     Case: 11-20661     Document: 00511921654         Page: 1     Date Filed: 07/16/2012




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

                                                                            FILED
                                                                           July 16, 2012

                                       No. 11-20661                        Lyle W. Cayce
                                                                                Clerk

FRONTERA EASTERN GEORGIA, LIMITED,

                                                  Plaintiff - Appellee
v.

ARAR, INCORPORATED,

                                                  Defendant - Appellant



                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:10-CV-1492


Before JOLLY, HIGGINBOTHAM, and DENNIS, Circuit Judges.
PER CURIAM:*
        ARAR, Incorporated (“ARAR”) appeals from the district court’s
confirmation of an arbitration award in favor of Frontera Eastern Georgia,
Limited (“Frontera”) and dismissal of its counterclaim for money had and
received. Having heard the parties’ arguments and studied their briefs and the
relevant case law, we affirm the judgment of the district court.




        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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                                  No. 11-20661

                                        I.
      Frontera initiated arbitration after a dispute arose between the parties
related to their drilling contract. The parties selected and confirmed a three-
member arbitral panel (the “panel”), and a merits hearing was scheduled for
December 2008. Mere days before the hearing, the parties negotiated and
executed a Settlement Agreement,1 the terms of which called for ARAR to make
an immediate $300,000 payment, followed by $950,000 (plus interest) in
installment payments over a period of twelve months beginning in January
2009. ARAR also was required to obtain a $500,000 irrevocable letter of credit
in favor of Frontera by January 15, 2009. Its failure to do so entitled Frontera,
under Section 5(i) of the Settlement Agreement, to submit a Final Award by
Consent (“Final Award”) in the amount of $1.25 million, plus certain expenses,
which the panel “shall issue,” if requested, in the form attached to the
Settlement Agreement as Exhibit B.
      ARAR timely made the $300,000 payment. It failed, however, to obtain
the letter of credit by January 15, 2009, or at any point thereafter. Although
Frontera warned ARAR that its noncompliance entitled Frontera to seek entry
of the Final Award, Frontera accepted ARAR’s installment payments through
July 2009. By that point, ARAR had made payments totaling approximately
$900,000. ARAR missed the August and September 2009 installment payments,
prompting Frontera to request entry of the Final Award from the panel under
the terms of Section 5(i), despite the fact that the unpaid installments only
totaled approximately $400,000.


      1
        The Settlement Agreement also was executed by: (1) ARAR Petrol ve Gaz
Arama Uretim Paz A.S. (“ARAR Turkey”), a joint stock company organized under the
laws of Turkey with principal offices in Turkey; and (2) Fatih Alpay, a citizen of
Turkey, who conducts business in Texas. Alpay is the president and controlling
shareholder of ARAR, as well as chairman of the board of directors and controlling
shareholder of ARAR Turkey.

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                                    No. 11-20661

      ARAR objected to the panel’s entry of the Final Award, arguing, inter alia,
that the panel lacked jurisdiction to enter the Final Award because the parties
had failed to comply with a mediation provision in the Settlement Agreement
and that ARAR should be awarded an offset in the amount of the Final Award
for payments it had made to Frontera. The panel, at ARAR’s urging, convened
a hearing on March 25, 2010 to hear the parties’ arguments on the disputed
issues.
      On April 19, 2010, the panel issued the Final Award, in which it ordered
ARAR to pay Frontera $1.25 million, plus certain expenses.2                 The panel
overruled ARAR’s jurisdictional objection and determined that neither the
language of the Settlement Agreement nor Texas law required that an offset in
the amount of the Final Award be given for ARAR’s payments to Frontera.
      Frontera filed suit in federal district court on April 29, 2010 to confirm and
enforce the Final Award under 9 U.S.C. § 9.3                  ARAR answered and
counterclaimed for, inter alia, vacatur of the award under 9 U.S.C. § 10,4 and
money had and received. The district court confirmed the panel’s Final Award
in its entirety and dismissed ARAR’s counterclaims and affirmative defenses.
The district court held that the panel did not exceed its authority in deciding: (1)
that it had jurisdiction to enter the Final Award; (2) that the language of the
Settlement Agreement did not require an offset; and (3) that Texas law


      2
       The panel ordered ARAR to pay $124,990.12 to Frontera for its attorneys fees and
expenses. Thus, the total amount of the award is $1,374,990.12.
      3
       This section states that, upon application for confirmation of an arbitration
award, the district court “must grant such an order unless the award is vacated,
modified, or corrected as prescribed in sections 10 and 11 of this title.” 9 U.S.C. § 9.
      4
        Section 10 lists four grounds upon which to vacate an award, the last of which
allows for vacatur “where the arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final, and definite award upon the subject matter
submitted was not made.” 9 U.S.C. § 10(a)(4).

