USA v. Travelers Casualty and Surety Company of America et al
Filing
43
ORDER denying 31 Motion to Vacate ; granting 38 Motion for Sanctions. On or before Friday, August 1, 2014, Brasfield & Gorrie is DIRECTED to file itemized time records of costs, expenses, and attorney's fees incurred in defending against the motion to vacate (Doc. 31) so that the Court can determine an appropriate sanction. Signed by Judge Roy B. Dalton, Jr. on 7/18/2014. (VMF)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
UNITED STATES OF AMERICA,
for the use and benefit of
POSTEL INDUSTRIES, INC.,
Plaintiff,
v.
Case No. 6:12-cv-1228-Orl-37DAB
TRAVELERS CASUALTY AND
SURETY COMPANY OF AMERICA;
and FEDERAL INSURANCE
COMPANY,
Defendants,
and
BRASFIELD & GORRIE, LLC,
Intervenor.
ORDER
This cause is before the Court on the following:
1.
Intervenor, Brasfield & Gorrie, L.L.C.’s Motion to Confirm Arbitration Award
Against Plaintiff and for Entry of Judgment with Interest (Doc. 25-1), filed
December 27, 2013;
2.
Plaintiff’s Motion to Vacate Award of Arbitrators and Request for Evidentiary
Hearing (Doc. 31), filed March 14, 2014;
3.
Brasfield & Gorrie, L.L.C.’s Response and Incorporated Memorandum in
Opposition to Plaintiff’s Motion to Vacate (Doc. 33), filed March 27, 2014;
4.
Intervenor, Brasfield & Gorrie, L.L.C.’s Motion for Sanctions (Doc. 38), filed
April 21, 2014;
5.
Plaintiff’s Response to Intervenor, Brasfield & Gorrie, L.L.C.’s Motion for
Sanctions (Doc. 39), filed May 5, 2014; and
6.
B&G’s Reply in Support of Its Motion for Sanctions (Doc. 42), filed May 12,
2014.
Upon consideration, the Court finds that the motion to confirm the arbitration award is due
to be granted, the motion to vacate the award is due to be denied, and the motion for
sanctions is due to be granted.
BACKGROUND
In this Miller Act case, Intervenor Brasfield & Gorrie (“B&G”) contracted with the
U.S. Department of Veterans Affairs (“VA”) to construct a VA hospital in Orlando, Florida.
(Doc. 31-1, p. 2; Doc. 33, p. 1.) B&G then entered into a subcontract with Plaintiff Postel
Industries, Inc. (“Postel”) to fabricate and install the hospital’s interstitial steel. (See
Doc. 33, p. 1.) As required by the Miller Act, 40 U.S.C. § 3131(b)(2), B&G furnished a
payment bond to guarantee payment to its subcontractors and suppliers. 1 (Id.)
Before the hospital’s completion, a dispute arose between B&G and Postel
involving construction site conditions and the quality and pace of Postel’s work.
(Doc. 31-1, pp. 2–3; Doc. 33, pp. 2–3.) Ultimately, B&G stopped payment and Postel
discontinued performance. (Doc. 31-1, p. 3.)
On August 9, 2012, Postel filed this action against B&G’s sureties, seeking
compensation from the payment bond for its partial performance. (Doc. 1.) The Court
compelled arbitration and stayed the case. (Doc. 16.) At the arbitration, B&G raised its
1
Specifically, B&G contracted with Defendants Travelers Casualty and Surety
Company of America and Federal Insurance Company to furnish the payment bond. (See
Doc. 1, ¶ 7; Doc. 33, p. 1.)
2
own claim for recovery of costs incurred to complete and correct Postel’s incomplete and
allegedly non-conforming work. (See Doc. 33, pp. 1–2.) On December 16, 2013, an
American Arbitration Association panel found for B&G and awarded it $4,245,837.76, plus
the costs of the proceeding. (Doc. 25-7.)
B&G intervened in this action and now moves to confirm the arbitration award.
(Docs. 25-1, 30.) Postel moves to vacate the award for evident partiality on the part of the
arbitration panel. (Doc. 31.) B&G opposes the motion to vacate (Doc. 33) and moves to
sanction Postel and its counsel for frivolous post-arbitration litigation (Doc 38). Postel
opposes the motion for sanctions. (Doc. 39.) B&G replied. (Doc. 42.) This matter is now
ripe for the Court’s adjudication.
