Guardian Builders, LLC v. Uselton

• Decision Date: 11 April 2014
• Docket Number: 1121534.
• Parties: GUARDIAN BUILDERS, LLC, and E. Wayne Tackett v. Randy USELTON and Melissa Uselton.
• Court: Alabama Supreme Court

154 So.3d 964

GUARDIAN BUILDERS, LLC, and E. Wayne Tackett

v.Randy USELTON and Melissa Uselton.

1121534.

Supreme Court of Alabama.

April 11, 2014.

Gary K. Grace and Bree Taylor Wilbourn of Grace, Matthews & Debro, LLC, Huntsville, for appellants.

Melissa D. Endsley and Thomas S. McGrath of McGrath Law Firm, Huntsville, for appellees.

Opinion

STUART, Justice.

Guardian Builders, LLC, and E. Wayne Tackett (hereinafter referred to collectively as “Guardian”) appeal from an order of the Madison Circuit Court denying their motion to vacate or modify an arbitration award entered in favor of Randy Uselton and his wife Melissa Uselton. We reverse and remand.

I.

This Court previously dismissed a premature appeal filed by Guardian in this action. Guardian Builders, LLC v. Uselton, 130 So.3d 179 (Ala.2013). At that time, we summarized the history of the parties' dispute as follows:

“In April 2010, the Useltons sued Guardian in the Madison Circuit Court, alleging several claims arising from Guardian's construction of a house for the Useltons. Guardian subsequently filed a motion to compel arbitration, and the circuit court granted that motion in October 2010. On December 21, 2011, the arbitrator entered a final award in favor of the Useltons in the amount of $452,275.20. On January 11, 2012, Guardian filed with the circuit court a motion to vacate or modify the arbitration award, to which it attached a copy of the arbitration award. On May 15, 2012, the Useltons filed a ‘motion to confirm’ the arbitration award and a response to Guardian's motion to vacate or modify. On May 31, 2012, the circuit court entered an order purporting to deny Guardian's motion to vacate or modify the arbitration award, purporting to grant the Useltons' motion to confirm the arbitration award, and purporting to order Guardian to pay $1,421.75 in Better Business Bureau fees and facility costs related to the arbitration. Guardian appealed.”

130 So.3d at 180. However, before this Court considered the merits of Guardian's arguments in that appeal, we noted that the clerk of the Madison Circuit Court had never entered the arbitration award as the judgment of that court; therefore, the trial court's order purporting to deny Guardian's motion to vacate or modify the arbitration award—the order being appealed—was void. 130 So.3d at 184. See Rule 71B(f), Ala. R. Civ. P. (stating that, after an appeal of an arbitration award is initiated in the circuit court, “[t]he clerk of the circuit court promptly shall enter the award as the final judgment of the court”). Accordingly, we vacated the trial court's order and dismissed Guardian's appeal, noting that, “[e]ssentially, Guardian's appeal remains pending in the circuit court, awaiting further procedures under Rule 71B.” 130 So.3d at 184.

On September 30, 2013, following our decision in Guardian Builders, the circuit court clerk entered the arbitration award in favor of the Useltons as the final judgment of the court pursuant to Rule 71B(f) ; on that same date Guardian moved the trial court to vacate or modify the award. Also that same day, the trial court denied Guardian's motion and Guardian filed its notice of appeal to this Court.

II.

Guardian argues that the trial court erred by denying its motion to vacate or modify the arbitration award returned in favor of the Useltons and that, pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“the FAA”), the judgment adopting the arbitration award should be reversed.

“In R.P. Industries, Inc. v. S & M Equipment Co., 896 So.2d 460 (2004), this Court reviewed the trial court's order granting a motion to confirm an arbitration award and denying the opposing party's motion to vacate that award. We stated:

“ ‘ “Where parties, as in this case, have agreed that disputes should go to arbitration, the role of the courts in reviewing the arbitration award is limited. Transit Casualty Co. v. Trenwick Reinsurance Co., 659 F.Supp. 1346 (S.D.N.Y.1987), affirmed, 841 F.2d 1117 (2d Cir.1988) ; Saxis Steamship Co. v. Multifacs International Traders, Inc., 375 F.2d 577 (2d Cir.1967). On motions to confirm or to vacate an award, it is not the function of courts to agree or disagree with the reasoning of the arbitrators. Application of States Marine Corp. of Delaware, 127 F.Supp. 943 (S.D.N.Y.1954). Courts are only to ascertain whether there exists one of the specific grounds for vacation of an award. Saxis Steamship Co. A court cannot set aside the arbitration award just because it disagrees with it; a policy allowing it to do so would undermine the federal policy of encouraging the settlement of disputes by arbitration. United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960) ; Virgin Islands Nursing Association's Bargaining Unit v. Schneider, 668 F.2d 221 (3d Cir.1981). An award should be vacated only where the party attacking the award clearly establishes one of the grounds specified [in 9 U.S.C. § 10 ]. Catz American Co. v. Pearl Grange Fruit Exchange, Inc., 292 F.Supp. 549 (S.D.N.Y.1968).” ’

