CITY OF BRIDGEPORT v. THE KASPER GROUP, INC.
(SC 17470)
Supreme Court of Connecticut
Argued October 26, 2005—officially released June 6, 2006
278 Conn. 466
Sullivan, C. J., and Borden, Katz, Palmer and Vertefeuille, Js.*
* The listing of justices reflects their seniority status on this court as of the date of oral argument.
Jason M. Kuselias, with whom, on the brief, were Craig A. Raabe and Patrick J. Sweeney, for the appellee (plaintiff).
Opinion
KATZ, J. The defendant, The Kasper Group, Inc., appeals from the judgment of the trial court granting the application of the plaintiff, the city of Bridgeport, to vacate an arbitration award under
The record reveals the following facts and procedural history. In 1998, the Bridgeport city council, desiring to construct a new elementary school, adopted a resolution establishing a school building committee (committee) to develop plans and specifications for the construction of the new West Side School and to apply for state grants to defray the construction costs. The committee invited professional design firms, including the defendant, to present proposals for the design of the new school. About one month after the defendant had presented its proposal, the committee notified the defendant that it had been selected as the design firm for the West Side School. The plaintiff attached to the notification a draft contract. Over the next few months, the parties negotiated the terms of the contract. On February 24, 2000, the defendant signed the contract, but a representative of the plaintiff never subsequently signed the contract.
On December 19, 2000, the committee, acting through its construction manager, notified the defendant that the scope of the project had changed because the num
In accordance with the submission, the dispute was submitted to arbitration. The arbitration proceedings began in June, 2001, and consisted of twelve days of hearings spanning nearly nineteen months. During the arbitration, the plaintiff claimed that, if a contract existed, it was void ab initio because it had been procured by illegal means. The undisputed fаct underpinning this defense was that, just prior to the start of the arbitration proceedings, Paul Pinto, who owned 99 percent of the shares of the defendant when it was awarded the West Side School project, had entered into
Ganim‘s criminal trial started after the arbitration proceedings at issue in the present case had begun. On February 11, 2003, approximately two weeks after the last day of hearings in the arbitration, the plaintiff filed with the arbitrator a motion to stay the posthearing briefing schedule until the conclusion of testimony in the Ganim trial. Specifically, the plaintiff sought to supplement the record before the arbitrator with the testimony from Ganim‘s trial of certain of the defendant‘s employees, most notably Pinto, who already had testified at length regarding many of his illegal activities. The arbitrator denied this motion.
By agreement, both parties submitted their posthearing briefs on March 10, 2003. At the same time, the plaintiff also filed a motion to submit additional evi
On May 14, 2003, the arbitrator rendered an award in favor of the defendant and ordered the plaintiff to pay the defendant $155,507.36.2 The arbitrator did not set forth his reasoning underlying the award. Pursuant to
On appeal, the defendant claims that the trial court improperly determined that the arbitrator‘s denial of the plaintiff‘s motions had constituted misconduct under
In response, the plaintiff claims that Pinto‘s testimony was relevant to its defense that the contract had been procured illegally. The plaintiff also claims that Pinto‘s testimony was relevant to rebut the defendant‘s argument that a prior course of dealing, namely, a long history between the parties of legally obtained contracts, had been established. In particular, the plaintiff contends that one of the prior contracts between the parties on which the defendant relies to establish the prior course of dealing was identified in Pinto‘s testimony as having been procured illegally. The plaintiff further claims that the arbitrator‘s denial of its motions deprived it of a full and fair hearing because Pinto had
Finally, the plaintiff asserts two alternate grounds on which the trial court‘s judgment should be affirmed. First, the plaintiff contends that enforcing the arbitrator‘s award would violate the public policy against binding a municipality on the basis of the unauthorized acts of its agents. Second, the plaintiff contends that the award also violates the public policy against the enforcement of illegal contracts.6 We agree with the plaintiff that it was deprived of a full and fair hearing because Pinto‘s testimony at the criminal trial was highly incriminating and instrumental to its defense that the contract was void because it had been procured illegally.
