Title: SIGNAL Corp. v. Keane Federal Systems Inc.
Citation: N/A
Docket Number: 020339
State: Virginia
Issuer: Virginia Supreme Court
Date: January 10, 2003

Present:  All the Justices 
 
SIGNAL CORPORATION 
 
 
            OPINION BY JUSTICE LEROY R. HASSELL, SR. 
v.  Record No. 020339 
January 10, 2003 
 
KEANE FEDERAL SYSTEMS, INC. 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Kathleen H. MacKay, Judge 
 
I. 
 
In this appeal of a judgment confirming an arbitration 
award, the primary issue that we consider is whether the 
arbitrators exceeded their powers within the intendment of 
Code § 8.01-581.010(3). 
II. 
 
Keane Federal Systems, Inc., initiated an arbitration 
proceeding against SIGNAL Corporation (SIGNAL).  Keane Federal 
Systems alleged that SIGNAL wrongfully terminated its 
subcontract and sought damages for breach of contract.  Keane 
Federal Systems also alleged in the arbitration proceeding 
that SIGNAL conspired with Keane Federal Systems' former 
employees in violation of Code §§ 18.2-499 through -501, 
Virginia's civil conspiracy statutes, and sought treble 
damages and attorney's fees as permitted by those statutes. 
 
As required by a subcontract executed by the litigants, 
their dispute was submitted to "binding arbitration" before a 
panel of three arbitrators, who conducted a lengthy hearing 
and unanimously concluded that SIGNAL breached its subcontract 
with Keane Federal Systems.  A majority of the panel concluded 
that SIGNAL violated the civil conspiracy statutes.  One 
arbitrator dissented from that portion of the panel's 
"memorandum opinion, order and award."  The panel awarded 
Keane Federal Systems treble damages in the amount of 
$6,883,029 and attorney's fees. 
 
As permitted by Code § 8.01-581.010, SIGNAL filed an 
application in the circuit court to vacate, or in the 
alternative, modify or correct the arbitration award.  SIGNAL 
asserted in a memorandum in support of its application that 
the arbitration panel ignored the plain language of a 
termination clause contained in the subcontract, that the 
arbitration panel disregarded the requirements of Virginia's 
civil conspiracy statutes, and that the arbitration panel's 
"damages award is arbitrary and irrational."  Keane Federal 
Systems also filed a memorandum and requested that the circuit 
court confirm the arbitrators' award.  The circuit court 
considered the memoranda submitted by counsel, the decision of 
the panel, and oral argument of counsel.  The court denied 
SIGNAL's motion to vacate and entered an order that confirmed 
the arbitrators' award.  SIGNAL appeals. 
III. 
 
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Even though the arbitration panel conducted a hearing 
over the course of five days, considered 139 exhibits, and 
issued a very lengthy opinion, only a brief recitation of the 
facts is necessary for our resolution of this appeal.  In 
September 1996, the Federal Highway Administration awarded a 
contract to SIGNAL.  Pursuant to the terms of that contract, 
SIGNAL agreed to provide certain information technology 
services to the Federal Highway Administration.  The prime 
contract contained a paragraph entitled "key personnel," which 
required SIGNAL to identify certain persons who served in "key 
positions," the replacement of whom was subject to the prior 
written approval of the Federal Highway Administration. 
 
SIGNAL and ANSTEC, Inc., signed a subcontract and 
pursuant to its terms, ANSTEC agreed to provide certain 
information technology services to SIGNAL.  ANSTEC was 
subsequently acquired by Keane Federal Systems and, therefore, 
will be referred to as Keane Federal Systems for the remainder 
of this opinion.  The subcontract contained the following 
termination provision: 
 
"In the event of a breach of a material term or 
condition of the subcontract, the Buyer [SIGNAL] may 
terminate this Subcontract in whole or in part for 
default.  If Seller [Keane Federal Systems] fails to 
cure the default within 10 days after receiving a 
notice specifying the default, such termination may 
require the Buyer to reprocure the goods and 
services and Subcontractor will be liable for 
 
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Buyer's costs for such reprocurement, to the extent 
not reimbursed by the Government." 
 
