                   United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                 ___________

                                 No. 99-3630
                                 ___________

Mark J. Hoffman,                       *
                                       *
             Appellee,                 *
                                       * Appeal from the United States
      v.                               * District Court for the Northern
                                       * District of Iowa.
Cargill Incorporated,                  *
                                       *
             Appellant.                *
                                       *
National Grain and Feed Association,   *
                                       *
             Movant.                   *
_____________                          *
                                       *
National Grain and Feed Association,   *
                                       *
             Movant/Amicus on behalf *
             of Appellant.             *
                                       *
                                  ___________

                           Submitted: November 15, 2000

                                Filed: January 9, 2001
                                 ___________

Before BOWMAN, FAGG and BEAM, Circuit Judges.
                          ___________

BEAM, Circuit Judge.
      Cargill Corporation appeals the district court's order vacating an arbitration
award. Because the district court exceeded its authority, we reverse.

       Between fall of 1995 and winter of 1996, Mark Hoffman, an Iowa farmer,
entered into ten contracts to supply Cargill with 475,000 bushels of corn. Five of these
called for delivery of "old crop" corn between February and July of 1996. The other
five called for delivery of "new crop" corn between December 1996 and February
1997. Each contract required the submission of disputes to binding arbitration before
the National Grain and Feed Association ("NGFA").

        The contracts required Hoffman to deliver the corn to Cargill at its Blair,
Nebraska, facility but also provided that Cargill could "designate any reasonable
alternative delivery points if necessary." To weigh each corn delivery, an incoming
driver would drive onto a truck scale and then signal Cargill's operator to take a gross
weight. The driver would then dump the grain into a hopper, from which a conveyer
transported it into the milling facility. The trucker would then signal the operator to
take a "tare" weight with the difference between the gross and the tare weights being
the weight of the corn. Cargill believed that the scales could not issue a tare weight
until the hopper was empty and all of the grain's weight was removed from the scale.

       At the time they were signed, the contracts offered Hoffman a premium above
the then-market price for corn. At the time of delivery, however, the market price had
risen well above the contract price.

      Hoffman commenced performance under the contracts, and delivered 27,928
bushels of corn. At the same time he began complaining to Cargill that its scales were
consistently "shorting" him by taking higher-than-expected tare weights, and thus
under-weighing the delivered corn. In an effort to alleviate Hoffman's concerns, Cargill
offered to weigh his trucks at a neighboring facility, Terra International, at Cargill's
expense . Alternatively, it offered to take delivery at an elevator in Council Bluffs,

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Iowa, and to pay for the extra transportation costs. Hoffman "tested" the Cargill scale
by weighing two deliveries at both Terra and Blair. The first set of weights matched
and the second differed by a few hundred pounds. Relying on this purported "failure,"
Hoffman refused Cargill's alternate delivery arrangements. In July 1996, Cargill
offered to accept old or new crop corn later that year against the old crop contracts.
Hoffman again refused to deliver. On July 29, 1996, Cargill canceled the old crop
contracts and claimed damages of $464,760.14, the difference between the contract
price and the then-market price.

       Hoffman complained to the Nebraska Department of Agriculture, Weights and
Measures Division. The Department tested the scales and determined that they could
actually issue a tare weight before the hopper was empty, thus under-weighing the
grain. The Department, however, did not assess fault nor did it de-certify Cargill's
scales. Rather it noted that both the trucker and the operator played a role in the
weighing process. It also found no indication that Cargill knew of the problem. By
December 1996, Cargill had rewritten the scales' software and installed sensors in the
hopper to prevent the scales from taking premature tare weights.

       In October 1996, Hoffman made some deliveries against the new crop contracts.
Cargill withheld payment on these deliveries pending determination of its damage
claims. Hoffman testified that he understood the scales would be fixed by mid-
October. When they were not, he refused to make further deliveries against those
contracts. In November 1996, Cargill canceled the new crop contracts.

       In December 1996, Cargill initiated arbitration proceedings on the old crop
contracts. As required by NGFA rules, Cargill and Hoffman at that time executed a
contract submitting to NGFA arbitration. After Cargill submitted its first argument to
the arbitration panel, Hoffman attempted to withdraw, challenging the process as
inadequate. Hoffman then filed this diversity lawsuit. Cargill responded by asking the
district court to compel arbitration. The district court did so but also expressed its deep

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discomfort with the arbitration process. The court stated that it was "committed to a
post-arbitration review to ensure that any result reached is the product of a
fundamentally fair arbitration proceeding."

