Case Title: RP Industries, Inc. v. S & M EQUIP. CO.

Citation: 896 So. 2d 460

Docket Number: 1021727

State: alabama

Court: Alabama Supreme Court

Date: 2004-08-20T00:00:00Z

Document:
896 So. 2d 460 (2004)
R.P. INDUSTRIES, INC.
v.
S & M EQUIPMENT COMPANY, INC.
1021727.

Supreme Court of Alabama.
August 20, 2004.
*461 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:
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:
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:
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 *463 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:
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:
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.
*464 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):
See also our further exposition of the standard of review in Birmingham News Co. v. Horn [Ms. 1020552, June 11, 2004] ___ So.2d ___, ___ (Ala.2004), concerning not only the ground in 9 U.S.C. § 10(a)(4) of vacatur when the arbitrators have "exceeded their powers" but also the ground of "manifest disregard of the law," a ground not asserted in this appeal.
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:
Birmingham News, ___ So.2d at ___ (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):
(Citations omitted.)
See also Tuskaloosa Bridge Co. v. Jemison, 33 Ala. 476 (1859), Ehrman v. Stanfield, 80 Ala. 118 (1885), and Flack-Beane Lumber Co. v. Bass, 258 Ala. 225, 228, 62 So. 2d 235, 238 (1952).
In H.L. Fuller Construction Co. v. Industrial Development Board of the Town of Vincent, 590 So. 2d 218 (Ala.1991), this Court observed:
590 So. 2d  at 222-23.
Stephen L. Hayford, A New Paradigm for Commercial Arbitration: Rethinking the Relationship Between Reasoned Awards and the Judicial Standards for Vacatur, 66 Geo. Wash. L.Rev. 443, 455-56 (March 1998) (footnotes omitted).
Executone Info. Sys., Inc. v. Davis, 26 F.3d 1314, 1323-24 (5th Cir.1994).
Hoeft v. MVL Group, Inc. 343 F.3d 57, 71-72 (2d Cir.2003). See also Nationwide Mut. Ins. Co. v. Home Ins. Co., 330 F.3d 843, 846 (6th Cir.2003); Buzas Baseball, Inc. v. Salt Lake Trappers, Inc., 925 P.2d 941 (Utah 1996); and Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250 (7th Cir.1994).
As noted, the arbitration clause in the subcontract, drafted by RPI on its letterhead, broadly gave RPI the option to require arbitration of any "dispute [which might] arise between the parties." At the time relevant to this case, Section R-46 of the Rules provided, in pertinent part:
(Emphasis added.) (Section "R-52" referred to in R-46(c) appears in the record; sections "R-53" and "R-54," likewise referenced, do not.)
As a part of its Demand for Arbitration, S & M submitted its amended complaint, which contained an explicit claim for interest and attorney fees based on RPI's alleged violation of the Prompt Pay Act. S & M also explained separately in the Demand for Arbitration that the relief it sought included "Interest... and Attorneys Fees." Its combined summary-judgment motion and prehearing brief expressly reasserted its claim that it was entitled to interest and attorney fees under the two specifically cited sections of the Prompt Pay Act. The arbitrators conducted a four-day hearing on all of the "claims and counterclaims asserted ... by the parties," which, at least as far as the claims of S & M were concerned, were framed and defined by its amended complaint and its pre-hearing brief. According to S & M in its brief to this Court:
(Emphasis in original.)
(Emphasis in original.)
RPI acknowledges in its reply brief, however, that "there is no transcript of the arbitration proceedings," and we cannot locate in the record any copy of RPI's "Answering Statement and Counterclaim." Argument in a brief reciting matters not disclosed by the record cannot be considered on appeal, and the appellate record cannot be impeached by statements in a brief. Cooper v. Adams, 295 Ala. 58, 61, 322 So. 2d 706, 708 (Ala.1975).
In arguing to this Court that the panel exceeded its authority by awarding S & M interest and attorney fees based on § 8-29-3 and § 8-29-6 of the Prompt Pay Act, RPI contends that the panel was not empowered to make such an award because, it says, (1) the Prompt Pay Act does not apply to an action to enforce a mechanic's lien; (2) only a trial court has the authority to award interest and attorney fees under the Prompt Pay Act; (3) S & M did not "perform" in accordance with the contract, and § 8-29-2 of the Prompt Pay Act specifies that "[p]erformance by a ... subcontractor ... in accordance with the provisions of [its] contract entitles [it] to payment from the party with whom [it] contract[s]"; and (4) the panel could not rely on the Prompt Pay Act because it made no finding that RPI had failed to make timely payments.
In terms of the interest award made by the panel to S & M, § 8-29-3 of the Prompt Pay Act, cited to the panel by S & M, authorizes such an award, providing, in pertinent part:
Regarding attorney fees, § 8-29-6, also cited to the panel by S & M, provides, in pertinent part:
RPI contends that the above-quoted sections do not apply here. It notes that the *469 Prompt Pay Act also provides in § 8-29-8 that "[t]his chapter does not amend or modify existing laws relating to mechanics and materialmen liens and shall not be applicable in civil actions pursuant to Title 35, Chapter 11, Division 8." Thus, RPI argues that because S & M's complaint was a civil action filed in order to enforce its claimed mechanic's lien, the prohibition stated in § 8-29-8 rendered the interest and attorney fee provisions of the Prompt Pay Act inapplicable, and the panel therefore exceeded its authority in awarding those items.
