Opinion
No. HHB CV05-4008908-S
June 28, 2006
MEMORANDUM OF DECISION
On May 22, 2006, the parties appeared before the court to argue the plaintiff's application to confirm and the defendant's application to vacate an arbitration award. Each party submitted exhibits and memoranda of law. After consideration, the court issues this memorandum of decision.
I Background
The plaintiff, Cianbro Corporation (Cianbro) filed its application to confirm arbitration award on December 20, 2005. The defendant National Eastern Corporation (NEC) filed its application to vacate arbitration award on January 17, 2006.
These proceedings arise from the parties' contractual relationship concerning a construction project. Cianbro was retained as a contractor, to replace White Oak Corporation (White Oak), in order to complete the replacement of the Tomlinson Bridge, over the Quinnipiac River, in New Haven, Connecticut. NEC originally had agreed to supply White Oak with fabricated steel and miscellaneous steel concerning the project. Cianbro retained NEC to complete its work on the project.
At the conclusion of the project, the parties had several disputes. Cianbro commenced arbitration and NEC counterclaimed therein. The arbitration was conducted by a panel of three arbitrators, pursuant to a written agreement to arbitrate in accordance with the rules of the American Arbitration Association (AAA). The agreement to arbitrate is contained in a Purchase Order issued by Cianbro on May 18, 2000 and signed by NEC on September 11, 2000 (the Purchase Order). The panel held hearings and the parties presented witnesses and submitted documentary evidence and briefs to the panel. The panel issued an Interim Award and, in December 2005, a Supplemental Award. In the Interim Award, NEC was ordered to pay the sum of $146,508.00 to Cianbro. In the Supplemental Award, NEC was ordered to pay the additional sum of $300,883.76 to Cianbro, for attorneys fees and for employee time and expenses.
II Discussion
"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 . . ." (Internal quotation marks omitted.) Harty v. Cantor Fitzgerald Co., 275 Conn. 72, 80, 881 A.2d 139 (2005).
"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." (Internal quotation marks omitted.) Id., 81. The court shall grant an application to confirm an arbitration award unless it is vacated, modified or corrected. See General Statute § 52-417.
Section 52-418(a) provides, "[u]pon 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 in which the land is situated or, when the court is not in 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 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."
Section 52-417 provides, "[a]t any time within one year after an award has been rendered and the parties to the arbitration notified thereof, any party to the arbitration may make application to the superior court for the judicial district in which one of the parties resides or, in a controversy concerning land, for the judicial district in which the land is situated or, when the court is not in session, to any judge thereof, for an order confirming the award. The court or judge shall grant such an order confirming the award unless the award is vacated, modified or corrected as prescribed in sections 52-418 and 52-419."
A. Date of Agreement to Arbitrate
NEC contends that the panel's award must be vacated since the panel exceeded its authority and imperfectly executed its powers by making an award based on an "arbitration agreement entered into by the . . . parties and dated May 18, 2000." See Interim Award; Supplemental Award; see also NEC's memorandum in support of application to vacate, pages 12-14. In particular, NEC states that "[t]here is no such thing as an arbitration agreement entered into by the parties dated May 18, 2000." See NEC's memorandum in support of application to vacate, page 14.
At various points in its presentation to the court, Cianbro provides citations to the transcript of testimony before the panel, but states that it is unable to submit the cited excerpts to the court because NEC has refused to provide Cianbro with a copy of the transcript. Apparently, Cianbro did not order a copy of the transcript from the reporters who prepared it. The court has not considered the cited portions of the transcript which have not been submitted for review. As discussed below, NEC has provided transcript excerpts, which the court has considered. Cianbro also filed a motion seeking the entry of a nonsuit against NEC as a result of its refusal to make the transcript available to Cianbro (#104), which the court has denied by separate order.
NEC's memorandum also states there was no valid agreement to arbitrate until September 11, 2000, when it executed the Purchase Order, which included the Terms and Conditions that contains the agreement to arbitrate. See NEC's memorandum in support of application to vacate, page 13. It argues that the parties' May 18, 2000 Completion Agreement did not provide the panel with authority to decide disputes between the parties, except insofar as it was made part of the Purchase Order.
NEC's contention that there is no arbitration agreement dated May 18, 2000 is without merit. On its face, near the top of its first page, the Purchase Order states that its "Order Date" is May 18, 2000. Below, at the bottom of the page this document was signed on September 11, 2000. The panel did not state that the agreement to arbitrate was executed on May 18, 2000. Clearly, the Purchase Order, which NEC acknowledges contains the agreement to arbitrate within its Terms and Conditions, paragraph 15, is dated May 18, 2000, as stated by the panel.
