                    United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 04-3602
                                   ___________

Christopher C. McGrann,                 *
                                        *
            Appellee,                   *
                                        * Appeal from the United States
    v.                                  * District Court for the
                                        * District of Minnesota.
First Albany Corporation,               *
                                        *
            Appellant.                  *
                                   ___________

                             Submitted: June 21, 2005
                                Filed: September 14, 2005
                                 ___________

Before RILEY, BOWMAN, and BENTON, Circuit Judges.
                           ___________

RILEY, Circuit Judge.

        Christopher C. McGrann (McGrann) filed suit to enforce an arbitration award
in his favor in the amount of $840,165.99 against his former employer, First Albany
Corporation (FAC). FAC moved to vacate the arbitration award partially to
$340,165.99. The district court1 confirmed the entire arbitration award, and entered
judgment in McGrann’s favor. We affirm.




      1
       The Honorable James M. Rosenbaum, Chief Judge, United States District
Court for the District of Minnesota.
I.    BACKGROUND
      From 1995 to 2001, McGrann worked as a research analyst and institutional
salesperson for the investment bank of Wessels, Arnold and Henderson (Wessels)2
in Minneapolis, Minnesota. During his tenure at Wessels, McGrann’s sales territory
included Boston and New York. In 1999, McGrann earned $1,075,000; in 2000, he
earned $1,400,000.08. In his 1999 year-end performance review, McGrann was
characterized as professional, trusted, intelligent, and one of Wessels’s top
salespersons.

      In the fall of 2000, FAC’s Senior Vice President and Director of Institutional
Equity Sales contacted McGrann and two other salespersons at Wessels to discuss
employment with FAC. During negotiations, McGrann estimated the revenues he
might generate if he joined FAC’s institutional equity sales division. In March 2001,
FAC offered employment to McGrann and the other two Wessels employees. In an
agreement dated March 30, 2001, FAC hired McGrann as Managing Director of
FAC’s Institutional Equity Sales Department under the following terms:

             We have agreed to pay you a base salary at the rate of $150,000
      per year for calendar years 2001 and 2002 to the extent you remain
      employed by us. Generally, bonuses are based on your contribution, the
      performance of the firm as a whole and other important factors within
      our sole discretion. However, we have agreed to pay you a bonus of not
      less than $500,000 for 2001 and $600,000 for 2002. Such bonuses will
      be payable on February 15th of the following year or on such other date
      as firm-wide bonuses are paid, and only if you remain employed by us
      at such times.

             ....


      2
      Wessels was later acquired by Dain Rauscher, which was then acquired by
Royal Bank of Canada. For convenience, we refer to McGrann’s employer as
Wessels.

                                        -2-
            We have agreed to give you a loan of $350,000 (the “Loan”)
      [, which] . . . will be forgiven in two equal annual installments during
      the Employment Period provided that you remain employed by us on
      such dates.

             We will also recommend to the Board [of Directors of FAC] that
      you be granted such number of shares of restricted stock of the firm (the
      “Restricted Stock”) valued at $500,000 . . . . The Restricted Stock shall
      be subject to vesting over the first three years of your employment, one-
      third per year.

            We will also make a contribution (the “Contribution”) on your
      behalf to [FAC’s] Deferred Compensation Plan for Key Employees and
      in accordance with the terms thereof in the amount of $500,000. Such
      contribution shall be subject to vesting over the first three years of your
      employment, one-third per year.

            You will also be entitled to participate in the standard employee
      benefit plans . . . .

            If [FAC] terminates your employment for any reason other than
      Cause (as defined below) prior to the second anniversary of your
      employment you will (i) receive the balance of your unpaid base salary
      and shall be vested in the Restricted Stock and the Contribution, in each
      case as though you had been employed for two full years, (ii) be
      forgiven the Loan in full and (iii) receive (or have already received) the
      bonus for the year 2001. . . .

            ....

            This letter agreement shall be subject to, governed by and
      construed in accordance with the laws of the State of New York without
      regard to its choice of law principles . . . .

