Spirit of the East, LLC v. Yale Products, Inc., et al

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-13122
Non-Argument Calendar
____________________
SPIRIT OF THE EAST, LLC,
a Florida limited liability company,
Plaintiff-Appellant,
versus
YALE PRODUCTS, INC.,
a Florida for-profit corporation,
ALAN LEIGH,
an individual,
Defendants-Appellees.
____________________
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2 Opinion of the Court 22-13122
Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 0:22-cv-60991-FAM
____________________
Before N EWSOM , BRANCH, and G RANT, Circuit Judges.
PER CURIAM:
This case is about the sale of a boat that went awry. One
party thought the sale had successfully closed, but the other denied
the sale ever took place. An arbitrator concluded that the sale
occurred, and the district court granted a motion to confirm the
arbitrator’s award and denied a motion to vacate the award. After
careful review, we affirm the district court because the arbitrator
did not exceed the scope of his authority when (1) interpreting the
contract or (2) awarding relief.
I. Background
In April 2021, Spirit of the East, LLC (“Spirit”) and Yale
Products, Inc. (“Yale”) entered into a written purchase agreement
for a custom-built, Aegean yacht. Ian Prider, the managing
member of Spirit, negotiated with Alan Leigh, the sole officer and
shareholder of Yale, to fashion the contract’s terms. Spirit
ultimately agreed to purchase the vessel, named “Spirit of the
East,” from Yale for $220,000.
The parties’ purchase agreement provided that “[t]he Seller
warrants . . . that the Seller has good and marketable title to the
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22-13122 Opinion of the Court 3
Vessel . . . and the lawful right to sell the Vessel” and “will deliver
to the Buyer . . . all documents necessary to transfer title to the
Vessel . . . and to enable the Buyer to document or register the
Vessel.” According to the agreement, “[t]he sale shall be deemed
closed when: (a) the Buyer has paid the full purchase price . . . to
the Selling Broker’s escrow account” and “(b) the Buyer or the
Selling Broker has received the title documents from the Seller,
properly executed for transfer and delivery to the Buyer.”
The purchase agreement also included an arbitration clause,
which stated:
The parties shall refer to arbitration any dispute
relating to this Agreement, including, but not limited
to, its interpretation, breach, or existence. . . . The
arbitration award shall bind the parties. . . .
Arbitration shall be the sole and exclusive forum for
resolving any dispute relating to this Agreement and
neither party may resort to any court except to
compel arbitration, refer questions of law, or confirm,
vacate, modify, or enforce the arbitration award.
On May 6, 2021, the parties signed and notarized documents
related to the vessel, and Prider inspected the vessel and discovered
that it (1) did not have a name on either of its sides; (2) did not have
a name on its stern; (3) could not be identified by a name on its
exterior; (4) did not have a hull number on either side; and (5) had
suffered recent damage to its starboard side. Shortly after his
inspection, Prider informed the escrow agent and Leigh that he
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4 Opinion of the Court 22-13122
wished to terminate the contract. Leigh insisted that the closing
had already occurred based on the documents they had signed and
notarized earlier that day and demanded that Spirit release the
purchase funds to Yale. In response, Spirit filed a petition for
arbitration to sort out the dispute.
After a two-day hearing and consideration of the parties’ oral
testimony, briefs, and other written documents, an arbitrator
issued a final award in favor of Yale. The arbitrator explained that
the parties’ dispute dealt with “whether a sale [of the vessel] had or
had not occurred, whether there [were] grounds for recission of the
transaction, and who [was] entitled to the $220,000 purchase price
which [was] being held in escrow.” Spirit argued that no sale had
occurred, that Yale acted fraudulently, and that the sale of the
vessel would constitute a crime under Florida law because the
vessel did not have a Hull Identification Number (“HIN”) on its
stern and was not properly documented or registered. Yale argued
that “a closing was held on board the vessel . . . on May 6, 2021 at
which all of the closing documents were executed by both parties
before a notary public”; that “the issue of registration or
documentation does not affect whether or not a sale occurred”;
that Spirit “can apply for registration and a HIN number pursuant
to Florida law”; and that “no HIN number was required because
the vessel . . . was built abroad and classified as a commercial
vessel.”
