PAUL IPPOLITO ET AL. v. OLYMPIC CONSTRUCTION, LLC
(AC 37437)
Alvord, Sheldon and Mullins, Js.
Argued December 9, 2015—officially released March 1, 2016
(
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Joseph DaSilva, Jr., with whom, on the brief, was Marc J. Grenier, for the appellants (plaintiffs).
Thomas M. Cassone, for the appellee (defendant).
Opinion
SHELDON, J. The plaintiff homeowners, Paul Ippolito and Lisa Ippolito, appeal from the judgment of the trial court, Hon. David R. Tobin, judge trial referee, denying their motion to vacate an arbitration award in favor of their home improvement contractor, defendant Olympic Construction, LLC, and granting the defendant’s motion to confirm that award. The arbitration involved a claim by the defendant for lost profits for work repairing water damage to the plaintiffs’ home, which it was not permitted to complete under the terms of their home improvement contract due to the plaintiffs’ alleged termination of that contract without just cause. The plaintiffs claim that the trial court erred in confirming the arbitrator’s award of lost profit damages to the defendant because the contract did not comply with certain provisions of the Home Improvement Act (HIA),
The following facts are relevant to this appeal. The plaintiffs, owners of a residential property located at 131 Pequot Lane in New Canaan, suffered water damage at their home following a storm. As a result, the plaintiffs entered into a contract with the defendant to repair the damage. That contract, dated May 26, 2011, consisted of an American Institute of Architects (AIA) Standard Form A133–2009 and several other documents, which were incorporated therein by reference, including AIA Document A201–2007, General Conditions of the Contract for Construction. The contract provides that all disputes between them arising out of or related to the contract will be subject to arbitration before an arbitrator from the American Arbitration Association in accordance with the association’s Construction Industry Arbitration Rules.
During the course of repairs, another storm caused more water damage to the plaintiffs’ home, prompting Paul Ippolito to terminate the parties’ contract before the defendant could complete the agreed upon work. The defendant then filed a claim for arbitration, seeking to recover lost profits for work it had agreed to perform under the contract but had not been allowed to complete.
The plaintiffs defended themselves in the arbitration by arguing that the contract was void for noncompliance with the HIA, and thus that it was unenforceable against them by the defendant, because it failed to give them proper statutory notice of their cancellation rights under the contract, and failed to include a starting date and completion date for the work to be performed thereunder. The arbitrator rejected the plaintiffs’ defense, found that Paul Ippolito’s termination of the contract had not been for cause, and thus awarded
After the arbitration, the plaintiffs moved to vacate the arbitration award in the Stamford Superior Court pursuant to
‘‘Judicial review of arbitral decisions is narrowly confined. . . . When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties’ agreement. . . . When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission. . . . Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution. . . .
‘‘Where the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous. Courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrators’ decision of the legal questions involved. . . . In other words, [u]nder an unrestricted submission, the arbitrators’ decision is considered final and binding; thus the courts will not review the evidence considered by the arbitrators nor will they review the award for errors of law or fact. . . .
‘‘Even in the case of an unrestricted submission, we have . . . recognized three grounds for vacating an award: (1) the award rules on the constitutionality of a
I
We first address the plaintiffs’ claim that the arbitrator’s award violates the clear public policy of this state because it enforces against a homeowner, on a claim for damages by a contractor, a home improvement contract that does not comply with the HIA. The plaintiffs argue, more particularly, that the location of the cancellation notice within the contract does not comply with
We begin by setting forth our standard of review. ‘‘[W]e favor arbitration as a means of settling private disputes, [thus] we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution. . . . We will, however, submit to higher scrutiny an arbitration award that is claimed to be in contravention of public policy. . . . [P]arties cannot expect an arbitration award approving conduct which is . . . contrary to public policy to receive judicial endorsement any more than parties can expect a court to enforce such a contract between them. . . . When a challenge to the arbitrator’s authority is made on public policy grounds, however, the court is not concerned with the correctness of the arbitrator’s decision but with the lawfulness of enforcing the award. . . .
‘‘Thus, when a party challenges a consensual arbitral award on the ground that it violates public policy, and where that challenge has a legitimate, colorable basis, de novo review of the award is appropriate in order to determine whether the award does in fact violate public policy. . . . As this court maintained in [State v. AFSCME, Council 4, Local 391, 309 Conn. 519, 528, 69 A.3d 927 (2013)], we defer to the arbitrator’s interpretation of the agreements regarding the scope of the [contract] provision . . . . We conclude only that as a reviewing court, we must determine, pursuant to our plenary authority and giving appropriate deference to the arbitrator’s factual conclusions, whether the contract provision in question violates those policies. . . .
