     Case: 11-20141   Document: 00511922960     Page: 1   Date Filed: 07/17/2012




          IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                   Fifth Circuit

                                                                      FILED
                                                                     July 17, 2012
                                  No. 11-20141
                                                                     Lyle W. Cayce
                                                                          Clerk
PETROFAC, INCORPORATED,

                                             Plaintiff - Appellee,

v.

DYNMCDERMOTT PETROLEUM OPERATIONS COMPANY,

                                              Defendant - Appellant.



                   Appeal from the United States District Court
                        for the Southern District of Texas


Before DeMOSS, CLEMENT, and ELROD, Circuit Judges.
JENNIFER WALKER ELROD, Circuit Judge:
        DynMcDermott Petroleum Operations Company (DM) appeals the district
court’s confirmation of an arbitration award in favor of Petrofac, Incorporated.
Because DM fails to show any reversible error, we AFFIRM.
                                        I.
        DM operates the Strategic Petroleum Reserve for the Department of
Energy. DM subcontracted with Petrofac to design and install a transportable
degas plant to service the reserve. On July 30, 2003, DM and Petrofac agreed
to resolve any claim under the subcontract through binding arbitration. The
contract stated:
        Petrofac and DM agree to enter into binding arbitration for any
   Case: 11-20141      Document: 00511922960          Page: 2    Date Filed: 07/17/2012

                                      No. 11-20141

      Request for Equitable Adjustment or claim submitted against the
      referenced subcontract, in lieu of litigation, in the event that a
      mutually agreeable resolution cannot be bilaterally achieved
      between DM and Petrofac through negotiations.
      In May 2004, Petrofac sent DM a multi-volume Request for Equitable
Adjustment (REA). There, Petrofac asserted that DM disrupted Petrofac’s
ability to perform its work and sought damages for differing site conditions,
delays, disruption costs, lost productivity, and acceleration costs.
      On December 6, 2005, Petrofac agreed to release DM from all but a few
specifically preserved claims.        Among these preserved claims, the release
included Petrofac’s REA “as may be amended or supplemented.”1
      By July 2006, the parties had failed to resolve the REA dispute via
negotiation. Pursuant to the 2003 arbitration agreement, DM and Petrofac
entered into an “Agreement for Arbitration and for Location and Methodology
of Arbitration.” There, the parties agreed that “[t]hey shall submit to binding
arbitration the [REA] and all claims and disputes between them arising out of
or relating to the Subcontract.”          In addition, the parties agreed that the
arbitration would be conducted by the American Arbitration Association under


      1
        The release stated that:
      In consideration of payments made heretofore, or to be made, by DM . . .
      [Petrofac] hereby unconditionally releases DM . . . from any and all liens and
      claims whatsoever arising out of or during the performance of said Subcontract
      other than such claims, if any, that may . . . be specifically excepted from the
      terms of this Release and Certificate, stated below:
             1. Request for Equitable Adjustment submitted by Petrofac, Inc. as may
             be amended or supplemented;
             2. Invoice No. 2004-79-855 in the amount of $995,718.00 . . . ;
             3. Invoice No. 2005-01-855 in the amount of $338,400.00;
             4. All rights and claims of [Petrofac] in connection with its disputes and
             objections to DM’s Unilateral Change Orders 17, 18, and 22;
             5. Claim for Equitable Adjustment in the amount of $536,128.08
             submitted by L.S. Womack, Inc. a subcontractor of Petrofac, Inc.; and
             6. Specified claims in full and precise amounts to be received by the
             Subcontract Manager within ninety (90) calendar days from the issuance
             of final acceptance by the Subcontract Manager.


