Preview:

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
United States of America for the Use                                                                     )
and Benefit of Coastal Roofing                                                                           )
Company, Inc.,                                                                                           )
                                                                                                         )
Plaintiff,                                                                                               )
                                                                                                         )                                          C.A. No.: 2:07-3008-PMD
v.                                                                                                       )
                                                                                                         )
P. Browne & Associates, Inc., Paul R.                                                                    )                                          ORDER
Browne, Fred Anthony, The Broadband                                                                      )
Companies, and Hartford Fire Insurance                                                                   )
Company,                                                                                                 )
)
Defendants.                                                                                              )
____________________________________)
This matter is before the court on Plaintiff Coastal Roofing Company, Inc.’s motion to
vacate an arbitrator’s award and Defendants’ motion to lift the court’s stay and confirm the
arbitrator’s award.  For the reasons set forth herein, Plaintiff’s motion to vacate is denied, and the
court grants Defendants’ motion and confirms the arbitrator’s award.
BACKGROUND
Plaintiff Coastal Roofing Company, Inc. (“Coastal”) is in the business of installing and
repairing  roofs.  In  the  summer  of                                                                   2006,  Coastal  President  Richard  Ryan   (“Ryan”)  began
negotiating  with  representatives  of  a  company  called  Broadband  Construction,  LLC
(“Broadband”).  Defendants  Paul  Browne  &  Associates  and  Paul  Browne                               (collectively,
“Browne”) had been given a contract to perform roofing work at the United States Navy’s
SPAWAR facility at the Charleston Weapons Station. Browne had then subcontracted this work
to Broadband. Broadband, in turn, was in negotiations to subcontract the work to Coastal.
Representing Broadband was Donald T. Reynolds (“Reynolds”), who held himself out to be




President of Broadband. On August 11, 2006, the parties entered into a contract, which contained
the terms under which Coastal would perform the actual roofing work in question.
On February 21, 2007, Broadband’s attorney sent a letter to Coastal informing them that
their employment had been terminated due to insufficient progress on the job. At this point,
Reynolds, again holding himself out to be President of Broadband, entered into a separate
contract with another subcontractor, Glasgow Roofing Company, Inc., to complete the roofing
work for which Coastal had been hired. In April 2007, Coastal notified Broadband’s counsel that
it would demand arbitration for breach of contract over its termination. While conducting
research for the arbitration, Coastal discovered that Broadband Construction, LLC, did not in fact
exist as a limited liability corporation. After bringing this issue up to Broadband’s attorney, the
attorney responded that the actual contracting party had been Broadband Construction Services,
LLC.  Upon  conducting  more  research,  however,  Coastal  discovered  that  Broadband
Construction Services, LLC had actually been dissolved with the Secretary of State on December
31,  2006. Despite this, Reynolds continued to do business as Broadband, particularly with
Glasgow, well after this date.
On June  26,  2007, the parties met for mediation of this dispute, but were unable to
resolve their differences. The mediator suggested that the two parties document their differences,
submit them to him, and return for mediation on September 12. On September 5, Coastal sent a
letter to Broadband’s attorney informing him that Coastal would not be attending any further
mediation. Also on September 5, Coastal filed the present action against Defendants in this court.
In its Complaint, Plaintiff alleges five separate causes of action: (1) a violation of the Miller Act,
which requires contractors on federal construction contracts to obtain a surety bond; (2) a legal
claim for quantum meruit, or the legal value of services rendered; (3) fraud; (4) civil conspiracy;
2




