Opinion
FSTCV146023698S
03-16-2016
RV V Lockworks, LLC v. Five Yale & Towne, LLC
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Donna Nelson Heller, J.
Before the court are the application of the plaintiff RV V Lockworks, LLC (Lockworks) to confirm an arbitration award (#100.31), filed on October 24, 2014, and the objection and cross-application of the defendant Five Yale & Towne, LLC (Five Yale) to vacate and/or modify the arbitration award in part (#102.00), filed on October 30, 2014. The court heard argument from counsel on the October 19, 2015 special proceedings calendar and reserved decision at that time. For the reasons set forth below, the application of Lockworks is granted, and the arbitration award is confirmed.
I
This matter arises out of Lockworks's December 2012 purchase of a newly-constructed 300-unit apartment complex at 119-121 Towne Street in Stamford, Connecticut (the property) from Five Yale for $130 million. The parties entered into a purchase and sale agreement (the purchase agreement) on November 20, 2012. In performing its due diligence in connection with its purchase of the property, Lockworks identified certain defects or problems, which Five Yale agreed to remediate prior to the closing on December 20, 2012. As of the closing date, however, Five Yale had not resolved all of the outstanding issues. Lockworks and Five Yale entered into a holdback escrow agreement (the escrow agreement), dated December 20, 2012, to address, inter alia, Five Yale's representations and warranties under the purchase agreement and to secure the cost of the remaining repairs to the property.
The court's summary of the underlying facts is based on the findings set forth in the arbitration award and the factual representations in the parties' respective applications, supporting memoranda, affidavits, and the exhibits attached thereto.
Lockworks and Five Yale are single purpose entities that were created to own the property by their respective parent companies, Public Institution for Social Security of Kuwait, advised by its subsidiary, Wafra Investment Advisory Group, and Building and Land Technology, Inc. (BLT).
Recital D of the escrow agreement provides that " SELLER and PURCHASER wish to establish the Seller Representations and Warranties Holdback (as hereinafter defined) so that SELLER may escrow sufficient funds to cover payments that SELLER may be required to make to PURCHASER after the Closing Date to address any breach of Seller's representations and warranties set forth in the Purchase Agreement, as contemplated in Section 7(x) thereof." Section 7(x) of the purchase agreement provides that " [t]he representations and warranties of Seller set forth in this Section 7 as updated as of the Closing in accordance with the terms of this Agreement, shall survive Closing for a period expiring on the last day of the twelfth (12th) full calendar month after the Closing Date. No claim asserted after Closing for a breach of any representation or warranty of Seller shall be actionable or payable if the breach in question results from or is based on a condition, state of facts or other matter which was known to Buyer prior to Closing. Seller shall have no liability to Buyer for a breach of any representation or warranty unless written notice containing a description of the specific nature of such breach shall have been given by Buyer to Seller prior to the expiration of said survival period and an action shall have been commenced by Buyer against Seller within thirty (30) days after the expiration of the survival period. Buyer's recovery from Seller for a claim of breach of a representation or warranty under this Agreement shall not exceed $1,000,000 in the aggregate (the 'Cap')."
Recital E provides that " SELLER and PURCHASER wish to establish the Seller's Remaining Work Holdback (as hereinafter defined) to escrow sufficient funds to cover the cost of Seller's Remaining Work not completed by Closing." The escrow agreement also provided for a Retail Lease Holdback and a WPCA Appeal Holdback, neither of which are at issue here.
Under section 3 of the escrow agreement, the Seller's Representations and Warranties Holdback was to " be applied by PURCHASER as a recovery from SELLER for a claim of breach of a representation or warranty as permitted under the Purchase Agreement." Under section 4 of the escrow agreement, the Seller's Remaining Work Holdback was to " be applied to reimburse SELLER for its out-of-pocket costs associated with each Work Item satisfactorily completed prior to March 29, 2013, or otherwise be paid to PURCHASER as liquidated damages for SELLER's failure to perform the Seller's Remaining Work. Section 16 of the escrow agreement provided for arbitration in the event of a dispute between the parties with respect to distributions payable from the escrow account.
