PATRICK MICHAEL DUFFY, District Judge.
This matter is before the court on Plaintiff Coastal Roofing Company, Inc.'s motion to vacate an arbitrator's award and Defendants' motion to lift the court's stay and confirm the arbitrator's award. For the reasons set forth herein, Plaintiff's motion to vacate is denied, and the court grants Defendants' motion and confirms the arbitrator's award.
Plaintiff Coastal Roofing Company, Inc. ("Coastal") is in the business of installing and repairing roofs. In the summer of 2006, Coastal President Richard Ryan ("Ryan") began negotiating with representatives of a company called Broadband Construction, LLC ("Broadband"). Defendants Paul Browne & Associates and Paul Browne (collectively, "Browne") had been given a contract to perform roofing work at the United States Navy's SPAWAR facility at the Charleston Weapons Station. Browne had then subcontracted this work to Broadband. Broadband, in turn, was in negotiations to subcontract the work to Coastal. Representing Broadband was Donald T. Reynolds ("Reynolds"), who held himself out to be President of Broadband. On August 11, 2006, the parties entered into a contract, which contained the terms under which Coastal would perform the actual roofing work in question.
On February 21, 2007, Broadband's attorney sent a letter to Coastal informing them that their employment had been terminated due to insufficient progress on the job. At this point, Reynolds, again holding himself out to be President of Broadband, entered into a separate contract with another subcontractor, Glasgow Roofing Company, Inc., to complete the roofing work for which Coastal had been hired. In April 2007, Coastal notified Broadband's counsel that it would demand arbitration for breach of contract over its termination. While conducting research for the arbitration, Coastal discovered that Broadband Construction, LLC, did not in fact exist as a limited liability corporation. After bringing this issue up to Broadband's attorney, the attorney responded that the actual contracting party had been Broadband Construction Services, LLC. Upon conducting more research, however, Coastal discovered that Broadband Construction Services, LLC had actually been dissolved with the Secretary of State on December 31, 2006. Despite this, Reynolds continued to do business as Broadband, particularly with Glasgow, well after this date.
On June 26, 2007, the parties met for mediation of this dispute, but were unable to resolve their differences. The mediator suggested that the two parties document their differences, submit them to him, and return for mediation on September 12. On September 5, Coastal sent a letter to Broadband's attorney informing him that Coastal would not be attending any further mediation. Also on September 5, Coastal filed the present action against Defendants in this court. In its Complaint, Plaintiff alleges five separate causes of action: (1) a violation of the Miller Act, which requires contractors on federal construction
It is well settled that a court's review of an arbitration award "is among the narrowest known to the law." United States Postal Service v. Am. Postal Workers Union, AFL-CIO, 204 F.3d 523, 527 (4th Cir.2000) (internal quotation marks omitted). "A court sits to `determine only whether the arbitrator did his job—not whether he did it well, correctly, or reasonably, but simply whether he did it.'" Id. (quoting Mountaineer Gas Co. v. Oil, Chem. & Atomic Workers Int'l Union, 76 F.3d 606, 608 (4th Cir.1996)). "As long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision." United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987). The Fourth Circuit has emphasized the limited scope of judicial review because "[a] policy favoring arbitration would mean little, of course, if arbitration were merely the prologue to prolonged litigation.... Opening up arbitral awards to myriad legal challenges would eventually reduce arbitral proceedings to the status of preliminary hearings." Remmey v. PaineWebber, Inc., 32 F.3d 143, 146 (4th Cir.1994). Therefore, "[a] confirmation proceeding under 9 U.S.C. § 9 is intended to be summary: confirmation can only be denied if an award has been corrected, vacated, or modified in accordance with the Federal Arbitration Act." Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir.1986); see also Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir.1987) ("Absent a statutory basis for modification or vacatur, the district court's task [is] to confirm the arbitrator's final award as mandated by section 9 of the Act."). It is the plaintiff's burden to prove that the unfavorable portions of the award should be vacated, as provided in sections 10 and 11 of the Federal Arbitration Act. O.R. Securities, Inc. v. Professional Planning Associates, Inc., 857 F.2d 742, 748 (11th Cir.1988).