and (5) a request for a declaratory judgment that no contract was formed between Plaintiff and
Broadband or any Defendants. Plaintiff sought compensatory damages in the amount of services
rendered for its roofing services, punitive damages, attorneys’ fees, and a declaration that both
the surety bond obtained by Plaintiff and the agreement between Coastal and Broadband are null
and void. On December  5,  2007, this court stayed the litigation and ordered the parties to
arbitration pursuant to an arbitration provision in their contract, and prior to arbitrating the claim,
Mr. Anthony and Broadband asserted the following counterclaims against Plaintiff: breach of
contract, breach of express and implied warranties, negligence, and indemnity. The arbitrator
issued his award on June 29, 2009, in which he found in favor of the Broadband Companies,
LLC,  as  successor  to  Broadband  Construction  Services,  LLC,  in  the  total  amount  of
$742,098.60, and on July 27, 2009, he confirmed the award after the parties filed motions to
modify it. Besides itemizing the damages awarded, the arbitrator did not provide the reasoning
for his award. Now, Fred Anthony and Broadband have filed with the court a motion to lift the
court’s stay and confirm the arbitration award, while Coastal moved the court to vacate it.
ANALYSIS
It is well settled that a court’s review of an arbitration award “is among the narrowest
known to the law.” United States Postal Service v. Am. Postal Workers Union, AFL-CIO, 204
F.3d 523, 527 (4th Cir. 2000) (internal quotation marks omitted). “A court sits to ‘determine only
whether the arbitrator did his job—not whether he did it well, correctly, or reasonably, but
simply whether he did it.’” Id. (quoting Mountaineer Gas Co. v. Oil, Chem. & Atomic Workers
Int’l Union,  76 F.3d  606,  608  (4th Cir.  1996)).  “As long as the arbitrator is even arguably
construing or applying the contract and acting within the scope of his authority, that a court is
convinced he committed serious error does not suffice to overturn his decision.” United Paper-
3




Workers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987). The Fourth Circuit has
emphasized the limited scope of judicial review because “[a] policy favoring arbitration would
mean little, of course, if arbitration were merely the prologue to prolonged litigation.  .  .
Opening  up  arbitral  awards  to  myriad  legal  challenges  would  eventually  reduce  arbitral
proceedings to the status of preliminary hearings.” Remmey v. PaineWebber, Inc., 32 F.3d 143,
146 (4th Cir. 1994). Therefore, “[a] confirmation proceeding under 9 U.S.C. § 9 is intended to be
summary: confirmation can only be denied if an award has been corrected, vacated, or modified
in accordance with the Federal Arbitration Act.” Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir.
1986); see also Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir. 1987) (“Absent a statutory
basis for modification or vacatur, the district court’s task [is] to confirm the arbitrator’s final
award as mandated by section  9 of the Act.”). It is the plaintiff’s burden to prove that the
unfavorable portions of the award should be vacated, as provided in sections 10 and 11 of the
Federal Arbitration Act. O.R. Securities, Inc. v. Professional Planning Associates, Inc., 857 F.2d
742, 748 (11th Cir. 1988).
I.                                                                                                    Coastal’s Motion to Vacate the Arbitrator’s Award
Plaintiff asks the court to vacate the arbitrator’s award pursuant to 9 U.S.C. § 10(a)(4),
which permits a district court to vacate an arbitrator’s award “[w]here the arbitrators exceeded
their powers, or so imperfectly executed them that a mutual, final, and definite award upon the
subject matter submitted was not made.” First, Plaintiff asks the court to vacate the arbitrator’s
award because the arbitrator failed to provide the reasons for his findings as requested by the
parties and allegedly required by the applicable arbitration rules. Furthermore, plaintiff argues
that the court vacate the award because the arbitrator acted in manifest disregard of the South
Carolina law regarding mergers and successors in interest by finding that The Broadband
4




