M.K. Weeden Constr., Inc. v. Simbeck & Assocs., Inc.
| Decision Date | 26 July 2022 |
| Docket Number | DA 21-0604 |
| Parties | M.K. WEEDEN CONSTRUCTION, INC., Applicant and Appellee, v. SIMBECK AND ASSOCIATES, INC., Respondent and Appellant. |
| Court | Montana Supreme Court |
For Appellant: Matthew A. Haus, Tarlow Stonecipher Weamer & Kelly, PLLC, Bozeman, Montana
For Appellee: Fred Simpson, Jenks & Simpson, P.C., Missoula, Montana
¶1 Simbeck and Associates, Inc. (Simbeck) appeals from the Findings of Fact, Conclusions of Law, and Order (Order) entered by the Eighteenth Judicial District Court, vacating the Arbitrator's Interim Award and Final Award, and requiring the parties to resubmit their dispute to arbitration before a new arbitrator. The issues on appeal are:
We reverse the District Court's Order and remand for a determination of attorney fees incurred by Simbeck in defense of the arbitration award before the courts.
¶2 In April 2019, M. K. Weeden Construction, Inc. (Weeden), entered into a contract with Stillwater Mining Company to raise the embankments on a tailings storage facility at the East Boulder Mine near Nye, Montana. In October 2019, Weeden and Simbeck entered a contract (Subcontract) for Simbeck to install a geosynthetic lining system on the slopes of the new embankment. Despite the Subcontract being signed in October, it was originally contemplated that this work would occur in late summer and early fall; the Subcontract itself did not provide a timeframe or deadline by which Simbeck would complete the project. Delays on the project ensued to the extent that most of Simbeck's work was pushed into the winter months, and harsh weather conditions limited the work Simbeck could perform on the site. Weeden and the mine owner became concerned about Simbeck's pace on the project and, without informing Simbeck, Weeden contracted with H2J Installers (H2J) to perform the same lining work Simbeck had contracted to perform. When Simbeck learned that H2J had been hired to perform the same work, and believing Weeden intended to replace Simbeck with H2J, Simbeck removed its equipment and workers from the project. Simbeck conveyed to Weeden that it would return to the project upon certain conditions, but Weeden refused and terminated the Subcontract by invoking the Subcontract's default provision.
¶3 In January 2020, Simbeck filed a demand for arbitration, pursuant to the Subcontract, with the American Arbitration Association (AAA). Weeden filed a counterclaim, resulting in both parties claiming the other had breached the Subcontract and the covenant of good faith and fair dealing, among other claims. At a preliminary hearing with the Arbitrator, the parties agreed the Arbitrator would issue a "reasoned award"—a reference to the form of decision. This stipulation of the parties was reflected in the Arbitrator's scheduling order. After a proceeding on the merits, the Arbitrator issued an Interim Award, concluding that Weeden materially breached the contract when it hired H2J to perform the same work as Simbeck.1 The Interim Award awarded Simbeck $337,431.40 in damages. After consideration of attorney fees and costs, the Arbitrator issued a Final Award, which awarded Simbeck an additional $198,032 in attorney fees and $62,314.83 in various other costs, thus rendering a total award of $597,778.23.
¶4 Weeden filed a petition to vacate the arbitration award in the District Court, and Simbeck responded with a motion to confirm the award. After a hearing, the District Court vacated the award, concluding the Arbitrator exceeded his authority by issuing an Interim Award that did not satisfy the standards for a "reasoned opinion" because it did not contain "a shred of legal analysis or ‘discussion of the law as applied to the facts of the case,’ " did not specifically reference which part of the Subcontract Weeden had breached, and improperly relied on the parties’ subjective opinions regarding the Subcontract. The District Court vacated the Interim and Final Awards and ordered the parties to again submit the dispute to arbitration before a new arbitrator.
