Primrose Retirement Communities, L.L.C. et al v. Omni Contruction Company, Inc.
Filing
25
OPINION AND ORDER Confirming Arbitration Award; denying 7 Motion to Vacate. Signed by U.S. District Judge Roberto A. Lange on 9/25/2017. (JLS)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
FILED
SEP 2 5 2017
>
NORTHERN DIVISION
PRIMROSE RETIREMENT COMMUNITIES,
L.L.C., AND RACINE RETIREMENT,L.L.C.,
^CLERK
1:I7-CV-01007-RAL
Plaintiffs,
OPINION AND ORDER CONFIRMING
ARBITRATION AWARD
vs.
OMNI CONTRUCTION COMPANY,INC.,
Defendant.
Plaintiffs Primrose Retirement Commtmities, LLC and Racine Retirement, LLC
(collectively "Primrose") filed this action in state court together with a Motion to Confirm
Arbitration Award and Enter Judgment Thereon, Doc. 1-1. Defendant Omni Construction
Company, Inc.(Omni) removed the action to this Court. Doc. I. Jurisdiction exists under the
Federal Arbitration Act, 9 U.S.C. § I-IO, and under 28 U.S.C. § 1332, diversity of citizenship
jmisdiction. Omni resisted the Motion to Confirm Arbitration Award and filed a Motion to
Either Vacate or Modify the Arbitration Award, Docs. 7, 8, 9, 21. Primrose opposed that
motion. Docs. 19, 20. This Court held oral argument on the motion and requested filing of the
transcript and exhibits of the arbitration to more fully consider Omni's arguments in the context
of the entire case. Doc. 22. The transcript and exhibits ofthe arbitration hearing then were filed.
Docs. 23, 24. For the reasons explained herein, this Court confirms the arbitration award in
fevor ofPrimrose and denies Omni's motion to vacate or modify the award.
I.
Summary of Material Facts
I
Plaintiffs, which are being jointly referred to as'Trirnrose" in this Opinion and OrdCT, are
South Dakota limited liability corporations with their principal places of business in AbCTdeen,
South Dakota. Doc. 1-1 atf 2. Primrose entered into a Form Agreement Between Primrose and
Contractor (the Contract) with Omni on July 26, 2013, for the construction in the Village of
Mount Pleasant, Wisconsin, of a 76-imit independent and assisted living facility and a four
building, eight-unit independent living villas (the Project). Doc. 1-1 at 6-59. The Contract
required Omni to achieve substantial completion of the entire work no later Uian 52 calendar
weeks from date of commencement, Doc. 1-1 at 7, If 3.3, and had a fixed contract stun of
37,809,540, Doc. 1-1 at 8, If 4.1. The contract attached and referenced General Conditions of
Contract for Construction (General Conditions). Doc. 1-1 at 6,11; Doc. 1-1 at 13-53. Section
4.6 of the General Conditions contained valid and enforceable arbitration provisions, including
§ 4.6.2:
Claims not resolved by mediation shall be decided by arbitration which unless the
parties mutually agree otherwise, shall be in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association currently in
effect. The agreed hearing locale of any arbitration proceeding shall be at
Aberdeen, South Dakota unless the parties mutually agree otherwise...
Doc. 1-1 at 31. Section 4.6.6 of the General Conditions makes any arbitration award final,
allows judgment to be entered thereon, and selects South Dakota state or federal court for any
action to confirm or challenge any arbitration award. Doc. l-I at 32.
The date of commencement of the Project was on or about August 12, 2013. Disputes
arose between Primrose and Omni during construction. Omni fell behind schedule, which it
blamed on the weather, other excusable neglect, and Primrose's withholding of some progress
payments. Primrose and Omni discussed the importance of Omni making up time. Primrose
became deeply concerned about Omni's delays, Omni's personnel turnover, days when little to
no work was being done, and Omni's varying excuses for being behind schedule. Primrose and
Omni discussed as early as January of2014 whether termination ofthe Contract for cause should
occur, and Omni at that time assured Primrose that it could make up lost time. The parties
adjusted the completion deadline. In the summer of 2014, it became clear that Omni would not
complete the Project by the adjusted completion deadline. Primrose delivered its first Notice to
Cure to Omni, which prompted Omni to forecast "a new and unlikely completion date" as the
arbitration award put it.