    In November 2001, FAC tried to renegotiate the terms of the agreement, asking
McGrann “to rip up” his compensation guarantees. McGrann responded, “We all


                                         -3-
negotiated in good faith and all of a sudden [FAC] want[s] us to give these up six
months later? No. We’re not interested in that.” Within a week, FAC terminated the
employment of one of the three Wessels employees who had moved to FAC. The day
after that termination, FAC summoned McGrann to a meeting, informing him his
“account package is under review.” At the meeting, FAC changed McGrann’s
coverage territory. McGrann responded he was willing to make the change if he
could help the firm. FAC then sought concessions on McGrann’s guaranteed
compensation, saying, “You should do the honorable thing and offer to make
concessions to FAC.” McGrann responded, “We all negotiated in good faith.” FAC
replied, “Honorable men make honorable gestures.” Although McGrann refused to
concede his compensation guarantees, FAC nonetheless reassured McGrann that FAC
wished to retain him.

       On April 30, 2002, FAC again approached McGrann about his compensation,
informing McGrann that FAC was “coming after” his contractual guarantees. FAC
asked McGrann, “Will you tear up your guarantee [on your cash bonus]. . . . if you
tear that up, you can keep the restricted stock and deferred comp, but just give back
the $600,000.” The next day, FAC bluntly said to McGrann, “We want to honor
[your employment] contract but your production has sucked.”3 To the point, FAC
said, “If you don’t give up your guarantees, [FAC] can’t control what might happen.”
In response to FAC’s request to renegotiate, McGrann stated, “At this point I am not
willing to cut up my contract. I took a ton of risk coming here.” FAC answered,
“OK. That’s your–that’s your choice, but now it’s all about business. It’s not
personal.”

      On May 13, 2002, FAC sent McGrann a letter stating he had “not substantially
performed [his] duties” and his “production ha[d] been extremely disappointing.”


      3
       Despite FAC’s contention, McGrann was ranked fourth out of nineteen
salespersons at the time.

                                         -4-
The letter threatened a for cause termination of employment if McGrann did not cure
all of his performance deficiencies, which could only be accomplished if McGrann
generated $400,000 of revenue per month for three months. FAC’s top producer had
achieved only $300,000 of revenue in any given month. Despite the tall order,
McGrann increased the intensity of his work to meet FAC’s new demands.

      On October 18, 2002, FAC terminated McGrann’s employment, contending the
termination was for cause because McGrann failed to perform his duties. FAC simply
determined “it was worth the risk to fire [McGrann] for cause.” When seeking
employment after the termination, McGrann informed potential employers FAC
terminated his employment for cause due to his inability to meet production
requirements. McGrann believes his duty to inform potential employers of his for
cause termination caused him to lose “leverage” in the employment process, as he
“was not able to negotiate . . . from a position of strength.”

      Because the parties were associated with the National Association of Securities
Dealers, Inc. (NASD), McGrann sought arbitration before an NASD Dispute
Resolution panel. Over the course of eleven days, McGrann and FAC presented their
claims to an arbitration panel. The panel’s arbitration award provided the following
case summary:

             [McGrann] asserted the following causes of action [against FAC]:
      breach of contract, violation of Minnesota Stat. § 181.64, and violations
      of NASD rules. The causes of action related to [McGrann]’s allegation
      that FAC breached its employment contract with him after unilaterally
      imposing additional performance obligations. [McGrann] further
      alleged that FAC stated false and defamatory reasons for his departure
      and has not honored the guaranteed bonuses and incentives as set forth
      in the March 30, 2001 employment contract.




                                         -5-
McGrann initially sought unspecified damages. At the hearing, McGrann sought
$840,165.99 in compensatory damages, as well as costs, attorney fees, interest,
punitive damages and equitable relief. McGrann’s attorney presented the following
argument to the panel: “[FAC] breached the contract. They don’t get the benefit of
a contract that they didn’t adhere to. Mr. McGrann worked 5/6ths of the year. At a
minimum he is entitled to 5/6ths of his bonus. And we believe, but for this breach,
he would have finished the year and earned his entire $600,000.”

