Global Gold Mining LLC & Global Gold Corp. v. Caldera Resources, Inc., No. 12-CV-3193 (S.D.N.Y. Apr. 15, 2013) [click for opinion]

Petitioners Global Gold Mining LLC and Global Gold Corp. sought to confirm part of a partial final award entered in an arbitration with Respondent Caldera Resources, Inc.  Respondent opposed confirmation and requested that the court vacate the award for a variety of reasons. 

The dispute arose from a joint venture agreement (the "JVA") between the parties to mine gold in Armenia.  Petitioners cancelled the agreement, citing Respondent's failure to comply with its obligations under the JVA, and Respondent initiated an arbitration proceeding to enforce the JVA.  A district court judge appointed an arbitrator, who bifurcated the arbitration into liability and damages phases.  At the request of the parties, the arbitrator issued an interim order at the outset of oral argument, ordering the party deemed the "winner" in an award on liability issues to move to confirm that award within thirty days of issuance.  Respondent petitioned in federal court and obtained a confirmation of this interim order. 

During the liability phase of the arbitration, the arbitrator found that Respondent failed to comply with virtually all of its obligations under a letter agreement and with certain conditions precedent to the JVA becoming effective.  As conditions precedent to the JVA taking effect, Respondent was required to make several payments and to obtain the approval of the TSX Venture Exchange ("TSX-V").  However, the arbitrator found that neither of these conditions precedent had been filled, as Respondent never delivered required shares of its stock to Petitioners, and Respondent never submitted a copy of the JVA to the TSX-V until the middle of the arbitration proceedings.  The arbitrator also found that, even assuming arguendo that the JVA went into effect, Respondent materially breached its obligations by failing to obtain required consent for certain actions, and failing to make certain payments required by the JVA.  Accordingly, the arbitrator issued a partial final award on the question of liability in Petitioners' favor, ordering that (1) the property should revert to Petitioners within thirty days of the award, (2) any sums paid by Respondent to Petitioners should be returned within thirty days of the award, and (3) Respondent was entitled to a Net Smelter Royalty for each tranche of $1,000,000 it actually spent on the property. 

Respondents opposed the petition to confirm the award on the basis that paragraphs 2 and 3 of the Award were more in the nature of preliminary rulings on damages than a final determination on whether the JVA went into effect and who owns the property.  Petitioners conceded that paragraphs 2 and 3 were not final, but that paragraph 1 of the Award was definite and final.  The court agreed, ruling that the liability finding and order in paragraph 1 were sufficiently independent and definite to be confirmed, while paragraphs 2 and 3 were not (and were not even properly before the court, given Petitioners' concession). 

Respondent also requested that the court vacate the award on various grounds, all of which were rejected by the district court.  The court first rejected Respondent's arguments that the arbitrator's decision was arbitrary and capricious and/or showed a manifest disregard for New York law regarding issuance of shares, since Respondent cited no legal authority to show that the law allegedly ignored was clear and explicitly applicable to the matter before the arbitrator.  The court noted that even applying the "inapt law" on inter vivos gifts cited by Respondent, the argument failed because the arbitrator found that there was no delivery of the stock certificates at issue. 

Next, Respondent argued for vacatur based on allegations that the arbitrator had improper ex parte communications with Respondent itself, and that this caused Respondent to ignore mediation and the issue of TSX-V approval.  The court rejected this argument, noting that it was difficult to see how such communications could have resulted in undue prejudice to Respondent.  Furthermore, the court held that alleged comments of the court to Respondent regarding why it was trying to settle were at most a present assessment of the case, and there was no evidence that in the absence of such communications, the parties would have sought mediation. 

The court likewise dispensed with Respondent's argument that the arbitrator exceeded his authority by making an improper review of a decision of the TSX-V, a self-regulatory agency.  The court noted that this ground is accorded the narrowest of readings in the Second Circuit, limiting the court's focus to whether the arbitrator had the power to reach a certain issue, not whether the arbitrator correctly decided that issue.  The court found that the arbitrator's ruling was simply a finding of fact that the TSX-V never approved the JVA pursuant to the JVA's requirements, and as such did not purport to "review" a decision of the TSX-V. 

Finally, Respondent argued that the award must be vacated because the arbitrator breached the AAA rules governing the proceeding.  However, the court rejected this argument as well, first noting that Respondent cited no authority for the proposition that a mere violation of the AAA rules, by itself, provides grounds for vacatur.  Further, the court observed that Respondent had not clearly identified the rules it contended were broken, or citations to the record that would support such an argument, or any evidence of bias. 

Having rejected all of Respondents arguments for vacatur and against confirmation, the district court granted the petition to confirm the award in large part, denying confirmation only as to paragraphs 2 and 3 of the award, without prejudice.