“896 So.2d at 464 (quoting Maxus, Inc. v. Sciacca, 598 So.2d 1376, 1380–81 (Ala.1992) ). The standard by which an appellate court reviews a trial court's order confirming an arbitration award under the Federal Arbitration Act is that questions of law are reviewed de novo and findings of fact are reviewed only for clear error. See Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1289 (11th Cir.2002).”

Hereford v. D.R. Horton, Inc., 13 So.3d 375, 378 (Ala.2009).

On appeal, Guardian does not take issue with the essence of the decision made by the arbitrator: That Guardian Builders negligently constructed and delivered to the Useltons a house containing substantial defects and deficiencies and, as a result, the Useltons were entitled to certain damages. Rather, Guardian objects only to a subset of the damages that were awarded the Useltons that were not directly related to the poorly constructed house, specifically, attorney fees and arbitration fees (including both the arbitrator fee and the forum fee charged by the Better Business Bureau of North Alabama (“the BBB”), which administered the arbitration).

When the arbitrator issued his interim decision on November 22, 2011, he awarded the Useltons $305,711.05 in damages, a sum that included a $10,311.05 arbitrator fee. The arbitrator further stated in that decision that Guardian would be liable for the Useltons' reasonable attorney fees and for the forum fee paid the BBB, and the arbitrator gave the Useltons 30 days to submit evidence of those costs. The Useltons' attorney subsequently submitted to the arbitrator an affidavit indicating that his contract with the Useltons entitled him to 45% of any amount recovered and the repayment of all expenses; accordingly, he requested an additional $137,569.97 for his contingency fee and $8,994.21 in litigation expenses, which included $1,121.50 for the forum fee paid to the BBB. On December 21, 2011, the arbitrator, over Guardian's objection that he lacked authority to award attorney and arbitration fees, issued his final decision awarding the Useltons a total of $452,275.20.¹

Guardian argues that the arbitration agreement entered into by it and the Useltons did not authorize the arbitrator to award attorney fees or arbitration fees and that the arbitrator accordingly exceeded his authority by awarding such fees. Thus, Guardian argues, the arbitration award should be vacated or modified pursuant to § 10(a)(4) of the FAA, which authorizes the vacatur of an arbitration award “where the arbitrators exceeded their powers.” This Court explained the analysis to which such a claim is subjected in R.P. Industries, Inc. v. S & M Equipment Co., 896 So.2d 460, 464–65 (2004) :

“In reviewing a challenge to an arbitration award on the basis that the arbitrators exceeded their powers, a circuit court, in the first instance, and this Court or the Court of Civil Appeals, at the appellate level, must bear in mind the narrow scope of that ground:

“ ‘ “We have consistently accorded the narrowest reading to section 10(d) [currently section 10(a)(4) ], especially when it has been invoked in the context of the arbitrators' alleged failure to correctly decide a question which all concede to have been properly submitted in the first instance. Our inquiry under § 10(a)(4) thus focuses on whether the arbitrators had the power, based on the parties' submissions or the arbitration agreement, to reach a certain issue, not whether the arbitrators correctly decided that issue.” ’

“Birmingham News [Co. v. Horn ], 901 So.2d [27,] 47 [ (Ala.2004) ] (quoting DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 824 (2d Cir.1997) ).

“Even before the enactment of the FAA, our caselaw had considered the general concept that an arbitration award must conform to the power and authority accorded the arbitrators by the arbitrating parties. The following analysis appears in Reynolds v. Reynolds, 15 Ala. 398, 403 (1849) :

“ ‘It is well settled, that an award must conform to the submission under which it is made. If, therefore, arbitrators transcend their authority, pro tanto their award will be void, and will stand good for the residue, unless that which is void, affects the merits of the submission, so that it cannot, without injustice, be separated from it; but if it forms the consideration for what the other party is required to do, the award will be void in toto.

“ ‘All reasonable presumptions shall be made in favor of awards; and if, by the application of this principle, an award can be brought within the submission, and is in other respects unexceptionable, it will be sustained.’

“(Citations omitted.)”

III.

Before we can determine whether the arbitrator exceeded his power in awarding the Useltons attorney fees, we must first determine what authority Guardian and the Useltons granted the arbitrator. The arbitration provision in the construction agreement executed by the parties provides, in whole:

“Any

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