to be resolved by an
accountant. See XL Capital, Ltd., 2004 WL 2101952, at *1. Significantly, however, the parties
defined that subset substantively to include only “questions, issues or disputes . . . with respect to
the calculations of the Cashout Payment and the Earned Payout Amount.” Id. (emphasis added).
Relying on that limiting language, Judge Rakoff had no trouble concluding that the respondents’
claims of fraud and deceitful conduct, negligent misrepresentation, breach of contract, breach of
the covenant of good faith and fair dealing, and the like were for the AAA, not the accountant, to
decide. “The issues,” he reasoned, “are not, in their essence, accounting issues, let alone issues
that directly respect the ‘calculation’ of the Earned Payout Amount, which is the subject matter
of [the accountant clause].” Id. at *2. On appeal, the Second Circuit reached the same result and
for the same reason. The language of the accounting clause, the Court of Appeals explained,
“requires a close relationship of the disputed issue to the process of arriving at the final earnout
amount.” 145 F. App’x at 385.
Here, unlike in XL Capital, the purchase price adjustment dispute-resolution provisions
do not substantively limit the kinds of disputes to be delegated to the IAF; they require only that
a dispute be included in the Dispute Notice and remain unresolved. That is not to say that any
claim would be subject to resolution by the IAF simply because Alstom chose to include it in the
Dispute Notice. As this Court observed in HBC Solutions, “there may well be claims whose link
to the [purchase price adjustment dispute-resolution provisions of the Agreement] would be so
attenuated that it would not be ‘a plausible interpretation’ of the Agreement to find the claims
arbitrable” by the IAF. 2014 WL 6982921, at *5 n.1 (quoting Chung & President Enters. Corp.,

11

943 F.2d 225, 230 (2d Cir. 1991)). But that is not the case here. Although GE contends that the
disputed items impermissibly challenge its engineering and business judgments (See, e.g., GE
Opp’n 1-3, 20-21), the issues raised by Alstom are not merely collateral to the determination of
the Final Working Capital; to the contrary, Alstom has laid out — in a more than plausible
manner — the specifics of its objections and the accounting principles upon which each
objection is based. (See Petrovic Decl., Ex. 3). The mere fact that the issues raised by Alstom
call for more than “bean-counting” does not take them outside the scope of the purchase price
adjustment dispute-resolution provisions. Alliant Techsystems, Inc. v. MidOcean Bushnell
Holdings, L.P., C.A. No. 9813-CB, 2015 WL 1897659, at *11 (Del. Ch. Apr. 24, 2015); see also,
e.g., Seed Holdings, 5 F. Supp. 3d at 584 (“[T]he calculation of working capital for the purpose
of making a purchase price adjustment necessarily entails resolving the proper accounting
methodology to be used.”); Talegen Holdings, Inc., 1998 WL 513066, at *6 (“As courts have
consistently found, accounting methods are integral to the derivation of calculations related to
closing balance sheets. Hence, disputes regarding the accounting methods are also disputes
regarding the calculations in the financial statements.” (internal quotation marks, ellipsis, and
citations omitted)).
GE’s efforts to avoid the implications of the unqualified language of Section 3.05 to
which it agreed are unavailing. As it did in arguing that the ICC should decide the question of
arbitrability, GE points first to the broad language of Sections 15.12 and 15.13. (See GE Mtn. to
Stay 16-21). But, again, that argument ignores the beginning of Section 15.13, which carves out
any disputes that fall within the scope of Section 3.05. See, e.g., HBC Solutions, 2014 WL
6982921, at *7. Somewhat more compellingly, GE relies on the language in Section 3.05(e) of

