Dustex Corporation v. Board of Trustees of the Municipal Electric Utility of the City of Cedar Falls, Iowa et al
Filing
32
ORDER denying 3 Motion to Vacate Arbitration Award; granting 23 Motion to Confirm Arbitration Award. Signed by Chief Judge Linda R Reade on 6/18/2014. (pac)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
EASTERN DIVISION
DUSTEX CORPORATION,
Plaintiff,
No. 13-CV-2087-LRR
vs.
ORDER
BOARD OF TRUSTEES OF THE
MUNICIPAL ELECTRIC UTILITY OF
THE CITY OF CEDAR FALLS, IOWA,
MIRON CONSTRUCTION CO., INC.
and CONTINENTAL CASUALTY CO.,
Defendants.
__________________________________
BOARD OF TRUSTEES OF THE
MUNICIPAL ELECTRIC UTILITY OF
THE CITY OF CEDAR FALLS, IOWA
Counter Claimant,
vs.
DUSTEX CORPORATION,
Counter Defendant.
____________________
TABLE OF CONTENTS
I.
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II.
PROCEDURAL HISTORY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
III.
SUBJECT MATTER JURISDICTION .. . . . . . . . . . . . . . . . . . . . . . . . . 3
IV.
STANDARD OF REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
V.
FACTUAL BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
VI.
SUMMARY OF ARBITRATION PANEL’S FINDINGS.. . . . . . . . . . . . . 14
VII.
MOTION TO VACATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
A.
B.
C.
Iowa’s Public Bidding Laws.. . . . . . . . . . . . . . . . . . . . . . . . . . .
Condition Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
Parties’ arguments. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
Applicable law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prejudicial Conduct of the Arbitration Panel Chair. . . . . . . . . . . .
1.
Parties’ arguments. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
17
17
19
20
23
23
26
VIII. MOTION TO CONFIRM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
XI. CONCLUSION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
I. INTRODUCTION
The matters before the court are Plaintiff and Counter Defendant Dustex
Corporation’s (“Dustex”) “Motion to Vacate Arbitration Award” (“Motion to Vacate”)
(docket no. 3) and Defendant and Counter Claimant Board of Trustees of the Municipal
Electric Utility of the City of Cedar Falls, Iowa’s (“CFU”) “Motion to Confirm
Arbitration Award” (“Motion to Confirm”) (docket no. 23).
II. PROCEDURAL HISTORY
On December 30, 2013, Dustex filed a Complaint (docket no. 2) against CFU,
Miron Construction Co., Inc. (“Miron”) and Continental Casualty Company (“CNA”).
On December 31, 2013, Dustex filed the Motion to Vacate. On February 28, 2014, CFU
filed the Motion to Confirm. Also on February 28, 2014, Miron and CNA filed a
“Memorandum in Support of [the] Motion to Vacate” (“Joinder in Motion to Vacate”)
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(docket no. 25), joining Dustex’s Motion to Vacate.1 On March 3, 2014, CFU filed a
Resistance to the Motion to Vacate (docket no. 27). On March 7, 2014, Dustex filed a
Reply to the Resistance to the Motion to Vacate (docket no. 28). On March 14, 2014,
Dustex filed a Resistance to the Motion to Confirm (docket no. 30). On that same date,
CFU filed a Resistance to Miron and CNA’s Joinder in Motion to Vacate (docket no. 31).
On December 6, 2013, CFU filed a Motion to Confirm against Miron and CNA in
Board of Trustees of the Municipal Electric Utility of the City of Cedar Falls, Iowa v.
Miron Construction Co., Inc. et al., case no. 13-CV-2080-LRR (docket no. 12). On
December 30, 2013, Miron and CNA filed a Motion to Vacate. Case no. 13-CV-2080LRR (docket no. 19). On February 26, 2014, the court granted in part and reserved ruling
in part the Motion to Confirm and denied the Motion to Vacate. February 26, 2014 Order,
Case no. 13-CV-2080-LRR at 28-29. On that same date, the Clerk of Court entered
judgment in favor of CFU and against Miron and CNA in the amount of $3,419,697.29;
in favor of CFU and against Miron and CNA in the amount of $274,053.17; in favor of
CFU and against Miron and CNA in the amount of $33,439.73; and in favor of Miron and
CNA and against CFU in the amount of $420,872.96. Judgment, case no. 13-CV-2080LRR (docket no. 27).
III. SUBJECT MATTER JURISDICTION
The parties do not dispute that the court has diversity jurisdiction over the instant
matter. The parties to an arbitration agreement must have an affirmative agreement
providing for judicial confirmation of an arbitration award for a federal court to have
1
In the Brief in Support of the Joinder in Motion to Vacate (docket no. 25-2),
Miron and CNA filed the same brief that they filed in Board of Trustees of the Municipal
Electric Utility of the City of Cedar Falls, Iowa v. Miron Construction Co., Inc. et al.,
case no. 13-CV-2080-LRR, in order to prevent any waiver. See Motion to Vacate, case
no. 13-CV-2080-LRR (docket no. 19). The court has already addressed Miron and CNA’s
arguments in that case and, accordingly, will not revisit them here. See case no. 13-CV2080-LRR, February 26, 2014 Order (docket no. 26).
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confirmation authority under 9 U.S.C. § 9. The Contract between CFU and Miron
(docket no. 27-4) provides the following:
All claims, disputes and other matters in question between
[CFU] and [Miron] arising out of or relating to the Contract
. . . or the breach thereof . . . will be decided by arbitration
. . . . The award rendered by the arbitrators will be final,
judgment may be entered upon it in any court having
jurisdiction thereof.
Contract at 80. The court is satisfied that it has diversity jurisdiction over this case
because complete diversity exists between the parties and the amount in controversy
exceeds $75,000.
See 28 U.S.C. § 1332 (“The district courts shall have original
jurisdiction of all civil actions where the matter in controversy exceeds the sum or value
of $75,000, exclusive of interest and costs, and is between . . . citizens of different States
. . . .”). For purposes of diversity jurisdiction, CFU is a citizen of Iowa. Dustex is a
North Carolina corporation with its principal place of business in Georgia. Miron is a
Wisconsin corporation with its principle place of business in Neenah, Wisconsin. CNA
is an Illinois corporation with its principle place of business in Chicago, Illinois.