STANDARDS
The Federal Arbitration Act (“FAA”) provides that, “[o]n application for an order
confirming [an] arbitration award, the court ‘must grant’ the order ‘unless the award is
vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.’” Hall St.
Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 587 (2008) (quoting 9 U.S.C. § 9). “There is
nothing malleable about ‘must grant,’ which unequivocally tells courts to grant
confirmation in all cases, except when one of the ‘prescribed’ exceptions applies.” Id.
Under the “evident partiality” exception, a court may vacate an arbitration award
“where there was evident partiality or corruption in the arbitrators.” 9 U.S.C. § 10(a)(2).
Evident partiality exists “only when either (1) an actual conflict exists, or (2) the arbitrator
knows of, but fails to disclose, information which would lead a reasonable person to
believe that a potential conflict exists.” Gianelli Money Purchase Plan & Trust v. ADM
Investor Servs., Inc., 146 F.3d 1309, 1312 (11th Cir. 1998). “[T]he evident partiality
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exception is to be strictly construed,” and the “alleged partiality must be direct, definite
and capable of demonstration rather than remote, uncertain and speculative.” Id.
(citations and internal quotation marks omitted).
“When a party who loses an arbitration award assumes a never-say-die attitude
and drags the dispute through the court system without an objectively reasonable belief
it will prevail, the promise of arbitration is broken.” B.L. Harbert Int’l, LLC v. Hercules
Steel Co., 441 F.3d 905, 913 (11th Cir. 2006), abrogated on other grounds by Frazier v.
CitiFinancial Corp., 604 F.3d 1313 (11th Cir. 2010). Accordingly, “if a party on the short
end of an arbitration award attacks that award in court without any real legal basis for
doing so, that party should pay sanctions.” Id.
DISCUSSION
“The FAA presumes the confirmation of arbitration awards, and federal courts
should defer to an arbitrator’s decision wherever possible.” Id. at 909. B&G’s motion to
confirm the arbitration award is therefore due to be granted unless Postel can
demonstrate that one of the narrow statutory grounds for vacatur applies in this case. See
Hall St. Assocs., 552 U.S. at 587.
Postel contends that the arbitration award should be vacated under the FAA’s
“evident partiality” exception. (Doc. 31-1, pp. 4–10 (citing 9 U.S.C. § 10(a)(2)).)
Specifically, Postel argues that Arbitrator Nuechterlien, a member of the panel in this
case, was evidently partial to B&G because: (1) he knew two of B&G’s attorneys from
prior social gatherings and had previously mediated cases in which those attorneys were
involved; (2) at the time of the arbitration, he knew but did not disclose that his former
legal secretary was employed by the law firm representing B&G; and (3) he also knew
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but did not disclose that B&G’s general counsel had met his former law partner at a social
gathering in Washington, D.C., during the arbitration. (Id. at 5–6; Doc. 31-4, ¶¶ 3–4.)
No reasonable person would believe that Arbitrator Nuechterlien’s professional
relationships with his former secretary and with counsel for B&G would create a potential
conflict. Regarding the B&G attorneys,
familiarity due to confluent areas of expertise does not indicate bias. Rather,
so long as the previous interactions do not represent part of an ongoing
business relationship, it may be an asset, since an arbitrator's experience
in an industry, far from requiring a finding of partiality, is one of the factors
that can make arbitration a superior means of resolving disputes.
Univ. Commons-Urbana, Ltd. v. Universal Constructors Inc., 304 F.3d 1331, 1340
(11th Cir. 2002) (citation and internal quotation marks omitted). Regarding B&G’s
relationship with Arbitrator Nuechterlien’s former legal secretary and former law partner,
Postel has not provided any indication that the arbitrator knew of those relationships (see
Doc. 31-1), and in any event, the arbitrator’s connection to B&G by virtue of those
relationships is far too attenuated to reasonably suggest bias. See Austin S. I, Ltd. v.