Doc. 1-1 at 57. That schedule also was adjusted again. Primrose's
representatives visited the Project site on October 27, 2014; found no one from Omni on site; and
learned that Omni's latest of four superintendents had quit the job the previous Friday. On
October 28, 2014, Primrose chose to terminate Omni's contract for cause based on Omni's
breach and hired other contractors to complete the project.
Primrose then filed a demand for arbitration under Section 4.6 of the General Conditions
seeking various damages and relief. Omni answered and counterclaimed seeking damages from
Primrose under a number of claims and theories. The parties conducted discovery, including
depositions taken of each other's key witnesses and experts.
A three arbitration panel—James Duffy O'Connor, an attorney and the chair of the
Construction Law Group of Maslon Edelm^i Borman & Brand, LLP; John G. Patterson, an
attomey in the construction law practice of Fredrikson & Byron, P.A.; and William M. Beadie, a
construction, contracts and construction surety lawyer at Moore, Costello & Hart, P.L.L.P—
convened in Aberdeen for a five day evidentiary arbitration hearing from December 6 to
December 10, 2016. The arbitrators heard from nine witnesses testifying live at the hearing,
considered three video depositions together with deposition transcripts, and received thousands
of pages of exhibits contained in some ten three-ring binders. The transcript of the arbitration
hearing is 1,676 pages long. Review of the transcript and materials from the arbitration makes
clear that both sides were given an ample opportimity to present their evidence, case and
arguments.
The Scheduling Order issued by the arbitrators on December 3, 2015, prior to the
arbitration stated in Paragraph 17:
The arbitrators shall issue reasoned awards for both cases' unless the parties agree
otherwise. A "reasoned" award means that the arbitration will set out a brief
summary of the principal reasons supporting their award{s), but shall not include
findings offact or conclusions oflaw.
Doc. 9-3 at ^ 17. On March 15, 2017, the arbitrators issued a six-page Final Award of
Arbitrators. Doc. 1-1 at 54-59. The Final Award found that "Omni breached the Contract by
substantially falling short of completing their work within the Contract time, and that Primrose
was justified in terminating Omni for cause." Doc. 1-1 at 55. The arbitrators addressed and
rejected Omni's excuses for its delays. Doc. 1-1 at 55-57. Although the arbitrators found that
"Omni suffered some excusable delay because of unusually severe weather, the extent of the
delay falls substantially short of the number of days Omni claims." Doc. 1-1 at 56. The
arbitrators found Omni's final forecasted completion date to be unrealistic and that "[t]he
percentage of completion referenced in the Pay Applications leading up to the date of Omni's
termination, were not binding on the parties, wwe disputed and were not the most reliable
measure of the remaining Work." Doc. 1-1 at 57-58. The arbitrators rejected some of
Primrose's arguments, including that Omni's claims were untimely and that Primrose sustained
damage from Omni filing an incorrect and overstated lien claim. Doc. 1-1 at 58. The arbitrators
did not grant Omni relief on any ofits counterclaims. Doc. 1-1 at 54.
' parties have a dispute concerning another project that is subject to arbitration.
The
4
The arbitrators awarded Primrose "$767,119.14 for Primrose's excess costs to complete
the Project plus interest at the [contractual] rate of 18% per annum from September 26, 2015
until paid" and "Primrose's attomey's fees of $224,443.58 plus its costs and disbursements of
$61,509.63 for [a] total of$285,953.21." Doc. 1-1 at 54. Omni was ordered to promptly satisfy,
remove and discharge its mechanics lien filed against Primrose's property for this Project. Doc.
1-1 at 54. The AAA administrative fees and arbitrators' fees were to be split between the parties.
Doc. 101 at 54.
Primrose has filed a motion to confirm the arbitration award. Doc. 1-1. Omni has filed a
motion to either vacate or modify the arbitration award. Doc. 7. Omni asserts that the arbitration
award should be vacated because the arbitrators "were guilty of misconduct ... in refusing to
hear evidence pertinent and material to the controversy" under 9 U.S.C. § 10(a)(3). Specifically,
0mm first complains that on the final day of the arbitration, the arbitrators refused to hear
evidence fiom Primrose's expert Robert Sniegowski; after Omni had rested its case and Primrose
chose not to call its construction scheduling expert Sniegowski in rebuttal, the arbitrators chose
not to allow Omni to call Sniegowski adversely but instead considered Sniegowski's deposition
testimony offered by Omni. Second, Omni contends that the arbitrators refused to hear evidence
when sustaining objections during Omni's cross-examination of Primrose's witness Joe
Hawkins. Third, Omni considers it a refusal to hear evidence that the arbitrators did not account
for Omni having paid bond claims. And, fourth, Omni argues that the arbitrators ignored or
refused to consider improper completion cost claims ofPrimrose. Docs. 7, 8. Omni also asserts
that the arbitrators failed to make a "mutual, final and definite award" under 9 U.S.C. § 10(a)(4)
and committed computational errors under 9 U.S.C. § 11(a) when not discounting the award by
Omni's payments on bond cldms or amounts Omni considers to be excessive completion costs.