IV. STANDARD OF REVIEW
The Federal Arbitration Act (“FAA”) provides courts with the authority to confirm
or vacate an arbitration award:
If the parties in their agreement have agreed that a judgment of
the court shall be entered upon the award made pursuant to the
arbitration, and shall specify the court, then at any time within
one year after the award is made any party to the arbitration
may apply to the court so specified for an order confirming the
award, and thereupon the court must grant such an order unless
the award is vacated, modified, or corrected as prescribed in
sections 10 and 11 of this title. If no court is specified in the
agreement of the parties, then such application may be made to
the United States court in and for the district within which such
award was made.
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9 U.S.C. § 9. 9 U.S.C. § 10 provides the “exclusive ground[]” for vacating an arbitration
award. Hall Street Assocs. v. Mattel, Inc., 552 U.S. 576, 584 (2008). Section 10(a)
provides:
(a) In any of the following cases the United States court in and
for the district wherein the award was made may make an order
vacating the award upon the application of any party to the
arbitration—
(1) where the award was procured by corruption, fraud,
or undue means;
(2) where there was evident partiality or corruption in
the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause shown,
or in refusing to hear evidence pertinent and material to the
controversy; or any other misbehavior by which the rights of
any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.
9 U.S.C. § 10(a).
A court’s review of a motion to vacate an arbitration award is limited to the grounds
listed in § 10. “Congress did not authorize de novo review of [an arbitration] award on
its merits; it commanded that when the exceptions do not apply, a federal court has no
choice but confirm.” UHC Mgmt. Co., v. Computer Scis. Corp., 148 F.3d 992, 997 (8th
Cir. 1998). “[R]eview of an arbitration award under the Federal Arbitration Act is
exceedingly limited and deferential.” St. John’s Mercy Med. Ctr. v. Delfino, 414 F.3d
882, 884 (8th Cir. 2005). A court may not “reconsider the merits of an award even
though the parties may allege that the award rests on errors of fact or on misinterpretation
of the contract.” United Paperworkers International Union v. Misco, Inc., 484 U.S. 29,
5
36 (1987); accord Med. Shoppe Int’l, Inc. v. Turner Inv., Inc., 614 F.3d 485, 488 (8th
Cir. 2010) (“Courts have no authority to reconsider the merits of an arbitration award,
even when the parties allege that the award rests on factual errors or on a misinterpretation
of the underlying contract.”). “‘The district court affords the arbitrator’s decisions an
extraordinary level of deference and confirms so long as the arbitrator is even arguably
construing or applying the contract and acting within the scope of his authority.’” Wells
Fargo Bank, N.A. v. WMR e-PIN, LLC, 653 F.3d 702, 710 (8th Cir. 2011) (quoting
Crawford Grp., Inc. v. Holekamp, 543 F.3d 971, 976 (8th Cir. 2008)); see also StoltNielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 671 (2010) (“It is not enough for
petitioners to show that the [arbitration] panel committed an error—or even a serious
error.”); McGrann v. First Albany Corp., 424 F.3d 743, 748 (8th Cir. 2005) (“The bottom
line is ‘[w]e will confirm the arbitrator’s award even if we are convinced that the arbitrator
committed serious error, so long as the arbitrator is even arguably construing or applying
the contract and acting within the scope of his authority.’” (alteration in original) (quoting
Schoch v. InfoUSA, Inc., 341 F.3d 785, 788 (8th Cir. 2003))); Ace Elec. Contractors, Inc.
v. International Brotherhood of Electrical Workers, Local Union No. 292, 414 F.3d 896,
899 (8th Cir. 2005) (“Where the parties have contemplated that an arbitrator will give
meaning to the language of the contract and determine the remedies for the violations it
finds, ‘courts have no authority to disagree with [the arbitrator’s] honest judgment’ and a
court may not reject an arbitrator’s fact-findings or interpretation of contract ‘simply
because it disagrees with them.’” (alteration in original) (quoting United Paperworkers
International Union, 484 U.S. at 38)); Inter-City Gas Corp. v. Boise Cascade Corp., 845
F.2d 184, 187 (8th Cir. 1988) (providing that “contract interpretation is left to the
arbitrator”). “A party seeking vacation of an award [under § 10(a)(3)] must demonstrate
that the conduct influenced the outcome of the arbitration.” Delta Mine Holding Co. v.
AFC Coal Properties, Inc., 280 F.3d 815, 822 (8th Cir. 2001); see also M & A Elec.
6
Power Co-op v. Local Union No. 702, Int’l Broth. of Elec. Workers, AFL-CIO, 977 F.2d
1235, 1238 (8th Cir. 1992) (“[A]n arbitrator’s conduct must be such that a party can say
that he was deprived of a fair hearing by the challenged conduct, and the party seeking a
vacation of an award . . . must demonstrate that the conduct influenced the outcome of the
arbitration.”).
Section 10(a)(3) of the FAA allows a district court to vacate an arbitration decision
“where the arbitrators were guilty of misconduct . . . in refusing to hear evidence pertinent
and material to the controversy[,] or of any other misbehavior by which the rights of any
party have been prejudiced.” 9 U.S.C. § 10(a)(3). “To constitute misconduct requiring
vacation of an award, an error in the arbitrator’s determination ‘must be one that is not
simply an error of law, but which so affects the rights of a party that it may be said that
he was deprived of a fair hearing.’” El Dorado Sch. Dist. No. 15 v. Continental Cas. Co.,
247 F.3d 843, 848 (8th Cir. 2001) (quoting Grahams Serv. Inc. v. Teamsters Local 975,
700 F.2d 420, 422 (8th Cir. 1982)).
Section 10(a)(4) of the FAA allows a district court to vacate an arbitration decision
“where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). However, “[a] party
seeking relief under [9 U.S.C. § 10(a)(4)] bears a heavy burden.” Oxford Health Plans
LLC v. Sutter, __ U.S. __, __, 133 S. Ct. 2064, 2068 (2013). “[C]onvincing a court of
an arbitrator’s error—even his grave error—is not enough” for a court to vacate an
arbitration decision. Id. at 2070. “So long as the arbitrator was ‘arguably construing’ the
contract . . . a court may not correct his mistakes under § 10(a)(4).” Id. (quoting E.
Associated Coal Corp. v. United Mine Workers of America, District 17, 531 U.S. 57, 62
(2000)). “It is only when [an] arbitrator strays from interpretation and application of the
agreement and effectively dispense[s] his own brand of industrial justice that his decision
may be unenforceable.” Stolt-Nielsen S.A., 559 U.S. at 671 (alterations in original)
(quoting Major League Baseball Players Ass’n v. Garvey, 532 U.S. 504, 509 (2001))
7
(internal quotation marks omitted). “The potential for those mistakes is the price of
agreeing to arbitration.” Oxford Health Plans LLC, __ U.S. __, 133 S. Ct. at 2070. “‘It
is the arbitrator’s construction [of the contract] which was bargained for; and so far as the
arbitrator’s decision concerns construction of the contract, the courts have no business
overruling him because their interpretation of the contract is different from his.’” Id.
