BERYL A. HOWELL, District Judge.
Pending before the Court is Priority One Services, Inc.'s (hereinafter "Priority One") petition to confirm an arbitration award, and respondent W & T Travel Services, LLC's (hereinafter "W & T") motion to vacate, modify, and correct this award. Priority One alleges that W & T materially breached and improperly terminated a contract between the parties. As agreed to under the terms of the contract, the parties' dispute was presented to the American Arbitration Association, and a panel of three arbitrators (hereinafter "the Panel") entered an award in favor of Priority One. W & T now seeks to vacate, modify, and correct the Panel's decision, arguing that the Panel exceeded its power, manifestly disregarded the law, and, in any event, miscalculated the damages awarded
Respondent W & T is a Maryland limited liability company that maintains its principal place of business in Maryland. Pet'r Mem. Supp. Pet. Confirm Arbitration Award (hereinafter "Pet'r Mem. Confirm"), ECF No. 1, at 2. On August 20, 2008, the National Institutes of Health (hereinafter "NIH") awarded W & T a contract (hereinafter "the Prime Contract") to operate shuttle buses for NIH employees and patients between the NIH campus in Bethesda, Maryland and other NIH locations, including those in Washington, D.C. and Virginia.
At about the same time that NIH awarded W & T the Prime Contract, W & T entered into an agreement (hereinafter "the Subcontract"), on August 27, 2008, with Priority One, a Virginia corporation with its principal place of business in Virginia, under which Priority One would be responsible for managing the NIH patient shuttle bus services. Id. at 9; Pet'r Mem. Confirm, at 2. W & T retained responsibility under the Prime Contract for managing the NIH employee shuttle buses. Resp't Mot. Vacate, at 7.
Like the Prime Contract, the Subcontract provided for one year of services, but stated that the contract was automatically renewed if NIH renewed the Prime Contract for the option years. Pet. Confirm Arbitration Award, ECF No. 1, Ex. 1, Subcontract between W & T and Priority One (hereinafter "Subcontract"), at 2. The Subcontract additionally stated that "[a]ll claims, disputes and matters in question arising out of, or relating to, this Subcontract
Id. at § 9. Furthermore, in addition to its own terms, the Subcontract "incorporated by reference" the Prime Contract between W & T and NIH. Id. at § 11.
Under the Prime Contract, NIH had the option of requiring W & T to install NextBus (or similar) technology on employee shuttle buses. Resp't Mot. Vacate, at 7. This technology electronically tracks the buses on which it is installed and relays arrival and departure times to waiting passengers. Id. If NIH requested this technology, in addition to Priority One's other responsibilities under the Subcontract, Priority One was responsible for installing the NextBus technology on W & T's employee shuttle buses. Id.
On January 5, 2009, NIH exercised the NextBus technology option and allegedly gave W & T until September 30, 2009 to get it installed.
On September 22, 2009, eight days before NIH's deadline, W & T alleges that the NextBus technology was not fully installed on all employee shuttle buses. Id. Pursuant to the Subcontract, on that date W & T sent Priority One a notice to cure. Id. Ten days later, after the NIH deadline had passed, W & T states that the NextBus Technology was still not completely installed in the employee shuttle buses. Id. W & T considered this a material breach of the Subcontract, and, on October 6, 2009, sent Priority One a letter notifying it that W & T was terminating the agreement as of November 30, 2009.
On December 15, 2009, Priority One filed a demand for arbitration with the American Arbitration Association (hereinafter "AAA"), arguing that W & T's termination of the Subcontract was improper and a material breach of the contract terms. Pet'r Opp'n Mot. Vacate, ECF No. 7, at 2. As compensation for breach of contract, Priority One sought "damages
From August 10 to August 12, 2010, the parties presented their claims to a panel of three arbitrators in Washington, D.C. Id. at 2-3.
After receiving the parties' post-hearing briefs, on October 18, 2010, the Panel unanimously entered an award in favor of Priority One, determining that Priority One did not materially breach the subcontract because "NIH did not view the [September 30, 2009] deadline as significant," the NextBus technology was operating properly on 13 of 14 employee shuttle buses on the deadline date, and W & T's "unreasonable conduct" prevented Priority One from completing installation and correcting any malfunctions. Pet. Confirm
On November 3, 2010, pursuant to 9 U.S.C. § 9,
Both Priority One's petition to confirm the arbitration award and W & T's motion to vacate, modify, and correct the award are pending before the Court.