Companies, LLC was a legal successor in interest to the terminated Broadband Construction
Services,  LLC.  Lastly,  Plaintiff  argues  that  the  contract  which  contained  the  arbitration
agreement was procured by fraud and, therefore, is unenforceable. The court addresses these
arguments in turn.
a)  Reasoned Award
Plaintiff first asks the court to vacate the arbitrator’s award on the ground that the
arbitrator  failed  to  provide  a  reasoned  award  as  requested  by  the  parties  pursuant  to  the
Construction Industry Arbitration Rules of the American Arbitration Association. In addressing
the merits of the parties’ dispute, the arbitrator’s award stated the following:
The   Broadband   Companies,   successor   in   interest   to   Broadband
Construction Services, LLC, shall recover of Coastal Roofing Company,
Inc., the total sum of $719, 203.33, derived as follows:
Damages                                                                                                   $436,545.13
Pre Award Interest at 8.75%                                                                               $64,465.20
Attorney fees and expenses                                                                                $218,193.00
(Id. Ex. 4.) With respect to the form of an arbitrator’s award, Rule 43 of the prior Construction
Industry Arbitration Rules of the American Arbitration Association, applicable to the parties in
this case, stated:
R-43. Form of Award
(a) Any  award  shall  be  in  writing  and  signed  by  a  majority  of  the
arbitrators. It shall be executed in the manner required by law.
(b) The arbitrator shall provide a concise, written breakdown of the award.
If requested in writing by all parties prior to the appointment of the
arbitrator, or if the arbitrator believes it is appropriate to do so, the
arbitrator shall provide a written explanation of the award.
Plaintiff contends that the parties did request a reasoned award from the arbitrator, and to support
this argument, Plaintiff provided a copy of the original arbitrator’s Report of Preliminary
Hearing, Scheduling Order, and Procedural Directive No. 2, which stated, “A reasoned award
5




was requested.”  (Id. Ex.  2  ¶  13.) Plaintiff also provided the court with a transcript of the
arbitration hearing, in which Plaintiff contends the parties repeated their request for a reasoned
award. The pertinent portions of the transcript are as follows:
MR. BUNDY  [counsel for Coastal]: I would like a reasoned award. I
don’t usually like it. Usually what I like is just a number, but the reason I want a
reasoned award is because we’ve got downstream subs and material suppliers that
apparently have been—even just listening to what you have to say, they said one
thing on the front end, they told you there was a certificate, now they come back
later and say there was no certificate. I’ve got a written document from them
which says there is a certificate.
So, you know, at some point in time, depending on how this thing shakes
out, I mean, if my client loses this case because McElroy and Bradco lied to these
people, okay, then I’m going to go after them. All right. So I don’t want—I’d like
to have the award specified to the extent that you are willing to, or able to, based
on the evidence that if this damage has been incurred by the respondents because
of Coastal, that that was a function of this failure, whatever it might be.
It might be the failure to put the sealant underneath the roof panels. So at
least I’ve got a finding. Okay? And then I can shake out with them later on, was it
our role to put sealant under or theirs. That’s sort of—you got any objection to
that?
MR. SYMON [counsel for Mr. Anthony and Broadband]: I don’t, but
what I’d like to see, this case has been pending for a long time and my client’s out
a lot of money. I would like to see an award followed by reasoned decision, if
that’s acceptable. I would not have a problem, I just don’t want to wait for it.
THE ARBITRATOR: You wouldn’t wait. If I decide to give a reasoned
award, it’s not going to take me any longer.
MR. SYMON: Okay. Then that’s—I don’t have any objection.
MR. BUNDY: Good.
THE ARBITRATOR: I’m not—I’m not making any promises to you that
I will.
MR. BUNDY: Oh, I understand.
THE ARBITRATOR: What I will tell you—this is—I don’t remember,
but this is convened under construction industry rules, right, not commercial
rules?
MR. SYMON: Sure.
6




THE ARBITRATOR: So you’ve got a right to a breakdown anyway.
MR. BUNDY: Right.
THE ARBITRATOR: So that leads me to this. When we’re—by the time
we’re done, I would like you all to give me, on the last day of hearing, or sooner,
if you want, what you think the award should look like. If you want, you can give
me the—you know, your—
MR. BUNDY: The reason—
THE ARBITRATOR: If you want, but I don’t need that. But what I do
need is to know what kind of breakdown you want. Yours is probably in your
brief, but you may need more detail. I don’t know. I’d leave that to you.
MR. SYMON: I just need a number.
THE ARBITRATOR: Okay. But your—under the construction rules, you
are entitled to a breakdown. I’ll certainly do that at a minimum. Whether I go
beyond that, I can’t —I don’t know yet.
MR. SYMON: I understand. I understand.
THE ARBITRATOR: Because I tend not to do reasoned awards unless I
have to or unless there’s some really good reason to, and I hear what you’re
articulating, so I’ll keep that in mind.
MR. SYMON: Thank you.
(Id. Ex. 2, Transcript 38:1-41:5.) Lastly, Plaintiff cites to a Ninth Circuit case for the proposition
that an arbitrator exceeds his authority by failing to provide a written explanation of the award
when the parties contracted for it. (Id. at 7) (citing Western Employees Ins. Co. v. Jefferies &
Co., Inc., 958 F.2d 258 (9t h Cir. 1992) (“However, arbitrators can also ‘exceed their powers’
under 9 U.S.C. § 10(d) when they fail to meet their obligations, as specified in a given contract,
to the parties.”) (emphasis in original)).
Mr. Anthony and Broadband contend that the arbitrator was never under an obligation to
provide a reasoned award. They argue that former Rule 43 required the parties to request a
7




