Opinion ID: 2065752
Heading Depth: 1
Heading Rank: 2

Heading: Whether the Panel's Improper Subject Matter Jurisdiction Ruling Rendered the Award Incomplete or Defective

Text: The city correctly notes that the panel's conclusion on the face of the award that it lacked subject matter jurisdiction over the contract illegality claim conflicts with the trial court's conclusion, which was upheld by this court, that such a claim was within the jurisdictional ken of the arbitrators. [29] See part I A of this opinion. The city further contends that, since the panel concluded that it lacked subject matter jurisdiction over the illegality claim, and it in fact did have such jurisdiction, the award is incomplete, and therefore fatally defective as not final or definite. See General Statutes ง 52-418(a)(4). We disagree. If the record in this case were as simple as the city apparently envisions, reversal and vacatur of the award would in fact be required because the panel would have executed its powers in an incomplete and defective manner. The city gives short, or no, shrift, however, to the fact that the panel also emphasized in the award that the city's amended pleading was untimely because it had been filed twenty months after the indictment of Ganim. Moreover, on the record of this case, the city's claim is unavailing because the panel did in fact offer the city the opportunity to submit its illegality claim, however untimely, for resolution. By not pursuing that opportunity further before the panel, the city waived that claim. See part I B of this opinion. This waiver rendered the panel's incorrect legal determination, in effect, harmless error not requiring vacatur of the award. [30]
Whether the City's Waiver of the Illegal Contract Defense Before the Panel Affected Its Right to Claim that the Arbitration Award Should Be Vacated on Public Policy Grounds The city next contends that the trial court improperly concluded that the city waived its right to assert that arbitral enforcement of the illegally procured CM agreement would violate public policy. Citing our decision in Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., 252 Conn. 416, 747 A.2d 1017 (2000), the city argues that, because the public policy claim was raised in a timely application to vacate the award, it was not subject to waiver since the court engages in de novo review in a public policy challenge to an arbitration award. The city, with the support of the amici curiae, namely, the state of Connecticut, the Connecticut Association of Municipal Attorneys and the Connecticut Conference of Municipalities, further argues that the panel's award in this case violated the public policy against corruption in municipal contracting because it enforced an agreement that was the product of improper conflicts of interest that violated applicable state statutes and ethics ordinances. In response, Klewin contends that the city's arguments conflate two issues: (1) whether enforcement of an arbitration award, which deals with the lawfulness of the award itself, violates public policy; and (2) whether the contract underlying the award violates public policy because of its terms or the manner in which it was procured. Klewin claims that, because there is nothing facially illegal about the contract or the award, its enforcement would not violate public policy, and that attacks on the legality of the underlying contract are exclusively within the province of the panel. Accordingly, Klewin argues that the city's claim is merely an improper relabeling of its contract illegality defense. We conclude that, on this record, the city's public policy claim is functionally indistinguishable from its contract illegality defense, and because the city waived its opportunity to present that claim before the panel, the trial court properly determined that the city had waived its public policy claim because there was no factual predicate under which it could be reviewed. Whether the trial court properly concluded that the city's public policy claim was subject to the waiver doctrine presents a question of law, over which our review is plenary. See LaSalla v. Doctor's Associates, Inc., 278 Conn. 578, 586, 898 A.2d 803 (2006) ([w]e agree with the defendant that the proper scope of review, in both the trial court and this court, for a colorable claim that an award violated public policy is plenary). A court's refusal to enforce an arbitrator's award . . . because it is contrary to public policy is a specific application of the more general doctrine, rooted in the common law, that a court may refuse to enforce contracts that violate law or public policy. United Paperworkers International Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 42, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987). This rule is an exception to the general rule restricting judicial review of arbitral awards. MedValUSA Health Programs, Inc. v. MemberWorks, Inc., 273 Conn. 634, 655, 872 A.2d 423, cert. denied sub nom. Vertrue, Inc. v. MedValUSA Health Programs, Inc., ___ U.S. ___, 126 S.Ct. 479, 163 L.Ed.2d 363 (2005). The exception, however, is narrowly construed and . . . is limited to situations where the contract as interpreted would violate some explicit public policy that is well defined and dominant, and is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests. (Internal quotation marks omitted.) Id. To be vacated under the narrow public policy exception, the award must be clearly illegal or clearly violative of a strong public policy. (Emphasis in original; internal quotation marks omitted.) Id., at 656, 872 A.2d 423. Furthermore, [t]he party challenging the award bears the burden of proving that illegality or conflict with public policy is clearly demonstrated. (Internal quotation marks omitted.) Id.; see also id., at 641, 654, 872 A.2d 423 (concluding that Connecticut does not have explicit, well-defined public policy prohibiting excessive punitive damages awards, and that judicial confirmation process was not state action for purposes of due process clause protections against excessive punitive damages). Judicial review of whether an arbitration award violates public policy is de novo, but not completely unfettered. The legal determination of whether a particular award violates public policy necessarily depends on the facts found by the arbitrator during those proceedings. For example, in Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., supra, 252 Conn. at 416, 747 A.2d 1017, a case involving a public policy challenge under rule 5.6 of the Rules of Professional Conduct to a partnership agreement provision that had conditioned the receipt of retirement benefits on compliance with a noncompete clause, we concluded that when an arbitrator has been called upon to determine whether an . . . agreement violates a legitimate and clearly established public policy, such as that underlying rule 5.6, de novo review is proper; id., at 426, 747 A.2d 1017; because