Title: Lackman v. Long & Foster Real Estate

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices 
 
FRANK X. LACKMAN, T/A  
FRANK X. LACKMAN, BROKER 
 
v.  Record No. 021985     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
June 6, 2003 
LONG & FOSTER REAL  
ESTATE, INC., ET AL. 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Arthur B. Vieregg, Jr., Judge 
 
 
In this appeal, Frank X. Lackman, t/a Frank X. Lackman, 
Broker, (Lackman) seeks reversal of a judgment confirming an 
arbitration award and granting a motion for attorneys' fees.  
Because none of the various grounds Lackman asserts in support 
of reversal is meritorious, we will affirm the judgment of the 
trial court. 
BACKGROUND 
 
Long & Foster Real Estate, Inc., Patricia Lawless, Reggie 
Copeland (collectively "Long & Foster"), and Lackman are real 
estate brokers and members of the Northern Virginia 
Association of Realtors, Inc. (the Association).  Members of 
that Association agree to submit disputes arising out of the 
real estate business to arbitration in accordance with the 
rules and regulations of the Association.  In January 2001, 
Long & Foster filed a Request and Agreement to Arbitrate with 
the Association claiming that they were entitled to a $19,500 
commission which Lackman received in connection with an 
earlier sale of property.  Lackman filed a Response and 
Agreement to Arbitrate, denying that Long & Foster was 
entitled to any commission.  The issue presented to the 
arbitration panel was whether Lackman was the procuring agent 
in the sale of the property which generated the contested 
commission.  Following an evidentiary hearing, the arbitration 
panel entered an AWARD OF ARBITRATORS, directing Lackman to 
pay Long & Foster the $19,500 commission. 
 
Lackman filed an amended bill of complaint against Long & 
Foster seeking vacation of the arbitration award.  In Counts I 
through V, Lackman asserted that the award should be vacated 
on four of the statutory grounds enumerated in Code § 8.01-
581.010.1  In Count VI, Lackman asserted that the trial court 
should use its equity powers to enjoin enforcement of the 
award because the arbitrators' actions prevented him from 
                     
1 Code § 8.01-581.010 provides in pertinent part: 
 
Upon application of a party, the court shall 
vacate an award where: 
 
1.  The award was procured by corruption, fraud or 
other undue means; 
2.  There was evident partiality by an arbitrator 
appointed as a neutral, corruption in any of the 
arbitrators, or misconduct prejudicing the rights 
of any party; 
3.  The arbitrators exceeded their powers; 
4.  The arbitrators refused to . . . hear evidence 
material to the controversy or otherwise so 
conducted the hearing . . . in such a way as to 
 
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relying on his theory that the defendants engaged in 
fraudulent conduct and from relying on principles of estoppel 
and unclean hands. 
 
Prior to trial, the trial court struck Count VI, holding 
that Code § 8.01-581.010 was the exclusive means for vacating 
an arbitration award.  Following an evidentiary hearing, the 
trial court found the evidence insufficient to support 
vacation of the arbitration award under any of the grounds 
identified in subsections (1) through (4) of Code § 8.01-
581.010, and entered an order confirming the award.  The trial 
court also awarded attorneys' fees to Long & Foster. 
In this appeal, in addition to the contentions raised in 
the trial court, Lackman challenges the constitutionality of 
Code § 8.01-581.010, as interpreted by the trial court, and 
asserts that the trial court erred in striking Count VI and in 
awarding attorneys' fees. 
DISCUSSION 
Code § 8.01-581.010 
 
Lackman first claims that Long & Foster engaged in 
fraudulent conduct in conjunction with the sale of the 
property and that such fraudulent conduct supports vacation of 
the award under subsection (1) of Code § 8.01-581.010.  That 
                                                                
substantially prejudice the rights of a party; 
. . . 
 