In its final award, the arbitrator found that “a closing did
occur on May 6, 2021,” and that “none of the issues raised by
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22-13122 Opinion of the Court 5
[Spirit] prevented a sale of the vessel from closing.” Specifically,
the arbitrator explained:
The fact that the vessel was not documented or
registered did not prevent it from being sold. A vessel
is “goods” under the Florida Uniform Commercial
Code (UCC). Under the UCC ownership passes after
a sale. The UCC does not permit repudiation of a sale
under the circumstances of this case. No HIN was
required because the vessel was foreign built and
classified as a commercial vessel. Under Florida law
a HIN number can be obtained by [Spirit]. . . . [The]
sale [of the vessel] was confirmed by order of [a] U.S.
District Court. The erroneous HIN on the bill of sale
does not prevent a sale because the vessel is identified
by name and manufacturer’s official number. There
was insufficient evidence to establish that there is no
way under Florida law to correct the presence of the
erroneous HIN number in the bill of sale. No Florida
statute or regulation was so cited. . . . Even if it is a
misdemeanor under Florida law to “transfer” a vessel
that was not registered or documented it would not
prevent that transfer by sale from occurring. Without
such a transfer there could be no misdemeanor.
In light of his decision “in favor of [Yale] and against [Spirit],” the
arbitrator ordered the escrow agent “to release the $220,000
purchase price that he [was] holding and to pay that sum to [Yale].”
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The arbitrator also awarded Yale reasonable legal fees as the
prevailing party and ordered Spirit to pay the fees and expenses of
arbitration.
Spirit then filed a motion to vacate the arbitration award in
district court, and Yale subsequently filed a motion to confirm the
arbitration award. The district court granted Yale’s motion to
confirm the arbitration award and denied Spirit’s motion to vacate,
concluding that “Spirit has not shown that any of the exclusive
statutory bases for vacating or modifying an arbitration award
[were] present” in the case.
Spirit timely appealed.
II. Standard of Review
When reviewing an appeal from an order confirming an
arbitration award or denying a motion to vacate an arbitration
award, we review the district court’s legal conclusions
de novo and
its factual findings for clear error.
Frazier v. CitiFinancial Corp.,
LLC, 604 F.3d 1313, 1321 (11th Cir. 2010). “Because arbitration is
an alternative to litigation, judicial review of arbitration decisions
is among the narrowest known to the law.”
AIG Baker Sterling
Heights, LLC v. Am. Multi-Cinema, Inc., 508 F.3d 995, 1001 (11th
Cir. 2007) (quotation omitted). Indeed, there “is a presumption
under the [Federal Arbitration Act (“FAA”)] that arbitration awards
will be confirmed, and ‘federal courts should defer to an arbitrator’s
decision whenever possible.’”
Frazier, 604 F.3d at 1321 (quoting
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22-13122 Opinion of the Court 7
B.L. Harbert Int’l, LLC v. Hercules Steel Co., 441 F.3d 905, 909
(11th Cir. 2006)).
III. Discussion
a. Whether the arbitrator exceeded his authority when
interpreting the parties’ contract
First, Spirit argues that the arbitrator “acted outside the
scope allowed in the [c]ontract and overstepped his authority by
consummating and mandating a crime” and by “ordering Spirit [to]
commit . . . criminal acts.” We disagree.
The FAA gives federal courts limited authority to vacate or
modify arbitration awards.1
Gherardi v. Citigroup Glob. Mkts.
Inc., 975 F.3d 1232, 1236 (11th Cir. 2020). Section 10 of the FAA
enumerates the four circumstances in which vacatur is allowed.2 9
1 9 U.S.C. § 11 governs modification, which is not relevant here.
2 In full, § 10 provides that vacatur is permitted:
(1) where the award was procured by corruption, fraud, or
undue means;
(2) where there was evident partiality or corruption in the
arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing
to postpone the hearing, upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the
controversy; or of any other misbehavior by which the rights
of any party have been prejudiced; or
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8 Opinion of the Court 22-13122
U.S.C. § 10(a)(1)–(4). Both the Supreme Court and this Court have
emphasized that these four statutory bases are the exclusive
grounds for vacatur.
Hall St. Assocs., L.L.C. v. Mattel, Inc., 552
U.S. 576, 584 (2008);
Frazier, 604 F.3d at 1324;
Johnson v. Directory
Assistants Inc., 797 F.3d 1294, 1299 (11th Cir. 2015) (“[T]he grounds
for vacatur listed in § 10(a) are exclusive.”). Because Spirit invokes
the fourth statutory basis as the ground for vacatur, only § 10(a)(4)
is at issue in this case. Section 10(a)(4) provides that a court may
vacate an award “where the arbitrators exceeded their powers, or
so imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.” 9 U.S.C.
§ 10(a)(4).