       FAC denied McGrann’s allegations, asserted a number of affirmative defenses,
and counterclaimed for breach of contract, fraud, misrepresentation, fraudulent
inducement, negligence, negligent misrepresentation and violation of NASD rules.
At the hearing, FAC sought $350,000 in compensatory damages, as well as interest,
attorney fees, punitive damages, costs and equitable relief. FAC presented the
arbitration panel an exhibit outlining FAC’s theory regarding “the alternate ‘for
cause’ and ‘no cause’ termination pay-out scenarios as of October 18, 2002, the
termination date.” According to FAC, if the arbitration panel found FAC terminated
McGrann’s employment for cause, then McGrann owed FAC $175,000 plus interest.
On the other hand, FAC contended, if the arbitration panel found FAC terminated
McGrann’s employment without cause, then the maximum FAC owed McGrann was
$340,165.99. According to FAC, the agreement limited McGrann’s damages for
termination without cause to $340,165.99, which included $66,875 in unpaid salary;
$136,673.99 in restricted stock; and $136,617 in deferred compensation.

       On March 2, 2004, the arbitration panel issued its award. The arbitration panel
found in McGrann’s favor, and awarded him $840,165.99 in compensatory damages,
interest on that amount, $100,000 in attorney fees under Minnesota Statutes section
181.13, and $250 for filing fees. The arbitration panel also found no evidence
supported FAC’s fraud claim, and that claim “was made only for the purpose of
coercing” McGrann.



                                         -6-
        Seeking confirmation of the arbitration award, McGrann filed suit in Minnesota
state court, and FAC removed the case to federal court. FAC moved to vacate, in
part, the award based on the no cause termination provision. Claiming the arbitration
panel failed to follow the parties’ agreement, manifestly disregarded the law, and
acted irrationally in delivering its award, FAC asked the district court to reduce the
award to $340,165.99.

       The district court confirmed the arbitration award, finding “there is no evidence
to support the claim that the arbitrators disregarded the law. . . . [T]he defendant also
fail[ed] to illustrate irrationality in the award such that this Court should disregard its
conclusions.” Rejecting FAC’s argument the agreement limited the damages the
arbitration panel could award, the district court concluded:

             [T]here’s no evidence to support [FAC’s] argument that the
      arbitrators were restricted simply to that [agreement] in returning their
      awarded damages. The panel is not bound by FAC’s own self-serving
      interpretation of its letter agreement. The agreement makes no provision
      for any contractual damages. . . . [T]here was evidence from which [the
      arbitration panel] could have found that [FAC] did breach the letter
      agreement when they fired [McGrann] and falsely styled it as for cause.
      In that case [the arbitration panel] could have awarded damages
      resulting simply from the breach alone.

Citing United Industrial Syndicate, Inc. v. Western Auto Supply Co., 686 F.2d 1312,
1316 (8th Cir. 1982), the district court noted the arbitration award could have been
based on the general proposition “that breach of [contract] damages are measured by
placing the nonbreaching party in the position it would have been but for that
breach.”4 However, the district court quickly recognized, “It’s not for this Court to


      4
       Although the district court cited an Eighth Circuit case for this general
statement of breach of contract remedies, New York law adheres to this same
principle. See Siegel v. Laric Entm’t Corp., 763 N.Y.S.2d 607, 608 (N.Y. App. Div.

                                           -7-
conjecture on the basis which the arbitral panel reached.” Finally, the district court
noted:

      [McGrann] also produced evidence that his termination did cause
      damages beyond his lost compensation, and that might have included
      damages for defamation . . . . The arbitrators may have considered
      [McGrann’s] difficulty in securing new employment in their award.
      Having then a number of possible bases, this Court cannot find that the
      determination by the arbitral panel was either in disregard of the law or
      irrational.

       FAC appeals the district court’s confirmation of the entire arbitration award.
FAC contends the arbitration panel “exceeded their powers and foisted their
interpretation upon an unambiguous contract provision,” and also “crafted an
irrational award that failed to draw its essence from the plain language of the parties’
Agreement.” In essence, FAC argues its interpretation of the agreement’s
compensation guarantees, when analyzed under either the for cause or no cause
termination provisions, is the only reasonable interpretation of what FAC deems to
be an unambiguous agreement. Because the arbitration panel–and later the district
court–did not agree with FAC’s interpretation, FAC contends we must reverse the
district court, vacate the arbitration award, and remand with instructions to confirm
the arbitration award only in the amount of $340,165.99.

