SPX CORPORATION, a Delaware corporation, Defendant Below, Appellant,
GARDA USA, INC., a Delaware corporation and GARDA WORLD SECURITY CORPORATION, a corporation organized under the laws of Canada, Plaintiffs Below, Appellees
Submitted April 23, 2014.
Motion for Reargument filed 6/23/14; Denied 6/24/14. Case Closed June 24, 2014.
Court Below: Court of Chancery of the State of Delaware. C. A. No. 7115-VCL.
John V. Fiorella, Esquire (argued), Archer & Greiner, P.C., Wilmington, Delaware for Appellant.
Peter B. Ladig, Esquire, Brett M. McCartney, Esquire, Morris James LLP, Wilmington, Delaware for Appellees.
Of Jeffrey A. Simes, Esquire (argued), Goodwin Proctor LLP, New York, New York.
Before STRINE, Chief Justice, HOLLAND, BERGER, JACOBS and RIDGELY, Justices, constituting the Court en Banc.
In this appeal we consider the circumstances under which an arbitration award may be vacated where it is argued that the arbitrator manifestly disregarded the law. The parties to a corporate acquisition agreed to arbitrate disputes about the acquired company's balance sheet on the effective date of the transaction. They retained an arbitrator to decide whether a workers' compensation reserve had been calculated correctly. The arbitrator decided, without any analysis, that there would be no adjustment to the balance sheet. The Court of Chancery vacated the arbitrator's decision, finding that the arbitrator did not follow the relevant provision of the parties' share purchase agreement. But the test for " manifest disregard for the law" is not whether the arbitrator misconstrued the contract--even if the contract language is clear and unambiguous. To vacate an arbitration award based on " manifest disregard of the law," a court must find that the arbitrator consciously chose to ignore a legal principle, or contract term, that is so clear that it is not subject to reasonable debate. As the record does not support such a finding, the arbitrator's award must be reinstated.
FACTUAL AND PROCEDURAL BACKGROUND
In November 2005, SPX Corporation entered into an agreement to sell all of the capital stock of its subsidiary, Vance International, to Garda USA, Inc., and its parent company, Garda World Security Corporation (collectively, " Garda" ). On January 13, 2006, the parties entered into an Amended and Restated Stock Purchase Agreement (the " SPA" ), under which Garda agreed to purchase Vance's stock for $67,250,000 plus Net Cash. The actual purchase price was subject to adjustment based on differences between SPX's Pre-Closing Balance Sheet, produced five days before closing, and the Effective Date Balance Sheet, produced within 60 days after closing.
On both balance sheets, Working Capital was to be calculated in accordance with the Working Capital Schedule contained in Section 1.3 of the SPA's Seller Disclosure Schedule. The Working Capital Schedule defines Vance's Working Capital generally as " current ...