(alteration in original) (quoting United Steelworkers of America v. Enter. Wheel & Car
Corp., 363 U.S. 593, 599 (1960)). Moreover, “[a]rbitrators are not required to elaborate
their reasoning supporting an award, and to allow a court to conclude that it may substitute
its own judgment for the arbitrator’s whenever the arbitrator chooses not to explain the
award would improperly subvert the proper functioning of the arbitral process.” Stroh
Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 750 (8th Cir. 1986) (citation omitted)
(citing Sobel v. Hertz, Warner & Co., 469 F.2d 1211, (2d Cir. 1972) (“[F]orcing
arbitrators to explain their award . . . will unjustifiably diminish whatever efficiency the
process now achieves.”)).
V. FACTUAL BACKGROUND
The court accepts the arbitration panel’s findings of facts. See Arbitration Award
(docket no. 3-5) at 1-5. The facts of this case are summarized as follows:
The underlying dispute arises from a project to furnish a new filter system for the
exhaust-gas stream from a stoker-fired boiler (Unit #6) (“the project”). CFU entered into
a contract with Brown Engineering Co. (“Brown”) on April 13, 2005, for Brown to
“provide professional services relating to the engineering design and construction
management involved in a project to install a fabric filter (baghouse) on Streeter Unit 6.”
Cedar Falls Utilities Professional Services Agreement (docket no. 3-6) at 1.
In 2006, CFU initiated public bidding for a contractor to build the project. Miron
submitted a bid that included a proposal from Dustex, its subcontractor. On August 10,
2006, CFU entered into the Contract with Miron to complete the project for a price of
8
$3,350,000 based on the drawings and specifications that Brown created. Arbitration
Award at 2. The Contract provides that Miron, referred to as CONTRACTOR in the
Contract, shall
complete all Work as specified in the Contract Documents. The
Work is generally described as follows: streeter station unit no.
6 environmental upgrade—fabric type dust collector addition[.]
Contract at 1 (emphasis omitted). In addition, the Contract states:
The Project has been designed by the engineering staff of
Brown Engineering Company, Des Moines, Iowa, who are
hereinafter called ENGINEER and who assumes all duties and
responsibilities and have the rights and authority assigned to
ENGINEER in the Contract Documents in connection with
completion of the Work in accordance with the Contract
Documents.
Id. The Contract Documents “comprise the entire agreement” between CFU and Miron,
consisting of the eleven items enumerated in the Contract. Id. at 4.
The Contract Documents also provide for the resolution of “[a]ll claims, disputes
and other matters in question between [CFU] and [Miron] arising out of or relating to the
Contract Documents or the breach thereof” to be “decided by arbitration.” Id. at 80.
Additionally, “[t]he award rendered by the arbitrators will be final, judgment may be
entered upon it in any court having jurisdiction thereof, and it will not be subject to
modification or appeal.” Id.
In addition, and relevant to the Motion to Vacate and the Motion to Confirm, the
Contract provides the following:
6.9.1. . . . Nothing in the Contract Documents shall create for
the benefit of any . . . Subcontractor . . . any contractual
relationship between OWNER or ENGINEER and any such
Subcontractor . . . nor shall it create any obligation on the part
of OWNER or ENGINEER to pay or to see to the payment of
any moneys due to any such subcontractor . . . .
9
...
9.11. ENGINEER will be the initial interpreter of the
requirements of the Contract Documents and judge of the
acceptability of the Work thereunder. Claims, disputes and
other matters relating to the acceptability of the Work or the
interpretation of the Work or the interpretation of the
requirements of the Contract Documents pertaining to the
performance and furnishing of the Work and Claims under
Articles 11 and 12 in respect of changes in the Contract Price
or Contract Times will be referred initially to ENGINEER in
writing with a request for a formal decision in accordance with
this paragraph. Written notice of each such claim, dispute or
other matter will be delivered by the claimant to ENGINEER
and the other party to the Agreement promptly (but in no event
later than thirty days) after the start of the occurrence or event
giving rise thereto, and written supporting data will be
submitted to ENGINEER and the other party within sixty days
after the start of such occurrence or event unless ENGINEER
allows an additional period of time for the submission of
additional or more accurate data in support of such claim,
dispute or other matter. . . . ENGINEER’s written decision on
such claim, dispute or other matter will be final and binding
upon OWNER and CONTRACTOR unless: (i) an appeal from
ENGINEER’s decision is taken within the time limits and in
accordance with the procedures set forth in EXHIBIT GC-A,
“Dispute Resolution agreement,” entered into between
OWNER and CONTRACTOR pursuant to Article 16, or (ii) if
no such Dispute Resolution Agreement has been entered into,
a written notice of intention to appeal from ENGINEER’s
written decision is delivered by OWNER or CONTRACTOR
to the other and to ENGINEER within thirty days after the date
of such decision and a formal proceeding is instituted by the
appealing party in a forum of competent jurisdiction to exercise
such rights or remedies as the appealing party may have with
respect to such claim, dispute or other matter in accordance
with applicable Laws and Regulations within sixty days of the
date of such decision, unless otherwise agreed in writing by
OWNER and CONTRACTOR.
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9.12. . . . The rendering of a decision by ENGINEER
pursuant to paragraphs 9.10 and 9.11 with respect to any such
claim, dispute or other matter . . . will be a condition precedent
to any exercise by OWNER or CONTRACTOR of such rights
or remedies as either may otherwise have under the Contract
Documents or by Laws or Regulations in respect of any such
claim, dispute or other matter pursuant to Article 16.
...
16.2. No demand for arbitration of any claim, dispute or other
matter that is required to be referred to ENGINEER initially
for decision in accordance with paragraph 9.11 will be made
until the earlier of (a) the date on which ENGINEER has
rendered a written decision or (b) the thirty-first day after the
parties have presented their evidence to ENGINEER if a
written decision has not been rendered by ENGINEER before
that date. No demand for arbitration of any such claim, dispute
or other matter will be made later than thirty days after the date
on which ENGINEER has rendered a written decision in
respect thereof in accordance with paragraph 9.11; and the
failure to demand arbitration within said thirty days’ period will
result in ENGINEER’s decision being final and binding upon
OWNER and CONTRACTOR. If ENGINEER renders a
decision after arbitration proceedings have been initiated, such
decision may be entered as evidence but will not supersede the
arbitration proceedings, except where the decision is acceptable
to the parties concerned. . . .
