U.S. SUPREME COURT TO CONSIDER CASE ON CHOICE-OF-LAW PROVISIONS FOLLOWING AIRLINE COMPANY DISPUTE
January 25, 2023
The U.S. Supreme Court will consider a case on how to interpret general choice of law provisions in contracts under the Federal Arbitration Act following a decision by the Eleventh Circuit refusing to vacate a $1 million award to Gulfstream Aerospace Corporation (“Gulfstream”) over business jet payments stipulated in a contract between it and Oceltip Aviation 1 Pty. Ltd. (“Oceltip”). This comes in response to Oceltip’s November 16 petition requesting the Court to determine whether courts can replace state law with FAA standards based on the federal common law rule requiring “clear intent” to opt out of FAA default standards in favor of state arbitration rules when they consider contracts that include both arbitration and choice of law provisions.
As background, in 2016, a tribunal of the International Centre for Dispute Resolution found that Oceltip breached a sales agreement with Gulfstream by failing to pay for a private jet it purchased through an agreement with Gulfstream. The contract between Gulfstream and Oceltip included a choice of law clause that indicated Georgia state law would govern the contract, which the entities’ arbitration proceedings followed, but a dispute later arose over whether a state or federal court should enforce the award after Gulfstream attempted to confirm its $1 million award in federal court. In response, Oceltip argued that the choice of law clause in the agreement should have been construed as meaning that Gulfstream could not seek to enforce any award in federal court. Oceltip also argued that not confirming the award according to the Georgia arbitration code amounted to a “manifest disregard for the law.” Both a Georgia federal court and the Eleventh Circuit found that the FAA’s standards should be applied, however, as unless a clear preference for a state’s arbitration standards is explicitly detailed in the contract, the Federal Arbitration Act would apply.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com 202-659-6622) or Drew Derco (dderco@eckertseamans.com 202-659-6665).
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