Sooner Builders v. Nolan Hatcher Const.

• Decision Date: 19 June 2007
• Docket Number: No. 103,167.,103,167.
• Parties: SOONER BUILDERS & INVESTMENTS, INC., an Oklahoma corporation, Appellee, v. NOLAN HATCHER CONSTRUCTION SERVICES, L.L.C., an Oklahoma limited liability company, Appellant.
• Court: Oklahoma Supreme Court

164 P.3d 1063

2007 OK 50

SOONER BUILDERS & INVESTMENTS, INC., an Oklahoma corporation, Appellee, v. NOLAN HATCHER CONSTRUCTION SERVICES, L.L.C., an Oklahoma limited liability company, Appellant.

No. 103,167.

Supreme Court of Oklahoma.

June 19, 2007.

Appeal from the District Court of Tulsa County; The Honorable Jefferson D. Sellers, Presiding.

¶ 0 Sooner Builder and Investments, Inc., filed this contract action against defendant, Nolan Hatcher Construction Services, L.L.C., in the district court in Tulsa County, Oklahoma, alleging Hatcher failed to pay for construction work performed under six construction contracts. Hatcher appeared specially and filed a motion to refer the claims to arbitration. The district court referred Sooner's claims against Hatcher to arbitration and stayed the remainder of the case pending arbitration. The arbitrator entered an award of $71,304.87 in favor of Sooner and against Hatcher. The arbitrator denied Sooner's request for attorney fees and directed each party to pay one-half of the arbitration fees and expenses. Sooner filed a motion to modify and award prevailing party attorney fees. The arbitrator denied the motion. Sooner filed in the district court a motion to modify the arbitrator's award and to award prevailing party attorney fees and expenses in accordance with the contracts and Oklahoma law. The district court found the arbitrator manifestly disregarded the law by ignoring the parties' contract and granted Sooner's motion to modify. By separate order, the district court ordered Hatcher to pay Sooner $30,633.25 for attorney fees and $13,353.23 for expenses. Hatcher timely filed a petition in error and a motion to retain in this Court. We retained the appeal.

DISTRICT COURT AFFIRMED.

John B. Hayes, Hayes, Margrini & Gatewood, Oklahoma City, OK, for appellant.

John M. Hickey and Joe M. Fears, Barber & Bartz, Tulsa, OK, for appellee.

TAYLOR, J.

¶ 1 The question presented in this appeal is whether the district court erred when it ordered Nolan Hatcher Construction Services, L.L.C., defendant/appellant (Hatcher), to pay prevailing party attorney fees and expenses to Sooner Builders & Investments, Inc., plaintiff/appellee (Sooner), after the arbitrator denied all requests for attorney fees and directed each party to pay one-half of the arbitration expenses. We answer in the negative. We affirm the district court.

I. The Proceedings Below

¶ 2 In March of 2004, Sooner filed this contract action against Hatcher in the district court in Tulsa County, Oklahoma. The petition alleged that in March of 2003, Sooner, a subcontractor, entered into six separate contracts (subcontracts) with Hatcher, a prime contractor, to perform construction work at the sites of three Walgreen's Drug Stores in Ponca City, Broken Arrow, and Claremore, Oklahoma; that Sooner performed the construction work for Hatcher; that Hatcher did not fully pay Sooner for the work performed; and that Hatcher owed Sooner more than One Hundred Thousand Dollars for the construction work related to the six subcontracts. The petition also alleged a dispute between Sooner and one of Sooner's subcontractors arising out of Hatcher's failure to timely pay for the work at the Ponca City site. Hatcher appeared specially and moved the district court to refer Sooner's subcontract claims to arbitration. On May 24, 2004, the district court referred Sooner's claims against Hatcher to arbitration and stayed the remainder of the case pending arbitration.

¶ 3 Sooner initiated arbitration proceedings with the Construction Industry Arbitration Tribunal of the American Arbitration Association (AAA). The parties agreed to the appointment of an arbitrator. On August 18, 2004, the arbitrator scheduled the arbitration hearing to commence January 18, 2005. The arbitrator entered an award in favor of Sooner on August 4, 2005.

¶ 4 The arbitrator's award contained findings in the form of a detailed accounting of the outstanding balance due Sooner for work performed under each subcontract, the amount due Sooner for other work related to each subcontract, and the amount Hatcher paid to others for material or work related to each subcontract. The arbitrator's award summarized the accounting, showing $92,876.96 due Sooner and $25,438.11 paid by Hatcher to others, which resulted in a net amount of $67,438.85 due Sooner. It also awarded Sooner $3,866.02 for pre-judgment interest due on a $46,570.85 excessive offset withheld by Hatcher from January 17, 2004 through June 5, 2005. The arbitrator's award directed Hatcher to pay Sooner a total of $71,304.87. The arbitrator denied all requests for attorney fees and expenses incurred in the course of the arbitration and directed each party to pay one-half of the $2,250.00 fees Sooner paid to the AAA and the $12,157.20 compensation for the arbitrator.

