Telecom Business Solution, LLC v. Terra Towers Corp.

Background

Telecom Business Solution, LLC, LATAM Towers, LLC, and AMLQ Holdings (Cay) Ltd. asked the court to confirm a First Partial Final Award issued by a three-arbitrator panel. Terra Towers Corp., TBS Management, S.A., and DT Holdings, Inc. opposed confirmation and cross-petitioned to vacate the award. The respondents also sought to vacate two interim orders issued during the arbitration and later moved to amend their challenge to add an argument concerning the panel’s chairman.

The dispute arose from a 2015 shareholders’ agreement concerning Continental Towers LATAM Holdings, Ltd., a telecommunications-tower business. The agreement gave the petitioners, after a five-year lock-up period, the ability to initiate a sale of the company through a specified process. The agreement also stated that the parties were entitled to specific performance of its terms. After the petitioners attempted to initiate a sale, Terra rejected the proposed transaction and sought instead to buy the petitioners’ shares.

The petitioners began arbitration, alleging that Terra had breached the shareholders’ agreement by obstructing the proposed sale. In a February 24, 2022 First Partial Final Award, the panel found a breach of the forced-sale provision and ordered specific performance requiring a sale of the company. During the arbitration, the panel also issued a November 12, 2021 interim order requiring restoration of the company’s management team and a March 15, 2022 interim order requiring corrective statements after finding that the respondents had not complied with the earlier order.

Respondents’ challenges to the final award

The court explained that review of an arbitration award is very limited. Under the Federal Arbitration Act, an award may be vacated for specified reasons, including corruption or fraud, evident partiality by an arbitrator, serious misconduct concerning the hearing or evidence, or the arbitrators’ exceeding their authority. The court also discussed the narrow doctrine of “manifest disregard of the law,” which requires more than a legal mistake.

The respondents argued that the panel denied them a fair opportunity to be heard by using a phased process and refusing discovery during the first phase. The court rejected that argument. It held that the panel had broad discretion to structure the arbitration and that the respondents had received extensive briefing, evidence, and hearing time. The respondents also did not identify a specific category of discovery necessary to decide the first-phase issue.

The respondents argued that the panel manifestly disregarded New York law by ordering specific performance. The court rejected that argument because the panel expressly considered the shareholders’ agreement, the arbitration rules, and New York specific-performance law. The panel concluded that the agreement authorized the remedy and that the petitioners had satisfied the applicable requirements.

The respondents also alleged evident partiality involving the respondents’ appointed arbitrator and the panel chairman. The court noted that the International Centre for Dispute Resolution had already reviewed and rejected the challenges, and that the arbitration rules made those decisions conclusive. The court further held that, even apart from those decisions, the respondents had not shown actual bias or objective facts inconsistent with impartiality. The proposed amendment concerning the chairman therefore would have been futile.

Interim orders and disposition

The court held that it could not review the November 12 and March 15 orders because they were expressly interim, contemplated further proceedings, and did not finally resolve the issues submitted to the arbitrators. The court added that, even if review had been available, it would have denied the request to vacate those orders. It concluded that the panel had authority to issue the orders and that the respondents had received a fundamentally fair opportunity to address alleged noncompliance.

Judge Kaplan granted the petition to confirm the First Partial Final Award. He denied the respondents’ cross-petition to vacate the First Partial Final Award, the November 12 interim order, and the March 15 interim order. He also denied the respondents’ motion to amend their cross-petition to vacate as futile, and directed the clerk to enter judgment.