Board of County Com'rs of Lawrence County, Ohio v. L. Robert Kimball and Associates

• Decision Date: 31 October 1989
• Docket Number: No. 87-3635,87-3635
• Citation: 860 F.2d 683
• Parties: BOARD OF COUNTY COMMISSIONERS OF LAWRENCE COUNTY, OHIO, Plaintiff-Appellee, v. L. ROBERT KIMBALL AND ASSOCIATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 683

860 F.2d 683

BOARD OF COUNTY COMMISSIONERS OF LAWRENCE COUNTY, OHIO, Plaintiff-Appellee, v. L. ROBERT KIMBALL AND ASSOCIATES, Defendant-Appellant.

No. 87-3635.

United States Court of Appeals, Sixth Circuit.

Argued March 29, 1988.

Decided Nov. 3, 1988.

Rehearing Denied Oct. 31, 1989.

John E. Jevicky, Dinsmore & Shohl, Cincinnati, Ohio, James P. Hollihan, argued, Manion, McDonough & Lucas, Pittsburgh, Pa., for defendant-appellant.

Robert J. Hollingsworth, argued, Stephen S. Holmes, Cors, Bassett, Kohlhepp, Hallora & Moran, Cincinnati, Ohio, Craig A. Allen, Ironton, Ohio, for plaintiff-appellee.

Before WELLFORD and NORRIS, Circuit Judges, and COOK, District Judge. ^*

ALAN E. NORRIS, Circuit Judge.

L. Robert Kimball and Associates ("Kimball") appeals the district court's having granted summary judgment to the Board of County Commissioners of Lawrence County, Ohio. The court reasoned that contracts relied upon by Kimball in its claim against the county are unenforceable as a matter of public policy.

During 1971, Kimball, an engineering firm, entered into two contracts with Lawrence County to provide it with preliminary engineering services for a proposed county-wide sewage treatment system and for improvements to an existing treatment plant. These preliminary services included Kimball's acting as the county's representative in the development phases of the project and producing a preliminary engineering report to be used in obtaining government funding. Under the contracts, if the project proceeded beyond the preliminary stage, the county was to compensate Kimball for the preliminary services and to hire the company to perform the subsequent engineering work. The contracts also provided for arbitration "of all questions in dispute under this Agreement ... in accordance with the rules of the American Arbitration Association."

From 1971 until 1973, Kimball acted as the county's representative in dealing with health and water authorities and pollution control agencies, and prepared preliminary reports on the proposed system and on improvements to the existing system. According to Kimball, the firm became less involved in the project in 1973 due to the increasing involvement of the Army Corps of Engineers, and the passage of amendments to the Federal Water Pollution Control Act. After 1973, and until 1984, there was no contact between the county and Kimball on the projects. However, during this period there were changes in federal laws concerning funding and plan requirements; the Corps of Engineers researched and completed a facilities plan which was accepted by the county; and in 1978, the county hired another engineering firm to do the engineering work as contemplated by the Corps plan. The plan was revised several times, both by the Corps and the new engineering firm. It received tentative approval by the Environmental Protection Agency in early February 1984.

In April 1984, when Kimball learned that the sewage project was being funded and was going forward with new project engineers, it demanded compensation for the work it completed in 1971 and 1972, and insisted that it be retained to perform final design work. When the county refused, Kimball demanded arbitration. Although an arbitration hearing was scheduled, the county filed a complaint in the state court of common pleas, asserting a state law claim for damages and seeking an injunction against the arbitration proceedings. On Kimball's motion, the state court proceedings were removed to district court, where Kimball filed a counterclaim requesting a stay of the proceedings pending arbitration under the provisions of the United States Arbitration Act.

In May 1985, the district court issued an order granting Kimball's motion for a preliminary injunction and requiring the county to arbitrate. Basing its decision on Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), the district court concluded that the county's claim that the contracts were ultra vires because they were for an indefinite term was a legal defense to the enforceability of the contract which properly should be referred to arbitration.