...
16.5. Notwithstanding paragraph 16.4[,] if a claim, dispute or
other matter in question between OWNER and
CONTRACTOR involves the Work of a Subcontractor, either
OWNER or CONTRACTOR may join such Subcontractor as
a party to the arbitration between OWNER and
CONTRACTOR hereunder. . . .
Contract at 62, 68, 80.
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On February 2, 2007, Miron and Dustex entered into a Purchase Agreement for
Dustex’s work on the project. Purchase Agreement (docket no. 27-5). Dustex agreed to
build the critical component of the filter system, the dust collection “baghouse,” which is
a series of hundreds of sixteen-inch, tube-shaped filters housed in four steel modules. The
baghouse system includes a sophisticated, automated air system to pulse clean subsets of
bag filters while the balance remains in operation. Dustex sized the components of the
proprietary filter system based on a performance specification contained in the Contract
Documents. In addition, Dustex elected to produce a bottom-flow, rather than a crossflow, design for the pulse-cleaning system. When the filter bags clog with ash, the
upstream exhaust steam pressure increases until it reaches levels unsafe for boiler operation
and shuts down the boiler and associated generator. The effectiveness of a fixed filter area
is dependent on several factors, including the volume of exhaust gas that must be processed
per minute of operation.
The Contract Documents set forth the design parameters for the system and
anticipated four equally sized filter modules, one of which was designated as a spare to
allow for off-line maintenance and cleaning. The Contract required capacity for any three
modules to accommodate the gas volume anticipated by CFU as provided for in the
Contract Documents. In addition, the Contract Documents required Miron to size all
equipment in the system, including the baghouse, for a maximum flue-gas flow rate of
93,000 actual cubic feet per minute (“ACFM”). The Contract Documents also required
Miron to guarantee baghouse performance based on specific fuel, inlet dust loading and
a flue-gas flow of 80,000 ACFM at 350 degrees Fahrenheit. The baghouse was required
to operate under those conditions with a maximum draft loss, or differential pressure, of
six inches w.g. (water gauge) before cleaning and at 99% particulate collection efficiency.
The Contract Documents further required Miron to hire a third party to conduct
performance tests of the system after thirty days or more of continuous operation of the
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baghouse. There is no evidence that Miron ever hired a third party to conduct such testing
and no performance test was ever run after thirty continuous days of baghouse operation.
In the Purchase Agreement, Dustex intended and agreed to satisfy the performance
guarantee with three modules on-line and a fourth module serving as a spare.
The project was completed in the summer of 2007, however, it has never operated
to CFU’s satisfaction.
CNA underwrote a performance bond assuring Miron’s
performance to CFU with a penal sum of $3,350,000. Accordingly, CNA is subject to the
same claims and defenses as its principal, Miron. Arbitration Award at 2.
On August 18, 2009, Miron filed a Demand for Arbitration/Mediation Form (docket
no. 27-6), asserting a claim against CFU for $475,000 in damages, the unpaid amount on
the Contract. On September 2, 2009, CFU filed an Answering Statement (docket no. 277) denying Miron’s claim and asserting a counter claim for $1,461,000 in damages. On
December 3, 2010, CFU filed a Petition (docket no. 3-4) in the Iowa District Court for
Black Hawk County, Case No. EQCV114721, seeking to compel Dustex to join the
arbitration action, which the Iowa District Court for Black Hawk County granted. On July
5, 2011, the American Arbitration Association (“AAA”) sent counsel for Miron, CFU and
Dustex a letter (docket no. 27-12) listing the roster of arbitrators and their resumes from
which the parties could select a panel of three arbitrators and noting that, absent an
agreement of the parties, “each party shall independently strike the names objected to,
number the remaining names in order of preference and return the list to the [AAA].” July
5, 2011 Letter at 2. The July 5, 2011 Letter further stated that if the parties failed to reach
an agreement or return the list by the deadline, “the arbitrators will be appointed as
authorized in the Rules.” Id. On October 17, 2011, the AAA sent counsel for Miron,
CFU and Dustex a letter (docket no. 27-13) providing the parties with a second list of
arbitrators to select from. On December 16, 2011, the AAA sent counsel for Miron, CFU
and Dustex a letter (docket no. 27-14) stating that it had “appointed Jerome V. Bales,
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Wyatt A. Hoch, and Marshall P. Young as arbitrators.” December 16, 2011 Letter at 1.
In addition, the December 16, 2011 Letter directed the parties to “advise the [AAA] of any
objections to the appointment of” the arbitrators.
Id.
No party objected to the
appointment of the arbitrators at any point during the proceedings.
On May 15, 2012, CFU filed a Second Amended Statement of Claims (docket no.
27-19) seeking damages in “an amount in excess of $2,000,000,” as well as liquidated
damages. Second Amended Statement of Claims at 5. On December 7, 2012, CFU filed
a Third Amended Statement of Claims (docket no. 27-26) seeking damages “in an amount
in excess of $6,500,000,” as well as liquidated damages. Third Amended Statement of
Claims at 5. The arbitration hearing began on January 21, 2013, and the panel heard
evidence from January 21 through January 25, 2013; January 28 through January 29,
2013; April 21 through April 23, 2013 and August 26 through August 27, 2013. CFU
submitted a Post-Hearing Brief on October 8, 2013 (docket no. 27-41). On that same date,
Miron and CNA also submitted a Post-Hearing Brief (docket no. 27-42).
VI. SUMMARY OF ARBITRATION PANEL’S FINDINGS
On November 6, 2013, the panel of AAA arbitrators issued an Arbitration Award
in favor of CFU. The panel made the following findings:
First, with respect to CFU’s claims against Miron, the panel found Miron liable to
CFU for $274,053.17 in liquidated damages and $33,439.63 for automation of the ash
conveyancing system. In addition, the panel found that Dustex, Miron’s subcontractor,
intended and agreed to install four equally sized filter modules, one of which was
designated as a spare to allow for off-line maintenance and cleaning. Second, the panel
found that Miron breached the Contract with CFU because: (1) Dustex sized the baghouse
for a gas flow rate of 80,000 ACFM, below the 93,000 ACFM rate that the Contract
required; and (2) Dustex admitted that the baghouse as installed needed to operate with all
four modules on-line, rather than with three and one spare, to comply with the Contract.
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Third, the panel found that Miron breached an express warranty in the Contract that “all
Work will be in accordance with the Contract Documents and will not be defective,”
Contract at 65 (emphasis omitted), and is liable to CFU pursuant to this alternative theory.