reasoned award in writing prior to the appointment of the arbitrator and that Coastal has failed to
produce any evidence that the parties entered into such an agreement prior to selecting the
original arbitrator in this case. Next, Mr. Anthony and Broadband contend that the hearing
transcript reveals that they never requested a reasoned award, as their lawyer merely clarified
that he “just need[ed] a number.” Lastly, they contend that the court should not rely on the Ninth
Circuit case cited by Coastal as authority to vacate the arbitrator’s award for failure to provide a
written explanation of his award, assuming the parties properly requested one. Unlike the
arbitration provision invoked in this case, Mr. Anthony and Broadband point out that the parties
in the Ninth Circuit case altered their arbitration agreement to add a provision requiring the
“arbitrators to accompany any award with a statement of their findings of fact and conclusions of
law.” W. Emplrs Ins. Co. v. Jefferies & Co., 958 F.2d 258, 259 (9th Cir. 1992). Since Coastal and
Broadband merely contracted to arbitrate their disputes “in accordance with the most current
Construction Industry Arbitration Rules of the American Arbitration Association,” Mr. Anthony
and Broadband contend that the case proves irrelevant to the disposition of this case.
After considering each side’s argument, the court finds that the arbitrator was not
obligated to provide a reasoned award as argued by Coastal. As already discussed, the version of
Rule  43  of  the  Construction  Industry  Arbitration  Rules  applicable  to  the  parties’  dispute
provided, “The arbitrator shall provide a concise, written breakdown of the award. If requested
in writing by all parties prior to the appointment of the arbitrator, or if the arbitrator believes it
is appropriate to do so, the arbitrator shall provide a written explanation of the award.” (emphasis
added). Coastal has not provided any evidence that both parties to the arbitration requested, in
writing and prior to selecting the arbitrator, an explanation of the award. Aware of the technical
nature of this finding, the court notes that the revised Construction Industry Arbitration Rules,
8




made effective October 1, 2009, allows the parties to request a reasoned award up until the
conclusion of the first Preliminary Management Hearing. Current Rule 44 provides:
Rule 44. Form of Award
(c) The parties may request a specific form of award, including a reasoned
opinion, an abbreviated opinion, findings of fact or conclusions of law[,] no later
than the conclusion of the first Preliminary Management Hearing. If the parties
agree on a form of award other than that specified in R-44 (b) of these Rules the
arbitrator shall provide the form of award agreed upon. If the parties disagree with
respect to the form of the award, the arbitrator shall determine the form of award.
Thus, the rule was revised to provide the parties with additional time to agree upon the form of
the arbitrator’s award. In this case, however, the rule required that the parties request a reasoned
award in writing and prior to the selection of the arbitrator, but it was not until a conference call,
which resulted in the Report of Preliminary Hearing, Scheduling Order and Procedural Directive
#2, that the parties requested a reasoned award and that the original arbitrator1 memorialized the
fact that a reasoned award was requested.
Coastal, however, does call attention to Rule 1 of the Construction Industry Arbitration
Rules, which permits the parties to modify the procedures set forth in the rules after the
appointment of an arbitrator, so long as the arbitrator consents to the modification. Even if the
court accepted Coastal’s position that the original arbitrator appointed to the case actually agreed
to issue a reasoned award by noting in his Directive #2 that “a reasoned award was requested,”
the question becomes whether or not that consent can bind the later-appointed arbitrator who
actually heard the case and determined the award. Coastal contends that “the third arbitrator was
not at liberty under the AAA rules to abandon the procedural decision at his whim,” but it has
not offered any authority to support this argument. The transcript of the hearing makes it clear
1 The original arbitrator removed himself from the case when a conflict of interest arose. A second
arbitrator was appointed, but also withdrew at a later date. Then, the final arbitrator, who heard the case
and issued the award, was appointed.
9