B. Claims for Labor and Equipment
NEC presents two arguments concerning the portions of the panel's award in which it determined that Cianbro was entitled to recover for labor and equipment expenses. Alternatively, NEC contends (1) that the award did not conform to the submission and (2) that the panel acted in manifest disregard of the law. See NEC's memorandum in support of application to vacate, pp. 14-22; See also Interim Award.
Essentially, in the first of these arguments, NEC revisits a legal argument it made to the panel, concerning a clause contained in one of the attachments to the Purchase Order, the Vendor's Quote Proposal, Attachment 4, page 2 of 7, which states, concerning "Claims," "[a]ny claims for damage in transit shall be limited to replacement of the defective product only. No claims will be allowed for labor or equipment — working or idled." NEC argues that, pursuant to General Statutes § 42a-2-719, this clause limited the remedies available to Cianbro. NEC supports it argument on this subject by attaching a copy of the reply brief it submitted to the panel, dated May 2, 2005 (see pages 7-11 thereof). It contends that the relief afforded by the panel is inconsistent with the parties' agreement.
NEC acknowledges that, here, the parties' submission was unrestricted. See NEC's reply, page 7. This is confirmed by the terms of the arbitration clause to which the parties agreed, as stated, in pertinent part, in the Purchase Order Terms and Conditions, page 2 of 2, paragraph 15(B): "With respect to any disputes between the Buyer [Cianbro] and the Vendor [NEC] arising under this Purchase Order the Vendor agrees that Buyer [at] its sole option and in its sole discretion, may elect to submit such disputes to arbitration, in which such event all claims between the parties hereunder shall be subject to arbitration . . . This agreement to arbitrate shall be specifically enforceable under the prevailing law. The award rendered shall be final [and] judgment may be entered upon the award by any court having jurisdiction thereof." See Industrial Risk Insurers v. Hartford Steam Boiler Inspection and Insurance Co., 258 Conn. 101, 110-11, 779 A.2d 737 (2001) (agreement to arbitrate between the parties "constituted the submission to arbitration").
"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 . . . With respect to the latter, we have explained that, as long as the arbitrator's remedies were consistent with the agreement they were within the scope of the submission . . . [W]here it is clear from face of award itself . . . that the arbitrator has included an element of damages specifically excluded by the contract pursuant to which he obtained his very authority to act, he exceeds his powers under the contract and the award thus made must be vacated upon proper application . . . In making this determination, the court may not engage in fact-finding by providing an independent interpretation of the contract, but simply is charged with determining if the arbitrators have ignored their obligation to interpret and to apply the contract as written." (Citations omitted; footnotes omitted; internal quotation marks omitted.) Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 85-86.
"Indeed, a claim that the award does not conform to the submission is predicated on the arbitrators' absolute lack of authority to decide an issue or to grant certain relief." Id., 88. "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." (Internal quotation marks omitted.) Id., 85 n. 7.
"When the scope of an arbitration submission is unrestricted, a resulting award is not subject to de novo review, even for errors of law, so long as the award conforms to the submission." Saturn Construction Co. v. Premier Roofing Co., 238 Conn. 293, 309, 680 A.2d 1274 (1996). "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." Garrity v. McCaskey, 223 Conn. 1, 5, 612 A.2d 742 (1992).
The parties' arbitration clause contains no restriction on the arbitrators' authority to decide an issue or on the scope of relief which the panel was empowered by the parties to award. See, in contrast, Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 76, where the arbitration provision expressly provided that the arbitrators could not award exemplary or punitive damages.
Accordingly, in view of the unrestricted submission, the issue of the extent to which damages were to be awarded based on NEC's breaches of the Purchase Order was within the panel's authority to determine. As discussed below, in the context of NEC's argument that the panel acted in manifest disregard of the law, the panel rejected NEC's claim that its liability was limited. The issue of whether the panel was correct in that decision is beyond the scope of review which applies to NEC's claim that, with respect to the award of monies for labor and equipment, the award exceeds the submission. As our Supreme Court has stated, "[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." (Internal quotation marks omitted.) Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 80; Industrial Risk Insurers v. Hartford Steam Boiler Inspection and Insurance Co., supra, 258 Conn. 110.