                                             2
   Case: 11-20141   Document: 00511922960        Page: 3   Date Filed: 07/17/2012

                                 No. 11-20141

its Construction Industry Arbitration Rules (AAA Rules).
      Petrofac subsequently filed its demand for arbitration. In June 2008,
Petrofac provided DM the report of its damages expert, Frank Adams. The
Adams report calculated Petrofac’s damages using a different methodology and
reached a different amount than the original REA. The arbitration began in
March 2009.    After five days of hearings, however, the arbitration panel
recessed for seven months. When the arbitration reconvened, DM objected to
the arbitration panel hearing any claims stemming from the different damages
methodology used in the Adams report, claiming that it effectively created a
new constructive change claim outside the parties’ agreement to arbitrate.
      The arbitration panel dismissed DM’s objection because “the arbitration
agreement is clear and encompasses all of the issues between the parties arising
out of this contract. It is also clear that DM waived any objection it had to the
arbitration of a constructive change claim.” The arbitration panel subsequently
awarded Petrofac damages for the “contract balance, damages for a constructive
change to the contract, an award for the benefit of Womack, and interest from
August 24, 2006 to July 26, 2010” to be paid “within thirty days of the Award.”
      The district court confirmed the award. The district court rejected DM’s
argument that the REA and the Adams report represented different claims.
Therefore, the district court ruled that the arbitration panel did not exceed its
authority by awarding damages as presented in the Adams report. The court
also determined that the award was not procured through fraud or undue
means under 9 U.S.C. § 10(a)(1).             Finally, the district court ordered
prejudgment interest after August 26, 2010, ruling that prejudgment interest
recommenced after DM failed to pay the award within the thirty-day period.
                                       II.
      This court reviews “a district court’s confirmation of an award de novo, but
the review of the underlying award is exceedingly deferential.” Apache Bohai


                                        3
   Case: 11-20141    Document: 00511922960       Page: 4   Date Filed: 07/17/2012

                                  No. 11-20141

Corp. LDC v. Texaco China BV, 480 F.3d 397, 401 (5th Cir. 2007) (internal
quotation marks omitted).
                                        A.
      On appeal, DM argues that the arbitration panel exceeded its powers by
issuing an award on a claim not covered by the parties’ arbitration agreement.
9 U.S.C. § 10(a)(4) (allowing a district court to vacate an award “where the
arbitrators exceeded their powers”).         Specifically, DM contends that the
calculations in the expert report were extinguished by the 2005 release and
therefore fall outside the parties’ agreement to arbitrate. Petrofac responds that
the parties contracted for the arbitration panel (and not the courts) to decide this
question of arbitrability, and even if the arbitration panel did not have the power
to decide arbitrability, the district court properly determined that the claims at
issue were within the arbitration agreement.
      We first consider if the arbitration panel properly determined the initial
question of arbitrability, i.e. whether the claim is within the parties’ agreement
to arbitrate. “Just as the arbitrability of the merits of a dispute depends upon
whether the parties agreed to arbitrate that dispute, so the question ‘who has
the primary power to decide arbitrability’ turns upon what the parties agreed
about that matter.” First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943
(1995) (internal citations omitted). We will not assume that the parties agreed
to arbitrate arbitrability “[u]nless the parties clearly and unmistakably provide
otherwise.” AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649
(1986).   Accordingly, we must decide if DM and Petrofac “clearly and
unmistakably” provided for the arbitration panel to decide arbitrability.
      Here, the parties expressly incorporated into their arbitration agreement
the AAA Rules. These rules state that “[t]he arbitrator shall have the power to
rule on his or her own jurisdiction, including any objections with respect to the
existence, scope or validity of the arbitration agreement.” We agree with most


                                         4
   Case: 11-20141       Document: 00511922960         Page: 5     Date Filed: 07/17/2012

                                       No. 11-20141

of our sister circuits that the express adoption of these rules presents clear and
unmistakable evidence that the parties agreed to arbitrate arbitrability. See
Fallo v. High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009) (“[W]e conclude that
the arbitration provision’s incorporation of the AAA Rules . . . constitutes a clear
and unmistakable expression of the parties’ intent to leave the question of
arbitrability to an arbitrator.”); Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366,
1372–73 (Fed. Cir. 2006) (same); Terminix Int’l Co., LP v. Palmer Ranch Ltd.
P’ship, 432 F.3d 1327, 1332–33 (11th Cir. 2005) (same); Contec Corp. v. Remote
Solution Co., 398 F.3d 205, 208 (2d Cir. 2005) (same); Apollo Computer, Inc. v.
Berg, 886 F.2d 469, 473 (1st Cir. 1989) (same result under the similar ICC
Rules). But see Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775,
780 (10th Cir. 1998).2 Therefore, the arbitration panel properly made the
decision that the damages calculations in the Adams report fell within the
agreement to arbitrate.3
                                             B.
       Next, DM contends that Petrofac procured the overtime premium portion
of the award through fraud or undue means. 9 U.S.C. § 10(a)(1) (permitting the
district court to vacate an award “where the award was procured by corruption,
fraud, or undue means”). Among the many claims brought in the original REA,
Petrofac brought two distinct claims for damages: (1) an overtime premium claim
for the additional overtime on the degas project; and (2) a claim for DM’s impact