The Supreme Court has interpreted § 10(a)(4)’s language
“very narrowly.”
Gherardi, 975 F.3d at 1237. A party seeking relief
under this provision “bears a heavy burden”; “[i]t is not enough . . .
to show that the arbitrator committed an error—or even a serious
error.”
Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 (2013)
(alteration adopted) (quotation omitted). “Because the parties
bargained for the arbitrator’s construction of their agreement, an
arbitral decision even arguably construing or applying the contract
must stand, regardless of a court’s view of its (de)merits.”
Id.
(4) where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.
9 U.S.C. § 10(a).
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22-13122 Opinion of the Court 9
(quotations omitted);
see Stolt-Nielsen S.A. v. AnimalFeeds Int’l
Corp., 559 U.S. 662, 682 (2010) (“[A]n arbitrator derives his or her
powers from the parties’ agreement to forgo the legal process and
submit their disputes to private dispute resolution.”). Accordingly,
the “sole question for us is whether the arbitrator (even arguably)
interpreted the parties’ contract, not whether he got its meaning
right or wrong.”
Sutter, 569 U.S. at 569.
To answer this question, and to determine whether a court
may vacate an arbitration award because it “exceeds the scope of
the arbitrator’s authority,” “two principles guide us.”
Wiregrass
Metal Trades Council AFL-CIO v. Shaw Env’t & Infrastructure,
Inc., 837 F.3d 1083, 1087 (11th Cir. 2016) (quotation omitted);
id. at
1088 (explaining that these two principles “define the scope of the
arbitrator’s authority”). First, “we must defer entirely to the
arbitrator’s interpretation of the underlying contract no matter
how wrong we think that interpretation is.”
Id. at 1087. And
second, “an arbitrator may not ignore the plain language of the
contract.”
Id. at 1088 (quotations omitted).
Spirit argues that the arbitrator exceeded his authority by
mandating a criminal act. Specifically, Spirit argues that because
the vessel lacked a HIN, certificate of title, and proper bill of sale—
which Spirit contends are all required to “transfer a vessel” under
Florida law—the arbitrator’s award “enforced [a] criminal closing
on the [v]essel” and “therefore ordered numerous criminal acts.”
Spirit presented these same arguments to the arbitrator. But
after considering Spirit’s arguments—and Yale’s arguments to the
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10 Opinion of the Court 22-13122
contrary—the arbitrator ultimately found that a closing occurred
on May 6, 2021, and that “none of the issues raised by [Spirit]
prevented a sale of the vessel from closing.”
Spirit’s argument boils down to a disagreement with the
arbitrator’s conclusion that a closing occurred and with how the
arbitrator interpreted and applied Florida law to the transaction. In
other words, Spirit disagrees with the arbitrator’s legal conclusions.
But “the FAA does not empower us to review . . . allegations of
legal error.”
White Springs Agric. Chems., Inc. v. Glawson Invs.
Corp., 660 F.3d 1277, 1281 (11th Cir. 2011) (citing
Frazier, 604 F.3d
at 1323–24). Indeed, when considering vacatur under § 10(a)(4), we
may not “look to the legal merits of the underlying award.”
Id. at
1283. As we have explained, “even a serious error” is not enough.
Sutter, 569 U.S. at 569 (quotation omitted). We look only to
whether the arbitrator arguably interpreted the parties’ contract—
“not whether he got its meaning right or wrong.”
Id.
Here, the arbitrator was tasked with deciding “whether a
sale had or had not occurred, whether there [were] grounds for
recission of the transaction, and who [was] entitled to the $220,000
purchase price which [was] being held in escrow.” These questions
fall within the scope of the parties’ arbitration clause—which
provides that “[t]he parties shall refer to arbitration any dispute
relating to this Agreement, including, but not limited to, its
interpretation, breach, or existence”—and thus are properly within
the arbitrator’s ambit. The arbitrator’s conclusions that a closing
occurred and that Yale should receive the $220,000 purchase price
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22-13122 Opinion of the Court 11
do not stray from the contract’s scope or its plain language.
See
Wiregrass Metal, 837 F.3d at 1087–88 (explaining that “we must
defer entirely to the arbitrator’s interpretation of the underlying
contract no matter how wrong we think that interpretation is” and
that “an arbitrator may not ignore the plain language of the
contract” (quotation omitted)). Accordingly, the arbitrator did not
exceed his authority under the contract and arguably interpreted
and applied the contract.
See Sutter, 569 U.S. at 569. And where
the arbitrator arguably construed and applied the contract, his
arbitral decision must stand.
