Central Ceilings, Inc. v. Suffolk Construction Co., Inc. , 93 Mass. App. Ct. 207 ( 2018 )

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17-P-184 Appeals Court
CENTRAL CEILINGS, INC. vs. SUFFOLK CONSTRUCTION COMPANY, INC.,
& others.1
No. 17-P-184.
Suffolk. January 10, 2018. - May 9, 2018.
Present: Blake, Neyman, & Ditkoff, JJ.
Arbitration, Award, Discretion of arbitrator, Scope of
arbitration, Confirmation of award, Judicial review,
Attorney's fees. Contract, Arbitration. Practice, Civil,
Interest, Attorney's fees.
Civil action commenced in the Superior Court Department on
January 31, 2008.
A motion to confirm an arbitration award was heard by Peter
M. Lauriat, J., and a motion to correct and confirm as corrected
or to vacate an arbitration award was heard by Linda E. Giles,
J.
Paul R. Mordarski (Margaret Capp also present) for the
plaintiff.
Joel Lewin (John P. Connelly also present) for the
defendants.
1 Fidelity and Deposit Company of Maryland, Safeco Insurance
Company of America, and XL Specialty Insurance Company.
2
DITKOFF, J. The parties submitted a construction dispute,
pending in litigation in the Superior Court, to arbitration
under the Uniform Arbitration Act, G. L. c. 251, §§ 1 et seq.
The arbitrator issued a substantial award in favor of the
plaintiff, Central Ceilings, Inc., but purported to reserve the
calculation of preaward interest to a Superior Court judge. The
parties did not agree to this reservation. On the plaintiff's
motion to confirm the arbitration award, the judge (remanding
judge) remanded the matter to the arbitrator for the calculation
of preaward interest. After the arbitrator awarded preaward
interest well below that requested by the plaintiff, the
plaintiff moved to correct or to vacate that award. The
plaintiff now appeals from the order denying that motion.
Concluding that an arbitrator may not reserve the calculation of
preaward interest for a judge without the agreement of the
parties, and finding no error in the failure to award attorney's
fees, we affirm.
1. Background. The plaintiff was a subcontractor to
defendant Suffolk Construction Company, Inc. (Suffolk), the
general contractor, in a project for the renovation and
construction converting the old Charles Street jail in Boston
3
into the Liberty Hotel.2 On January 31, 2008, the plaintiff
commenced an action in Superior Court against the defendants,
raising various claims arising out of its subcontract with
Suffolk. After discovery and pretrial proceedings, the parties
filed a joint motion to stay the case in favor of resolving the
dispute through arbitration. On October 8, 2013, the parties
entered into an arbitration agreement governed by the Uniform
Arbitration Act, G. L. c. 251, §§ 1 et seq., expressly
incorporating the Construction Industry Arbitration Rules of the
American Arbitration Association. The arbitration agreement
reached "all relevant issues appertaining" to the civil lawsuit
and granted the arbitrator "full power and authority to award
money damages and to grant such other relief, including without
limitation reasonable attorney's fees and any other
contractually authorized damages as he, in his sole discretion,
shall deem just and proper" "[t]o the same extent as if he were
a justice of the Massachusetts Superior Court." A judge allowed
the motion and stayed the case during the pendency of the
arbitration.
2 The remaining defendants, Fidelity and Deposit Company of
Maryland, Safeco Insurance Company of America, and XL Specialty
Insurance Company, are the joint sureties on the payment bond
covering the project.
4
After extensive arbitration proceedings, the arbitrator
issued an initial award on the merits in favor of the plaintiff
in a decision dated February 20, 2015, in the amount of
$1,324,819.24, "with interest thereon in the amount ultimately
assessed by the Court," plus attorney's fees and costs as set
out in the subcontract between the parties.3
The parties filed timely cross motions with the arbitrator
requesting modification, correction, and clarification of the
initial award. The arbitrator denied the defendants' motion and
allowed the plaintiff's motion. The modified award, dated April
6, 2015, changed the award only to require an additional
interest calculation. It continued to reserve the task of
calculating interest on the $1,324,819.24 award to a judge, but
also required that judge to calculate interest on a payment of
$402,852 already made by Suffolk shortly after the parties
agreed to arbitration and prior to any award.
