Denison Mines (USA) Corporation v. KGL Associates

2016 UT App 171THE UTAH COURT OF APPEALS
DENISON MINES (USA) CORPORATION AND
DENISON WHITE MESA LLC,
Appellees,
v.
KGL ASSOCIATES INC.,
Appellant.
Opinion
No. 20150049-CA
Filed August 11, 2016
Seventh District Court, Monticello Department
The Honorable Lyle R. Anderson
No. 100700151
Denver C. Snuffer Jr., Steven R. Paul, Michael B.
Lapicola, and James J. Hartnett, Attorneys
for Appellant
Craig C. Coburn, Brian D. Bolinder, and Samantha E.
Wilcox, Attorneys for Appellees
JUDGE MICHELE M. CHRISTIANSEN authored this Opinion, in
which JUDGE KATE A. TOOMEY and SENIOR JUDGE PAMELA T.
GREENWOOD concurred. 1
CHRISTIANSEN, Judge:
¶1 KGL Associates Inc. (KGL) appeals from the order of the
district court confirming an arbitration award in favor of
Denison Mines Corporation and Denison White Mesa LLC
(collectively, Denison). We affirm.
1. Senior Judge Pamela T. Greenwood sat by special assignment
as authorized by law. See generally Utah R. Jud. Admin. 11-
201(6).
Denison Mines (USA) Corporation v. KGL Associates
BACKGROUND
¶2 This case arises from a breach of contract action. In
October 2009, Denison contracted with KGL to construct a mill
tailings cell at the White Mesa Mill near Blanding, Utah, for a
lump sum of $4,339,350. During construction, Denison issued
several change orders, which increased KGL’s compensation by
approximately $724,000. Denison also accelerated payments and
advanced money to KGL to assist KGL with its cash flow
problems. After Denison refused to issue additional change
orders that KGL proposed, KGL unilaterally terminated the
parties’ contract, abandoned the project prior to completion, and
acquired a lien on Denison’s property. Additionally, KGL filed a
lis pendens against Denison’s property.
¶3 Before KGL walked off the project, Denison had paid or
advanced KGL all but $454,000 of the approximately $5,063,000
adjusted contract price. Moreover, when KGL walked off the
project, it was more than $2 million in arrears in its payments to
subcontractors and suppliers, triggering further lien and bond
claims against Denison and its property. Denison settled with
these subcontractors and suppliers for roughly $1,860,000 and
spent approximately $355,000 completing the project.
¶4 Ultimately, Denison and KGL agreed to submit their
dispute to binding arbitration, and on August 23, 2013, they
entered into an agreement to arbitrate (the Arbitration
Agreement). Among other things, the Arbitration Agreement
provided that the arbitrator would “have until December 31,
2013 to render his interim award, in the form of a brief written,
reasoned award, not to exceed 5 pages in length.” The
Arbitration Agreement also provided:
The Arbitrator shall decide which party is the
prevailing party . . . and shall, consistent therewith,
award arbitrator’s fees, costs and expenses,
20150049-CA 2 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
reasonable attorney’s fees and costs to the
prevailing party. Proof of attorney’s fees and other
costs recoverable by the prevailing party shall
follow the Arbitrator’s interim award on the
merits . . . . The final award shall be issued no later
than 30 days after the submission of proof of
attorney’s fees and costs, but no later than
February 28, 2014.
¶5 The parties’ dispute encompassed nine claims by Denison
for affirmative relief, three claims by KGL for affirmative relief,
and multiple affirmative defenses by both parties. At the
conclusion of the arbitration hearing, the arbitrator informed the
parties that it might take him more than five pages to provide a
reasoned award due to the magnitude of the case. Neither party
objected. In addition, the parties agreed to extend the deadline
for the arbitrator to issue his interim award (the Interim Award)
to January 10, 2014.
¶6 On January 10, 2014, the arbitrator advised the parties
that he was having computer difficulties and that he would not
be able to issue the Interim Award until January 11. Neither
party objected to the delay. On January 11, the arbitrator issued a
nineteen-page Interim Award, explaining that the “Award
exceed[ed] counsel’s requested page limitation due to the
complexity of some issues which require[d] elaboration.” 2
Among other things, the arbitrator determined that KGL had
mismanaged its work on the project, had abandoned the project,
and had materially breached the parties’ contract. Therefore, the
arbitrator determined that Denison’s “completion actions and
2. KGL contends in its briefing that “[t]he parties . . . did not
agree to a 19-page Award.” However, KGL conceded at oral
argument that it agreed the arbitrator could exceed the five-page
limit specified in the Arbitration Agreement.
