Opinion
No. 03-3168
March 30, 2004
MEMORANDUM
Presently before the Court are Plaintiff's Motion to Vacate Arbitration Award (Docket No. 2), Plaintiffs Motion to Vacate Supplemental Arbitration Award (Docket No. 7), and Defendant Williams Union Boiler's ("Williams") respective Replies thereto. Oral argument on the pending motions was held on March 4, 2004. For the following reasons, Plaintiffs Motion to Vacate Arbitration Award and Plaintiff's Motion to Vacate Supplemental Arbitration Award will be denied. Judgement will be entered in Defendant's favor on Defendant's counterclaim to confirm the undisputed portions of the Arbitration Award.
I. Factual and Procedural Background
The relevant facts are briefly set forth as follows: Plaintiff entered into a subcontract with Williams for the performance of certain services involved in the construction of a gasification power system for Motiva Enterprises, LLC ("Motiva"). Due to alleged delays in construction, Williams completed the project on April 21, 2000, after the pre-determined Milestone Date of January 17, 2000. Parsons asserts that Williams' failure to complete the project by the target date resulted in Parsons accruing $4.5 million in liquidated damages to be paid to, or charged against Parsons' account by, Motiva. Parsons argues that pursuant to the prime contract with Motiva, Parsons incurred $4.5 million liquidated damages upon the rate of $100,000.00 per day for 45 delay days.
At the completion of the project Williams submitted an invoice for full payment of the Schedule Incentive Fee included in the subcontract between Parsons and Williams. The subcontract provided that Williams was eligible for a maximum $2.5 million Schedule Incentive Fee upon completion.Subcontract. Section IV. The subcontract also contained a provision which apportioned payment of any liquidated damages owed by Parsons to Motiva, and which required Williams' share of liquidated damages to be funded through forfeiture of the Schedule Incentive Fee. Subcontract. Section IV. Allegedly as a result of tardy completion of the project, and the later discovery of overbilling, Parsons refused to oblige Williams' request for payment of the Schedule Incentive Fee and other invoices.
The subcontract between Parsons and Williams contained a dispute resolution provision requiring the parties to submit to arbitration in the event that they were not able to resolve disputes arising between them In December 2000, Williams filed a Demand for Arbitration seeking payment of invoices totaling $5,749,530. A panel of three arbitrators was convened by the American Arbitration Association. As agreed upon by both Parsons and Williams, the Arbitration Panel conducted twenty-five hearing days in Philadelphia, Pennsylvania during 2002. On February 20, 2003, the Arbitration Panel issued Williams an award of $2,859,066 for unpaid invoices, $1.5 million for the Schedule Incentive Fee, $522,074 in accrued interest, and attorneys' fees, expert fees and expenses to be determined in a supplemental award. Arbitration Award, at 1. The Arbitration Panel awarded Parsons a counterclaim award of $1,607,848 for various overbillings by Williams. Arbitration Award, at 1. Thus, the net sum of $3,273,292 was awarded to Williams. Arbitration Award, at 2. On August 1, 2003, the Arbitration Panel issued a supplemental award to Williams of $598,407 for attorneys' fees, and $271,783 for expert witness fees and expenses. Supplemental Award, at 1.
Plaintiff presently argues that both the Arbitration Award and Supplemental Arbitration Award should be vacated because the Arbitration Panel manifestly disregarded the contractual agreement between the parties in awarding Williams the Schedule Incentive Fee of $1.5 million. Plaintiff asserts that pursuant to the specific terms of the subcontract, Defendant was required to forfeit the Schedule Incentive Fee upon Plaintiff's payment of, or being charge for, liquidated damages to Motiva. Therefore, Plaintiff concludes that because it incurred $4.5 million in delay damages to Motiva, Defendant was not entitled to the Schedule Incentive Fee, and that the Arbitration Panel disregarded the terms of the parties' contract in nevertheless granting Defendant the Schedule Incentive Fee.
Plaintiff also asserts that the Supplemental Arbitration Award must be vacated because that award is an award of attorney fees and expert expenses. Plaintiff asserts that the Arbitration Panel disregarded the applicable arbitration rules and Delaware law in awarding attorneys' fees and expert expenses to Defendant.
II. Discussion
The Federal Arbitration Act ("FAA") authorizes a district court to vacate an arbitration award in the following limited circumstances:
(1) Where the award was procured by corruption, fraud, or undue means.
(2) Where there was evident partiality or corruption in the arbitrators, or either of them.
(3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.
(4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.9 U.S.C. § 10(a)(1994).
Plaintiff argues that in addition to the fourth statutory ground enumerated above, there is also a judicially created basis upon which it relies in support of having the awards vacated. An arbitration award may also be vacated when the award was made "in manifest disregard of the law." First Options of Chicago. Inc. v. Kaplan, 514 U.S. 938, 942 (1995) (citing Wilko v. Swan. 346 U.S. 427, 436-37 (1953), overruled on other grounds in Rodriguez de Quijas v. Shearson/American Express. Inc., 490 U.S. 477 (1989)). However, because the scope of review under the FAA is "narrow in the extreme," Amalgamated Meat Cutters Butcher Workmen v. Cross Brothers Meat Packers. Inc., 518 F.2d 1113, 1121 (3d Cir. 1975), a court may only vacate an arbitration award when the arbitrator's decision manifests disregard for the law, not merely an erroneous interpretation of the law. See Local 863 Int'l Bhd. of Teamsters v. Jersey Coast Egg Producers. Inc., 773 F.2d 530, 533 (3d Cir. 1985), cert. denied, 475 U.S. 1085 (1986) (citing Wilco, 346 U.S. at 436).
