Coastal Indus., LLC v. Arkel Constructors, LLC

• Decision Date: 01 September 2022
• Docket Number: 2021 CA 0906
• Parties: COASTAL INDUSTRIES, LLC v. ARKEL CONSTRUCTORS, LLC, Smith LaRock Architecture P.C. and The Leffler Group Consulting Structural Engineering, Inc.
• Court: Court of Appeal of Louisiana — District of US

350 So.3d 912

COASTAL INDUSTRIES, LLC
v.
ARKEL CONSTRUCTORS, LLC, Smith LaRock Architecture P.C. and The Leffler Group Consulting Structural Engineering, Inc.

2021 CA 0906

Court of Appeal of Louisiana, First Circuit.

Judgment Rendered: SEPTEMBER 1, 2022

Russel W. Wray, St. Francisville, Louisiana, Counsel for Plaintiff/Appellant, Coastal Industries, LLC

John C. Funderburk, Thomas D. Bourgeois, Jr., Baton Rouge, Louisiana, Counsel for Defendant/Appellee, Arkel Constructors, LLC

BEFORE: McCLENDON, WELCH, AND THERIOT, JJ.

McCLENDON, J.

In this construction contract case, the plaintiff appeals a district court's judgment that confirmed an arbitration award in favor of the defendant. For the reasons that follow, we reverse in part and affirm in part.

FACTS AND PROCEDURAL HISTORY

On June 13, 2016, the plaintiff, Coastal Industries, LLC (Coastal), filed a petition for damages against Arkel Constructors, LLC (Arkel), Smith LaRock Architecture P.C. (Smith LaRock), and The Leffler Group Consulting Structural Engineers, Inc., d/b/a The Leffler Group (Leffler). Coastal sought damages from the three defendants arising from the construction of a control building at the Marathon Petroleum

350 So.3d 915

Company LP (Marathon) plant in Garyville, Louisiana (the Project). Arkel, the general contractor, had subcontracted with Coastal to perform certain work on the Project (the Subcontract). In its petition, Coastal claimed that Arkel breached the Subcontract resulting in damages to Coastal in an amount no less than $700,000.00. Coastal also alleged that Smith LaRock, the architect, was engaged by Marathon to design the Project and that Smith LaRock contracted with Leffler to perform the structural engineering work. Coastal asserted that Smith LaRock and Leffler breached the standard of care owed to Coastal by providing untimely and incorrect plans, specifications, and modifications that interfered in Coastal's work causing damages.

On July 20, 2016, Arkel filed a dilatory exception of prematurity and alternative motion to stay and compel arbitration, alleging that Coastal's claims fell within the scope of an arbitration clause contained in the Subcontract. Thus, Arkel requested that Coastal's claims be dismissed.¹ Additionally, Leffler and Smith LaRock answered the petition and, thereafter, filed a joint memorandum in support of Arkel's exception of prematurity. Leffler and Smith LaRock requested that the district court sustain the dilatory exception and dismiss Coastal's claims against Arkel, but reject Arkel's alternative motion to stay, arguing that only Coastal's claims against Arkel were subject to arbitration. After a hearing held on May 9, 2017, the district court took the matter under advisement and, on May 16, 2017, issued its ruling, sustaining the exception of prematurity, ordering arbitration between Coastal and Arkel, and staying the proceedings as to all other parties. On June 13, 2017, the district court issued an order memorializing its oral ruling and ordering that the pending arbitration between Arkel and Coastal be administered by the American Arbitration Association (AAA).

On June 9, 2017, Coastal initiated arbitration proceedings with the AAA. In the demand for arbitration, Coastal attached a copy of its previously filed petition, and stated that "[t]he arbitrator will be called upon to hear claims for delay, disruption, extra work, payments due, and de facto termination-for-convenience damages, along with penalties, interest, and attorney fees in excess of one million dollars."

Arkel filed an answer and counterclaim to Coastal's arbitration demand, specifically asserting numerous delays and errors committed by Coastal, as well as abandonment of the project prior to completion. Arkel further alleged that, as a result, it terminated the Subcontract with Coastal for default and self-performed Coastal's remaining work under the Subcontract. Arkel requested the costs of completing Coastal's scope of work after termination and for payments it made on behalf of Coastal to Coastal's subcontractors or material suppliers that Coastal failed to pay, which resulted in deductive change orders. Arkel asserted that it terminated Coastal's Subcontract for cause under Section 22.4 of the Subcontract, which provided that upon termination, Coastal "shall be liable for all expenses of completing the Subcontract Work." Arkel also asserted a claim for interest and attorney fees under the Subcontract.