20150049-CA 3 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
decisions were justified” and that Denison was entitled to its
reasonable costs of completion after KGL’s abandonment of the
project. In addition, the arbitrator rejected KGL’s fraud in the
inducement defense and concluded that KGL had not
demonstrated it was entitled to a monetary award. The
arbitrator then awarded damages and interest to Denison
totaling $3,989,654, subject to Denison submitting “verified
statements based on generally accepted accounting principles to
confirm those amounts [the arbitrator] tentatively allowed” and
to “confirm[] that the costs in the records total said amounts and
that they do not arise from other causes.”
¶7 On January 30, 2014, KGL objected to the Interim Award
and the arbitrator’s request for verification, arguing that the
arbitrator lacked the authority to reopen the hearing or to
request additional evidence “related to the underlying claims
presented for resolution at the hearing.” KGL asserted that the
Interim Award did not comply with the Arbitration Agreement,
because it failed to resolve all of the issues submitted for
resolution. In addition, KGL asked the arbitrator to modify the
Interim Award to reject Denison’s claims and to find that KGL
was the prevailing party. On February 7, Denison responded to
KGL’s objections and argued that its damages claims were
supported by the evidence from the arbitration hearing and that
additional information was unnecessary. Nevertheless, in
response to the arbitrator’s request, Denison provided a
“Verification Statement” and declarations from three hearing
witnesses.
¶8 On February 28, 2014, the arbitrator issued his final award
(the Final Award), changing none of the prevailing-party
determinations or the amount of damages or interest awarded to
Denison in the Interim Award. Furthermore, as contemplated by
the Arbitration Agreement, the Final Award included an
additional award to Denison for attorney fees and costs,
bringing the total award to $4,820,043.99. That same day, the
20150049-CA 4 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
arbitrator issued an “Arbitrator Ruling on KGL Objections and
Other Considerations,” wherein he removed his request in the
Interim Award for verification by Denison. The arbitrator stated
that he had “reconsidered the record,” that it was “sufficient in
and of itself,” and that he had not considered Denison’s response
to his request for verification. Denison then filed a motion in the
district court to confirm the Final Award, and KGL filed a
counter-motion to have the Final Award vacated.
¶9 Among other things, KGL contended that the Interim
Award was untimely because (1) the Interim Award failed to
“offer a brief, reasoned decision” on two of KGL’s three change-
order claims; (2) the arbitrator “did not issue a final Award on
the merits” of Denison’s claims in the Interim Award because he
asked for verification of Denison’s damages; and (3) the
arbitrator inappropriately reopened the hearing “for the
submission of additional evidence by Denison, but not KGL.”
KGL also asserted that the arbitrator demonstrated evident
partiality in favor of Denison. After a hearing, the district court
confirmed the Final Award. The court concluded that KGL’s
objection to the timeliness of the Interim Award did not warrant
vacatur of the Final Award, that the arbitrator did not exceed his
authority or exhibit evident partiality in favor of Denison, and
that the arbitrator conducted the arbitration process “fairly and
honestly and in a manner that respected and did not prejudice
the substantial rights of either KGL or Denison.” KGL timely
appealed.
ISSUES AND STANDARDS OF REVIEW
¶10 KGL contends that the district court erred by confirming
the Final Award because (1) the arbitrator exceeded his authority
and (2) the arbitrator exhibited evident partiality in favor of
Denison.
20150049-CA 5 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
¶11 There are two standards applicable to the review of
arbitration awards. The standard of review for a district court
reviewing an arbitration award “‘is an extremely narrow one’
giving ‘considerable leeway to the arbitrator,’ and setting aside
the arbitrator’s decision ‘only in certain narrow circumstances.’”
Softsolutions, Inc. v. Brigham Young Univ., 2000 UT 46, ¶ 10, 1 P.3d
1095 (additional internal quotation marks omitted) (quoting
Buzas Baseball, Inc. v. Salt Lake Trappers, Inc., 925 P.2d 941, 947
(Utah 1996)). It is well settled that a district court “may not
substitute its judgment for that of the arbitrator, nor may it
modify or vacate an award because it disagrees with the
arbitrator’s assessment.” Buzas, 925 P.2d at 947. In reviewing the
order of a district court confirming, vacating, or modifying an
arbitration award, “we grant no deference to the district court’s
conclusions [of law] but review them for correctness,” and we
review the district court’s factual findings for clear error. Id. at
948 (alteration in original) (citation and internal quotation marks
omitted).
ANALYSIS
¶12 The Utah Uniform Arbitration Act (the Act) governs the
arbitration process. See Utah Code Ann. §§ 78B-11-101 to -131
(LexisNexis 2012). “The Act supports arbitration of both present
and future disputes and reflects long-standing public policy
favoring speedy and inexpensive methods of adjudicating
disputes.” Allred v. Educators Mutual Ins. Ass'n of Utah, 909 P.2d
1263, 1265 (Utah 1996). “Accordingly, the standard for reviewing
an arbitration award is highly deferential to the arbitrator.”