Section 16 of the escrow agreement provides in pertinent part as follows: " Arbitration of Disputes . In the event of a dispute between SELLER and PURCHASER concerning distributions payable hereunder, either of them may deliver to the other notice of intent to arbitrate. If such a notice of intent to arbitrate is given, then PURCHASER and SELLER shall proceed to arbitrate the dispute in accordance with the provisions of this Section 16 . . . The Arbitrator . . . shall proceed to decide any such dispute if at all possible within ten (10) days after being selected, and in all events as quickly as is reasonably possible. The decision of the Arbitrator upon any such dispute shall be final conclusive and binding upon the parties and shall pertaining to a determination of the dispute, but any such consultation shall be made in the presence of both parties with full right on their part to cross-examine. The Arbitrator shall have no power to modify the provisions of this Escrow Agreement or the Purchase Agreement . . ."
On June 14, 2013, Lockworks was notified by the Stamford fire marshal that all of the 300 balconies attached to the residential units in the property were not in compliance with the Connecticut state fire code and the Connecticut state building code because they had been constructed with " Trex" decking, a material that was not designated as a non-combustible or a limited combustible building material under the fire code. This material could only be used if the balconies were covered by a sprinkler system. The fire marshal advised Lockworks that it would have to install sprinkler coverage for every balcony or replace all of the Trex decking with material that was code compliant. In addition, the so-called " sleepers" or " nailers" under the Trex decking violated the state fire code and the state building code because they were not fire retardant or treated with a preservative. The cost of replacing or reconstructing the balconies would be in excess of $600,000.
Five Yale told Lockworks that it was not aware of any of these code violations before Lockworks received the June 2013 notice of violation from the Stamford fire marshal. Five Yale had previously represented to Lockworks in section 7(g) of the purchase agreement that " Seller has not received any notice with respect to nor has any knowledge of (i) any violations of applicable laws, ordinances or public regulations relating to the Property which remain uncured (including those relating to . . . safety)." Five Yale also represented in section 7(t) of the purchase agreement that " [t]o Seller's knowledge there are no defects, latent or patent, relating to the roof, structure or any of the building systems on the Property or violations of any requirement of any governmental authorities with respect thereto."
On January 15, 2014, Lockworks served a written demand for arbitration upon Five Yale pursuant to section 16 of the escrow agreement, alleging that Five Yale had breached its representations and warranties with respect to the balconies and the code violations. Lockworks also included other claims in the arbitration demand relating to defects and problems with the property that Five Yale had not resolved.
On or about April 29, 2014, the parties selected the Honorable John R. Downey, a retired Connecticut Superior Court judge, to arbitrate the dispute. At the arbitrator's request, the parties executed the arbitrator's form agreement to arbitrate in May 2014.
Counsel for Five Yale executed the agreement to arbitrate on May 7, 2014. Counsel for Lockworks executed the agreement to arbitrate on May 20, 2014.
Lockworks served an amended demand for arbitration on May 16, 2014. Five Yale responded to the demand for arbitration on May 30, 2014. Lockworks asserted four claims in the arbitration arising out of Five Yale's breach of certain provisions of the purchase agreement and the escrow agreement:
(i) A claim that the apartment balconies were constructed in violation of the Connecticut state fire code and the Connecticut state building code, thus creating a public safety hazard that could only be corrected by the removal and replacement of all 300 balconies (the balcony claim);
(ii) A claim that the canopies that extended over the ground floor entrances had been defectively designed and constructed so that they leaked rain water onto the sidewalk below and lost their structural integrity under a snow and ice load, thus requiring the modification of every canopy (the canopy claim);
(iii) A claim for indemnification against any claims asserted by Harlan Social Restaurant, the property's largest commercial tenant, for property damage due to water infiltration into its premises (the Harlan claim); and
(iv) A claim arising from water infiltration into the parking garage under the concrete paver deck that had yet to be remediated (the garage leaks claim).
