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The University of Notre Dame (USA) In England v. TJAC Waterloo, LLC

United States Court of Appeals, First Circuit

June 28, 2017



          John W. DiNicola, II, with whom DiNicola, Seligson & Upton, LLP was on brief, for appellant TJAC Waterloo, LLC.

          Richard Briansky, with whom Amy B. Hackett and McCarter & English, LLP were on brief, for appellant ZVI Construction Co., LLC.

          John A. Tarantino, with whom Nicole J. Benjamin, Adler Pollock & Sheehan P.C., Michael J. McMahon, and Cooley LLP were on brief, for appellee.

          Before Lynch, Circuit Judge, Souter, Associate Justice, [*] and Baldock, Circuit Judge.[**]

          SOUTER, Associate Justice.

         This is an appeal from the district court's judicial recognition of an English arbitrator's determination of joint contract liability against the seller and the renovator of a building. As the parties had agreed, the assessment of damages for the items of breach was postponed to a subsequent stage of arbitration. Owing to that agreement to bifurcate litigation of the liability and damages issues, the district court treated the arbitrator's liability judgment as final and thus entitled to judicial recognition, and it specifically held the contractor for the renovation work bound as a party to the agreement providing for arbitration of disputes. In this review of the district court's determinations of finality and party-status we affirm.


         The University of Notre Dame (USA) in England agreed to buy an English building from TJAC Waterloo, LLC, for $58, 833, 700, once the structure had been renovated and converted into a student dormitory by TJAC's associated corporation, ZVI Construction Co., LLC. The purchase and sale agreement between Notre Dame and TJAC addressed both the conveyance and the reconstruction to be performed by ZVI, there referred to as the contractor, which also executed the P&S Agreement by the same agent who signed for TJAC. So far as it concerns us here, the P&S Agreement provided that in case the parties could not resolve any dispute that might arise (except over the meaning and construction of the agreement itself), either buyer or seller could refer the disagreement for adjudication by an "expert, " who in American usage would be called an arbitrator. Despite a rosy projection of satisfaction by Notre Dame's own consultant after the work was finished, Notre Dame subsequently identified a number of inadequacies claimed to add up to $8, 500, 000 in necessary remedial work.

         Since the parties could not resolve their differences, at Notre Dame's behest the breach of contract claims were submitted to an arbitrator as provided in the P&S Agreement, subject to a further agreement by the three parties to the P&S Agreement to try the liability elements of the breach claims first and separately litigate the issues of "quantum" or damages for any items of breach the arbitrator might find at the liability stage. The three parties proceeded to try the liability claims, and in due course the arbitrator circulated a report of his preliminary conclusions, which he invited the parties to comment upon. After considering the responses, he issued a "determination, " or judgment, that TJAC and ZVI were jointly liable to Notre Dame, based on findings of substantial shortcomings in the required renovation.

         After Notre Dame circulated its opening submission in the subsequent damages phase, TJAC and ZVI asked for a postponement of litigation due to the ill health of someone involved on their side. This led Notre Dame to ask for a showing that the two corporations would be in a position to satisfy the award of damages that the arbitrator would at some point decree. The liable parties were not reassuring and refused to confirm that the liability insurance required by the P&S Agreement remained in effect. Notre Dame responded by filing suit in a Massachusetts state court for an order enjoining TJAC and ZVI from dissipating, encumbering, or transferring assets that might be needed for payment of any judgment for damages. After TJAC and ZVI removed the case to the federal district court under the statute implementing the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (ratified by the United States on Sept. 30, 1970), see 9 U.S.C. § 205, Notre Dame supplemented its claim for judgment security by requesting judicial confirmation of the arbitrator's determination on liability, for which the Convention made provision, see 9 U.S.C. § 207; Convention arts. III, V.

         The district court granted confirmation under the terms of the Convention and authorized attachment of property in the amount of just over $7 million as security for the anticipated award of damages. Univ. of Notre Dame (USA) in Eng. v. TJAC Waterloo, LLC, No. 16-cv-10150-ADB, 2016 WL 1384777 (D. Mass. Apr. 17, 2016). In this ensuing appeal, TJAC and ZVI claim that the arbitrator's judgment of liability in the bifurcated arbitration proceeding lacks the finality required for judicial confirmation of a foreign arbitral award under 9 U.S.C. § 207. And ZVI claims that in any event it is not subject to that judgment because the P&S Agreement's arbitration clause was a submission to arbitration by Notre Dame and TJAC only.


         The issue of the eligibility of the arbitrator's liability decree for judicial confirmation under the terms of the Convention encompasses both legal and factual components: the rule stating the necessary condition for judicial cognizance and the sufficiency of the record to show that the standard is satisfied by the arbitrator's liability judgment at this point in the present case. So far as relevant here, the parties address the legal standard at two levels of specificity, and at the more general of the two, they have no apparent disagreement. Although judicial construction of the Federal Arbitration Act has produced the requirement for judicial recognition that a decree be "final, " see El Mundo Broad. Corp.v.United Steelworkers of Am., AFL-CIO CLC, 116 F.3d 7, 9 (1st Cir. 1997), and the Convention textually requires that it be "binding, " see Convention art. V(1)(e), both parties treat these as conceptually indistinguishable standards. In so assuming, they are in harmony with cases from outside this circuit that have addressed the Convention standard for judicial confirmation with the domestic law vocabulary. See Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iranv.Cubic Def. Sys., Inc., 665 F.3d 1091, 1100 (9th Cir. 2011) ("Th[e not-binding] defense [in the Convention's Article V(1)(e)] may be invoked when an action to confirm or enforce an arbitration award is filed before the award has become final."); Ecopetrol S.A.v.Offshore Expl. & Prod. LLC, 46 F.Supp.3d 327, 336 (S.D.N.Y. 2014) (referring interchangeably to the Convention's condition that an award must be "binding" and a requirement that the award be "final"); Daum Glob. Holdings Corp.v.Ybrant Digital Ltd., No. 13 Civ. 03135 (AJN), 2014 WL 896716, at *2 (S.D.N.Y. Feb. 20, 2014) (citing as an "example" of a foreign award that "is not binding on the parties" one "that is interim, not final" (internal quotation marks omitted)). We see no reason to doubt the parties' common understanding at this general level and ...

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