Buzas, 925 P.2d at 946. “[J]udicial review of arbitration awards
should not be pervasive in scope or encourage repetitive
adjudications but should be limited to the statutory grounds and
procedures for review.” DeVore v. IHC Hosps., Inc., 884 P.2d 1246,
1251 (Utah 1994); see also Allred, 909 P.2d at 1265 (“Given the
public policy and law in support of arbitration, judicial review of
20150049-CA 6 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
arbitration awards confirmed pursuant to the Act is limited to
those grounds and procedures provided for under the Act.”).
Generally, “an arbitration award will not be disturbed . . .
because the court does not agree with the award as long as the
proceeding was fair and honest and the substantial rights of the
parties were respected.” DeVore, 884 P.2d at 1251. We bear these
fundamental arbitration principles in mind as we review
whether the district court’s decision denying KGL’s motion to
vacate the Final Award was correct.
I. The Arbitrator Did Not Exceed His Authority.
¶13 KGL contends that the district court erred in confirming
the arbitrator’s award because the arbitrator exceeded his
authority “when he improperly extended the hearing and failed
to issue a timely award on the merits.”
¶14 Under the Act, a court shall vacate an arbitration award if
it appears that “an arbitrator exceeded the arbitrator’s
authority.” Utah Code Ann. § 78B-11-124(1)(d). For a reviewing
court to conclude that an arbitrator exceeded his or her
authority, the court must determine that the arbitrator’s award
“covers areas not contemplated by the submission agreement”
or determine that the award is “without foundation in reason or
fact.” Buzas, 925 P.2d at 949–50 (citation and internal quotation
marks omitted). In this case, KGL has not explicitly identified
either situation. Rather, KGL contends that the arbitrator
exceeded his authority by (1) untimely issuing the Interim
Award; (2) “reopen[ing] the hearing for Denison alone”; and (3)
reconsidering the record evidence after issuing the Interim
Award. We address each argument in turn.
A. The Timeliness of the Interim Award
¶15 KGL first contends that the arbitrator exceeded his
authority under section 78B-11-120 of the Utah Code, which
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provides that “[a]n award must be made within the time
specified by the agreement to arbitrate.” 3 Utah Code Ann. § 78B-
11-120(2). In this case, the parties’ Arbitration Agreement as
amended required the arbitrator to issue an “interim award on
the merits” by January 10, 2014. On appeal, KGL contends that
the arbitrator’s Interim Award, issued on January 11, 2014, did
not constitute an “interim award on the merits” because it did
not finally and “fully resolve the claims submitted on the
merits.” Specifically, KGL argues that the Interim Award did not
do so because (1) the arbitrator “[f]ound that Denison’s damage
claims were not adequately proven and required additional
‘verification’” and (2) the Interim Award failed to address two of
KGL’s change-order claims. 4 Thus, according to KGL, the
untimely issuance of the Interim Award warrants vacatur of the
Final Award.
¶16 The relevant provision of the Arbitration Agreement
provides:
The Arbitrator shall decide which party is the
prevailing party . . . and shall, consistent therewith,
award arbitrator’s fees, costs and expenses,
reasonable attorney’s fees and costs to the
prevailing party. Proof of attorney’s fees and other
costs recoverable by the prevailing party shall follow
the Arbitrator’s interim award on the merits and
proceed as directed by the Arbitrator. The final
3. We note that section 78B-11-120 does not distinguish between
interim and final awards. See Utah Code Ann. § 78B-11-120(2)
(LexisNexis 2012).
4. During oral argument before this court, KGL clarified that it is
not challenging the Interim Award on the ground that the
arbitrator issued the award one day late.
20150049-CA 8 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
award shall be issued no later than 30 days after
the submission of proof of attorney’s fees and
costs, but no later than February 28, 2014.
(Emphases added.)
¶17 On January 11, 2014, the arbitrator issued his nineteen-
page Interim Award. The arbitrator determined that KGL had
mismanaged its work on the project, abandoned the project, and
materially breached the parties’ contract. Consequently, the
arbitrator determined that Denison’s “completion actions and
decisions were justified” and that Denison’s reasonable costs of
completion after KGL’s abandonment were justified and
awardable. The arbitrator considered several other issues as
well. He rejected KGL’s fraud in the inducement defense, which,
according to KGL, “would have been a complete defense to
Denison’s affirmative claim for breach of contract,” concluding
that “[t]here was no ‘inducement’ or ‘fraud’ here.” He
determined that KGL “was or should have been aware of any
potential impact of [archaeological sites] upon their earthwork
operations at Denison’s mine” and that despite the high number
of archaeological sites and Denison’s willingness to adjust KGL’s
contract to account for the archaeological sites, “KGL did not ask
Denison to revise its pricing or its proposed schedule.” He also
considered KGL’s claims and determined that “the
preponderance of the evidence does not justify any monetary
award to KGL.” The arbitrator recognized that KGL had decided
to rely on the “‘total cost approach’ for its recovery” and that
“KGL’s approach to proving that the total cost method should be
applied for its relief [was] seriously lacking.” Because KGL failed
to present “any other alternative, credible method that [met] the
test of allowable damages upon which an award may be made,”
the arbitrator concluded that KGL had not demonstrated that it
was entitled to a monetary award.