Doc. 7, 8.
II.
Discussion
A. Standard of Review Under Federal Arbitration Act
Under the Federal Arbitration Act(FAA), 9 U.S.C. § 1 et sea., the district court "'must'
confirm an arbitration award 'unless' it is vacated, modified, or corrected 'as prescribed'" in die
FAA. Hall Street Assocs.. L.L.C. v. Mattel. Inc.. 552 U.S. 576, 582(2008)(quoting 9 U.S.C. §
9). An arbitration award can be vacated only if(1) the award "was procured by corruption,
fiaud, or undue means";(2)the arbitrator was impartial or corrupt;(3)the ^bitrator was "guilty
of misconduct in refusing to postpone the hearing, upon sufficient cause shown," or refuses to
hear certain evidence, or otherwise prejudices the rights of a party; or(4)the arbitrator exceeded
his own power. 9 U.S.C. § 10. These four grounds constitute the exclusive justifications for
vacating an award. Medicine Shopne Int'l.. Inc. v. Turner Invs.. Inc.. 614 F.3d 485,489(8th Cir.
2010).
A 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 ofhis authority." Wells Fareo Bank. N.A. v. WMN e-PTN. rJ.C. 653 F.3d 702,
710 (8th Cir. 2011)(quoting Crawford Group. Inc. v. Holekamn. 543 F.3d 971, 976 (8th Cir.
2008)). "Courts have no authority to reconsider the merits of an arbitration award, even when
the award rests on factual errors or on a misinterpretation of the underlying contract." Medicine
Shoppe. 614 F.3d at 488. Because this Court lacks authority to review the merits of the
arbitration award, review is limited to whether any grounds to vacate or modify exist under 9
U.S.C. § 10 or § 11.
B. Omni's Arguments to Vacate or Modify
1. Robert Sniegowski Testimony
Robert Sniegowski was Primrose's expert on construction scheduling matters.
Sniegowski had written an expert report disclosed to Omni and underwent a deposition
conducted by Omni's counsel. The arbitration which had begun on Tuesday, December 6, had
stretched into the morning of Saturday, December 10, with Omni still presenting its case in chief.
When Omni rested, Primrose, which had planned to call Sniegowski as a rebuttal witness, opted
to introduce Sniegowski's report in lieu of calling him. By that point, Sniegowski had a plane to
catch and a winter storm was threatening. Upon hearing that Sniegowski was not going to
testify, Omni then wanted to call Sniegowski as an adverse witness in what would be either the
re-opening of its case in chief or its rebuttal case. Primrose had presented one brief rebuttal
witness, but Omni's apparent interest in calling Sniegowski appears to have had little connection
to Primrose's rebuttal case. Primrose objected to Omni calling Primrose's expert under those
circumstances. The arbitrators probed why Omni wished to call Primrose's expert xmder the
circumstances and chose to receive as evidence, over Primrose's objection, the transcript of
Omni's deposition of Sniegowski. Omni believed that Sniegowski made concessions during that
dqwsition helpful to Omni's case. Before this Court, Omni asserts that Sniegowski ifquestioned
in the arbitration by Omni might have given further testimony helpful to Omni. Thus, Omni
argues that the arbitrators "refus[ed] to hear evidence pertinent and material to the controversy"
contrary to 9 U.S.C. § 10(a)(3).
