RP Industries, Inc. v. S & M EQUIP. CO.

• Decision Date: 20 August 2004
• Citation: 896 So.2d 460
• Parties: R.P. INDUSTRIES, INC. v. S & M EQUIPMENT COMPANY, INC.
• Court: Alabama Supreme Court

896 So.2d 460

R.P. INDUSTRIES, INC. v. S & M EQUIPMENT COMPANY, INC.

1021727.

Supreme Court of Alabama.

August 20, 2004.

Robert L. Gonce, Young, Norris & Collum-Butler, Florence, for appellant.

Jack G. Kowalski and L. Griffin Tyndall of Burr & Forman, LLP, Birmingham, for appellee.

HARWOOD, Justice.

R.P. Industries, Inc. ("RPI"), appeals from an order of the Lauderdale Circuit Court granting the motion of S & M Equipment Company, Inc. ("S & M"), seeking confirmation of an arbitration award; denying RPI's motion to vacate, modify, or correct the award; and entering a judgment in favor of S & M and against RPI for the "net" amount of the award. We affirm.

The arbitration proceeding arose out of RPI's termination on February 21, 2001, of a paving subcontract it had awarded S & M. On July 9, 2001, S & M sued RPI and several other defendants in the Lauderdale Circuit Court. S & M's complaint asserted claims of breach of contract, "account stated and/or open account," "work and labor done," enforcement of a mechanic's lien on the real estate improved, and a violation of Ala.Code 1975, § 8-29-1 et seq ("the Prompt Pay Act"). S & M expressly claimed interest and attorney fees as a part of its damages.

On February 28, 2002, RPI filed a motion asking the court "to compel the parties to arbitrate this dispute" and to stay all proceedings pending the arbitration "of the merits of the underlying disputes." It attached to its motion, among other things, a copy of the subcontract between RPI and S & M; that subcontract contained an arbitration provision. RPI predicated its right to enforce the arbitration agreement on the provisions of the Federal Arbitration Act, as codified at 9 U.S.C.A. § 1 et seq. ("the FAA").

On March 27, 2002, the trial court entered an order "transferring" the mechanic's lien to a bond that had been filed by RPI and its bond surety. On April 1, 2002, S & M amended its complaint to acknowledge the filing and implementation of the lien-transfer bond and to request that a judgment be rendered against RPI and its surety. In that amendment, S & M reasserted at length all of its prior claims, including the claim that RPI had violated the Prompt Pay Act.

The subcontract between RPI and S & M contained the following arbitration provision:

"Should a dispute arise between the parties, [RPI] shall reserve the option to require arbitration between the parties in accordance with the arbitration provisions of the specifications. If the specifications do not address arbitration provisions, then the Construction Industry Arbitration Rules of the American Arbitration Association will govern. Any required arbitration proceedings will be held in Nashville, Tennessee."

On April 5, 2002, S & M filed a "Consent to Arbitrate and Stay Litigation" and soon thereafter filed a "Demand for Arbitration" with the American Arbitration Association ("the AAA") under the AAA's Construction Industry Arbitration Rules ("the Rules"). (The parties agree that "the specifications do not address arbitration.") The Demand for Arbitration identified the nature of the dispute by referring to the attached amended complaint and stated the relief sought to be "in excess of $250,000," together with "interest, costs and attorney fees." A preliminary hearing was held at which the parties and representatives of the AAA were present, and on August 29 the AAA wrote the attorneys for S & M and RPI to confirm that the following, in pertinent part, were the terms the parties had agreed to at the hearing:

"The parties shall assert all claims on or before September 13, 2002.

"....

"On or before January 27, 2003, each party shall serve and file a pre-hearing brief on all significant disputed issues, setting forth briefly the party's position and the supporting arguments and authorities.

"All deadlines shown herein will be strictly enforced. After such deadline, the parties may not file such motions except with the permission of the arbitrators, good cause having been shown.

"....

"The hearing has been set for February 10-13, 2003 the enclosed Notice of Hearing [sic]."

On February 3, 2003, S & M served on RPI and the three arbitrators the parties had selected its "Motion for Summary Judgment/Arbitration Brief." In that submission, S & M alleged, among other things, that "RPI unjustifiably terminated S & M after substantial completion" and in a section captioned "Damages" included the following statements:

"Under Alabama Code [1975,] §§ 8-29-3 and 8-29-6, S & M is entitled to interest at 12% per annum and legal fees and costs arising out of RPI's failure to make payment. Interest from February 21, 2001, on the principal balance due totals $55,936.75 as of February 3, 2003.

