Grp. III Mgmt., Inc. v. Suncrete of Carolina, Inc., Appellate Case No. 2015-002584

CourtCourt of Appeals of South Carolina
Writing for the CourtKONDUROS, J.
Citation425 S.C. 141,819 S.E.2d 781
Parties GROUP III MANAGEMENT, INC., Respondent, v. SUNCRETE OF CAROLINA, INC., d/b/a Crystal Pools, Appellant.
Decision Date19 September 2018
Docket NumberOpinion No. 5599,Appellate Case No. 2015-002584

425 S.C. 141
819 S.E.2d 781

GROUP III MANAGEMENT, INC., Respondent,
v.
SUNCRETE OF CAROLINA, INC., d/b/a Crystal Pools, Appellant.

Appellate Case No. 2015-002584
Opinion No. 5599

Court of Appeals of South Carolina.

Heard March 14, 2018
Filed September 19, 2018


Alan Ross Belcher, Jr. and Elizabeth Wieters, both of Hall Booth Smith, PC, of Mount Pleasant, for Appellant.

John C. Bruton, Jr., of Haynsworth Sinkler Boyd, PA, of Columbia, and Sarah Patrick Spruill, of Haynsworth Sinkler Boyd, PA, of Greenville, for Respondent.

KONDUROS, J.:

819 S.E.2d 784
425 S.C. 146

Suncrete of Carolina, Inc. appeals the circuit court's order altering the previous circuit court order, which had granted Suncrete's motion to modify the arbitration award on the basis that the arbitrator erroneously relied on South Carolina law

425 S.C. 147

instead of North Carolina law when determining attorney's fees. We affirm.

FACTS/PROCEDURAL HISTORY

In October of 2012, Group III Management, Inc. entered into a construction contract with the Army Corps of Engineers for repairs, renovations, and upgrades to the Legion Pool Complex at Fort Jackson. The contract included removal of an existing swimming pool, construction of a new pool and deck, and construction of a building and other improvements. In November of 2012, Group III entered into a contract (the Contract) with Suncrete, which was doing business as Crystal Pools, for Suncrete to build the new swimming pool and deck for $339,960. The Contract included an arbitration clause, which specified the Federal Arbitration Act (FAA) applied to the agreement to arbitrate. The Contract also stated it was governed by North Carolina law. It further provided:

Should either party employ an attorney to institute suit or demand arbitration to enforce any of the provision hereof, to protect its interest in any matter under this Agreement, to collect damages for the breach of the Agreement, or to recover on a surety bond given by a party under this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees, costs, charges, and expenses expended or incurred therein.

Problems arose during construction, and Group III terminated Suncrete in March of 2013. On September 19, 2013, Group III filed a demand for arbitration against Suncrete, seeking to recover damages in the amount of $252,313.71 plus any other amounts to which it may be entitled from Suncrete's failure to complete work required by the Contract. Suncrete filed a counterclaim, alleging Group III owed it a balance under the Contract. Arbitration hearings were held in July of 2014. The arbitrator determined Suncrete was entitled to additional costs for certain services totaling $15,324.74, which were not included in Suncrete's counterclaim. The arbitrator determined Suncrete owed Group III a net amount of $81,138.03 after deducting the amount Group III owed Suncrete. Following the final hearing, the parties submitted affidavits regarding attorney's fees. On August 18, 2014, the arbitrator issued its determination, finding in favor of Group

425 S.C. 148

III in the amount of $197,304.09, of which $116,165.86 was for attorney's fees.1 The arbitrator did not award Suncrete damages for its counterclaim.

On September 8, 2014, Suncrete filed a motion with the arbitrator to modify the award to reduce or eliminate the attorney's fees portion of the award because the arbitrator failed to apply North Carolina law. The arbitrator denied the motion, finding "[t]he parties submitted to the [a]rbitrator the issue of determining the ‘prevailing party’ and the amount of reasonable attorney's fees that should be awarded to that party. That decision was carefully considered and made as set forth in the Award."

Group III filed a motion to confirm the arbitration award, but Suncrete filed a motion to vacate or modify the award; both motions were filed in the circuit court. Judge J. Ernest Kinard, Jr. heard the motions on February 6, 2015, and requested proposed orders. Judge Kinard issued an order dated April 23, 2015, granting Suncrete's motion to

819 S.E.2d 785

vacate the attorney's fees because under North Carolina law Group III was not the prevailing party because it did not recover at least 50% of the amount of damages it sought. There was a delay in the filing of the order, and Judge Kinard passed away on May 19, 2015, the day after the order was filed.2

Group III filed a motion to alter or amend pursuant to Rule 59(e), SCRCP, and Judge Tanya A. Gee heard the motion as the successor judge. Judge Gee determined she did not need to reach Suncrete's argument about whether North Carolina law would bar the attorney's fees based on the standard of review provided by the FAA requiring manifest disregard by the arbitrator, which must be more than a showing the arbitrator misconstrued the law. Judge Gee granted the motion and amended Judge Kinard's order to deny Suncrete's motion to modify or vacate the arbitration award and confirmed the arbitration award in full. This appeal followed.

