Massachusetts Highway Department v. Perini Corp.
79 Mass. App. Ct. 430
| Mass. App. Ct. | 2011Background
- CA/T and PKC dispute postaward interest on DRB awards for PKC’s change proposals on the Central Artery/Tunnel project.
- 1999 DRB disputes resolution agreement created binding arbitration before DRB, superseding contract provisions for identified claims.
- DRB Orders 11A and 16 awarded PKC amounts with postaward interest at 9% compounded annually for delays beyond 60 days.
- CA/T funded PKC via interim interim payments (Mod 507, 950 IA, etc.), later allocated to specific changes over time but left $20,089,149 unallocated as of January 2004.
- CA/T argued interim funding satisfied final payment; DRB and judge distinguished between preaward and postaward interest, holding interim funding did not fully satisfy awards.
- Judge modified the awards by applying statutory interest rate and rejected CA/T’s sovereign immunity and public policy challenges to postaward interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does interim funding constitute final payment? | PKC contends interim funding did not finalize payment; postaward interest accrues. | CA/T argues interim funding fully paid and superseded by later allocations, stopping interest. | Interim funding did not constitute final payment; postaward interest valid. |
| Equitable/public policy limits on postaward interest against a public entity | PKC asserts arbitration interest enforces timely compliance; public policy favors arbitration. | CA/T argues equity requires relief not punitive to taxpayers. | Public policy favors arbitration; no basis to deny postaward interest. |
| Sovereign immunity and consent to pay postaward interest | PKC relies on contract and DRB’s broad authority to waive immunity for interest. | CA/T contends sovereign immunity requires statutory authorization for interest. | Waiver via contract and DRB authority included consent; immunity does not bar interest. |
| Relation of c. 30, § 39G to DRB postaward interest | Interest rate should not be limited to § 39G; DRB may set different rate for arbitration. | CA/T argues § 39G governs only undisputed undisputed payments and applies by contract. | § 39G does not control DRB interest on disputes; DRB may award interest differently. |
| Compound interest validity | Argued DRB’s 9% compounded interest is permitted under arbitration. | Contends court should limit to statutory rate and prohibit compounding. | DRB’s compound interest permitted; not directly contrary to law. |
| Prejudgment interest | Prejudgment interest should reflect entire arbitration remedy including postaward interest. | No separate prejudgment interest beyond the DRB award. | Prejudgment interest added as part of the remedy; affirmed. |
Key Cases Cited
- Blue Hills Regional Dist. Sch. Comm. v. Flight, 10 Mass. App. Ct. 459 (Mass. App. Ct. 1980) (arbitrator can award interest as part of remedy; not subject to court interest rules)
- Baxter Health Care, Corp. v. Harvard Apparatus, Inc., 35 Mass. App. Ct. 204 (Mass. App. Ct. 1993) (arbitrator may award interest as part of damages)
- Watertown Firefighters, Local 1347 v. Watertown, 376 Mass. 706 (Mass. 1978) (interest to encourage compliance with arbitration awards)
- Minton Constr. Corp. v. Commonwealth, 397 Mass. 879 (Mass. 1986) (waiver of sovereign immunity for contractual obligations)
- Todino v. Wellfleet, 448 Mass. 234 (Mass. 2007) (implicit waiver of immunity in presence of statutory remedy and interest)
- D. Federico Co. v. New Bedford Redev. Authy., 9 Mass. App. Ct. 141 (Mass. App. Ct. 1980) (39G not controlling in arbitration of disputed claims)
- Plymouth-Carver Regional Sch. Dist. v. J. Farmer & Co., 407 Mass. 1006 (Mass. 1990) (narrow scope of review of arbitration awards)
- Lynn v. Thompson, 435 Mass. 54 (Mass. 2001) (arbitration award review limits; cannot substitute judgment)
- Marlborough Firefighters, Local 1714 v. Marlborough, 375 Mass. 593 (Mass. 1978) (public policy considerations in arbitration)