Opinion
No. CV-08-4008149 S
January 29, 2009
MEMORANDUM OF DECISION RE #108: DEFENDANT'S MOTION TO RE-ARGUE JUNE 4, 2008, DECISION BY HOLZBERG, J.
Before the court is the defendant, Woodframe Construction Co., LLC's ("Woodframe") motion to reargue the undersigned's decision of June 4, 2008. The factual and procedural history of this case is tangled.
On January 7, 2008, the plaintiff homeowners Alfred and Barbara Marulli ("Marullis") commenced this action by filing a Application to Vacate Arbitration Award. The award in question resulted from the arbitration of a dispute between the parties concerning the amount owed to Woodframe for construction work on the Marullis' residence. The arbitrator, Michael Giordano, who was appointed by the American Arbitration Association pursuant to a provision in the parties' written agreement, entered an award requiring the plaintiffs to pay Woodframe $200,000. Plaintiffs then filed the motion to vacate; the defendants responded by filing a motion to confirm arbitration award.
The plaintiffs' motion to vacate rests on a number of alleged deficiencies, only two of which are relevant to this decision. The first is that the arbitrator improperly failed to rule on the plaintiff's claim that the contract between the parties is unenforceable because it failed to comply with the Connecticut Home Improvement Act § 20-418 et seq. The second is that the arbitrator exceeded the scope of his authority by improperly entering a ruling without allowing plaintiffs the opportunity to cross examine the defendant or present their own evidence.
On April 8, 2008, the court, after argument by the parties in support of their respective motions to confirm and vacate, entered the following order: "The Marullis' application to vacate is denied; Woodframe's application to confirm is granted. Krassner v. Ansonia, 100 Conn.App. 203 (2007). A review of the briefs and contracts does not disclose a violation of the Home Improvement Act." On April 21, 2008, the plaintiffs filed Motion to Reargue (#105) pointing out the court's failure, in its decision of April 8, 2008 to consider Nussbaum v. Kimberly Timbers, LTD, 271 Conn. 65, 78 (2004) in which the court concluded that "the plaintiffs' claim that the contract is unenforceable is within the scope of the arbitration clause and must be decided initially by the arbitrator." The court granted the plaintiffs' motion to reargue, and upon reconsideration, vacated its order of April 8, 2008 and entered the following ruling on June 4, 2008: "Upon reconsideration the court concludes that it failed to properly consider plaintiff's claim that the arbitrator improperly failed to consider the enforceability of the contract in light of the alleged violations of the Home Improvement Act. Because the arbitrator failed to comply with the rule of Nussbaum v. Timbers, Ltd. the previous order confirming the award is hereby vacated."
Following the entry of the June 4, 2008 ruling, Woodframe in turn filed its own "Motion To Re-Argue June 4, 2008 Decision by Holzberg, J." On August 4, 2008, argument was presented on defendant's motion. Upon a careful review of the briefs and arguments in this matter, the court reaffirms its June 4, 2008 ruling and hereby grants the plaintiff's motion to vacate and denies the defendant's motion to confirm. The following constitutes the court's findings of fact and conclusions of law with respect to this ruling.
The legal principles governing the resolution of this dispute are well established. General Statutes § 52-418(a) provides that an arbitration award may be vacated: "(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 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 have been 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." The guidelines governing judicial review of arbitration awards pursuant to § 52-418(a) are also well established. "This court has for many years wholeheartedly endorsed arbitration as an effective alternative method of settling disputes intended to avoid the formalities, delay, expense and vexation of ordinary litigation . . . 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 acts and proceedings . . . The party challenging the award bears the burden of producing evidence sufficient to invalidate or avoid it . . . [W]e have . . . recognized three grounds for vacating an [arbitrator's] 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 . . ." Krassner v. City of Ansonia, supra, 100 Conn.App. at 207.
In this matter, the plaintiff relies on § 52-418(a)(4), specifically, in urging that the award be vacated because the arbitrator failed to rule on their claim that the contract is unenforceable because of its failure to comply with the Home Improvement Act. It is clear that the question of the contract's enforceability was consistently raised as an issue for the arbitrator to consider and resolve. A review of the correspondence and pleadings in the arbitration hearing discloses that plaintiffs unambiguously and repeatedly asserted that the arbitrator should reject the defendant's claim because the contract failed to adhere to the requirements of the Connecticut Home Improvement Act, General Statutes § 20-418 et seq. Under these circumstances Nussbaum v. Kimberly Timbers, Ltd., supra, requires that the arbitrator rule on this claim. "Because the arbitration agreement is separate and distinct from the underlying contract; and because the plaintiffs' claim that the contract is unenforceable does not pertain to the validity of the arbitration agreement itself, the claim plainly falls within the scope of the arbitration agreement and must be decided in the first instance by the arbitrator." Id., 271 Conn. at 78.
