Opinion
No. FST CV 09-4016359 S
September 7, 2010
MEMORANDUM OF DECISION RE APPLICATION TO VACATE ARBITRATION AWARD DATED MAY 8, 2009 (#101.00)
This lawsuit and four related lawsuits involve disputes over the performance of architectural, design and construction contracts for a new residence on real property belonging to the plaintiffs at 70 LaFrentz Road, Greenwich, Connecticut. The plaintiffs are Harvinder Sandhu and Sonia Sandhu, the homeowners. The first defendant is the contractor, Haverson Construction Management, LLC (HCM). The second defendant is the architect, Haverson Architecture Design, PC (HAD). The contracts were dated July 15, 2004 and November 18, 2005. The four other related lawsuits are pending in the judicial district of Stamford/Norwalk at Stamford: Haverson Construction Management, LLC v. Sandhu et al., FST CV 07-5005132 S (foreclosure of mechanics lien for unpaid construction services); Quality Stairs, Inc. v. Sandhu et al., FST CV 08-5007521 S (suit by unpaid subcontractor); Gunzy Electric, Inc. v. Sandhu et al., FST CV 08-5008617 S (suit by unpaid subcontractor) and Sandhu v. Haverson Construction Management, LLC et al., FST CV 07-5004567 S. This last lawsuit was the first filed. Its operative complaint is the Amended Complaint dated July 18, 2008 (#162.00) in six counts: CUTPA, fraud, negligent misrepresentation, negligence/malpractice, unjust enrichment and breach of fiduciary duty. Additional defendants in that 2007 Sandhu lawsuit are Jay Haverson and Carolyn Haverson, principals of HAD and HCM and 351 Round Hill Road, LLC, a Haverson controlled entity engaged in its own residential construction project at 351 Round Hill Road, Greenwich, Connecticut.
This instant lawsuit is Sandhu's Application to Vacate Arbitration Award. FST CV 07-5004567 S contains HCM and HAD's Motion to Confirm Arbitration Award dated May 19, 2009 (#172.00). The Motion to Confirm and the Application to Vacate involve the same arbitration award.
On May 8, 2009 the Sandhus commenced this instant matter, FST CV 09-4016359 S, by filing an application for "an Order vacating, correcting and/or confirming that certain Arbitration Award." (#101.00.) The body of the Application requested alternative relief: Paragraph 10 "The Award should . . . be vacated, in whole or in part . . ." Paragraph 11 "Alternatively, the order should be modified and corrected . . ." and in Paragraph 12 "Alternatively if the Award is neither vacated nor modified nor corrected, the Sandhus seek confirmation of the Award pursuant to C.G.S. § 52-417 insofar as relief is affirmatively awarded to the Sandhus." In their claims for relief the Sandhus requested: "1. That the Award be vacated, corrected and/or confirmed." Since HCM and HAD requested confirmation in its Motion to Confirm Arbitration Award dated May 19, 2009 in the companion case (#172.00) FST CV 07-5004567 S, the court will refer to the Sandhus' May 8, 2009 cause of action as an Application to Vacate Arbitration Award. In this Memorandum of Decision the court will discuss all forms of relief requested by the Sandhus despite referring to the action for simplicity sake as an Application to Vacate.
The parties have engaged in over two years of litigation. The parties eventually agreed to submit to arbitration based on the contractual arbitration clauses. The Sandhus commenced an arbitration proceeding against HAD before the American Arbitration Association, in which HAD counterclaimed. HCM commenced an arbitration proceeding against the Sandhus before the American Arbitration Association, in which the Sandhus counterclaimed. Three arbitrators were selected and held thirty-one days of hearings, with over a thousand exhibits and multiple briefs filed by the attorneys. The three arbitrators filed an eleven-page decision dated April 9, 2009, eight pages of which was in a column format. The first column listed the claimed defects and/or non-payment. One hundred thirteen items were listed in the first column. They ranged from: "pantry doors changed style to match others in room," a smaller item but specifically described, to "labor and materials to remove and replace brickwork and stone masonry on the house includes galvanized lintels, flashing and winter protections," the largest item at over $600,000. The first column also lists various payments, billings and credits. The second column was titled "Claimed" and contained a dollar amount for each item set forth in the first column. The third column was titled "Awarded" and contained a dollar amount that each party was awarded by the arbitrators for the "Claimed" in the second column and the described item in the first column. Those columns were then totaled. The arbitrator's decision broke down those columns for the two main lawsuits; the first was the claim of HCM v. Sonia Sandhu and Harvinder Sandhu. This involved the construction claims and included the "Contract Total (as if completed)," the extras, allowances contained in the contract, the homeowner's counterclaim for costs to complete the contract work, the homeowner's counterclaim for the costs to repair the defective work, the homeowner's counterclaim for value of work to be credited and the homeowner's counterclaim for value of Site Management. The second was the claim of Sonia Sandhu and Harvinder Sandhu v. HAD. This involved the architectural and design claims. This included the base design contract, additional design services and reimbursements by HAD. It also involved Sandu's claims against HAD for design development, contract documents, bid negotiations, construction administration and failure to administer the contract for construction.
In the construction case, HCM claimed the original "Contract Total (as if completed)" was $4,994,755. In addition HCM claimed $1,721,208 as allowances that exceeded the contract, other extras, the cost of a bonus room/bonus area and other items listed in the first and second columns on pages 1 and 2 of the Arbitrator's decision. The total HCM claim submitted to the arbitrators was $6,715,963. The parties apparently agreed that Sandhus had paid HCM $5,585,503 on account. Thus HCM's net claim against the Sandhus submitted to arbitration was $1,130,460. The arbitrators allowed $915,376 of HCM's claim.
The arbitrators then considered the homeowner's counterclaims to be applied against the original HCM $1,130,460 claim. The Sandhus' claim against HCM is contained on pages 2 through 7 of the Arbitrator's decision. The homeowners claimed $718,402 for the costs to complete contract work, $2,135,817 for cost to repair defective work, $315,000 for the total value of work to be credited and $503,351 for the value of Site Management. The total of these four items of damages submitted by the Sandhus to the arbitrators was $3,672,570. The arbitrators awarded the Sandhus $854,171 for those four items. See the bottom of page 7 of the Arbitrators' decision. The Arbitrators then compared the net award to HCM of $915,376 with the net award to the Sandhus of $854,171 and rendered a net award in favor of HCM against the Sandhus in the amount of $61,205.
In the design case, HAD claimed the base contract of $294,000, additional services of $207,510, reimbursables of $28,281 for a total HAD claim against the Sandhus of $529,791. The payments made by Sandhus of $418,071 were credited against the $529,791. Of this net claim by HAD of $111,720 the Arbitrators awarded HAD $500. Against that HAD claim the Sandhus' claimed damages for design development $43,058, contract documents $96,881, bid negotiations $21,529, construction administration $43,058, and failure to administer the contract for construction $4,048,708. The Sandhus' claim against HAD submitted at arbitration was $4,253,234. The Arbitrators only awarded the Sandhus the $21,529 and $43,058 as mentioned above. That totaled $64,587. Subtracting the HAD award of $500, the Arbitrators therefore entered a net award in favor of Sandhus against HAD in the amount of $64,087.
In summary, the HCM v. Sandhu construction claim was in favor of HCM in the amount of $61,205 and the Sandhu v. HAD design claim was in favor of the Sandhus in the amount of $64,087. Each claim was to be paid within 30 days. In addition to those claims certain other nonmonetary orders were entered concerning release of liens, the use of the HAD drawings to the Sandhus and termination of certain paragraphs of the design contract.
The Arbitrators found that the Sandhus were the losing party in HCM v. Sandhu. They found that pursuant to paragraph 15 of the Rider to the HCM construction contract the Sandhus were responsible for attorneys fees, consulting fees and expenses incurred by HCM. There were no attorneys fees, consulting fees or expense provisions in the HAD design contract, and thus no such fees and expenses could be awarded to the Sandhus as the prevailing party against HAD. The Arbitrators awarded attorneys fees and consulting fees to HCM in the amount of $187,787. The administration fee for American Arbitration Association of $33,550 and the compensation and expenses of the arbitrators totaling $213,396.39 were ordered to "be borne by the parties as incurred." All three Arbitrators signed this eleven-page arbitration decision which is on file with this court. The Arbitrators' decision was unanimous.
