Thursday, May 24, 2018

In a Matter of First Impression, the Supreme Court Reverses Trial Court: No "Evident Miscalculation" in Arbitration Award

The Supreme Court of Mississippi in D. W. Caldwell, Inc. v. W.G. Yates & Sons Constr. Co., No. 2017-CA-00116-SCT, -- So.3d.-- (Miss. May 10, 2018) reversed and remanded a trial court's modification of an arbitration award for "evident miscalculation."  The Supreme Court held that "evident miscalculation of figures was not apparent from face of arbitration award, and thus, modification of the award was not warranted." The Supreme Court remanded for the trial court to confirm the award.

The underlying dispute concerned a roofing subcontract for a dormitory at Auburn University.  After the subcontractor started work, it discovered structural issues that needed to be addressed before roofing could begin.  The general contractor and the subcontractor agreed that the subcontractor would perform the structural repairs and then complete the roofing.  However, subcontractor was not paid in full for both the repair change order and the original roofing scope.  A dispute arose and the parties arbitrated.  The arbitrator issued a reasoned award in favor of the subcontractor. The general contractor requested clarification of this award, which the arbitrator denied, and then proceeded to Mississippi trial court on a motion to "alter, amend, or vacate the award." The subcontractor, for its party, moved to confirm the award. 

In Mississippi, like many other states, the grounds justifying an amendment or correction to an arbitration award are quite limited including only: "(a) an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award; (b) The arbitrators have awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or (c) The award is imperfect in a matter of form, not affecting the merits of the controversy."  Miss. Code. Ann. § 11-15-135.

The trial court "believing that an evident miscalculation was present as it related to the retainage amounts" denied the subocontractor's motion to confirm the award and instead allowed the general contractor to introduce new evidence and witness testimony as to the miscalculation.  The trial court held that there was a "facially evident miscalculation" as "the arbitrator had duplicated the labor costs for shingle installation in its award–once under the original subcontract and once under the oral agreement to repair the structural damage [and] amended the award, reducing the total by $104,507."

The subcontractor appealed the trial court decision and the Mississippi Supreme Court reversed holding that "arbitrator's award contained no evident miscalculations which would merit modification." The Court first focused on the extreme narrowness of arbitration review, but also acknowledged that "what amounts to an evident miscalculation" had not previously been decided by this Court.  After reviewing cases from other jurisdictions it decided on this definition: an "evident (plain, obvious, or clearly understood) miscalculation must be apparent from nothing more than the four corners of the award and the contents of the arbitration record." Indeed the moving party must be able to show "[w]ithout looking outside the undisputed facts or relying upon testimony from a witness in the trial court" that "a different, but correct, calculation could be made."  In the instant case, the Court examined "the thirteen-page award for any facially evident miscalculations or computational errors. In doing so, [it found] that no such errors [were] present. Looking next to the attorney-written arguments, oral arguments, and agreed-upon record evidence, [it] likewise failed to find such errors."  In sum, the court "fail[ed] to find that the arbitrator erroneously duplicated costs of labor and relied on such a duplication in making his award. Nor [did the Court] ascertain that the arbitrator erred by excluding the retainage totals."

In reaching this holding, the Mississippi Supreme Court also held that the trial court had abused its discretion by hearing and crediting witness testimony during the award modification hearing.  The trial court took additional testimony regarding the cost of the structural repairs in order to determine whether and to what extent there was an evident miscalculation of figures in the award. The Supreme Court emphasized that "arbitration is meant to supplant litigation, not supplement it" and that the trial court's error "transformed . . . the very narrow and limited purpose of its review [impermissibly]  imbu[ing] it with the responsibility of the factfinder." Note that trial court's abuse of discretion was not the linchpin of its evident miscalculation decision.
The author, Katharine Kohm, Esq. is a committee member for The Dispute Resolver.  She practices construction law at Pierce Atwood, LLP in Providence, Rhode Island. 

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