Finally, the panel found that Miron is entitled to a credit from CFU for $420,872.96, the
unpaid balance on the Contract.
Next, the panel addressed CFU’s claims against Dustex. First, the panel found that
CFU is an intended third-party beneficiary of the Purchase Agreement between Miron and
Dustex. The panel found that Dustex breached the Purchase Agreement because the
baghouse that it installed did not conform with the specifications set forth in the Contract.
Second, the panel found that CFU is entitled to damages against Dustex because Dustex
breached the indemnification provision of the Purchase Agreement and the indemnification
provision of the Contract that was incorporated into the Purchase Agreement, which
requires Dustex to indemnify CFU. The Purchase Agreement includes an indemnification
provision that provides:
To the fullest extent permitted by law, [Dustex] agrees to hold
harmless and defend [CFU] and Miron . . . from any and all
claims, demands, and judgments, including attorney’s fees, and
to indemnify and reimburse [CFU] and Miron . . . for any and
all expenses, damage, or liability incurred by [CFU] or Miron
. . . , whether directly or indirectly caused in whole or in part
by [Dustex], on account of or in connection with any material
furnished by [Dustex] under this [Purchase] Agreement, or by
any person, firm, or corporation to whom any portion of the
material is let or sublet by [Dustex].
Purchase Agreement at 9. The Contract, incorporated into the Purchase Agreement by
reference, also requires Dustex to indemnify CFU for all “claims, costs, losses and
damages” resulting from any defective work. Contract at 74. These costs include “all
fees and charges of engineers, architects, attorneys and other professionals and all court
or arbitration or other dispute resolution costs.” Id. at 79. Accordingly, the panel found
15
that CFU is entitled to recover damages resulting from Dustex’s breach of these
indemnification provisions. The panel also found that CFU is not entitled to recover
against Dustex on theories of equitable indemnity or professional negligence.
Finally, the panel provided its damages calculations. The panel found that CFU is
entitled to recover the following damages from Miron and CNA: (1) $274,053.17 in
liquidated damages; (2) $33,439.63 that was spent to hire another contractor to complete
automation of the ash conveying system that Miron left unfinished; (3) $3,419, 697.29 to
correct the baghouse; and (4) less the remaining $420,872.96 that CFU did not pay Miron
under the Contract, resulting in a total damages amount of $3,306,317.13. The panel
found that CFU is entitled to recover from Dustex, jointly and severally with Miron and
CNA, $3,419,697.29 to correct the baghouse. Finally, the panel held that Miron and
Dustex must pay $171,114.88 for the AAA’s fees and expenses and $23,350.00 for the
AAA’s administrative fees and expenses. The panel provided that Miron, Dustex and
CNA must pay the award within ten days after the date that the last arbitrator signed the
Arbitration Award, which was on November 6, 2013.
VII. MOTION TO VACATE
At the outset, the court notes that it “ha[s] no authority to reconsider the merits of
an arbitration award, even when the parties allege that the award rests on factual errors or
on a misinterpretation of the underlying contract.” Med. Shoppe Int’l, Inc., 614 F.3d at
488. Rather, as discussed above, the court may only vacate the Arbitration Award for the
reasons enumerated in 9 U.S.C. § 10. Dustex asserts that the court should vacate the
Arbitration Award: (1) because it violates public policy; (2) pursuant to 9 U.S.C. §
10(a)(4), which provides that the court may vacate an award “where the arbitrators
exceeded their powers, or so imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made,” 9 U.S.C. § 10(a)(4); and (3)
pursuant to 9 U.S.C. § 10(a)(3), which provides that the court may vacate an award
16
“where the arbitrators were guilty . . . in refusing to hear evidence pertinent and material
to the controversy[,] or of any other misbehavior by which the rights of any party have
been prejudiced,” id. § 10(a)(3). The court shall address each argument in turn.
A. Iowa’s Public Bidding Laws
In the Motion to Vacate, Dustex argues that the court should vacate the Arbitration
Award because it is contrary to Iowa’s public bidding law. Miron and CNA raised this
issue in their Motion to Vacate and the court fully addressed and rejected this argument
in its February 26, 2013 Order and finds it unnecessary to address it again. See February
26, 2013 Order, case no. 13-CV-2080-LRR at 13-22. Accordingly, for the reasons more
fully explained in the February 26, 2013 Order, the Motion to Vacate is denied to the
extent that it contends that the court should vacate the Arbitration Award because it is
contrary to Iowa’s public bidding law.
B. Condition Precedent
1.
Parties’ arguments
In the Motion to Vacate, Dustex contends that the court should vacate the
Arbitration Award pursuant to 9 U.S.C. § 10(a)(4) because CFU failed “to follow the
condition precedent set forth in the contract documents,” Brief in Support of the Motion
to Vacate (docket no. 3-1) at 6, and thereby “exceeded their powers, or so imperfectly
executed them that a mutual, final and definite award upon the subject matter was not
made,” 9 U.S.C. § 10(a)(4). According to Dustex, the Contract required CFU to take the
dispute to and request a formal decision from Brown, and only once Brown rendered a
decision was CFU permitted to appeal that decision to the arbitration panel. However,
CFU did not seek a decision from Brown before filing its claim to the arbitration panel on
September 2, 2009. Rather, CFU submitted a letter to Brown on April 5, 2010 (docket
no. 3-14), which Brown responded to in an August 13, 2010 letter (docket no. 3-16).
Because CFU failed to comply with the condition precedent in the Contract, Dustex argues
17
that the arbitration panel could not properly hear the dispute and the court should vacate
the Arbitration Award. Brief in Support of the Motion to Vacate at 12 (“The [arbitration]
[p]anel had no jurisdiction over improperly submitted claims against Dustex and the claims
should have been dismissed. The [p]anel exceeded its powers by exercising jurisdiction
over claims that were not brought in conformity with the contract documents.”). Dustex
further contends that it preserved this issue because it raised it to the arbitration panel. See
Dustex Motion for Summary Judgment (docket no. 3-11) at 4-11.
However, the
arbitration panel summarily denied Dustex’s Motion for Summary Judgment without
addressing the merits. See December 19, 2012 Arbitration Panel Decision (docket no. 312) at 1. Dustex again raised this issue in its Post-Hearing Brief (docket no. 3-13), but the
arbitration panel did not address it in the Arbitration Award.