NEC also argues that the arbitrators manifestly disregarded the law by awarding damages to Cianbro for labor and equipment costs. Such an argument is reviewed under a "highly deferential standard." Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 102. NEC "has the burden of proving three elements, all of which must be satisfied in order for a court to vacate an arbitration award on the ground that the arbitration panel manifestly disregarded the law: (1) the error was obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator; (2) the arbitration panel appreciated the existence of a clearly governing legal principle but decided to ignore it; and (3) the governing law alleged to have been ignored by the arbitration panel is well defined, explicit, and clearly applicable . . . [T]he 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." (Citation omitted; internal quotation marks omitted.) Id. This is a "high hurdle." Id.
As stated above, NEC's argument revisits its contention before the panel that the Vendor's Quote Proposal and General Statute § 42a-2-719 effectively limited its liability, by excluding labor and equipment costs from permissible damages. In essence, it amounts to an assertion that the panel misinterpreted the parties' agreement and the statute, and disregarded testimony offered by NEC as to how the contract documents should be interpreted.
The panel was not bound to adopt NEC's interpretation or the testimony which it offered. As our Supreme Court stated in Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 104, as to an argument based on the ground of manifest disregard of the law, where the arbitrators are empowered to decide factual and legal questions, "an award cannot be vacated on the grounds that the construction placed upon the facts or the interpretation of the agreement by the arbitrators was erroneous." (Internal quotation marks omitted.) "In order to prevail, the defendant must demonstrate that the award reflects an egregious or patently irrational rejection of clearly controlling legal principles." Garrity v. McCaskey, supra, 223 Conn. 11. "Even if the arbitrators were to have misapplied the law . . ., such a misconstruction of the law would not demonstrate the arbitrators' egregious or patently irrational rejection of clearly controlling legal principles." Id., 11-12.
NEC's reliance on United Illuminating Co. v. Wisvest-Connecticut, LLC, 259 Conn. 665, 791 A.2d 546 (2002) is unpersuasive. There, the court discussed the principles applicable to contract interpretation. Also, it reviewed the arbitration panel's conclusions of law since the arbitration provision in the contract provided that "[a]ny conclusions of law by the arbitrators shall be subject to review in any court of competent jurisdiction . . ." Id., 670 n. 1.
With regard to General Statute § 42a-2-719, NEC has not shown that the panel made an obvious error, or that it appreciated the existence of a clearly governing legal principle but decided to ignore it, or that the statutory limitation was clearly applicable. NEC has not met its burden of proof.
In the Purchase Order Terms and Conditions, Attachment 1, page 1 of 2, paragraph 5, the Vendor [NEC] guaranteed to repair and replace its defective work: "GUARANTEE. [NEC] agrees: (i) to guarantee its products against all defects of material and/or workmanship and to repair or replace any broken, defective, malfunctioning, or unsatisfactory items to the full and complete satisfaction of the Buyer, the Owner, and the Architect or Engineer, and (ii) to guarantee or warrant its products and services to the Owner and Buyer to the full extent the Buyer is required to guarantee or warrant such products or services to the Owner."
Also, in the Completion Agreement, Attachment 9 to the Purchase Order, page 3 of 3, paragraph 9, NEC agreed that it "further indemnifies and holds Cianbro harmless to the fullest extent allowed by law for any and all liabilities, expenses, and other damages . . . arising out of any non-conforming work by [NEC] . . ." (Emphasis added.) The Purchase Order states, on its third page, that its attachments "are considered an integral part of this order."
NEC argues that the clause in the Vendor's Quote Proposal, providing that "no claims will be allowed for labor or equipment," supersedes these other provisions of the parties' agreement. General Statutes § 42a-2-719 does not so provide in the circumstances here. Section 42a-2-719(1)(b) states that "resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy." Comment 2 to this Section states that "[s]ubsection (1)(b) creates a presumption that clauses prescribing remedies are cumulative rather than exclusive." See Gaynor Electric Co. v. Hollander, 29 Conn.App. 865, 872 n. 4, 618 A.2d 532 (1993).
The parties' agreement does not state that the limitation stated in the Vendor's Quote Proposal was to be the only remedy permitted under the Purchase Order, which, as stated above, includes all attachments, not just the Vendor's Quote Proposal. Cianbro was provided with various remedies, to the fullest extent allowed by law. The limitation in the Vendor's Quote Proposal was not an exclusive remedy under § 42a-2-719.
In addition, the Purchase Order Terms and Conditions, Attachment 1, page 1 of 2, paragraph 1, negates the effect of the limitation of remedy stated in the Vendor's Quote Proposal, which was dated April 5, 2000, by providing that, "[t]his Purchase Order constitutes the sole and exclusive statement of the agreement of the parties. Accordingly, any limitation of remedy or damages or any disclaimer of warranties contained in any quotation of Vendor or subsequent acknowledgment of this Purchase Order by Vendor shall be null, void, and of no effect."
