## Facts

- Apollo Computer, later succeeded by Hewlett-Packard (HP), entered a two-year distributorship contract with Swedish distributor Dicoscan in 1982; the contract required binding arbitration.
- In 1984, the parties executed a new distributorship contract that also contained an arbitration clause.
- Dicoscan encountered financial distress; Apollo terminated the 1984 agreement in September 1984, and Dicoscan filed for bankruptcy the next month.
- A Swedish bankruptcy court assigned to Dicoscan’s directors/officers, Helge Berg and Lars Skoog, the right to bring contract-based claims against Apollo.
- Berg and Skoog initiated ICC arbitration seeking damages for Apollo’s termination of the 1984 agreement; the contracts required application of Massachusetts law.
- Apollo/HP counterclaimed for unpaid amounts allegedly due under both contracts: approximately $10,000 under the 1984 contract and approximately $207,000 under the 1982 contract.
- The arbitral tribunal awarded roughly $700,000 plus interest to Berg and Skoog and allowed a setoff only for the $10,000 owed under the 1984 contract.
- The tribunal declined jurisdiction over HP’s larger 1982-contract claim, concluding it was not within the arbitration’s Terms of Reference, leaving that claim unresolved.
- HP sought a second arbitration on the 1982 contract and filed federal litigation seeking either a declaration that the award was satisfied by setoff or a stay of confirmation pending the second arbitration.
- The district court confirmed the award and denied a stay and declaratory setoff relief, reasoning it lacked authority to stay confirmation.

## Issues

1. Whether a federal district court confirming an arbitral award under the New York Convention and the FAA has authority to stay or defer confirmation on prudential grounds.
2. Whether, in these circumstances, the district court could or should postpone confirmation due to a closely related, unresolved arbitral claim that could offset the award.
3. Whether a judicial declaration of setoff against the award is appropriate where the asserted offsetting claim has not yet been adjudicated in arbitration.

## Decision

- The First Circuit vacated the confirmation order and remanded.
- The court held the district court had authority to stay the confirmation proceeding and erred in concluding otherwise.
- The court indicated a stay could be appropriate in the unusual setting presented, given the unresolved 1982-contract claim and the risk of prejudice from immediate payment to claimants associated with an insolvent entity.
- The court did not award HP an immediate setoff; it treated setoff as premature while the 1982-contract claim remained unadjudicated.

## Legal Principles

- Confirmation of New York Convention awards is generally expedited and judicial review is limited, but courts retain discretion to manage proceedings for prudential reasons.
- A district court may stay or defer confirmation to coordinate judicial enforcement with related, pending arbitral proceedings when immediate confirmation risks substantial unfairness.
- Where a claimed setoff depends on an unresolved dispute committed to arbitration, a court ordinarily should not impose a setoff; instead, it may address the risk indirectly through case-management tools such as a stay.
- Insolvency-related collection risks can support prudential deferral of confirmation when later recovery on an offsetting claim may be impracticable.

## Conclusion

The First Circuit held that, although Convention award confirmation is typically summary, a district court has discretion to stay confirmation on prudential grounds when a related arbitration claim remains pending and immediate enforcement could cause nonrecoverable prejudice; the case was remanded for the district court to exercise that discretion with a correct view of its authority.


Hewlett-Packard Co. v. Berg, 61 F.3d 101 (1st Cir. 1995)