J. Don Gordon Construction, Inc., and Western Surety Company
Ann Rankin Brown et al.
Appeal from Baldwin Circuit Court (CV-10-901832)
The defendants below, J. Don Gordon Construction, Inc. ("Gordon Construction"), and Western Surety Company ("Western Surety"), appeal from the Baldwin Circuit Court's judgment on an arbitration award entered against them. The defendants argue that the award should be vacated for various reasons under § 10(a) of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA"). We affirm.
Dr. Ann Rankin Brown is a veterinarian who has been practicing in Baldwin County for several years. Around 2006, Brown decided to open her own veterinarian practice, and she and her husband purchased property on which to build a clinic. Brown testified that she and her husband formed Gone to the Dogs, LLC, to take ownership of the property and that she formed Rankin Animal Clinic, PC, as the veterinary entity that would rent the clinic from Gone to the Dogs. Other testimony indicates that Gone to the Dogs did in fact own the property and that Rankin Animal Center rented the property. In November 2007, Brown contracted with Gordon Construction to build a clinic on the property. Western Surety later issued a performance bond on the building project. Construction on the clinic began in January 2008. During construction, disputes arose between Brown and Gordon Construction regarding the quality of the work, and the project lagged. Eventually construction was completed, and the clinic opened in December 2008.
In October 2010, Brown sued Gordon Construction and Western Surety in the circuit court, alleging breach of contract. Gordon Construction and Western Surety moved to compel arbitration, and the circuit court granted their motion, apparently without opposition from Brown. The parties chose local attorney Marion E. Wynne to decide the case ("the arbitrator"). The parties also adopted a letter agreement written by the arbitrator in which they agreed to certain arbitration terms.
In March 2012, an amended complaint was filed naming as additional plaintiffs Gone to the Dogs and Rankin Animal Clinic, the two entities formed by Brown. Gordon Construction and Western Surety later filed an answer and counterclaim. The answer alleged, as an affirmative defense, that Gone to the Dogs and Rankin Animal Clinic were not parties to the construction contract and thus were not proper parties in the arbitration. Although Brown apparently remained a nominal plaintiff, comments made by the arbitrator during the proceedings indicated that he viewed Gone to the Dogs and Rankin Animal Clinic to be the real parties in interest. (For ease of discussion, we will sometimes refer to Brown, Gone to the Dogs, and Rankin Animal Clinic as "the plaintiffs.") The arbitrator held hearings for 10 days over an extended period in 2012 and 2013.
In May 2013, the arbitrator issued a partial award determining liability and awarding damages (primarily against Gordon Construction); the award also stated that the arbitrator would later consider an additional award of legal fees. In July 2013, Gordon Construction and Western Surety filed a motion with the arbitrator seeking his recusal, which the arbitrator promptly denied; that motion will be discussed in more detail below. In November 2013, the arbitrator issued a final award (1) awarding $157, 750.80 to Gone to the Dogs and Rankin Animal Clinic against Gordon Construction; (2) awarding $91, 272.40 to Gordon Construction against Gone to the Dogs and Rankin Animal Clinic (for a net award of $66, 478.40 to Gone to the Dogs Rankin Animal Clinic against Gordon Construction); and (3) awarding $362, 287 in legal fees, including attorney fees and expenses, to Gone to the Dogs and Rankin Animal Clinic against Western Surety.
The defendants appealed the arbitration award to the circuit court, and the circuit court entered a judgment on the award. See Rule 71B, Ala. R. Civ. P. (outlining the procedure for appealing an arbitration award). The defendants filed a postjudgment motion to vacate the award, which the circuit court denied. See id. The defendants then appealed to this Court.
"'Where parties, as in this case, have agreed that disputes should go to arbitration, the role of the courts in reviewing the arbitration award is limited. On motions to confirm or to vacate an award, it is not the function of courts to agree or disagree with the reasoning of the arbitrators. Courts are only to ascertain whether there exists one of the specific grounds for vacation of an award. A court cannot set aside the arbitration award just because it disagrees with it; a policy allowing it to do so would undermine the federal policy of encouraging the settlement of disputes by arbitration. An award should be vacated only where the party attacking the award clearly establishes one of the grounds specified [in 9 U.S.C. § 10].'"
R.P. Indus., Inc. v. S & M Equip. Co., 896 So.2d 460, 464 (Ala. 2004) (quoting Maxus, Inc. v. Sciacca, 598 So.2d 1376, 1380–81 (Ala. 1992) (citations omitted)).
"Under the FAA, courts may vacate an arbitrator's decision 'only in very unusual circumstances.' First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995). That limited judicial review, we have explained, 'maintain[s] arbitration's essential virtue of resolving disputes straightaway.' Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 588 (2008). ..."
Oxford Health Plans LLC v. Sutter, U.S.,, 133 S.Ct. 2064, 2068 (2013). "The [FAA] does not provide a dispute settlement mechanism; it facilitates private dispute settlement. The standards for judicial intervention are therefore narrowly drawn to assure the basic integrity of the arbitration process without meddling in it." Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673, 681 (7th Cir. 1983).
Section 10(a) of the FAA establishes very limited grounds upon which a court may vacate an arbitration award. Tucker v. Ernst & Young, LLP, 159 So.3d 1263 (Ala. 2014). The defendants first argue that the award should be vacated under § 10(a)(4), which allows a court to vacate an arbitration award "where the arbitrators exceeded their powers." "'Section 10(a)(4) ... applies narrowly and only if the arbitrators decide an issue not submitted by the parties or grant relief not authorized in the arbitration agreement.'" Gower v. Turquoise Props. Gulf, Inc., [Ms. 1120045, Dec. 20, 2013] __So. 3d __, __(Ala. 2013) (quoting Morgan Stanley & Co. v. Core Fund, 884 F.Supp.2d 1229, 1231 (M.D. Fla. 2012) (emphasis omitted)). "[A]s long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision." United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38 (1987).
The defendants argue that the arbitrator exceeded his powers because, they say, he entered an award as to two entities, i.e., Gone to the Dogs and Rankin Animal Clinic, that were not parties to the construction contract containing the arbitration agreement. However, the record does not indicate that the defendants presented this argument during the arbitration proceedings, despite the fact that the two entities participated in the proceedings. As noted, Brown, who signed the contract, sued the defendants, who then compelled arbitration. An amended complaint was later filed naming as plaintiffs the two entities formed by Brown –– Gone to the Dogs and Rankin Animal Clinic. After the amended complaint was filed, the defendants did file an answer summarily alleging, as an affirmative defense, that Gone to the Dogs and Rankin Animal Clinic were not parties to the contract and thus were not proper parties to the arbitration. However, after that assertion, the record does not indicate that the defendants ever presented a legal argument to the arbitrator that he lacked authority to determine the rights and obligations of the two entities formed by Brown. Only after the defendants received an unfavorable award did they present their legal argument in any meaningful way, first arguing it to the circuit court in their motion to vacate the judgment entered on the arbitration award. The record does not indicate that the arbitrator had a ...