{"id":894989,"date":"2018-10-03T11:20:49","date_gmt":"2018-10-03T17:20:49","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=894989"},"modified":"2018-10-04T11:30:22","modified_gmt":"2018-10-04T17:30:22","slug":"getting-wrong-result-arbitration-may-bought","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/getting-wrong-result-arbitration-may-bought\/","title":{"rendered":"Why Getting the Wrong Result in Arbitration May Be What You Bought"},"content":{"rendered":"

Ken Slavens | The Contractor’s Perspective<\/a> | September 25, 2018<\/p>\n

Arbitration is often seen as a way of getting a more predictable result in complex construction disputes. The subject matter expertise available with experienced arbitrators and the finality of the arbitration process itself are certainly important considerations. But resolving disputes in arbitration can sometimes lead to surprising results, even ones that might be inconsistent with the underlying contract or with applicable state law.<\/p>\n

The Eighth Circuit\u2019s recent decision in\u00a0Beumer Corp. v. ProEnergy Services, LLC<\/em>, No. 17-2862 (8th<\/sup>\u00a0Cir. Aug. 9, 2018), is an example of such a case. The arbitrator in this case awarded attorney\u2019s fee of nearly a million dollars more than the liability cap in the contract. Despite the possibility that this result was inconsistent with state law, the Eighth Circuit let the award stand.<\/p>\n

<\/span>ProEnergy Service, LLC contracted with Beumer Corporation and Beumer Kansas City, LLC to fabricate and supply steel for Beumer\u2019s pipe conveyor system. As work progressed, Beumer came to the conclusion that ProEnergy\u2019s work was deficient. The resulting dispute led to ProEnergy filing a demand for arbitration.\u00a0 ProEnergy sought $500,000 and Beumer counterclaimed for $2,300,000.<\/p>\n

The contract between ProEnergy and Buemer had a limitation of liability clause. The contract also provided for the prevailing party to recover attorney\u2019s fees and the application of Missouri law.<\/p>\n

The arbitrator entered an award in Beumer\u2019s favor for damages and prejudgment interest of $699,702.39 (the amount of the liability cap) together with attorney\u2019s fees and expenses of $916,027.90.<\/p>\n

In the award, the arbitrator concluded that the attorney\u2019s fee recovery was not limited by the limitation of liability clause, which provided that ProEnergy\u2019s liability for \u201cany loss, indemnity, damage, or delay\u201d will not exceed the contract sum. The arbitrator found that Beumer\u2019s attorney\u2019s fees were not a \u201closs\u201d and were not \u201cdamages.\u201d According to the arbitrator, attorney\u2019s fees are routinely treated in caselaw as \u201ccosts\u201d and not damages.<\/p>\n

ProEnergy challenged the attorney\u2019s fees award in court, arguing that the award exceeded the arbitrator\u2019s powers. In arbitrations that are subject to the Federal Arbitration Act, this is one of the only grounds upon which a court may vacate an arbitration award.\u00a0See<\/em>\u00a09 U.S.C. \u00a7 10(a)(4).<\/p>\n

In its opinion, the court noted that \u201can error of law or fact, even a serious one\u201d does not mean that the arbitrator exceeds his or her powers.<\/p>\n

ProEnergy argued that the arbitrator did more. ProEnergy argued that the arbitrator exceeded his powers by ignoring the choice of law provision in the contract and by ignoring Missouri law, which provides that attorney\u2019s fees are a \u201closs\u201d or \u201cdamages.\u201d If correct, this would mean the $916,027.90 award of attorney\u2019s fees would be capped by the limitation of liability. ProEnergy\u2019s argument would do away with the award of attorney\u2019s fees because the limitation of liability cap was already exhausted by the damages award.<\/p>\n

The court could not find evidence that the arbitrator had intentionally ignored the choice-of-law provision or Missouri law. Although the arbitration award did not cite Missouri law on the attorney\u2019s fee issue, the arbitrator never stated that he was substituting his own preferences for those specified in the contract.<\/p>\n

The arbitrator may have mistakenly overlooked Missouri law, but the court concluded that such an error would not justify vacating the award. The court made a point of noting that it did not agree with ProEnergy that Missouri law holds attorney\u2019s fees are part of the \u201closs\u201d or \u201cdamages.\u201d But the court also noted that its assessment of whether the arbitrator was right or wrong on this issue is \u201cbeside the point.\u201d<\/p>\n

In the court\u2019s words, \u201c[t]he parties bargained for the arbitrator\u2019s decision; if the arbitrator got it wrong, then that was part of bargain.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Ken Slavens | The Contractor’s Perspective | September 25, 2018 Arbitration is often seen as a way of getting a more predictable result in complex construction disputes. The subject matter expertise available with experienced arbitrators and the finality of the arbitration process itself are certainly important considerations. But resolving disputes in arbitration can sometimes lead… Continue reading Why Getting the Wrong Result in Arbitration May Be What You Bought<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[41],"tags":[9895,42],"class_list":["post-894989","post","type-post","status-publish","format-standard","hentry","category-arbitration","tag-advise-consult","tag-arbitration-2","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nWhy Getting the Wrong Result in Arbitration May Be What You Bought - 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