Barton-Malow Co., 799 F. Supp. 1135, 1142 (M.D. Fla. 1992) (“A trivial relationship does
not create the appearance of impropriety necessary to violate 9 U.S.C. § 10(b); there
must be a substantial relationship between the arbitrator and a party in order to establish
‘evident partiality’ under the statute.”). In short, Arbitrator Nuechterlien’s alleged partiality
was at best “remote, uncertain and speculative,” and Postel has therefore failed to make
out a prima facie case of evident partiality. 2 Gianelli, 146 F.3d at 1312. The motion to
2
Postel also briefly argues that Arbitrator Nuechterlien’s rejection of certain legal
arguments during the arbitration proceedings evinces bias. (Doc. 31-1, pp. 7–9.)
Challenges to the merits of an arbitral decision are not appropriately raised under § 10(b).
Scott v. Prudential Sec., Inc., 141 F.3d 1007, 1015 n.18 (11th Cir. 1998). The Court
therefore rejects this argument.
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vacate the arbitration award is therefore due to be denied, and the motion for confirmation
of the award is due to be granted. 3 See Hall St. Assocs., 552 U.S. at 587.
As to the motion for sanctions, the U.S. Court of Appeals for the Eleventh Circuit
has plainly directed that, “if a party on the short end of an arbitration award attacks that
award in court without any real legal basis for doing so, that party should pay sanctions.”
B.L. Harbert, 441 F.3d at 913. Here, while Postel attacks the arbitration award under a
valid statutory provision, its motion to vacate is woefully deficient factually and reflects the
“never-say-die” attitude that robs arbitration proceedings of their ability to provide speedy,
less costly, and final resolution. See id. Accordingly, because Postel’s motion to vacate
has no reasonable factual basis and has “unreasonably and vexatiously” multiplied the
proceedings in this action, B&G’s motion for sanctions is due to be granted. See Fed. R.
Civ. P. 11(c) (permitting issuance of sanctions for factually frivolous motions);
28 U.S.C. § 1927 (“Any attorney . . . who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the court to satisfy personally the
excess costs, expenses, and attorneys’ fees reasonably incurred because of such
conduct.”). B&G will be awarded costs and attorney’s fees reasonably incurred in
defending against Postel’s motion to vacate. See id.
3
In connection with its motion for confirmation of the arbitration award, B&G seeks
an award of post-arbitration, pre-judgment interest calculated according to Florida’s
statutory interest rate on judgments. (See Doc. 25-1, p. 3 (citing Fla. Stat. § 55.03).) The
Court finds in its discretion that such an award is due to be granted. See Indus. Risk
Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1447 (11th Cir. 1998) (“In
the absence of a controlling statute, federal courts’ choice of a rate at which to determine
the amount of prejudgment interest to be awarded is . . . a matter for their discretion. That
choice is usually guided by principles of reasonableness and fairness, by relevant state
law, and by the relevant fifty-two week United States Treasury bond rate, which is the rate
that federal courts must use in awarding post-judgment interest.”).
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CONCLUSION
Accordingly, it is hereby ORDERED AND ADJUDGED:
1.
Intervenor, Brasfield & Gorrie, L.L.C.’s Motion to Confirm Arbitration Award
Against Plaintiff and for Entry of Judgment with Interest (Doc. 25-1) is
GRANTED.
2.
Plaintiff’s Motion to Vacate Award of Arbitrators and Request for Evidentiary
Hearing (Doc. 31) is DENIED.
3.
The arbitration award (Doc. 25-7) is CONFIRMED.
4.
On or before Friday, August 1, 2014, Brasfield & Gorrie is DIRECTED to
submit to the Court’s email address a proposed final judgment in Word
format. The proposed final judgment should include a calculation of the
post-arbitration-award, pre-judgment interest which will have accrued under
Florida Statutes § 55.03 as of August 1, 2014. See supra note 2.
5.
Intervenor, Brasfield & Gorrie, L.L.C.’s Motion for Sanctions (Doc. 38) is
GRANTED.
6.
On or before Friday, August 1, 2014, Brasfield & Gorrie is DIRECTED to file
itemized time records of costs, expenses, and attorney’s fees incurred in
defending against the motion to vacate (Doc. 31) so that the Court can
determine an appropriate sanction.
DONE AND ORDERED in Chambers in Orlando, Florida, on July 18, 2014.
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Copies:
Counsel of Record
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