Trident Technical College v. Lucas & Stubbs, Ltd., 22350

• Citation: 333 S.E.2d 781,286 S.C. 98
• Decision Date: 06 June 1985
• Docket Number: No. 22350,22350
• Court: United States State Supreme Court of South Carolina
• Parties: , 27 Ed. Law Rep. 385 TRIDENT TECHNICAL COLLEGE, Respondent, v. LUCAS & STUBBS, LTD. and George A. Creed & Son, Inc., Defendants, of whom Lucas & Stubbs, Ltd. is also a Respondent, and George A. Creed & Son, Inc., is Appellant. Appeal of GEORGE A. CREED & SON, INC. . Heard

Page 781

333 S.E.2d 781

286 S.C. 98, 27 Ed. Law Rep. 385

TRIDENT TECHNICAL COLLEGE, Respondent, v. LUCAS & STUBBS, LTD. and George A. Creed & Son, Inc., Defendants, of whom Lucas & Stubbs, Ltd. is also a Respondent, and George A. Creed & Son, Inc., is Appellant.

Appeal of GEORGE A. CREED & SON, INC.

No. 22350.

Supreme Court of South Carolina.

Heard June 6, 1985.

Decided July 8, 1985.

T. Alexander Beard, of Cooper, Bowen, Beard & Smoot, Camden, for appellant.

W.H. Bundy, Jr., of Howe & Bundy; and A. Arthur Rosenblum, Charleston; and Asst. Attys. Gen. Victor S. Evans, Judith Evans Finuf and Grady L. Patterson, III, Columbia, for respondent Trident Technical College.

Claron A. Robertson, III, of Buist, Moore, Smythe & McGee, Charleston, for respondent Lucas & Stubbs, Ltd.

PER CURIAM:

This is an appeal from an arbitration award. We affirm and adopt the trial court's Order, as amended.

I. INTRODUCTION

This matter is before the Court upon the motion of respondents Trident Technical College (TTC) and Lucas & Stubbs (L & S) to confirm an arbitration award. Appellant George A. Creed & Son, Inc. (Creed) has opposed the motions with a motion to vacate the arbitrator's award.

II. FINDINGS OF FACT

On August 31, 1977 TTC entered into a negotiated contract with L & S to design and supervise the construction of a new campus on the Ashley River in Charleston, South Carolina. On August 26, 1978, TTC entered into a standard form AIA contract with Creed to construct the campus pursuant to the plans and specifications of L & S for approximately $3,200,000.00. The contract called for substantial completion of the building to occur in early April 1980. Both of the contracts required all disputes to be resolved by arbitration, with such arbitration to be conducted by the American Arbitration Association. The project was plagued by numerous problems from its inception and, finally, in April of 1980, L & S certified to TTC that reasonable cause existed to terminate Creed's contract; this was done by the owner in a letter dated April 11, 1980.

On April 21, 1980 Creed demanded arbitration pursuant to the contract, claiming damages in an amount that was later set by Creed at $2,051,933.77. TTC refused to arbitrate and on April 30, 1980, Creed petitioned this Court to compel TTC to arbitrate under the Federal Arbitration Act, 9 U.S.C. §§ 1-14. On May 20, 1980 a hearing was held before the Honorable Walter J. Bristow, Jr., who issued an order finding that the federal act was applicable and requiring TTC to arbitrate. No appeal was perfected from that order.

On July 16, 1980 TTC filed a demand for arbitration with L & S and also filed a petition to consolidate the arbitration between Creed and TTC and between TTC and L & S into a single proceeding. On September 4, 1980, the Honorable Richard E. Fields issued an order requiring that the entire matter be consolidated as requested.

Thereafter, on December 11, 1980 a pretrial conference was held between the parties, in the presence of the arbitrators, at which time discovery procedures and other issues were discussed. Also during that pretrial conference, the parties were instructed by the arbitrators to submit detailed outlines of their claims against each other, so that the parties would be better informed concerning the issues to be arbitrated.

The arbitration hearings commenced on March 9, 1981 before three arbitrators selected by the American Arbitration Association; this panel consisted of a lawyer, a general contractor, and an architect, all residing in the State of North Carolina as requested by Creed. Over the course of the next eleven months, the arbitration eventually totalled forty-one separate days of proceedings, which were transcribed for the record along with the numerous exhibits introduced by the parties. The total expense to the parties for the arbitration process itself, including arbitration expenses, administration, and arbitrators' compensation, was $165,711.19. Of course, this figure does not include the substantial expenses borne by the parties for attorneys' fees, expert witness fees, and other costs. On April 19, 1980 the arbitrators rendered their award of $562,697.68 total damages to TTC, $434,837.88 from Creed and $127,859.80 from L & S. Immediately thereafter, L & S tendered its payment in full to TTC.