In the Resistance to the Motion to Vacate, CFU makes several arguments in support
of its contention that the court should deny the Motion to Vacate. First, CFU argues that
it satisfied the condition precedent because the Contract permitted it to seek a formal
decision from Brown at any time and, thus, Brown’s August 13, 2010 letter satisfied the
condition precedent. According to CFU, the fact that Brown’s “decision was rendered
after the initiation of arbitration proceedings does not mean the condition precedent was
not satisfied.” Resistance to the Motion to Vacate at 24-25. Second, CFU argues that
Dustex lacks standing to enforce any condition precedent in the Contract because Dustex
is not a party or a third-party beneficiary to the Contract. Third, CFU argues that the
Contract contemplates an engineer’s (Brown) decision before the owner (CFU) or
contractor (Miron) initiate arbitration against one another, but does not require an
engineer’s decision before CFU initiates arbitration against a subcontractor (Dustex).
Fourth, CFU argues that it and Miron were permitted to join Dustex to the arbitration
without Brown’s decision pursuant to paragraph 16.5 of the Contract. Finally, CFU
asserts that it sought Brown’s decision at the appropriate time, in August 2010, after
18
testing revealed that Unit No. 6 failed to meet the performance guarantee and CFU,
Miron and Dustex “reached an impasse.” Id. at 29.
2.
Applicable law
Generally, the failure to satisfy a contractually agreed upon condition precedent
precludes later litigation on a dispute under the contract. Cameo Homes v. KrausAnderson Const. Co., 394 F.3d 1084, 1088 (8th Cir. 2005) (holding that, where the
plaintiff failed to give written notice to an architect of its breach of contract claims against
the defendant, a condition precedent required under the contract, the plaintiff was
“contractually barred” from litigating the claim). “Where contracting parties condition
an arbitration agreement upon the satisfaction of some condition precedent, the failure to
satisfy the specified condition will preclude the parties from compelling arbitration and
staying proceedings under the FAA.” HIM Portland, LLC v. DeVito Builders, Inc., 317
F.3d 41, 44 (1st Cir. 2003) (affirming the district court’s denial of the plaintiff’s motion
to compel arbitration).
However, “[u]nlike the question whether a federal court has jurisdiction over a
claim, the question of whether the contractual prerequisites to arbitration have been
fulfilled are ‘procedural requirements that go to the heart of the dispute’ and do not alter
the parties’ contractual obligations to arbitrate.” El Dorado Sch. Dist. No. 15, 247 F.3d
at 847 (quoting Contracting Nw., Inc. v. City of Fredericksburg, 713 F.2d 382, 386 (8th
Cir. 1983)). In El Dorado Sch. Dist. No. 15, the Eighth Circuit Court of Appeals affirmed
the district court’s confirmation of an arbitration award in favor of a plaintiff school
district and against a defendant contractor and surety where the contract from which the
dispute arose provided that “disputes would first be submitted in writing to the architect,
and, if the parties were not satisfied with the architect’s resolution . . . , would then be
subject to binding arbitration.” Id. at 845. In that case, the defendants contended that the
arbitrator lacked jurisdiction because the school district failed to submit the written claim
19
to the architect, an argument that the defendants raised to the arbitrator but which the
arbitrator denied. Id. at 846. The Eighth Circuit held that the issue of whether a condition
precedent has been satisfied is procedural, rather than substantive, noting that it “must . . .
accord even greater deference to the arbitrator’s decisions on procedural matters than those
bearing on substantive grounds” and, given the very deferential standard afforded to
arbitrators on substantive matters, “it is difficult to articulate a standard of even lesser
scope to apply for procedural challenges.” Id. at 846-47 (quoting Stroh Container Co.,
783 F.2d at 748-49); see also John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557
(1964) (“Once it is determined . . . that the parties are obligated to submit the subject
matter of a dispute to arbitration, ‘procedural’ questions which grow out of the dispute . . .
should be left to the arbitrator.”); Contracting Nw., Inc., 713 F.2d at 385 (“[W]hether the
failure to meet any procedural prerequisite will bar recovery [is] for the arbitrator to
decide.”); Stroh Container Co., 783 F.2d at 749 (“In translating this rule of deference into
a standard of review, we must therefore accord even greater deference to the arbitrator’s
decisions on procedural matters than those bearing on substantive grounds.”). Thus, in
El Dorado Sch. Dist. No. 15, even though “neither the arbitrator nor the district court
made an express finding of fact that the condition precedent had been met,” the Eighth
Circuit nonetheless affirmed the district court’s confirmation of the arbitration award
because the defendants “raised these issues to the arbitrator . . . and the arbitrator rejected
them,” and the arbitrator’s finding did not “indicate a manifest disregard for the law.” El
Dorado Sch. Dist No. 15, 247 F.3d at 847.
3.
Application
Miron initiated the underlying action on August 18, 2009, by filing an arbitration
demand against CFU. Miron did not present its claim to Brown.2 On September 2, 2009,
2
The court notes that, although the arbitration was initiated by Miron, the record
(continued...)
20
CFU filed a counterclaim against Miron. On August 5, 2010,Tom Risse of CFU presented
its claim to Terry Martin of Brown. In the August 5, 2010 letter, CFU sought Brown’s
opinion on several issues, including “[w]hether the contract specifications require the
baghouse have a spare module which would allow for off-line cleaning and/or maintenance
of one module, while the remaining modules continued to operate up to the level of 80,000
acfm” and “[w]hether the baghouse as constructed meets the contract specifications.”
August 5, 2010 letter at 1. On August 13, 2010, Martin sent a response letter to CFU,
stating that Brown “do[es] not believe that the fabric filter provided by Dustex and
installed by Miron for the project meets all of the significant requirements called for in the
Technical Specifications in the Project Manual” and that “a Certificate of Substantial
Completion can [not] be issued at this time.” August 13, 2010 letter at 2-3. On December
3, 2010, CFU filed a Petition in Black Hawk County, Iowa, seeking to compel Dustex to
join the arbitration.
The parties dispute whether the August 2010 exchange between CFU and Brown
satisfied the condition precedent in the Contract. Whether the condition precedent was
satisfied is a procedural issue that Dustex presented to the arbitration panel. See Dustex
Motion for Summary Judgment at 4-11. However, the arbitration panel rejected Dustex’s
argument. See December 19, 2012 Arbitration Panel Decision. There is no requirement
that the arbitration panel further expound on their reasoning or analysis. See El Dorado
Sch. Dist. No. 15, 247 F.3d at 847 (“Arbitrators ‘are not required to elaborate their
reasoning supporting an award.’” (quoting Stroh Container Co., 783 F.2d at 750)). The
court disagrees with Dustex’s contention that, if the condition precedent was not satisfied,
2
(...continued)
indicates that Miron failed to satisfy the condition precedent because it never presented its
claim to Brown and Miron’s claim that CFU owed it money under the Contract is a
“[c]laim [or] dispute[] . . . relating to . . . the interpretation of the requirements of the
Contract Documents.” Contract at 68.