¶5 "Montana's Uniform Arbitration Act [(MUAA)] strictly limits a district court's review of an arbitration award." Sutey Oil Co. v. Monroe's High Country Travel Plaza, L.L.C. , 2022 MT 50, ¶ 8, 408 Mont. 69, 506 P.3d 310 (citing Tedesco v. Home Sav. Bancorp, Inc. , 2017 MT 304, ¶ 11, 389 Mont. 468, 407 P.3d 289 ). "We review district court decisions on arbitration awards like any other district court decision, accepting findings of fact that are not clearly erroneous but deciding questions of law de novo." Tedesco , ¶ 11 . "A finding is clearly erroneous if it is not supported by substantial evidence, the district court misapprehended the effect of the evidence, or our review of the evidence convinces us that the district court made a mistake." In re Marriage of Tummarello , 2012 MT 18, ¶ 21, 363 Mont. 387, 270 P.3d 28 (citation omitted). "We review for an abuse of discretion the court's ultimate decision to confirm an arbitration award." Sutey Oil , ¶ 8 (citing Tedesco , ¶ 11 ). "In reviewing whether the District Court abused its discretion in confirming the arbitration award, we apply the law that a court cannot review the merits of the controversy, but may only confirm, vacate, modify, or correct an arbitration award pursuant to §§ 27-5-311, -312, and -313, MCA." Tedesco , ¶ 12 (citing Roberts v. Lame Deer Pub. Sch. Dist. #6 , 2013 MT 358, ¶ 7, 373 Mont. 49, 314 P.3d 647 ).
¶6 1. Did the District Court err by vacating the Arbitrator's award and ordering a new arbitration?
¶7 Montana law grants to arbitrators broad authority to decide "all issues" of a submitted dispute. City of Livingston , ¶ 14 (citation omitted). A corollary is the settled rule that "a court's power to vacate an arbitration award must be extremely limited" because overly expansive review would "undermine the litigation efficiencies which arbitration seeks to achieve." Sutey Oil , ¶ 16 (quoting City of Livingston , ¶ 14 ). "As long as an arbitrator's factual determination and legal conclusions derive their essence from the [contract] itself and the award represents a plausible interpretation of the contract, judicial inquiry ceases and the award must be enforced." City of Livingston , ¶ 15 (citing Sheet Metal Workers Int'l Ass'n, Local No. 359 v. Arizona Mechanical & Stainless, Inc. , 863 F.2d 647, 653 (9th Cir. 1988) ).
¶8 The MUAA provides, in relevant part, that a district court shall vacate an award if: "(b) there was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party; [or] (c) the arbitrators exceeded their powers."
Section 27-5-312(1)(b), (c), MCA. We have held that "when an arbitrator is aware of a clearly governing principle of Montana law, and blatantly refuses to follow it," the § 27-5-312(1)(b), MCA, condition is satisfied. Terra W. Townhomes, L.L.C. v. Stu Henkel Realty , 2000 MT 43, ¶ 35, 298 Mont. 344, 996 P.2d 866 (quoting Geissler v. Sanem , 285 Mont. 411, 416, 949 P.2d 234, 237-38 (1997) ). Because an arbitrator's authority is "limited by the bounds of the [arbitration] agreement," arbitrators exceed their power under § 27-5-312(1)(c), MCA, when they issue an award "that extend[s] beyond the contractual scope of arbitration" by "decid[ing] matters which were not submitted to [them]." Nelson v. Livingston Rebuild Ctr., Inc. , 1999 MT 116, ¶¶ 14-15, 294 Mont. 408, 981 P.2d 1185 (citation omitted). On the other hand, " ‘if the remedy fashioned by the Arbitrator has been rationally derived from the [arbitration] agreement it will be upheld on review.’ " Terra W. Townhomes , ¶ 27 (quoting Nelson , ¶ 19 ).
¶9 Here, the District Court first noted that the briefing submitted during arbitration had made the Arbitrator "aware of the clearly governing principle of Montana law that the standard to apply to determine whether a party materially breached a contract is an objective rather than a subjective standard." See Davidson v. Barstad , 2019 MT 48, ¶ 23, 395 Mont. 1, 435 P.3d 640 (quoting 23 Richard A. Lord, Williston on Contracts § 63:3 (4th ed. 2018) ) ("Whether a breach is material or not is a matter of ‘objective reasonableness rather than’ the non-breaching party's ‘purely subjective belief.’ "). The District Court adopted Weeden's position that the Arbitrator wrongly applied a subjective standard in determining whether the breach was material, citing to several paragraphs in the Interim Award:
(Emphasis original.) Noting the references therein to "Simbeck's perspective," the District Court concluded that "[t]he...
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