## Facts

- Yahoo and Microsoft entered a 2009 search-and-advertising agreement requiring Yahoo to migrate its paid-search platform to Microsoft’s Bing Ads platform worldwide.
- The agreement required staged transitions across multiple markets and included an AAA arbitration clause with an emergency-arbitration procedure authorizing interim, injunctive, and other non-monetary relief to maintain or restore the status quo.
- By 2013, transitions were complete in most markets, but Taiwan and Hong Kong remained.
- Yahoo unilaterally delayed the Taiwan and Hong Kong transitions, citing concerns about changes in Microsoft’s leadership and commitment to the partnership.
- Microsoft treated the delay as a breach and initiated emergency arbitration seeking (1) specific performance compelling completion and (2) an injunction against further delay.
- After expedited proceedings, the Emergency Arbitrator found Yahoo breached the agreement and that the breach caused Microsoft irreparable harm; he denied specific performance but issued an injunction requiring Yahoo to proceed by specified dates and restraining further delay.
- Yahoo petitioned in federal court to vacate the emergency award under the Federal Arbitration Act (FAA); Microsoft cross-petitioned to confirm it.

## Issues

1. Whether the Emergency Arbitrator exceeded his powers under 9 U.S.C. § 10(a)(4) by issuing injunctive relief that Yahoo characterized as effectively final rather than interim relief authorized by the agreement’s emergency-arbitration clause.
2. Whether the award should be vacated for manifest disregard of the law based on the arbitrator’s findings of irreparable harm and decision to grant injunctive relief.

## Decision

- The court denied Yahoo’s petition to vacate and granted Microsoft’s cross-petition to confirm.
- The Emergency Arbitrator acted within the authority conferred by the agreement and incorporated AAA emergency rules in issuing injunctive relief, even if the relief had a final practical effect.
- The arbitrator did not manifestly disregard the law; he identified and applied the governing standards for injunctive relief and had at least a “barely colorable justification” for the findings of breach and irreparable harm.
- Disagreement with the arbitrator’s weighing of evidence did not justify vacatur under the FAA.

## Legal Principles

- Under 9 U.S.C. § 10(a)(4), vacatur is warranted only when an arbitrator exceeds the powers granted by the parties’ agreement; courts do not vacate for mere error, even serious error.
- An award is enforced if the arbitrator’s interpretation of the contract and resulting remedy has at least a “barely colorable justification” grounded in the agreement.
- Manifest disregard requires proof that (1) the allegedly ignored law is well-defined, explicit, and clearly applicable, and (2) the arbitrator knew the controlling principle and intentionally ignored it.
- Courts do not reweigh evidence or second-guess factual determinations made in arbitration when assessing vacatur requests.

## Conclusion

The court confirmed an emergency arbitration injunction compelling Yahoo to proceed with time-sensitive market transitions, holding that the arbitrator’s contract-based construction of emergency relief authority was permissible and that the irreparable-harm determination did not meet the demanding standard for vacatur under the FAA.


Yahoo! Inc. v. Microsoft Corp., 983 F. Supp. 2d 310 (S.D.N.Y. 2013)