Opinion ID: 2756440
Heading Depth: 2
Heading Rank: 1

Heading: The Arbitration Demand

Text: On July 22, 2011, Irwin filed an arbitration complaint against LMB and Cabot Lyman, claiming damages related to the allegedly defective construction of a 52-foot custom sailing -2- vessel.1 Irwin alleged that LMB and Cabot Lyman had agreed to build the vessel with the 'best practices for quality yacht construction' using the 'highest quality materials' for a price of $2,155,000. However, there were cost overruns, and Irwin eventually ended up paying over $3,400,000 for the completed vessel. Moreover, upon LMB's delivery of the vessel to Irwin, Irwin allegedly discovered multiple defects, which necessitated a series of rejections and repairs. As of the date of filing of the arbitration complaint, the quality of the vessel was still unsatisfactory to Irwin. That complaint alleged eight causes of action: intentional fraud, negligent misrepresentation, constructive fraud, breach of contract, rejection and revocation of acceptance under the Uniform Commercial Code, breach of the implied warranty of fitness for a particular purpose, breach of the implied warranty of merchantability, and violations of Maine's unfair trade practices laws. Irwin requested rescission of the agreement and a refund and damages for the time he spent and the expenses he incurred during the period when he repeatedly rejected the yacht because of its defects, as well as the return . . . of the amounts overpaid to [LMB and Cabot Lyman] and the difference between the value of the 1 The Yacht Construction Contract applicable to the transaction contains an arbitration clause providing that [a]ny dispute arising from this agreement will be resolved via binding arbitration. -3- 'highest quality' version of the Vessel that [LMB and Cabot Lyman] represented that [Irwin] would receive and the actual version [Irwin] received. He also requested punitive damages, attorneys' fees and costs, interest, and such other and further relief as the Court deems just and proper. The arbitration complaint contained two paragraphs naming Cabot Lyman. First, Irwin alleged that Cabot Lyman, the controlling owner of LMB, was the alter ego of the corporation, and alleged that [a] unity of interest exists between [Cabot] Lyman and [LMB] and injustice and fraud can only be avoided by piercing the corporate veil and holding Cabot Lyman jointly and severally liable for the wrongs alleged. Second, in the course of alleging violations of Maine's unfair trade practices laws, the complaint stated that LMB and Cabot Lyman made further repeated representations and promises to [Irwin] about best practices and highest quality construction that they guaranteed for the completion of the Vessel . . .; for example, [Cabot] Lyman expressly represented to [Irwin] that he had extensive experience sailing worldwide including in the Caribbean and he was aware of the most common problems [Irwin] would encounter during his travels in tropical and other varying conditions . . .; as such he assured the Vessel would be completed to withstand these issues. After the insurer refused their request for defense, LMB hired a law firm, Thompson & Bowie, LLP, to represent both it and -4- Cabot Lyman in the arbitration. That firm then filed this lawsuit on behalf of the insureds, seeking to recover from Northern Assurance the costs and attorneys' fees incurred in the arbitration.2 LMB and Cabot Lyman also brought a claim for unfair claims settlement practices, contending that Northern Assurance had not made a coverage decision in a timely manner.