On April 20, 2009 the defendants, HCM and HAD, moved to modify and/or correct the Arbitrators' award and on April 29, 2009 the plaintiffs, Sandhus, filed their own motion to modify and/or correct. Both parties responded to those motions respectively on April 28, 2009 and May 5, 2009. All of those documents were considered by the arbitrators on the motions filed.
On May 27, 2009 the three Arbitrators unanimously issued a four-page order disposing of the above motions. The arbitrators noted that there were two instances of clerical or computational errors made by the three arbitrators in assembling their award. The first was a computational error in the amount of attorneys fees awarded to HCM of $13,057. The award of attorneys fees to HCM was increased to $200,844. The second clerical error was the claim by the Sandhus for the "Gate." The arbitrators found that in its deliberation the panel awarded the Sandhus $24,379.96 for the "Gate" but this sum failed to be included in the final award. The arbitrators therefore reduced the sum that would be due by the Sandhus to HCM from $61,205 to $36,825.04. Those two mathematical corrections resulted in the following unanimous final decision of the three arbitrators: (1) In the construction case of HCM v. Sandhu, HCM is due $36,825.04. (2) In the design case of Sandhu v. HAD, Sandhus are due $64,087. (3) The Sandhus must pay HCM for attorneys fees and consulting fees $200,844.
The Sandhus filed this instant lawsuit, FST CV 09-4016359 S, returnable May 8, 2009 against HCM and HAD moving "for an Order vacating, correcting and/or confirming that certain Arbitration Award . . ." the April 9, 2009 award. It is noted that the plaintiffs did not amend their application to vacate the arbitration award to reflect the two mathematical changes made by the three arbitrators on May 27, 2009.
In Sandhu v. HCM and HAD, FST CV 07-5004567 S, the defendants filed an Application to Confirm the Arbitration Award dated May 20, 2009 (#172.00). HCM and HAD did not amend their application to reflect the two mathematical changes made by the three arbitrators on May 27, 2009. The court will treat the arbitration award that is the subject of the application to vacate as being the original April 9, 2009 arbitration decision as amended by the four-page amendment dated May 27, 2009. The court will refer to the date contained on the Arbitration Award of April 9, 2009 as the award even though counsel have referred to the date of the award as April 10, 2009. No application to confirm, modify, vacate or correct the arbitration award was made in the HCM v. Sandhu et al. case, FST CV 07-5005132 S.
The court has applied the following general rules in resolving the issues presented.
When arbitration is created by contract, we recognize that its autonomy can only be preserved by minimal judicial intervention . . . Because the parties themselves, by virtue of the submission, frame the issues to be resolved and define the scope of the arbitrator's powers, the parties are generally bound by the resulting award . . . Since the parties consent to arbitration, and have full control over the issues to be arbitrated, a court will make every reasonable presumption in favor of the arbitration award and the arbitrator's act and proceedings . . . The party challenging the award bears the burden of producing evidence sufficient to invalidate or avoid it . . .
OG/O'Connell Joint Venture v. Chase Family Ltd. Partnership No. 3, 203 Conn. 133, 145-46 (1987).
We have . . . recognized three grounds for vacating an award: (1) the award rules on the constitutionality of a statute . . .; (2) the award violates clear public policy . . .; or (3) the award contravenes one or more of the statutory proscriptions of § 52-418.
Garrity v. McCaskey, 223 Conn, 1, 6 (1992).
Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution.
Garrity v. McCaskey, supra, 223 Conn. 4.
Upon the application of any party to an arbitration, the superior court for the judicial district in which one of the parties resides or, in a controversy concerning land, for the judicial district which the land is situated or, when the court is not is session, any judge thereof shall make an order vacating the award if it finds any of the following defects; (1) If the award has been procured by corruption, fraud or undue means; (2) if there has been evident partiality or corruption on the part of any arbitrator; (3) if the arbitrators have been guilty of misconduct in refusing to postpone the hearing upon sufficient cause or in refusing to hear evidence pertinent and material to the controversy or of any other action by which the rights of any party have been so prejudiced; or (4) if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.
Gen. Stat. § 52-418(a).
The latest appellate case reviews the general rules of judicial review of arbitration awards.
Judicial review of arbitral decisions is narrowly confined . . . When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties' agreement . . . When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission . . . Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution.
Where the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous. Courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrators' decision of the legal questions involved . . . In other words, [u]nder an unrestricted submission, the arbitrators' decision is considered final and binding; thus the courts will not review the evidence considered by the arbitrators nor will they review the award for errors of law or fact . . .
Even in the case of an unrestricted submission, we have . . . recognized three grounds for vacating an award: (1) the award rules on the constitutionality of a statute . . . (2) the award violates clear public policy . . . [and] (3) the award contravenes one or more of the statutory proscriptions of § 52-418 . . . [Section] 52-418(a)(4) provides that an arbitration award shall be vacated if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.
In our construction of § 52-418(a)(4), we have, as a general matter, looked to a comparison of the award with the submission to determine whether the arbitrators have exceeded their powers. (Internal quotation marks omitted.) Harty v. Cantor Fitzgerald Co., 275 Conn. 72, 80-81, 881 A.2d 139 (2005). "The standard for reviewing a claim that the award does not conform to the submission requires what we have termed 'in effect, de novo judicial review.'" Id., 84. "Although we have not explained precisely what in effect, de novo judicial review entails as applied to a claim that the award does not conform with the submission, that standard best can be understood when viewed in the context of what the court is permitted to consider when making this determination and the exact nature of the inquiry presented. Our review is limited to a comparison of the award to the submission. Our inquiry generally is limited to a determination as to whether the parties have vested the arbitrators with the authority to decide the issue presented or to award the relief conferred.
In determining whether an arbitrator has exceeded the authority granted under the contract, a court cannot base the decision on whether the court would have ordered the same relief, or whether or not the arbitrator correctly interpreted the contract. The court must instead focus on whether the [arbitrator] had authority to reach a certain issue, not whether that issue was correctly decided. Consequently, as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of authority, the award must be enforced. The arbitrator's decision cannot be overturned even if the court is convinced that the arbitrator committed serious error." (Internal quotation marks omitted.) Id., 86 n. 7, quoting 1 M. Domke, Commercial Arbitration (3d Ed. 2003) § 39:6, pp. 39-12 through 39-13. Moreover, "[e]very reasonable presumption and intendment will be made in favor of the award and of the arbitrator's acts and proceedings. Hence, the burden rests on the party challenging the award to produce evidence sufficient to show that it does not conform to the submission." (Internal quotation marks omitted.) Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 88-89.Teamsters Local Union No. 677 v. Board of Education, 122 Conn.App. 617, 622-24 (2010).
If the claim is that the award was inconsistent with the contractual rights of the parties the court should
"compare the agreement with the award to determine whether the arbitrator has ignored his obligation to interpret and apply that agreement as written." Board of Education v. Local 818, 5 Conn.App. 636, 640, 502 A.2d 426 (1985). "This additional analysis is conducted pursuant to such a claim because an arbitrator's award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator's words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of this award . . . If, for example, there was evidence that revealed that [the arbitrator] had reached his decision by consulting a ouija board, [it would] not suffice that the award conformed to the submission . . . It must be emphasized, however, that merely claiming inconsistence between the agreement and the award will not trigger judicial examination of the merits of the arbitration award. Rather, in the face of such a claimed inconsistency, this court will review the award only to determine whether it draws its essence from the collective bargaining agreement." (Citations omitted; internal quotation marks omitted.) Id. We will not, however, employ a broader standard of review simply as an alternative means for determining whether the arbitrator correctly decided the issues that were submitted to arbitration. See Comprehensive Orthopaedics Musculoskeletal Care, LLC v. Axtmayer, 293 Conn. 748, 760-62, 980 A.2d 297 (2009).
