Willoughby Roofing & Supply v. Kajima Intern.

• Citation: 598 F. Supp. 353
• Decision Date: 06 December 1984
• Docket Number: Civ. A. No. CV82-L-5556-NE.
• Parties: WILLOUGHBY ROOFING & SUPPLY COMPANY, INC., Plaintiff, v. KAJIMA INTERNATIONAL, INC., Defendant.
• Court: U.S. District Court — Northern District of Alabama

598 F. Supp. 353

WILLOUGHBY ROOFING & SUPPLY COMPANY, INC., Plaintiff, v. KAJIMA INTERNATIONAL, INC., Defendant.

Civ. A. No. CV82-L-5556-NE.

United States District Court, N.D. Alabama, Northeastern Division.

December 6, 1984.

Ralph W. Hornsby, David H. Meginniss, Hornsby, Blankenship, Robinson & Meginniss, Huntsville, Ala., for plaintiff.

Robert O. Fleming, Jr., Smith & Fleming, Atlanta, Ga., Philip A. Geddes, Decatur, Ala., for defendant.

MEMORANDUM OPINION^*

LYNNE, Senior District Judge.

This matter comes before the Court on the plaintiff's application for judgment. The plaintiff's fraud, breach of contract, and related claims have been submitted to an arbitration panel at the insistence of the defendant. The arbitrators, having considered those claims and having found them meritorious, have awarded the plaintiffs $41,091.25 in compensatory damages. In addition, because they found the defendant guilty of willful misrepresentations of material fact concerning the transaction at issue, the arbitrators have awarded the plaintiffs the further sum of $108,908.75 in punitive damages. However, the defendant, once the champion of the need for arbitration in this case, now expresses dissatisfaction with the results achieved by that process. Having once argued strenuously that the arbitration clause contained in the parties' contract required arbitration of all of the plaintiff's claims,¹ the defendant now seeks to qualify its previous position. Now, for the first time, the defendant argues that the arbitration panel lacked authority to consider the plaintiff's claims for punitive damages. On this basis, the defendant has filed a motion to vacate the award of punitive damages.² Because the Court is satisfied that the arbitrators' award was within the broad scope of their authority under the contract and under law, the defendant's motion will be overruled and judgment entered in accordance with the arbitral award.

BACKGROUND

This action began when the plaintiff, Willoughby Roofing & Supply Company ("Willoughby Roofing"), filed suit in the Circuit Court of Madison County, Alabama. The complaint sought compensatory and punitive damages for breach of contract, fraud, misrepresentation, and breach of the duty of good faith and fair dealing by the defendant, Kajima International, Inc. ("Kajima"). These claims emanated from a contract between the parties whereby plaintiff, as subcontractor, was to construct and install a roof on a building for Kajima, the general contractor on a certain construction project in Huntsville, Alabama. Willoughby Roofing had allegedly prepared its bid on the roofing job in reliance on certain representations by Kajima as to the plans and specifications that would have to be followed in constructing the roof. Following acceptance of Willoughby Roofing's bid, however, those plans and specifications were materially altered by Kajima, so much so that the cost to the plaintiff of completing the contract would have been substantially higher than anticipated. Therefore, Willoughby sought to renegotiate the contract price or to submit a new bid. Despite the fact that Willoughby had gone to considerable expense in preparing to fulfill the contract under the original specifications, Kajima chose instead to cancel the contract and engage another subcontractor to do the work.

It was at this point that the state court action was filed. Shortly thereafter, the case was removed to this Court by the defendant. Following removal, the defendant filed a motion for a stay of the proceedings pending arbitration. This motion was based upon the arbitration clause of the contract between the parties:

Section 6.07. Arbitration.

All claims, disputes, and other matters in question arising out of, or relating to, this Agreement or a Work Assignment or the breach thereof, except with respect to matters for which the Architect's decision shall be final and binding as provided in this Agreement, shall be resolved by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association unless the parties mutually agree otherwise. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.

This arbitration clause is, of course, quite broad, and it evinces an intent of the parties to vest the arbitrators with authority to decide virtually any claim that could arise in relation to the contract and its performance. Indeed, as the defendant itself aptly argued in support of its motion for a stay pending arbitration,

... the arbitration procedure applies to all disputes arising in connection with the subcontract. It would have been difficult, if not impossible, for the parties to have drafted a broader arbitration provision. This broad language, coupled with the national policy favoring a liberal construction of arbitration agreements, makes it clear that the disputes involved in this case are well within the scope of the arbitration agreement.³

Convinced that the arbitration clause did indeed cover all of the plaintiff's claims, including the claims for compensatory and punitive damages for fraud, see generally Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), the Court granted the stay. An arbitration panel was selected, and the plaintiff's claims were presented to that panel. Finding those claims to be meritorious, the panel awarded the plaintiff $150,000 in unspecified damages.