12

the Agreement providing that the IAF “shall” function “as an expert and not as an arbitrator” to
argue that “the parties specifically cabined the review of the IAF.” (GE Opp’n 22-23). But that
language merely “means that [the IAF] will resolve the dispute as accountants do — by
examining the corporate books and applying normal accounting principles plus any special
definitions the parties have adopted — rather than entertaining arguments from lawyers and
listening to testimony. It does not imply that the whole section of the contract committing the
resolution to an independent private party is hortatory.” Omni Tech Corp. v. MPC Sols. Sales
LLC, 432 F.3d 797, 799 (7th Cir. 2005). And in any event, the phrase is not sufficient, in itself,
to override the plain language of Section 3.05(d), committing “any matters identified in [the]
Dispute Notice that remain in dispute” (or, at a minimum, “any” such matters that plausibly
relate to calculation of the Final Positive (or Negative) Working Capital Adjustment) to the IAF.
(Agmt. § 3.05(d) (emphasis added)). Mindful that GE’s and Alstom’s accounting and finance
staffs prepared the documents currently at issue, there is simply no reason to believe that the
IAF, even acting as an accounting “expert,” is not in a position (let alone the best position) to
evaluate whether GE complied with the TAPs in producing its proposed statements. (See Docket
No. 55 (“Bialecki Decl.”) 19-24).
Finally, relying principally on Cytec Industries, Inc. v. Allnex (Luxembourg) & Cy S.C.A.,
No. 14-CV-1561 (PKC), 2015 WL 3762592, at *7 (S.D.N.Y. May 15, 2015), and Westmoreland
Coal Co. v. Entech, Inc., 100 N.Y.2d 352 (2003), GE argues that the disputed items actually fall
within the scope of the “representation and warranties” provisions of the Agreement (or raise
claims that would have fallen within the scope of representation and warranties that were not
included in the final Agreement), and thus are legal arguments improperly disguised as

13

accounting disagreements. (GE Opp’n 23-25). The Court, however, considered and rejected
much the same argument in HBC Solutions, and its reasoning there applies with equal force here.
First, as with the parties’ agreement in HBC Solutions, the Agreement in this case explicitly
carves out disputes that are to be resolved by the IAF pursuant to Section 3.05. See HBC
Solutions, 2014 WL 6982921, at *7. Second, unlike the agreements in Cytec Industries and
Westmoreland, the Agreement here does not make indemnification the exclusive remedy for
claims that might otherwise fall within the scope of its “representation and warranties”
provisions. See Cytec Indus., 2015 WL 3762592, at *7-8; Westmoreland Coal Co., 100 N.Y.2d
at 527-28. To the contrary, Section 15.14(a) of the Agreement explicitly states that “all remedies
under this Agreement expressly conferred upon a Party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby,” and Sections 14.02 and 14.06 bar double
recovery for losses via indemnification and the purchase price adjustment process. (See also
Agmt. § 14.05). “If anything,” therefore, the Agreement “appears to contemplate that some
disputes could be pursued either through the Purchase Price Adjustment procedures or through
indemnification (albeit not through both).” HBC Solutions, 2014 WL 6982921, at *6-7; accord
Seed Holdings, 5 F. Supp. 3d at 584-85 (holding similarly and citing cases).
GE’s “representation and warranties” argument fails for an additional reason: At bottom,
it relates to the merits, not to whether the claims should be submitted to the IAF in the first
instance. The Second Circuit’s decision in Chung is instructive. In that case, the parties had
agreed to arbitrate only breach-of-warranty disputes. When the buyer sought to compel
arbitration, the seller argued — not unlike GE here — that the buyer’s claims were merely
disguised warranty claims and thus outside the scope of the narrow arbitration agreement. The

14

Court of Appeals rejected the argument, describing it as one “directed at the merits of the dispute
rather than the issue of arbitrability.” 943 F.2d at 230. Concluding that there was “an
interpretation of the parties’ agreement that cover[ed] the disputes at issue,” the Court held that
arbitration was required, even though the arbitrator might “subsequently agree with [the seller’s]
interpretation of the agreement.” Id. So too here, there is plainly “an interpretation” of Section
3.05 that “covers” the issues raised by Alstom in its Dispute Notice. Id. It follows that they
must be submitted in the first instance to the IAF, even if the IAF might “subsequently agree”
with GE that the items cannot be resolved by reliance on the TAPs alone, and require
consideration of the Agreement’s representations and warranties. Id.
This last point underscores an important limitation to the Court’s holdings. Under
Section 3.05, the IAF is bound to decide any disputed items “as an expert” and in accordance
with the TAPs. (See Agmt. §§ 3.05, 3.07). In holding that the disputed items must be submitted
to the IAF in the first instance, the Court does not reach, let alone answer, the question of
whether the disputed items can be resolved on those bases alone. GE is free to argue in its
submissions to the IAF, as it does here (GE Opp’n 1-3, 20-21), that Alstom’s arguments rely on
more than mere accounting and the TAPs. Moreover, any decision by the IAF on that score is
thereafter subject to review for “manifest error or gross negligence.” (Agmt. § 3.05(e)). In other
words, borrowing from the Second Circuit’s warning in XL Capital, the Court “caution[s] that
[its] conclusion . . . is not a back door permitting” non-accounting issues “to be brought before”
the IAF, and notes that disputes may well remain for the ICC to decide even after the IAF
“resolves the issues before it.” 145 F. App’x at 385-86. But these are arguments that GE must