Teamsters Local Union No. 677 v. Board of Education, supra, 122 Conn.App. 624-25.
The Sandhus are claiming public policy violations.
When a party raises the issue of a public policy violation with regard to an arbitral award, a two step process is required. "First, [the court must] determine whether an explicit, well-defined and dominant public policy can be identified." (Internal quotation marks omitted.) MedValUSA Health Programs, Inc. v. Memberworks, Inc., 273 Conn. 634, 656, 872 A.2d 423, cert. denied sub nom. Vertrue, Inc. v. MedValUSA Health Programs, Inc., 546 U.S. 960, 126 S.Ct. 479, 163 L.Ed.2d 363 (2005). Second, if a clear public policy can be identified, the court must then address the ultimate question of whether the award itself violates that policy. Id. When analyzing the second step, the court conducts a de novo review of the award. See Metropolitan District Commission v. AFSCE, Council 4, Local 184, 89 Conn.App. 680, 683, 874 A.2d 839, cert. Denied, 275 Conn. 912, 882 A.2d 673 (2005). Nevertheless, "[e]ven in the context of de novo review, [the court] defer[s] to the arbitrators' factual determinations." Brantley v. New Haven, 100 Conn.App. 853, 861, 920 A.2d 331 (2007).
The first issue is whether a clear public policy is implicated in this case. "A challenge that an award is in contravention of public policy is premised on the fact that the parties cannot expect an arbitration award approving conduct which is illegal or contrary to public policy to receive judicial endorsement any more than parties can expect a court to enforce such a contract between them." (Internal quotation marks omitted.) Metropolitan District Commission v. AFSCME, Council 4, Local 184, supra, 89 Conn.App. 683-84. Under these circumstances, "the court is not concerned with the correctness of the arbitrator's decision, but with the lawfulness of enforcing the award." (Internal quotation marks omitted.) Id., 684.
Accordingly, the public policy exception to arbitral authority should be narrowly construed and [a] court's refusal to enforce an arbitrator's interpretation of [collective bargaining agreements] is limited to situations where the contract as interpreted would violate some explicit public policy that is well defined and dominant, and is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interest. (Internal quotation marks omitted.) State v. AFSCE, Council 4, Local 2663, AFL-CIO, 59 Conn.App. 793, 798, 758 A.2d 387, cert. denied, 255 Conn. 905, 762 A.2d 910 (2000). "Our view that public policy exceptions to arbitral authority should be narrowly construed finds support in . . . United Paperworkers International Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 44, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987), [where] the United States Supreme Court concluded that a policy against the operation of dangerous machinery by persons under the influence of drugs or alcohol, while firmly rooted in common sense, did not permit a court to set aside an arbitration award. New Haven v. AFSCME, Council 15, Local 530, 208 Conn. 411, 417, 544 A.2d 186 (1988). Therefore, the award must be clearly illegal or clearly violative of a strong public policy . . . Furthermore, [t]he party challenging the award bears the burden of proving that illegality or conflict with public policy is clearly demonstrated." (Citation omitted; internal quotation marks omitted.) MedValUSA Health Programs, Inc. v. Member Works, Inc., supra, 273 Conn. 655-56.
In determining whether an arbitral award violates a well-defined public policy, the courts of our states have looked to "statutes, administrative decisions and case law." Id., 657. "Rather than requiring that public policy be grounded on a particular type of source, however, in determining whether a party has satisfied its burden of demonstrating the existing of a well-defined public policy, [courts] have instead focused [their] inquiry on whether the alleged public policy is in fact, clearly discernible in the purported source." Id., 657-58.
Hartford v. AFSCME, Council 4, Local 1716, 51 Conn.Sup. 467, 473-75 (2010).
The Sandhus commenced arbitration proceedings against HAD. HCM commenced arbitration procedures against the Sandhus. Both arbitration proceedings were consolidated by the parties' agreement and submitted for a single award in accordance with the procedure of the American Arbitration Association.
In their application to vacate the arbitration award dated May 8, 2009 (#101.00) the Sandhus are making a series of claims which they argue fit under the above stated law for objecting to an arbitration award. These claims are as follows: (1) the award does not conform to the submission; (2) the panel's mathematical calculations of damages was improper; (3) there was misconduct in the granting of the damage award and misconduct in the opportunity to be heard as to damages; (4) the award failed to consider the claims of defective work; (5) the award fails to comply with clear public policy; (6) the attorneys fees provision of the HCM contract cannot be enforced; (7) the panel failed to consider a reasoned award as to the issues of fraud and CUTPA; (8) the panel failed to find the Sandhus as the prevailing party thus denying the Sandhus' claim for attorney fees; (9) the arbitrators engaged in a manifest disregard of the law; (10) the mathematical findings made by the arbitrators require a finding that HAD violated CUTPA; (11) the arbitrators' method of calculating damages created a windfall to HCM; (12) the arbitrators did not give the Sandhus an opportunity to be heard; (13) the arbitrators disregarded the evidence of bid rigging; (14) the arbitrators failed to find a conflict of interest between HAD and HCM; (15) the arbitrators exceeded their powers; (16) the arbitrators imperfectly executed their powers; (17) a mutual, final and definite award upon the subject matter submitted was not made; (18) there has been an evident material miscalculation of figures and thus the award should be modified or corrected; (19) the award should be modified or corrected because the award is imperfect in matter of form not affecting the merits of the controversy; (20) even if the award is not vacated, modified or corrected the portion of the award to the Sandhus should be confirmed; (21) the arbitrators improperly allocated the finding of damages to one defendant instead of considering those claims as to both defendants; (22) the arbitrators' award to HCM contravened its contract; (23) the arbitrators awarded damages by using the improper method of calculation; the total cost method instead of the direct cost method submitted by the parties and; (24) the arbitrator's award is indefinite and inconsistent.
Sandhus' Application to Vacate the Arbitration Award was assigned on the Special Proceedings short calendar for June 9, 2009 presided over by the undersigned. At that hearing argument was heard only on the Sandhus' request to admit the box of transcripts and exhibits from the arbitration proceedings into evidence. In the related case HCM/HAD, FST CV 07-5004562 S, had already filed an Application to Confirm Award dated May 19, 2009 (#172.00). That Application to Confirm had not been assigned to the June 9, 2009 Special Proceedings short calendar. Both Applications were assigned to the July 20, 2009 Special Proceedings short calendar presided by over the undersigned. Memoranda of Law had been previously filed by both parties. The matter could not be heard on July 20, 2009 due to other matters on the calendar. All matters were then assigned to the Law Arguable short calendar for Monday, September 8, 2009, presided over by the undersigned. Both parties appeared and requested that the court take the papers. No oral argument occurred on September 8, 2009. The court granted the defendants the right to submit their own exhibits, which they did on September 16, 2009.
The Sandhus offered one exhibit; a box containing transcripts of and certain exhibits offered at the hearings before the arbitrators. The court overruled the defendants' objections to that evidence. The clerk marked the Sandhus' exhibits as Exhibit 1, "One box of transcripts." Although defendants objected to the offer of any exhibits and indicated that the matter should be taken on the papers, the defendants offered their own exhibits. They did so on September 16, 2009 in the form of a binder that contains nine separate tabs including spread sheets, architectural drawings, agreements, expert claim analysis, two post-arbitration hearing briefs, HAD-HCM's exhibit list of 732 exhibits submitted at arbitration, Sandhu exhibit list submitted at arbitration itemized from number 1 and ending with number 683, some of which exhibit list contained subparts marked with small letters with exhibits numbers 413 through 671 missing and in tab 9 a joint exhibit list Exhibits A-H submitted at arbitration.
A few days after the September 8, 2009 short calendar hearing the court reviewed both files. The 2007 court file with the Application to Confirm is seven folders and the 2009 court file with the Application to Vacate is on its second folder. The court then conducted independent research and started dictating a draft decision intending to outline the procedural matters as well as the general law on a court's review of an arbitration award. The box with the transcripts had then been delivered to the clerk's office and was not reviewed by this court in its preparation of a draft decision.