Also, as NEC acknowledges, Cianbro argued to the panel that the limitation of remedy failed its essential purpose, since it could not have been implemented in a manner that would have allowed the bridge project to be completed on time if it was an exclusive remedy. Section 42a-2-719(2) provides that "[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title." Where a limitation of remedy fails of its essential purpose, resort to consequential damages and incidental damages may be had. See General Statutes §§ 42a-2-711 to 2-715.
It was the panel's province to interpret the parties' agreement and to resolve any conflicting testimony. With respect to the award of labor and equipment expenses, NEC has not shown that the panel manifestly disregarded the law.
C. Attorneys Fees
NEC argues also that the panel exceeded its power and prejudiced NEC when, in the Interim Award, it awarded specific sums to Cianbro for attorneys fees in connection with defending a claim by AIG, White Oak's surety; and for prosecuting its steel withholding claim against NEC in the Superior Court. In addition, it contends that the attorneys fee awards to Cianbro, relating to AIG, to the steel withholding claim, and to fees incurred in the arbitration itself, were contrary to the parties' submission. As part of this argument, it contends that the panel acted in manifest disregard of the law, again raising the limitation of liability provision in the Vendor's Quote Proposal, which is discussed above in part II B of this memorandum of decision, at pages 7-11. Finally, NEC asserts that the panel should have awarded attorneys fees to NEC, since it claims that it prevailed on its counterclaim. The court addresses each of these contentions below.
1. Substantial Prejudice
General Statutes § 52-418(a)(3) provides that the court "shall make an order vacating the award if it finds any of the following defects: . . . 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 . . ." "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 . . . must prove that, by virtue of an evidentiary ruling, he was in fact deprived of a full and fair hearing before the arbitration panel." (Internal quotation marks omitted.) Bridgeport v. The Kasper Group, Inc., 278 Conn. 466, 475 (2006). In addition, "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.) Id., 278 Conn. 476-77.
"A party's choice to accept arbitration entails a trade-off. A party can gain a quicker, less structured way of resolving disputes; and it may . . . also gain the benefit of submitting its quarrels to a specialized arbiter . . . Parties lose something, too: the right to seek redress from the courts for all but the most exceptional errors at arbitration." (Internal quotation marks omitted.) Id., 278 Conn. 478-79. "The party challenging the award bears the burden of producing evidence sufficient to invalidate or avoid it." (Internal quotation marks omitted.) Id., 278 Conn. 474.
In the Interim Award, the panel awarded, as attorneys fees to Cianbro, the sums of $18,339.00 on the withholding steel claim and $126,041.00 for "defending AIG Claim." Citing a footnote in Cianbro's post-hearing brief to the arbitrators, NEC contends that the panel disregarded a clear agreement of the parties, and, in the Interim Award, awarded specific sums to Ciambro for attorneys fees in connection with defending AIG's claim and Cianbro's prosecution of its withholding steel claim, without giving NEC the opportunity to rebut the reasonableness of the fees sought. In its post-hearing brief to the panel, dated April 4, 2005, p. 31, n. 6, Cianbro stated, "[a]s with all of Cianbro's claims for attorneys fees and costs, the parties have agreed that the Panel will make an initial determination of liability. If NEC is liable and contests the reasonableness of Cianbro's fees, the parties have agreed that the Panel will reconvene the hearings to take evidence on those fees."
In response, Cianbro contends that it put into evidence every invoice for which it was claiming attorneys fees, and that NEC chose to wait until after the Interim Award to challenge the amount of Cianbro's attorneys fees. It states that NEC requested, and the panel required, that Cianbro submit its evidence, as to attorneys fees related to the AIG claim and to the witholding steel claim, at the beginning of the hearing. It argues that NEC had ample time to make objections.
Subsequent to the Interim Award, the panel held a hearing on October 3, 2005. NEC's counsel then argued to the panel that it had the power and the opportunity to correct itself if it had made a mistake concerning the attorneys fees award concerning the AIG claim. See hearing transcript, October 3, 2005, p. 20. The panel chairman, Arbitrator Zaccaro, stated, "Wouldn't the proper means for dealing with that be though the process in the American Arbitration Association rules requesting a reconsideration of our award?" See hearing transcript, October 3, 2005, p. 20. NEC's counsel then responded, "I believe I did in my objection. If you'll read my objection, I think I did request it." See hearing transcript, October 3, 2005, p. 20. Although NEC provided excerpts from the hearing transcript, the court has not been provided with a copy of the referenced objection and therefore cannot review its contents.
