National Aerotech Aviation, Inc. v. Seaborne Virgin Islands, Inc.

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JULY 19, 2010
No. 10-10927 JOHN LEY
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 09-CV-3252-RLV
NATIONAL AEROTECH AVIATION, INC.,
Petitioner-Appellant,
versus
SEABORNE VIRGIN ISLANDS, INC.,
d.b.a. Seaborne Airlines,
Respondent-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(July 19, 2010)
Before TJOFLAT, PRYOR and FAY, Circuit Judges.
PER CURIAM:
National Aerotech Aviation appeals the summary judgment that confirmed
an arbitration award of damages to Seaborne Virgin Islands. Seaborne contracted
with Aerotech to repair an airplane, and after Aerotech failed timely to complete
those repairs, Seaborne sought and an arbitrator awarded damages against
Aerotech. Aerotech argues that the district court “improperly and erroneously
weighed the material facts” in determining whether the arbitrator acted in
“manifest disregard of the law,” Ga. Code Ann. § 9-9-13(b)(5), and Aerotech
argues, for the first time on appeal, that the district court terminated discovery
prematurely. We affirm.
The contract between Seaborne and Aerotech provided that Aerotech would
return or “redeliver” the airplane to Seaborne by January 15, 2008, and the contract
provided increased payments for an early delivery and compensation for a late one.
Article 4.7 stated, “The parties agree that if redelivery of the Aircraft does not
occur on or before the Redelivery Date, payments made by Seaborne to [Aerotech]
prior to the Redelivery Date shall constitute full and final settlement of all claims
by either Party arising from this contract or related to the Aircraft in any other
way.” Article 6.1 provided, “For each day before the Redelivery Date that
[Aerotech] redelivers the Aircraft, Seaborne shall pay [Aerotech] $9,780.00 above
and beyond the Contract Price.” In the event of an untimely return of the airplane,
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Article 6.2 provided that “each day after the Redelivery Date that [Aerotech] fails
to redeliver the Aircraft, [Aerotech] shall pay Seaborne $8,500.00.” The contract
also provided that it was to be “governed by and construed in accordance with the
laws of the State of Georgia” and any dispute was to be resolved by arbitration.
Seaborne and Aerotech later executed an addendum to the contract, which retained
the same redelivery date but provided that the parties “agree that no penalty or
incentive payments under Article 6 (“Performance Incentives”) shall accrue” if
Aerotech “redelivers the Aircraft on or before February 8, 2008.”
After Seaborne received the airplane from Aerotech on April 17, 2008,
Seaborne sought to recover damages from Aerotech under Article 6.2 of the
contract, and the companies submitted their dispute to arbitration. Aerotech argued
that Seaborne was “barred from seeking liquidated damages” under Article 6.2
“because its exclusive remedy [was] the payments made” to Aerotech, as provided
in Article 4.7. Seaborne referred to Article 6.2 as a “liquidated damages” provision
and argued that Article 6.2 satisfied the “conditions for allowable damages under
Georgia law.” Aerotech responded that Article 6.2 provided an “inaccurate
measure of [Seaborne’s] alleged damages,” and Aerotech argued that Seaborne had
not “suffered any economic damages.”
The arbitrator ruled that Seaborne was entitled to recover damages from
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Aerotech. “Reading the contract as a whole” to determine the intentions of the
parties as required by “Georgia law,” the arbitrator concluded that “the dominant
purpose of the contract was to perform maintenance, repairs, and overhaul of” the
airplane “so as to return it to revenue service by the Redelivery Date” and the
parties had incorporated “[i]ncentives . . . to carry out [that] purpose.” The
arbitrator also ruled that the failure of Aerotech to “complete work” on the airplane
“by the Redelivery Date authorizes assessment of negative incentives pursuant to
Article 6” of the October 2007 addendum to the contract. The arbitrator found that
Aerotech exceeded the redelivery date by 54 days, which resulted in a “total
negative incentive” of $459,000. The arbitrator reduced the total negative
incentive by amounts owed by Seaborne to calculate a “total amount due” by
Aerotech of $335,453.37.