that the arbitrator who actually heard the case did not consent to provide a reasoned award, as he
was “not making any promises” that he would issue one, but would only keep the request “in
mind.” And instead of arguing to the arbitrator that he had such an obligation because the parties
has already so requested, as it argues now, Coastal’s counsel simply stated that he “understood”
the arbitrator’s undecided position. Although Coastal believes that “the arbitrator’s refusal to
commit to providing a reasoned decision cannot have the effect of altering with no prior warning
the agreed upon procedures set out by the parties and agreed to by the [original] arbitrator . . . ,”
Coastal did not take this position at the hearing.
Also, as Mr. Anthony and Broadband argued, the parties’ arbitration provision in this
case did not require the arbitrator to produce a reasoned award like the contract provision at issue
in the Ninth Circuit case cited by Coastal. In that case, the parties’  arbitration provision
specifically stated that an arbitrator’s award would contain “findings of fact and conclusions of
law,” thus the court found that the arbitration panel exceeded its authority under § 10 when its
award did not contain findings of fact and conclusions of law, as the award failed to meet the
obligations specified under the parties’ contract. W. Emplrs Ins. Co., 958 F.2d at 262. Here, the
parties merely agreed that if mediation did not resolve a dispute between them, then the matter
was to be “decided by arbitration in accordance with the most current Construction Industry
Arbitration Rules of the American Arbitration Association.” (Broadband’s Mem. in Support Ex.
E.) Of course, the arbitration rule applicable to this case permitted arbitrators to provide reasoned
awards, “if the arbitrator believes it is appropriate to do so.” While Coastal may have asked the
arbitrator at the start of the hearing to issue a reasoned award, “courts generally have held that
arbitrators are not required to give their reasons for an award . . .                                   . Arbitrators are not required to
disclose the basis upon which the awards are made and courts will not look behind a lump-sum
10




award in an attempt to analyze their reasoning process.” Atlanta-Tomberlin, Inc. v. E. Band of
Cherokee Indians, 672 F. Supp. 887, 889 (W.D.N.C. 1987).
Finally, even if the court were to find that the arbitrator was required to issue a reasoned
award, courts have not recognized a failure to do so as a ground for vacating an arbitrator’s
award. In MCI Constructors, Inc. v. Hazen and Sawyer, P.C., the plaintiff asked the court to
vacate an arbitrator’s damages award under § 10(a)(4) because the arbitration panel did not
provide a reasoned award. No.  1:02-396,  2009 U.S. Dist. LEXIS  17866, at  *27  (M.D.N.C.
March  9,  2009). In rejecting the plaintiff’s request, the court noted that  “[a]n award being
unreasoned is not a basis for vacatur under § 10(a)(4),” as “awards are generally vacated under §
10(a)(4) only where the arbitrators failed to resolve an issue presented to them or the award is
ambiguous or unclear. Id. (citation omitted). Thus, based on the foregoing, the court rejects
Coastal’s request for vacatur based on an unreasoned award.
b)  Manifest Disregard of the Law
Plaintiff also asks the court to vacate the arbitration award based on the arbitrator’s
alleged “manifest disregard of the law.”2 Specifically, Coastal believes the arbitrator manifestly
disregarded South Carolina law by concluding that The Broadband Companies, LLC was the
2 Although Plaintiff characterizes this argument as one made pursuant to § 10(a)(4), the Fourth Circuit has
recognized “manifest disregard of the law” as a non-statutory basis for vacating an arbitration award.
Upshur Coals Corp. v. United Mine Workers of Am. Dist. 31, 933 F.2d 225, 229 (4th Cir. 1991). Plaintiff
may have elected to frame its argument this way because of the uncertainty surrounding the validity of
non-statutory grounds for vacating arbitrator’s awards. In Hall Street Assocs., L.L.C. v. Mattel, Inc., 128
S.Ct. 1396, 1403 (2008), the Supreme Court recently held that “§§ 10 and 11 respectively provide the
FAA’s exclusive grounds for expedited vacatur and modification [of arbitration awards].” The Hall Street
Court  did  not,  however,  determine  whether  common  law  grounds  for  vacatur,  including  “manifest
disregard” and  “essence of the agreement,” are permissible bases for vacatur independent of, or as a
shorthand for, the grounds for vacating awards that are specified in the FAA. Id. at 1404, 1406 (“parties
wanting review of arbitration awards  .  .  . may contemplate enforcement under state statutory law or
common law . . .                                                                                                  . [H]ere we speak only to the scope of expeditious judicial review under §§ 9, 10, and 11
[of  the  FAA],  deciding  nothing  about  other  possible  avenues  of  judicial  enforcement  of  arbitration
awards.” (emphasis added)). Therefore, the court conducts its analysis assuming, without deciding, that it
could vacate the award because of the arbitrator’s “manifest disregard of the law.”
11