The parties engaged in document discovery in advance of the arbitration hearings, with each side seeking documents from the other regarding all claims and defenses in the arbitration. Lockworks specifically requested documents from Five Yale relating to the balcony claim, including documents regarding materials used in the balcony construction and any inspection of the balconies. Lockworks also served a subpoena duces tecum on BLT's chief estimator, Richard Woolley (Woolley), directing him to produce documents concerning the balconies, including documents regarding the decking material and compliance with the fire code.
The arbitration hearing commenced on June 19, 2014. The hearing continued on June 23 and 24, 2014, and it concluded on June 26, 2014. Prior to the last day of the arbitration hearing, counsel for Lockworks obtained documents from a third party that reflected email correspondence from April, May and June 2012 between Woolley, BLT's outside architect, EDI, and BLT's building code compliance consultant, Bruce Spiewak, concerning whether the material used to construct the balconies was fire retardant in compliance with the State fire code and building code. These documents had not been produced by Five Yale in discovery in the arbitration proceeding or by Woolley in response to the subpoena duces tecum.
On the last hearing day, after Woolley testified that he had no knowledge that the Trex decking was not compliant with the fire code until June 2013, he was confronted with the email correspondence from June 2012. As the arbitrator observed, " [t]here was evidence of concealment, revealed in a dramatic way at the hearing." (Decision of Arbitrator, dated September 30, 2014 (the Award) at 13 (#100.31, Ex. C.)).
In view of the newly-discovered evidence of Five Yale's fraud and concealment, Lockworks requested leave to amend its arbitration demand to assert a claim for punitive damages. Lockworks submitted a second amended demand for arbitration on September 3, 2014.
Following the conclusion of the arbitration hearing, Five Yale advised Lockworks that it was no longer contesting the balcony claim or the Harlan claim. Five Yale authorized the escrow agent to pay Lockworks $666,862.03 and $17,854.73, respectively, on each of these claims. The parties informed the arbitrator that these claims had been resolved in their post-hearing briefs, filed August 7, 2014. They filed limited reply briefs on September 3, 2014.
The arbitration award was issued on September 30, 2014. At the time the arbitrator issued the award, the canopy claim, the garage leaks claim, and Lockworks' claim for punitive damages were the only remaining claims. The arbitrator found in favor of Lockworks on the canopy claim and awarded liquidated damages of $8,500, the amount that the parties had previously agreed upon to cover the canopy claim. (Award at 18, 22.) With respect to the garage leaks claim, the arbitrator found that Five Yale was still attempting to correct the problem and had entered into a $44,000 contract in May 2014 to repair the garage leaks. The arbitrator concluded that Five Yale by its conduct had waived the agreed-upon liquidated damages cap of $5,000 on the garage leaks claim. (Id. at 19.) The arbitrator awarded Lockworks $4,590.58 for repair costs and $5,180.00 for investigation costs. (Id. at 24.)
With respect to the Harlan claim, the arbitrator reported that the parties had advised him that Five Yale had conceded liability and had authorized the release of $17,854.73 to Lockworks from escrow. Therefore, no award was required on the Harlan claim.
" In the exercise of [his] powers under Connecticut law to fashion an appropriate remedy, " the arbitrator ordered Five Yale to direct its contractor to perform the repair work for the total price of $44,000. (Id. at 22.) The arbitrator stated that if the contemplated repairs were effective, Five Yale would have no further obligation to Lockworks on the garage leaks. (Id. at 22-23.) If the repairs were not successful, the arbitrator directed Lockworks to retain the Fisher Group, its vendor, " to undertake its proposed exploratory work and define a solution to the leaks, which Five Yale shall promptly implement, with all costs up to $495,350, including the Fisher Group's expenses, to be paid by Five Yale." The arbitrator also ordered that Five Yale secure its performance by a surety performance bond or the guaranty of its parent company. The arbitrator indicated that he was retaining jurisdiction through the implementation of this part of the award. (Id. at 23.)
