## Facts

- Flexible Manufacturing Systems Pty. Ltd. (an Australian company) and Super Products Corp. (a Wisconsin company) entered a 1988 license agreement for Super Products to provide drawings and technical information for industrial vacuum loading equipment.
- Flexible alleged Super Products failed to provide the required technology and sued in federal court (diversity) for breach of contract and fraud in the inducement.
- Super Products gave notice of intent to terminate the license after the suit was filed.
- The license included a commercial arbitration clause requiring unresolved disputes to be determined by a U.S. commercial arbitration forum and specifying Wisconsin governing law.
- The district court compelled arbitration of the contract claims, while retaining the fraud-in-the-inducement claims.
- A three-member American Arbitration Association panel held a 17-day hearing, heard 16 witnesses, received over 400 exhibits, and issued an award for Flexible.
- Super Products moved to vacate the award, arguing the arbitrators failed to enforce the agreement’s terms (including termination provisions) and manifestly disregarded applicable law; the district court denied vacatur and confirmed the award.
- Super Products appealed; Flexible sought a finding the appeal was frivolous and requested double costs.

## Issues

1. Whether the arbitration award should be vacated under Wis. Stat. § 788.10(1)(d) on the theory that the arbitrators exceeded their powers or so imperfectly executed them that no mutual, final, and definite award was made.
2. Whether the arbitrators’ handling of contract interpretation and termination amounted to a failure to enforce the agreement or a “manifest disregard of the law.”
3. Whether the appeal was frivolous such that double costs or other sanctions should be imposed.

## Decision

- The Seventh Circuit affirmed the district court’s order confirming the arbitration award.
- The court held Super Products failed to prove invalidity of the award by clear and convincing evidence under Wisconsin arbitration law.
- The court rejected requests to re-litigate contract interpretation and termination, treating those matters as within the arbitrators’ authority and the scope of the submission.
- The court denied Flexible’s request for a declaration of frivolousness and for double costs.

## Legal Principles

- When parties choose Wisconsin law for arbitration, vacatur is governed by Wis. Stat. § 788.10(1)(d), permitting vacatur only if arbitrators exceeded their powers or failed to render a mutual, final, and definite award.
- Judicial review of commercial arbitration awards is extremely limited; courts do not reweigh evidence or correct arguable legal or factual errors by arbitrators.
- The party seeking vacatur bears the burden to show statutory grounds by clear and convincing evidence, and arbitration awards carry a presumption of validity.
- Alleged “manifest disregard of the law” requires more than an arguable mistake; it requires a showing that arbitrators knew controlling law and deliberately refused to apply it.
- An unsuccessful appeal from confirmation of an arbitration award is not sanctionable absent a stronger showing of objective baselessness.

## Conclusion

The court upheld a commercial arbitration award because the challenger did not meet Wisconsin’s demanding vacatur standard and could not convert disagreement with the panel’s contract and termination analysis into proof that the arbitrators exceeded their authority; however, the court declined to impose sanctions for the unsuccessful appeal.


Flexible Mfg. Sys. Pty. Ltd. v. Super Prods. Corp., 86 F.3d 96 (7th Cir. 1996)