An arbitration award may be vacated under 9 U.S.C. § 10(a)(3) when an arbitrator
"refus[ed] to hear evidence pertinent and material to the controversy." However,"[e]very failure
of an arbitrator to receive relevant evidence does not constitute misconduct requiring vacatur of
an arbitrator's award." Hoteles Condado Beach v. Union De Tronquistas Local 901. 763 F.2d
34, 40(IstCir. 1985); see also. Lxmsford v. RBC Pain Rauscher. Inc.. 590 F.Supp.2d 1153,1156
(D. Minn. 2008){'To wm'ant vacation of an award, an arbitrator's refusal to hear evidence must
either be in 'bad faith or so gross as to amount to affirmative misconduct.'" (quoting United
Paperworks Inl'l Union v. Misco. Inc.. 484 U.S. 29, 40 (1987))). In conducting arbitration
hearings, "[a]rbitrators must be given discretion to determine whether additional evidence is
necessary or would simply prolong the proceedings." Tempo Shain Corp. v. Bertek. Inc.. 120
F.3d 16, 19(2d Cir. 1997). "In making evidentiary determinations, an M'bitrator need not follow
all the niceties observed by the federal courts." Id at 20 (internal quotations and citations
omitted). Indeed, the United States Court of Appeals for the Eighth Circuit has stated "an error
that requires the vacation of an award must be one that is not simply an error of law, but which
so affects die rights of a party that it may be said that he was deprived of a fair hearing."
Grahams Serv.. Inc. v. Teamsters Local 975. 700 F.2d 420, 422 (8th Cir. 1982) (internal
quotation marks and citations omitted).
A review of the record reveals that Primrose and Omni both received a fair arbitration
hearing. The arbidators' decision to receive the transcript of Sniegowski's deposition taken by
Omni's counsel (as Omni had offered and over Primrose's objection) in lieu of live testimony
did not so adversely affect the rights of Omni such that Omni "was deprived of a fair hearing."
See Grahams Serv.. 700 F.2d at 422. Indeed, Omni was able to point to matters in Sniegowski's
deposition testimony that Omni believed was helpful to it. The arbitrators did not truly refuse to
hear evidence in that the arbitrators received Sniegowski's report and deposition testimony of
Sniegowski conducted by Omni's counsel. Rather, the arbitrators refused to let Omni prolong
the arbitration by calling Primrose's expat in a rebuttal case (thou^ Sniegowski's testimony
was truly not rebuttal of Primrose's brief rebuttal witness) in the speculative hope that Omni
could elicit some other admission to turn around an ^bitration where Omni was losing. With
bad weather approaching, the expert having a plane to catch, and the receipt into evidence of the
deposition transcript from which Omni could make its ^guments, the decision of the arbitrators
was not the sort of misconduct to justify vacatur of the award under 9 U.S.C. § 10(a)(3).
Omni argues that had the arbitrators considered Sniegowski's deposition, they could not
have found: 1) that Primrose had subst^tial work to do on the Project after Omni's termination;
2)that state inspection issues did not contribute to delaying the Project along its critical path; or,
3) that Primrose was entitled to all of its claimed completion costs. Doc. 8 at 17. However,
Omni's contention that Sniegowski's deposition testimony would foreclose such findings is
incorrect. First, Sniegowski testified that in his opinion the project completion estimate in
Omni's Pay Application No. 14 (described as 89 percent, and a central component of Omni's
^gument it had completed much more of Ihe project than as alleged by Primrose) was
overstated. In fact, Sniegowksi believed that the project completion was closer to 81 percent as
of September 30th, 2014. Doc. 24 (Sniegowski Dep. Tr. at 33-34). Second, Sniegowski's
testimony was that the delays that arose from inspection issues were all concurrent with delays
for which Omni was responsible.
Doc. 24 (Sniegowski Dep. Tr. at 79-80).
Finally,
Sniegowski's testimony does not provide evidence which would require a finding by the
arbitrators that Primrose's claimed costs of completion were excessive.
BY [Omni's counsel]:
Q.
So for the work that we just listed. Primrose incurred roughly $2.3 million.
Does that sound reasonable to you? That's over a third of the total contract sum,
of the initial contract sum. And by your own admission the project was 81 percent
complete as of September 30.
[Primrose's counsel]: I have to object to the form of that question or
questions.
[Omni's counsel]; Yeah, it got kind of long-winded. Unfortunately, I
think Mr. Sniegowski was following me.
THE WITNESS: That certainly does sound like a lot of money. However,
whenever I have been involved in projects that were I'm going to say difficult
projects or terminations, those costs of completing the project tend to be more
than they would be had the contractor finished the project themselves.
Doc. 24(Sniegowski Dep. Tr. at 54-55).