Because Five Yale had conceded liability on the balcony claim and had authorized the release of $666,862.03 to Lockworks from escrow, the arbitrator determined that no award was required on the balcony claim itself. (Id. at 20.) With respect to Lockworks' claim for punitive damages, however, the arbitrator allowed Lockworks' second amended demand for arbitration and awarded Lockworks $210,923.41 in punitive damages. (Id. at 21.)
Under Connecticut law, punitive damages primarily serve compensatory purposes and are limited to litigation expenses, including attorneys fees, less taxable costs. Berry v. Loiseau, 223 Conn. 786, 825-27, 614 A.2d 414 (1992). The punitive damages award to Lockworks was based on the attorneys fees that Lockworks incurred in the arbitration.
The arbitrator determined that " Five Yale had fore knowledge of fire code violations concerning the balconies." (Id. at 7.) He observed that " [i]t appears to the undersigned that the Respondent [Five Yale] sold the Property to Lockworks with the knowledge that all 300 balconies were in violation of the State Fire Code and Building Code." (Id. at 11.) The arbitrator found 'That there is clear and convincing evidence that Mr. Woolley and others engaged in a conspiracy to conceal, that it was egregious, and recklessly indifferent to the rights of the Claimant and others, including future tenants. The behavior of Five Yale with respect to the entire balcony issue can only be described as egregious and flagrant and in total disregard of its obligations to both public safety and the integrity of the arbitration process. Under Connecticut law, Claimant is, therefore, entitled to punitive damages which are appropriately awarded where 'the evidence shows a reckless indifference to the rights of others or an intentional and wanton violation of those rights.' Harty v. Cantor Fitzgerald, 275 Conn. 72, 881 A.2d 139 (2005)." (Id. at 14.)
Lockworks timely filed an application to confirm the arbitration award on October 24, 2014. General Statutes § 52-417 provides that " [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." General Statutes § 52-417. On October 30, 2014, Five Yale objected to Lockworks' application and moved to partially vacate and/or partially modify the arbitration award pursuant to General Statutes § § 52-418(a)(4) and 52-419(a)(2), on the grounds that the arbitrator " (i) exceeded his powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made as to all matters properly submitted to the Arbitrator for decision; (ii) manifestly disregarded the law and improperly effectively re-wrote certain material provisions of the parties' underlying contracts at issue in derogation of an express limitation on his authority in the pertinent arbitration clause; and (iii) . . . awarded on matters either not submitted to him or that were not properly submitted to him." (#102.00.)
Although Lockworks's application (#100.31) purported to be filed pursuant to General Statutes § 52-418, the operative statute is General Statutes § 52-417.
" The trial court lacks any discretion in confirming the arbitration award unless the award suffers from any of the defects described in . . . § § 52-418 and 52-419 . . . Furthermore, if a motion to vacate, modify or correct is not made within the thirty-day time limit specified in General Statutes § 52-420, the award may not thereafter be attacked on any of the grounds specified in § § 52-418 and 52-419." (Citation omitted; internal quotation marks omitted.) Stratek Plastics, Ltd. v. Ibar, 120 Conn.App. 90, 91, 991 A.2d 577 (2010).
General Statutes § 52-418 provides that " (a) Upon 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." General Statutes § 52-419 provides that " (a) Upon 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 modifying or correcting the award if it finds any of the following defects: (1) If there has been an evident material miscalculation of figures or an evident material mistake in the description of any person, thing or property referred to in the award; (2) if the arbitrators have awarded upon a matter not submitted to them unless it is a matter not affecting the merits of the decision upon the matters submitted; or (3) if the award is imperfect in matter of form not affecting the merits of the controversy. (b) The order shall modify and correct the award, so as to effect the intent thereof and promote justice between the parties."