We begin with a restatement of the principles that guide our review of a trial court‘s judgment vacating an arbitration award. “This court has for many years wholeheartedly endorsed arbitration as an effective
“[A]rbitrators are accorded substantial discretion in determining the admissibility of evidence, particularly in the case of an unrestricted submission, which relieve[s] the arbitrators of the obligation to follow strict rules of law and evidence in reaching their decision. . . . Indeed, it is within the broad discretion of arbitrators to decide whether additional evidence is required or would merely prolong the proceedings unnecessarily. . . . This relaxation of strict evidentiary rules is both necessary and desirable because arbitration is an informal proceeding designed, in part, to avoid the complexities of litigation. Moreover, arbitra
A trial court‘s decision to vacate an arbitrator‘s award under
Additionally, to vacate an arbitrator‘s award on the ground of misconduct under
Federal case law considering whether an arbitrator‘s evidentiary ruling deprived a party of a fair hearing is consistent with requiring the moving party to demonstrate substantial prejudice to vacate an award on this ground. One federal court analogized to the standard of review accorded trial courts’ evidentiary rulings and declined to vacate an arbitrator‘s award because “it cannot be said as a matter of law that [the excluded evidence] was decisive or that its exclusion was seriously harmful in the light of the other evidence in the case.” Newark Stereotypers’ Union No. 18 v. Newark Morning Ledger Co., 397 F.2d 594, 599 (3d Cir.), cert. denied, 393 U.S. 954, 89 S. Ct. 378, 21 L. Ed. 2d 365 (1968); see also Steiner v. Glenn, United States District Court for the Northern District of Illinois, Docket No. 00C7645 (September 24, 2002) (refusing to vacate arbitrator‘s award because moving party did not establish that excluded evidence was central and decisive to disputed issue). Indeed, in the few instances in which federal courts have vacated an arbitrator‘s award on this ground, the arbitrator‘s evidentiary ruling had precluded the moving party from presenting evidence that was decisive and central to a disputed claim or defense. See, e.g., Tempo Shain Corp. v. Bertek, Inc., supra, 120 F.3d 20-21; Hoteles Condado Beach v. Union De Tronquistas Local 901, supra, 763 F.2d 40.
For example, in Hoteles Condado Beach v. Union De Tronquistas Local 901, supra, 763 F.2d 36, a union filed a grievance challenging an employee‘s dismissal and the dispute subsequently was referred to arbitration. During the arbitration, the employer‘s sole witness to the act that had caused the employee‘s dismissal refused to testify. Id., 37. The employer therefore attempted to substitute the witness’ live testimony with the transcript of the emplоyee‘s criminal trial for the
Requiring the moving party to establish substantial prejudice by demonstrating that the decision excluded evidence that was decisive or likely to have altered the outcome of a claim is consistent with the principles underlying arbitration. “A party‘s choice to accept arbitration entails a trade-off. A party can gain a quicker, less structured way of resolving disputes; and it may also gain the benefit of submitting its quarrels to a
We begin our analysis of whether, in the present case, the arbitrator‘s exclusion of the transcript of Pinto‘s testimony constituted misconduct, with a review of the evidence that was admitted into evidence in support of the plaintiff‘s defense that the West Side School contract had been procured illegally. First, the plaintiff submitted into evidence copies of the information charging Pinto along with his written plea agreement, in which he admitted that he had engaged in the conduct alleged in the information. The information charged Pinto with participating in a racketeering conspiracy involving the payment оf kickbacks and bribes to an elected official to enrich himself and to obtain preferential treatment of his business interests. Specifically, the information alleged that Pinto had paid bribes and kickbacks to obtain municipal contracts relating to a wastewater treatment facility, a sports complex located in Bridgeport, and asbestos removal from municipal properties. In addition, Ganim‘s criminal indictment was admitted into evidence. In relevant part, the indictment alleged that Ganim, in exchange for money and gifts, had directed that contracts be awarded to the defendant for the construction of an arena and a baseball stadium in Bridgeport. The final piece of evidence before the arbitrator on this issue was Pinto‘s refusal to testify during the arbitration. As we have noted previously, pursuant to the agreement of the parties and the arbitrator, the plaintiff submitted an offer of proof suggesting specific adverse inferences that could be drawn from Pinto‘s refusal to testify, including the inference that Pinto‘s illegal activities in procuring municipal contracts had extended to the West Side School contract.