The court then reviewed the box containing the arbitration transcripts and exhibits that were marked as a Sandhu Exhibit 1 on June 9, 2009. The box consists of six documents. The first document is an affidavit of Sandhus' trial counsel dated June 5, 2009 in which he states: "Submitted herewith as evidence in support of the motion are copies of the exhibits described in the Exhibit List appended hereto as Exhibit A. All these exhibits are true copies of the exhibits or copies of post hearing submissions or excerpts thereof in the arbitration proceedings and were before the Panel when it rendered its Awards." Attached to that affidavit is a single-space one-page Exhibit List with Exhibits A through TT, 46 exhibits in total with a one-line description of the contents of each exhibit. The second and third documents are two large pronged documents tabbed for each of the 46 lettered exhibits. There are at least 600 pages in those 46 exhibits.
Counsel's June 5, 2009 affidavit then continues: "Also submitted herewith as an exhibit are true copies of the transcripts of the full thirty-one days of testimony at the arbitration hearing. These exhibits are submitted to provide a record for the court's de novo review as to whether the Award should be vacated, modified or confirmed." In the exhibit box are three pronged sets of documents marked Exhibit 1, Volume 1, 2 and 3. They are transcripts of testimony. There are numbers on the upper right corner of each page. Each page is printed on both sides. There are eight pages of transcripts on each sheet of paper. In addition there are numerous administrative pages with the location of the individual words and where these words appear in the transcripts. Those administrative pages are separately numbered. The prong clasp prevents the transcript from being read on the reverse side without some physical adjustment of each of the three large documents. There appear to be over 7,800 separate transcript pages in Exhibit 1, Volumes 1, 2 and 3. In addition there are well over a thousand administrative pages contained within these three large pronged documents.
The parties have filed pleadings and briefs with attached exhibits that are contained in the court clerk's file relating only to the confirming/vacating/modifying issue. There are at least 500 pages of those documents in the court clerk's file. The court cannot determine if any of the documents are duplicates. For example, the Application to Vacate dated May 8, 2009 (#101.00) with its attached Exhibits A through I is 127 pages. There is another pleading in the file with attached Exhibits (#102.00) that may be a duplicate. Without assistance of counsel, the court could not accurately make that determination. There appear to be multiple copies of the HCM and HAD contracts submitted to the court. The court could not determine without the assistance of counsel, whether each party's exhibit list may contain duplicates or versions of exhibits that contain slight changes. The court could not accurately make these determinations without counsel's assistance as of December 31, 2009.
The court found itself overwhelmed by the sheer volume of material. The court submitted a sixteen-page Memorandum of Decision dated December 31, 2009 (#107.00) in the instant matter, FST CV 09-4016359 S, and marked the Application to Vacate the Arbitration Award dated May 8, 2009 (#101.00) "Off without prejudice." A similar order was entered in FST CV 07-5004567 S also on December 31, 2009 (#178.00). In that December 31, 2009 Memorandum of Decision (#107.00) the court cited a 2009 Appellate Court case as follows: "The mere recital of those claims, supposedly bolstered by the submission of a voluminous mass of documentary material, without directing the court's attention to those specific portions claimed to be relevant and material, does not adequately place those claims before the court for its consideration." Stuart v. Stuart, 112 Conn.App. 160, 184 (2009). The court thereafter stated: "The parties should be given an opportunity to demonstrate which specific portions of the exhibits offered are relevant to each stated legal argument. Drabik v. East Lyme, 234 Conn. 390, 399-400 (1995)." The court concluded its December 31, 2009 Memorandum of Decision with the following: "The parties are encouraged to request a status conference on the record presided over by the undersigned. Either party may reclaim the motions addressed to the arbitration award in either or both files in order to obtain a hearing on those motions."
A status conference on the record was scheduled for February 5, 2010 and both parties appeared. The court ordered each party to prepare a written outline of their legal and factual claims with a specific reference to portions of the exhibits and pleadings. The Sandhus submitted a timely twenty-five-page "Plaintiff's Outline of Argument" dated February 26, 2010 (#109.00). An identical "Plaintiff's Outline of Argument" was filed in the companion case, FST CV 07-5004567 S (#184.00). HCM/HAD submitted a three-page "Reply to Plaintiff's Outline of Argument" dated March 1, 2010 in this case (#110.00) and also in the companion case (#183.00). The parties then appeared at a May 10, 2010 hearing when both the Application to Confirm and Application to Vacate were argued before this court.
The Plaintiff's Outline of Argument (#109.00) contained twelve separate subheadings with each subheading containing either a statement or footnote notation of the exhibit offered at arbitration, the testimony before the arbitration panel and/or reference to legal briefs submitted by the parties. For the remainder of this Memorandum of Decision the court will discuss each the twelve subheadings set forth in the Plaintiff's Outline of Argument dated February 26, 2010 (#109.00).
1. The Submission to Arbitration was Restricted and the Award to HCM/HAD Violated the Restriction that HCM and HAD Would be Treated Separately in the Award.The parties apparently are in dispute as to whether the submission to arbitration was unrestricted. Sandhus are claiming that the submission to arbitration was restricted. "The significance . . . of a determination that an arbitration submission was unrestricted or restricted is not to determine what the arbitrators are obligated to do, but to determine the scope of judicial review of what they have done. Put another way, the submission tells the arbitrators what they are obligated to decide. The determination by a court of whether the submission was restricted, or unrestricted tells the court what its scope of review is regarding the arbitrators' decision . . ." Harty v. Cantor Fitzgerald, 225 Conn. 72, 80 (2005). There was no formal submission to arbitration signed by the parties. Both counsel, the three arbitrators and two arbitration case managers met on January 24, 2008 and reached an agreement on the arbitration procedures. The result of that conference was an agreement on twenty-four procedural points that is contained in an order of the arbitrators. Ex. C. Each reference to Exhibits in this Memorandum of Decision will refer the sub-exhibits in Sandhu's Exhibit 1 admitted into evidence by this court. The court will not refer thereafter to Exhibit 1.
Paragraph 1 of the arbitrators' January 24, 2008 order stated. "The parties, as a first order of business have agreed to consolidate the two arbitrations into a single arbitration proceeding. The parties referred to in this order will continue to be considered as separate entities and the award will consider them separately. The three parties will set out their specification of claim separately and the case will be resolved with a single award and that award will consider the claims and counterclaims of the three entities." No other documents reference any restriction on the submission of issues before the arbitrators. The arbitration hearing commenced on May 6, 2008. There is no evidence that this January 24, 2008 order was ever modified.
The Sandhus claim that paragraph 1 of the January 24, 2008 order was a restricted submission. HCM and HAD claim that the arbitration was unrestricted. "When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties' agreement." State v. New England Health Care Employees Union, District 1199, AFL-CIO, 265 Conn. 771, 777 (2003) In analyzing an agreement to arbitrate, the court inquires whether the parties intended to arbitrate all matters in dispute or whether the parties intended to arbitrate only selected matters in dispute. When the parties agree to arbitrate all parties in dispute, they make an unrestricted submission to the arbitrator. When the parties limit the matters intended for arbitration, they make a restricted submission to the arbitrator. "The authority of an arbitrator to adjudicate the controversy is limited only if the agreement contains express language restricting the breadth of issues, reserving explicit rights, or conditioning the award on court review. In the absence of any such qualifications, an agreement is unrestricted." Industrial Risk Insurers v. Hartford Steam Boiler Inspection and Insurance Co., 258 Conn. 101, 109 (2001).
The design contract between the Sandhus and HAD contained an arbitration clause in Article 7. It is a form contract prepared by the American Institute of Architects. Ex. A. The design contract contains no limitation as to "breadth of the issues" to be submitted to arbitration, no reservation of explicit rights and no condition of court review. "Claims, disputes or other matters in question between the parties to this Agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect until the parties mutually agree otherwise." Ex. B. Article 7.1.