the determination of whether . . . there exists a public policy mandate with which an arbitral award must conform . . . indisputably involves an issue of law properly resolved by an exercise of this court's plenary authority. (Citations omitted; internal quotation marks omitted.) Id., at 428-29, 747 A.2d 1017 (discussing expressions of public policy in statutes, case law or administrative regulations). We also stated that once it has been determined that an arbitral award does implicate a clearly established public policy, the ultimate question remains as to whether the award itself comports with that policy; id., at 429, 747 A.2d 1017; and concluded that judicial review of that determination is de novo. Id. In noting that courts have greater expertise and knowledge than arbitrators in the identification and application of the public policy of this state; id., at 430, 747 A.2d 1017; we emphasized that a reviewing court [is] better suited to evaluate whether certain facts, as found by the arbitrator, comport with the specific public policy that is at issue. (Emphasis added.) Id. Indeed, in Schoonmaker, we emphasized our adherence to the long-standing principle that findings of fact are ordinarily left undisturbed upon judicial review. Thus, in the present case, we defer to the arbitrator's interpretation of the agreements regarding the scope of the forfeiture upon competition provision, as well as the terms upon which postemployment benefits are offered to former employees. We conclude only that as a reviewing court, we must determine, pursuant to our plenary authority and giving appropriate deference to the arbitrator's factual conclusions, whether the forfeiture provision in question violates those policies. Id., at 432, 747 A.2d 1017; see also State v. AFSCME, AFL-CIO, Council 4, Local 2663, 257 Conn. 80, 95, 777 A.2d 169 (2001) (To the extent that the plaintiff claims that the award violated public policy because the arbitrator misapplied the [contract's] definition of salaried employee, we decline to undertake judicial review of the arbitrator's factual determinations in interpreting the terms of the contract. The arbitrator made a factual determination that commission staff attorneys are hourly, rather than salaried employees.); Groton v. United Steelworkers of America, 254 Conn. 35, 51-52, 757 A.2d 501 (2000) (noting that legal system ordinarily gives great deference . . . to both the factual and legal determinations of the arbitrators, and that even in a de novo public policy challenge, we give deference to the arbitrator's factual determinations [citations omitted]). [31] Whether an arbitration award violates the public policy against corruption in governmental contracting turns on a subsidiary factual determination that the underlying contract was illegally procured. This determination is fundamentally indistinguishable from resolution of the defense that the contract is void ab initio on grounds of illegality. This type of public policy claim is, therefore, especially dependent on arbitral findings of fact, which, as previously discussed, on which we both rely and defer to. In this regard, we find instructive Justice Vertefeuille's dissenting opinion in Bridgeport v. Kasper Group, Inc., 278 Conn. 466, 899 A.2d 523 (2006). In that case, Justice Vertefeuille, in addressing a proffered alternate ground for affirmance, [32] namely, that enforcement of an arbitration award would violate the public policy against enforcing a contract that was illegally procured; id., at 495, 899 A.2d 523; concluded that, even if I . . . were to assume, arguendo, that there exists an explicit, well-defined, and dominant public policy against enforcing illegally procured contracts, I would defer to the arbitrator's factual findings under this court's standard of review of the narrow public policy exception. . . . Thus, I would not review the correctness of the finding, implicit in the arbitrator's award, that the contract was not illegally procured. . . . The plaintiff contended throughout the arbitration that the [school construction] contract was illegally procured. The arbitrator's award in favor of the defendant reveals his clear rejection of this defense. Even if I were to consider the evidence excluded by the arbitrator, I would nevertheless conclude that this evidence was insufficient to prove clearly that the [school construction] contract was obtained illegally. [33] (Citations omitted.) Id., at 499, 899 A.2d 523 ( Vertefeuille, J., dissenting). In the present case, as in Kasper Group, Inc., the nature of the public policy claim renders it particularly fact bound and inextricably linked to the illegal contract defense; indeed, they are one and the same. [34] Thus, when the city waived the illegal contract defense before the panel; see part I B of this opinion; it necessarily deprived the trial and reviewing courts of the factual findings necessary to decide that claim in the context of a public policy challenge, even assuming the existence of a strong, well-defined public policy against corruption in the procurement of public contracts. [35] We are, however, mindful . . . that the arbitration under review is complicated by the fact that it involves public funds and the question of whether the city had a full and fair opportunity to contest the use of such funds for purposes of illegal dealings. Although we do not advocate different rules to govern such arbitrations, we must remain vigilant in ensuring that the efficiency and economics generally associated with arbitrations do not swallow the public interest that has been compromised as a result of the arbitrator's misconduct. [36] Bridgeport v. Kasper Group, Inc., supra, 278 Conn. at 486, 899 A.2d 523. In the present case, having already concluded that factual development of the contract illegality issue solely was committed to the panel, to then conclude that the trial court was required to hold extensive hearings, essentially amounting to a trial, in a confirmation proceeding addressing that identical issue in the guise of a public policy challenge would vitiate that first conclusion. Put differently, we decline to accept what we view as the city's invitation to turn public policy challenges into the arbitration equivalent of a mulligan [37] by inviting de novo factual review of illegal contract issues. See Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., supra, 252 Conn. at 429 n. 7, 747 A.2d 1017 ([A] party raising such a challenge to an arbitral award may not succeed in receiving de novo review merely by labeling its challenge as falling within the public policy exception to the normal rule of deference. The substance, not the form, of the challenge will govern.). Accordingly, we conclude that, when the city waived the illegal contract defense before the panel; see part I B of this opinion; it also deprived the court of the factual basis necessary to consider that same claim in the context of a public policy challenge.