20150049-CA 9 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
¶18 The arbitrator then concluded that Denison had prevailed,
and he awarded damages of $3,258,700 and interest of $730,954
to Denison, subject to verification. For verification, the arbitrator
required Denison to submit “verified statements based upon
generally accepted accounting principles to confirm those
amounts [the arbitrator] tentatively allowed” and to “confirm[]
that the costs in the records total said amounts and that they do
not arise from other causes.” The arbitrator also awarded
Denison its reasonable attorney fees and costs, as authorized by
statute, see Utah Code Ann. §§ 38-1a-101 to -804 (LexisNexis
Supp. 2013), in an amount to be determined by the arbitrator
after Denison submitted proof of such. Finally, the arbitrator
ordered KGL “to provide Denison . . . with original, signed and
recordable releases of KGL’s Lien and Lis Pendens against
[Denison’s] mine property.”
1. The arbitrator’s request for verification of Denison’s
damages
¶19 KGL first contends that the arbitrator inappropriately
“[f]ound that Denison’s damage claims were not adequately
proven and required additional ‘verification.’” Relying on the
arbitrator’s request for verification, KGL further asserts that the
Interim Award did not finally resolve the claims submitted on
the merits, and consequently, that the Interim Award did not
constitute an award “on the merits” as required by the
Arbitration Agreement.
¶20 In this case, the Arbitration Agreement provided for an
“interim award on the merits”; however, the Arbitration
Agreement did not define “on the merits” or “merits.” No Utah
decision has addressed the meaning of these terms in an
arbitration context, but Utah courts have discussed the meaning
of these terms in other contexts. “‘On the merits’ is a term of art
that means that a judgment is rendered only after a court has
evaluated the relevant evidence and the parties’ substantive
20150049-CA 10 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
arguments.” Miller v. USAA Cas. Ins. Co., 2002 UT 6, ¶ 42 n.6, 44
P.3d 663 (citation omitted). “As a technical legal term, ‘merits’
has been defined as a matter of substance, as distinguished from
a matter of form.” State Dep’t of Soc. Servs. ex rel. State v. Ruscetta,
742 P.2d 114, 116 (Utah Ct. App. 1987). And “[i]n the context of
res judicata, ‘merits’ has been interpreted to mean real or
substantial grounds of action or defense as distinguished from
matters of practice, procedure, jurisdiction or form.” Id. “A
judgment is upon the merits when it amounts to a declaration of
the law as to the respective rights and duties of the parties based
on . . . facts and evidence upon which the rights of recovery
depend, irrespective of formal, technical, or dilatory objections
or contentions.” Id. (omission in original) (citation and internal
quotation marks omitted).
¶21 In light of these definitions, the Interim Award’s content
indicates that it was an award “on the merits,” as required by the
Arbitration Agreement. Namely, the arbitrator’s Interim Award
decided the issues submitted as a matter of substance rather than
on procedural grounds. See Miller, 2002 UT 6, ¶ 42 n.6; Ruscetta,
742 P.2d at 116. In the Interim Award, the arbitrator
(1) determined that KGL had abandoned the project and
materially breached the parties’ contract; (2) rejected KGL’s
fraud in the inducement defense; (3) rejected KGL’s claims for
relief because KGL had failed to prove it was entitled to
damages; (4) ruled that Denison was entitled to damages based
on KGL’s material breach of the parties’ contract; and (5) ordered
KGL to release its lien against Denison’s property. Supra ¶¶ 17–
18. These are declarations of law rather than matters of
procedure. Simply put, the arbitrator’s Interim Award
determined that Denison was the prevailing party and that
Denison was entitled to damages.
¶22 Nevertheless, KGL contends that the arbitrator’s request
for verification demonstrates that the arbitrator found that
Denison “failed to satisfy its burden of proof as to damages with
20150049-CA 11 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
respect to all of its contested claims.” KGL made the same
argument at the hearing before the district court: “I would say
the arbitrator found that Denison failed to meet its burden of
proof based on the evidence presented at the hearing. That’s
what the interim award says, okay?” The district court, however,
disagreed: “He didn’t say that. He said something different
which you have recast in those terms because you think it’s the
same thing, but he didn’t say [Denison] failed to meet [its]
burden of proof. He said some of this is confusing[ and that he]
would like to have some more verification[.]” We are similarly
unpersuaded by KGL’s argument.
¶23 In his request for verification, the arbitrator stated, with
our emphases added:
I require Denison to submit . . . verified statements
based upon generally accepted accounting
principles to confirm those amounts I have
tentatively allowed, but for which I wish
verification . . . . This is not a request for an
“audit,” but rather for confirmation that the costs in
the records total said amounts and that they do not
arise from other causes.
