H.C. Nutting Co. v. Midland Atlantic Dev. Co., L.L.C.
5 N.E.3d 125
Ohio Ct. App.2013Background
- H.C. Nutting (consultant/testing) and Midland Atlantic (developer) contracted for geotechnical and construction testing services for a retail project; the contract included an arbitration clause and limits on liability.
- Contract limits: aggregate consultant liability capped at greater of $25,000 or fee (including attorney and expert fees) and an express consequential-damages exclusion (including loss of profits/revenue).
- Midland initiated AAA arbitration against H.C. Nutting (and Reece Campbell). Reece Campbell and Midland’s insurer paid $520,000 in settlements before the hearing.
- The arbitrator prepared a line-item award that included $61,621.44 labeled “lost revenue” and $187,234.99 in attorney fees, totaling $776,767.36, then credited the $520,000 settlements and awarded Midland $256,767.36 from H.C. Nutting.
- H.C. Nutting moved in common pleas court to vacate the award, arguing the arbitrator exceeded his powers by awarding consequential damages, attorney fees, and an amount inconsistent with the contractual limitation; the trial court vacated the award because it included consequential damages despite the contract exclusion.
Issues
| Issue | Plaintiff's Argument (H.C. Nutting) | Defendant's Argument (Midland) | Held |
|---|---|---|---|
| Whether the arbitrator exceeded authority by awarding consequential damages (lost profits/revenue) when the contract bars consequential damages | Arbitrator awarded "lost revenue" on the face of the award, which directly conflicts with the contract’s explicit consequential-damages exclusion | Any consequential-damage amount could have been absorbed by pre-award settlements; award as rendered ($256,767.36) did not necessarily require H.C. Nutting to pay consequential damages; arbitrator could have found exclusion inapplicable (e.g., gross negligence) | Vacated: award exceeded arbitrator’s authority because the award on its face included consequential damages expressly barred by the contract and the arbitrator gave no reasoning showing otherwise |
| Whether the arbitrator exceeded authority by awarding attorney fees or by awarding more than the contractual limitation | Arbitrator awarded attorney fees and other items possibly inconsistent with contract limits | Trial court can read the award as within contractual limits because aggregate award to Midland (after offsets) was below the contract cap; no clear showing arbitrator exceeded authority on fees | Trial court accepted that absence of contract language authorizing or forbidding fees precluded finding excess authority on fees; the appellate court affirmed vacatur only based on consequential-damages issue |
Key Cases Cited
- Goodyear Tire & Rubber Co. v. Local Union No. 200, 42 Ohio St.2d 516 (1975) (award must "draw its essence" from the agreement; mere ambiguity in reasoning does not justify vacatur if a rational nexus exists)
- State Farm Mut. v. Blevins, 49 Ohio St.3d 165 (1990) (vacatur required where award on its face included punitive damages not authorized by contract)
- Ohio Office of Collective Bargaining v. Civil Serv. Emp. Assn. Local 11 AFSCME, 59 Ohio St.3d 177 (1991) (arbitrator exceeds authority by ignoring plain contract terms and effectively rewriting the parties’ agreement)
- Southwest Ohio Reg. Transit Auth. v. Amalgamated Transit Union, 91 Ohio St.3d 108 (2001) (errors of law or fact by arbitrator are not grounds for vacatur; vacatur limited to statutory grounds such as exceeding authority)
- United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593 (1960) (arbitrators need not give reasons for awards; courts should uphold awards when reasonably possible)