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provision, however, allows vacation of an award if the award 
was procured by fraud.  Lackman's allegation regarding 
fraudulent conduct in connection with the sale of the property 
does not address procurement of the arbitration award and, 
therefore, cannot form a basis for vacation of the award under 
subsection (1) of Code § 8.01-581.010. 
Lackman next argues that the arbitrators were not 
impartial, refused to hear material evidence, and refused to 
allow certain cross-examination.  This conduct, Lackman 
asserts, rises to the level of misconduct and supports 
vacation of the award under subsections (2) and (4) of Code 
§ 8.01-581.010, and violates Code § 8.01-581.04(2).2  The 
record of the arbitration hearing, however, precludes Lackman 
from prevailing on these claims. 
As noted by the trial court, at the close of the 
arbitration hearing the panel chairperson asked both parties 
whether the hearing had been conducted fairly.  Lackman 
responded affirmatively.  Similarly, Lackman raised no 
objection when the chairperson stated at the end of the 
proceeding that "the claimant and the respondent have 
                     
2 Code § 8.01-581.04 provides 
 
Unless otherwise provided by the agreement: 
 
 
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indicated that they have had an adequate opportunity to 
testify and present evidence and witnesses, and conduct cross 
examination."  Moreover, review of the colloquy involving the 
disputed cross-examination testimony shows that the 
arbitration panel thought that the disputed testimony 
implicated an ethics violation, a matter not relevant to the 
arbitration proceeding.  The record is devoid of any final 
ruling by the panel on that issue, any further questioning by 
Lackman following the colloquy, or any objection by Lackman to 
the panel's actions or failure to rule on the matter.  This 
record clearly supports the trial court's determination that 
Lackman did not carry his burden to demonstrate that the 
arbitrators showed evident partiality or that he was precluded 
from presenting material evidence or engaging in cross-
examination. 
Finally, Lackman asserts that in making the award, the 
arbitration panel disregarded provisions of the underlying 
contract between the parties.3  This failure, according to 
Lackman, was "tantamount to fraud," and exceeded the powers of 
the arbitration panel. 
                                                                
2.  The parties are entitled to be heard, to 
present evidence material to the controversy and to 
cross-examine witnesses appearing at the hearing. 
3 The "contract" on which Lackman relies includes the 
listing agreement for the property, a short listing agreement, 
 
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Lackman relies on a number of cases for the proposition 
that arbitrators exceed their powers, or engage in fraud or 
misconduct, if they fail to apply the terms of the underlying 
contract.  These cases are neither dispositive nor persuasive 
because they either were decided prior to the enactment of 
Code § 8.01-581.010 or involved questions not presented in 
this case.4
Included in Code § 8.01-581.010, adopted in 1986, is the 
statement that "[t]he fact that the relief was such that it 
could not or would not be granted by a court of law or equity 
is not grounds for vacating . . . the award."  Therefore, 
whether an arbitration panel applies the contract between the 
parties in a manner consistent with its terms is not a matter 
for consideration by the trial court or this Court when 
reviewing an arbitration award.  "A contrary conclusion would 
                                                                
a regional sales contract, and the settlement statement for 
the property. 
4 Vulcan Chem. Techs., Inc. v. Barker, 167 F.Supp.2d 867, 
871 (W.D. Va. 2001) (applying Federal Arbitration Act, 9 U.S.C 
§ 10, and federal law allowing vacation of arbitration award 
"if it shows manifest disregard of applicable law"), vacated 
and remanded sub nom. Vulcan Chem. Techs., Inc. v. Barker, 297 
F.3d 332 (4th Cir. 2002); Trustees of Asbury United Methodist 
Church v. Taylor & Parrish, Inc., 249 Va. 144, 153, 452 S.E.2d 
847, 852 (1995) (basing award on "quantum meruit," a basis not 
within the parties agreement); United Paperworkers Int'l Union 
v. Chase Bag Co., 222 Va. 324, 328, 281 S.E.2d 807, 810 (1981) 
(applying former Code § 8.01-580 which allowed vacation of 
award for "errors apparent on its face"); and Mills & Fairfax 
v. Norfolk & Western R.R. Co., 90 Va. 523, 531-32, 19 S.E. 
 
