CONSTRUCTION LAWLETTERS

FOR INDUSTRY PROFESSIONALS, MANAGERS, TRADES & SUPPLIERS

J. NORMAN STARK, ATTORNEY-AT-LAW

JURIS DOCTOR, B. ARCHITECTURE, B.F.A

Vol. 2001-8 August, 2001

ARBITRATION AWARDS: MODIFIED / VACATED?

Query: After parties to a written contract requiring arbitration have submitted a dispute to binding arbitration, may the Common Pleas Court vacate or modify the arbitrator’s award? Answer: Revised Code Section 2711.10 provides for limited circumstances when an arbitrator’s award may be vacated, namely: " (A) The award was procured by corruption, fraud, or undue means; (B) There was evident partiality or corruption on the part of the arbitrators, or any of them; (C) The arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced. (D) 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."

Revised Code section 2711.11 similarly limits the court’s ability to modify the arbitrator’s award:"(A) There was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award; (B) The arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matters submitted; (C) The award is imperfect in matter of form not affecting the merits of the controversy."

These statutes intentionally prevent the Common Pleas Court from “…examining the actual merits upon which the arbitration award is based.” The Legislature intended that when “…parties voluntarily agree to submit their dispute to binding arbitration, they agree to accept the result regardless of its factual or legal accuracy.” There is a strong presumption that the arbitrator’s award is valid; this presumption will be “…overcome only upon a showing of fraud, corruption, material mistake or clear evidence that the arbitrator exceeded his authority.” Unless a party can show that the arbitrator’s decision lacks any basis or foundation, it will be unable to overcome the presumption of validity of the award. Additionally where the arbitration award indicates that it is in full settlement of the claims submitted to the arbitrator, this is “…sufficient evidence that all matters submitted were considered and ruled on.” Furthermore, an arbitration award has the “…same preclusive effect as a court judgment for the matters it decided.”

The Court of Appeals of Ohio addressed these controlling issues in a recent decision. A nursing home entered into a written contract with an architectural firm to renovate their nursing facility. The contract provided that disputes arising from this agreement would be decided by “…arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association.” The contract also provided that the arbitrator’s award would be final. After a dispute over payment arose, the architectural firm filed a Demand for Arbitration, to which the nursing home responded with a counterclaim alleging breach of contract, negligence and professional malpractice.

After hearing the claims, the arbitrator awarded the architectural firm $81,000.00 plus costs. The nursing home then filed an application in the Jefferson County Court of Common Pleas, seeking to vacate and/or modify the arbitration award, along with a complaint re-asserting the allegations of its arbitration counterclaim. The Trial Court confirmed the arbitrator’s award and dismissed the nursing home’s complaint with prejudice.

On appeal, the nursing home alleged that the award of $81,000.00 did not “…rationally flow from the terms of the agreement”, and that the arbitrator did not consider all of its claims. The Court of Appeals affirmed the trial court’s decision, concluding that the nursing home failed to allege any “statutorily permissible” grounds for the court to vacate or modify the arbitration award. The Court also determined that the arbitrator’s award “…constituted full settlement of the claim submitted…” and, therefore, the trial court properly dismissed the nursing home’s claim with prejudice. Ford Hull-Mar Nursing Home, Inc. v. Marr, Knapp, Crawfis & Associates, Inc., (2000) 138 Ohio App.3d 174.

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Author:  J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He has had experience in business, Construction, Real Property, Litigation and Construction-Legal Project and Crisis Management.

 


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