21
the court should vacate the Arbitration Award because the arbitration panel lacked
jurisdiction. As the Eighth Circuit stated in El Dorado School Dist. No. 15, in a case with
similar facts to those in the instant matter, “the question of whether contractual
prerequisites to arbitration have been fulfilled are ‘procedural requirements that go to the
heart of the dispute’ and do not alter the parties’ contractual obligations to arbitrate,”
“[u]nlike the question of whether a federal court has jurisdiction.”
Id. (quoting
Contracting Nw. Inc., 713 F.2d at 386).
Because the issue of whether the condition precedent was satisfied is a procedural
issue—not a substantive issue—the arbitrators’ decision is entitled to even more deference
than it would receive were this an issue of substantive arbitrability. Stroh Container Co.,
783 F.2d at 749 (“[W]e must . . . accord even greater deference to the arbitrator’s
decisions on procedural matters than those bearing on substantive grounds.”). Moreover,
the issue here is whether the court should vacate the Arbitration Award, not whether the
court should preclude the parties from compelling arbitration. Cf. HIM Portland, LLC,
317 F.3d at 44. Therefore, because: (1) the arbitration panel rejected the argument that
Dustex asserts now—that CFU failed to satisfy the condition precedent and the arbitration
panel lacked jurisdiction over the dispute; (2) there is no requirement that the arbitration
panel provide reasons for its decisions; and (3) procedural issues are to be left to the
arbitration panel, the court finds that there is no reason to disrupt the arbitration panel’s
decision on this ground. Accordingly, the Motion to Vacate is denied to the extent it
requests that the court vacate the Arbitration Award because CFU failed to satisfy the
condition precedent in the Contract. See Stroh Container Co., 783 F.2d at 749 (“We hold
. . . that the procedural issues were properly decided by the arbitrators based on their own
conclusion that the matter was properly before them.”).
22
C. Prejudicial Conduct of the Arbitration Panel Chair
1.
Parties’ arguments
In the Motion to Vacate, Dustex contends that the court should vacate the
Arbitration Award because Marshall Young, the chair of the arbitration panel, exhibited
prejudicial conduct that deprived Dustex of a fair hearing, pursuant to 9 U.S.C. § 10(a)(3).
Motion to Vacate at 1 (“Dustex further asserts that the arbitrators were guilty of
misconduct and other misbehavior that prejudiced the rights of Dustex and the award
should be vacated as provided by 9 U.S.C. § 10[a](3).”). Dustex asserts that Young was
appointed by the AAA and that it “never had the opportunity to reject or accept . . . Young
as a member of [the] [p]anel.” Brief in Support of the Motion to Vacate at 14. Dustex
puts forth several specific arguments with respect to its contention that the court should
vacate the Arbitration Award on this ground.
First, Dustex argues that Young “suffered from a profound hearing loss” that
prejudiced Dustex because he ruled on all of Dustex and Miron’s objections and motions
and “routinely denied [them] simply because he could not hear the objection.” Id.
Dustex’s counsel had to appeal to the other two members of the arbitration panel “[o]n
three occasions during the first week of testimony” because “counsel was unsuccessful in
eliciting any verbal response from . . . Young.” Id. Second, Dustex contends that,
although its defense was very complex, “[t]here was not a single occasion during the
hearings in January 2013 or afterwards in which . . . Young opened his exhibit notebook(s)
in order to follow along with direct or cross-examination testimony.” Id. at 15. Third,
Dustex contends that Young “refused to permit Dustex to cross-examine a witness . . . by
asking the witness to explain inconsistent performance data” because his “hearing loss
prevented him from understanding the nature and relevance of the prior data” and “simply
23
ruled that the examination in question was ‘not at issue’ or ‘irrelevant.’” Id.3 Fourth,
Dustex contends that Young would sleep during the arbitration hearings and that,
“primarily during the late mornings and late afternoons, . . . Young would close his eyes
and remain motionless for minutes at a time. During one such incident late into the first
week of the January hearing, . . . Young appeared to be unresponsive for approximately
twenty minutes.” Id. at 17. Fifth, Dustex argues that it was “prejudiced by the absence
of any note-taking by . . . Young, who must [have] subsequently rel[ied] on either his
memory of what little testimony he may have heard or notations prepared by someone
other than himself.” Id. Sixth, Dustex contends that, even at the end of all of the hearings
before the arbitration panel, Young could not distinguish among counsel for Dustex and
counsel for the other parties. Finally, Dustex contends that Young cross-examined Brian
Kalata, an engineer at Dustex, “as if advocating for CFU” and that Young had already
made up his mind before the parties had presented all of the evidence. Id. at 19.
Additionally, Dustex contends that this line of questioning from Young shows his
“fundamental misunderstanding of the plain language in the contract as well as the
testimony and admissions of the witnesses.” Id. at 20.
In the Resistance to the Motion to Vacate, CFU argues that the court should deny
the Motion to Vacate on this ground because Young’s conduct over the course of the
arbitration proceedings did not prejudice Dustex. First, CFU contends that Young “had
a sophisticated understanding of the testimony and exhibits presented” as evidenced by “a
series of pointed questions” that Young asked Dustex’s final witness, demonstrating “a
detailed understanding of the Contract Documents.” Resistance to the Motion to Vacate
at 32. Second, CFU argues that Dustex waived any complaints about Young by never
3
Dustex claims that it was prejudiced because of Young’s hearing when it tried to
cross-examine Terry Martin, an engineer and the chief executive officer of Brown and
when it questioned Dr. John McKenna, Dustex’s expert witness.
24
objecting in writing over the course of the arbitration proceedings. Third, CFU contends
that Young never engaged in prejudicial conduct because, in arbitration proceedings, the
arbitrator is afforded “preference to hear all relevant evidence and consider its weight.”