II.   DISCUSSION
      A.     Standard of Review
      When reviewing a district court’s order confirming an arbitration award, we
review de novo questions of law, but we accept the district court’s factual findings
unless clearly erroneous. Schoch v. InfoUSA, Inc., 341 F.3d 785, 788 (8th Cir.


2003) (“It is well established that [breach of contract] damages are intended to return
the parties to the point when the breach arose and to place the non-breaching party
in as good a position as it would have been had the contract been performed.”).

                                          -8-
2003). Although we review de novo the district court’s legal conclusions, we provide
“an extraordinary level of deference” to the underlying arbitration award. Id. (citation
omitted). Courts have absolutely no authority to reconsider the merits of an
arbitration award, even when the parties allege the award rests on factual errors or on
a misinterpretation of the underlying contract. Id.; see also Inter-City Gas Corp. v.
Boise Cascade Corp., 845 F.2d 184, 187 (8th Cir. 1988) (acknowledging “contract
interpretation is left to the arbitrator”). Even though an “arbitrator may interpret
ambiguous language” in a contract without fear of judicial intervention, “the
arbitrator may not disregard or modify unambiguous contract provisions.” Inter-City
Gas Corp., 845 F.2d at 187. The bottom line is “[w]e will confirm the arbitrator’s
award even if we are convinced that the arbitrator committed serious error, so long
as the arbitrator is even arguably construing or applying the contract and acting
within the scope of his authority.” Schoch, 341 F.3d at 788 (citations and quotations
omitted).

       Although arbitrators have broad authority, their decisions are subject to limited
judicial review. Id. The Federal Arbitration Act (FAA) sets forth specific reasons for
vacating an arbitration award. See 9 U.S.C. § 10(a) (including corruption, fraud, or
undue means in the procurement of the award, or evident partiality or corruption,
misconduct, or ultra vires acts by the arbitrators). For instance, a district court may
vacate an arbitrator’s award if the arbitrator exceeded his or her powers. 9 U.S.C.
§ 10(a)(4). The reasons for vacating an arbitration award are not limited to the
reasons listed in the FAA, however.

       In addition to the FAA’s expressed reasons for vacating arbitration awards, our
court has recognized two additional, but “extremely narrow,” reasons for vacating
arbitration awards. Schoch, 341 F.3d at 788 (citation omitted). First, a court can
vacate an arbitration award if it is “completely irrational,” which means “it fails to
draw its essence from the agreement.” Id. (citation omitted). An arbitration award
draws its essence from the agreement if the award is derived from the agreement,

                                          -9-
viewed in light of the agreement’s language and context, as well as other indications
of the parties’ intention. Id. Second, a court can vacate an arbitration award if it
“evidence[s] a manifest disregard for the law.” Id. (alteration in original) (citation
omitted). An award manifests disregard for the law when an arbitrator clearly
identifies the applicable, governing law, but then ignores it. Id.

       B.    No Grounds to Vacate Arbitration Award
       FAC contends “the plain language of the [no cause termination] provision . . .
provide[s McGrann] could not receive his 2002 bonus unless employed by [FAC] on
February 15, 2003.”5 FAC specifically argues, “No provision [of the agreement]
allows [FAC] to pay or McGrann to receive a pro-rata share of his 2002 bonus.
According to the plain language of the Agreement, the 2002 bonus would not be paid
unless [FAC] employed McGrann on February 15, 2003.” FAC certainly tried to
persuade the arbitration panel with this argument, but the arbitration panel rejected
it. FAC then reprised its views onto the district court, which rejected FAC’s
contention only FAC possessed the proper interpretation of the agreement. We, too,
reject FAC’s argument, concluding the arbitration panel was not bound by FAC’s
contract interpretation argument.