Plaintiff asks the court to vacate the arbitrator's award pursuant to 9 U.S.C. § 10(a)(4), which permits a district court to
Plaintiff first asks the court to vacate the arbitrator's award on the ground that the arbitrator failed to provide a reasoned award as requested by the parties pursuant to the Construction Industry Arbitration Rules of the American Arbitration Association. In addressing the merits of the parties' dispute, the arbitrator's award stated the following:
Damages $436,545.13 Pre Award Interest at 8.75% $ 64,465.20 Attorney fees and expenses $218,193.00
(Id. Ex. 4.) With respect to the form of an arbitrator's award, Rule 43 of the prior Construction Industry Arbitration Rules of the American Arbitration Association, applicable to the parties in this case, stated:
Plaintiff contends that the parties did request a reasoned award from the arbitrator, and to support this argument, Plaintiff provided a copy of the original arbitrator's Report of Preliminary Hearing, Scheduling Order, and Procedural Directive No. 2, which stated, "A reasoned award was requested." (Id. Ex. 2 ¶ 13.) Plaintiff also provided the court with a transcript of the arbitration hearing, in which Plaintiff contends the parties repeated their request for a reasoned award. The pertinent portions of the transcript are as follows:
(Id. Ex. 2, Transcript 38:1-41:5.) Lastly, Plaintiff cites to a Ninth Circuit case for the proposition that an arbitrator exceeds his authority by failing to provide a written explanation of the award when the parties contracted for it. (Id. at 7) (citing Western Employers Ins. Co. v. Jefferies & Co., Inc., 958 F.2d 258 (9th Cir.1992) ("However, arbitrators can also `exceed their powers' under 9 U.S.C. § 10(d) when they fail to meet their obligations, as specified in a given contract, to the parties.") (emphasis in original)).
Mr. Anthony and Broadband contend that the arbitrator was never under an obligation to provide a reasoned award. They argue that former Rule 43 required the parties to request a reasoned award in writing prior to the appointment of the arbitrator and that Coastal has failed to produce any evidence that the parties entered into such an agreement prior to selecting the original arbitrator in this case. Next, Mr. Anthony and Broadband contend that the hearing transcript reveals
After considering each side's argument, the court finds that the arbitrator was not obligated to provide a reasoned award as argued by Coastal. As already discussed, the version of Rule 43 of the Construction Industry Arbitration Rules applicable to the parties' dispute provided, "The arbitrator shall provide a concise, written breakdown of the award. If requested
Thus, the rule was revised to provide the parties with additional time to agree upon the form of the arbitrator's award. In this case, however, the rule required that the parties request a reasoned award in writing and prior to the selection of the arbitrator, but it was not until a conference call, which resulted in the Report of Preliminary Hearing, Scheduling Order and Procedural Directive # 2, that the parties requested a reasoned award and that the original arbitrator
Coastal, however, does call attention to Rule 1 of the Construction Industry Arbitration Rules, which permits the parties to modify the procedures set forth in the rules after the appointment of an arbitrator, so long as the arbitrator consents to the modification. Even if the court accepted
Also, as Mr. Anthony and Broadband argued, the parties' arbitration provision in this case did not require the arbitrator to produce a reasoned award like the contract provision at issue in the Ninth Circuit case cited by Coastal. In that case, the parties' arbitration provision specifically stated that an arbitrator's award would contain "findings of fact and conclusions of law," thus the court found that the arbitration panel exceeded its authority under § 10 when its award did not contain findings of fact and conclusions of law, as the award failed to meet the obligations specified under the parties' contract. W. Emplrs. Ins. Co., 958 F.2d at 262. Here, the parties merely agreed that if mediation did not resolve a dispute between them, then the matter was to be "decided by arbitration in accordance with the most current Construction Industry Arbitration Rules of the American Arbitration Association." (Broadband's Mem. in Support Ex. E.) Of course, the arbitration rule applicable to this case permitted arbitrators to provide reasoned awards, "if the arbitrator believes it is appropriate to do so." While Coastal may have asked the arbitrator at the start of the hearing to issue a reasoned award, "courts generally have held that arbitrators are not required to give their reasons for an award.... Arbitrators are not required to disclose the basis upon which the awards are made and courts will not look behind a lump-sum award in an attempt to analyze their reasoning process." Atlanta-Tomberlin, Inc. v. E. Band of Cherokee Indians, 672 F.Supp. 887, 889 (W.D.N.C.1987).