KGL’s interpretation of the arbitrator’s request for verification is
untenable. There is nothing about the arbitrator’s request for
verification that indicates the arbitrator had concluded that
Denison had failed to prove its claims or its entitlement to
damages. Rather, the arbitrator’s request for verification related
only to the amount of Denison’s damages, i.e., the arbitrator was
seeking to confirm the math behind the damages evidence
Denison had presented at the arbitration hearing. Consequently,
KGL’s argument in this regard is unsupported by the actual
language of the arbitrator’s request for verification.
20150049-CA 12 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
¶24 KGL also asserts that the arbitrator’s request for
verification demonstrates that the arbitrator had failed to finally
resolve the claims submitted for resolution on the merits, in
violation of the Arbitration Agreement. According to KGL, the
“express terms of the [Arbitration] Agreement . . . required that
all matters submitted to the Arbitrator for determination be
finally resolved” by the Interim Award. (Emphasis added.) We
discern no such requirement from the Arbitration Agreement. In
support of its argument, KGL relies on the following provision
from the Arbitration Agreement: “Proof of attorney’s fees and
other costs recoverable by the prevailing party shall follow the
Arbitrator’s interim award on the merits and proceed as directed
by the Arbitrator.” Contrary to KGL’s assertion, nothing in this
provision expressly states that the Interim Award was required
to resolve the parties’ dispute, including the amount of damages,
in a final and irrevocable manner, a fact which KGL implicitly
recognized by asking the arbitrator to modify the Interim Award
to “deny[] Denison any recovery.” Likewise, none of the above-
mentioned definitions of “on the merits,” see supra ¶ 20, suggest
that an “interim award on the merits” requires a final and
binding statement of damages. Thus, the fact that the Interim
Award left the amount of Denison’s damages subject to final
verification does not render the Interim Award substantively
incomplete such that it does not constitute an award “on the
merits.”
¶25 Similarly, KGL argues that the same provision of the
Arbitration Agreement unambiguously means that “the ‘interim
award’ was to address ‘the merits’ of the dispute; the only thing
to follow was ‘proof of attorney’s fees and other costs.’” Again,
we do not think the language in the Arbitration Agreement is
nearly as exacting as KGL asserts. Particularly, we do not read
the language in the Arbitration Agreement as imposing a firm
restriction on what the arbitrator could and could not consider
after issuing the Interim Award. Instead, we read this provision
as simply requiring the arbitrator to determine attorney fees and
20150049-CA 13 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
costs after issuing his Interim Award. In other words, the
Arbitration Agreement contains no explicit limit on the
arbitrator’s authority to revisit the amount of his damages award
between the Interim and Final Awards.
¶26 Based on the foregoing, we are persuaded that the Interim
Award constituted an award “on the merits.” Although the
arbitrator left Denison’s damages award open to final
verification, nothing in the Arbitration Agreement explicitly
prohibited him from doing so, and the fact that he did so does
not render the Interim Award substantively incomplete.
Moreover, the substance of the Interim Award indicates that it is
an award “on the merits.” Consequently, we are not convinced
that the arbitrator’s request for verification rendered the Interim
Award untimely, as suggested by KGL.
2. KGL’s change-order claims
¶27 KGL next contends that the Interim Award did not
constitute an “interim award on the merits” because it did not
address two of KGL’s change-order claims and was therefore
untimely. According to KGL, it was “entitled to have the Award
address [its] claims via a ‘brief, reasoned award,’” and therefore,
“[t]he arbitrator’s failure to resolve KGL’s claims requires
vacatur.” We disagree.
¶28 To begin with, the Arbitration Agreement merely
required the arbitrator to issue a “brief, reasoned award.”
Contrary to KGL’s assertion, the Arbitration Agreement did not
explicitly require the arbitrator to specifically address each claim
asserted by the parties or to issue a reasoned decision on specific
claims. See Intermountain Power Agency v. Union Pac. R.R. Co., 961
P.2d 320, 324 (Utah 1998) (“Irrefutably, the arbitrator had
jurisdiction to resolve the ultimate matter on any of the
reasonable grounds presented by the parties. In deciding
20150049-CA 14 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
whether to confirm or vacate the award, we will not assess the
wisdom of any particular decisional basis.”).
¶29 Moreover, KGL has failed to demonstrate that it did not
receive a “reasoned award.” Although Utah courts have not
addressed what constitutes a “reasoned award,” the Eleventh
Circuit Court of Appeals’ definition is persuasive:
Webster’s [Dictionary] defines “reasoned” as
“based on or marked by reasoning,” and
“provided with or marked by the detailed listing or
mention of reasons.” Relatedly, “reason”—as used
in this context—is defined as “an expression or
statement offered as an explanation of a belief or
assertion or as a justification of an act or
procedure.” Strictly speaking, then, a “reasoned”
award is an award that is provided with or marked
by the detailed listing or mention of expressions or
statements offered as a justification of an act—the
“act” here being, of course, the decision of the
[arbitrators].