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permit a dissatisfied party, who by agreement voluntarily 
submitted to arbitration, to invoke the jurisdiction of a 
circuit court in an effort to relitigate the merits of the 
controversy already decided by the arbitrators."  Signal Corp. 
v. Keane Fed. Sys., Inc., 265 Va. 38, 45, 574 S.E.2d 253, 257 
(2003).  Correct application of the contract terms pertaining 
to that sale, while perhaps pertinent to the result reached by 
the arbitrators, is not pertinent to determining whether the 
arbitrators exceeded their powers under Code § 8.01-
581.010(3).  The relevant inquiry for that determination is 
whether the issues resolved were within the scope of authority 
granted the arbitrators in the agreement to arbitrate.  No 
such claim has been made in this case. 
Lackman also asserts that interpreting Code § 8.01-
581.010 to allow the arbitrators to "ignore the contract 
between the parties," renders the statute unconstitutional.  
This assertion again ignores the fact that the issue before 
the arbitration panel was whether Lackman was the procuring 
source for the sale of the property.  Moreover, when agreeing 
to submit a claim to arbitration, the parties also agree that 
the decision reached by the arbitrators will not be set aside 
by a court based on traditional legal principles but only on 
                                                                
171, 174 (1894) (applying instructions in contract for making 
arbitration decision). 
 
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those grounds set out in the statute.  A contractual agreement 
by the parties to abide by both the rules of arbitration and 
the arbitrators' decision does not render Code § 8.01-581.010 
unconstitutional. 
Accordingly, the trial court did not err in rejecting 
Lackman's contention that the award should be vacated because 
it was procured by fraud, because the arbitrators engaged in 
misconduct, or because the arbitrators exceeded their powers. 
Equity Power 
 
Lackman asserts that the procedure in Code § 8.01-581.010 
is not the exclusive method for vacating an arbitration award, 
and, therefore, the trial court erred in striking Count VI of 
his amended bill of complaint in which he invoked the trial 
court's equity powers to enjoin enforcement of the arbitration 
award based on his equitable defenses of fraud, estoppel, and 
unclean hands.  We disagree. 
The predecessor to the current statute, former Code 
§ 8.01-580, specifically stated that the section "shall not be 
construed to take away the power of courts of equity over 
awards."  This provision continued the traditional authority 
of equity courts to review arbitration awards based on a 
"submission in pais."  See e.g. Edge Hill Stock Farm, Inc. v. 
Morris, Gray & Hunter, 155 Va. 103, 108, 154 S.E. 473, 474 
(1930).  The General Assembly eliminated this provision when 
 
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it enacted Code § 8.01-581.010 in 1986.  Elimination of the 
provision terminated the ability of a court to invoke its 
equity powers when reviewing an arbitration award. 
Thus, Code § 8.01-581.010 provides the exclusive means 
for setting aside an arbitration award, and the trial court 
correctly struck Count VI of Lackman's amended bill of 
complaint.  See Signal Corp., 265 Va. at 45, 574 S.E.2d at 
257. 
Attorneys' Fees 
Lackman's last assignment of error challenges the award 
of attorneys' fees entered in favor of Long & Foster.  His 
objections relate to the trial court's refusal to admit 
certain documents regarding the Association's arbitration 
rules and its refusal to allow Lackman to produce an 
authenticating witness prior to entry of the order awarding 
attorneys' fees.  
The documents Lackman sought to admit apparently were in 
support of his assertion that he complied with the rules 
governing arbitration and, therefore, was not liable for 
attorneys' fees.  This argument however must be considered in 
light of the following provision contained in Lackman's 
Response and Agreement to Arbitrate: 
If I do not comply with the arbitration award and 
it is necessary for any party to this arbitration 
to obtain judicial confirmation and enforcement of 
 
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the arbitration award against me, I agree to pay 
the party obtaining such confirmation the costs 
and reasonable attorney's fees incurred in 
obtaining such confirmation and enforcement. 
 
The right to attorneys' fees and costs is invoked when there 
is non-compliance with the arbitration award.  Recovery of 
attorneys' fees under this provision is not dependant on 
compliance with the rules governing this arbitration.  
Therefore, evidence regarding such compliance is not relevant 
to an award of attorneys' fees under this paragraph. 
 
In this case, the arbitration award was not paid, Lackman 
instituted suit to vacate the award, and an order was entered 
confirming the arbitration award.  Long & Foster incurred 
attorneys' fees in obtaining an order confirming the award.  
Under these circumstances, we cannot say that the trial court 
abused its discretion in awarding attorneys' fees to Long & 
Foster. 
 
For the reasons stated above, we will affirm the order of 
the trial court. 
Affirmed. 
 
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