      The first reason to reject FAC’s argument is the arbitration panel was not
bound by FAC’s interpretation of the agreement, because the agreement was not so
simplistically drawn to be free from ambiguity. Although FAC’s proposed



      5
       Actually, the no cause termination provision does not require McGrann to be
employed on February 15, 2003, to receive his 2002 bonus. Instead, the no cause
termination provision simply states what McGrann is entitled to receive should his
employment be terminated “for any reason other than Cause . . . prior to the second
anniversary of [his] employment.” As the district court rightly noted, the arbitration
panel was not required to adhere to FAC’s self-serving interpretation of the
agreement, especially when FAC’s arguments distort the agreement’s plain language.

                                        -10-
interpretation–that McGrann was entitled to his 2002 bonus only if he was employed
by FAC on February 15, 2003–is reasonable, it is not the only plausible interpretation.

       The agreement specifically referenced FAC’s discretion when it came to
awarding bonuses to employees: “Generally, bonuses are based on your contribution,
the performance of the firm as a whole and other important factors within our sole
discretion.” FAC did not have unbridled discretion, however, when it came to
McGrann’s bonuses. Instead, the agreement guaranteed McGrann’s bonuses to the
following extent: “we have agreed to pay you a bonus of not less than $500,000 for
2001 and $600,000 for 2002. Such bonuses will be payable on February 15th of the
following year or on such other date as firm-wide bonuses are paid, and only if you
remain employed by us at such times.”

       There is no doubt the agreement guaranteed the payment of the 2002 bonus in
full if McGrann was employed on February 15, 2003. However, the agreement
arguably is ambiguous as to payment if McGrann were not employed on February 15.
A plausible interpretation is the agreement’s payment date provision, which follows
the bonus guarantee, simply referred to when payment would occur. For example, if
McGrann were not employed on the payment date (whether that be February 15 or on
the dates bonuses were paid firm-wide), then his guaranteed bonus would be paid on
some other date, i.e., McGrann would not have to wait until February 15 (or another
date) to receive his 2002 bonus if his employment ended earlier.

       FAC responds that the combination of the bonus provision and the no cause
termination provision compels a conclusion that McGrann would not be entitled to
any bonus if his employment were terminated without cause before February 15,
2003. We do not read the agreement as requiring such an interpretation, because
ambiguities exist. These ambiguities arise mostly out of the agreement’s silence on
related issues, which cast doubt on the parties’ intent on the bonus issue at the heart
of the arbitration and this appeal. For example, if McGrann’s employment had ended

                                         -11-
by death or resignation (as opposed to being terminated) on February 14 after having
the strongest year of any FAC salesperson, did the contract’s bonus provision mean
his bonus was not payable? For the reasons stated above, another interpretation
exists. Of course, the no cause termination provision would not apply to these
situations, so only the bonus provision would control. Because a plausible
interpretation of the agreement in those situations might compel FAC to pay
McGrann his 2002 bonus, that interpretation could likewise apply in this case. FAC
cites no legal authority requiring the arbitration panel to interpret the agreement as
FAC interprets it.

        The second reason to reject FAC’s proposed interpretation of the agreement
involves FAC’s implicit promise of good faith and fair dealing. Under New York
law, every contract necessarily includes a covenant of good faith and fair dealing.
State Street Bank & Trust Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 169
(2d Cir. 2004). Under the covenant of good faith and fair dealing, each party to a
contract is prohibited from doing “anything which will have the effect of destroying
or injuring the right of the other party to receive the fruits of the contract.” Id.
(citation omitted). If a contract authorizes a party to exercise discretion, that party
impliedly promises “not to act arbitrarily or irrationally in exercising that discretion.”
Id. (citation omitted). However, the implied covenant of good faith and fair dealing
has limits, such that no promise “can be implied that would be inconsistent with other
terms of the contractual relationship.” Id. at 170 (citation omitted).

      McGrann took a huge risk leaving his multi-million dollar job at Wessels to
work for FAC. To induce McGrann, FAC made a number of compensation
guarantees, including bonuses for 2001 and 2002. Within months of luring McGrann
away from Wessels, FAC tried to slash McGrann’s compensation and renegotiate the
agreement. When McGrann refused to budge, FAC devised a scheme to terminate
McGrann’s employment and label the termination for cause to avoid any payment to
McGrann. Indeed, FAC sought payment from McGrann.