Arbitrator Zaccaro also stated, "[t]here's also the issue of timeliness for filing a motion for reconsideration." See hearing transcript, October 3, 2005, p. 21. NEC's counsel asserted that there is no procedure under the AAA Rules for filing a motion for reconsideration. See hearing transcript, October 3, 2005, p. 21. Arbitrator Zaccaro also stated that he did not construe NEC's objection as "a motion for us to reconsider." See hearing transcript, October 3, 2005, p. 23. Whether or not the panel would have reconsidered the aspects of the Interim Award related to the attorneys fee awards concerning the AIG and withholding steel claims if NEC had timely filed a motion for reconsideration or a motion to modify is a matter of conjecture at this point.
Concerning Modification of Award, AAA Rule 47 provides, in pertinent part, "[w]ithin twenty calendar days after the transmittal of an award, the arbitrator on his or her initiative, or any party, upon notice to the other parties, may request that the arbitrator correct any clerical, typographical, technical or computational errors in the award. The arbitrator is not empowered to redetermine the merits of any claim already decided."
In addition, NEC has not provided any evidence which challenges the reasonableness of the amounts of the attorneys fees awarded to Cianbro on the AIG claim or on the withholding steel claim. Under these circumstances, it has not met its burden to show that it has been substantially prejudiced as to those aspects of the Interim Award. See Bridgeport v. The Kasper Group, Inc., supra, 278 Conn. 481, 483 (court compared evidence which was excluded with the evidence that was admitted, at the arbitration in order to determine if there was substantial prejudice).
Also, the court has not been provided by NEC with a full transcript of the arbitration proceeding. It therefore cannot determine what evidence was offered before the panel concerning the reasonableness of the attorneys fees which were awarded and whether or not NEC was denied a full and fair hearing on those subjects. See Clairol, Inc. v. Enertrac Corp., 44 Conn.App. 506, 515, 690 A.2d 418, cert. denied, 241 Conn. 906, 695 A.2d 537 (1997) (minimal record was insufficient basis on which to determine that party suffered substantial prejudice). Where a movant has not met its burden of proof with regard to prejudice, the trial court is required to "presume that the actions of the arbitration panel were proper." Metropolitan District Commission v. AFSCME, 237 Conn. 114, 123, 676 A.2d 825 (1996).
2. Unrestricted Submission
As noted above, NEC also argues that there was nothing in the submission that permitted Cianbro to recover from NEC its attorneys fees concerning the AIG claim and that the awards of attorneys fees concerning the withholding steel claim and for the arbitration itself were contrary to the submission. In essence, these are challenges to the factual and legal conclusions of the arbitrators. As stated above, here the parties' submission was unrestricted. The court may not review the award for errors of fact or law. See Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 80; Industrial Risk Insurers v. Hartford Steam Boiler Inspection and Insurance Co., supra, 258 Conn. 110.
In view of the parties' agreement to arbitrate, Harty v. Cantor Fitzgerald Co., supra, does not provide support for NEC's argument. There, the arbitration provision expressly provided that the arbitrators could not award exemplary or punitive damages. See Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 76. The court found that an attorneys fee award was outside of the scope of the submission. "The attorneys fees and costs provide the same relief and serve the same function as would be afforded by common-law punitive damages . . . It is clear, therefore, that they are `in the nature of' punitive damages. Accordingly, the award of attorneys fees and costs exceeded the scope of the submission and must be vacated." Id., 275 Conn. 99-100.
As noted above, here, the parties' arbitration clause, which appears in the Purchase Order Terms and Conditions, page 2 of 2, provided that "all claims between the parties" were subject to arbitration. No limitation was set forth which excepted attorneys fees claims from those which were covered by the clause.
The Purchase Order contains three attorneys fees provision which allow Cianbro to recover attorneys fees arising from NEC's breaches. See Indemnification provision, Purchase Order Terms and Conditions, attachment 1, paragraph 7, page 1; Vendor Debts provision, Purchase Order Terms and Conditions, attachment 1, paragraph 8, page 1; and Completion Agreement, attachment 9, paragraph 9, page 3.
NEC also contends that Cianbro limited the scope of the arbitration by not claiming attorneys fees in its second amended demand for arbitration. It also cites its then-counsel's letter to the AAA, dated February 19, 2003 (Exhibit N to Cianbro's memorandum in opposition), which it argues does not say that NEC will arbitrate legal fees.