The AAA arbitration hearing was conducted for nine days in September 2018. Thereafter, both parties submitted post-hearing

350 So.3d 916

briefs, after which the hearing was deemed closed.² On December 11, 2018, the arbitrator issued an Interim Award, addressing the merits and ruling in favor of Arkel.³ The arbitrator made several findings, including that Coastal breached its Subcontract with Arkel and that, as a result, its Total Loss Claim was not reasonable. Accordingly, Coastal's claim of $972,278.72 for Termination Costs was denied. The arbitrator also found that Arkel had the contractual right to delay or withhold any payments to Coastal when there were questions or concerns as to compliance with the Subcontract; that Arkel was justified in delaying or withholding payments to Coastal; that Arkel's billing and payment methods to Coastal did not violate the Subcontract; and that Arkel did not breach its Subcontract with Coastal regarding its payments to Coastal. Thus, the arbitrator denied the claims made by Coastal for payment of penalties, interest, and attorney fees.

The arbitrator also determined that when Coastal demobilized from the jobsite, its "scope of work was 95% - 97% complete and invoiced for." As such, the arbitrator determined that Coastal "substantially performed" its subcontract work under the Subcontract with Arkel and did not default. The arbitrator found that although Coastal may have technically breached some provisions of the Subcontract with Arkel, "none of them, even all together," rose to the level of a "material breach" of the Subcontract. Accordingly, the arbitrator found no material breach of the Subcontract by either party. Further, the arbitrator determined that Arkel's termination of Coastal was a termination for "convenience," i.e ., a "no fault" termination pursuant to Section 22.5 of the Subcontract.⁴

350 So.3d 917

Pursuant to Section 22.5, the arbitrator determined that the Adjusted Subcontract amount was $1,765,468.00; that the amounts paid by Arkel on Coastal's behalf, including the performance of Coastal's remaining work (Arkel's counterclaim), amounted to $243,390.95; and that the total amount of backcharges was $129,218.92. Subtracting the $243,390.95 and $129,218.92 amounts, the arbitrator determined that the amount due Coastal under Section 22.5 was $1,392,858.13. The parties had stipulated that $1,437,614.11 was paid to Coastal. Accordingly, the arbitrator awarded Arkel $44,755.98, reflecting the overpayment, plus judicial interest from the date of termination, September 1, 2016. Further, the arbitrator found that Arkel was entitled to reasonable attorney fees and costs, including expert fees.⁵ The arbitrator requested that Arkel submit a spreadsheet setting forth the attorney fees and related expenses incurred as a result of the arbitration proceeding, along with sufficient backup information, to the AAA and to him, with a copy to Coastal.

Subsequently, Coastal sought to modify the Interim Award of the arbitrator, asserting "clerical, typographical, technical, and/or computational errors in the award," which was denied.⁶ Coastal also filed an objection to Arkel's submission of its attorney fees and costs. Coastal asserted that the redaction by Arkel of the attorney fees invoices sent to Coastal precluded any meaningful review of the invoices in determining the reasonableness of the fees.

On February 12, 2019, the arbitrator issued his Final Award, which incorporated the Interim Award, and awarded Arkel a total of $530,574.02. The total amounts awarded were as follows:

 Principal and Interest $ 50,037.08
                 Attorney Fees7 $ 408,772.46
                 Arbitrator's Compensation $ 30,471.26
                 Costs of Experts $ 25,069.13
                 Other Costs $ 16,224.09
                 ___________
                 Total Amount of Final Award $530,574.02
                

Editors Note: The preceding image contains the reference for footnote⁷ ].

[350 So.3d 918

On February 15, 2019, Arkel filed a motion to lift the stay and to confirm the arbitration award with the district court. The motion also included a request for additional attorney fees to confirm the arbitration award. On March 14, 2019, Coastal filed its own motion to vacate, correct, and/or modify the award of the arbitrator and ex parte motion to stay proceedings to enforce the award. The motions were opposed. The district court heard both motions on May 6, 2019, and on May 20, 2019, the district court ruled on the motions in open court, denying Coastal's motion to vacate and granting Arkel's motion to confirm. The district court also adopted Arkel's briefing as its reasons for judgment.⁸

On August 19, 2019, the district court signed a Partial Final Judgment that lifted the stay; denied Coastal's motion to vacate, correct, or modify the award of the arbitrator and ex parte motion to stay proceedings to enforce the award; and granted Arkel's motion to lift the stay and confirm the award. The judgment further awarded Arkel $530,574.02 against Coastal for the sum due in the award; $14,191.40 for additional attorney fees incurred by Arkel to confirm the arbitration award; $5,785.42 for interest on $525,292.92 (the total amount due in the award excluding interest therein) from March 16, 2019, through May 21, 2019; and judicial interest on $525,292.92 (the total amount due in the award excluding interest awarded therein) from May 22, 2019, until paid.

Coastal appealed. On September 21, 2020, another panel of this Court dismissed the appeal, finding that although the district court's judgment confirmed the final arbitration award of $530,574.02 to...