Cat Charter, LLC v. Schurtenberger, 646 F.3d 836, 844 (11th Cir.
2011) (emphasis and citations omitted).
¶30 At its core, the dispute between Denison and KGL was
about which party breached the contract. Thus, the primary
issue submitted to the arbitrator was whether either KGL or
Denison, or both, failed to perform their obligations under the
contract. The arbitrator’s Interim Award set forth myriad ways
in which KGL mismanaged its work on the project, and the
arbitrator plainly concluded that KGL had abandoned the
project and materially breached the parties’ contract.
Consequently, we certainly cannot say that the Interim Award is
devoid of any statements offered as a justification for the
arbitrator’s conclusion that Denison was the prevailing party. See
20150049-CA 15 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
id. While KGL’s change-order claims could have been used as
“intermediary mileposts” to guide the arbitrator’s ultimate
decision, we conclude that the arbitrator was not required to
specifically address each of KGL’s change-order claims. See
Intermountain Power Agency, 961 P.2d at 323–24. 5 The fact that the
arbitrator did not explicitly address two of KGL’s change-order
claims does not indicate that the Interim Award was so
substantively incomplete as not to constitute an award “on the
merits” or that the Interim Award was untimely rendered.
¶31 In sum, we are unpersuaded that the arbitrator’s request
for verification and the fact that he did not explicitly address two
of KGL’s change-order claims render the Interim Award
untimely in violation of Utah Code section 78B-11-120. And even
if we were to assume that the arbitrator’s Interim Award was
untimely issued for the reasons alleged by KGL, we would
conclude that the delay was harmless. See Jones v. Cyprus Plateau
Mining Corp., 944 P.2d 357, 360 (Utah 1997) (“Harmless errors are
those that are sufficiently inconsequential so no reasonable
likelihood exists that the error affected the outcome of the
proceedings.”).
5. We also note that it is not certain that the arbitrator did in fact
fail to address KGL’s change-order claims. In the Interim Award,
the arbitrator observed that “had Denison agreed to the change
orders as presented by KGL and paid monies, or released
remaining retainage, there were NOT sufficient monies
remaining in its Contract to save KGL from disaster.” In other
words, “there was not enough money in the Contract as a whole,
even with the pending change orders, which would have come
close to paying off KGL’s obligations to subcontractors,
suppliers and other creditors.” The arbitrator therefore
concluded, “Denison’s completion actions and decisions were
justified.” The arbitrator’s statements indicate that he did
consider KGL’s change-order claims.
20150049-CA 16 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
¶32 KGL contends that under section 78B-11-120, an
arbitration award that is issued after the time specified by the
agreement to arbitrate is void. However, we do not believe that
the statute mandates such a strict result. Section 78B-11-120 does
not specifically provide for vacatur on the basis of untimely
rendition of an award, nor does it specifically provide that an
untimely arbitration award is void as a matter of law. See Utah
Code Ann. § 78B-11-120(2) (LexisNexis 2012). Indeed, section
78B-11-120 does not address the consequences of an untimely
arbitration award at all. 6 See id.
¶33 As discussed above, an arbitration award “will not be
disturbed on account of irregularities or informalities, or because
the court does not agree with the award, so long as the
proceeding has been fair and honest and the substantial rights of
the parties have been respected.” Allred v. Educators Mutual Ins.
Ass’n of Utah, 909 P.2d 1263, 1265 (Utah 1996) (citation and
internal quotation marks omitted). Under this fairness standard,
we do not believe that a short delay, or even a six-week delay
like the one alleged here, 7 should automatically negate the
parties’ and the arbitrator’s protracted efforts to resolve a
dispute so long as neither party is prejudiced by the delay. See,
e.g., West Rock Lodge No. 2120 v. Geometric Tool Co., 406 F.2d 284,
286 (2d Cir. 1968) (“[W]e believe it to be a better rule that any
limitation upon the time in which an arbitrator can render his
6. Notably, KGL has not cited, nor have we been able to find, any
case in which a court vacated a timely final award because an
interim award was untimely rendered.
7. According to KGL, the Interim Award was “over six weeks
late” because “[a]n Award that finally resolved all of the claims
submitted to the Arbitrator at the hearing was not issued by the
Arbitrator until February 28, 2014,” when the arbitrator issued
his Final Award.