We now review Pinto‘s testimony at the Ganim trial, which the arbitrator refused to admit into evidence. In the most relevant parts, Pinto testified that, although he had had no experience or training as an architect, surveyor or engineer, he joined the defendant‘s firm, whose largest paying client at the time was the plaintiff. Pintо‘s main responsibility with the defendant was “just to interact with [Ganim], continue to get whatever city jobs the [defendant] was going after, and make sure that work continued to flow and do whatever is necessary to
On the basis of a comparison of Pinto‘s trial testimony with the evidence admitted at the arbitration, we сonclude that Pinto‘s trial testimony was both relevant and not cumulative on the issue of whether the West Side School contract had been procured illegally. Evidence is relevant if it has “any tendency to make the existence of any fact that is material to the determination of the proceeding more probable or less probable than it would be without the evidence.”
Although Pinto‘s refusal to testify in the arbitration coupled with the documentary evidence, including Pinto‘s information and plea agreement and Ganim‘s indictment, could have provided a basis for drawing an inference that the West Side School contract was awarded as part of a kickback and bribery scheme between Pinto and Ganim, the arbitrator also reasonably could have rejected such an inference because only certain specific contracts that had been procured illegally were identified in those documents, none of which were related to school contracts. Conversely, Pinto‘s testimony would have made the conclusion that he illegally had procured the West Side School contract very likely. At the very least, his testimony very “[likely] would [have] affect[ed] the result” of the arbitration had it been introduced. (Internal quotation marks omitted.) Daley v. McClintock, supra, 267 Conn. 403. Indeed, to consider the testimony and conclude otherwise, an arbitrator would have to find that, although Pinto‘s job was to do whatever he had to do in order to continue the flow of work to the defendant, that Pinto had engaged in a widespread corruption scheme that resulted in him getting every contract he wanted, and that Pintо had procured major municipal contracts, including “some
We recognize that, if the arbitrator had admitted Pinto‘s testimony, the arbitrator would have been required to allow the defendant additional time to examine and respond to this new evidence,12 with the potential for
In reviewing the arbitrator‘s refusal to consider Pinto‘s testimony, we are mindful of the primary goal of arbitration, which is to provide “the efficient, economical and expeditious resolution of private disputes.” Wu v. Chang, 264 Conn. 307, 313, 823 A.2d 1197 (2003).
The judgment is affirmed.
In this opinion SULLIVAN, C. J., and BORDEN and PALMER, Js., concurred.
VERTEFEUILLE, J., dissenting. I agree with the majority that the testimony of Paul Pinto was both relevant and not cumulative. I disagree, however, with the majority‘s conclusion that the arbitrator‘s exclusion of Pinto‘s testimony substantially prejudiced the defendant, The Kasper Group, Inc. In my view, the exclusion of Pinto‘s testimony, in light of the other evidence, did not substantially prejudice the plaintiff, the city of Bridgeport, and, accordingly, I conclude that the arbitrator‘s decision to exclude this evidence was not misconduct. Because I conclude that the arbitrator did not commit misconduct, I, unlike the majority, would reach the plaintiff‘s argument that the trial court‘s judgment should be affirmed on the alternate grounds that
I
At the outset, I note my agreement with the majority‘s determination that substantial prejudice arises if the excluded evidence would have been likely to alter the outcome if it had been introduced. See Daley v. McClintock, 267 Conn. 399, 403, 838 A.2d 972 (2004) (new civil trial required only when trial court‘s evidentiary “ruling [likely] would [have] affect[ed] the result“); Hoteles Condado Beach v. Union De Tronquistas Local 901, 763 F.2d 34, 40 (1st Cir. 1985) (vacating arbitrator‘s award because evidence excluded was “central and decisive” to proffering party‘s claim). I disagree, however, with the majority‘s application of this rule to the present case. The majority concludes that Pinto‘s testimony “very likely” would have altered the outcome of the arbitration because he had testified in a related criminal