Id. at 35. Moreover, CFU asserts that “Dustex has not identified any violations of the
AAA Construction Rules, such as the exclusion of evidence that should have been
admitted, to support vacating the [Arbitration] [A]ward.” Id. Fourth, CFU contends that
Young exhibited no bias4 over the course of the arbitration proceedings because “Dustex
cannot establish evident partiality or corruption as a basis for vacating the [A]rbitration
[A]ward.” Id. at 36. Fifth, CFU contends that Dustex participated in the selection of the
arbitration panel to the same extent as CFU and to the extent permitted by the AAA, that
“Dustex struck every single name on the first list of potential arbitrators circulated by the
AAA” and, accordingly, pursuant to AAA Construction Rule 14, the AAA had the
authority to appoint a panel without the submission of additional lists since the parties
failed to agree on a panel. Id. at 37. According to CFU, “[t]here is no right under the
AAA Construction Rules to strike appointments by the AAA after the parties have failed
to reach an agreement” as to the composition of the arbitration panel. Id. Sixth, CFU
argues that Young was attentive, took notes and did not sleep when the parties presented
evidence and Dustex was not limited in its examination or cross-examination of any
witnesses. Finally, CFU argues that Dustex has a credibility deficit because “Tim Lewis,
Dustex’s [p]roject [m]anager, forwarded an ‘altered’ report to CFU.” Id. at 42. CFU also
points to conflicting testimony regarding the color of the fly ash on the bags from CFU’s
stoker-fire boiler.
4
The court notes that Dustex does not seek relief pursuant to 9 U.S.C. § 10(a)(2),
which authorizes vacatur “where there was evident partiality or corruption in the
arbitrators.” 9 U.S.C. § 10(a)(2). Thus, CFU’s argument on this point is irrelevant.
25
2.
Analysis
The parties raise numerous arguments related to Young’s alleged prejudicial
conduct. However, the court finds no reason to address each of Dustex’s arguments on
this ground because Dustex fails to articulate how its allegations actually prejudiced it to
justify relief under 9 U.S.C. § 10(a)(3). Additionally, the court finds no basis to support
a finding that Young’s conduct prejudiced Dustex.5
As discussed above, 9 U.S.C. § 10(a)(3) of the FAA allows a district court to vacate
an arbitration award “where the arbitrators were guilty of misconduct . . . in refusing to
hear evidence pertinent and material to the controversy[,] or of any other misbehavior by
which the rights of any party have been prejudiced.” 9 U.S.C. § 10(a)(3). “To constitute
misconduct requiring vacation of an award, an error in the arbitrator’s determination ‘must
be one that is not simply an error of law, but which so affects the rights of a party that it
may be said that he was deprived of a fair hearing.’” El Dorado Sch. Dist. No. 15, 247
F.3d at 848 (quoting Grahams Serv. Inc., 700 F.2d at 422); see also Sherrock Bros., Inc.
v. DaimlerChrysler Motors Co., 260 F. App’x 497, 501 (3d Cir. 2008) (“The statute . . .
‘cannot be read . . . to intend that every failure to receive relevant evidence constitutes
misconduct which will require the vacation of an arbitrator’s award.’” (second alteration
in original) (quoting Stereotypers’ Union No. 18 v. Newark Morning Ledger Co., 397 F.2d
594, 500 (3d Cir. 1968)). Furthermore, “by agreeing to arbitrate, a party ‘trades the
procedures and opportunity for review of the courtroom for the simplicity, informality, and
expedition of arbitration.’” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 31
(1991) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
628 (1985)).
5
In light of the court’s finding that Dustex’s argument fails on the merits, the court
also finds it unnecessary to address CFU’s argument that Dustex waived any objection to
Young because Dustex did not preserve this argument by raising it in writing during the
arbitration.
26
The court finds that it cannot be said that Young’s behavior deprived Dustex of a
fair hearing. The arbitration panel heard evidence over the course of twelve days. Dustex
makes various arguments asserting that Young did not hear or understand evidence that it
presented over the course of the arbitration proceeding, but it provides no legal authority
that supports a finding that this behavior deprived it of a fair hearing. Moreover, the
record indicates that Young actively listened to the evidence and, when he felt appropriate,
asked witnesses additional questions. Even if Dustex were able to show that Young slept
while Dustex presented some of its evidence or did not understand the evidence, this would
not necessarily warrant relief under 9 U.S.C. § 10(a)(3), which provides that the district
court may vacate an arbitration award “where the arbitrators . . . refuse[d] to hear
evidence pertinent and material to the controversy.” 9 U.S.C. § 10(a)(3). Here, Dustex
was allowed to present all of its evidence and does not argue that it was prevented from
offering any evidence. Even if one arbitrator did not hear all of the evidence because he
either did not understand it or was sleeping when it was presented, Dustex presented all
of the evidence it sought to present. In addition, Dustex presented its evidence to three
arbitrators who wrote the Arbitration Award unanimously and there is no allegation that
the other two arbitrators did not understand or did not listen to the evidence. Young’s lack
of note taking, mixing up counsel for Dustex and CFU and any other misbehavior that
Dustex alleges does not support a conclusion that Dustex was “deprived of a fair hearing.”
Id. In addition, with respect to Dustex’s argument that Young ignored or denied Dustex’s
motions or objections “simply because he could not hear,” Brief in Support of the Motion
to Vacate at 14, Dustex does not provide evidence showing that any objection prevented
Dustex from presenting evidence “pertinent and material to the controversy,” depriving
Dustex of a fair hearing. See 9 U.S.C. § 10(a)(3). Accordingly, the Motion to Vacate is
denied to the extent it requests that the court vacate the Arbitration Award because of
Young’s alleged misconduct.
27
VIII. MOTION TO CONFIRM
In the Motion to Confirm, CFU argues that there are no grounds to vacate the
Arbitration Award and, therefore, the court must confirm the Arbitration Award. In the
Resistance to the Motion to Confirm, Dustex asserts that the court should deny the Motion
to Confirm because the court should grant the Motion to Vacate for the reasons set forth
in the Motion to Vacate. As discussed above, the court has determined that there is no
reason pursuant to 9 U.S.C. § 10 to vacate the Arbitration Award. Accordingly, the court
finds it appropriate to confirm the Arbitration Award and grant the Motion to Confirm.
IX. CONCLUSION
In light of the foregoing, IT IS HEREBY ORDERED THAT Plaintiff and Counter
Defendant Dustex Corporation’s “Motion to Vacate Arbitration Award” (docket no. 3) is
DENIED. Defendant and Counter Claimant Board of Trustees of the Municipal Electric
Utility of the City of Cedar Falls, Iowa’s “Motion to Confirm Arbitration Award”(docket
no. 23) is GRANTED. The Clerk of Court is DIRECTED to enter judgment in favor of
Board of Trustees of the Municipal Electric Utility of the City of Cedar Falls, Iowa and
against Dustex Corporation.
DATED this 18th day of June, 2014.
28
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