In its objection and cross-application, Five Yale also represented that certain issues submitted to the arbitrator were not considered in the award and asked the court to remand the matter to the arbitrator for decision consistent with the court's ruling herein. It suggested that the court might lack subject matter jurisdiction in view of the arbitrator's retention of continuing jurisdiction over matters relating to the so-called garage leaks claim. The court does not agree, and, for the avoidance of doubt, it expressly finds that it has subject matter jurisdiction pursuant to General Statutes § 52-417, et seq.
Between October 2014 and October 2015, the parties filed a stipulation and seven joint motions for continuances in which they represented that they were attempting to resolve the garage leaks issue prior to the court's hearing Lockworks' application to confirm the arbitration award and Five Yale's objection and cross-application to vacate and/or modify the award in part. On October 2, 2015, Five Yale filed a memorandum of law in further support of its objection to Lockworks' application to confirm the arbitration award and its cross-application to partially vacate or modify the award (#116.00). Both parties filed reply memoranda on October 19, 2015 (#119.00; #120.00).
The parties filed a joint motion for a continuance on January 15, 2015 (#105.00), a second joint motion for a continuance on February 10, 2015 (#107.00), a third joint motion on March 6, 2015 (#108.00), a fourth on April 16, 2015 (#109.00), a fifth on May 29, 2015 (#110.00), the sixth on July 10 (#111.00), and the seventh and final joint motion for a continuance on August 19, 2015 (#113.00). Each of these motions has largely the same purpose, and only differs in the dates requested for the hearing, and in the status of the remedial work on the garage leaks.
Lockworks maintains that the arbitrator's award of punitive damages is the only aspect of the arbitration award remaining for judicial review. Lockworks claims that every other issue raised by Five Yale in its objection to Lockworks' application to confirm and cross-application to vacate or modify has been rendered moot by reason of the parties' settlement negotiations, performance and/or payment. In response, Five Yale asserts that the punitive damages award is not the only issue in dispute. It contends that it did not waive any rights by resolving certain issues with Lockworks following the arbitration and claims that its objection to the arbitrator's ruling on the garage leaks claim is also before the court. The court will consider these arguments below.
II
In articulating the well-established standard of review of arbitration awards, our Supreme Court has observed that " [j]udicial 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 . . . 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 . . ." (Citations omitted; internal quotation marks omitted.) Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., 273 Conn. 86, 92-93, 868 A.2d 47 (2005). " Arbitration is a creature of contract between the parties and its autonomy requires a minimum of judicial intrusion . . . The parties themselves, by the agreement of the submission, define the powers of the arbitrator . . . The submission constitutes the charter of the entire arbitration proceedings and defines and limits the issues to be decided . . . When the parties have agreed to a procedure and have delineated the authority of the arbitrator, they must be bound by those limits." (Citations omitted.) Bic Pen Corp. v. Local No. 134, 183 Conn. 579, 583-84, 440 A.2d 774 (1981).
" The resulting award can be reviewed, however, to determine if the award conforms to the submission . . . Such a limited scope of judicial review is warranted given the fact that the parties voluntarily bargained for the decision of the arbitrator and, as such, the parties are presumed to have assumed the risks of and waived objections to that decision . . ." Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., supra, 273 Conn. at 93. The arbitration clause in a contract is either unrestricted, meaning that the arbitrator has the authority to determine all issues under the contract, or restricted, in which case the arbitrator may only decide those things specifically named. See Exley v. Connecticut Yankee Greyhound Racing, Inc., 59 Conn.App. 224, 229, 755 A.2d 990, cert. denied, 254 Conn. 939, 761 A.2d 760 (2000). " Where the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous." (Citations omitted; internal quotation marks omitted.) State v. New England Health Care Employees Union, District 1199, AFL-CIO, 265 Conn. 771, 778, 830 A.2d 729 (2003).
" In determining whether a submission is unrestricted, [courts] look to the authority of the arbitrator." (Citation omitted; internal quotation marks omitted.) Zelvin v. JEM Builders, Inc., 106 Conn.App. 401, 407, 942 A.2d 455 (2008). " Where the language of the arbitration clause indicates an intention on the part of the parties to include all controversies which may arise under their agreement, and where the record reveals no specific questions which the parties submitted to the arbitrator, the submission will be construed as unrestricted . . ." (Citation omitted; internal quotation marks omitted.) Id. at 408. " 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." (Citations omitted.) Garrity v. McCaskey, 223 Conn. 1, 5, 612 A.2d 742 (1992).