¶ 5 On August 9, 2005, Sooner filed a motion to modify the award, requesting the arbitrator to award prevailing party attorney fees. Sooner argued it is entitled to prevailing party attorney fees under section 14.4 of the subcontracts and under Oklahoma law, citing 12 O.S.Supp.2002, § 936. Hatcher, in response, argued that the arbitrator may not, under the AAA arbitration rules, modify the award except to correct clerical, typographical, technical, or computational error or change the ruling on the merits or the results of the award. On September 15, 2005, the arbitrator denied Sooner's motion to modify.¹

¶ 6 While the motion to modify was pending before the arbitrator, on August 29, 2005, Sooner filed in the district court a motion to modify the arbitrator's award and to confirm the award as modified. Sooner contended that the arbitrator manifestly disregarded the clear mandate in the subcontract and in Oklahoma law requiring prevailing party attorney fees. Hatcher responded that the district court has no authority to modify an arbitration award to allow prevailing party attorney fees under federal or state arbitration law. The district court entered two separate orders. One order deals with the legal basis for the district court to modify the arbitrator's award. It found "that the arbitrator manifestly disregarded the law" and granted Sooner's motion for "[a]ttorney fees, costs, charges, expenses and expenditures incurred by plaintiff." At the conclusion of the December 21, 2005 evidentiary hearing, the judge explained his finding that the arbitrator "had manifestly disregarded the law with respect to — to ignoring the contract provisions concerning attorney's fees, costs, charges, expenses, and so forth." The other order deals with the amount of Sooner's attorney fees and expenses to be paid or reimbursed by Hatcher. It awarded Sooner $30,633.25 for attorney fees and $13,353.23 for expenses. Both orders were filed on February 28, 2005.

¶ 7 Hatcher timely commenced this appeal from the two orders. The petition specified numerous issues to be raised on appeal, including: 1) whether prevailing party attorney fees are governed by the subcontracts or the applicable statute; 2) whether the arbitrator manifestly disregarded the governing contractual and statutory provisions; 3) whether there is any statutory grounds to partially vacate and modify the arbitrator's award in this case; and 4) whether the evidence in this case supports the amount of attorney fees and expenses ordered by the district court. Hatcher asked this Court to retain the appeal, urging that parties to arbitration agreements, their attorneys and the trial courts need guidance as to the grounds established by statute and decisional law upon which the district court may modify the attorney fee ruling in an arbitration award. We retained the appeal.

II. Standard of Review

¶ 8 The primary issues in this appeal concern the legal underpinnings of the district court orders which effectively vacated the arbitrator's denial of Sooner's post-award motion to modify and modified the arbitrator's award on prevailing party attorney fees and expenses. Whether the district court had authority to vacate the rulings on attorney fees and expenses in the arbitrator's award and modify the award to grant prevailing party attorney fees and expenses is a question of law. A question of law is reviewed de novo. Gladstone v. Bartlesville Indep. Sch. Dist. No. 30, 2003 OK 30, ¶ 5, 66 P.3d 442, 445. Our de novo review is plenary, independent and non-deferential. Id. The amount of attorney fees and expenses to be allowed is ordinarily left to the sound discretion of the trial court, and whether the evidence supports the amounts set by the trial court is reviewed for abuse of discretion. Hamilton v. Telex Corp., 1981 OK 22, ¶ 27, 625 P.2d 106, 110.

III. Arguments of the Parties

¶ 9 Hatcher contends the district court had no statutory authority to partially vacate or modify the arbitration award. Hatcher asserts that the district court erred when it failed to recognize its very narrow role in reviewing an arbitration award and when it proceeded to correct a mere legal error by the arbitrator. Hatcher argues that the federal doctrine of "manifest disregard of the law" for vacating an arbitration award is not available in this case because Sooner failed to demonstrate that the "arbitrator accurately recited the law, acknowledged that a decision contrary to the law was being rendered, and said that the law was not being followed." Hatcher also argues that to satisfy the judicially-crafted two-prong test for "manifest disregard of the law" there must be a showing that: 1) the disregarded law is well-defined, explicit and clear, and 2) the arbitrator was aware of the law and decided to disregard the law. Recognizing that Sooner relied on both the attorney fee provision in the subcontracts and on the prevailing party attorney fee statute, Hatcher asserts that the arbitrator did not rely on the statute but interpreted the contract provision and that the arbitrator's interpretation of the contract is not subject to...