Baxter Health Care, Corp. v. Harvard Apparatus, Inc.

• Decision Date: 23 August 1993
• Docket Number: No. 92-P-439,92-P-439
• Parties: BAXTER HEALTH CARE, CORP., 1 v. HARVARD APPARATUS, INC.
• Court: Appeals Court of Massachusetts

Page 1018

617 N.E.2d 1018

35 Mass.App.Ct. 204

BAXTER HEALTH CARE, CORP., ¹ v. HARVARD APPARATUS, INC.

No. 92-P-439.

Appeals Court of Massachusetts,

Middlesex.

Argued May 13, 1993.

Decided Aug. 23, 1993.

Franklin H. Levy, Boston, for defendant.

Teresa A. Martland, Boston, for plaintiff.

Before PERRETTA, GILLERMAN and GREENBERG, JJ.

GILLERMAN, Justice.

After the parties settled a lawsuit by entering into an agreement which called for the purchase by the defendant (Harvard) of all of the plaintiff's inventory of infusion pumps and related items at a price to be determined by a formula, disagreements about the performance of the agreement arose, and the plaintiff (Bard) demanded arbitration by the American Arbitration Association (AAA) in accordance with an arbitration clause in the settlement agreement. That clause provided that arbitration by the AAA should take place in Boston, thereby conferring jurisdiction upon the courts of this Commonwealth to enter judgment upon the award, with venue in Suffolk County. See G.L. c. 251, §§ 16, 17. See also Stancioff v. Hertz, 10 Mass.App.Ct. 843, 406 N.E.2d 1318 (1980). ²

The record appendix does not include Bard's entire submission to the AAA, but it does include an "Attachment to Demand for Arbitration." The attachment sets forth the principal issues to be arbitrated: the "nature of the dispute"--described as Harvard's refusal to purchase the inventory--and the "claim or relief sought," which includes the following: "Bard requests that Harvard be required to purchase Bard's inventory of Harvard line syringe infusion pumps at the cost of $266,310 plus interest thereon from September 18, 1989.... In addition, Bard requests that attorneys fees and costs be assessed against Harvard."

The arbitrators issued their award on October 22, 1990. Harvard was required to purchase Bard's entire inventory of infusion pumps for which it was to pay $83,864, plus interest at the rate of twelve percent per year from September 18, 1989 (the closing date for the sale under the settlement agreement). Bard was required to deliver to Harvard the inventory and all appropriate documentation necessary for the approval of the pumps by the Federal Food and Drug Administration. The arbitrators also ordered Bard to pay Harvard $10,000 for attorneys' fees because of overreaching by Bard in asserting its claim against Harvard. The exchange of money for goods and documents was to take place within thirty days.

On November 27, 1990, Bard filed a motion in the Superior Court to vacate that part of the award that allowed attorneys' fees and to confirm the balance of the award. See G.L. c. 251, § 15. Harvard answered, including a counterclaim alleging violations of G.L. c. 93A by reason of Bard's "entire course of conduct."

Meanwhile, the parties found fresh cause to dispute. Harvard construed the award to mean that it was entitled to receive all the documentation and obtain FDA approval of the documentation before it was obliged to pay the purchase price. Harvard also asserted that if the number of units delivered differed even slightly from the precise number stated in the arbitration award, it was under no obligation to purchase any units. Bard disputed this interpretation.

On December 20, 1990, almost sixty days after the delivery of the award of the arbitrators to the parties, and while the Superior Court proceedings were pending, Bard, in an apparent effort to resolve the continuing dispute, wrote the arbitrators seeking a clarification of their award. Harvard objected to any further proceedings by the arbitrators, but on January 11, 1991, the arbitrators issued a "clarification" which (i) established that the inventory "may have a 10% quantity tolerance so as to not make exact counts a reason for noncompliance ... [with] this judgment," and (ii) that the required documents were to be delivered concurrently with the inventory and without regard for the adequacy or completeness of the documentation. Harvard again protested, and the arbitrators, again without a hearing, reiterated their clarification on February 11, 1991.