" When the parties have not restricted the scope of the arbitrator's authority, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission." (Citations omitted; internal quotation marks omitted.) Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., 252 Conn. 416, 427, 747 A.2d 1017 (2000). " Under 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." (Citations omitted; internal quotation marks omitted.) Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., supra, 258 Conn. at 110.
" The significance, therefore, of a determination that an arbitration submission was unrestricted or restricted is not to determine what the arbitrators are obligated to do, but to determine the scope of judicial review of what they have done. Put another way, the submission tells the arbitrators what they are obligated to decide. The determination by a court of whether the submission was restricted or unrestricted tells the court what its scope of review is regarding the arbitrators' decision." (Internal quotation marks omitted.) United States Fidelity & Guaranty Co. v. Hutchinson, 244 Conn. 513, 519-20, 710 A.2d 1343 (1998). Thus, as a preliminary matter, the court must determine whether the parties' submission to the arbitrator here was restricted or unrestricted.
The parties' arbitration agreement is set forth in section 16 of the escrow agreement, which provides in pertinent part that " [i]n the event of a dispute between SELLER and PURCHASER concerning distributions payable hereunder, either of them may deliver to the other notice of intent to arbitrate. If such a notice of intent to arbitrate is given, then PURCHASER and SELLER shall proceed to arbitrate the dispute in accordance with the provisions of this Section 16." Section 16 further provides that " [t]he Arbitrator shall have no power to modify the provisions of this Escrow Agreement or the Purchase Agreement." Five Yale contends that the arbitration clause limited the arbitrator's authority to simply resolving the parties' contractual disputes concerning the distribution of appropriate amounts from the escrowed funds--in other words, that the arbitrator had no power beyond directing the disposition of the funds held in escrow. Lockworks argues in response that, apart from the language precluding the arbitrator from modifying the terms of the escrow agreement and the purchase agreement, section 16 contained no limitation on the authority of the arbitrator, and, therefore, the submission was unrestricted. The court agrees. Nothing in the parties' arbitration agreement restricted the breadth of issues to be arbitrated, reserved explicit rights, or conditioned the award on court review. See Garrity v. McCaskey, supra, 223 Conn. at 5. While the parties' dispute concerning distributions under the escrow agreement triggered the provisions of the arbitration clause set forth therein, the arbitrator's authority was not limited to merely allocating the amounts in dispute between the respective parties. The court finds that the submission was unrestricted.
" Even with an unrestricted submission, however, it is well settled that the award may be reviewed to determine if the arbitrators exceeded their authority, one of the statutory grounds under § 52-418 for vacating an award." (Citation omitted.) Harty v. Cantor Fitzgerald & Co., 275 Conn. 72, 84, 881 A.2d 139 (2005). " [A] claim that the arbitrators have exceeded their powers may be established under § 52-418 in either one of two ways: (1) the award fails to conform to the submission, or, in other words, falls outside the scope of the submission; or (2) the arbitrators manifestly disregarded the law." (Citation omitted; internal quotation marks omitted.) Id. at 85. Five Yale has objected to the arbitration award on both grounds. The court will address each in turn below.