NEC's argument is undermined and contradicted by its own amended answer, dated October 14, 2004 (see Exhibit C to NEC's application to vacate), which was filed in the arbitration, where NEC set forth its counterclaim, in which it set forth claims as to the contract balance and for extras, but no claim for attorneys fees. Nevertheless, as discussed below, notwithstanding its argument that it did not agree that to arbitrate legal fees, it claims them itself, since it argues that it prevailed on its counterclaim in the arbitration.
As to the award to Cianbro of attorneys fees for the arbitration, the Interim Award provided, "[a]dditionally, we award to [Cianbro], its reasonable attorneys fees and costs of this arbitration, which amount is to be determined by additional submission at a supplemental hearing, by agreement of the parties, and awarded by a supplemental award. If the parties mutually agree, the supplemental award may be determined on the basis of the submissions only, without a supplemental hearing." The supplemental hearing occurred, as noted above, in October 2005. Cianbro contends that it offered evidence concerning its fees at that hearing. The limited transcript provided by NEC indicates that, there, it cross-examined Cianbro's witness, one of Cianbro's attorneys. Thus, NEC appears to have been afforded an opportunity to contest the claimed attorneys fees concerning the arbitration. Based on the limited transcript provided by NEC, the court cannot determine whether or not NEC was denied a full and fair hearing on this issue. As noted above concerning its claims about the AIG claim and the withholding steel claim, NEC has not met its burden of proof to show substantial prejudice as to this aspect of the panel's award.
NEC also contends that, as to the attorneys fees for the withholding steel claim and for the arbitration itself, Cianbro is precluded from recovering either since, in its post-hearing brief, it only sought such fees under a provision in the Completion Agreement, which is part of the Purchase Order, and an award was inappropriate under that provision. See NEC's Reply, p. 10. This argument mischaracterizes Cianbro's post-hearing brief, page 39. There, Cianbro argued to the panel that it was entitled to attorneys fees based on the Indemnification provision in the Purchase Order Terms and Conditions, Attachment 1, page 1, as well as under the Completion Agreement.
Also, the court is unpersuaded that NEC has shown that the parties' pleadings which were presented to the panel narrowed the broad submission to which they agreed in the agreement to arbitrate, and which is set forth in the Purchase Order. See Saturn Construction Co. v. Premier Roofing Co., supra, 238 Conn. 296 n. 3, 309-11 (broad arbitration clause, like the arbitration clause here, calling for the arbitration of "any dispute," was unrestricted submission; claim for relief in demand supported finding that award was within the scope of submission); OG/O'Connell Joint Venture v. Chase Family Limited Partnership No. 3, 203 Conn. 133, 155-56, 523 A.2d 1271 (1987) (evidence presented at hearings in support of claim, which parties discussed in post-hearing briefs).
In addition, to the extent that NEC's argument concerning attorneys fees awarded to Cianbro asserts that the panel acted in manifest disregard of the law, it is based, again, on the limitation of liability language in the Vendor's Quote Proposal, which the court addressed above, at pages 7-11, concerning NEC's labor and equipment argument. For the reasons stated there, NEC has not shown that the panel manifestly disregarded the law.
3. NEC's Attorneys Fees Claim
As mentioned above, NEC also contends that it was entitled to an attorneys fee award. This argument is based on a statement provided in its invoices to Cianbro, not on the terms of the Purchase Order. See defendant's memorandum in support of application to vacate arbitration award, pp. 33-34. Its argument is premised on the assertion that it prevailed on its counterclaim for outstanding contract amounts, since, in the Interim Award, the panel subtracted the contract balance of $721,928.00 from amounts which were found to be due to Cianbro for backcharges. As discussed below, the contract balance was agreed to by the parties by stipulation. This argument ignores the second page of the Interim Award, in which the panel stated, "[o]n the claims of the Respondent, National Eastern Corporation, we find in favor of the Claimant [Cianbro], and said claims are denied."
According to NEC, its invoices stated, "a late charge at the rate of 1.5% per month 18% per annum will be charged on all accounts after 30 days and if this matter is placed with an attorney, reasonable attorneys fees will be charged."
In response, Cianbro argues that the Purchase Order nowhere provided for attorneys fees to be paid to NEC and that the invoices amounted to a unilateral attempt by NEC to amend the Purchase Order, which was never accepted by Cianbro.
Once again, NEC's argument amounts to a challenge to the factual and legal conclusions of the arbitrators. As stated above, in view of the parties' unrestricted submission, the court may not review the award for errors of fact or law. See Harty v. Cantor Fitzgerald Co., supra, 275 Conn. 80; Industrial Risk Insurers v. Hartford Steam Boiler Inspection and Insurance Co., supra, 258 Conn. 110.