successor in interest to Broadband Construction Services, LLC. Coastal contends that Broadband
Construction was dissolved by its sole owner, Mr. Anthony, on December 31, 2006, and that Mr.
Anthony filed the articles of termination with the Secretary of State on April 9, 2007. Although
Mr. Anthony intended to merge Broadband Construction into Broadband Companies, Coastal
contends he never completed the merger by filing a merger plan with the South Carolina
Secretary of State, which Coastal argues is necessary for any attempt at a merger to be effective
under South Carolina law. Coastal argues that since the merger was ineffective, Broadband
Companies did not become the successor in interest of Broadband Construction’s cause of
actions  against  it  and,  accordingly,  lacks  standing  to  bring  its  claims.  Mr.  Anthony  and
Broadband contend that the arbitrator correctly found that Broadband Companies is the successor
in interest of Broadband Construction. They also contend that, regardless of the merits of the
dispute, the court’s review of an arbitrator’s award is narrow, so much that even a legal mistake,
which they do not believe the arbitrator made, does not permit the court to find that an arbitrator
manifestly disregarded the law. Regarding this ground of vacatur, the Fourth Circuit has stated:
[A]n award may be overturned if it flowed from an arbitrator’s manifest disregard
of the applicable law. Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d
188, 193 (4th Cir. 1998). In order to secure judicial relief on such grounds, it must
be  shown  that  the  arbitrator,  in  making  his  ruling,  was                                        ‘aware  of  the  law,
understood it correctly, found it applicable to the case before [him], and yet chose
to ignore it in propounding [his] decision.’ Remmey v. PaineWebber, Inc., 32 F.3d
143, 149 (4th Cir. 1994). As one of our sister circuits has explained, an arbitrator
does not act in manifest disregard of the law unless: ‘(1) the applicable legal
principle is clearly defined and not subject to reasonable debate; and  (2) the
arbitrator refused to heed that legal principle.’ Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir. 1995).
Long John Silver’s Rests., Inc. v. Cole, 514 F.3d 345, 349-50 (4th Cir. 2008) (internal alterations
omitted).
12