Aerotech petitioned the district court to vacate the arbitration award and
argued that the arbitrator acted in manifest disregard of Georgia law by interpreting
Article 6.2 as a liquidated damages provision. Seaborne counter-petitioned to
enforce the award and later moved for summary judgment. Aerotech filed a
preliminary report and discovery plan, which the district court approved. Aerotech
later moved for partial summary judgment regarding its interpretation of Article
6.2.
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The district court granted summary judgment in favor of Seaborne and
confirmed the arbitration award. The district court ruled that the arbitrator had
“clearly considered Georgia law with respect to penalty clauses and liquidated
damages” and had “determined that the performance incentives negotiated by the
two sophisticated corporations . . . were not penalties but were in the nature of
liquidated damages.” The district court ruled that the arbitrator had “not ignore[d]
Georgia law” in its decision.
Our review of a summary judgment seeking vacatur of an arbitration award
“‘is plenary, and we apply the same legal standards that bound the district court.’”
Bruno’s, Inc. v. United Food & Commercial Workers Int’l Union, Local 1657, 858
F.2d 1529, 1531 (11th Cir. 1988) (quoting Am. Ass’n of Christian Sch. v. United
States, 850 F.2d 1510, 1513 (11th Cir. 1988)). Under the Georgia Arbitration
Code, which the district court applied, “judicial review of an arbitration award is
limited.” Airtab, Inc. v. Limbach Co., LLC, 295 Ga. App. 720, 720, 673 S.E.2d
69, 71 (2009).
An arbitration award in Georgia may be vacated in only five narrowly
defined circumstances, one of which is “the arbitrator’s manifest disregard of the
law.” Ga. Code Ann. § 9-9-13(b)(5). As its wording suggests, a “manifest
disregard of the law” involves more than a “‘misapplication of the law to the
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facts,’” Airtab, 295 Ga. App. at 722, 673 S.E.2d at 72 (quoting Johnson Real Estate
Invs. v. Aqua Indus., 282 Ga. App. 638, 640, 639 S.E.2d 589, 593 (2006)), or even
an “incorrect interpret[ation of] the law,” BMW Bank of N. Am. v. Short, 300 Ga.
App. 430, 431, 685 S.E.2d 390, 391 (2009). To warrant relief, the party contesting
the award must produce evidence that the arbitrator knew of and “deliberately
ignore[d] applicable law.” Id.; Airtab, 295 Ga. App. at 722, 673 S.E.2d at 72; see
also O.R. Sec., Inc. v. Prof’l Planning Assocs., Inc., 857 F.2d 742, 747 (11th Cir.
1988) (applying same test under the Federal Arbitration Act).
Aerotech argues that the district court “improperly weighed” evidence that
the arbitrator disregarded Georgia law by “characteriz[ing] Article 6.2 as a
‘negative incentive’” and enforcing it as a liquidated damages provision instead of
as an unenforceable penalty, but we disagree. Article 6 of the contract is titled
“Performance Incentives.” The arbitrator reasonably construed Article 6.2 as a
liquidated damages provision.
Aerotech offered no evidence that the arbitrator deliberately ignored the law.
Georgia law provides that parties may agree to liquidated damages in their
contracts, see Ga. Code Ann. §§ 13-6-1, 13-6-7, and require the payment of daily
amounts to compensate an aggrieved party, Joyce’s Submarine Sandwiches, Inc. v.
Cal. Public Emps. Ret. Sys., 195 Ga. App. 748, 749–50, 395 S.E.2d 257, 258–60
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(1990) (clause in lease agreement requiring $50 payment each day lessee remained
closed provided liquidated damages instead of a penalty). The district court did
not err in granting summary judgment in favor of Seaborne.
The belated argument of Aerotech that the district court should have
“allow[ed] discovery to proceed according to” an order entered after Seaborne
moved for summary judgment also fails. “District judges are accorded wide
discretion in ruling upon discovery motions, and appellate review is accordingly
deferential.” Harris v. Chapman, 97 F.3d 499, 506 (11th Cir. 1996). Aerotech
stated in its request for discovery its belief “that limited discovery . . . may be
needed,” but Aerotech never argued in the district court, nor does it argue in this
Court, that additional evidence was required to adjudicate this controversy. The
district court did not abuse its discretion.
We AFFIRM the summary judgment that confirmed the arbitration award in
favor of Seaborne.
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