## Facts

- Diapulse Corporation of America manufactured an electronic medical device and distributed it abroad through exclusive territorial distributorships.
- Diapulse entered distributorship agreements granting Carba, Ltd. exclusive rights in Switzerland (1973) and Germany (1974).
- The agreements included (i) a noncompetition clause barring Carba from competing in the production or sale of Diapulse machines or similar devices during the contract term and for two years after, and (ii) an arbitration clause requiring New York City arbitration under AAA rules.
- Diapulse initiated AAA arbitration in 1976, alleging Carba breached the noncompetition clause by funding and marketing a competing device (“Ionar”) in Europe and elsewhere.
- Carba contested liability, arguing the Ionar was not similar, any restriction was limited to Switzerland and Germany, and the competing device was not sold in Switzerland.
- The arbitrators ruled for Diapulse, awarding damages and costs and issuing broad injunctive relief barring Carba from marketing similar machines.
- In federal court, Diapulse moved to confirm; Carba moved to modify, arguing the injunctive relief was overbroad and the restrictive period had expired.
- The district court modified the award by narrowing the injunction to a two-year restraint limited to Switzerland and Germany.
- Diapulse appealed the modification of the injunctive provisions; Carba withdrew its cross-appeal.

## Issues

1. Whether a district court may modify the substantive scope (duration and geography) of injunctive relief in an arbitration award under the Federal Arbitration Act.
2. Whether perceived overbreadth or restraint-of-trade concerns permit judicial rewriting of an arbitral injunction.
3. Whether ambiguity in an arbitral injunction should be addressed by judicial modification or by remand for arbitral clarification.

## Decision

- The Second Circuit held the district court lacked authority to modify the substantive injunctive provisions of the arbitration award.
- The court ruled that the district court’s narrowing of the injunction’s temporal and geographic scope exceeded the limited modification power provided by the Federal Arbitration Act.
- The court remanded for further proceedings so the parties could seek a remand to the arbitration panel to clarify ambiguities in the award.

## Legal Principles

- Judicial review of arbitration awards is narrowly limited to the grounds specified in the Federal Arbitration Act.
- FAA § 11(c) permits modification only to correct matters of form that do not affect the merits; it does not authorize changes that alter substantive rights or obligations set by arbitrators.
- Courts must not rewrite an arbitral award based on their own view of reasonableness or public policy when the statutory grounds for vacatur or modification are not met.
- If an arbitral injunction is unclear (e.g., as to what conduct is prohibited, geographic reach, or duration), the proper remedy is remand to the arbitrators for clarification rather than judicial redrafting.

## Conclusion

The Second Circuit reversed the district court’s substantive narrowing of the arbitral injunction, holding that the Federal Arbitration Act does not allow courts to reshape the merits of arbitral relief; any lack of clarity in the injunction must be resolved through arbitral clarification on remand.


Diapulse Corp. of Am. v. Carba, Ltd., 626 F.2d 1108 (2d Cir. 1980)