"Judicial review of arbitral awards is extremely limited," Kurke v. Oscar Gruss & Son, Inc., 454 F.3d 350, 354, (D.C.Cir.2006) (quoting Teamsters Local Union No. 61 v. United Parcel Serv., Inc., 272 F.3d 600, 604 (D.C.Cir.2001)), and the court "must confirm an arbitration award where some colorable support for the award can be gleaned from the record." LaPrade v. Kidder, Peabody & Co., Inc., 94 F.Supp.2d 2, 4 (D.D.C.2000). A proceeding to confirm an arbitration award is "intended to be summary." Adkins v. Teseo, 180 F.Supp.2d 15, 18 (D.D.C.2001) (quoting Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir.1986)). The party challenging the award faces a "high hurdle." Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., ___ U.S. ___, 130 S.Ct. 1758, 1767, 176 L.Ed.2d 605 (2010). Courts "do not sit to hear claims of factual or legal error by an arbitrator" as they would "in reviewing decisions of lower courts." Kurke, 454 F.3d at 354 (internal citations and quotations omitted).
Pursuant to the Federal Arbitration Act (hereinafter "FAA"), the court must confirm an arbitration award unless there are statutory grounds to vacate, modify, or correct the arbitrators' decision. 9 U.S.C. § 9 (the court must grant an order to confirm an arbitration award "unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title"). "[T]he grounds for vacating an arbitration award are limited to `extreme arbitral conduct' as defined in Sections 10 and 11 of the FAA." Contech Constr. Prods., Inc. v. Heierli, 764 F.Supp.2d 96, 108 (D.D.C.2011) (quoting Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576, 586, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008)). The party objecting to the award bears the burden of demonstrating that one of the statutory grounds set forth in the FAA exists. Affinity Fin. Corp. v. AARP Fin., Inc., No. 10-cv-2055, 794 F.Supp.2d 117, 119-20, 2011 WL 2582876, at *2 (D.D.C. July 1, 2011) (citing Al-Harbi v. Citibank, N.A., 85 F.3d 680, 682 (D.C.Cir.1996)).
Section 10 of the FAA lists four grounds upon which an arbitration may be vacated: "(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; or (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). Additionally, Section 11 of the FAA provides that a district court may, upon application by any party, modify or correct an arbitration
In addition to the statutory grounds to vacate or modify arbitration awards set forth in Sections 10 and 11 of the FAA, courts previously have also vacated an arbitrator's decision upon finding that the decision was made "in manifest disregard of the law." Kurke, 454 F.3d at 354 ("In addition to the statutory grounds, `arbitration awards can be vacated ... if they are in manifest disregard of the law,'" quoting LaPrade v. Kidder, Peabody & Co., Inc., 246 F.3d 702, 706 (D.C.Cir.2001)). Whether an arbitrator's manifest disregard for law remains a valid basis for vacating an arbitration decision is unclear after the Supreme Court's decision in Hall St. Associates v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008), which stated that "[9 U.S.C.] §§ 10 and 11 ... provide the FAA's exclusive grounds for expedited vacatur and modification." Id. at 584, 128 S.Ct. 1396. Since Hall St. Associates, neither the Supreme Court nor the D.C. Circuit has determined whether a manifest disregard for law may still provide a basis for vacating an arbitration decision. Stolt-Nielsen, 130 S.Ct. at 1768 n. 3 ("We do not decide whether `manifest disregard' survives our decision in Hall Street Associates ..."); see generally Regnery Publ'g, Inc. v. Miniter, 368 Fed. Appx. 148, 149 (D.C.Cir.2010) (per curiam) (affirming district court decision by "[a]ssuming without deciding that the `manifest disregard of the law' standard survives Hall Street Associates...."). The Court need not resolve this issue of whether a manifest disregard for the law continues to provide an independent basis for vacating arbitration awards because, even assuming arguendo that this standard exists, the Court finds no basis to vacate the Panel's judgment.
W & T urges the Court to vacate, modify, or correct the arbitration award pursuant to 9 U.S.C. § 10(a) because the Panel allegedly exceeded and imperfectly executed its powers when it (1) "chose not to apply federal law to the dispute even though it was clearly required to do so by the plain language of the Subcontract," and (2) "award[ed] more damages for lost profits than the law allows." Resp't Mot. Vacate, at 1-2. In the alternative, W & T argues that the Court should modify and correct the arbitration award pursuant to 9 U.S.C. § 11 because the Panel miscalculated interest damages. There is no basis to vacate the Panel's decision, but the Court agrees that the Panel miscalculated interest damages. Accordingly, that provision of the Panel's judgment is corrected.