20150049-CA 17 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
award be a directory limitation, not a mandatory one . . . .”);
Brandon v. Hines, 439 A.2d 496, 510 (D.C. 1981) (“Recently, . . .
courts have held that time limitation on rendering arbitration
awards—whether specified by statute, rule, or contract—are
‘directory.’” (collecting cases)); International Bank of Commerce-
Brownsville v. International Energy Dev. Corp., 981 S.W.2d 38, 56
(Tex. App. 1998) (noting that the Federal Arbitration Act “does
not specifically provide for vacatur on the basis of untimely
rendition of an award” and concluding that “[a] court has the
discretion to uphold a late award when there has been no
objection to the delay prior to rendition of the award or no
showing of harm or prejudice caused by the delay”); Anderson v.
Nichols, 359 S.E.2d 117, 121 n.2 (W. Va. 1987) (observing that “a
short de minimis delay by which no one is harmed should not be
permitted to void the prolonged efforts of the arbitrators”).
¶34 In this case, even assuming that the Interim Award was
untimely, KGL has not demonstrated any prejudice arising out
of the delay, nor do we perceive any. The arbitrator’s damages
award remained the same between the Interim and Final
Awards, and there is simply no indication that the arbitrator’s
decision would have been any different had the Interim Award
not been subject to final verification with regard to Denison’s
damages. Both parties are essentially in the exact same position
now as they were on the day the arbitrator issued the Interim
Award. Thus, even if the Interim Award was untimely issued,
we conclude that it does not warrant vacatur of the Final Award.
B. The Arbitrator’s Reopening of the Hearing
¶35 KGL next contends that “[t]he arbitrator’s decision to
reopen the hearing for Denison alone requires vacatur.” We
disagree.
¶36 As a preliminary consideration, we note that even if the
arbitrator had asked both sides to submit additional verification,
20150049-CA 18 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
there likely would have been nothing for KGL to submit because
the arbitrator was seeking verification of Denison’s damages
alone. But more importantly, in his ruling on KGL’s objections,
the arbitrator specifically stated that the record evidence from
the arbitration hearing was sufficient “in and of itself” and that
he had not considered Denison’s additional verification.
Consequently, even if the arbitrator erred by requesting
additional verification from Denison, because the arbitrator
ultimately withdrew that request and declined to consider the
verification, that error did not affect his decision and was
therefore harmless. Accordingly, we conclude that the arbitrator
did not exceed his authority under the Arbitration Agreement;
while the arbitrator’s actions were perhaps irregular or informal,
we will not disturb the arbitrator’s award on these bases. See
Allred v. Educators Mutual Ins. Ass’n of Utah, 909 P.2d 1263, 1265
(Utah 1996).
C. The Arbitrator’s Reconsideration of the Record Evidence
¶37 Finally, KGL contends that “[t]he arbitrator’s untimely
reconsideration of the record evidence requires vacatur.” KGL
directs our attention to the arbitrator’s ruling on KGL’s
objections to the Interim Award, which stated that the arbitrator
“has again considered the sworn testimony of Denison witnesses
and the itemizations of damages submitted during the hearings
in supporting exhibits.” According to KGL, “the parties’
Agreement did not permit the Arbitrator to ‘reconsider’ the
evidence submitted at the hearing after January 10, 2014, much
less reconsider only select portions of the evidence favorable to
only one party.”
¶38 We first observe that nothing in the Arbitration
Agreement explicitly prohibited the arbitrator from revisiting
and reconsidering the hearing record between the Interim and
Final Awards. But in any event, the arbitrator’s reconsideration
of the record evidence was nothing more than a procedural
20150049-CA 19 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
irregularity or informality. In the end, the arbitrator made no
modifications to the terms and provisions of the Interim Award,
and thus, his reconsideration of the record evidence had no
practical effect on the Final Award or the ultimate fairness of the
arbitration proceedings. Under Allred, “so long as the proceeding
has been fair and honest and the substantial rights of the parties
have been respected,” we will not disturb an arbitration award.
909 P.2d at 1265 (citation and internal quotation marks omitted).
Accordingly, we reject KGL’s claim that the arbitrator’s
reconsideration of the record evidence requires vacatur of the
Final Award.
¶39 Based on the foregoing, we conclude that the district court
did not err in determining that the arbitrator had not exceeded
his authority and that KGL’s “objection to the timeliness of the
Interim Award . . . does not warrant vacatur of the Final
Award.” We therefore affirm the district court’s confirmation of
the Final Award on this basis.
II. The Arbitrator Did Not Exhibit Evident Partiality.
¶40 KGL next contends that “[t]he district court’s decision
should be reversed and the award should be vacated because the
arbitrator’s conduct demonstrates evident partiality in favor of
Denison.”