Finally, even if the court were to find that the arbitrator was required to issue a reasoned award, courts have not recognized a failure to do so as a ground for vacating an arbitrator's award. In MCI Constructors, Inc. v. Hazen and Sawyer, P.C., the plaintiff asked the court to vacate an arbitrator's damages award under § 10(a)(4) because the arbitration panel did not provide a reasoned award. No. 1:02-396, 2009 WL 632930, at *7, 2009 U.S. Dist. LEXIS 17866, at *27 (M.D.N.C. March 9, 2009). In rejecting the plaintiffs request, the court noted that "[a]n award being unreasoned is not a basis for vacatur under § 10(a)(4)," as "awards are generally vacated under § 10(a)(4) only where the arbitrators failed to resolve an issue presented to them or the award is ambiguous or unclear. Id. (citation omitted). Thus, based on the foregoing, the court rejects Coastal's request for vacatur based on an unreasoned award.
Plaintiff also asks the court to vacate the arbitration award based on the arbitrator's alleged "manifest disregard of the law."
Long John Silver's Rests., Inc. v. Cole, 514 F.3d 345, 349-50 (4th Cir.2008) (internal alterations omitted).
After considering the record, the court does not find that the arbitrator manifestly disregarded the law in this case. "As long as the arbitrator is even arguably ... acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision." PPG Indus. v. Int'l Chem. Workers Union Council of the United Food and Commercial Workers, 587 F.3d 648 (4th Cir.2009) (citing United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987)). Here, the arbitrator heard arguments from both sides regarding the issue of whether or not The Broadband Companies, LLC was the successor in interest to Broadband Construction Services, LLC's claims against Coastal, and in his award, he found that it was. On this record, the court finds the arbitrator "did his job." Mountaineer Gas Co. v. Oil, Chem. & Atomic Workers Int'l Union, 76 F.3d 606, 608 (4th Cir.1996).
Even considering the lack of rationale provided by the arbitrator in his award, as Coastal asks the court to do, the court does not believe the arbitrator manifestly disregarded the law. See Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 390 (2d Cir.2003) ("Even where explanation for an award is deficient or non-existent, we will confirm it if a justifiable ground for the decision can be inferred from the facts of the case."). Again, "a federal court cannot vacate an arbitral award merely because it is convinced that the [arbitrator] made the wrong call on the law. On the contrary, the award should be enforced, despite a court's disagreement with it on the merits, if there is a barely colorable justification for the outcome reached." Wallace v. Buttar, 378 F.3d 182, 190 (2d Cir.2004) (internal quotation omitted). Although Coastal argues that no evidence "of any kind" exists that would cause the arbitrator to find that Broadband Companies, LLC was the successor in interest of Broadband Construction Services, LLC, it appears that Broadband did provide a copy of a resolution of Broadband Companies dated September 21, 2006, which appointed Mr. Anthony to terminate Broadband Construction, along with two other limited liability companies, and to "merge any business they may have with [Broadband Companies'] business...." Therefore, there was evidence before the arbitrator that Broadband Companies was to be the successor in interest to Broadband Construction Services, LLC, and the arbitrator so found, despite the fact that Broadband did not provide proof that a merger plan was filed with the South Carolina Secretary of State. As "[t]he decision of the arbitrator on matters agreed to be submitted to him is given considerable deference by the courts," the court denies Coastal's motion to vacate his award on this ground. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 456, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003).