The construction contract between Sandhus and HCM is a form contract prepared by the American Institute of Architects and the arbitration clause is contained in Article 4.6. Ex. B. The construction contract contains no express language reserving explicit rights nor does it contain a condition on court review of the arbitration award. The construction contract in Article 4.6 states as follows:
§ 4.6.1 Any Claim arising out of or related to the Contract, except Claims relating to aesthetic effect and except those waived as provided for in Sections 4.3.10, 9.10.4 and 9.10.5, shall, after decision by the Architect or 30 days after submission of the Claim to the Architect, be subject to arbitration. Prior to arbitration, the parties shall endeavor to resolve disputes by mediation in accordance with the provisions of Section 4.5.
§ 4.6.6 Judgment on Final Award. The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.
It appears that the issue of the aesthetic effect of any construction of the residence has been agreed by the parties, Sandhus and HCM, not to be the subject of arbitration. Article 4.6.1 also contains three other provisions relating to exemption from arbitration.
(1) consequential damages as defined in Article 4.3.10.
§ 4.3.10 Claims for Consequential Damages. The Contractor and Owner waive Claims against each other for consequential damages arising out of or relating to this Contract. This mutual waiver includes:
1. damages incurred by the Owner for rental expenses, for losses of use, income, profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons; and
2. damages incurred by the Contractor for principal office expenses including the compensation of personnel stationed there, for losses of financing, business and reputation, and for loss of profit except anticipated profit arising directly from the Work.
This mutual waiver is applicable, without limitation, to all consequential damages due to either party's termination in accordance with Article 14. Nothing contained in this Section 4.3.10 shall be deemed to preclude an award of liquidated direct damages, when applicable, in accordance with the requirements of the Contract Documents.
(2) Waiver of claim by reason of final payment in Article 9.10.4:
§ 9.10.4 The making of final payment shall constitute a waiver of Claims by the Owner except those arising from:
1. liens, Claims, security interests or encumbrances arising out of the Contract and unsettled;
2. failure of the Work to comply with the requirements of the Contract Documents; or
3. terms of special warranties required by the Contract Documents.
(3) Waiver of claims by reason of acceptance of payment in Article 9.10.5:
§ 9.10.5 Acceptance of final payment by the Contractor, a Subcontractor or material supplier shall constitute a waiver of claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment.
The court finds that the above two references in (2) and (3) address procedural matters and are not "restricting the breadth of issues" to be decided by the arbitrators. As to the references to "aesthetic effect" and consequential damages, neither of those provisions prevent the arbitrators from deciding the essential issues of this construction contract: whether or not the construction was fully performed without defects. The court finds, based on the above language, that the construction contract contains no limitation as to "breadth of issues" to be submitted to arbitration.
The court finds that the issues on the design contract and construction contract were unrestricted submission to the arbitrators. Cox Radio v. Smith, Superior Court, judicial district of New Haven of New Haven, Docket Number NNH CV 05-4009553 (June 24, 2005, Pittman, J.) [ 39 Conn. L. Rptr. 540].
The court finds that there is nothing in paragraph 1 of the January 24, 2008 arbitrator's order that limits the arbitration to selected matters. The paragraph contains no reservation of explicit rights and does not contain a condition of court review of the arbitration award. Paragraph 1 relates only to the format of the decision as opposed to the subject matter of the arbitrator's review. The remaining 23 paragraphs of the January 24, 2008 order equally do not restrict the matters in dispute.
The court has reviewed carefully the Award of Arbitrators dated April 9, 2009, Ex. D, and the Disposition of Application for Modification of Award dated May 27, 2009, Ex. L. Based upon the review of the award as modified, the court concludes that the arbitrators considered each party as a separate entity. The arbitrator's award as modified considered each entity separately. The award of the three arbitrators was unanimous.
The arbitrators considered the claims and counterclaims of the three parties: the Sandhus, HCM and HAD. The Award consisted of fifteen pages numbered 1 through 11. Ex. D. Pages 10 and 11 were the signature pages. Each of the three arbitrators executed a separate copy of signature pages 10 and 11 resulting in a total of fifteen pages. Page 1 contains the heading of both arbitration matters: HCM and Sandhus and Sandhus and HAD. It also contained two paragraphs of a general nature. The first paragraph stated: "having agreed with the parties at the preliminary hearing to make a single award in these two cases, considering each of the parties separately." The remainder of page 1 through and including page 8 was prepared in a chart format with three columns: subject matter, dollar amount claimed and dollar amount awarded. Page 9 contained a summary of the mathematical computations of the previous eight pages and found: Sandhus to pay HCM $61,205, HAD to pay Sandhus $64,087, HCM and HAD to release liens, HAD drawings awarded to Sandhus, orders as to photographs, an award of attorney fees, and an order that the administrative fees of the American Arbitration Association and the compensation and expenses of the arbitrators be "borne by the parties as incurred." All other claims and counterclaims were denied. The May 27, 2009 Disposition of Application for Modification Award was in manuscript format in which the attorney fees to HCM were increased from $187,787 to $200,844 and an acknowledged clerical error reduced the Sandhus to HCM award by $24,379.96 to $36,825.04.
On pages 1 through 8 of the April 9, 2009 Award, the panel first considered the HCM v. Sandhus matter. Pages 1 and 2 contained a column finding; "Total due HCM" less "Amount Paid by Sandhus." Pages 2 through 4 contained; "For the counterclaimant Sandhus,' costs to complete contract work $379,256.00." Pages 4 through 6 contained; "For the counterclaimant Sandhus, costs to repair defective work $318,803.00." Pages 6 through 7 contained; "For the counterclaimant Sandhus, value of work to be credited $16,500." Page 7 contained; "For the counterclaimant Sandhus, value of Site Management $139,612.00." Pages 7 and 8 contained a restatement of the previous monetary awards on pages 1 through 7 for both HCM and Sandhus on the construction claims. The finding by the arbitrators on page 2 of "Total Due HCM" of $6,500,879.00, less "Amount Paid by Sandhus" of $5,585,503.00 leaving a "Amount due HCM" of $915,376.00 was repeated on the page 7 compilation. Equally repeated were the four counterclaim awards in favor of the Sandhus against HCM previously mentioned, $379,256.00; $318,803.00; $16,500.00 and $139,612.00. These four amounts were then subtracted from the $915,376.00 previously found to be due HCM resulting in an award to HCM from the Sandhus of $61,205.00. As stated the May 27, 2009 modification reduced this $61,205.00 by the $24,379.96 clerical error resulting in an award to HCM against the Sandhus of $36,825.04.
The court finds that by using this format in its Award the arbitrators complied with paragraph 1 of the January 24, 2008 order. The arbitrators considered HCM separately from HAD. The arbitrators considered the claims of HCM and counterclaims of the Sandhus separately from any claims relating to HAD.
The Disposition of Application for Modification of Award also conformed with those standards.
The court finds that the submission was unrestricted and that the court's review is limited to comparing the submission to the arbitration award. As long as the award conforms to the submission, the court must confirm it and reject the application to modify, vacate and/or correct the award. The court may not review the arbitrator's factual or legal conclusions. Teamsters Local Union No. 677 v. Board of Education, supra, 122 Conn.App. 622; City of Milford v. Coppola Construction, Superior Court, judicial district of New Britain at New Britain Docket Number CV 03-0523112 (December 1, 2004, Burke, J.). The court finds that the award conforms to the submission.
Reason 1 is not sufficient to modify, correct and/or vacate the award.
2. The Award to HCM Exceeded the Arbitrator's Powers Under the Submission and Violated C.G.S. § 52-418(a)(4).
The Sandhus claim that the court should vacate the award for failure to comply with Gen. Stat. § 52-418(a)(4). "Upon the application of any party to an arbitration . . . any judge thereof, shall make an order vacating the award if it finds any of the following defects: . . . (4) if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made."
In Reason 2, Sandhus claim both prongs of Gen. Stat. § 52-418(a)(4): "that the arbitrators manifestly disregarded the law" and "that the Award fails to conform to the submission." Plaintiff's Outline of Argument (#109.00) page 6.
For the reasons stated, the court already has found that the submission to the arbitration was unrestricted. The arbitrators had before it all issues regarding the construction and design of the residential premises owned by the Sandhus and the separately awarded on the contract construction claims and the design claims. The court finds that the award conforms to the submission.
