Telecom Business Solution, LLC v. Terra Towers Corp.

Background

Telecom Business Solution, LLC and LATAM Towers, LLC, together called “Peppertree,” and AMLQ Holdings (Cay) Ltd. asked the court to confirm a Third Partial Final Award issued by a three-arbitrator panel. Terra Towers Corp. and TBS Management, S.A., together called “Terra,” and DT Holdings, Inc. asked the court to vacate, meaning set aside, that award.

The award required the respondents to cause the termination of two foreign arbitrations involving claims that substantially duplicated counterclaims already stayed in the New York arbitration. It also required the respondents to prevent similar proceedings, pay specified fees and expenses, indemnify the petitioners and the Company for certain resulting losses, and make escrow deposits under specified conditions. The award stated that the respondents would have to deposit $41,416,371.17 if they failed to meet certain termination and notice requirements, and could require additional deposits if similar proceedings were filed.

The petitioners later told the court that the Guatemala arbitration had issued an injunction that allegedly conflicted with the court’s January 18, 2023 judgment. They then sought expedited consideration of their request to confirm the award.

Legal standard

The court explained that review of an arbitration award is extremely limited. An award generally must be confirmed if there is at least a minimally reasonable basis for the arbitrators’ result, even if the court would have decided the merits differently. Under the Federal Arbitration Act, a court may set aside an award on specific grounds, including fraud, arbitrator misconduct that prejudiced a party, the arbitrators’ exceeding their authority, or evident partiality. A court may also consider the narrow doctrine of “manifest disregard of the law,” which requires more than a legal error or misunderstanding.

Respondents’ challenges

Respondents first argued that the arbitrators manifestly disregarded the law by using a burden-shifting framework for a mandatory injunction. The court rejected that argument, holding that the tribunal was permitted to use that framework and that the circumstances did not involve the kind of extreme legal error required for setting aside an award on this basis.

Respondents next argued that they were denied a full and fair opportunity to be heard. The court disagreed. It noted that respondents had submitted more than 80 pages of briefing, more than 1,300 pages of exhibits, and participated in a hearing lasting approximately three hours. The court found that respondents had not identified evidence they were prevented from presenting or shown misconduct that made the arbitration fundamentally unfair.

Respondents also argued that the tribunal exceeded its authority. The court found that the Shareholders Agreement and the Company’s other governing documents gave the tribunal broad authority over disputes connected to the agreement. The agreement and the arbitration rules also authorized specific performance and injunctive relief. The court declined to credit factual assertions that conflicted with the tribunal’s unanimous findings, including its finding that respondents had supported the foreign arbitrations and that the foreign proceedings breached the agreement’s implied duty of good faith and fair dealing. The court concluded that vacatur was not warranted on this ground.

Finally, respondents argued that the tribunal was evidently partial. The court relied on the parties’ agreement to follow the arbitration rules, including a rule stating that certain decisions by the International Centre for Dispute Resolution would be conclusive. The court also stated that, even if it reviewed the bias arguments independently, respondents had not identified objective facts requiring a conclusion that the tribunal was partial.

Ruling

Judge Lewis A. Kaplan granted the petitioners’ petition to confirm the Third Partial Final Award and denied the respondents’ cross-petition to vacate it. The court directed the Clerk to enter judgment accordingly.