On April 15, 2015, the defendants moved in Superior Court
to vacate the arbitrator's award. The defendants soon
reconsidered, paid the modified award plus postaward interest on
June 24, 2015, and then withdrew their motion to vacate.
3 The arbitrator also stated, "Should the parties fail to
agree upon the amount due for attorney's fees and costs, the
matter shall be submitted for determination by the Arbitrator
pursuant to" the subcontract between the parties.
5
Meanwhile, the parties were unable to agree on the attorney's
fees and costs owed to the plaintiff. The arbitrator awarded
attorney's fees and costs on July 20, 2015, which Suffolk paid
within one month.
The parties, however, continued to dispute the issue of
preaward (as opposed to postaward) interest, as neither the
initial nor the modified award expressly stated that the
interest to be calculated by a judge included preaward interest.
The plaintiff maintained that the arbitrator either explicitly
or implicitly awarded preaward interest from the commencement of
the suit at the statutory rate of twelve percent, see G. L.
c. 231, § 6C, and that the judge had the duty to calculate that
interest. The defendants, in turn, asserted that only the
arbitrator could calculate preaward interest.
On October 26, 2015, the plaintiff moved to confirm the
modified award under G. L. c. 251, §§ 11, 14, 15, and to enter
judgment against the defendants for the disputed preaward
interest in the amount of $1,563,763.58 plus an additional
$500.46 for every day after September 16 to the date of
judgment. The defendants, conversely, asserted that the
preaward interest had been submitted to the arbitrator and thus
no additional preaward recovery was permissible.
After a hearing, the remanding judge concluded that,
although the arbitrator implicitly awarded preaward interest,
6
the lack of any explicit agreement between the parties on the
issue precluded its reservation for a judge. Accordingly, the
remanding judge remanded the matter to the arbitrator pursuant
to G. L. c. 251, §§ 9, 13, for the calculation of preaward
interest.
On remand, the arbitrator explained that he had "mistakenly
believed" that he lacked the authority to calculate the preaward
interest. The arbitrator acceded to the remanding judge's order
and issued a postremand clarification dated August 9, 2016. The
arbitrator awarded the plaintiff $287,036 in preaward interest,
declining to adopt the statutory interest rate under G. L.
c. 231, § 6C. Citing his broad discretion on the matter, the
arbitrator instead considered "various factors" of the
underlying dispute to award a "fair and equitable" amount based
on the "totality of circumstances." Suffolk promptly paid that
amount.
In response, on September 26, 2016, the plaintiff moved
under G. L. c. 251, §§ 12, 13, to "correct" the arbitrator's
postremand award to $1,462,600, based on the twelve percent
interest rate in G. L. c. 231, § 6C, and additionally to award
the plaintiff supplemental attorney's fees and costs for the
postarbitration court proceedings. The defendants opposed the
motion, contending that (1) the plaintiff's motion was untimely;
(2) the arbitrator did not exceed his authority; and (3) the
7
plaintiff was not entitled to further attorney's fees and costs
because the defendants were the "prevailing party" in the
postremand litigation. A third Superior Court judge denied the
plaintiff's motion, citing the reasons set forth in the
defendants' opposition.
2. Remand to the arbitrator to calculate preaward
interest. We review de novo a judge's decision on a motion to
confirm an arbitration award under G. L. c. 251, § 11, Bolman v.
Plymouth Rock Assur. Corp., 82 Mass. App. Ct. 135, 142 (2012),
recognizing "that 'the entitlement of a party to preaward
interest is a decision that is within the purview of the
arbitrator[].'" Id. at 139, quoting from Connecticut Valley
Sanitary Waste Disposal, Inc. v. Zielinski, 436 Mass. 263, 271
(2002). "Generally, in a proceeding to confirm an arbitration
award, a judge may not alter an arbitrator's decision that
allows, denies or fails to mention pre award interest." Talty,
Talty, & Braunstein, Methods of Practice § 38.20 (4th ed. supp.