The second prong argued by Sandhus is that the arbitrators "manifestly disregarded the law." While this phrase was not found in the statute, Gen. Stat. § 52-418(a)(4), case law has adopted the phrase as being consistent with the statute. Garrity v. McCaskey, 223 Conn. 1, 4 (1992). "In light of the strong public policy that favors arbitration and in deference to the existing statutory scheme through which the legislature has chosen to define this field, we decline the defendant's invitation to create a new exception independent of § 52-418. The defendant's invocation of a doctrine of manifest disregard of the law may, however, be encompassed by the existing statutory scheme for judicial review of arbitration in § 52-418." Id. 7. The Garrity court noted that the "manifest disregard of the law" concept was first articulated in a 1953 United States Supreme Court decision.
"We conclude, therefore, that an award that manifests an egregious or patently irrational application of the law is an award that should be set aside pursuant to § 52-418(a)(4) because the arbitrator has 'exceeded [his] powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.' We emphasize, however, that the 'manifest disregard of the law' ground for vacating an arbitration award is narrow and should be reserved for circumstances of an arbitrator's extraordinary lack of fidelity to established legal principles." Id. 10. "Even if the arbitrators were to have misapplied the law governing statutes of limitations, such a misconstruction of the law would not demonstrate the arbitrator's egregious or potentially irrational rejection of clearly controlling legal principles. The defendant's claim in this case falls far short of an appropriate invocation of § 52-418(a)(4) for a manifest disregard of the law." Id. 11-12.
Sandhus fail to state what provision of the law that the arbitrators disregarded under Reason 2. In other portions of Plaintiff's Outline of Argument, Sandhus have made the same manifest disregard argument but in those sections stated the law that the arbitrators manifestly disregarded.
Reason 2 is not sufficient to modify, correct and/or vacate the award.
3. The Panel's "Total Value Approach" in Calculating Damages to HCM Exceeded the Scope of the Submission.
The Sandhus claim that by comparing the scope of submission as defined by the construction contract in Articles 6.1, 14.1, 14.2, and 14.4 with the awards in Exhibit D and Exhibit L, it is apparent that the award to HCM exceeds the scope of the submission and awards HCM far more than the contractual remedies allowed. The Sandhus are claiming that the arbitrators used a formula calculation of damage which the Sandhus defined as "Total Value Approach."
The Sandhus claim that Article 14.1.4 of the construction contract contains the method of calculation of damages. Ex. B. The Plaintiff's Outline of Argument contains the incorrect contractual provision, Article 14.1.3 states that: ". . . the Contractor may, . . . recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery including reasonable overhead, profit and damages." The court does not find it helpful in reviewing over 8,000 pages of material that a party has not cited the correct contract provision. Equally so the court did not find it helpful that Ex. 1 Volumes 1, 2 and 3 contain transcript pages out of numerical order.
Sandhus make three separate and distinct claims against the arbitrators' use of the "Total Value Approach:" In Reason 3 that it exceeded the scope of the submission; In Reason 4 that it was a manifest disregard of the law, and in Reason 5 that it violated public policy. The court in this Reason 3 will only discuss the exceeding scope of the submission argument.
The court has already found the submission was unrestricted. The arbitrators were required to determine issues involving the construction contract of a new residence: whether or not the construction was completed, whether or not any construction was defective, and if incomplete or defective, the cost to remedy, the payments made pursuant to the contract, change orders and allowances.
The construction contract contains three separate provisions for termination of the contract with each provision containing a different method of determining damages; Article 14.1. Termination by the Contractor, Article 14.2 Termination by the Owner for Cause and Article 14.4 Termination by the Owners for Convenience. The April 9, 2009 Award stated: "The panel carefully considered the claims of all three parties and their different approaches to calculations of damages and monies owed. The panel necessarily had to create its own approach. This Award is in full settlement of all claims and counterclaims submitted to this Arbitration. All claims not expressly granted herein are hereby, denied." Ex. D. In an asterisk to the first claim the arbitrators addressed in their chart, "For Claimant, HCM, we find the following," the arbitrators stated: "While HCM did not make this total dollar value claim, in the panel's award process, the panel used a total project value approach. Additionally, while the panel considered HCM's proposed offsets for sums due the Sandhus, for the purpose of the award format, we used the claims by the Sandhus." The first line stated: "Contract Total (as if completed)." Sandhus argue that: "The grossed-up 'as if completed' methodology used by the Panel resulted in an award to HCM of $915,376 to HCM, $273,870.39 more than HCM requested. This grossed-up award resulted in a net award to HCM of $36,824 and $200,844 in fees to HCM." (#184.00, page 8.) Sandhus noted that the net construction award of $36,824 would be more than offset by the actual award to the Sandhus if the calculation of damages was done pursuant to the construction contract agreement. In that event there would have been a net award to the Sandhus who would have been entitled to significant attorney fees under the provision of the construction contract and preventing any award of attorney fees to HCM, let alone the modified award of attorney fees to HCM of $200,844. Ex. B, RIDER Article 15.
The court notes that each of the three Articles above mentioned contains a different method of computing damages depending on whether the contract was terminated by the contractor, terminated by the owner for cause or terminated by the owner for convenience. Who terminated the contract, when terminated and for what reason the contract was terminated were contested issues presented to the arbitrators. The Sandhus' June 6, 2007 notification letter cites Article 14.2 Termination by Owner for Cause and Article 14.4 Termination by Owner for Convenience. Ex. HH. In Plaintiff's Outline of Argument dated February 26, 2010, Sandhus argue that Article 14.1 Termination by the Contractor should be utilized in determining damages. (#109, page 2.)
The arbitrators thus were presented with three different methods calculating damages. The arbitrators used the Total Value Approach and applied that method consistently throughout the entire award. Faced with the inconsistent construction contract damage terms and the parties' conflicting claims thereunder, the court finds that the arbitrators' award did not exceed the scope of the submission in their calculation of damages. The arbitrators drew the essence of their award from the contracts. Teamsters Local Union No. 677 v. Board of Education, supra, 122 Conn.App. 624-25.
Reason 3 is insufficient to modify, correct and/or vacate the award.
4. The Panel's "Total Value Approach" in Calculating
Damages to HCM Manifestly Disregarded the Law of Damages.
As a sub-argument to Reason 4 the Sandhus claim that: "The Arbitrators Were Informed of the Law of Damages" in briefs filed by both sides. Sandhus further claim in another sub-argument that: "The Award to HCM Resulted in a Windfall to HCM Because it Included the Full Value of Fixed Price Work that Was Incomplete at the Time of Termination, Which HCM Would Never Have to Pay to Complete the Project." Sandhus claim in a third sub-argument that: "The Award to HCM Resulted in a Windfall to HCM Because the Panel Included the Full Value of Incompleted Bonus Area Work That Was Done on a Time and Material Basis." In the fourth sub-argument the Sandhus claim that: "The Award to HCM Resulted in a Windfall to HCM Because the Panel Did Not Credit Direct Payments by Sandhus to HCM Subcontractors."
In support of these arguments, the Sandhus cite various sections of the briefs filed by both parties at the arbitration hearing, an extensive chart submitted in Exhibit H, certain sections of the arbitrators' award, payment requisitions, Sandhus' July 18, 2008 specification of claims and Exhibit OO, an expert analysis of the estimated value of time and material as if completed. The Sandhus also reference a number of pages of the transcripts from the arbitration hearings.
The court has found that the submission was unrestricted and thus the trial court's review of the award is generally limited to a determination of whether the award conforms to the submission. State v. New England Health Care Employees Union, District 1199, AFL-CIO, supra, 265 Conn. 778. In Reason 3 this court concluded that the calculation of damages by the arbitrators conformed to the submission. Now the Sandhus are claiming by using the "Total Value Approach" to damages, the arbitrators manifestly disregarded the law of damage calculation i.e., the measurement of damages set forth in Ex. B. Article 14.1.3. "When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission." Id. 777. ". . . an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous. Courts will not review the evidence nor, where the submission is unrestricted, will they reverse the arbitrators' decision of the legal questions involved." Id. 778.