       2
         Today’s holding complies with our own prior suggestions that the incorporation of the
AAA Rules “may be sufficient to show that the parties to those agreements intended to confer
that power on the arbitration panel.” DK Joint Venture 1 v. Weyand, 649 F.3d 310, 317 n.9
(5th Cir. 2011) (emphasis omitted). Also, while the Texas Supreme Court has not weighed in
on the issue, Texas appellate courts have adopted the same approach. See Schlumberger Tech.
Corp. v. Baker Hughes, Inc., 355 S.W.3d 791, 802–03 (Tex. App.–Houston [1st Dist.] Oct. 12,
2011).
       3
         Although DM characterizes its contracts as narrow arbitration agreements for only
a few preserved disputes, nothing limits the parties’ broad agreement to arbitrate “all claims
and disputes” that related to the subcontract. Indeed, the 2006 arbitration agreement covered
all disputes “including but not limited to” those preserved in the 2005 release.

                                              5
   Case: 11-20141      Document: 00511922960        Page: 6     Date Filed: 07/17/2012

                                     No. 11-20141

on other projects.4 Petrofac made a strategic decision to abandon the latter
claim, while maintaining the former. DM argues that Petrofac pulled a bait-and-
switch by representing that it had abandoned its impact on other jobs claim, but
then slipped those damages back in through its overtime premium claim.
Rather than a covert legerdemain hidden from the arbitration panel, DM
thoroughly advocated these arguments to the arbitration panel (both before and
during the arbitration) and to the district court. In each case, the arbitration
panel or court rejected DM’s arguments. See Forsythe Int’l, S.A. v. Gibbs Oil Co.
of Tex., 915 F.2d 1017, 1022–23 (5th Cir. 1990) (reversing a district court’s
vacatur of award where the arbitration panel heard evidence of the fraud and
ruled it immaterial). Having examined the record, we conclude that DM’s
allegation of fraud misunderstands the distinct nature of Petrofac’s claims.
                                            C.
       Finally, DM argues the district court committed reversible error by
ordering prejudgment interest. “Texas law governs the award of prejudgment
interest on the [arbitration] award,” and “[u]nder Texas law, prevailing parties
receive prejudgment interest as a matter of course.” Executone Info. Sys., Inc.
v. Davis, 26 F.3d 1314, 1329 (5th Cir. 1994). On July 26, 2010, the arbitration
panel ruled that Petrofac was entitled to interest, calculated the amount of
interest as of the date of the award, and ordered payment of “interest from
August 24, 2006 to July 26, 2010, within thirty days of the Award.” DM did not
pay within the required thirty-day period. The district court ordered that DM
pay additional interest, reasoning that by ordering payment by August 25, 2010,
the arbitration panel created “a thirty-day interest-free window from the date
of the award,” and DM “is not permitted to discount the arbitration panel’s

      4
        Under the overtime claim, Petrofac sought to recover the amount of overtime paid to
employees who were billed on other projects but, because of DM’s disruption, needed to work
overtime on the degas project. Under the impact on other projects claim, Petrofac demanded
damages because DM’s disruption of the degas project required Petrofac to hire additional
subcontractors and pay overtime for work on two other projects to keep them on schedule.

                                            6
   Case: 11-20141      Document: 00511922960         Page: 7     Date Filed: 07/17/2012

                                      No. 11-20141

award by recalcitrantly delaying payment.” We agree. The district court
properly reinstated the arbitration panel’s interest award after DM refused to
pay within the required period.5
                                            III.
       The district court properly confirmed the arbitration panel’s arbitration
award.      On appeal, DM has failed to demonstrate reversible error.
Consequently, the judgment of the district court is AFFIRMED.




       5
         The arbitration panel’s award of interest—and order that it be paid within thirty
days—distinguishes this case from others where the arbitration panel decided not to award
interest to the prevailing party. See Glover v. IBP, Inc., 334 F.3d 471, 477 (5th Cir. 2003).

                                             7