¶41 Pursuant to section 78B-11-124 of the Utah Code, “[u]pon
motion to the court by a party to an arbitration proceeding, the
court shall vacate an award made in the arbitration proceeding
if: . . . there was . . . evident partiality by an arbitrator appointed
as a neutral arbitrator.” Utah Code Ann. § 78B-11-124(1)(b)(i)
(LexisNexis 2012). A court shall vacate an arbitration award
under section 78B-11-124 “if a reasonable person would
conclude that an arbitrator, appointed as neutral, showed
partiality or was guilty of misconduct that prejudiced the rights
of any party.” DeVore v. IHC Hosps., Inc., 884 P.2d 1246, 1256
20150049-CA 20 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
(Utah 1994). “Furthermore, the burden of proof falls on the
movant, and the evidence of partiality must be certain and
direct, not remote, uncertain, or speculative.” Id. “[N]either an
arbitrator’s consistent reliance on the winning party’s evidence
nor the arbitrator’s conclusions in the winning party’s favor
establish partiality.” Id. at 1257.
¶42 The district court concluded that the arbitrator did not
exhibit evident partiality in favor of Denison and that the
arbitrator “conducted the arbitration process fairly and honestly
and in a manner that respected and did not prejudice the
substantial rights of either KGL or Denison.” We agree.
¶43 First, KGL contends that the arbitrator demonstrated
evident partiality by “[r]e-opening the hearing to allow the
submission of additional evidence by Denison, but not KGL”
and by receiving Denison’s evidence despite KGL’s timely
objection. At most, these arguments amount to speculative
allegations of partiality rather than the direct and certain
evidence of partiality required to vacate an award. See DeVore,
884 P.2d at 1256. This is especially true given that the arbitrator
ultimately “remove[d] the requirement or request in the Interim
Award” for additional verification by Denison and did not
consider Denison’s verification between the Interim and Final
Awards. Moreover, the contested verification did not pertain to
Denison’s entitlement to damages but only to the amount of
those damages. Although it would have been preferable for the
arbitrator to have refrained from requesting and receiving
Denison’s verification, a reasonable person would not regard the
arbitrator’s conduct as establishing certain and direct evidence of
partiality to Denison.
¶44 Second, KGL contends that the arbitrator demonstrated
evident partiality by reconsidering Denison’s record evidence
after KGL’s objection. Again, KGL’s allegation of partiality is, at
best, “remote, uncertain, [and] speculative.” See DeVore, 884 P.2d
20150049-CA 21 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
at 1256. Indeed, it could just as easily be argued that the
arbitrator reconsidered Denison’s record evidence to ensure that
Denison was not awarded undue damages. The facts simply do
not demonstrate, and KGL has produced no direct evidence of,
evident partiality with respect to the arbitrator’s reconsideration
of the record evidence.
¶45 Third, KGL contends that the arbitrator exhibited evident
partiality when he failed to address two of KGL’s change-order
claims. As previously discussed, the Arbitration Agreement only
required the arbitrator to issue a “reasoned award.” Supra ¶ 28.
Contrary to what KGL would have us believe, the Arbitration
Agreement simply did not require the arbitrator to address all of
the parties’ claims and defenses, nor could the arbitrator have
reasonably done so in light of the five-page limit set forth in the
Arbitration Agreement. But more importantly, we are not
persuaded by KGL’s highly speculative allegation that the fact
that the arbitrator did not explicitly address two of KGL’s
change-order claims demonstrates partiality, and we do not
believe a reasonable person would regard the arbitrator’s failure
to do so as establishing certain and direct evidence of partiality
to Denison. See DeVore, 884 P.2d at 1256.
¶46 Fourth, KGL contends that “the Arbitrator’s tortured
interpretation of the evidence with respect to KGL’s fraud-in-
the-inducement claim also demonstrates evident partiality.”
According to KGL, the arbitrator’s factual findings on KGL’s
fraud in the inducement claim were directly contrary to the
record evidence. KGL’s argument is nothing more than a veiled
attempt to have this court conduct an inappropriate review of
the merits of KGL’s fraud in the inducement claim. See Allred v.
Educators Mutual Ins. Ass’n of Utah, 909 P.2d 1263, 1266 (Utah
1996) (“[W]e will not conduct a substantive review of the merits
of a matter subject to arbitration.”). Moreover, there is no
evidence in the record to suggest that the arbitrator did anything
but use his best judgment to decide the issues before him. In the
20150049-CA 22 2016 UT App 171Denison Mines (USA) Corporation v. KGL Associates
Interim Award, the arbitrator spent approximately six pages
addressing KGL’s fraud in the inducement claim, and the fact
that the arbitrator ultimately found Denison’s evidence and
arguments to be more persuasive than KGL’s is not proof of
partiality. An adverse ruling in and of itself is not evidence of
partiality. See DeVore, 884 P.2d at 1257.
¶47 In sum, KGL has failed to establish that the arbitrator
demonstrated evident partiality. Consequently, we conclude that
the district court did not err in denying KGL’s motion to vacate
the Final Award on this basis.
CONCLUSION
¶48 We conclude that the district court did not err in
determining that the arbitrator did not exceed his authority and
that he did not exhibit evident partiality. Accordingly, we affirm
the district court’s order confirming the Final Award.
20150049-CA 23 2016 UT App 171