This court finds that any claimed departure by the arbitrators from the law of calculation of damages by using the "Total Value Approach" was not a manifest disregard of the law by the arbitrators. DuBaldo Electric, LLC v. Montagno Construction, Inc., 119 Conn.App. 423, 439-41 (2010). They did not "so egregiously depart from established law that they border on the irrational "and" would undermine society's confidence in the legitimacy of the arbitration process." Garrity v. McCaskey, supra, 223 Conn. 10; Maluszewski v. AllState Insurance Co., 34 Conn.App. 27, 36 (1994); Forge Square Associates Ltd. Partnership v. Construction Services of Bristol, Inc., 33 Conn.App. 669, 671 (1994); Forge Square Associates Ltd Partnership v. Construction Services of Bristol, Inc., 43 Conn.Sup. 32 (1993).
Reason 4 is insufficient to modify, correct and/or vacate the award.
5. The Panel's "Total Value Approach" in Calculating Damages to HCM Violated the Public Policy Against Awarding Windfall and Basing Damages on Speculation and Conjecture.The court has rejected the first two arguments about the "Total Value Approach" in calculating damages based upon the general arbitration law. The Sandhus are now attacking that on the basis of public policy considerations. In discussing a public policy violation with regard to an arbitration award, a two-step process is required. First the court must determine whether an explicit well-defined and dominant public policy can be identified and second, if a clear public policy can be identified, the court must then address the ultimate question whether the award itself violates that public policy. MedValUSA Health Programs, Inc. v. Member Works, Inc., 273 Conn. 634, 656 (2005).
These cases have narrowly construed the public policy exception. The party challenging the award bears the burden of proving that the illegality or conflict with public policy is clearly demonstrated. MedValUSA Health Programs, Inc. v. Member Works, Inc., supra, 273 Conn. 655-56. When an arbitration award violates a well-defined public policy, the courts in Connecticut have looked at statutes, administrative decisions and case law. Id. 657. An example of this approach is a United States Supreme Court that concluded that a policy against operating a dangerous machine by persons under the influence of drugs or alcohol, while firmly rooted in common sense, did not permit a court to set aside an arbitration award, since that did not violate a well-defined public policy. United Paperworkers International Union, AFL-CIO v. Misco, Inc., 484 US 29, 44, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987).
The Sandhus supported their public policy argument in the Plaintiff's Outline of Argument dated February 26, 2010 as follows: "The total value approach taken by the Panel is similar to the total cost method of computing overhead and profit that has never been accepted in Connecticut and would not be applicable even in those jurisdictions where it is followed, and violates the public policy against awarding damages based upon speculation and conjecture and awarding windfalls not based on actual loss." (#109.00, page 13.)
The court concludes that the Sandhus have abandoned this public policy argument by failing to state a well-defined public policy and by failing to support that public policy by case law, statutes and administrative decision.
The court finds, that in any event, these public policy arguments are merely a recasting of the same damage arguments that this court has already rejected.
Reason 5 is insufficient to modify, correct and/or vacate the award.
6. The Award to HCM Should Be Vacated Under Gen. Stat. § 52-418a(3).
"Upon the application of any party to an arbitration . . . any judge thereof, shall not make an order vacating the award if it finds any of the following defects . . . (3) if the arbitrators have been 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 of any other action by which the rights of any party has been prejudiced." Gen. Stat. § 52-418(a)(3). The Sandhus argue that the arbitrators were guilty of misconduct by using the "Total Value Approach" and not following contractual damage provisions, all without advance notice to the Sandhus and without offering them an opportunity to be heard as to the fallacy in this approach. "A charge of bias or prejudice must be deemed at or near the very top in seriousness for bias kills the very sole of judging fairness." McKenna v. Delente, 123 Conn. 137, 144-45 (2010). No legal authorities were furnished by the Sandhus in Plaintiff's Outline of Argument dated February 26, 2010. The Sandhus have the burden of proving misconduct. The Sandhus claim this misconduct is demonstrated by the arbitrators not applying the correct rule of damages without advance notice to the Sandhus. Case law indicates that the conduct necessary to support a vacating under Gen. Stat. § 52-418a(3) is stringent. Alexson v. Foss, 276 Conn. 599, 617-18 (2006).
"The concept of arbitral misconduct does not lend itself to a precise definition . . ." New Haven v. Local 884, Council 4, AFSCME v. AFL-CIO, 38 Conn.App. 709, 712 (1995). The failure to grant a continuance under certain circumstances can arise to the level of misconduct. Id. 712. Misconduct for failure to grant a continuance may be waived. New Haven, Local 884, Council 4, AFSCME v. AFL-CIO, 237 Conn. 378, 383-84, fn. 5 (1996). Evidence considered by the arbitrator that was not part of the arbitration hearing was held to be misconduct under Gen. Stat. § 52-418(a)(3). Wallingford v. Wallingford Police Union Local 1570, 45 Conn.App. 432, 440 (1997). There was no claim that the Sandhus requested a continuance which was denied by the arbitrators. There is no claim that the arbitrators considered evidence that was not part of the record before the panel. Sandhus are claiming that the use of a method of computing damages outside of the contractual provisions, should have prompted the arbitrators to give the parties notice thereof and give the parties an opportunity to comment thereon in the arbitration proceedings. Such a failure is alleged to be misconduct. In effect the Sandhus are raising a type of evidentiary claim. "To establish that an evidentiary ruling, or lack thereof, rises to the level of misconduct prohibited by § 52-418(a)(3) requires more than a showing that an arbitrator committed an error of law." Clairol, Inc. v. Enertrac Corp., 44 Conn.App. 506, 514 (1997). The court finds that the Sandhus' argument contained in this Reason 6 is a restatement of a claim already dismissed by this court, that the arbitrators applied the incorrect law in calculating damages.
Reason 6 is insufficient to modify, correct and/or vacate the award.
7. The Court Should Vacate the Denial of the CUTPA Claim Against HAD and HCM was and as Against Public Policy.
The CUTPA issue was raised early on by the Sandhus. Paragraph 22 of the January 24, 2008 Arbitration order stated: "Respondent has requested a reasoned award; Claimant 1 and Claimant 2 have requested a standard, non-reasoned award. The panel has agreed to decide later whether or not to provide a reasoned award." Ex. D. The Panel denied a reasoned award by an order dated February 25, 2009. The Award of Arbitrators dated April 9, 2009 also denied the reasoned award by (1) not issuing or reasoned award, (2) not discussing CUTPA in its award, (3) not referring to any bid-rigging and failure to administer the contract claims that underlie the CUTPA claim, (4) by stating in the Award "All claims not expressly granted herein are hereby denied." Ex. D, Pages 1 and 10, and (5) by stating in the Disposition of Application for Modification of Award dated May 27, 2009. "Furthermore, as the award was a standard, non-reasoned award per the rules and per a previous ruling by the Panel, the clarifications requested are outside the intended scope of the award as well." Ex. L.
The CUTPA issues are assigned for a jury trial for the week of September 8, 2011 in Sandhu v. Haverson Construction Management, FST CV 07-5004567 S. Breach of contract claims generally do not support a CUTPA claim. Hudson United Bank v. Cinnamon Ridge Corporation, 81 Conn.App. 557, 571 (2004). "To recover under CUTPA for a simple breach of contract, the plaintiff must show substantial aggravating circumstances intending to breach" Thames River Recycling, Inc. v. Gallo, 50 Conn.App. 767, 784 (1998). The issues surrounding such a CUTPA claim exceed the scope of the construction contract. The arbitrators had no obligation to consider the CUTPA/bid rigging/failure of HAD to administer the contract issues and no obligation to issue a reasoned award by engaging in fact finding that would be of assistance to the Sandhus in prosecuting its CUTPA damage claimed now assigned for a jury trial.
The failure of the arbitrators to engage in an analysis of CUTPA is claimed to be against public policy. The Sandhus have failed to brief such an explicit well-defined public policy nor furnish any statutes, case law or administrative decisions that describe that public policy. The court therefore leaves the CUTPA issues to further litigation with the Superior Court. The analysis of such issues are not necessary for this court to reach in making the determination whether to confirm or vacate the arbitration award.