Id.
Rather than arguing that the arbitrator exceeded his
authority by failing to “arguably constru[e] or apply[] the contract,”
id., Spirit’s arguments largely rest on public policy grounds. Spirit
argues that “[i]t is a general principle of contract law that courts
will not enforce contracts requiring the performance of an illegal
act”; that “[t]here can be no real debate that an award that
mandates a criminal act and orders further continuing criminal
activity is a violation of public policy”; and that a federal court
should not be compelled to adopt an arbitrator’s determination of
whether an act is illegal when doing so would result in the federal
court compelling illegal and criminal acts.
But Spirit’s arguments fall outside the scope of § 10(a)(4)—
the statutory basis for vacatur under which the “sole question for
us” is “whether the arbitrator (even arguably) interpreted the
parties’ contract.”
Sutter, 569 U.S. at 569. Instead, Spirit’s
arguments are aimed at seeking vacatur on grounds that we
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12 Opinion of the Court 22-13122
explicitly rejected in
Frazier v. CitiFinancial Corp., LLC.3
See 604
F.3d at 1324 (holding that “our judicially-created bases for vacatur
are no longer valid in light of
Hall Street”). Spirit attempts to
distinguish
Frazier by arguing that
Frazier “does not address the
issue of an arbitration award which mandates or condones a
criminal or illegal act or orders the performance of future criminal
acts.”4 But Spirit’s arguments—which invoke “public policy”
3 In
Frazier, when holding that our “judicially-created” bases for vacatur were
“no longer valid,” we specifically identified three non-statutory grounds for
vacatur that “our prior precedents [had] recognized”: (1) the “arbitrary and
capricious ground” permitted vacatur when the award “exhibit[ed] a
wholesale departure from the law” or “when the award [was] not grounded
in the contract which provide[d] for the arbitration”; (2) the “public policy”
ground permitted “district courts to refuse to enforce arbitration awards
where enforcement would violate some explicit public policy that [was] well
defined and dominant, and [was] to be ascertained by reference to the laws
and legal precedents and not from general considerations of supposed public
interests”; and (3) the “manifest disregard of the law” ground permitted
“district courts to vacate an award where there [was] clear evidence that the
arbitrator was conscious of the law and deliberately ignored it.” 604 F.3d at
1322 n.7, 1324 (quotations omitted).
4 In addition to attempting to distinguish
Frazier, Spirit relies on
American
Postal Workers Union v. United States Postal Service, 682 F.2d 1280, 1282 (9th
Cir. 1982), in which the Ninth Circuit held that an arbitration order was
unenforceable because it compelled the Postal Service to perform an illegal
act. As an initial matter, this out-of-circuit case is not binding on us.
Moreover, in coming to its conclusion, the Ninth Circuit reasoned that “courts
are bound to defer to the conclusions of the arbitrator unless the arbitrator has
manifestly disregarded the law.”
Id. at 1284. Considering the Supreme
Court’s more recent declaration that § 10 provides the exclusive bases for
vacatur,
Hall St. Assocs., L.L.C., 552 U.S. at 586, and our explicit rejection of
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22-13122 Opinion of the Court 13
grounds and maintain that the arbitrator’s award exhibits a
“manifest disregard of [the] law”—fall squarely within the
“judicially-created bases for vacatur” that were repudiated in
Frazier. 604 F.3d at 1322 n.7, 1324 (rejecting the “public policy”
ground and the “manifest disregard of the law” ground as
permissible bases for vacatur (quotation omitted)). Indeed, the
heart of Spirit’s argument—that the arbitrator’s award mandates a
criminal act—is essentially an argument that the arbitrator
“exhibit[ed] a wholesale departure from the law” or “was conscious
of the law and deliberately ignored it,” which are vacatur grounds
that
Frazier rejected.5
Id. (rejecting vacatur grounds based on an
“award exhibit[ing] a wholesale departure from the law” or an
award where an “arbitrator was conscious of the law and
deliberately ignored it” (quotations omitted)). Accordingly, Spirit’s
the “manifest disregard for the law” ground as a basis for vacatur,
Frazier, 604
F.3d at 1323–24, we do not find
American Postal Workers Union persuasive.
5 We have rejected this type of argument before. In
White Springs, the
appellant argued that the arbitration panel exceeded its powers by awarding
prejudgment interest because Florida law prohibited such a recovery. 660 F.3d
at 1282–83. We explained that, in essence, the appellant was arguing that “the
panel exceeded its powers by acting contrary to the law.”