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make in the first instance to the IAF, not to this Court or to the ICC. 2
CONCLUSION
In short, given the language of the Agreement and the undisputed facts, the Court
concludes that the parties’ disputes must be submitted in the first instance to the IAF, not the
ICC. See 9 U.S.C. § 4 (“[U]pon being satisfied that the making of the agreement for arbitration
or the failure to comply therewith is not in issue, the court shall make an order directing the
parties to proceed to arbitration in accordance with the terms of the agreement.” (emphasis
added)); see also Severstal U.S. Holdings, LLC v. RG Steel, LLC, 865 F. Sup. 2d 430, 438
(S.D.N.Y. 2012) (noting there is “no place for the exercise of discretion by a district court” in
enforcing this mandatory remedy). Accordingly, Alstom’s motion for summary judgment and to
compel submission to the IAF is GRANTED, and GE’s cross-motions — which, in one way or
another, seek to compel arbitration before the ICC — are DENIED. 3
One final question remains: whether the Court should enter judgment and close the case

2

Similarly, any argument that Alstom’s Dispute Notice was insufficiently detailed to
trigger the purchase price adjustment dispute-resolution process under Section 3.05 must be
made to the IAF in the first instance. See, e.g., SOHC, Inc. v. Zentis Sweet Ovations Holding
LLC, No. 14-CV-2270 (JMF), 2014 WL 5643683, at *3 (S.D.N.Y. Nov. 4, 2014) (noting that
procedural disputes over preconditions to an arbitration are for the arbitrator to decide).
Additionally, Alstom’s motion, on consent, for leave to file certain exhibits under seal or
in redacted form is GRANTED. (Docket Nos. 21 (“Pl.’s Req. to Seal”) & 23; see also Docket
No. 24 (sealing certain materials temporarily)). The information the parties seek to keep
confidential reflects their substantive positions as to the underlying accounting dispute that is to
be decided by the IAF, not by this Court. In light of that, the Court agrees with Alstom that the
material is not subject to the presumption in favor of public access — or, if it is, that the
presumption in favor of access is weak. See, e.g., Lugosch v. Pyramid Co. of Onondaga, 435
F.3d 110, 119-20 (2d Cir. 2006). Moreover, the parties’ proposed redactions are limited to
“confidential and commercially sensitive information regarding the rail-signaling business” (Pl.’s
Req. to Seal at 3), the disclosure of which would potentially harm both parties. See, e.g., SOHC,
2014 WL 5643683, at *5 (granting a similar request).
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3

or stay proceedings pending arbitration before the IAF. Section 3 of the Federal Arbitration Act
requires a district court to stay proceedings where an issue before it requires arbitration, see 9
U.S.C. § 3, but a district court has discretion to dismiss, rather than stay, an action where, as
here, all of the issues in the case must be arbitrated, see Salim Oleochemicals v. M/V Shropshire,
278 F.3d 90, 92-93 (2d Cir. 2002). The Second Circuit has urged district courts to be “be
mindful of the fact that a dismissal is appealable whereas a granting of a stay is not, and
‘[u]nnecessary delay of the arbital process through appellate review is disfavored.’” HBC
Solutions, 2014 WL 6982921, at *9 (quoting Salim Oleochemicals, 278 F.3d at 93). The Court
will therefore stay the proceedings pending arbitration of Alstom’s claims by the IAF.
The Clerk of Court is directed to terminate Docket Nos. 26, 38, 48, and 62. Further, as
there is no reason to keep the case open pending the arbitration, the Clerk is directed to
administratively close the case without prejudice to either party moving by letter motion to
reopen the case within thirty days of the conclusion of the arbitration proceedings.

SO ORDERED.
Dated: January 10, 2017
New York, New York

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