Reason 7 is insufficient to modify, correct and/or vacate the award.
8. The Failure to Award Damages Against HAD for Defective Work Manifestly Disregarded the Law and Violated Public Policy.
Plaintiff's Outline of Argument dated February 26, 2010 (#109.00) contains only two sentences in support of this claim: "The law and public policy of this state requires that each party be held responsible for damages caused by that party, even if another party also caused the same damage. HAD had an independent duty to protect the Sandhus from HCM's defective work by administrating the contract and the same repair costs should have been assessed against HAD for defective work by HCM not rejected by HAD." The Sandhus have failed to furnish any authority whatsoever for an explicit well-defined public policy. They have further failed to outline exactly what that well-defined and explicit public policy is and they further failed to brief the claim that the arbitrator manifestly disregarded the law by citing either the statutory or case law authority for that proposition. The Sandhus are seeking a double award having already obtained a damage award against HCM. They are seeking the same award against HAD. The arbitrators rightly rejected this theory of double recovery. Connecticut has a policy against double recovery. Collins v. Colonial Penn. Insurance Company, 257 Conn. 718, 735 (2001).Reason 8 is insufficient to modify, confirm and/or vacate the award.
9. The Panel Manifestly Disregarded the Law When it Refused to Enforce CUTPA Against HAD and HCM.
Reason 9 is insufficient to modify, correct and/or vacate the award for the reasons stated in Reason 7.
10. The Award of Attorneys Fees to HCM and Failure to Award Fees to the Saudhus is Against Public Policy and Should be Vacated.
The Sandhus claim is that if the court vacates the award to HCM then the award of attorneys fees to HCM should also be vacated. The court has declined to vacate the award to HCM. Therefore the arbitrators were well within their rights to determine that HCM was the prevailing party and the Sandhus were the losing party. The construction contract permits an award of attorneys fees. See Ex. B, Construction contract in RIDER paragraph 15: "In the event either party needs to enforce any of its rights hereunder, the losing party, or otherwise the party against whom remedy is sought if successful, shall be responsible for the other party's attorneys fees, including fees charged by any consultants and experts associated therewith." Since the issue of attorney fees was in the construction contract and the arbitration determined HCM was the prevailing party, the award of attorney fees was within the submission. Comprehensive Orthopedics and Musculoskeletal Care, LLC v. Axtmayer, 293 Conn. 748, 756 (2009).
The construction contract does not state the methodology by which these fees were to be calculated nor does the contract limit the amount of the attorneys fees. The submission to the arbitrators did not limit the amount of attorney fees. The Sandhus argue that Gen. Stat. § 42-150aa limits the award of attorneys fees on a consumer contract to not more than 15% of any judgment which is entered. There is no mention of Gen. Stat. § 42-150aa in the construction contract. The attorney fees awarded to HCM were $200,844 and yet HCM only recovered $36,825.04 from the Sandhus. The Sandhus argue Gen. Stat. § 42-150aa limits the attorneys fees to $5,523.76., 15% of $36,825.04. This court finds that the 15% limitation set forth under Gen. Stat. § 42-150aa is applicable to consumer contracts and leases and is not applicable to the construction contract for the erection of a new residence on real property owned not by the contractor but the homeowner. Liapes v. Beaulieu, 18 Conn.App. 329, 331 (1989).
Reason 10 is insufficient to modify, correct and/or vacate the award.
11. The Panel's Failure to Award Counsel Fees to the Sandhus on the Counterclaims should be Vacated as Against Public Policy.
This is again another public policy argument. The Plaintiff's Outline of Argument dated February 26, 2010 states: "The Sandhus were the prevailing parties on their counterclaims and should have been awarded attorneys fees and expert fees under the contract (Exhibit B, Rider § 15) and by virtue of C.G.S. § 42-150bb. The Sandhus prevailed both on the counterclaims and defending against HCM's claim that the Sandhus had wrongfully terminated the contract. See Plaintiff's Mem. pp. 33-34 36." The plaintiffs Sandhus have failed to furnish a well-defined and explicit public policy in favor of awarding attorney fees. Connecticut has adopted the American rule that requires that each party to pay for their own attorneys fees. Gagne v. Vaccaro, 118 Conn.App. 367, 369 (2009). HCM did recover as against the Sandhus. The Sandhus were successful in reducing the amount of damages by their counterclaims but the end result was that the net award was in favor of HCM against the Sandhus in the amount of $36,825.04. The mere fact that the attorneys fees far exceeded the award is not a violation of public policy. Steiger v. J.S. Builders, Inc., 39 Conn.App. 32, 38 (1995); Sotavento Corporation v. Coastal Pallet Corporation, Superior Court, judicial district of Stamford/Norwalk of Stamford, Complex Litigation, docket Number X08 FST CV 04-4004519 S (February 18, 2010, Jennings, J.T.R.). The court has already found that Gen. Stat. § 42-150aa is not applicable to this construction contract and therefore its opposite, Gen. Stat. § 42-150bb, does not authorize the Sandhus to be awarded attorneys fees for their successful counterclaims when the net award was in favor of HCM.
Reason 11 is insufficient to modify, correct and/or vacate the award.
12. The Award to the Sandhus on the Counterclaim against HCM and on the Claims against HAD Should be Confirmed.
The Sandhus state as follows: "HCM and HAD have not moved to vacate or modify the award and their time to do so has passed. The confirmation of the award against HCM for $878,550.96 and HAD for $64,087 should be without prejudice to any remand to arbitration for increase of the awards against HCM and HAD for the various reasons raised by the Sandhus in their application to vacate those portions of the Award." Sandhus seek confirmation of its counterclaim against HCM and their direct claims against HAD. In both instances the arbitrators found in favor of the Sandhus for a portion of both claims. The arbitrators found that the Sandhu counterclaims against HCM were offset by the claim they found for HCM against the Sandhus resulting in a net award to HCM. The arbitrators found that Sandhus' direct claims against HAD were offset by the counterclaims they found for HAD reducing the Sandhus' net award against HAD. In effect by rendering a net award, the arbitrators found in favor of the Sandhus for a portion of these claims. The arbitrators had the authority to award a net award in the HCM and Sandhu arbitration and in the Sandhu and HAD arbitration.
HCM and HAD filed a motion to confirm the award in the companion litigation. In seeking to confirm the award HCM and HAD sought to confirm the entirety of the award as modified. This included what the Sandhus are arguing in this Reason 12, the awards to Sandhus against HCM for $878,550.96 and to Sandhus against HAD for $64,087. These numbers consist of the following awards. (1) Sandhus against HCM: Counterclaim cost to complete $379,256.00; counterclaim cost to repair $318,803.00; counterclaim value of work to be credited $16,500; counterclaim value of Site Management $139,612.00. Ex. D, page 7, and the typographical error of $24,379.96 noted in the Modification of Award, Ex. L, page 2. These five figures total the $878,550.96 claim that Sandhus seek to confirm in Reason 12. (2) Sandhus against HAD net award found by the arbitrators against HAD $64,087.00. Ex. D; page 8.
Reason 12 is insufficient to modify, correct and/or vacate the award.
Conclusion
"Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution." New Britain v. AFSCME, Council 4, Local 1186, 121 Conn. 564, 572 (2010). "Judicial review of arbitration decisions is narrowly confined . . ." Hartford Steam Boiler Inspection Insurance Company v. Underwriters of Lloyds Cos. Collective, 121 Conn.App. 31, 50 (2010).
For the reasons stated herein, the plaintiffs, Harvinder Sandhu and Sonia Sandhu's, application for an Order vacating, correcting modifying and/or confirming the arbitration award dated April 9, 2009, as modified on May 27, 2009, is denied in its entirety.
The court has entered an order in the companion file, FST CV 07-5004567 S, of even date herewith confirming the arbitration award dated April 9, 2009 as modified on May 27, 2009.
The court orders the defendants, Haverson Construction Management, LLC and Haverson Architecture Design, LLC, to prepare and submit to this court, after serving a copy on the plaintiffs, an order consistent with this Memorandum of Decision.