Leeward Construction Co. v. American University of Antigua-College of Medicine
2016 U.S. App. LEXIS 11570
| 2d Cir. | 2016Background
- AUA contracted with Leeward in 2008 for construction of a medical school in Antigua; the contract required arbitration in Antigua under AAA Construction Industry Rules for disputes.
- Leeward initiated arbitration in 2011 over disputed work, and the arbitrators (after deciding in a preliminary order to issue a reasoned award) conducted hearings and accepted post-hearing submissions.
- The panel issued an initial award (June 22, 2012) and a modified award (Aug. 8, 2012) granting Leeward various sums: damages for deleted work reassigned under separate contracts, overhead/profit on deleted and omitted work, and EC $190,201.19 for Change Order Work.
- AUA petitioned to modify/vacate in SDNY; district court confirmed the award and denied modification, finding the award sufficiently reasoned and that there was at least a "barely colorable justification" for the awards.
- On appeal AUA principally argued (1) the panel failed to issue a sufficiently reasoned award on Change Order Work and (2) the panel improperly awarded damages under a "bad faith" doctrine not pleaded at arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitrators were required to issue a reasoned award and, if so, whether this award met that requirement | AUA: Panel promised a reasoned award and failed to provide sufficient reasoning for Change Order damages | Leeward: Panel complied with its preliminary order; detailed findings on central issues suffice even if not line-by-line on damages | Court: A reasoned award is more than a bare result but less than full findings; the panel provided substantive discussion of rationale and satisfied the requirement |
| Whether the award of damages under a "bad faith" theory (not explicitly invoked at arbitration) required vacatur | AUA: Leeward did not rely on "bad faith" at hearing, so AUA lacked opportunity to defend and award exceeded authority | Leeward: Panel’s award reflected accepted arguments for profit/compensation; terminology aside, justification exists in the record | Court: Applying "barely colorable justification" standard, panel’s rationale sufficed; award stands despite label of "bad faith" |
Key Cases Cited
- D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95 (2d Cir.) (arbitrator need not explain rationale when reasoned award not required)
- Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469 (5th Cir.) (description of "reasoned award" as more than a simple result but less than findings and conclusions)
- Cat Charter, LLC v. Schurtenberger, 646 F.3d 836 (11th Cir.) (reasoned award spectrum; credibility-based awards can be sufficiently reasoned)
- T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir.) ("barely colorable justification" standard for upholding arbitral awards)
- Banco de Seguros del Estado v. Mut. Marine Office, Inc., 344 F.3d 255 (2d Cir.) (courts must enforce arbitration awards if even a barely colorable justification exists)
- Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir.) (challenger bears heavy burden to vacate award)
- Sarofim v. Trust Co. of the West, 440 F.3d 213 (5th Cir.) (prior framing of reasoned award standard)
- U.S. Steel & Carnegie Pension Fund v. Dickinson, 753 F.2d 250 (2d Cir.) (arbitrator exceeding authority analyzed under "barely colorable justification")