trial against the plaintiff‘s then mayor, Joseph Ganim, that: (1) it was his job to do whatever he had to do in order to continue the flow of work to the defendаnt; (2) he had engaged in a widespread corruption scheme that resulted in him getting every contract he wanted; and (3) he had procured major municipal contracts including “some school jobs.” I disagree with the majority‘s conclusion because the prejudice of excluding evidence cannot be determined in a vacuum, but must be evaluated in light of the other evidence that was before the arbitrator. See Newark Stereotypers’ Union No. 18 v. Newark Morning Ledger Co., 397 F.2d 594, 599 (3d Cir.) (declining to vacate arbitrator‘s award because “it cannot be said as a matter of law that [the excluded evidence] was decisive or that its exclusion was seriously harmful in the light of the other evidence in the case” [emphasis added]), cert. denied, 393 U.S. 954, 89 S. Ct. 378, 21 L. Ed. 2d 365 (1968); see also Vasquez v. Rocco, 267 Conn. 59, 71-72, 836 A.2d 1158 (2003) (in determining whether improperly excluded evidence was harmful, “we necessarily must view that impropriety in the context of the totality of the evidence adduced at trial“). I conclude, for several reasons, that Pinto‘s testimony, viewed in light of the other evidence, does not make it likely that the arbitrator would have determined that the plaintiff met its burden in establishing that the West Side School contract was procured illegally.
First, there was no evidence at all offered during the arbitration showing that Ganim was involved in any way with the award of the West Side School contract to the defendant.1 The lack of evidence regarding Ganim‘s
Second, Pinto testified that Ganim, in return for bribes and kickbacks, would bypass the proper selection procedures to award projects to the defendant. In particular, Pinto detailed how Ganim directed the contracts for the construction of a ballpark for a minor league baseball team and an indoor hockey arena to the defendant outside of the normal bidding and selection process. Yet, no evidence was presented to the arbitrator demonstrating that the proper selection process had not been followed for the West Side School contract. Indeed, it appears that the proper selection process was followed. John Marsilio, the plaintiff‘s director of facilities, described, in his testimony during the arbitration, the proper selection procedure for a design profes-
Third, the majority suggests that Pinto may have been motivated not to testify during the arbitration in order not to jeopardize his plea bargain deal. See footnote 11 of the majority opinion. Pinto may also have been similarly motivated to be a strong witness for the government in order to not risk his plea deal. This motivation could have led the arbitrator reasonably to discount some of Pinto‘s sweeping statements that “there was not a contract that we wanted or actively sought that we did not get,” and that he got “any job contract or outcome that I needed to get and I was successful in all of them.”
Fourth, despite Pinto‘s testimony that he illegally obtained “some school jobs,” the United States Attorney did not pursue additional criminal charges against Ganim or Pinto with regard to any school сontracts. Although prosecution of such criminal charges would have required a higher burden of proof than in a civil proceeding, the failure to pursue additional criminal charges for any school contracts undercuts Pinto‘s claim to have obtained them through bribery. Thus, the arbitrator also reasonably could have discounted Pinto‘s testimony that he illegally obtained “some school jobs” as the result of either an imprecise memory
Fifth, Pinto‘s broad statements that he got every contract he wanted do not necessarily mean that the defendant obtained all of its contracts through bribery. For example, Patrick M. Rose, the senior vice president of the defendant, testified during the arbitration that he “has a contract in hand . . . for the [plaintiff].” This contract was not mentioned in Pinto‘s testimony or implicated in Pinto‘s information or Ganim‘s criminal indictment. In addition, Pinto admits in his testimony that when he went to work for the defendant, the plaintiff was already the defendant‘s largest client. Thus, Pinto‘s testimony would not necessarily establish that the defendant could have been selected for a municipal contract only through bribery, as opposed to on the merits of its bid.
