On June 24, 2016, in Leeward Constr. Co., Ltd. v. Am. Univ. of Antigua-Coll. of Med., the Second Circuit joined its sister circuits in defining a reasoned arbitration award. ( (2d Cir. June 24, 2016)).

American University of Antigua-College of Medicine (AUA) and Leeward Construction Company (Leeward) entered into an agreement for Leeward to build a medical school in Antigua. In February 2011, Leeward demanded arbitration of certain disputes that arose during construction. At a preliminary hearing, the arbitral panel decided (without objection from the parties) that it would provide a reasoned award at the conclusion of the matter. On August 8, 2012, the panel issued its award in favor of Leeward.

Leeward filed a petition to confirm the award in the US District Court for the Southern District of New York and AUA cross-petitioned to modify the award, arguing primarily that the arbitrators exceeded their powers by failing to issue a reasoned award. The district court concluded that the award provided sufficient analysis to constitute a reasoned award and confirmed the award. AUA appealed.

The Second Circuit explained that 9 U.S.C. § 10(a) of the FAA provides four grounds on which an arbitration award may be vacated. In line with the general presumption in favor of upholding arbitral awards, a court is required to enforce the arbitration award as long as there is a "barely colorable justification for the outcome reached" (citing Banco de Seguros del Estado v. Mut. Marine Ofice, Inc., 344 F.3d 255, 260 (2d Cir. 2003)).

Further, the court acknowledged that, generally, an arbitrator's rationale for an award need not be explained (D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006)). However, once the arbitrators stated in the preliminary hearing order that they would provide a reasoned award and neither party objected, a reasoned award was required. The court noted that the Second Circuit had not yet determined what constituted a reasoned award, when a reasoned award was required.

The Second Circuit joined the Fifth and Eleventh Circuits in holding that a reasoned award:

The court found that the arbitral award at issue in this case satisfied the standard as it set forth the relevant facts and key factual findings supporting its conclusions.

AUA also challenged the arbitral award on the ground that the arbitrators exceeded their authority in awarding damages to Leeward under the doctrine of "bad faith." As Leeward never presented this theory to the arbitrators, AUA argued that it was deprived of the opportunity to address this claim in the arbitration. The Second Circuit held that the district court properly applied the "barely colorable justification" standard to AUA's argument and found no error in its result. While Leeward did not use the term "bad faith" during the arbitration, it did argue that its damages included the benefit of the profit margins it had originally negotiated for the work, and that appears to be what the arbitrators referred to in awarding "bad faith" damages.