## Facts

- Ryder System, Inc. reorganized its aviation-related businesses into Aviall, Inc. and spun Aviall off to Ryder’s shareholders in 1993.
- The spin-off was governed by a Distribution and Indemnity Agreement and related transaction documents executed by both companies.
- The agreement contemplated an intended Aviall net worth and required preparation of a “Distribution Statement” calculating dividends and debt repayments needed to reach that target.
- Section 3.03(c) required that any disputed items “related to the Distribution Statement” be submitted to KPMG Peat Marwick for resolution.
- At the time of contracting, KPMG served as outside auditor to Ryder and Aviall; Aviall later retained a different auditor.
- Other provisions in the transaction documents used different dispute-resolution language, including at least one clause that conditioned KPMG’s role on KPMG being the independent auditor for both companies at the time of the dispute.
- A dispute arose over Ryder’s allocation of pension-related assets and liabilities affecting the Distribution Statement.
- Aviall initially invoked the KPMG dispute-resolution process, then sued seeking to disqualify KPMG, alleging bias due to KPMG’s ongoing business relationship with Ryder and alleged assistance to Ryder in preparing for the arbitration.
- The district court granted summary judgment to Ryder, enforcing the contractual designation of KPMG; Aviall appealed.

## Issues

1. Whether the agreement required Distribution Statement disputes under § 3.03(c) to be submitted to KPMG even though KPMG was no longer Aviall’s auditor.
2. Whether a court may disqualify the contractually designated arbitrator before an award based on alleged partiality and alleged assistance to one party.

## Decision

- The Second Circuit affirmed summary judgment for Ryder.
- The court enforced § 3.03(c) as written and held KPMG remained the designated dispute resolver for Distribution Statement disputes.
- The court rejected Aviall’s attempt to obtain pre-award judicial disqualification of KPMG based on alleged partiality.

## Legal Principles

- Courts generally enforce arbitration agreements according to their terms, including provisions naming a specific arbitrator or dispute resolver for a defined category of disputes.
- Contract interpretation gives effect to differences in drafting across related provisions; an express condition in one clause and its absence in another supports enforcing the unconditioned clause as written.
- Challenges to arbitrator bias are ordinarily addressed after an award through statutory vacatur standards (including “evident partiality”), not through pre-award judicial intervention.
- Where the parties knowingly designate a dispute resolver with existing business ties, generalized claims based on those foreseeable ties typically do not justify nullifying the designation at the outset.

## Conclusion

The court required Aviall to proceed under the parties’ agreement submitting Distribution Statement disputes to KPMG and held that alleged partiality was not a basis for pre-award disqualification of the contractually chosen arbitrator.


Aviall, Inc. v. Ryder Sys., Inc., 110 F.3d 892 (2d Cir. 1997)