In addition to awarding monetary damages against the defendants, the arbitration panel ordered that the defendants be divested of their shares in the plaintiff corporation. The defendants sought to vacate the award, arguing that the panel was improperly constituted and the award included speculative or punitive damages, rendering it unenforceable (among other reasons). The trial court’s judgment confirming the arbitration award was affirmed.
As to the argument that the panel was improperly constituted, the plaintiffs appointed five arbitrators and the defendants appointed two. The defendants argued that the method of selection was against the terms of the contract, which required an equal number of appointed arbitrators per side. While the court agreed that if the selection of the arbitration panel fundamentally departed from the contract’s selection process, the award should be vacated. However, the court found that there was no such departure here, as the contract’s selection process contemplated the number of parties, not the number of sides. Here there were seven parties and seven arbitrators.
As to the argument that the award included speculative or punitive damages, the court found that, while the panel did not have the authority to issue punitive damages per the parties’ agreement, it did possess powers to grant court-enforceable injunctive relief. Divesting the defendants of their shares in the plaintiff corporation “operates to achieve what the panel considered a fair result” to compensate the parties financially and achieve a just outcome, which “is precisely a matter of equity” and therefore distinguishable from punitive damages.
Soaring Wind Energy, LLC v. Catic USA Inc., No. 18-11192 (5th Cir. Jan. 7, 2020).