2017), quoting from Bolman, supra.4 If the award is simply
silent as to preaward interest, the confirming court lacks the
authority to add preaward interest. Reilly v. Metropolitan
Property & Liab. Ins. Co., 412 Mass. 1006, 1007 (1992), citing
4 The calculation of postaward interest, of course, remains
a judicial duty where the parties cannot agree. See Diaz v.
Cruz, 76 Mass. App. Ct. 773, 774 (2010).
8
Sansone v. Metropolitan Property & Liab. Ins. Co., 30 Mass. App.
Ct. 660, 662-663 (1991).
The calculation of preaward interest, however, may properly
be reserved for a confirming court in certain conditions.
Talty, Talty, & Braunstein, supra, citing Bolman, 82 Mass. App.
Ct. at 140-141. Specifically, in Bolman, supra at 141, we
decided that the issue of preaward interest may be properly
reserved for the confirming court where "the reservation
unambiguously was agreed to by the parties and the arbitrator."
Here, there is no suggestion in the record that the parties
agreed to this reservation. Both the arbitration agreement and
the parties' own conduct, in fact, demonstrate the opposite.
The arbitration agreement was broad enough to include the
calculation of preaward interest within the arbitrator's
authority, and in no way expressly reserved the issue for the
confirming court. The plaintiff, moreover, specifically
requested that the arbitrator calculate a sum certain award of
preaward interest, and the defendants took the position in the
Superior Court that they agreed for only the arbitrator to
calculate preaward interest.
We reject the suggestion that an arbitrator may reserve the
calculation of preaward interest to a confirming court without
the agreement of the parties. It is a "fundamental principle
that the arbitrator's authority is defined by the parties'
9
arbitration agreement." Lynn v. Council 93, Am. Fedn. of State,
County, & Mun. Employees, Local 193, 51 Mass. App. Ct. 905, 905
(2001). See Bolman, 82 Mass. App. Ct. at 141 ("the issue of
preaward interest properly was reserved because the reservation
unambiguously was agreed to by the parties and the arbitrator").
Cf. Perlin & Blum, Procedural Forms Annotated § 116:1 (6th ed.
supp. 2017), citing Sansone, 30 Mass. App. Ct. at 662–663 ("In
the absence of an explicit agreement to the contrary, pre-award
damage claims, including interest must be considered to have
been submitted to arbitration"). Moreover, when agreed to by
the parties, there is a "strong public policy favoring
arbitration as an expeditious alternative to litigation for
settling commercial disputes." Massachusetts Hy. Dept. v.
Perini Corp., 79 Mass. App. Ct. 430, 441 (2011), quoting from
Plymouth–Carver Regional Sch. Dist. v. J. Farmer & Co., 407
Mass. 1006, 1007 (1990). This strong public policy would not be
honored if we allowed an arbitrator to reserve the calculation
of preaward interest when the parties had agreed to arbitrate
the issue. Furthermore, that course of action presumes that
there will be further litigation, where the hope is that the
losing party to the arbitration will comply with the
arbitrator's award without the necessity of resort to the
courts. See Katz, Nannis & Solomon, P.C. v. Levine, 473 Mass.
784, 794 (2016) (allowing parties to redefine "the scope of what
10
a court was to review with respect to every arbitration award
. . . would spawn potentially complex and lengthy case-within-a-
case litigation devoted to determining what the parties intended
. . . . This is fundamentally contrary to the intent and
purpose of our arbitration statute"). Indeed, the instant case
demonstrates the complications that would arise if the parties
could be required to return to court, rather than allowed simply
to comply with the arbitrator's award.
Faced with an arbitrator's award that erroneously reserved
the calculation of preaward interest to the court, the judge
properly returned the matter to the arbitrator for correction.