 
Even though Keane Federal Systems was required to submit 
its invoices to SIGNAL on the 11th day of each month, Keane 
Federal Systems failed to do so on numerous occasions.  SIGNAL 
issued a notice to cure defects to Keane Federal Systems on 
May 18, 2000, and Keane Federal Systems responded the next day 
with a "cure plan."  However, Keane Federal Systems continued 
to submit untimely invoices after that date.  On September 15, 
2000, SIGNAL informed the Federal Highway Administration that 
SIGNAL's subcontract with Keane Federal Systems would be 
terminated "for default effective the close of business on 
September 30, 2000.  This termination is a result of [Keane 
Federal Systems'] failure to comply with material subcontract 
requirements.  This failure has negatively affected SIGNAL's 
ability to comply with prime contract requirements and to 
serve [the Federal Highway Administration] to our standards."  
SIGNAL also informed Keane Federal Systems on September 15, 
2000 that SIGNAL intended to terminate the subcontract. 
 
The subcontract contained the following "no-hire 
provision" which stated: 
 
"During the period of performance of this 
subcontract, and for a period of one (1) year 
thereafter, neither party shall solicit or engage 
the services of any employee of the other party 
engaged in performance of work related to this 
 
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subcontract, without expressed written notification 
to and acceptance by the other party." 
 
 
Keane Federal Systems' employees provided computer 
services to SIGNAL pursuant to the terms of the subcontract.  
These services were described as "scarce and unusual" due to 
the obsolescence of the Federal Highway Administration's 
equipment and software.  In an effort to acquire personnel who 
could provide these services to SIGNAL after it had terminated 
the subcontract with Keane Federal Systems, SIGNAL posted the 
job descriptions of Keane Federal Systems employees on the 
SIGNAL website as "job vacancies," and placed job vacancy 
notices outside SIGNAL's project manager's office at the 
Federal Highway Administration's work area. 
 
Arthur Hazel III, Keane Federal Systems' project manager 
for the subcontract, had extensive interaction with Nelson 
Ebersole, SIGNAL's project manager on the prime contract.  
Hazel purportedly had a secret meeting with certain Keane 
Federal Systems employees, and "it became 'common knowledge' 
through Hazel that SIGNAL would give [Keane Federal Systems] 
employees who resigned from [Keane Federal Systems] prior to 
September 30, 2000, their present job assignments, a signing 
bonus of $1,500, negotiated raises, reimbursements of 
educational expenses owed to [Keane Federal Systems], and 
other benefits.  Hazel relayed these offers through the team 
 
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leaders, carried draft resignation letters for each [Keane 
Federal Systems] employee to the various team locations and 
repeatedly followed up on each [Keane Federal Systems] 
employee who had not given him a signed resignation letter.  
During this period, Hazel told [Keane Federal Systems] 
management that he would not support [Keane Federal Systems] 
in discussions with [the Federal Highway Administration] 
because he 'did not want to rock the boat.'  Meanwhile, Hazel 
negotiated details of SIGNAL offers to individual [Keane 
Federal Systems] employees." 
 
The arbitrators made a factual finding that on September 
28, 2000, Hazel surprised his Keane Federal Systems superiors 
by presenting them with 22 resignation letters that contained 
either identical or substantially similar language.  These 22 
employees were hired by SIGNAL at its "job fair open house," 
and they received bonuses, negotiated increases in 
compensation, and other benefits. 
IV. 
A. 
 
SIGNAL argues that "the circuit court erred as a matter 
of law by failing to vacate [the] arbitration award [because] 
the arbitrators exceeded their powers by rewriting the 
subcontract."  Continuing, SIGNAL contends that the 
arbitration panel erroneously applied "the general law of 
 
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contracts" to determine whether SIGNAL's termination of the 
subcontract was proper.  SIGNAL asserts that the arbitration 
panel failed to apply the unambiguous standard for termination 
expressly contained in the termination clause of the 
subcontract.  SIGNAL states that the unambiguous provision in 
the subcontract permitted it to terminate Keane Federal 
Systems "in the event of a breach of a material term" and that 
the subcontract's invoice and payment requirement was a 
material term of the subcontract. 
 