"S & M will present evidence supporting the exact amount of legal costs incurred as a result of RPI's wrongful termination at the arbitration hearing. Such costs will include attorney fees, expert fees, legal fees and expenses, arbitration filing fees and arbitration expenses. S & M's legal costs through February 3, 2002 are estimated to be in excess of $95,000.00."

Attached as exhibits to S & M's submission were full reproductions of the cited sections of the Prompt Pay Act (§§ 8-29-3 and 8-29-6) and a voluminous collection of the billings to S & M by its attorneys. The record does not reflect if the summary-judgment-motion aspect of that submission was ever ruled on. For all that appears in the record, RPI filed no opposition to the motion and filed no prehearing brief of its own; it did, however, file a counterclaim, seeking, among other relief, attorney fees on its own behalf.

The three-member arbitration panel conducted an evidentiary hearing February 10 through 13, 2003. On March 12, 2003, a unanimous panel issued an award, stating that it had "heard the allegations and proof of the parties in support of and in response to the claims and counterclaims." It found that RPI had "breached the subcontract agreement by wrongfully terminating the subcontract agreement and failing to pay S & M funds due under the subcontract agreement." The panel also found that "S & M performed defective workmanship on portions of its work," entitling RPI to a partial recovery under its counterclaim. The panel awarded S & M $182,740.35, the net difference between the amount due S & M under the subcontract and the off-setting damages awarded to RPI. Additionally, and central to this appeal, the panel made the following additional awards:

"III. Interest

"[RPI] shall pay to S & M interest on the sum of $182,740.351 at the rate of 12 percent per annum from February 21, 2001, through the date of the close of the hearing of February 13, 2003 in the amount of $43,437.13, plus interest at the rate of $60.08 per day from February 14, 2003, until paid.2

"....

"IV. Attorneys' and Consultants' Fees

"[RPI] shall pay to S & M the sum of $108,067.00 in attorneys' fees pursuant to Ala.Code [1975,] § 8-29-6. S & M's claim for expert's fees is denied. [RPI]'s counterclaims for attorneys' and consultants' are denied.

"1 $229,521.35 less $46,781.00.

"2 Interest awarded and calculated on [the] unpaid subcontract balance pursuant to the Alabama Prompt Pay Statute, Ala.Code [1975,] § 8-29-3."

On March 25, 2003, S & M filed in the Lauderdale Circuit Court its motion to confirm the arbitration award, relying upon the FAA, 9 U.S.C. § 9, and asking the trial court to enter a judgment in the amount of the award, including the accrued interest.

On April 25, 2003, RPI filed its response to S & M's motion, which it styled, in the alternative, a motion to vacate, modify, or correct the award. RPI argued that the panel had "exceeded its authority" in awarding S & M interest and attorney fees in addition to the amount due under the subcontract. RPI cited the FAA, 9 U.S.C. §§ 9, 10, and 11, as authority for the relief it sought. FAA, 9 U.S.C. § 10(a)(4) permits the vacation of an arbitration award "[w]here the arbitrators exceeded their powers...." After conducting a hearing, the trial court confirmed the award on June 10, 2003, ordering the following, as pertinent to this appeal:

"1. Judgment is hereby entered against the Defendants, ... jointly and severally, in the amount of $155,709.83 in favor of [S & M] (see accounting below):

"Principal $182,740.35 "Interest from 2/21/2001 to 2/13/2003 [included in the award] 43,437.13 "Attorney fees [included in the award] 108,067.00 "Interest at $60.08 per day from 2/14/03 to 4/25/03 [provided for in the award] 4,205.60 "TOTAL $338,450.08 "4/25/03 partial payment by [RPI] ($182,740.35) __________ "NET JUDGMENT $155,709.73

"and;

"2. The judgment shall accrue interest at the statutory, post-judgment interest rate of twelve percent (12%) per annum, and all costs are taxed against Defendants ...; and

"3. The Defendant, [RPI]'s Response in Opposition to Plaintiff's Motion to Confirm Arbitration Award or, in the Alternative, Motion to Vacate, Modify, or Correct Said Award is denied...."

RPI appealed, reasserting all of the arguments it made in the trial court to the effect that the panel had exceeded its authority in awarding S & M interest and attorney fees under the authority of the Prompt Pay Act. The standard of review applicable to a ruling on a motion to confirm or vacate an arbitration award was discussed in Maxus, Inc. v. Sciacca, 598 So.2d 1376, 1380-81 (Ala.1992):

"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

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