While some of Sniegowski's deposition testimony may have arguably been
helpful to Omni in some respects, contending that it precludes the arbitrators' findings, as
Omni has done, is simply incorrect. Sniegowski's deposition testimony certainly did not
foreclose the arbitrators from making the findings that they did, and provides no basis for
this Court to conclude that those arbitrators engaged in misconduct that would justify
vacatur ofthe award.
2. Sustaining Objections During Hawkins Testimony
Omni next argues that the arbitrators refused to hear evidence pertinent and material to
the controversy by sustaining objections to questions Omni asked Primrose's witness Joe
Hawkins. Hawkins, Primrose's Director of Construction Services, testified in Primrose's case
in chief and was cross-examined for several hours by Omni. The transcript of Hawkins's crossexamination extends for more than 100 pages. Omni during the arbitration asserted that the
Project was more complete at die time Omni was terminated than Primrose contended, and
Omni relied on Omni's Payment Application No. 14, on which Hawkins had signed, as
evidence that the Project was 89% complete prior to Omni's termination. The parts of
Hawkins' cross-examination pertinent to Omni's arguments read:
BY [Omni's counsel]:
Q.
And according to payment application 14, despite all the delays which you
claim were exclusively OMNI's fault, OMNI say it was 89 percent complete as of
September 30, 2014, ri^t?
A.
That's what they stated, yes.
10
Q.
Okay. Now, before Primrose and/or its architect would sign off on a
payment application, it would undertake its own analysis and review and
inspection, right?
A,
That's correct.
Q.
And that certainly was done in this case?
A.
Correct.
Q.
In fact, it was doubled up, because you did an inspection yourself, right?
A.
Yes.
Q.
And as a result of WAI's inspection and your inspection. Primrose
certified that OMNI, in fact, had completed 89 percent of this work as of
September 30, right?
A.
We were doing everything that we could to keep the project moving
forward with the controls we had, so yes, we did approve it.
Q.
And that's your signature on payment application 14; isn't it?
A.
Yes.
Q.
And that's the signature of your architect, as well?
A.
That's correct.
Q.
And that certification reads,"certifies that based on their own observations
and review of the contract documents and the information contained herein," yomarchitect was certifying that 89 percent of the work was done?
A.
We were trying to keep payment going on the project. We didn't believe
the project was 89 percent complete.
Q.
Now, you gave this payment application to your lender in order to obtain
the release of funds, right?
A.
We did.
Q.
A.
You wouldn't deliberately mislead your lender, would you?
It was in everybody's best interest[Primrose's counsel]: Objection.
[An arbitrator]: Sustained
THE WITNESS: -- to process this.
[An arbitrator]: Come on, move on.
BY [Onmi's Counsel]:
Q.
But you certified to the lender that die project was 89 percent complete,
ri^t?
[Primrose's cotmsel]: Asked and answered.
THE WITNESS: That's correct.
Doc. 9-4 at 2. The sustaining of an objection here made no difference to anything. Witness
Hawkins actually responded to the question through the objection, and the point that Hawkins
had signed off on the pay application Mid submitted it to Primrose's lender had been made.
The cross-examination continued as follows:
BY[Omni's counsel]:
11
Q.
It's your cxurent position, is it not, Mr. Hawkins, that OMNI was only 75
percent complete as of the end of October?
A.
I believe that's what I've stated, yes.
Doc. 9-4 at 3.
Q.
Mr. Hawkins, you supplied the answer to Interrogatory Number 28, right?
A.
That's correct.
Q.
And in the answer you say you now estimate that the Racine project was
only 75 percent complete as of October 29, 2014,right?
A.
That's correct.
Q.
So have you decided that you gave misinformation to Primrose's lender
back in 2014-
[Primrose's counsel]: Objection to those same phrases.
[Omni's counsel]: - when Primrose certified 89 percent completion?
[An arbitrator]: I didn't hear. Restate the question.
BY [Omni's counsel]:
Q.
Is it - now your position that you gave inaccurate information to your
lender back in 2014 when Primrose certified 89 percent complete?
[Primrose's counsel]: Same objection as previously stated.
[An arbitrator]: Well, go ahead and answer.
THE WITNESS: We were doing anything that we could to keep the
project going. That's why we certified the pay application.
BY [Omni's counsel]:
Q.
You believe the pay application was accurate when you submitted it to
your lender, did you not?
A.
No. Not 89 percent complete.
Q.
So you deliberately gave your lender misinformation?
[Primrose's counsel]: Objection.
[An arbitrator]; Sustained. Move on.