III
Five Yale claims that the arbitration award should be partially vacated or modified because the arbitrator's award of punitive damages to Lockworks exceeded his powers under the submission. " [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." Harty v. Cantor Fitzgerald & Co., supra, 275 Conn. at 88, " When addressing a claim that the arbitrators have exceeded their authority and violated § 52-418(a)(4), the court's 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 . . . Thus, the court's review of [a] claim that the arbitrators exceeded their authority in rendering their award is limited to a comparison between the submission and the award to see whether, in accordance with the powers conferred upon the arbitrators, their award conforms to the submission." (Citations omitted; internal quotation marks omitted.) AFSCME, Council 4, Local 1303-325 v. Westbrook, 309 Conn. 767, 779, 75 A.3d 1 (2013); see Harty v. Cantor Fitzgerald & Co., supra, 275 Conn. at 85-86 (if the award conforms to the submission, the arbitrators have not exceeded their powers). " [T]he burden rests on the party challenging the award to produce evidence sufficient to show that it does not conform to the submission." (Citation omitted; internal quotation marks omitted.) Zelvin v. JEM Builders, Inc., supra, 106 Conn.App. at 410.
" 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. Consequently, as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of authority, the award must be enforced. The arbitrator's decision cannot be overturned even if the court is convinced that the arbitrator committed serious error." (Citation omitted; footnote omitted; internal quotation marks omitted.) Comprehensive Orthopaedics & Musculoskeletal Care, LLC v. Axtmayer, 293 Conn. 748, 755, 980 A.2d 297 (2009) (arbitrator had authority to decide whether one party had prevailed in order to be entitled to attorneys fees); see also State v. Conn. State Employees Ass'n., 117 Conn.App. 54, 60, 978 A.2d 131 (2009) (arbitrator exceeded authority which only allowed him to address remedy if he found there was no just cause for the termination of employee).
Five Yale cites the federal district court decision in NFL Management Council v. NFL Players Ass'n, 96 F.Supp.3d 81 (S.D.N.Y., Sept. 3, 2015) (commonly known as Deflategate ), which is currently on appeal to the United States Court of Appeals for the Second Circuit, as a case in which an arbitration award was vacated because the arbitrator exceeded his authority. The court does not find the Deflategate decision to be on point.
In the absence of an express provision in the submission precluding an award of punitive damages, an arbitrator has the inherent authority to award punitive damages where the evidence supports such an award under applicable law. See Med Val USA Health Programs, Inc. v. Member Works, Inc., 273 Conn. 634, 872 A.2d 423 (2005) (arbitration panel found defendant had engaged in unfair and deceptive acts in violation of CUTPA and awarded punitive damages under provision in CUTPA providing for such award); Harty v. Cantor Fitzgerald & Co., supra, 275 Conn. at 99-100 (award of attorneys fees and costs exceeded scope of submission where submission expressly did not authorize award of punitive damages).
Although Five Yale contends that the arbitrator exceeded his authority in awarding punitive damages to Lockworks, the court finds nothing in the parties' unrestricted submission that precluded an award of punitive damages or limited the amount of such damages to the funds remaining in escrow. To the contrary, the arbitrator had the authority to award punitive damages to Lockworks and awarded such damages after finding that " Five Yale's conduct regarding the construction of the balconies on the Property and the concealment of the code violations relating to those balconies, was done with a reckless indifference to the rights of both its tenants and Lockworks as the Buyer of the Property, and constituted an intentional and wanton violation of those rights." (Award at 21.) The arbitrator concluded that " [s]uch conduct warrants the award of punitive damages under Connecticut law." (Id. ) Accordingly, the court finds that the arbitrator's award of punitive damages to Lockworks did not exceed his powers under the submission.
(Feb. 18, 2014, Povodator, J.), aff'd, 157 Conn.App. 731, 118 A.3d 550, cert. denied, 319 Conn. 903, 122 A.3d 638 (2015). Five Yale also argues that the arbitrator effectively awarded attorneys fees to Lockworks under the " guise/label" of punitive damages despite the fact that the purchase agreement and the escrow agreement did not provide for the prevailing party to recover its attorneys fees in any subsequent litigation or arbitration. The court does not agree. " It may seem semantic if not pedantic, but the court does not agree that defendant 'was awarded attorneys fees and costs by the Arbitrator (in the form of punitive damages)'--rather, defendant was awarded punitive damages that were measured, in large part, by attorneys fees . . ." (Citation omitted; emphasis in original.) SBD Kitchens, LLC v. Jefferson, Superior Court, judicial district of Stamford/Norwalk, Docket No. FST-CV-12-6014447-S,
Five Yale also argues that the arbitrator improperly awarded punitive damages in an amount equal to Lockworks' total attorneys fees, although the balcony claim that gave rise to the punitive damages award was only one of Lockworks' four claims in the arbitration. The court has found no authority mandating apportionment of a punitive damages award. The arbitrator had the power to award punitive damages in the full amount of Lockworks' attorneys fees.