       At arbitration, Cargill sought breach damages of $464,760.14 plus interest on the
old crop contracts. Hoffman brought several counterclaims including claims for breach
based on the inaccurate scales. In December 1998, after hearing testimony and
accepting evidence, the panel issued a unanimous written decision. It found that, given
Cargill's right under the old crop contracts to designate reasonable alternative delivery
points, Hoffman's refusal to deliver constituted breach. The panel ruled against
Hoffman's claims, finding the evidence insufficient to prove that he had been shorted,
and awarded Cargill $408,262.50.

       Cargill moved the district court to confirm the award. As Hoffman did not timely
oppose the motion, the district court granted Cargill's request. Hoffman belatedly filed
a motion to vacate the judgment, which the district court did, after which it accepted
briefing and evidence as to both the arbitration process and the merits. Ultimately, the
district court vacated the panel's decision as "irrational and in manifest disregard of the
law," and also as "fundamentally unfair." Cargill has appealed to this court and the
NGFA appears as amicus. Hoffman, however, chose not to file a timely brief.1
Accordingly, the district court's lengthy opinion must speak for itself. We review the



      1
        Cargill filed its appeal on October 13, 1999. Its brief was originally due on
December 6, 1999, with Hoffman's brief due on January 5, 2000. Cargill sought and
received an extension and ultimately filed its brief on December 28, 1999. On
February 16, 2000, Hoffman sought an extension and received a delayed briefing date
of February 29. He then received a second extension to March 13. On April 6, the
Clerk of the Court notified Hoffman that if he failed to file within fifteen days, he would
forfeit his right to appear. On April 28, after Hoffman failed to file a brief, the clerk
notified him of his default.

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district court's decision to vacate an arbitration award de novo. Executive Life Ins. Co.
v. Alexander Ins. Ltd., 999 F.2d 318, 320 (8th Cir. 1993).

       Arbitration agreements are governed by the Federal Arbitration Act ("FAA").
9 U.S.C. §§ 1-16. Congress passed the FAA in 1925 to overcome "longstanding
judicial hostility to arbitration agreements." Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20, 24 (1991). It established "a liberal federal policy favoring arbitration
agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983). The FAA compels courts to be solicitous of both the arbitration process and
its results. The statute requires judicial confirmation of an arbitration award unless it
was "procured by corruption, fraud, or undue means," where there was "evident
partiality or corruption in the arbitrators," where the arbitrators were guilty of
misconduct or where the arbitrators exceeded their authority. 9 U.S.C. § 10(a).
Against this background, courts tread lightly in reviewing arbitration awards. "The
courts' review of arbitration awards is extremely narrow. The courts' sole function is
to decide whether the arbitrators' decision draws its essence from the contract."
Executive Life Ins., 999 F.2d at 320. The district court, however, vacated the award
on two extra-statutory grounds.

       The district court first ruled that the arbitration award was irrational and in
manifest disregard of the law. The court ruled that "the record before the arbitrators
made it abundantly clear that, contrary to the testimony of Cargill's witnesses, 'short'
weights could be and were obtained on the scales." The court pointed to various
instances of testimony and exhibits which questioned the accuracy of the scales. The
court held that the arbitrators should have considered whether any such short
constituted a breach on Cargill's part.

      We have allowed that, "'[b]eyond the grounds for vacation provided in the FAA,
an award will only be set aside where it is completely irrational or evidences a manifest
disregard for the law.'" Val-U Constr. Co. v. Rosebud Sioux Tribe, 146 F.3d 573, 578

                                          -5-
(8th Cir. 1998) (quoting Kiernan v. Piper Jaffray Cos., 137 F.3d 588, 594 (8th Cir.
1988) (quotation omitted)). These extra-statutory standards are extremely narrow: An
arbitration decision may only be said to be irrational where it fails to draw its essence
from the agreement, and an arbitration decision only manifests disregard for the law
where the arbitrators clearly identify the applicable, governing law and then proceed
to ignore it. Stroh Container Co. v. Delphi Indus., 783 F.2d 743, 749-50 (8th Cir.
1986). "We may not set an award aside simply because we might have interpreted the
agreement differently or because the arbitrators erred in interpreting the law or in
determining the facts." Id. at 751. Rather, the contract must not be "susceptible of the
arbitrator's interpretation." Local 970 v. B.F. Nelson Folding Cartons, Inc., 151 F.3d
748, 750 (8th Cir. 1998) (quotation omitted).