General Laws c. 251, § 9, authorizes the direct submission from
the court to the arbitrator for the modification or correction
of an award pending confirmation if (1) there is an evident
mistake or miscalculation; (2) the award was imperfect in a
matter of form, not affecting the merits of the controversy; or
(3) for the purpose of clarifying the award.5 G. L. c. 251,
§§ 9, 13. Baxter Health Care, Corp. v. Harvard Apparatus, Inc.,
35 Mass. App. Ct. 204, 209 (1993). Here, because the award
improperly directed the judge to calculate preaward interest
without the requisite agreement of the parties, it was imperfect
5 Section 9 expressly allows resubmission to the arbitrator
by the judge independent of a party's application; as a result,
the plaintiff's argument on the basis of waiver is meritless.
11
as a matter of form, in a manner outside the merits of the
underlying dispute.6 G. L. c. 251, § 13(a)(3). Accordingly, the
issue of preaward interest was properly remanded to the
arbitrator for calculation. See Baxter Health Care, Corp.,
supra at 210 (resubmission to arbitrator under § 9 "is within
the discretion of the court, and may be upon such conditions as
the court orders").
It follows from the preceding conclusion that the
plaintiff's motion to "correct" the arbitrator's postremand
award was properly denied. The plaintiff's motion essentially
asked the judge to disregard the arbitrator's postremand
decision and to calculate the postaward interest himself.
Because, however, the remanding judge properly had remanded the
matter to the arbitrator, the third judge also properly rejected
this motion. See Bolman, 82 Mass. App. Ct. at 141. See also
6 This is because the arbitrator awarded preaward interest
but failed to calculate it. See Finn, Mone, & Kelly, Mediation
and Arbitration § 19:172 (2017-2018 ed. 2017) ("The corrections
and modifications may be made without affecting the merits of
the award upon the issues submitted to the arbitrators"
[emphasis supplied]). Cf. Bruner and O'Connor on Construction
Law § 21:215 (2014) ("Courts are authorized to correct or modify
awards that are 'imperfect in matter of form,' as long as doing
so does not affect the merits of the controversy. As a general
rule, courts have been reluctant to modify damage awards on this
ground because changing the amount awarded affects the merits"
[emphasis supplied]). By contrast, had the award merely been
silent on the issue of preaward interest, the remanding judge
could not have remanded. See Reilly, 412 Mass. at 1007.
12
Bruner and O'Connor on Construction Law § 21:215 (2014) (courts
generally reluctant to correct awards imperfect in matter of
form when doing so would change the amount awarded).
3. Motion in the alternative to vacate the arbitrator's
postremand award. We uphold an arbitration award even if the
arbitrator's findings and conclusions "appear erroneous,
inconsistent, or unsupported by the record at the arbitration
hearing." Katz, Nannis & Solomon, P.C., 473 Mass. at 790,
quoting from Lynn v. Thompson, 435 Mass. 54, 61 (2001), cert.
denied, 534 U.S. 1131 (2002). "With respect to awarding
damages, so long as the arbitrator 'do[es] not overstep the
limits of the issues submitted to [him], a court may not
substitute its judgment on the matter.'" Perini Corp., 79 Mass.
App. Ct. at 435, quoting from Softkey, Inc. v. Useful Software,
Inc., 52 Mass. App. Ct. 837, 839 (2001). "We do, however,
vacate an award if '[a]n arbitrator exceeds his authority by
granting relief beyond the scope of the arbitration agreement
. . . or by awarding relief prohibited by law.'" Springfield v.
United Pub. Serv. Employees Union, 89 Mass. App. Ct. 255, 257-
258 (2016), quoting from Lynn v. Lynn Police Assn., 455 Mass.
590, 596 (2010).
General Laws c. 251, § 12, inserted by St. 1960, c. 374,
§ 1, likewise, specifies that a judge shall vacate an
arbitration award if:
13
"(1) the award was procured by corruption, fraud or other
undue means;
(2) there was evident partiality by an arbitrator appointed
as a neutral, or corruption in any of the arbitrators, or
misconduct prejudicing the rights of any party; [or]
(3) the arbitrators exceeded their powers."
Here, the plaintiff does not allege corruption, fraud, or
prejudice. Rather, the plaintiff contends only that the
arbitrator exceeded his authority in the postremand award.