                                          -12-
       It is plausible to interpret the agreement, when read with the implicit good faith
and fair dealing provision, to mean FAC could not invoke the for cause termination
provision in bad faith to deprive McGrann of the fruits of his agreement, including
the guaranteed 2002 bonus. Although FAC generally pays bonuses based on its sole
discretion, FAC guaranteed McGrann bonuses for 2001 and 2002 so he would leave
his lucrative position at Wessels. We believe New York’s good faith and fair dealing
requirement frowns on FAC’s conduct in trying to void the bonus guarantee within
months of McGrann’s arrival. Even the no cause termination provision, when read
alongside the bonus provision and the good faith and fair dealing requirement, does
not contemplate FAC terminating McGrann’s employment under the guise of cause,
intending to deprive McGrann of his 2002 bonus. The amounts payable under the no
cause termination provision can be read to mean what McGrann would be owed if
FAC terminated his employment without cause, but still acted in good faith. This did
not happen here.

       The arbitration panel heard testimony and viewed evidence suggesting that,
almost from the beginning of the employment relationship, FAC wanted to avoid
paying bonuses to McGrann. A plausible interpretation of the agreement could have
led the arbitration panel to conclude FAC’s breach of its duty of good faith and fair
dealing required FAC to pay McGrann $500,000 of the $600,000 guaranteed bonus.

      Although FAC’s conduct could be considered egregious, it could have been
worse. For instance, FAC could have decided in early 2002 to terminate McGrann’s
employment to avoid paying the 2002 bonus, but strung McGrann along to profit
from his efforts. After wringing every bit of effort out of McGrann, FAC could have
waited until a second before February 15, 2003, to terminate McGrann’s employment.
FAC’s interpretation of the agreement would authorize this type of conduct without
a bonus coming due. We disagree.




                                          -13-
       The final reason to reject FAC’s arguments is based on an interesting–but
reasonable–interpretation of the agreement. This interpretation somewhat tracks the
good faith and fair dealing analysis. Arguably, the agreement contemplated FAC
would discharge McGrann either for cause or without cause, but that FAC would not
attempt a for cause termination to avoid paying a bonus when sufficient cause for
termination does not exist. Under this interpretation, the no cause termination
provision would only apply when FAC intended to terminate McGrann’s employment
without cause. If FAC terminated McGrann’s employment under the for cause
provision without justification, the no cause termination provision would not be
implicated. Instead, McGrann would be entitled to breach of contract damages.
Under this theory, McGrann’s damages would include whatever it would take to put
him in the position he would have enjoyed had FAC not terminated his employment
and styled it for cause. Siegel, 763 N.Y.S.2d at 608. Interestingly, this amount could
have included the entire $600,000 for the 2002 bonus.

      Addressing the breach of contract remedies available to McGrann, FAC
contends the no cause termination provision was meant to act as a liquidated damages
provision or a limitation of liability provision. However, we would expect
sophisticated parties like FAC and McGrann to be able to state clearly this intent.
The agreement does not do so. The no cause termination provision does not even
mention the possibility it might apply to a breach of contract claim.

      FAC had two choices to ensure the agreement was interpreted the way FAC
wished it to be. First, FAC could have drafted an unambiguous agreement. Second,
FAC could have retained the right to litigate any issues arising out of the agreement
in a court as opposed to arbitration. It did not, and the arbitration panel was not
required under the facts of this case to interpret the agreement at FAC’s urging.

      Although a court might have interpreted the agreement differently, the parties
did not submit their claims to a court. Instead, they chose arbitration. Because the

                                        -14-
arbitration panel did not exceed its authority and its award was not completely
irrational, the district court correctly confirmed the arbitration award. See Schoch,
341 F.3d at 790 (“Although we may disagree with the arbitrator’s factual findings or
legal analysis, our limited review does not authorize us to substitute our judgment for
that of an arbitrator hired by the parties.”).6

III.CONCLUSION
    For the foregoing reasons, we affirm the district court’s judgment in
McGrann’s favor confirming the arbitration award.
                    ______________________________




       6
        Our limited review of the arbitration award assures us no grounds require us
to vacate the award. Thus, we do not consider whether the award was justified under
other theories, such as defamation or violations of the NASD rules or Minnesota law.

                                         -15-