Sixth, even if the arbitrator fully credited Pinto‘s admission that he obtained “some school contracts” illegally, the arbitrator was not required to conclude that the West Side School contract was among them. The majority acknowledges that Patrick Rose testified during the arbitration hearing that, in addition to the West Side School, the defendant worked on two other schools in Bridgeport, as well as a regional vocational agricultural school. See footnote 10 of the majority opinion. Thus, it was not a certainty, particularly in light of the complete absence of evidence of Ganim‘s involvement in the selection of the defendant for the West Side School contract, that the arbitrator would have concluded that the West Side School contract was procured illegally.
I therefore conclude that, even if Pinto‘s testimony had been admitted into evidence, the arbitrator nevertheless could have concluded that the defendant failed to meet its burden of proving its defense that the con-
I also disagree with the majority‘s conclusion that the arbitrator‘s exclusion of Pinto‘s testimony does not find support in the rules under which the arbitration was conducted. Arbitration is a creature of contract and in that contract the parties can agree to the rules under which an arbitrator will decide the dispute. See Stratford v. International Assn. of Firefighters, AFL-CIO, Local 998, 248 Conn. 108, 121, 728 A.2d 1063 (1999). The majority observed that the parties’ submission to arbitration included a provision under which the parties agreed to arbitrate the dispute in accordance with the construction industry arbitration rules of the American Arbitration Association (arbitration rules). See footnote 12 of the majority opinion. Under the arbitration rules, if evidence is submitted after the conclusion of the hearing, “[a]ll parties shall be afforded an opportunity to examine and respond to such documents or other evidence.”2 (Emphasis added.) American Arbitration Association, Construction Industry Dispute Resolution Procedures (1999 Ed.) rule R-32, pp. 28-29. Thus, if the arbitrator had admitted Pinto‘s testimony, he would have been required to allow the defendant, after twelve days of hearings spanning nearly nineteen months, additional time to examine and respond to this new evidence. In addition, the arbitration rules provide the arbitrator with the discretion to “reject evidence deemed . . . to be . . . of slight value compared to
The majority expresses doubt about the extent of any delay that admitting Pinto‘s testimony would have caused in bringing the arbitration proceedings to a conclusion. Specifically, in footnote 13 of its opinion, the majority “question[s] . . . in light of Pinto‘s refusal to testify in the first instance, the extent, if at all, to which he would have responded to that evidence.” If the majority is suggesting that the defendant would not have responded if Pinto‘s testimony was admitted into evidence, I disagree. First, Pinto would have played no role in the defendant‘s decision to respond to Pinto‘s testimony because, by the time of the arbitration, Pinto
Alternatively, if the majority is suggesting in the previously set forth quoted statement that the delay would have been minimal because Pinto likely would have refused to testify for the defendant in its response to the submission of his testimony from the Ganim trial, I also disagree. I believe that admitting Pinto‘s testimony would have delayed further the conclusion of the arbitration proceedings even if Pinto had again refused to testify because the arbitrator would have been required to, at the very least, give the defendant time to review the entire transcript of Pinto‘s testimony and any other relevant evidence from the Ganim trial, and to submit pertinent excerpts to the arbitrator. Further, the defendant may also have decided to call witnesses or adduce other evidence to attack Pinto‘s credibility and undermine the allegations he made in his testimony.
II
Because I conclude that the arbitrator did not commit misconduct, I reach the plaintiff‘s alternate grounds to affirm the judgment of the trial court. Specifically, the plaintiff argues that the arbitrator‘s award should be vacated because its enforcement would violate two public policies. First, the plaintiff claims that enforcement
This court will vacate an arbitrator‘s award if the award violates a clear public policy. Garrity v. McCaskey, 223 Conn. 1, 6, 612 A.2d 742 (1992). In deciding whether to vacate the arbitrator‘s award on this ground, a court “is not concerned with the correctness of the arbitrator‘s decision but with the lawfulness of enforcing the award. . . . Accordingly, the public policy exception to arbitral authority should be narrowly construed and [a] court‘s refusal to enforce an arbitrator‘s interpretation of [a contract] is limited to situations where the contract as interpreted would violate some explicit public policy that is well defined and dominant, and is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests. . . . The party challenging the award bears the burden of proving that illegality or conflict with public policy is clearly demonstrated. Therefore, given the narrow scope of the public policy limitation on arbitral authority, the plaintiff can prevail in the present case only if it demonstrates that the [arbitrator‘s] award clearly violates an established public policy mandate.” (Internal quotation marks omitted.) State v. AFSCME, Council 4, Local 387, AFL-CIO, 252 Conn. 467, 474-75, 747 A.2d 480 (2000).