BY[Omni's counsel]:
Q.
When did you do this reassessment to arrive at 75 percent?
A.
We did - we did one around the time of our site visits in October, and then
doing our schedule analysis from the DFRs and the site photos, to help us
understand where the project was at at that time.
Q.
So you're saying you did this reassessment before you certified payment
application 14? And to help you out, you certified payment application 14 on
November 6, 2014. Are you saying that you did this reassessment at 75 percent
prior to that time?
A.
No. We did the reassessment here recently.
Q.
Okay. So only two years later that you decided that OMNI was only 75
percent complete?
A.
We verified that they were 75 percent complete, yes.
Q.
And how did you do this reassessment two years after the fact?
A.
With the DFRs, with site photos of both interior and exterior.
12
Doc. 9-4 at 3.
By sustaining these objections, Omni argues, it was prevented from eliciting testimony
from Hawkins whereby "he likely would have admitted that he never misrepresented percentage
of completion to Primrose's lender, thereby admitting that the Project was 89% complete an
entire month prior to Omni's termination..." Doc. 8 at 18. However, Hawkins made clear in the
testimony quoted that he did not believe the project was 89 percent complete but was about 75
pCTcent complete. Moreover,the arbitrators directly questioned him on this very point:
BY [an arbitrator]:
Q.
...as of October or November when this pay app was signed, what
percentage complete did you at that time think they had achieved?
A.
It was hard to gather exactly what the number was, but I mean it was
around 75 percent. There was still a lot of things to complete throughout the
building.
Q.
I know that's what you've determined looking back, but as of that time,
November, early November before this app was signed off, did you have in mind
what percentage complete they were?
A.
Yeah, it was roughly there, yeah.
Q.
75?
A.
Yes.
Doc. 23-2 at 24
Another arbitrator further clarified:
BY [an arbitrator]:
Q.
So when you signed pay app 14, you knew it wasn't 89 percent, right?
A.
Yes
Q.
At that time, did you know it was a different percentage, or you just hadn't
looked at it close enough to determine that?
A.
We knew it was a different percentage.
Q.
And closer to 75?
A.
Yes.
Doc. 23-2 at 24.
Omni introduced as evidence Omni's Payment Application No. 14 and was allowed to
establish that Hawkins signed the payment application. The arbitrators did not refuse to hear
13
relevant and material evidence by sustaining the two objections, and in fact Uiey questioned
Hawkins on the very point Omni claims it was not allowed to make. Omni certainly was not
deprived of a fair hearing by virtue of not being allowed to badger Hawkins. The arbitrators'
sustaining of those two objections, when taken in context of the long cross-examination was not
even close to the sort of misconduct to justify vacatur of the award. ^Grah^ Servs.. 700
F.2d at 433; see also Temno. 120 F.3d at 19; Hoteles Condado Beach. 763 F.2d at 40.
3. Omni's Payment of Bond Claims
Omni next argues that the arbitrators refused to hear evidence, failed to give a reasoned
decision, or committed a computational error when not addressing Omni's evidence that it paid
$419,017.14 in bond claims made by subcontractors and suppliers. Omni asserts that its
payment of the bond claims was uncontroverted and not disputed by Primrose. At core, Omm's
argument about treatment of bond claim payments is an attack on the merits of the arbitrators'
ruling that this Court cannot use to vacate or modify the ruling. See Medicine Shoppe.614 F.3d
at 488.
Omni's payment of $419,017.14 in bond claims was evidence that the arbitrators heard.
TR 1556, 1568, 1571-74; Arb. Ex. 156; Arb Ex. 177. However, Omni was obliged to pay its
subcontractors and suppliers out of what Primrose paid Omni. Omni prior to termmation
received about $6,257,597.48 of the contract amount to pay subcontractors, suppliers and itself
for work on the Project. There was no contractual provision that obligated Primrose to reimburse
Omni when subcontractors or suppliers filed bond claims or when Omni paid those bond claims.
The ^bitrators' ruling directly addressed why Primrose was justified in terminating the contract
when it did, why Omni's arguments about justifiable delays did not entitle Omni to continue
under the contract, why Omni's assertions of the extent of contract completion were incorrect,
14
and how mudi Primrose paid and Omni in tum owed for additional costs to complete the Project.
Doc. 1-1 at 54-59. The fact that the arbitrators' ruling did not address Omni's payment of bond
claims does not establish a refusal to hear evidence, failure to give a reasoned decision, or a
computational error.