D. Cianbro Fabrication
NEC argues that the panel rendered an award which was beyond the scope of the parties' submission by awarding the sum of $112,304.00 concerning monies due to a third party, Cianbro Fabrication and Coating Corporation ("Cianbro Fabrication"), an affiliate of Cianbro (referred to by the parties as the "Fab Shop"). NEC also argues that the panel allowed Cianbro to assert the claim of a third party, Cianbro Fabrication, which was not a party to the agreement to arbitrate. NEC contends that the Cianbro Fabrication claim should have been dealt with in a separate arbitration between it and Cianbro Fabrication, based on Cianbro Fabrication's separate agreement with NEC.
In his testimony before the panel, Thomas Stone, Cianbro's chief financial officer, explained that, effective on December 31, 2001, Cianbro transitioned to a new corporate structure, under which Cianbro Companies is a holding company, with four operating subsidiaries, including Cianbro Corporation and Cianbro Fabrication. He stated that the work assigned by NEC to the Cianbro "Fab Shop" before December 31, 2001 was assigned to Cianbro Corporation, which was the only corporate entity that then existed. He also stated that Cianbro Fabrication was the entity to whom the receivable was owed. See transcript, November 22, 2004, pp. 609-10, Exhibit Q to NEC's memorandum in support of application to vacate.
Cianbro Fabrication was not in existence as a separate corporate entity at the time the referenced agreement was entered into by NEC and Cianbro. The referenced agreement is a Purchase Order, dated December 29, 2000, between NEC and Cianbro Corporation Fabrication Paint Facility. See Exhibit H to NEC's memorandum in support of application to vacate. The date of this agreement is consistent with Mr. Stone's testimony, cited above, in which he noted that, prior to December 31, 2001, Cianbro Corporation was the only extant corporate entity.
In pertinent part, the Interim Award states, "[a]dditionally, we award to [Cianbro] the amount of $112,304.00 on its Payment due to the Cianbro Fabrication and Coating Corporation Claim. Claimant is hereby ordered to pay directly to Cianbro Fabrication and Coating Corporation the amount of $112,304.00 in satisfaction of [NEC's] obligations under its contract with Cianbro Fabrication and Coating Corporation or its predecessor."
NEC asserts that Cianbro Fabrication never made a claim or threatened to do so, "thereby depriving the Panel of the authority, pursuant to the submission, to decide on any payment allegedly due Cianbro Fabrication." See NEC's memorandum in support of application to vacate, p. 22.
In response, Cianbro contends that, under the parties' Purchase Order, it has a right to withhold money from NEC when NEC refuses to pay its subcontractors, and has the right to pay those subcontractors directly. It asserts that NEC contested Cianbro's withholding of amounts due to Cianbro Fabrication and thereby put at issue in the arbitration the amount of Cianbro Fabrication's claims against NEC and Cianbro's right to withhold the amount of those claims from NEC.
In the Purchase Order, Terms and Conditions, Paragraph 8, Cianbro and NEC agreed to the Vendor Debts provision (at page 1 of 2), which states, in pertinent part: "In the event of an actual or threatened Mechanics Lien or claim against the project or against [Cianbro] on account of [NEC's] failure to pay any of its debts, [Cianbro] shall have the right to make payments directly to such claiming creditors or to [NEC] and the claiming creditor, jointly. Any such payments made by [NEC] shall be deducted from sums otherwise due [NEC]. Alternatively, [Cianbro] shall have the right to retain out of any money then due, or to become due, [NEC] an amount sufficient to completely indemnify [Cianbro] against such lien or claim as well as legal and other related costs."
The evidence before the panel included the testimony of Chet Muckenhirn, Cianbro's manager of projects, which is cited by NEC in support of its argument. He was asked by NEC's counsel, "[W]hat claim, piece of paper, do you have where the Cianbro fabrication shop threatened a claim against Cianbro because of a claim that [NEC] did not pay a debt?" In response, he stated, "I don't believe it was a claim. There were some disputed invoices that they wanted to get resolved, and they invoiced us for those. We did not pay them directly for that money because my contention was they needed to resolve it with these guys. We had not paid our shop for those invoices yet either." Transcript of arbitration hearing, Nov. 5, 2004, p. 390.