On the basis of the foregoing, this court‘s analysis proceeds in two steps: First, it must be determined “whether an explicit, well-defined and dominant public policy can be identified. . . . If so, [we] then [decide] if the award violated the public policy.” (Citation omitted; internal quotation marks omitted.) MedValUSA Health Programs, Inc. v. MemberWorks, Inc., 273 Conn. 634, 656, 872 A.2d 423, cert. denied sub nom. Vertrue, Inc. v. MedValUSA Health Programs, Inc., 546 U.S. 960, 126 S. Ct. 479, 163 L. Ed. 2d 363 (2005); State v. AFSCME, Council 4, Local 387, AFL-CIO, supra, 252 Conn. 476. It should be noted, however, that this court has “been wary about vacating arbitral awards on public policy grounds because implicit in the stringent and narrow confines of this exception to the rule of deference to arbitrators’ determinations, is the notion that the exception must not be interpreted so broadly as to swallow the rule.” (Internal quotation marks omitted.) MedValUSA Health Programs, Inc. v. MemberWorks, Inc., supra, 657.
A
Turning to the plaintiff‘s first alternate ground for affirmance, I conclude that it lacks merit because, even if I were to assume, arguendo, that this state has an explicit, well-defined, and dominant public policy against enforcing contracts entered into by a municipality‘s agent who lacked the authority to bind the municipality, the plaintiff‘s claim seeks to disturb the arbitrator‘s factual findings in violation of this court‘s traditional deference to the arbitrator‘s factual findings. Although this court reviews de novo whether an arbitrator‘s award is clearly violative of public policy; State v. AFSCME, Council 4, Local 387, AFL-CIO, supra, 252 Conn. 475-76; Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., 252 Conn. 416, 429, 747 A.2d 1017 (2000); we still “adhere to the long-standing principle that findings of fact are ordinarily left undisturbed upon judicial review.” Schoonmaker v. Cummings & Lockwood of Connecticut, P.C., supra, 432; see also State v. AFSCME, AFL-CIO, Council 4, Local 2663, 257 Conn. 80, 95, 777 A.2d 169 (2001) (court deferred to arbitrator‘s factual findings in rеview of whether award violated public policy). The arbitrator, in the present case, did
“Whether a particular act . . . was authorized by the city, by any previous delegation of power . . . is a question of fact. . . .” (Internal quotation marks omit-
B
Turning to the plaintiff‘s second alternate ground for affirmance, I conclude that this claim also lacks merit because, even if I again were to assume, arguendo, that there exists an explicit, well-defined, and dominant public policy against enforcing illegally procured contracts, I would defer to the arbitrator‘s factual findings under this court‘s standard of review of the narrow public policy exception. See part II A of this opinion. Thus, I would not review the correctness of the finding, implicit in the arbitrator‘s award, that the contract was not illegally procured. See Connecticut Importing Co. v. Janowitz, 128 Conn. 433, 436, 23 A.2d 514 (1941) (whether circumstances surrounding contract show that it was induced illegally is question of fact). The plaintiff contended throughout the arbitration that the West Side School contract was illegally procured. The arbitrator‘s award in favor of the defendant reveals his clear rejection of this defense. Even if I were to consider the evidence excluded by the arbitrator, I would nevertheless conclude that this evidence was insufficient to prove clearly that the West Side School contract was obtained illegally. See part I of this opinion. I therefore conclude that the plaintiff‘s second alternate ground also lacks merit.
I therefore respectfully dissent.