Lasco Inc. v. Inman Construction Corp.
467 S.W.3d 467
Tenn. Ct. App.2015Background
- Lasco (subcontractor) and Inman (general contractor) entered a subcontract for a university construction project that incorporated the AAA Construction Industry Arbitration Rules.
- Work proceeded 2009–2011; disputes arose and Lasco filed suit in chancery court in January 2012 seeking contract damages and attorney’s fees; the parties agreed to arbitrate.
- Arbitrator denied Lasco’s claim and awarded Inman and its surety $162,333.44 in attorney’s fees (total award to appellants $174,445.65 including other expenses).
- Lasco moved to vacate the fee portion of the award, arguing the subcontract (and Tennessee law) did not authorize attorney’s fees and the arbitrator exceeded his powers; appellants moved to confirm the award.
- Trial court vacated the attorney’s fee award; appellants appealed. The Court of Appeals reversed, holding the AAA Construction Industry Arbitration Rules were incorporated and authorized a fees award where all parties requested such relief.
- The Court remanded for entry of judgment confirming the arbitration award and for a determination of reasonable attorneys’ fees for enforcement proceedings.
Issues
| Issue | Plaintiff's Argument (Lasco) | Defendant's Argument (Inman/Travelers) | Held |
|---|---|---|---|
| Whether arbitrator exceeded authority by awarding attorney’s fees | Award unauthorized by subcontract/Tenn. law; arbitrator exceeded powers | Subcontract incorporated AAA Construction Industry Rules, which allow fees if authorized or requested; arbitrator had power | Held: Arbitrator did not exceed authority; award authorized because Rule 45 applies and both parties requested fees |
| Whether incorporation of AAA Rules can supply authority to award fees despite Tenn. Code § 29-5-311 | Section 29-5-311 bars counsel fees absent agreement to the contrary | Statute allows divergence “unless otherwise provided in the agreement to arbitrate”; incorporation supplies that agreement | Held: Incorporation by reference is valid; parties agreed to the Rules, so statute does not bar fees here |
| Whether arbitrator’s interpretation of contract is reviewable for correctness | Lasco: court may vacate award for errors of law/contract interpretation that exceed arbitrator’s scope | Inman: mere contractual interpretation errors are not grounds to vacate; only scope-exceeding acts are reviewable | Held: Deferential review applies; courts may determine whether award exceeded scope under the arbitration agreement (question of law) and here it did not |
| Entitlement to attorneys’ fees for enforcement and appeal | Lasco: trial court was correct; appellants not entitled | Inman/Travelers: entitled under Tenn. Code § 29-5-315 for costs/disbursements and enforcement | Held: Court exercised discretion to award reasonable attorneys’ fees for trial-court and appellate enforcement proceedings |
Key Cases Cited
- Arnold v. Morgan Keegan & Co., 914 S.W.2d 445 (Tenn. 1996) (defers to arbitrators; vacatur limited to statutory grounds such as exceeding powers)
- D & E Construction Co., Inc. v. Robert J. Denley Co., Inc., 38 S.W.3d 513 (Tenn. 2001) (arbitrator exceeds powers when award is not within scope of agreement to arbitrate; courts construe arbitration agreements like other contracts)
- McCall v. Towne Square, Inc., 503 S.W.2d 180 (Tenn. 1973) (writings referred to in a contract are incorporated by reference and construed together)
- Alison Group, Inc. v. Ericson, 181 S.W.3d 670 (Tenn. Ct. App. 2005) (Tenn. Code § 29-5-315 authorizes awards of costs and fees incurred enforcing arbitration awards)