Section 10(a)(4) of the FAA authorizes the Court to vacate an arbitration award "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)(4). To succeed in vacating an award under § 10(a)(4), a party must demonstrate that the "arbitrator strayed from interpretation
To the extent that W & T argues that the Panel manifestly disregarded the law, the Court's review under this standard is "extremely narrow." Kurke, 454 F.3d at 354. To vacate an award for manifest disregard of the law, the court "must find that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case." Id. (quoting LaPrade, 246 F.3d at 706). If an "explanation for an award is deficient ... [a court] will confirm it if a justifiable ground for the decision can be inferred from the facts of the case." Id. (quoting Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 390 (2d Cir.2003)). Even "[w]hen the arbitrators give no explanation for their decision, as commonly occurs in arbitration ... [a court] must confirm the award if any justification can be gleaned from the record." Id. (internal and citations quotations omitted). "In order to obtain a vacatur of an arbitration award on `manifest disregard' grounds, a party must make a specific showing that an arbitrator knowingly disregarded the applicable law." Williams Fund Private Equity Grp., Inc. v. Engel, 519 F.Supp.2d 100, 103 (D.D.C.2007) (citing Alston v. UBS Fin. Servs., Inc., No. 04-cv-01798, 2006 WL 20516, at *3 (D.D.C. Jan. 2, 2006) ("[Petitioners] fail to allege that the arbitrators undertook to correctly state the law and then proceeded to disregard their own pronouncement.")).
W & T argues that the Panel exceeded its power when it "consciously refused to apply" Federal Procurement Law despite W & T "convincingly [making] the Panel aware that [Federal law] applied to [the] matter." Resp't Mot. Vacate, at 25. According to W & T, the Panel "knew of the relevant legal principle, appreciated that this principle controlled the outcome of the disputed issue, and nonetheless willfully flouted the governing law by refusing to apply it." Id. at 26 (quoting Stolt-Nielsen, 130 S.Ct. at 1768 n. 3). Consequently, W & T declares that the Panel's decision to apply Maryland law was "a direct move on the part of the Panel to employ its own version of justice." Id. at
The Subcontract provides that:
Subcontract, § 21.1.
W & T argues that Federal law is applicable to this dispute because the Prime Contract was incorporated by reference into the Subcontract, and the Prime Contract "incorporates by reference FAR 52-212-4 which permits the government, and thus, [W & T] as the Prime Contractor, to terminate [Priority One] for convenience as well as terminate the Subcontract for default." Resp't Mot. Vacate, at 14. Thus, pursuant to the allegedly incorporated FAR provision, W & T argues that the Panel "had no basis whatsoever not to apply federal procurement regulatory law" and that under federal law its termination of the Subcontract was proper. Id. at 26. Two consequences would apparently flow if W & T's contract construction had been adopted by the Panel: first, W & T would have broader grounds for termination of the Subcontract with Priority One, even absent a material breach by Priority One; and, second, under federal procurement regulatory law, "in contrast with damages stemming from breach of contract, the sum due a contractor after a termination for convenience is significantly circumscribed... [and Priority One] would not be due anticipatory profits and consequential damages pursuant to its Subcontract with [W & T]." Id. at 20.
Despite W & T's assertions, the Panel did not exceed its power when it declined to apply federal law both to the determination of the legality of W & T's termination of the Subcontract and to the calculation of damages. In its decision, the Panel stated that "despite the actual termination having been for material breach," W & T argued for the first time in a post-hearing brief that its termination action should be regarded as a `termination for convenience' or a `termination for default' and that "both these termination clauses in the [] Prime Contract with NIH were incorporated by reference into the Subcontract." Award of Arbitrators, ¶ 13. The Panel found this argument to be "seriously flawed" because the Subcontract "expressly limits the Respondent's right to terminate under the termination for convenience clause to a situation in which NIH has first terminated the prime contract either for default or inconvenience" and it was "undisputed that no such termination occurred by NIH." Id. ¶ 14. Moreover, the Panel concluded that incorporation by reference of the FAR provision, which allows the government to terminate its contract with W & T for convenience or for default, did not "confer[] on the Respondent exactly the same rights with respect to the Claimant as NIH had with [W & T]." Id. ¶ 15.