A review of the arbitrator's decision discloses that he neither made reference to plaintiffs' claim nor ruled on it. Under these circumstances the arbitrator's ruling departs from the requirements of § 52-418(a) and therefore must be vacated.
Defendant urges the court to remand the matter for the arbitrator for clarification pursuant to Hartford Steam Boiler Inspection and Insurance Company v. Underwriters at Lloyd's and Companies Collective, 271 Conn. 474 (2004). Because the arbitrator's decision is also vacated on additional, independent grounds, infra, a remand would be futile.
The plaintiffs also assert that the award should be vacated, pursuant to § 52-418(a)(3) because of misconduct of the arbitrator. Specifically, plaintiffs claim that the arbitrator improperly denied the plaintiffs their right to conclude their cross examination of the defendant and to present evidence on their own behalf. The factual basis for this claim is recited in the plaintiffs' brief. The last of the series of arbitration hearings was scheduled for January 24, 2007. Most, if not all, of that day was spent by the parties negotiating a resolution of the matter. The plaintiffs believed that, in fact, an agreement had been reached. Approximately six months later, in July 2007, Woodframe requested a new hearing date. Having received an objection from the Marullis, the arbitrator held a conference call with counsel on August 28, 2007. When Marullis' counsel objected to a new hearing date and suggested that Woodframe file a new claim for arbitration, the arbitrator stated that he had enough information to decide the case and no new hearings were required. The arbitrator subsequently issued his award without receipt of further evidence or argument. The Marullis now claim that the arbitrator's refusal to permit cross examination of the defendant and presentation of evidence prior to entering his award constitutes the type of misconduct that justifies vacating the award.
"A trial court's decision to vacate an arbitrator's award under § 52-418 involves questions of law and, thus, we review them de novo. 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 . . . Rather, a party challenging an arbitration award on the ground that the arbitrator [made an improper evidentiary ruling] must prove that, by virtue of an evidentiary ruling, he was in fact deprived of a full and fair hearing before the arbitration panel . . ." Additionally, to vacate an arbitrator's award on the ground of misconduct under § 52-418(a)(3), the moving party must establish that it was substantially prejudiced by the improper ruling . . . This requirement that the moving party establish substantial prejudice is consistent with the showing that this court requires to order a new trial when a trial court makes an improper evidentiary ruling in a civil trial . . . In such cases, a new trial will be ordered only when the improper evidentiary ruling [likely] would [have] affect[ed] the result." (Citations omitted, internal quotation marks omitted.) "Thus, to establish that an evidentiary ruling rises to the level of misconduct prohibited by § 52-418(a)(3), a claimant must demonstrate more than that an arbitrator committed an error of law. Rather, a party challenging an arbitration award on the ground that the arbitrator made an improper evidentiary ruling must prove that, by virtue of that evidentiary ruling, he was in fact deprived of a full and fair hearing before the arbitration panel." Krassner v. City of Ansonia, supra, 100 Conn.App. at 210-11.
The unrefuted facts in this case indicate that the arbitrator summarily closed the hearing and rendered a decision without providing the plaintiffs a full and fair opportunity to question the defendant and present evidence of their own. The essence of due process is the right to be heard and the right to meaningfully challenge the opponent's claims. Under these circumstances, the plaintiffs have satisfied their burden of demonstrating the type of arbitral misconduct that requires the vacating of the award. "The concept of arbitral misconduct does not lend itself to a precise definition, but is, instead, best illustrated by example . . . Among the actions that have been found to constitute such misconduct on the part of an arbitrator as would warrant vacating an arbitration award are the following: participation in ex parte communications with a party or a witness, without the knowledge or consent of the other party . . . ex parte receipt of evidence as to a material fact, without notice to a party . . . holding hearings or conducting deliberations in the absence of a member of an arbitration panel, or rendering an award without consulting a panel member . . . undertaking an independent investigation into a material matter after the close of hearings and without notice to the parties . . . and accepting gifts or other hospitality from a party during the proceedings . . . An award may likewise be set aside on the basis of procedural error by an arbitration panel if, for instance, the panel arbitrarily denies a reasonable request for postponement of a hearing . . . or commits an egregious evidentiary error, such as refusing to hear material evidence or precluding a party's efforts to develop a full record. Though not exhaustive, these examples of arbitral misconduct delineate the broad contours of conduct that is unacceptable and prohibited under § 52-418(a)(3). The presumptive validity of consensual arbitration awards depends upon the underlying integrity of the arbitration process. When that integrity is tainted either by actual impropriety or the appearance of impropriety, the arbitration award cannot be permitted to stand." (Emphasis supplied.) Id.
Accordingly, for the foregoing reasons, the plaintiffs' motion to vacate is granted; the defendant's motion to confirm is denied.
SO ORDERED.