SIGNAL also argues that the arbitrators exceeded their 
authority by rewriting the option clause of the subcontract.  
SIGNAL contends that the arbitration award "includes 
[$1,988,896.50] ($662,965.50 trebled) representing revenues 
that [Keane Federal Systems] purportedly would have received 
if the subcontract were extended into Option Period Four, 
which would have begun after the termination date. . . .  The 
option clause of the subcontract required SIGNAL to exercise 
the option if, and only if, [Keane Federal Systems] 'has 
continually provided timely, quality, and within cost 
performance.'  It is undisputed in this case, and the panel 
[of arbitrators] specifically found, that there were 
timeliness and quality problems with [Keane Federal Systems'] 
invoices."  Continuing, SIGNAL contends that the arbitration 
panel failed to apply "the plain language of the option clause 
 
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and imposed the same common law 'material breach' standard" 
that it applied when the panel considered the termination 
clause of the subcontract. 
 
Keane Federal Systems responds that the arbitrators did 
not exceed their powers and that the parties' contract 
conferred upon the arbitration panel the broad authority to 
decide "[a]ny dispute arising under or related to this 
subcontract with respect to the rights, duties or obligations 
of the parties. . . ."  We agree with Keane Federal Systems. 
 
Code § 8.01-581.010, which is a part of Virginia's 
Uniform Arbitration Act, states 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 postpone the 
hearing upon sufficient cause being shown therefor 
or refused to hear evidence material to the 
controversy or otherwise so conducted the hearing, 
contrary to the provisions of § 8.01-581.04, in such 
a way as to substantially prejudice the rights of a 
party; or 
 
"5.  There was no arbitration agreement and the 
issue was not adversely determined in proceedings 
under § 8.01-581.02 and the party did not 
participate in the arbitration hearing without 
raising the objection. 
 
. . . . 
 
 
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"If the application to vacate is denied and no 
motion to modify or correct the award is pending, 
the court shall confirm the award." 
 
A circuit court's review of an arbitration award is limited to 
the specific statutory criteria contained in Virginia's 
Uniform Arbitration Act.  See Trustees of Asbury United 
Methodist Church v. Taylor & Parrish, Inc., 249 Va. 144, 153, 
452 S.E.2d 847, 852 (1995). 
 
Essentially, SIGNAL argues that the arbitrators exceeded 
their powers because they purportedly applied the wrong legal 
standard in the resolution of the contract claim.  We express 
no opinion regarding the correctness of the arbitrators' legal 
analysis.  The issue before this Court is not whether the 
arbitrators' conclusions were legally correct, but rather, 
whether the arbitrators had the power to resolve the parties' 
contractual claims. 
 
We hold that the arbitrators did not exceed their powers 
because the issues that they resolved were within the scope of 
the powers conferred upon the arbitrators by the subcontract.  
The express language contained in the subcontract that the 
parties executed specifically conferred upon the arbitrators 
the authority to resolve "[a]ny dispute arising under or 
related to this subcontract with respect to the rights, duties 
or obligations of the parties, which is not disposed of by 
mutual agreement . . . ."  The parties' contractual dispute is 
 
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within the scope of this broad language.  Therefore, neither 
the circuit court nor this Court may review the merits of the 
arbitrators' decision.  A contrary conclusion would 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. 
 
We recognize that in Trustees v. Taylor & Parrish, Inc., 
we held that an arbitrator exceeded his power because he acted 
beyond the terms of a contract that contained the arbitration 
agreement by resolving a claim that did not relate to the 
contract.  We applied Code § 8.01-581.010 and invalidated the 
arbitration award.  249 Va. at 153-54, 452 S.E.2d at 852-53.  
In the present appeal, unlike the circumstances in Trustees v. 
Taylor & Parrish, Inc., SIGNAL does not assert that the 
arbitrators resolved a dispute that was beyond the scope of 
the arbitration agreement contained in the subcontract. 
 
We also observe, with approval, the Supreme Court of 
Michigan's admonition that "an allegation that the arbitrators 
have exceeded their powers must be carefully evaluated in 
order to assure that this claim is not used as a ruse to 
induce the court to review the merits of the arbitrators' 
decision."  Gordon Sel-Way, Inc. v. Spence Bros., Inc., 475 
N.W.2d 704, 710 (Mich. 1991). 
 