In the instant matter, Plaintiff contends that the Arbitration Panel both exceeded their powers and acted in manifest disregard of the law by disregarding the terms of the parties' subcontract. However, upon careful review of the record the Court finds that the Arbitration Panel had an evidentiary basis to support its award of a portion of the Schedule Incentive Fee to Defendant. Specifically, the Court notes that the Panel extensively questioned Defendant Williams' expert witness, Bradley Hornburg, about the terms of the contract, the interpretation of the liquidated damages provision in the subcontract, actual liquidated damages incurred and Defendant's forfeiture of its expected bonus. See, Def.'s Post-Hr'g Mem., Exh. 4, 5. Moreover, the Court also notes that Mr. Hornburg testified that upon his review of the contract, the change orders, and correspondence between Plaintiff and Motiva, he is unable to arrive at a calculation of 45 days of delay (the number of days Plaintiff asserts it was charged delay damages at the rate of $100,000.00 per day). Id., Exh. 4. Plaintiff disputes and disagrees with the evidence presented by Defendant, which is a basis upon which the Arbitration Panel could have relied in making its award. However, as stated above, the Court may only vacate an arbitration award when the arbitrator's decision manifests disregard of the evidence or of the law, not merely a possible erroneous factual determination or interpretation of the law. The credibility of the witnesses and evaluation of any conflicting evidence presented to the arbitrators, and the inferences drawn therefrom, is exclusively for the Arbitration Panel. I conclude therefore, that in light of the consideration given by the Arbitration Panel to the interpretation of the Schedule Incentive Fee provision of the converted subcontract, and the questioning of the Defendant's expert witness, the record does not support a finding that Arbitration Panel exceeded its powers nor acted in manifest disregard of the law.
In addition to the $1.5 million awarded to Defendant for the Schedule Incentive Fee, the Arbitration Panel, in a Supplemental Award also granted Defendant's request for attorneys fees and expert expenses. Plaintiff asserts that the Supplemental Arbitration Award consisting of attorneys' fees and expert expenses should also be vacated because: 1) the award of attorneys' fees and expenses exceeded the Arbitration Panel's authority; 2) the dispute provision portion of the converted contract does not permit such an award; 3) the parties did not agree to such an award, nor was there a joint submission for an award of attorneys' fees; and 4) the award of attorneys' fees violates Delaware law. It is undisputed that the converted subcontract does not authorize an award of attorneys' fees. Therefore, the only question this Court must address is whether the Arbitration Panel either exceeded it's authority or violated Delaware law in awarding attorneys' fees and expenses. The American Arbitration Association Rule 46 permits an award of attorneys' fees if the parties have requested such an award, if the award is authorized by law, or pursuant to the arbitration agreement. The parties did not jointly request an award nor did they agree to an award of attorneys's fees in their arbitration agreement. Therefore, an award of attorneys' fees is only proper if authorized pursuant to Delaware law, the agreed upon law governing the converted subcontract.
During the course of the hearing before the Arbitration Panel, Plaintiff requested attorneys' fees for alleged discovery violations. The Court does not consider Plaintiffs request for attorneys' fees for discovery sanctions as a joint request for prevailing party attorney's fees. See, Sun Ship, Inc. v. Matson Navig. Co., 785 F.2d 59 (3d Cir. 1986).
Title 6, Section 3509, of the Delaware Code, 6 Del.C. § 3509(b), provides as follows:
(b) Absent any agreements to the contrary between the parties, the arbitrator in any arbitration proceeding arising under this chapter shall award to the substantially prevailing party its reasonable attorneys' fees, arbitration costs and expenses for expert witnesses.
The statute clearly authorizes the payment of attorneys' fees and expert expenses. Plaintiff contends that any reliance on 6 Del.C. § 3509(b) is misplaced because the statute became effective after both the execution of the converted subcontract and also after the arbitration proceedings began. The new statute became effective on June 30, 2002. The arbitration proceedings were held between March and December 2002, and the Arbitration Panel issued its Award on February 20, 2003. The law in effect at the time of the completion of the arbitration proceedings permitted an award of attorneys fees. Plaintiff posits that applying 6 Del.C. § 3509(b) to the original Arbitration Award is a retroactive application of the statute. The Supreme Court of Delaware has not yet addressed whether this statute may be applied retroactively, therefore, both this Court and the Arbitration Panel are left to predict the Supreme Court of Delaware's holding on this issue. Assuming arguendo, that in predicting the law of the highest court of the State of Delaware, I would conclude that the statute should not be applied retroactively, I cannot conclude that the Arbitration Panel, in making a contrary prediction, disregarded the law of Delaware. Therefore, this Court cannot determine that the Arbitration Panel exceeded its authority or acted in manifest disregard of the law. The award of attorneys' fees and expert expenses will not be vacated.
Finally, Defendant has filed a counterclaim against Plaintiff. At oral argument, Plaintiff did not dispute Defendant's right to prevail on this claim. Therefore, the award Defendant requested will be granted.
An appropriate order follows.
ORDER
AND NOW, this day of March 2004, IT IS HEREBY ORDERED that:
1. Plaintiff's Motion to Vacate Arbitration Award is DENIED.
2. Plaintiff's Motion to Vacate Supplemental Arbitration Award is DENIED.
3. Defendant's Motion to Confirm the Award of Arbitrators as to the undisputed portions of the Award in the amount of $1,501,509.00, plus interest from the date of the Award is GRANTED.
4. Defendant's Motion to Confirm the Arbitration Award is GRANTED.
JUDGMENT
AND NOW this day of March 2004, IT IS HEREBY ORDERED that JUDGMENT IS ENTERED in favor of Defendant and against Plaintiff. The Arbitration Award is CONFIRMED in its entirety.