At this point, the defendant first objected that the arbitrators had awarded punitive damages and that to do so was beyond their authority. In order to clarify the issue, the Court on April 26, 1984, ordered that the award be resubmitted to the same arbitration panel for an explicit breakdown of the claims for which damages were provided. Subsequently, on August 21, 1984, the panel issued the following award:⁴

... We the undersigned Arbitrators find the following facts:

1. That KAJIMA INTERNATIONAL, INC., did in fact breach its contract to WILLOUGHBY ROOFING & SUPPLY CO., INC., and that the compensatory damages suffered by WILLOUGHBY ROOFING & SUPPLY CO., INC., were $41,091.25.

2. We further find that KAJIMA INTERNATIONAL, INC., did make misrepresentations of material facts, that these facts were willfully made to deceive WILLOUGHBY ROOFING & SUPPLY CO., INC., that these misrepresentations were made by KAJIMA INTERNATIONAL, INC., to be relied upon by WILLOUGHBY ROOFING & SUPPLY CO., INC., and that in fact WILLOUGHBY ROOFING & SUPPLY CO., INC., did rely on these misrepresentations and that WILLOUGHBY ROOFING & SUPPLY CO., INC., suffered damages as a result of this reliance.

For these wrongful acts of KAJIMA INTERNATIONAL, INC., we find that KAJIMA INTERNATIONAL, INC., should pay punitive damages of $108,908.15.

Therefore, Arbitrators, AWARD as follows:

A. Award compensatory damages in the amount of $41,091.25 to be paid by KAJIMA INTERNATIONAL, INC.

B. Award punitive damages in the amount of $108,908.75 to be paid by KAJIMA INTERNATIONAL, INC.

Now unhappy with the bed it has made for itself, Kajima no longer wishes to lie in it. Consequently, Kajima now seeks an order vacating this award on two separate grounds: (1) the contract between the parties does not authorize the arbitrators to award punitive damages; and (2) even if the contract does authorize the arbitrators to make such an award, public policy prohibits them from doing so. As discussed below, however, neither of these arguments is sufficiently persuasive to displace the plenary deference traditionally owing to the decisions of arbitrators as a matter of federal policy.⁵

DISCUSSION

I.

The contention that the arbitration clause involved in this case is not broad enough to empower the arbitration panel to award punitive damages is one that must fail. As the defendant has candidly admitted, "it would have been difficult, if not impossible, for the parties to have drafted a broader arbitration provision."⁶ Moreover, the arbitration clause incorporates by reference the Construction Industry Arbitration Rules. Rule 43 of those rules provides that

The arbitrator may grant any remedy or relief which is just and equitable and within the terms of the agreement of the parties (emphasis supplied).

When the extremely broad arbitration clause is read in light of the equally broad grant of remedial power in Rule 43, it is clear that the parties by their contract have authorized the arbitrators to award punitive damages. Cf. Willis v. Shearson/American Express, Inc., 569 F.Supp. 821 (M.D.N.C.1983). The contract purports to place no limits on the remedial authority of the arbitrators, nor should one be implied to exclude the authority to award punitive damages. The parties certainly had the power to limit the arbitrator's ability to fashion appropriate remedies,⁷ but they chose not to do so. As defendants have conceded, strong federal policy requires a liberal construction of arbitration agreements, not a strict one.⁸ See, e.g., United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 585, 80 S.Ct. 1347, 1354, 4 L.Ed.2d 1409 (1960). In resolving questions pertaining to the arbitrator's authority, courts must broadly construe the agreement and resolve all doubts in favor of the arbitrator's authority. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941-942, 74 L.Ed.2d 765 (1983); Lackawanna Leather Co. v. United Food & Commercial Workers, 706 F.2d 228 (8th Cir.1983); Daniel Construction Co. v. International Union of Operating Engineers, Local 513, 570 F.Supp. 299 (E.D.Mo.1983), aff'd 738 F.2d 296 (8th Cir.1984). This is particularly true with respect to the remedial authority of arbitrators, for it is essential that...