425 S.C. 149

LAW/ANALYSIS

I. Standard of Review of an Arbitration Award

"The [FAA] evidences the well-established federal policy favoring the arbitration of disputes." Trident Tech. Coll. v. Lucas & Stubbs, Ltd. , 286 S.C. 98, 103, 333 S.E.2d 781, 784 (1985) (citation omitted). "While this policy favoring the arbitration of disputes is also well established in South Carolina, both in its statutory and decisional law, this state law is supplanted by federal substantive law with respect to disputes to which the [FAA] is applicable." Id. at 103-04, 333 S.E.2d at 785 (footnote and citations omitted). The FAA "is intended to advance the ‘federal policy in favor of arbitration of disputes.’ " Id. at 104, 333 S.E.2d at 785 (quoting Bruno v. Pepperidge Farm, Inc. , 256 F.Supp. 865, 867 (E.D. Pa. 1966) ). "The fundamental premise upon which this policy is grounded is the laudable goal of providing ‘a relatively quick and inexpensive resolution of contractual disputes by avoiding the expense and delay of extended court proceedings.’ " Id. (quoting Diapulse Corp. of Am. v. Carba Ltd. , 626 F.2d 1108, 1110 (2d Cir. 1980) ). "The primary function of arbitration is to serve as a substitute for and not a prelude to litigation." Id. at 104-05, 333 S.E.2d at 785 (quoting Farris v. Alaska Airlines, Inc. , 113 F.Supp. 907, 908 (W.D. Wash. 1953) ).

"[T]he scope of judicial review for an arbitrator's decision ‘is among the narrowest known at law because to allow full scrutiny of such awards would frustrate the purpose of having arbitration at all ....’ " Three S Del., Inc. v. DataQuick Info. Sys., Inc. , 492 F.3d 520, 527 (4th Cir. 2007) (quoting Apex Plumbing Supply, Inc. v. U.S. Supply Co. , 142 F.3d 188, 193 (4th Cir. 1998) ). "The ‘widely recognized’ policy ‘to encourage the use of arbitration’ requires this limited scope of judicial review." UBS Fin. Servs., Inc. v. Padussis , 842 F.3d 336, 339 (4th Cir. 2016) (quoting Remmey v. PaineWebber, Inc. , 32 F.3d 143, 146 (4th Cir. 1994) ). "A policy favoring arbitration would mean little, of course, if arbitration were merely the prologue to prolonged litigation." Remmey , 32 F.3d at 146. "Indeed, ‘[b]road judicial review on the merits would render resort to arbitration wasteful and superfluous. ...’ " Trident Tech. Coll. , 286 S.C. at 105, 333 S.E.2d at 785 (alterations by court) (quoting Farris , 113 F.Supp. at 908 ).

425 S.C. 150

"Generally speaking, ‘[a]n award within the scope of submission is conclusive on fact issues and interpretation of law.’ " Id. at 111, 333 S.E.2d at 788 (alteration by court) (quoting Oinoussian Steamship Corp. v. Sabre Shipping Corp. , 224 F.Supp. 807, 809 (S.D.N.Y. 1963) ). "The award is presumptively correct, and ‘[i]t is the general rule that the courts will refuse to review the merits of an arbitration award.’ " Id. at 111, 333 S.E.2d at 788-89 (alteration by court) (quoting Newark Stereotypers' Union No. 18 v. Newark Morning Ledger Co. , 261 F.Supp. 832, 835 (D.N.J. 1966), aff'd , 397 F.2d 594 (3d Cir. 1968) ). "[C]ourts defer to the arbitral panel both on the merits of the final decision and on procedural questions that ‘grow out of the dispute,’ even where those questions ‘bear on its final disposition.’ " UBS Fin. Servs., Inc. , 842 F.3d at 339 (quoting

819 S.E.2d 786

Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ). "Otherwise, an arbitration award would signify ‘the commencement , not the end, of litigation.’ " Trident Tech. Coll. , 286 S.C. at 111, 333 S.E.2d at 789 (quoting Newark Stereotypers' Union No. 18 , 261 F.Supp. at 835 ). "Opening up arbitral awards to myriad legal challenges would eventually reduce arbitral proceedings to the status of preliminary hearings. Parties would cease to utilize a process that no longer had finality. To avoid this result,...

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1 practice notes
  • Waldo v. Cousins, 2021-UP-368
    • United States
    • Court of Appeals of South Carolina
    • October 27, 2021
    ...law "presupposes something beyond a mere error in construing or applying the law"); Grp. III Mgmt., Inc. v. Suncrete of Carolina, Inc., 425 S.C. 141, 153, 819 S.E.2d 781, 787 (Ct. App. 2018) ("Factual and legal errors by arbitrators do not constitute an abuse of powers, and a court is not r......
1 cases
  • Waldo v. Cousins, 2021-UP-368
    • United States
    • Court of Appeals of South Carolina
    • October 27, 2021
    ...law "presupposes something beyond a mere error in construing or applying the law"); Grp. III Mgmt., Inc. v. Suncrete of Carolina, Inc., 425 S.C. 141, 153, 819 S.E.2d 781, 787 (Ct. App. 2018) ("Factual and legal errors by arbitrators do not constitute an abuse of powers, and a court is not r......

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