As previously discussed, however, arbitrators are
authorized to grant preaward interest. See Bolman, 82 Mass.
App. Ct. at 139. Indeed, arbitrators have substantial
discretion to determine the scope of their contractual authority
to fashion remedies, "unless expressly restricted by the
agreement or the submission to arbitration." Perini Corp., 79
Mass. App. Ct. at 443, quoting from Superadio Ltd. Partnership
v. Winstar Radio Prods., LLC, 446 Mass. 330, 339 (2006). An
arbitrator's preaward interest award, moreover, "when made as a
component of an award, is an integral part of the total remedy
that he fashions and, as such, is not subject to the statutory
provisions which apply to court-awarded interest on contract
claims" (emphasis supplied). Id. at 434, quoting from Blue
Hills Regional Dist. Sch. Comm. v. Flight, 10 Mass. App. Ct.
459, 472 (1980), S.C., 383 Mass. 642, 644 (1981). See also
Construction Industry Arbitration Rules and Mediation Practices
R-48(d)(i) (2015) (arbitrator's award may include "interest at
14
such rate and from such date as the arbitrator may deem
appropriate").
The agreement in this case contained no such provision
limiting the arbitrator's authority to award interest of any
kind, nor prescribed interest rates. The arbitrator did not, as
the plaintiff suggests, thereby exceed his authority in
calculating preaward interest below the statutory rate under
G. L. c. 231, § 6C. See Perini Corp., 79 Mass. App. Ct. at 446
("once the parties resort to arbitration and legal proceedings
to resolve payment of disputed claims, . . . the interest
provisions of [the statute] are no longer controlling"). To the
contrary, the determination was consistent with the Construction
Industry Arbitration Rules incorporated into the arbitration
agreement. See Construction Industry Arbitration Rules and
Mediation Procedures R-48(a) (2015) ("The arbitrator may grant
any remedy or relief that the arbitrator deems just and
equitable and within the scope of the agreement of the
parties"). The third judge thus correctly denied the
plaintiff's motion to vacate the arbitrator's postremand award.7
7 The defendants had paid all existing obligations awarded
by the arbitrator at the time of the plaintiff's motion. As a
result, there was no need for the judge to confirm the
arbitrator's postremand award pursuant to G. L. c. 251, § 12(d).
See Murphy v. National Union Fire Ins. Co., 438 Mass. 529, 533
(2003) ("confirmation of the award became moot because the
obligation owed to the [prevailing party] had been satisfied").
15
4. Attorney's fees and costs. As a general rule,
"litigants bear their own expenses unless a statute or a
contract or other agreement provides otherwise." E. Amanti &
Sons, Inc. v. R.C. Griffin, Inc., 53 Mass. App. Ct. 245, 258
(2001). Here, the plaintiff claims supplemental attorney's fees
and costs from the proceedings in the Superior Court to confirm
the arbitrator's award pursuant to art. 8.16 of the subcontract
between the plaintiff and Suffolk.8 In the absence of such an
agreement, legal fees arising out of arbitration, including
those to confirm, modify, or vacate an arbitration award, may
not be awarded by a reviewing court. Finn, Mone, & Kelly,
Mediation and Arbitration § 9:9 (2017-2018 ed. 2017), citing
Floors, Inc. v. B. G. Danis of New England, Inc., 380 Mass. 91,
99-101 (1980). See Sun Fire Protection & Engr., Inc. v. D.F.
Pray, Inc., 73 Mass. App. Ct. 906, 907-908 (2009) (declining to
award attorney's fees and costs incurred solely in connection
with obtaining award's confirmation). Rather, so far as the
record before us reveals, the arbitration agreement confers on
the arbitrator the sole power to award attorney's fees and
costs. Accordingly, the parties have not demonstrated to us any
error in the third judge's decision not to award attorney's fees
8 The subcontract, while referenced by both parties, does
not appear in the record before us.
16
for the litigation in Superior Court. Similarly, we do not
award attorney's fees for this appeal.
5. Conclusion. The order dated November 10, 2016, denying
the motion to confirm and correct or vacate the postremand
arbitration award is affirmed.
So ordered.