Yahoo! Inc. v. Microsoft Corp., No. 13-cv-7237, 2013 U.S. Dist. LEXIS 151175 (S.D.N.Y. Oct. 21, 2013) [click for opinion]

Yahoo and Microsoft entered into an agreement to merge their search capabilities in foreign countries to better compete with Google.  Their contract provided for emergency arbitration in certain circumstances. When Yahoo said it would be "pausing" its performance under the contract and would be unable to meet the contractual deadlines, Microsoft filed an emergency arbitration demand with the American Arbitration Association ("AAA").

There was extensive briefing, two days of hearings and testimony of 10 witnesses, including the CEOs of both parties.  The emergency arbitrator issued an injunction against Yahoo, ordering it to perform as required under the contract.  Yahoo then sued in district court and asked the court to vacate the arbitral award.  Microsoft cross-moved to confirm the award.

Yahoo argued that the award should be vacated because the emergency arbitrator awarded Microsoft “final permanent relief” even though the parties’ agreement—and the AAA Emergency Rules—only permit an award of “interim relief.”  Yahoo contended that the injunctive relief granted was in effect final because the actions required of Yahoo were irreversible.  The court rejected the argument, explaining that the arbitration agreement gave the arbitrator power to grant not only "interim relief" but also "injunctive or emergency relief."  This provided a colorable basis (which is all the arbitrator needed) to support the award, even though the award was in essence final.

Yahoo also argued that the arbitrator exceeded his authority by failing to find the existence of an emergency that would trigger his emergency authority.  According to Yahoo, the delay was like other delays in the ordinary course of contract performance and, thus, there was no emergency.  The court disagreed, deferring—as the court must under existing case-law—to the arbitrator's findings of both an emergency and a risk of immediate irreparable harm.

Finally, the court rejected Yahoo's argument that the arbitrator manifestly disregarded the law.  Yahoo could point to no clear rule of law the arbitrator ignored or refused to apply.  To the contrary, the court found (citing specific passages in the arbitration award) that the arbitrator had considered and applied the law applicable to granting an injunction.

With respect to Microsoft's cross-motion to confirm the award, Yahoo argued that the award should not be confirmed because it was only an interim award.  But the court had already found (earlier in its opinion) that the equitable relief the arbitrator awarded was final.  If “an arbitral award of equitable relief based upon a finding of irreparable harm is to have any meaning at all," the court stated, "the parties must be capable of enforcing or vacating it at the time it is made.”  The court therefore granted the motion to confirm.