"In ascertaining the contractual rights and obligations of the parties, we seek to effectuate their intent, which is derived from the language employed in the contract, taking into consideration the circumstances of the parties and the transaction . . . We accord the language employed in the contract a rational construction based on its common, natural and ordinary meaning and usage as applied to the subject matter of the contract." (Citations omitted.) Cantonbury Heights Condominium Assoc., Inc. v. Local Land Development, LLC, 273 Conn. 724, 734-35, 873 A.2d 898 (2005).
The Vendor Debts provision of the Purchase Order Terms and Conditions does not define the term "claim." It does not state that a "claim" means a formal claim, such as that made in a complaint filed in court proceeding or in a demand for arbitration. Rather, the ordinary meaning of the tern "claim" is applicable. "`Claim' is defined as `a demand for compensation, benefits or payment' . . . Webster's Third New International Dictionary." Rivera v. Allstate Insurance Co., 44 Conn.App. 47, 52, 686 A.2d 530 (1996). Webster's Third New International Dictionary, page 1190, defines "invoice" as meaning "an itemized statement furnished to a purchaser by a seller and usu[ally] specifying the price of goods or services and the terms of sale" and as "a printed form used for detailing charges."
An invoice for goods supplied and/or services rendered amounts to a claim for the same. See Henniker Enterprises, Inc. d/b/a Evans Painting Co. v. Erlanger, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV96 0155686 (April 16, 1997, Lewis, J.) ("extra painting services as claimed in the invoice"); Andrew's Framing v. Gagnon, Superior Court, judicial district of Litchfield, Docket No. 0048466 (May 11, 1992, Dranginis, J.) ( 7 CSCR 627) ( 6 Conn. L. Rptr. 772) (claims for roofing and siding set forth in invoice).
Thus, the evidence before the panel included testimony which reflected that Cianbro Fabrication had invoiced Cianbro for the monies which Cianbro Fabrication claimed were due from NEC. It was within the panel's purview to treat that testimony as evidence of a claim or threatened claim under the terms of the Purchase Order, and to resolve it as part of the issues submitted for its consideration under the parties' unrestricted submission.
As noted above, in its reply, page 7, NEC acknowledges that the parties' submission to the panel was unrestricted.
The court also is unpersuaded that the panel allowed Cianbro to assert the claim of a third party, Cianbro Fabrication, which was not a party to the agreement to arbitrate. According to Cianbro, before the panel, the parties stipulated to a contract balance of $721,928.00, which included $113,689.00 owed by NEC to Cianbro Fabrication for extra work. See Cianbro's memorandum of law in opposition to NEC's application to vacate, p. 23. In its reply, page 11, NEC acknowledges that the stipulation settled the accounting of the contract balance. Also, in its reply, page 12, NEC stated that the parties stipulated to a contract balance of $721,928.00. In its memorandum in support of application to vacate arbitration award, page 5, NEC states that, when this arbitration was commenced, Cianbro owed NEC $721,927.93.
In its Interim Award, the panel subtracted the sum of $721,928.00, the contract balance due to NEC, from the amount it awarded to Cianbro. In addition, it awarded to Cianbro the amount of $112,304.00 "on its Payment due to the Cianbro Fabrication Claim." Cianbro was ordered to pay that amount to Cianbro Fabrication in satisfaction of NEC's obligations under its contract with Cianbro Fabrication or its predecessor.
In its Second Amended Demand For Arbitration (Exhibit B to NEC's application to vacate), as part of its claim for the total sum of $917,585.72, Cianbro included an item for "Fabrication Shop Receivable" in the amount of $113,689.00. Cianbro's demand stated, in explanation, that "NEC owes Cianbro's Fabrication Shop $113,689 for work under the Purchase Order that NEC subcontracted to Cianbro's Fabrication Shop."
Contrary to NEC's argument, the Vendor Debts provision of the Purchase Order does not require Cianbro to "have made payments to the claiming creditor, Cianbro Fabrication." See NEC's Reply, p. 17. As set forth above, the provision expressly permits Cianbro to "retain out of any money then due, or to become due, [NEC] an amount sufficient to completely indemnify [Cianbro] against such lien or claim." As part of its demand, Cianbro submitted to arbitration, under the unrestricted agreement to arbitrate between NEC and Cianbro, which also is set forth in the Purchase Order, the amount it retained, as a result of the Cianbro Fabrication claim, from sums claimed due by NEC. The panel's award in that respect, which, in effect, affirmed that Cianbro rightly retained that sum, which the panel determined was owed to Cianbro Fabrication, was not an award to a third party.
CONCLUSION
For the foregoing reasons, Cianbro's application to confirm the panel's award is granted and NEC's application to vacate the panel's award is denied.
It is so ordered.