In making this decision, the Panel did not "choose to institute its own brand of justice." The Panel interpreted the contract, concluded that federal law did not directly govern the dispute, and, thus, in accordance with the Subcontract, applied Maryland Law. Id. ¶¶ 15-16; see also Subcontract § 21.1 ("Where no Federal law is applicable, this Agreement shall be governed by the appropriate law of the State of Maryland."). The Panel was "arguably
To the extent that W & T argues that the Panel's decision to apply Maryland law represented a manifest disregard for the law, the Court disagrees. W & T's claim that the Panel knew the relevant legal principle, appreciated this principle controlled and nonetheless refused to apply it, is erroneous. Although W & T cited cases that arguably supported incorporating the termination by convenience and default clauses in FAR 52-212-4 into the Subcontract, Priority One presented the Panel with cases to support the opposite conclusion. See Hartford Accident & Indem. Co. v. Scarlett Harbor Assoc., Ltd. P'ship, 109 Md.App. 217, 674 A.2d 106, 142-43 (Md.Ct. Spec.App.1996) ("When an earlier document is `incorporated by reference' into a subsequent contract, it simply means that the earlier document is made a part of the second document, as if the earlier document were fully set forth therein. Absent an indication of a contrary intention, the incorporation of one contract into another contract involving different parties does not automatically transform the incorporated document into an agreement between the parties to the second contract.") (internal citations omitted); United States for Use of Yonker Constr. Co. v. Western Contracting Corp., 935 F.2d 936, 939 (8th Cir.1991) (stating that the court was "not convinced" that a subcontract incorporated provisions of the general contract when the general contract's provisions applied to the government). The Panel chose the position contrary to the one advocated by W & T. That decision, however, was not in manifest disregard to the applicable law. See Kurke, 454 F.3d at 354 (Courts "do not sit to hear claims of factual or legal error by an arbitrator" as they would "in reviewing decisions of lower courts.").
W & T also claims that the Panel exceeded its powers in its award of damages, claiming that the Panel (1) did not adequately explain its method for calculating damages and chose "a damage figure for lost profits totally unsupported by the relevant caselaw or any kind of law;" (2) improperly awarded Priority One speculative lost profits for option year 2; and (3) improperly imposed punitive damages by awarding prejudgment interest. The Court finds no basis for these arguments.
W & T states that the Panel exceeded its powers when calculating the damage award because there was "no basis for its irrational calculation of lost profits damages." Resp't Mot. Vacate, at 27. The fact that the Panel did not provide a full explanation for its damages calculation, according to W & T, supports the conclusion that the Panel exceeded its power or manifestly disregarded the law. See id. at 27-28.
According to W & T, the Prime Contract is a Fixed-Price Incentive contract with a firm profit margin of 4.5% "built into the ceiling price of the contract." Id. at 22. W & T states that with the "assistance and full knowledge of [Priority One], [W & T] drafted and submitted its cost/price proposal to NIH with a profit margin of 4.5% for the entire contract." Id. Thus, "there
When calculating damages, the Panel did not apply a fixed 4.5% profit margin, but instead accepted Priority One's damage analysis, awarding Priority One $546,839 for the remaining nine months of option year one, and $588,181 for option year 2. Award of Arbitrators, at 7. W & T claims that Priority One "used the wrong methodology for calculating profit in assessing its damages" and that the Panel should have used the built-in profit margin on the contract. Resp't Mot. Vacate, at 12, 22.
As a preliminary matter, W & T relies on Tinaway v. Merrill Lynch & Co., Inc., 658 F.Supp. 576 (S.D.N.Y.1987), and Halligan v. Piper Jaffray, Inc., 148 F.3d 197 (2d Cir.1998), to argue that the Panel's failure to more fully explain its calculation method demonstrates that the Panel exceeded its power or manifestly disregarded the law. See Resp't Mot. Vacate, at 21, 29-30 ("There is no reasoned discussion in the Panel's decision of the method used to calculate the lost profits awarded."). W & T's reading of those cases is incorrect.
In Tinaway, the court stated that "arbitrators were under no obligation to give reasons for their decision, and the courts are instructed that where a ground for the arbitrator's decision can be inferred from the facts of the case, the award should be confirmed." 658 F.Supp. at 579 (internal citations omitted). The reason the Court vacated the arbitration decision in that case was because the court was unable to infer the basis for the arbitration decision from the record and, as the court stated, the "reduction of the amount of the award by ninety-five percent can only represent `evident partiality.'" Id. Absent such glaring deficiencies, Tinaway confirmed that when arbitrators' rationale can be gleaned from the record, a detailed explanation is not needed or required. Id.; see also Lessin v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 481 F.3d 813, 820 (D.C.Cir. 2007) (citing Sargent v. Paine Webber Jackson & Curtis, Inc., 882 F.2d 529, 532 (D.C.Cir.1989)).