IV
Five Yale also seeks to have the award vacated or modified in part under General Statutes § 52-418(a)(4) on the ground that the arbitrator manifestly disregarded the law in rendering the arbitration award. " [A] necessary predicate to a claim that the arbitrators manifestly disregarded the law is that the arbitrators generally were vested with the authority to decide the issue or to grant the relief but ignored clearly applicable law in making that determination." Harty v. Cantor Fitzgerald & Co., supra, 275 Conn. at 88. The court must find proof of three elements in order to vacate an arbitration award under the manifest disregard standard: " (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 [arbitrator] 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." (Citation omitted; internal quotation marks omitted.) Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., supra, 273 Conn. at 95. Put simply, the arbitrator's award " must demonstrate . . . an egregious or patently irrational rejection of clearly controlling legal principles." Garrity v. McCaskey, supra, 223 Conn. at 11.
" The 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.) Zelvin v. JEM Builders, Inc., supra, 106 Conn.App. at 413. " This standard of proof has rarely, if ever, been met in Connecticut . . . Indeed, [our Supreme Court] has acknowledged that [t]he exceptionally high burden for proving a claim of manifest disregard of the law under [General Statutes] § 52-418(a)(4) is demonstrated by the fact that, since the test was first outlined . . . [the court had] yet to conclude that an arbitrator manifestly disregarded the law." (Citation omitted; internal quotation marks omitted.). SBD Kitchens, LLC v. Jefferson, 157 Conn.App. 731, 742-43, 118 A.3d 550, cert. denied, 319 Conn. 903, 122 A.3d 638 (2015).
The arbitrator's detailed analysis of the underlying facts and the applicable law makes clear that the arbitrator appreciated and followed established legal principles in awarding punitive damages to Lockworks. Nothing in the award remotely suggests that the arbitrator manifestly disregarded the law. Accordingly, there is no basis for vacating or modifying the award on this ground.
V
The parties agree that the garage leaks have been repaired. Five Yale contends, however, that its challenge to the portion of the arbitration award that authorized payment to Lockworks of $9,770.48 on the garage leaks claim (rather than the parties' agreed-upon liquidated damages amount of $5,000), ordered Five Yale to pay $44,000 to a contractor to repair the garage leaks, and potentially exposed Five Yale to costs up to $495,350, remains before the court. At the same time, Five Yale acknowledges that " admittedly it is no longer necessary for Five Yale to prevail on its present cross-motion to partially vacate the Arbitration Award in order to stave off the possible imposition of a remediation liability in the range of $44,000 to be paid to a . . . vendor or almost $500,000 to Plaintiff's proposed contractor for the Garage Leaks." (#120.00 at 3.) In view of the fact that the garage leaks have been remediated, and thus Five Yale has no continuing exposure or risk with respect to the garage leaks, the court finds that these issues are moot. See Wyatt Energy, Inc. v. Motiva Enterprises, LLC, 308 Conn. 719, 736, 66 A.3d 848 (2013) (case is considered moot if court cannot grant any practical relief through its disposition of the merits); Paupack Development Corp. v. Conservation Commission, 229 Conn. 247, 249 n.2, 640 A.2d 70 (1994) (unnecessary to address claim that a party concedes is moot).
VI
Accordingly, for the reasons set forth above, Lockworks's application to confirm the arbitration award is GRANTED, Five Yale's objection to the application to confirm the arbitration award is OVERRULED, and Five Yale's cross-application to partially vacate and/or modify the arbitration award is DENIED. The arbitration award is hereby CONFIRMED in all respects.