Tully Construction Co., A.J. Pegno Construction Co., J v. v. Canam Steel
684 F. App'x 24
2d Cir.2017Background
- Tully contracted to supply steel for a New York State Whitestone Bridge project and subcontracted fabrication to Eastern Bridge; Eastern Bridge later sold assets/liabilities to Canam under an Asset Purchase Agreement (APA).
- Disputes over delayed deliveries led to a Completion Agreement (2007) and later a Delivery Agreement containing arbitration clauses; Tully demanded arbitration against Canam in 2008.
- After 17 days of hearings and extensive evidence, the arbitrator issued an award (Revised Award) largely in Tully’s favor, awarding roughly $6.88 million to Tully and $366,914 to Canam.
- Tully moved in district court to confirm the award; Canam moved to vacate, arguing manifest disregard of law, improper contractual interpretation (Letter Agreement and APA), lack of a reasoned award, and erroneous escrow credit handling.
- The district court confirmed the award and denied vacatur; the Second Circuit affirmed, rejecting Canam’s manifest-disregard, reasoned-award, and escrow arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitrator manifestly disregarded New Hampshire court order (preclusive effect) | Canam: NH order precludes liability for pre-APA breaches; arbitrator ignored it | Tully: NH language was obiter dicta; arbitrator permissibly treated it as non-preclusive | Court: Affirmed arbitrator; no manifest disregard — arbitrator reasonably treated NH language as dicta |
| Effect/interpretation of the Letter Agreement (timing extension) | Canam: Letter Agreement extended delivery schedule; arbitrator miscalculated delay/damages | Tully: Letter Agreement was an unenforceable agreement-to-agree; arbitrator reasonably rejected it | Court: Affirmed arbitrator; qualified, tentative language supports arbitrator’s conclusion |
| Whether Canam may be held liable for pre-APA breaches under the APA | Canam: Section 2.03(ii) prohibits assuming liabilities for pre-APA breaches | Tully: Arbitrator permissibly found Canam responsible for some damages based on evidence and contract interpretation | Court: No clear manifest disregard; award could be justified on the factual record and contract interpretation |
| Whether award was reasoned and whether escrow credit should include earned interest | Canam: Award lacked adequate explanation for percentage allocations; escrow credit should include interest | Tully: Award provided sufficient reasoning; escrow credit limited to principal per Delivery Agreement | Court: Arbitrator issued a reasoned award; escrow credit limited to principal only |
Key Cases Cited
- Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99 (2d Cir.) (standard of review for confirmation/vacatur)
- Porzig v. Dresdner, Kleinwort, Benson, N.A. LLC, 497 F.3d 133 (2d Cir.) (manifest-disregard standard reviewed de novo)
- Wallace v. Buttar, 378 F.3d 182 (2d Cir.) (manifest disregard requires more than legal error)
- STMicroelectronics, N.V. v. Credit Suisse Sec. (USA) LLC, 648 F.3d 68 (2d Cir.) (FAA §9 confirmation framework)
- D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95 (2d Cir.) (high burden to vacate arbitration award)
- Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir.) (limited grounds for vacatur)
- T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir.) (manifest disregard discussion)
- Leeward Constr. Co., Ltd. v. Am. U. of Antigua–Coll. of Med., 826 F.3d 634 (2d Cir.) (definition of a reasoned award)
- Major League Baseball Players Ass’n v. Garvey, 532 U.S. 504 (U.S.) (arbitrator’s improvident factfinding not ground for vacatur)