Here, the arbitrators' method for calculating lost profits is clearly discernable from the record before the Court. In its briefs to the Panel, Priority One argued that its lost profits should be calculated by subtracting its cost of performing the contract from the total contract price. These figures amounted to "$586,839 in lost profits for the unperformed portion of option year one" and "$748,181 in lost profits for option year two." Pet'r Opp'n Mot. Vacate, ECF No. 7, Ex. 10, Claimant's Pre-Hearing Brief, at 10.
W & T also relies on Halligan for the contention that the Panel's failure to fully explain its method for calculating damages should be seen as indicative of the Panel's wrongdoing. In Halligan, however, the court was already inclined to find that the arbitrators manifestly disregarded the law based on other facts in the case, and explicitly stated that it "want[ed] to make clear that [it was] not holding that arbitrators should write opinions in every case or even in most cases." 148 F.3d at 204. Rather, the court "merely observe[d] that where a reviewing court is inclined to find that arbitrators manifestly disregarded the law or the evidence and that an explanation, if given, would have strained credulity, the absence of explanation may reinforce the reviewing court's confidence that the arbitrators engaged in manifest disregard." Id.; see also Kanuth, 949 F.2d at 1179 ("[C]ourts will not generally inquire into the basis of a lump-sum award unless they believe that the arbitrators rendered it in `manifest disregard' of the law or unless the facts of the case fail to support it.") (internal quotations and citations omitted).
In the present situation, the Court is not inclined to find that the arbitrators manifestly disregarded the law. The Panel stated that it applied Maryland law, which allows lost profits that can be proved by "reasonable certainty." Award of Arbitrators, ¶ 20 (quoting Sloane, Inc. v. Stanley G. House & Assocs., Inc., 311 Md. 36, 42, 532 A.2d 694 (1987)); see also Hoang v. Hewitt Ave. Assoc., LLC, 177 Md.App. 562, 936 A.2d 915, 934 (Md.2007) ("In a breach of contract action, upon proof of liability, the non-breaching party may recover damages for 1) the losses proximately caused by the breach, 2) that were reasonably foreseeable, and 3) that have been proven with reasonable certainty."). Although W & T states that "there was no need for speculation or estimation as to [Priority One's] lost profits," the Panel chose not to accept the 4.5% profit margin as the proper estimation. The Panel instead subtracted Priority One's projected costs, which it deemed "easily capable of calculation," from the amount that Priority One would have received from the contract. Award of Arbitrators, ¶ 21.
Moreover, there is no basis for the argument that the Panel exceeded its powers when calculating lost profits. As Priority One notes, the "[b]road arbitration clause... empowered the Panel to resolve `all claims, disputes and matters in question arising out of, relating to, this Subcontract.'" Pet'r Opp'n Mot. Vacate, at 12 (quoting Subcontract, § 12). The Panel was given the responsibility of determining whether W & T breached the Subcontract, and the damage Priority One suffered as a result of the alleged breach. Although W & T does not agree with the result, the Panel fulfilled the responsibility with which it was tasked when it calculated the damages it believed Priority One suffered. See Kanuth, 949 F.2d at 1180-81 (holding that an arbitration panel did not exceed its powers when "[t]he parties explicitly requested
W & T claims that the Panel exceeded its power and manifestly disregarded the law by awarding Priority One lost profits for option year 2, "an option year which was awarded when [Priority One] was not even a subcontractor to W & T." Resp't Mot. Vacate, at 28. W & T contends that damages for option year 2 are speculative "because there is no guarantee that an option year will be exercised" and that the contract with NIH "may not have been renewed because [Priority One] was in fact the subcontractor." Resp't Reply, at 15-16. According to W & T, the Panel "accurately states the controlling case(s) ... but then goes beyond the dictates of the cases with no explanation whatsoever." Resp't Mot. Vacate, at 28-29.