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concerning unenforceable contractual penalties did not apply to the Final Award.
The district court dismissed ARAR’s money had and received counterclaim on
the ground that it was an impermissible collateral attack on the panel’s Final
Award.
                                        II.
      Although we review a district court’s confirmation of an arbitration award
de novo, our “‘review of the underlying award is exceedingly deferential.’” Rain
CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469, 472 (5th Cir. 2012)
(quoting Apache Bohai Corp. LDC v. Texaco China BV, 480 F.3d 397, 401 (5th
Cir. 2007)). “An award may not be set aside for a mere mistake of fact or law.”
Apache, 480 F.3d at 401.
                                        III.
      The district court correctly concluded that the panel did not exceed its
authority in determining that it had jurisdiction to interpret the Settlement
Agreement and enter the Final Award because the parties’ Settlement
Agreement incorporated the International Arbitration Rules of the International
Centre for Dispute Resolution (“ICDR Rules”). Article 15(1) of the ICDR Rules
states that “[t]he tribunal shall have the power to rule on its own jurisdiction,
including any objections with respect to the existence, scope or validity of the
arbitration agreement.” The parties’ incorporation of the ICDR Rules constitutes
clear and unmistakable evidence of the parties’ intent to arbitrate questions of
arbitrability, Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002), and
we will not disturb the panel’s jurisdictional decision even if we disagree with it,
T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329, 344-45 (2d Cir.
2010). In rejecting ARAR’s argument that the parties were required to mediate
under Section 12 of the Settlement Agreement before the panel could interpret
the agreement and enter the Final Award, the panel determined that Section 12
must be reconciled with Sections 4 and 5, which clearly subjected the parties to

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the panel’s jurisdiction to enter a Final Award pursuant to Exhibit B. We agree
with the district court that the panel’s interpretation of these sections is
rationally inferable from the language of the Settlement Agreement, Reed v.
Florida Metro. Univ., Inc., 681 F.3d 630, 637 & n.8 (5th Cir. 2012), and a
decision that, consistent with Texas contract law, “harmonize[d] and [gave] effect
to all the provisions of the contract so that none will be rendered meaningless,”
Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex.
2006) (internal quotation marks and emphasis omitted).
      The district court did not err, moreover, in determining that the panel did
not exceed its authority in issuing the Final Award in the amount of $1.25
million with no offset for the payments ARAR had made to Frontera through
July 2009.    Even if we disagreed with the panel’s interpretation of the
Settlement Agreement, the panel’s Final Award was rationally inferable from
the language of the Settlement Agreement. Reed, 681 F.3d at 637 & n.8.
Furthermore, we cannot say the panel exceeded its authority based on any legal
error it made in rejecting ARAR’s argument that the Final Award constituted an
unenforceable contractual penalty under Texas law. See Rain CII Carbon, 674
F.3d at 472 (arbitration award may not be vacated under 9 U.S.C. § 10 for mere
mistake of fact or law).
      With respect to ARAR’s money had and received counterclaim, we hold
that the district court did not err in construing the counterclaim as an
impermissible collateral attack on the panel’s Final Award. See Gulf Petro
Trading Co. v. Nigerian Nat’l Petroleum Corp., 512 F.3d 742, 749-50 (5th Cir.
2008); Decker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 205 F.3d 906, 910
(6th Cir. 2000). The district court, furthermore, correctly determined that ARAR
had expressly agreed to waive its right to challenge the Final Award under any
legal or equitable basis pursuant to Section 4 of the Settlement Agreement and
thus was contractually precluded from pursuing any challenges to the Final

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                                    No. 11-20661

Award. Accordingly, we affirm the district court’s dismissal of the counterclaim
on this basis as well.
      In sum, the district court did not err in confirming the Final Award and
dismissing ARAR’s counterclaim for money had and received. Accordingly, the
judgment of the district court is
                                                                    AFFIRMED.




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