At the time relevant to this case, Section R-40 of the Rules stated:
S & M asserts that RPI waived any challenge to the inclusion in the award of interest and attorney fees because RPI did not object to the submission of the entire dispute to arbitration and because RPI did not submit a prehearing brief or interpose any objection or argument apprising the panel that RPI was taking the position that the panel lacked the authority to award interest and attorney fees under the Prompt Pay Act. There is no indication that any of the arbitrators had any legal training; two of them were clearly nonlawyer business executives. S & M contends that RPI's failure to raise the issue that the panel supposedly did not have the authority to award interest or attorney fees under the Prompt Pay Act until after the panel had announced its decision, and even then not to the panel, makes its challenge in that regard untimely. S & M's position is strongly supported by caselaw. In All American Termite & Pest Control, Inc. v. Walker, 830 So. 2d 736, 740 (Ala.2002), this Court stated:
(Citations omitted.) See also Leon C. Baker, P.C. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 821 So. 2d 158, 166 (Ala.2001) ("`An objection to the arbitrability of a claim must be made on a timely basis, or it is waived,' "quoting ConnTech Dev. Co. v. University of Conn. Educ. Props., Inc., 102 F.3d 677, 685 (2d Cir.1996)), Roscoe v. Jones, 571 So. 2d 1043, 1045 (Ala.1990)("Because Roscoe availed himself of the arbitration provision by requesting arbitration, and did nothing to indicate an objection to the provision, he has effectively waived any right to dispute it's validity."), and McKee v. Hendrix, 816 So. 2d 30, 35 (Ala.Civ.App.2001)("Assuming that the arbitrator was precluded by the Warranty Agreement from awarding damages on the Hendrixes' claim for mental-anguish damages, we conclude that the defendants failed to timely and adequately apprise the arbitrator or the Hendrixes of their position on this issue.... We cannot say that the defendants properly or adequately apprised the arbitrator of their argument that he should not consider the claim for damages for mental anguish. Therefore, we affirm the trial court's refusal to vacate that portion of the arbitration award awarding damages for mental anguish.").
*470 The fact that Section R-46 of the Rules governing the panel's authority expressly authorized an award of interest and an award of attorney fees when both parties "requested such an award" further imposed on RPI an obligation to bring to the attention of the panel any objection to its awarding those items based on the implications of the "mechanic's lien" exception of § 8-29-8. The record simply does not indicate that RPI made any objections based upon § 8-29-8 before the panel reached its decision; rather, the first objection RPI raised in that regard appearing in the record is the one it included in its motion to the trial court to vacate the arbitration award.
S & M also argues that because RPI itself requested that the panel award attorney fees, Section R-46(d)(b) operated to authorize an award of attorney fees to either party.
Based on the record before us, we conclude that RPI waived any right to dispute, on the basis of § 8-29-8, the "power" of the panel to award, in response to the express claims submitted by S & M and under the express provisions of Section R-46 of the Rules, interest and attorney fees. RPI purposefully availed itself of the arbitration process and proceedings conducted under the Rules and is thereby bound by all the features of that process.
Similarly, we find that the panel was not put on notice of RPI's contention on appeal that only a court, as opposed to a panel of arbitrators, can award interest and attorney fees under the Prompt Pay Act. The reference in the award to the fact that RPI "disputed and denied S & M's claims, and asserted counterclaims ... which claims were disputed and denied by S & M" provides no support for the idea that the technical challenge now asserted was articulated to the panel. Unlike a court, a panel of lay arbitrators cannot be presumed to know and appreciate the full import of the law. Section R-46 expressly authorized the arbitrators to grant any relief they deemed just and equitable, including interest at such rate and from such date as they deemed appropriate and attorney fees where both parties had requested them or where such fees were authorized by law.
RPI's agreement based on the language of § 8-29-2 of the Prompt Pay Act, which entitles a subcontractor to payment upon "[p]erformance ... in accordance with the provisions of his or her contract," suffers the same fate. RPI argues that because the panel found that S & M's workmanship on portions of its work had been defective, the panel could not have found that S & M performed in accordance with the provisions of the subcontract. The panel expressly found, however, that RPI had breached the subcontract by wrongfully terminating it and by failing to pay S & M funds due under the subcontract. The panel had the authority to decide those issues, and its findings do not demonstrate that it exceeded its power, which included determining the sufficiency of S & M's performance under the subcontract. Lastly, RPI's claim that it in fact timely paid S & M in accordance with the subcontract, relying on various circumstances it says in its brief to this Court it proved at the arbitration hearing, simply relates to matters outside of the record and cannot serve to show that the panel exceeded its assigned powers.
Having found no instance in the record establishing that the arbitrators exceeded their powers, we affirm the award.
AFFIRMED.
NABERS, C.J., and SEE, BROWN, and STUART, JJ., concur.