The claims were arbitrated before a three-member panel appointed under the rules of the American Arbitration Association, and the panel entered an award for Kimball.

The county then sought to vacate the arbitration award, and moved for summary judgment. Kimball counterclaimed seeking confirmation of the award, and also moved for summary judgment. The district court granted the county's motion for summary judgment and vacated the arbitration award, saying it had reevaluated its previous order to arbitrate and concluded that, under AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), it had the power to determine that the contract dispute was not subject to arbitration. The court then addressed the merits of the parties' claims and declared the contracts invalid as a matter of public policy, since they contained no definite term and could extend beyond the "life" of the board of county commissioners which agreed to the contract. The court also concluded that the contracts were contrary to public policy because they conflicted with federal law enacted after the contracts were entered into. The court did not address the county's state law claims. Its order was certified pursuant to Fed.R.Civ.P. 54(b), and this appeal followed.

We conclude that the district court's initial decision, that the contract dispute and the county's defense that the contract was ultra vires should be arbitrated, was correct, and that public policy does not require that the arbitration award be overturned.

In Prima Paint, the plaintiff's claim that the contract, which contained an agreement to arbitrate, was fraudulently induced was held to have been properly referred to arbitration for resolution. The Supreme Court determined that, under the provisions of the United States Arbitration Act, a federal court is to order arbitration if the making and performance of the agreement to arbitrate itself is not in dispute. 388 U.S. at 403-04, 87 S.Ct. at 1805-06. The plaintiff in Prima Paint did not claim that the agreement to arbitrate was fraudulently induced, and there was no indication that the broad language of the arbitration agreement was not intended to cover legal issues such as fraudulent inducement of a contract.

Similarly, the question before the district court was not whether the dispute was subject to arbitration. Instead, the question involved the validity of contracts which happened to include provisions for arbitration. Under Prima Paint, resolution of that question was for the arbitrators. The county's claim that the contracts were ultra vires is a legal defense to the enforceability of the contracts. Rather than contending that it had not agreed to the broad arbitration clause in the contracts, the county instead questioned the enforceability of the entire contract. Had it contended that its dispute with Kimball over reimbursement and hiring was not subject to arbitration, we would be faced with a different question, since "[i]t [is] for the court, not the arbitrator, to decide in the first instance whether the dispute [is] to be resolved through arbitration." AT & T Technologies, Inc., 475 U.S. at 651, 106 S.Ct. at 1420.

Once it is determined that a dispute should be referred to arbitration, questions of contract interpretation are within the province of the arbitrator. Courts play only a limited role in reviewing an arbitration decision. "The courts are not authorized to reconsider the merits of an award even though the parties may allege that the award rests on errors of fact or on misinterpretation of the contract." United Paperworkers Int'l Union v. Misco, --- U.S. ----, ----, 108 S.Ct. 364, 370, 98 L.Ed.2d 286 (1987).

The county's claims that the contracts were ultra vires and were inconsistent with federal statutes and regulations were presented and argued to the arbitrators. Although they issued no written opinion, one must of necessity assume that the arbitrators, in order to rule for Kimball, determined that the contracts were valid, enforceable contracts between the parties--that they were neither ultra vires nor inconsistent with federal statutes and regulations--and that Lawrence County had breached the contracts.

The district court also held that, because the contracts were for an indefinite term, they violated Ohio's public policy against such contracts, and that the contracts also violated public policy because they were inconsistent with subsequently enacted federal law and regulations.

Whether an arbitration award violates public policy is a question for the court. W.R. Grace & Co. v. Local Union 759, Int'l Union of United Rubber Workers, 461 U.S. 757, 766, 103 S.Ct. 2177, 2183, 76 L.Ed.2d 298 (1983). However, a court's refusal to enforce "an arbitrator's interpretation of such contracts is limited to situations where the contract as interpreted would violate 'some explicit public policy' that is 'well defined and dominant, and is...