After  considering  the  record,  the  court  does not  find  that  the  arbitrator  manifestly
disregarded the law in this case. “As long as the arbitrator is even arguably . . . acting within the
scope of his authority, that a court is convinced he committed serious error does not suffice to
overturn his decision.” PPG Indus. v. Int'l Chem. Workers Union Council of the United Food
and Commercial Workers, 587 F.3d 648 (4th Cir. 2009) (citing United Paperworkers Int'l Union
v. Misco, Inc., 484 U.S. 29, 38 (1987)). Here, the arbitrator heard arguments from both sides
regarding the issue of whether or not The Broadband Companies, LLC was the successor in
interest to Broadband Construction Services, LLC’s claims against Coastal, and in his award, he
found that it was. On this record, the court finds the arbitrator “did his job.” Mountaineer Gas
Co. v. Oil, Chem. & Atomic Workers Int'l Union, 76 F.3d 606, 608 (4th Cir. 1996).
Even considering the lack of rationale provided by the arbitrator in his award, as Coastal
asks the court to do, the court does not believe the arbitrator manifestly disregarded the law. See
Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 390 (2d Cir. 2003)
(“Even where explanation for an award is deficient or non-existent, we will confirm it if a
justifiable ground for the decision can be inferred from the facts of the case.”). Again, “a federal
court cannot vacate an arbitral award merely because it is convinced that the [arbitrator] made
the wrong call on the law. On the contrary, the award should be enforced, despite a court’s
disagreement with it on the merits, if there is a barely colorable justification for the outcome
reached.” Wallace v. Buttar,  378 F.3d  182,  190  (2d Cir.  2004)  (internal quotation omitted).
Although Coastal argues that no evidence “of any kind” exists that would cause the arbitrator to
find that Broadband Companies, LLC was the successor in interest of Broadband Construction
Services, LLC, it appears that Broadband did provide a copy of a resolution of Broadband
Companies dated September 21, 2006, which appointed Mr. Anthony to terminate Broadband
13




Construction, along with two other limited liability companies, and to “merge any business they
may have with [Broadband Companies’] business . . .                                                   .” Therefore, there was evidence before the
arbitrator  that  Broadband  Companies  was  to  be  the  successor  in  interest  to  Broadband
Construction Services, LLC, and the arbitrator so found, despite the fact that Broadband did not
provide proof that a merger plan was filed with the South Carolina Secretary of State. As “[t]he
decision of the arbitrator on matters agreed to be submitted to him is given considerable
deference by the courts,” the court denies Coastal’s motion to vacate his award on this ground.
Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 456 (2003).
c)  Validity of Arbitration Agreement
Finally, Coastal argues in both its motion to vacate and in its response in opposition to
Mr.  Anthony  and  Broadband’s  motion  to  confirm  that,  based  on  testimony  given  at  the
arbitration hearing, its agreement with Broadband was procured by fraud, and its enforcement
would be contrary to public policy. As such, Coastal argues that the contract between the parties
is void and that the court should now find that the parties were not required to arbitrate. Coastal
bases this argument on the assertion that Mr. Anthony, the owner of all of the Broadband
entities, testified during the arbitration hearing that the Broadband entities never had a contract
with P. Browne & Associates, the general contractor, to perform roofing work at the Charleston
Weapons  Station.  Coastal  contends  that  Broadband  Construction  represented  that  it  had  a
subcontract with P. Browne & Associates to perform roofing work, which Coastal relied on
when deciding to enter into its contract with Broadband Construction, but had it known that a
contract did not exist between those entities, it never would have entered into its contract with
Broadband.
14




Moreover, Coastal contends that P. Browne & Associates and Broadband violated federal
law. It asserts that, as a recipient of a subcontract from the Small Business Administration
special 8(a) program, P. Browne & Associates was required to perform twenty-five percent of
the work on the roofing project and could not have subcontracted all of the work to Broadband,
as a third party, without the government’s approval. Coastal alleges that the government never
approved Broadband’s participation in its contract with P. Browne & Associates and that P.
Browne & Associates and Broadband were able to conceal Broadband’s involvement in the
project by executing an assignment of claims. As such, Coastal believes Broadband must have
made deliberate misrepresentations to the Navy for Coastal to have access to the Charleston
Weapons Station to conduct the work it did, and since its contract with Broadband Construction
was allegedly procured by fraud, its enforcement would be against public policy.
Mr. Anthony and Broadband contend that the evidence supports the arbitrator’s finding
that a subcontract existed between P. Browne & Associates and Broadband Construction and
believe the court lacks subject matter jurisdiction to hear this claim, as the law requires an
arbitrator to judge a contract’s validity, compared to the validity of an arbitration clause, which
the court can review. The court agrees with this argument. As already explained in this court’s
previous order, the United States Supreme Court has determined that when a party challenges the
agreement, rather than the arbitration provision, “[t]he challenge should . . . be considered by an
arbitrator, not a court. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46 (2006).
Inherent in the arbitrator’s award is his finding that Coastal and Broadband Construction entered
into a valid contract, and to the extent Coastal would argue that the arbitrator manifestly
disregarded the law by making this finding, the court does not make such a finding.
15




