Petrofac, Inc. v. DynMcDermott Petroleum Operations Co.
687 F.3d 671 | Court of Appeals for the Fifth Circuit | 2012
What This Case Means for Subcontractors
Petrofac, a subcontractor, submitted a Request for Equitable Adjustment (REA) to DynMcDermott for delays and disruption costs on a petroleum reserve project. The parties had agreed to binding arbitration for all contract disputes. An arbitration panel awarded damages to Petrofac, and the court upheld the award. The Fifth Circuit confirmed that broad arbitration clauses covering "all contract disputes" will be enforced, even when they include complex damages calculations.
Key Takeaways
- •Broad arbitration clauses that say "all disputes" or "any claim" will be enforced by courts—don't expect a judge to narrow them later
- •Document your REAs carefully with detailed damages breakdowns (differing site conditions, delays, disruption, lost productivity, acceleration) because arbitrators will review these closely
- •Once you agree to arbitration, you generally cannot go to court instead—make sure your arbitration clause is what you actually want before signing
The arbitration panel properly made the decision that the damages calculations fell within the agreement to arbitrate.
Frequently Asked Question
If I have a broad arbitration clause in my subcontract, can I still sue in court instead?
No. Courts will enforce broad arbitration clauses that cover "all disputes" or "any claims." Once you sign an arbitration agreement, you've agreed to resolve disagreements through arbitration, not litigation. Make sure you understand and accept the arbitration terms before signing your subcontract.
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