       In vacating the arbitration award, the district court essentially re-tried the
already-arbitrated matter. The district court accepted evidence on matters and
arguments that either were or could have been submitted to the arbitration panel. The
district court simply disagreed with the arbitrators' analysis of the facts. Despite
testimony suggesting that either the driver or Cargill's operator may have been at fault
in obtaining the tare weights, the district court chose to blame Cargill. The district
court discounted the evidence regarding the change in corn prices between the time
Hoffman signed the contracts and when he refused delivery–evidence which the panel
credited. Moreover, the district court disagreed with the panel's interpretation of
Hoffman's contractual duty to accede to Cargill's designation of reasonable alternate
delivery points. The record clearly does not sustain the conclusion that the arbitrators
acted irrationally or identified applicable law and then ignored it.

       The district court also vacated the award on the grounds that the proceedings
were "fundamentally unfair." The district court took issue with the entire NGFA
arbitration process and specifically challenged three elements of that process. First, the
district court questioned the method of panel selection because an NGFA panel, being
selected from NGFA membership, will necessarily be comprised of grain purchasers

                                           -6-
rather than sellers. Second, the district court objected to the lack of discovery,
specifically to the lack of an enforceable subpoena. Finally, the district court
challenged the NGFA's arbitration appeals process which required the appealing party
to post a bond equal to the arbitration award. The district court found that these
elements, together, made the process "fundamentally unfair."

       We have never recognized "fundamental unfairness" as a basis for vacating an
arbitration award. Indeed, our narrow construction of extra-statutory review militates
against such a standard. We have repeatedly said that an arbitration award may be
challenged "only" in the previously articulated instances. Val-U Constr., 146 F.3d at
578; Kiernan v. Piper Jaffray Cos., 137 F.3d 588, 594 (8th Cir. 1998); Lee v. Chica,
983 F.2d 883, 885 (8th Cir. 1993). While we do not categorically reject the possibility
of such a standard, should any such standard exist it could not possibly sustain the
district court's conclusion in this particular case, especially given the lack of briefing
from the party who would profit by this newly minted precept.

       Arbitration is not a perfect system of justice, nor it is designed to be. See
Gilmer, 500 U.S. at 30-32 (discussing the differences between litigation and
arbitration). "[W]here arbitration is contemplated the courts are not equipped to
provide the same judicial review given to structured judgments defined by procedural
rules and legal principles. Parties should be aware that they get what they bargain for
and that arbitration is far different from adjudication." Stroh Container, 783 F.2d at
751 n.12. Arbitration is designed primarily to avoid the complex, time-consuming and
costly alternative of litigation.

      In the arbitration setting we have almost none of the protections that
      fundamental fairness and due process [usually] require. . . . Discovery is
      abbreviated if available at all. The rules of evidence are employed, if at
      all, in a very relaxed manner. The factfinders (here the panel) operate
      with almost none of the controls and safeguards [expected in litigation].


                                           -7-
Lee, 983 F.2d at 889 (Beam, J. concurring in part and dissenting in part). Arbitrators
need not even articulate reasons for their decisions. Alexander v. Gardner-Denver Co.,
415 U.S. 36, 58 (1974). Having entered such a contract, a party must subsequently
abide by the rules to which it agreed. Val-U Constr., 146 F.3d at 579-80.

        If a "fundamental unfairness" standard exists, it must apply to arbitration
schemes so deeply flawed as to preclude the possibility of a fair outcome. Such is not
the case in this matter. The NGFA has been formally arbitrating cases since 1901 and
the record does not sustain the charge that it systematically favors buyers over sellers.
In drafting the FAA, Congress specifically chose to not empower arbitration parties
with an enforceable subpoena, precisely to avoid the costs and delays of full-blown
litigation. Finally, the NGFA's choice to provide an appellate proceeding, not required
by statute, should not be grounds for attacking its form. The district court's ruling
merely imported the very elements of litigation that arbitration seeks to avoid. Nothing
compels us to conclude that this process was fundamentally unfair.

       We reverse the district court and remand with instructions to confirm the
arbitration panel's award favoring Cargill.

      A true copy.

             Attest:

                 CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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