United States District Court, W.D. Virginia, Roanoke Division
Glen E. Conrad Chief United States District Judge
April 1, 2016, The O'Gara Group, Inc.
("O'Gara") was granted an arbitration award
against UXB International, Inc. ("UXB"). O'Gara
has filed an application for confirmation of the arbitration
award and UXB has moved to vacate the award. For the
following reasons, the court will deny UXB's motion and
confirm the arbitration award.
an Ohio corporation, and UXB, a Virginia corporation based in
Blacksburg, Virginia, were parties to Subcontract Agreement
No: 12-024 (the "Subcontract"). Pursuant to the
Subcontract, O'Gara, as subcontractor, agreed to provide
qualified and properly-cleared personnel to furnish services
in support of various UXB projects. The prime contract for
the work had previously been awarded to UXB by the federal
Subcontract contained an arbitration provision, which
provided as follows:
Claims, controversies or disputes between the parties that
are not subject to the procedures of (b) above including
without limitation, any claim, controversy, or dispute
concerning any determination, negotiation, or agreement to be
reached by the Parties under this Agreement (hereinafter, the
"Dispute") shall be settled by mediation under the
then current Center for Public Resources (hereinafter,
"CPR") Institute for Dispute Resolution Mediation
Procedure in effect on the date of this Agreement. Unless
otherwise agreed, the Parties will select a mediator from the
CPR Panels of Distinguished Neutrals. Any Dispute which
remains unresolved thirty (30) days after the appointment of
a mediator shall be settled by binding arbitration by a sole
arbitrator in accordance with CPR Rules for Non-Administered
Arbitration in effect on the date of this Agreement. The
arbitration shall be governed by the Federal Arbitration Act,
9 U.S.C. Section 1-16 to the exclusion of state laws
inconsistent therewith, and judgment upon the award rendered
by the arbitrator may be entered by any court having
jurisdiction thereof. The place of arbitration shall be
Montgomery County, Virginia. The arbitrator is not empowered
to award punitive damages or damages in excess of
compensatory damages and each party irrevocably waives any
right to recover such punitive damages or excess damages.
21, 2014, O'Gara sent UXB a demand letter alleging that
the company owed O'Gara over $1, 000, 000 for unpaid
services provided under the Subcontract. The parties'
efforts to resolve the dispute through mediation were
unsuccessful. Consequently, on July 29, 2015, O'Gara
commenced an arbitration proceeding with the International
Institute for Conflict Prevention and Resolution
("CPR"), pursuant to § H-26 of the Subcontract
(the "Subcontract Arbitration").
addition to the Subcontract, the parties entered into a
separate contract for the purchase of ammunition by
O'Gara from UXB (the "Ammunition Contract").
The Ammunition Contract also contained an arbitration
provision, which required the parties to resolve "any
disputes under the terms and conditions of [the Ammunition
Contract] . . . through binding arbitration ... in accordance
with the rules of the American Arbitration Association."
Ammunition Contract § 16. On October 22, 2015, UXB
initiated a separate arbitration proceeding with the American
Arbitration Association ("AAA") regarding a dispute
arising from the Ammunition Contract.
January 21, 2016, prior to an evidentiary hearing in the
Subcontract Arbitration, UXB filed a prehearing brief
indicating that it intended to seek the amount that
O'Gara allegedly owed under the Ammunition Contract as a
setoff against any amount that UXB was found to owe
O'Gara under the Subcontract. The requested setoff was
based on § H-31 of the Subcontract, which permitted the
"Contractor [to] set off against amounts payable to
Subcontractor hereunder any claim or charge Contractor may
have against Subcontractor." Subcontract § H-31.
January 22, 2016, O'Gara moved to exclude all evidence
related to the Ammunition Contract. O'Gara argued that
the arbitration clause of the Subcontract only covered
disputes arising under the Subcontract, and that disputes
under the Ammunition Contract were subject to a separate
arbitration provision, which required arbitration through the
AAA. O'Gara further emphasized that the Ammunition
Contract was already the subject of a separate arbitration
proceeding before the AAA, and that the parties disputed what
amounts, if any, were owed to whom under that agreement.
January 25, 2016, the arbitrator assigned to the Subcontract
Arbitration conducted a hearing on the issue via conference
call. The following day, the arbitrator entered an order
granting O'Gara's motion to exclude. The order
provided that UXB "shall not be allowed to present
evidence as an offset to, and/or reduction of, the claims of
O'Gara under the Subcontract, to the extent the offset
arises from alleged breaches by O'Gara in the conduct of
the Ammunition Contract, which is the subject of a separate
arbitration proceeding before the American Arbitration
Association (AAA)." Case Management Order No. 3 at 4. In
the order, the arbitrator noted that "counsel for both
parties acknowledged that the Subcontract's offset
provision does not, by its explicit terms, convey to the
Tribunal jurisdiction over and upon an affirmative
counterclaim asserted by UXB based on facts and claims
outside the penumbra of the Subcontract scope of
services." Id. at 3. The arbitrator ultimately
concluded that "opening the instant arbitration to
matters outside the Subcontract, even for an offset defense,
could potentially be determined to be beyond the scope of the
arbitration provision within the Subcontract, depriving the
Tribunal of jurisdiction . ..." Id. at 4.
arbitrator held an evidentiary hearing on January 26, 2016.
He received further testimony on February 10, 2016. On April
1, 2016, the arbitrator awarded O'Gara $1, 331, 096.49
plus interest against UXB.
April 7, 2016, O'Gara commenced this action by filing an
application for confirmation of the arbitration award. On May
9, 2016, UXB moved to vacate the award on the basis that the
arbitrator disregarded the law and exceeded his authority by
"improperly exclud[ing] ...