In its decision, the Panel stated that "[w]here, as here, a contract is renewable solely at the discretion of the government, the government is under no obligation to exercise the option." Award of Arbitrators, ¶ 25 (citing Gov. Sys. Advisors, Inc. v. United States, 847 F.2d 811, 813 (Fed.Cir. 1988)). The Panel, however, found that "at time of the breach of the subcontract, the unrebutted evidence was that NIH had already orally indicated that the prime contract would be renewed and in fact, the prime contract was renewed for option year 2." Id. ¶ 21. Given these facts, the Panel concluded that Priority One's would have realized lost profits for year two but for W & T's breach of the Subcontract.
Although W & T argues that the Panel did not explain its decision, the Panel's reasoning is clear. Based on the evidence before it, the Panel found that if W & T did not terminate the Subcontract, Priority One would likely still be the subcontractor in option year 2, which the government had exercised prior to the alleged breach. The Panel determined that Priority One's lost profits for year 2 was not speculative and could be calculated with reasonable certainty. The Panel did not exceed its power or manifestly disregarded law in making this decision.
W & T claims that the Panel had no authority to award prejudgment interest because it "is a form of punitive damages" and "private punishment is against public policy." Resp't Mot. Vacate, at 30. The Panel applied Maryland law, which allows prejudgment interest. See Pulte Home Corp. v. Parex, Inc., 174 Md.App. 681, 923 A.2d 971, 1022 (Md.Ct. Spec.App.2007) ("Whether a party is entitled to prejudgment interest ... is left to the discretion of the fact finder.") (internal citations and quotations omitted). W & T's contention on this issue is meritless.
The Court finds no basis to vacate the Panel's ruling, but W & T is correct that the Panel erred when calculating prejudgment interest.
After concluding that W & T breached the Subcontract, the Panel awarded Priority One lost profits of $546,839 for the remaining 9 months of option year 1, plus six percent interest per annum "from October 7, 2009, until paid," and lost profits of $588,181 for option year 2, plus six percent interest per annum from "30 days after the date of this Award [November 17, 2010] until paid." Award of Arbitrators, at 7. W & T claims that the Panel
The Court may modify or correct an arbitral award if the movant can demonstrate that "there was an evident material miscalculation of figures." 9 U.S.C. § 11(a). "When an arbitration award orders a party to pay damages that have already been paid or which are included elsewhere in the award, a court may modify the award." Eljer Mfg. v. Kowin Dev. Corp., 14 F.3d 1250, 1254 (7th Cir.1994); accord Consol. Biscuit Co. v. Karpen, No. 3:00-cv7703, 2001 WL 1142001, at *6 (N.D.Ohio Aug. 28, 2001) ("If a panel awards damages that have already been paid, a court has authority to modify the award."). "Double recovery constitutes a materially unjust miscalculation which may be modified under section 11 of the Federal Arbitration Act." Eljer Mfg., 14 F.3d at 1254.
On October 6, 2009, W & T provided Priority One notice that it was terminating the Subcontract, but gave Priority One until "until November 30, 2009 to phase out the rest of its activities" under the Subcontract and paid Priority One through that date. Resp't Mot. Vacate, at 9-10. The Panel, however, awarded Priority One prejudgment interest from October 7, 2009, the date notice was provided, not the date the Subcontract was terminated, and thereby included in the award almost two months for which Priority One had been fully paid.
Under Maryland law, the purpose of prejudgment interest "is to compensate the aggrieved party for the loss of the use of the principal liquidated sum found due it and the loss of income from such funds." Pulte Home Corp., 923 A.2d at 1022 (citations omitted); see also Buxton v. Buxton, 363 Md. 634, 770 A.2d 152, 165 (2001) ("Pre-judgment interest is allowable as a matter of right when the obligation to pay and the amount due had become certain, definite, and liquidated by a specific date prior to judgment so that the effect of the debtor's withholding payment was to deprive the creditor of the use of a fixed amount as of a known date."). Priority One was paid for its services through November 30, 2009, and therefore suffered no loss of income due to W & T's breach prior to that time. The Panel's award of prejudgment interest for beginning on October 7, 2009, instead of December 1, 2009, was an evident material miscalculation, which requires correction. The Court therefore modifies the Panel's award to set prejudgment interest on Priority One's lost profits for option year 1 to run beginning December 1, 2009, the effective termination date of the Subcontract.
For the foregoing reasons, W & T's motion to vacate, modify, and correct the arbitration award is denied in part and granted in part. The Court denies W & T's motion to vacate or modify the Panel's award, but grants W & T's request to correct the Panel's prejudgment interest calculation. Aside from this correction, Priority One's petition to confirm the arbitration award is granted. An Order consistent with this Memorandum Opinion will be entered.