4. Primrose's Completion Costs
Omni's fina] assertion of a refusal to hear evidence, failure to give a reasoned decision, or
computational error involves the arbitrators' award of $767,119.14 to Primrose in costs to
complete the Project exceeding the remaining ammmt on the contract. When the contract was
terminated, $1,551,942.52 remained to be paid out of a contract sum of $7,809,540. Primrose's
evidence was that to complete the Project, it used the remaining $1,551,942.52 plus had to pay
an additional $767,119.14. Omni asserts that this amount is excessive and challenges in
particular $176,394.47 of costs that Omni views as especially questionable. Again, Omni's
argument about excess costs of completion at core is mi argument about the merits of the
arbitrators' ruling that cannot be used at this stage to justify vacating or modifying the ruling.
See Medicine Shoone. 614 F.3d at 488.
The arbitrators did not refuse to hear evidence concerning Omni's criticism of Primrose's
completion costs claims.
Indeed, Omni cross-examined Primrose's primary witness on
completion costs, B.J. Schaefbauer, for several hours as demonstrated by the 147 pages of the
transcript,^ The arbitrators' ruling determined that Primrose's evidence and Schaefbauer's
^ Similar to Sniegowski's testimony, Omni alleges the arbitrators could not have found
Primrose's claimed completion costs to be properly included based on the evidence, and thus
assert the arbitrators ignored and refused to hear evidence regarding improper charges. Doc. 8 at
19. For instance, Omni points to a $15,000 exterior caulking charge that it claims Schaefbauer
admitted was a mistake and not within Omni's scope of work under the contract. Id But this is
a mischaracterization of his testimony. While being questioned on the invoice that listed the
expense for exterior caulking, Schaefbauer stated that the invoice was incorrect and that the
15
testimony "adequately satisfied Primrose's burden of proving Primrose's claimed costs of
completion of the work after Omni's termination, and are recoverable under the terms of the
Parties' Contract: $767,119.14." Doc. 1-1 at 58. Nor is the arbitrators' ruling subject to
modification for a computational error. Omni did not raise any claim of computational error
under Rule 51 of the American Arbitration Association Rules, which requires such a request to
be made within 20 days of transmittal of the award. Rather, the arbitrators' award reflects a
merits-of-the-claim decision based on what evidence the arbitrators fotmd credible and
persuasive. A court cannot supplant the arbitrators' decision in that regard, even if there might
be reasons to question part of the award. "Courts have no authority to reconsider the merits of an
arbitrator's award, even when the parties allege that the award rests on factual errors or on a
misinterpretation of the contract." Medicine Shopoe.614 F.3d at 488.
Omni also asserts that the arbitrators fdled to provide a reasoned decision, as they had
agreed to do in a scheduling order. Thus Omni argues that there was no "mutual, final and
definite award" tmder 9 U.S.C. § 10(1)(4). The arbitrators in fact provided a final and definite
award in a six-page reasoned decision. Doc. 1-1 at 54-59. Vacating or modifying the award
cannot be based on Omni's dissatisfaction that the arbitrators did not embrace Omni's positions
or devote more of the decision to explaining why Omni lost. The Federal Arbitration Act and
case authority directs that this Court affirm the award. 9U.S.C.§ 1-11.
charge had been for interior caulking. Doc. 23-3 at 22. While he agreed that a charge for
exterior caulking would be improper, he directly refuted the impropriety of this charge despite
the invoice description, stating "I know what it says. I'm telling you it was a mistake on their
part when they did the invoice." Id Omni's claim that Schaefbauer admitted this charge was
improperly included is mistaken and contrary to Schaefbauer's actual testimony. The 147 pages
of transcript show that Schaefbauer was questioned by Omni's counsel on the various charges
Omni asserts were improper, and Schaefbauer refuted Omni's contentions of impropriety. The
fact that the arbitrators believed Schaefbauer does not prove a refusal to hear evidence depriving
Omni of a fair hearing.
16
III.
Conclusion and Order
For the reasons explained above,it is hereby
ORDERED that Primrose's Motion to Affirm the Arbitration Award, Doc. 1-1, is granted
and that Omni's Motion to Vacate or Modify the Award, Doc. 7, is denied.
DATED this 9^day of September,2017.
BY THE COURT;
ROBERTO A. LANGI
UNITED STATES DISTRICT JUDGE
17
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