Id. at 1283.
Rejecting that argument, we explained that we could not “review the panel’s
award for underlying legal error” and that “[e]ven though [the appellant]
present[ed] its argument in terms of the FAA, it ask[ed] us to do what we
[could] not—look to the legal merits of the underlying award.”
Id. So too
here. Although Spirit presents its argument in terms of the arbitrator
exceeding his authority under the contract, in reality, it is asking us to evaluate
the legal merits of the arbitrator’s decision—which we cannot do.
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arguments that we should vacate the arbitrator’s award based on
general principles of contract law or public policy fly in the face of
Frazier and fail because they are not based on a statutory ground
for vacatur under § 10 of the FAA.6
See also Hall St. Assocs.,
L.L.C., 552 U.S. at 586 (“[T]he text compels a reading of the §§ 10
and 11 categories as exclusive.”);
id. at 589 (“[T]he statutory text
gives us no business to expand the statutory grounds.”);
id. at 590
(“[Sections] 10 and 11 provide exclusive regimes for the review
provided by the statute . . . .”).
b. Whether the arbitrator exceeded his authority when
awarding relief to Yale
Second, Spirit argues that the arbitrator “exceeded his
powers” by ordering the escrow agent to release the “contract sale
money,” which totaled $220,000, to Yale. Spirit argues that Yale
never affirmatively requested this relief and thus “[t]he award
exceeded the scope of the matters before the [a]rbitrator.” We
disagree.
6 When arguing that the arbitrator acted outside the scope of his contractual
authority, Spirit focuses on the arbitrator’s finding that “[e]ven if it is a
misdemeanor under Florida law to ‘transfer’ a vessel that was not registered
or documented it would not prevent that transfer by sale from occurring.
Without such a transfer there could be no misdemeanor.” But, as we
explained, Sprit’s arguments ultimately quibble with the legal merits of the
arbitration award and the public policy implications of the arbitrator’s
decision, and it is not our role to review either.
White Springs, 660 F.3d at
1283 (explaining that we do not “look to the legal merits of the underlying
award”);
Frazier, 604 F.3d at 1322 n.7, 1324.
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An arbitrator derives his powers from the parties’
agreement.
White Springs, 660 F.3d at 1281. As such, courts look
to the “terms of the governing arbitration clause to determine” the
arbitrator’s powers.
Id. As explained above, to vacate an award
under § 10(a)(4), we look only to whether the arbitrator arguably
interpreted the parties’ contract—“not whether he got its meaning
right or wrong.”
Sutter, 569 U.S. at 569. Accordingly, we do not
“look to the legal merits of the underlying award.”
White Springs,
660 F.3d at 1283. “[E]ven a serious error” is not enough.
Sutter,
569 U.S. at 569 (quotation omitted).
Here, the parties’ arbitration provision stated: “The parties
shall refer to arbitration any dispute relating to this Agreement,
including, but not limited to, its interpretation, breach, or
existence.” And the purchase agreement provided that Spirit (the
buyer) would pay Yale (the seller) $220,000, the negotiated
purchase price, at closing.7 The arbitrator—who was tasked with
determining “whether a sale had or had not occurred” and “who
[was] entitled to the $220,000 purchase price”—ultimately
concluded that a closing had occurred and that Yale, as the seller,
was entitled to $220,000. Awarding the purchase price amount to
Yale was within the scope of the arbitrator’s powers, and thus the
arbitrator did not exceed his authority under the contract by doing
7 The purchase price was divided into the deposit ($22,000), which Spirit was
required to pay to the selling broker or escrow agent upon signing the
purchase agreement, and the balance ($198,000), which was “due and payable
from [Spirit] or [the escrow agent] at closing.”
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so. Accordingly, because the arbitrator arguably interpreted and
applied the contract and did not ignore the contract’s plain
language, the arbitral decision must stand.
See Sutter, 569 U.S. at
569 (“[A]n arbitral decision even arguably construing or applying
the contract must stand, regardless of a court’s view of its
(de)merits.” (quotations omitted));
Wiregrass Metal, 837 F.3d at
1087–88 (explaining that “we must defer entirely to the arbitrator’s
interpretation of the underlying contract no matter how wrong we
think that interpretation is” and that “an arbitrator may not ignore
the plain language of the contract” (quotation omitted)).
IV. Conclusion
Because Spirit has not shown that a statutory basis for
vacating the arbitration award exists, we affirm the district court’s
order.
AFFIRMED.
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