Paul Browne, owner of P. Browne & Associates, testified during his deposition that he
drafted a subcontract document which was executed with Broadband. Although a signed copy
was never introduced into evidence because, according to Mr. Browne, a fire at his home
destroyed the document, the arbitrator admitted, over objection, an unexecuted copy of the
alleged agreement during the arbitration hearing. Mr. Anthony also testified that Broadband
Construction had a standard subcontract agreement with Mr. Browne’s company. While Coastal
contends that Mr. Anthony did not reveal until the last day of the arbitration hearing that a
subcontract was never signed by both his company and Mr. Browne’s company, Mr. Anthony
testified in his deposition on March  26,  2009 that the parties  “never signed the subcontract
agreement because the numbers continued to change.” (Anthony Dep. 32:7-8.) Coastal believes
this testimony proves that P. Browne & Associates and Broadband Construction never reached
an agreement as to the scope of the work and the price to be paid, and thus never had a valid
contract.
Before  the  arbitrator,  however,  was  more  than  just  the  unexecuted  copy  of  the
subcontract agreement between P. Browne & Associates Broadband. According to Mr. Anthony
and Broadband, the evidence also consisted of a signed Teaming Agreement, dated August 30,
2006, and a Letter of Understanding from Mr. Anthony to Mr. Browne, dated August 30, 2006,
which respectively memorialized the terms of the parties’ arrangement and listed the scope of
Broadband’s performance. Based on this evidence, the arbitrator could have concluded that a
valid contract existed between all of the parties involved with this project, and simply because
Broadband failed to produce a signed copy of its subcontract agreement with P. Browne &
Associates does not necessarily mean the two parties did not enter into an enforceable contract or
that  Coastal  was  fraudulently  induced  into  entering  into  its  contract  with  Broadband.
16




Additionally, the court declines to vacate the arbitrator’s award based on Coastal’s public policy
argument. Coastal dismissed its argument that P. Browne & Associates violated the regulations
of the 8(a) subcontractor program with prejudice at the arbitration hearing, and it is uncertain that
Coastal has standing to assert such a claim. Accordingly, the court does not find that no
justifiable ground for the arbitrator’s decision can be inferred from the facts of this case, and it
denies Coastal’s motion to vacate based on a fraudulent procurement theory.
II.                                                                                                     Mr. Anthony and Broadband’s Motion to Confirm Arbitrator’s Award
Section 9 of the Federal Arbitration Act provides that any time within one year after an
arbitration award is made, a party to the arbitration may apply to a federal district court for an
order confirming the award. 9 U.S.C. § 9. As already discussed, the federal court=s review of an
arbitration award is tightly circumscribed, see, e.g., Union Pac. R.R. v. Sheehan, 439 U.S. 89, 91
(1978)  (per  curiam)  (stating  that  the  scope  of review of arbitration award is                    “among the
narrowest known to the law” (internal quotation marks omitted)); Upshur Coals Corp. v. United
Mine Workers of America, 933 F.2d 225, 229 (4th Cir. 1991) (noting that arbitration awards are
“accorded great deference”), and a court must confirm the arbitration award unless the award is
vacated, modified, or corrected pursuant to sections 10 or 11 of the FAA. 9 U.S.C. § 9. The court
has denied Coastal’s motion to vacate on the various grounds asserted; therefore, the court grants
Mr. Anthony and Broadband’s motion to lift the court’s stay and confirm the arbitration award.
17




CONCLUSION
It is therefore, ORDERED, for the foregoing reasons, that Defendants Fred Anthony and
The  Broadband  Companies,  LLC’s  motion  to  lift  stay  and  confirm  arbitration  award  is
GRANTED and that Plaintiff Coastal Roofing Company, Inc.’s motion to vacate is DENIED. It
is also ORDERED that the total award received by Defendants shall bear post-judgment interest
at the legal rate.
AND IT IS SO ORDERED.
January 22, 2010
Charleston, SC
18

Download 27924.pdf

South Carolina Law