The parties then continued their dispute in the Superior Court until a judgment was entered on April 25, 1991, and amended on October 23, 1991, vacating the award of counsel fees, confirming the balance of the award as clarified by the arbitrators on January 11, 1991 and February 11, 1991, denying Harvard's motion to amend its counterclaim and to dismiss the action, and allowing Bard's motion to dismiss Harvard's counterclaim. Harvard appealed.

1. The judgment was correct in confirming the arbitrators' award of interest on the payment due Bard at the rate of twelve percent per annum from the original closing date. Cf. G.L. c. 231, § 6C. The arbitration agreement is silent on the point, but the award was within the inherent power of the arbitrators. See Blue Hills Reg. Dist. Sch. Comm. v. Flight, 10 Mass.App.Ct. 459, 471-472, 409 N.E.2d 226 (1980) (affirming an award of preaward interest). "The right to interest involves questions of fact and law that are within the purview of the arbitrators." Id. at 472, 409 N.E.2d 226, quoting from Eager, The Arbitration Contract and Proceedings § 131 (1971). See also Sansone v. Metropolitan Property & Liab. Ins. Co., 30 Mass.App.Ct. 660, 661-663, 572 N.E.2d 588 (1991) (court has no power to add preaward interest to an arbitration award).

2. The dismissal of the counterclaim (as well as the denial of Harvard's motion to amend its counterclaim) was not error. General Laws c. 251, § 15, authorizes only the "making and hearing of motions" with respect to the arbitration proceedings; it does not authorize or contemplate that such proceedings may provide the occasion for the assertion of new claims not part of the arbitration proceedings sought to be enforced. Harvard cites no authority for its position, and we know of none.

3. The award of counsel fees by the arbitrators was error, whether one applies Massachusetts or, as Harvard argues, Federal law. See note 1 supra. In the absence of an agreement to award fees, the award of fees is prohibited by G.L. c. 251, § 10. ³ This avoids encumbering the "arbitration procedure by appending to it any of the incidents of litigation...." Floors, Inc. v. B.G. Danis of New England, Inc., 380 Mass. 91, 96, 401 N.E.2d 839 (1980). See also Raytheon Co. v. Computer Distributors, Inc., 632 F.Supp. 553, 560 (D.Mass.1986) (award excluding attorneys' fees is consistent with the policies promoted by the Federal Arbitration Act).

4. The judgment confirming the award of the arbitrators, as clarified on January 11, 1991, and February 11, 1991, was in error.

We start with the basic principles that "an arbitrator is without power to modify his final award except where the controlling statute or the parties authorize modification ...," Ciampa v. Chubb Group of Ins. Cos., 26 Mass.App.Ct. 941, 525 N.E.2d 1344 (1988), and that G.L. c. 251 was designed "to further the speedy, efficient, and uncomplicated resolution of business disputes with very limited judicial intervention or participation." Marino v. Tagaris, 395 Mass. 397, 400, 480 N.E.2d 286 (1985), quoting from Floors, Inc. v. B.G. Danis of New England, Inc., 380 Mass. 91, 96, 401 N.E.2d 839 (1980).

The scheme of c. 251 is consistent with these principles. The court can vacate or modify the award of an arbitrator only upon the narrow grounds described in §§ 12 and 13, and an arbitrator can modify, correct or clarify his award only within the limits and upon the conditions described in § 9.

If a party, acting under § 9, seeks to modify or correct an award, application to the arbitrator must be made within twenty days of the delivery of the award; but if proceedings to confirm, modify, or vacate an award are pending in the Superior Court, only the court may make the submission to the arbitrator, and it may do so without regard to the twenty-day limitation. See Ciampa v. Chubb Group of Ins. Cos., supra, 26 Mass.App.Ct. at 942, 525 N.E.2d 1344. Whether the submission is by the court or by a party, a modification or correction is permitted only (i) if there is an evident mistake or miscalculation, (ii) if the award was imperfect in a matter of form, not affecting the merits of the controversy, or (iii) for the purpose of clarifying the award. G.L. c. 251, §§ 9 & 13. See Trustees of Boston & Me. Corp. v. Massachusetts Bay Transp. Authy., 363 Mass. 386, 394, 294 N.E.2d 340 (1973).

Here Bard, purportedly seeking clarification of the award under the provisions of § 9, failed to comply with its express provisions by (i) applying directly to the arbitrators for a clarification of their award during the pendency in the Superior Court of...