Fairchild Corp. v. Alcoa, Inc.

In 2002, Fairchild Corp. (defendant) sold its aerospace-fastener business to Alcoa, Inc. (plaintiff) for $657 million. Under the parties’ agreement, Fairchild would indemnify Alcoa for environmental-remediation work out of a specifically reserved $25 million account. Thereafter, Alcoa incurred over $16.3 million in remediation work and submitted claims for indemnification to Fairchild. Fairchild rejected all the claims for various reasons, including that the costs were insufficiently documented. Alcoa initiated arbitration against Fairchild. Discovery between the parties was extensive. Alcoa produced volumes of documents to support its claimed costs. Two dozen witnesses were deposed in three countries. A former state-court judge served as the arbitrator, and the arbitration hearing lasted almost two weeks. During the hearing, Alcoa produced a witness who testified over two days about materials that summarized Alcoa’s claimed costs, the details of which had been produced in discovery. Fairchild cross-examined the witness. In post-hearing proceedings, Alcoa offered to produce volumes of evidence of its expenditures, but Fairchild objected to the late submission. The arbitrator declined to accept the additional material. Later, the arbitrator issued a ruling that accepted $12,455,585.88 out of $16,385,463.92 of Alcoa’s claims. The arbitrator therefore found that about $3.304 million of Alcoa’s claims was for work not indemnifiable due to being unnecessary, not commercially reasonable, or not performed at a reasonable cost. In district court, Fairchild filed a petition to vacate the award, arguing that the arbitrator refused to hear relevant and material evidence in the form of Alcoa’s post-hearing submission.