Finally, Coastal argues in both its motion to vacate and in its response in opposition to Mr. Anthony and Broadband's motion to confirm that, based on testimony given at the arbitration hearing, its agreement with Broadband was procured by fraud, and its enforcement would be contrary to public policy. As such, Coastal argues that the contract between the parties is void and that the court should now find that the parties were not required to arbitrate. Coastal bases this argument on the assertion that Mr. Anthony, the owner of all of the Broadband entities, testified
Moreover, Coastal contends that P. Browne & Associates and Broadband violated federal law. It asserts that, as a recipient of a subcontract from the Small Business Administration special 8(a) program, P. Browne & Associates was required to perform twenty-five percent of the work on the roofing project and could not have subcontracted all of the work to Broadband, as a third party, without the government's approval. Coastal alleges that the government never approved Broadband's participation in its contract with P. Browne & Associates and that P. Browne & Associates and Broadband were able to conceal Broadband's involvement in the project by executing an assignment of claims. As such, Coastal believes Broadband must have made deliberate misrepresentations to the Navy for Coastal to have access to the Charleston Weapons Station to conduct the work it did, and since its contract with Broadband Construction was allegedly procured by fraud, its enforcement would be against public policy.
Mr. Anthony and Broadband contend that the evidence supports the arbitrator's finding that a subcontract existed between P. Browne & Associates and Broadband Construction and believe the court lacks subject matter jurisdiction to hear this claim, as the law requires an arbitrator to judge a contract's validity, compared to the validity of an arbitration clause, which the court can review. The court agrees with this argument. As already explained in this court's previous order, the United States Supreme Court has determined that when a party challenges the agreement, rather than the arbitration provision, "[t]he challenge should... be considered by an arbitrator, not a court." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). Inherent in the arbitrator's award is his finding that Coastal and Broadband Construction entered into a valid contract, and to the extent Coastal would argue that the arbitrator manifestly disregarded the law by making this finding, the court does not make such a finding.
Paul Browne, owner of P. Browne & Associates, testified during his deposition that he drafted a subcontract document which was executed with Broadband. Although a signed copy was never introduced into evidence because, according to Mr. Browne, a fire at his home destroyed the document, the arbitrator admitted, over objection, an unexecuted copy of the alleged agreement during the arbitration hearing. Mr. Anthony also testified that Broadband Construction had a standard subcontract agreement with Mr. Browne's company. While Coastal contends that Mr. Anthony did not reveal until the last day of the arbitration hearing that a subcontract was never signed by both his company and Mr. Browne's company, Mr. Anthony testified in his deposition on March 26, 2009 that the parties "never signed the subcontract agreement because the numbers continued to change." (Anthony Dep. 32:7-8.) Coastal believes this testimony proves that P. Browne & Associates and Broadband Construction never reached an agreement as to the scope of the work and the price to be paid, and thus never had a valid contract.
Section 9 of the Federal Arbitration Act provides that any time within one year after an arbitration award is made, a party to the arbitration may apply to a federal district court for an order confirming the award. 9 U.S.C. § 9. As already discussed, the federal court's review of an arbitration award is tightly circumscribed, see, e.g., Union Pac. R.R. v. Sheehan, 439 U.S. 89, 91, 99 S.Ct. 399, 58 L.Ed.2d 354 (1978) (per curiam) (stating that the scope of review of arbitration award is "among the narrowest known to the law" (internal quotation marks omitted)); Upshur Coals Corp. v. United Mine Workers of America, 933 F.2d 225, 229 (4th Cir.1991) (noting that arbitration awards are "accorded great deference"), and a court must confirm the arbitration award unless the award is vacated, modified, or corrected pursuant to sections 10 or 11 of the FAA. 9 U.S.C. § 9. The court has denied Coastal's motion to vacate on the various grounds asserted; therefore, the court grants Mr. Anthony and Broadband's motion to lift the court's stay and confirm the arbitration award.
It is therefore,