III. CONCLUSIONS OF LAW

A. Applicable Law

The Federal Arbitration Act, 9 U.S.C. §§ 1-14 evidences the well-established federal policy favoring the arbitration of disputes. See J.S. & H. Constr. Co. v. Richmond County Hosp. Auth., 473 F.2d 212 (5th Cir.1973); Corbin v. Washington Fire & Marine Ins. Co., 278 F.Supp. 393 (D.S.C.1968), aff'd 398 F.2d 543 (4th Cir.1968).

While this policy favoring the arbitration of disputes is also well established in South Carolina, both in its statutory, S.C.Code Ann. § 15-47-10 (1976), ¹ and decisional law, Harwell v. Home Mutual Fire Ins. Co., 228 S.C. 594, 91 S.E.2d 273 (1956); Bollmann v. Bollmann, 6 S.C. 29 (1874), this state law is supplanted by federal substantive law with respect to disputes to which the Federal Arbitration Act is applicable. ² See In re Mercury Constr. Corp. 656 F.2d 933 (4th Cir.1981); Episcopal Housing Corp. v. Federal Ins. Co., 269 S.C. 631, 239 S.E.2d 647 (1977).

[W]e are here dealing not with state-created rights, but with rights arising out of the exercise by the Congress of its constitutional power to regulate commerce and hence there is involved no difficult question of constitutional law under Erie Railroad Co. v. Tompkins, 304 U.S. 64 [58 S.Ct. 817, 82 L.Ed. 1188] (1938).

Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 404-405 (2d Cir.1959). Thus, the Federal Arbitration Act "is a declaration of national law equally applicable in state or federal court." Id. at 407.

B. Federal Arbitration Act

1. Generally

As previously indicated, the Federal Arbitration Act, 9 U.S.C. §§ 1-14, is intended to advance the "federal policy in favor of arbitration of disputes." Bruno v. Pepperidge Farm, Inc., 256 F.Supp. 865, 867 (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." Diapulse Corp. of America v. Carba Ltd., 626 F.2d 1108, 1110 (2d Cir.1980). Moreover, the Act also serves to "help ease congested court dockets." Tepper Realty Co. v. Mosaic Tile Co., 259 F.Supp. 688, 693 (D.N.Y.1966). As succinctly stated by the court in Farris v. Alaska Airlines, Inc., 113 F.Supp. 907, 908 (D.Wash.1953): "The primary function of arbitration is to serve as a substitute for and not a prelude to litigation."

In order to advance the underlying purposes of arbitration, the scope of judicial review is necessarily restricted. See 9 U.S.C. §§ 9-11. "[T]he court's function in confirming or vacating an arbitration award is severely limited. If it were otherwise, the ostensible purpose for resort to arbitration, i.e., avoidance of litigation, would be frustrated...." Amicizia Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 808 (2d Cir.1960), cert. denied, 363 U.S. 843, 80 S.Ct. 1612, 4 L.Ed.2d 1727 (1960). Indeed, "[b]road judicial review on the merits would render resort to arbitration wasteful and superfluous...." Farris v. Alaska Airlines, Inc., supra at 908. Consequently, a court "may vacate or modify an arbitration award only if one of the grounds specified in 9 U.S.C. §§ 10 and 11 is found to exist." Diapulse Corp. of America v. Carba, Ltd., supra at 1110.

2. Grounds for Vacating Award

Section 10 of the Federal Arbitration Act provides that an arbitration award may be vacated ³ on four grounds:

(a) Where the award was procured by corruption, fraud, or undue means.

(b) Where there was evident partiality or corruption in the arbitrators, or either of them.

(c) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

(d) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.

9 U.S.C. § 10(a)-(d). These grounds must be construed in light of the rule that the Court's function in vacating, or confirming, an arbitration award is severely limited. Newark Stereotypers' Union No. 18 v. Newark Morning Ledger Co., 261 F.Supp. 832 (D.N.J.1966), aff'd 397 F.2d 594 (3d Cir.1968), cert. denied, 393 U.S. 954, 89 S.Ct. 378, 21 L.Ed.2d 365 (1968).

In its motion, Creed asserts that the arbitration award here should

be vacated on the grounds that (i) the arbitrators exceeded their powers; (ii) the award was procured by undue means by virtue of the manifest disregard of the law and facts; (iii) the arbiters refused to hear evidence/law material to the controversy; and (iv) the arbiters otherwise so conducted the hearings as to prejudice substantially the rights of George A. Creed & Son, Inc.

(a) Scope of arbiters' authority

Appellant's first ground tracks the language of 9 U.S.C. § 10(d), but reliance on that subsection is misplaced. The question of whether the arbitrators exceeded their power relates to the arbitrability of the underlying dispute. See, e.g., United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). An arbitrator exceeds his powers and authority when he attempts to resolve an issue that is not arbitrable because it is outside the scope of the arbitration agreement. Id. Conversely, if the issues presented to the arbitrators are within the scope of the arbitration agreement, subsection (d) does not require the court to "review the merits of every construction of the contract." Id. at 598-99, 80 S.Ct....