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B. 
 
SIGNAL argues that "the circuit court erred by failing to 
vacate the trebling of the award based upon the majority's 
exceeding its authority and its manifest disregard of the 
Virginia Conspiracy Statute."  SIGNAL argues that the panel 
exhibited a " 'manifest disregard of the law' in finding 
statutory conspiracy in the absence of concerted action."  We 
disagree with SIGNAL. 
 
As we have already held, pursuant to the arbitration 
provision contained in the subcontract, the arbitrators had 
the power to adjudicate any dispute arising under or related 
to the performance of the subcontract.  This provision is 
broad enough to include Keane Federal Systems' civil 
conspiracy claims.  And, as we have already stated, even 
though we may not agree with the arbitration panel's 
application of the law, the issue before this Court is whether 
the arbitrators exceeded their powers, and we are compelled to 
conclude that they did not do so. 
 
Even though courts in other jurisdictions have vacated 
arbitration awards when there has been a "manifest disregard 
of the law," we refuse to adopt that standard in this case 
because to do so would require that this Court add words to 
Code § 8.01-581.010, which enumerates the bases on which a 
court shall vacate an arbitration award.  Conspicuously 
 
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missing from this statute is a provision that permits a court 
to vacate a judicial award when the arbitration panel has 
exhibited a "manifest disregard of the law."  In this 
Commonwealth, courts are required to apply the plain meaning 
of statutes, and we are not free to add language, nor to 
ignore language, contained in statutes.  We have repeatedly 
stated that: 
 
"While in the construction of statutes the 
constant endeavor of the courts is to ascertain and 
give effect to the intention of the legislature, 
that intention must be gathered from the words used, 
unless a literal construction would involve a 
manifest absurdity.  Where the legislature has used 
words of a plain and definite import the courts 
cannot put upon them a construction which amounts to 
holding the legislature did not mean what it has 
actually expressed." 
 
Halifax Corp. v. First Union Nat'l Bank, 262 Va. 91, 99-100, 
546 S.E.2d 696, 702 (2001); Watkins v. Hall, 161 Va. 924, 930, 
172 S.E. 445, 447 (1934); accord Haislip v. Southern Heritage 
Ins. Co., 254 Va. 265, 268, 492 S.E.2d 135, 137 (1997); 
Weinberg v. Given, 252 Va. 221, 225, 476 S.E.2d 502, 504 
(1996); Turner v. Wexler, 244 Va. 124, 127, 418 S.E.2d 886, 
887 (1992); Grillo v. Montebello Condo. Unit Owners Ass'n, 243 
Va. 475, 477, 416 S.E.2d 444, 445 (1992); Barr v. Town & 
Country Prop., Inc., 240 Va. 292, 295, 396 S.E.2d 672, 674 
(1990). 
C. 
 
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SIGNAL assigns as error that "the Circuit Court erred by 
not modifying or correcting an arbitration decision that 
included damages based upon evident miscalculations of figures 
and evident mistakes in the description of the damages 
referred to in the award."  SIGNAL, however, did not make this 
argument in its motion to vacate or in its memorandum 
submitted in the circuit court.  SIGNAL argued in the circuit 
court that "the panel's damages award is arbitrary and 
irrational."  In this Court, SIGNAL argues that the circuit 
court was required to modify or correct the arbitrators' award 
because the award "contains evident mistakes and palpable 
errors with no rational basis."   
 
We will not consider SIGNAL's arguments because we 
conclude that they are procedurally barred.  Code § 8.01-
581.011 permits a circuit court to modify or correct an award 
when "[t]here was an evident miscalculation of figures or an 
evident mistake in the description of any person, thing or 
property referred to in the award."  SIGNAL, however, did not 
raise this issue in the circuit court and, therefore, may not 
raise this issue for the first time on appeal.  Rule 5:25.  
SIGNAL may not raise its contention that the panel's award is 
arbitrary and irrational because that argument is not the 
subject of an assignment of error. 
V. 
 
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We conclude that SIGNAL's arguments lack merit and, 
therefore, we will affirm the judgment of the circuit court. 
Affirmed. 
 
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