‘‘To determine whether an arbitration award must be vacated for violating public policy, we employ a twopronged analysis. . . . First, we must determine whether the award implicates any explicit, well-defined, and dominant public policy. . . . To identify the existence of a public policy, we look to statutes,regulations, administrative decisions, and case law. . . . Second, if the decision of the arbitrator does implicate a clearly defined public policy, we then determine whether the contract, as construed by the arbitration award, violates that policy.’’ (Citations omitted; emphasis in original; internal quotation marks omitted.) Burr Road Operating Co. II, LLC v. New England Health Care Employees Union, District 1199, 316 Conn. 618, 629–31, 114 A.3d 144 (2015) (Burr Road). ‘‘Our case law . . . has emphasized, however, that a reviewing court still is bound by the arbitrator’s factual findings in making such a determination.’’ AFSCME, Council 4, Local 1565 v. Dept. of Correction, 298 Conn. 824, 837, 6 A.3d 1142 (2010).
The plaintiffs claim that the arbitrator’s award violates public policy because the contract is noncompliant with two sections of the HIA: (1)
A
We first turn to the plaintiffs’ claim that the contract violates public policy because it does not comply with the notice of cancellation requirements of the HIA under
The plaintiffs initially argued before the arbitrator that the contract did not contain any notice of cancellation rights, but the arbitrator disagreed, finding as follows: ‘‘The [plaintiffs] claim . . . that the contract failed to contain a notice of cancellation rights. This claim does not hold up. The contract, in section 12.2, directly above Mr. Ippolito’s signature, states that the contract includes AIA document A201–2007, General Conditions of the Contract for Construction. On pages 38–39 of that document is the notice of cancellation, which states explicitly that the Owner may cancel the contract ‘without any penalty or obligation’. The effectiveness of this inclusion is not affected by the fact that the date of the notice was changed from June 6 to June 10 and the date of the notice limit was changed from June 9 to June 13. The contract clearly does contain the notice of cancellation rights required by the [HIA].’’
The plaintiffs argued in the trial court, however, as they do before this court, that even if the contract did contain a cancellation notice, its location in the contract was improper. The trial court concluded that the award did not violate a clear public policy because the plaintiffs were unable to produce any case law holding that a defect in the location of the notice of cancellation, absent any other defect, was fatal.
Although the plaintiffs argued in the trial court that the contract violated
Our first step is to ‘‘determine whether the award implicates any explicit, well-defined, and dominant public policy.’’ Burr Road, supra, 316 Conn. 630. We conclude that the arbitration award, insofar as it rejects the plaintiffs’ challenge to the contract’s notice of cancellation, does not ‘‘[implicate] any explicit, well-defined, and dominant public policy.’’ Id. Although our Supreme Court has recognized that compliance with
In Dowling, our Supreme Court concluded that it would be inappropriate to require ‘‘technically perfect compliance’’ with
The arbitrator in this case found that the cancellation notice complied in substance with the requirements of the HIA, because, even though it was set forth on pages thirty-eight and thirty-nine of a separate document that had been incorporated into the contract by reference, the incorporated document itself was referenced in close proximity to the signature line on the contract. Here, then, because the plaintiffs have not demonstrated that the cancellation notice was missing from the contract, or that the language or typeface or any other aspect of the cancellation notice was deficient in such a way as to deprive them of notice of their cancellation rights under the HIA, we cannot conclude that enforcement of the contract against the homeowners violated an explicit, well-defined and dominant public policy of this state.
B
We turn next to the plaintiffs’ claim regarding
The arbitrator made the following findings as to the starting date and completion date of work to be performed under the parties’ contract: ‘‘The . . . claim . . . that the contract does not include a start date and a completion date . . . fails. The General Conditions state in section 8.1.2: ‘[t]he date of commencement of the Work is the date established in the agreement.’ Section 2.3.1.1 of the agreement states: ‘For purposes of Section 8.1.2 of A201–2007, the date of commencement of the Work shall mean the date of commencement of the Construction Phase.’ In the following section 2.3.1.2, it states, ‘The Construction Phase shall commence upon the Owner’s acceptance of the Construction Manager’s Guaranteed Maximum Price proposal or the Owner’s issuance of a Notice to Proceed, whichever occurs earlier.’ The completion date for the contract is defined in Section 9.8 of the General Conditions.8 In this matter, the start dates and the completion date can be readily adduced by
The trial court thus rejected the plaintiffs’ claim that the contract violated the starting date and completion date requirement of the HIA, and with it the claim that enforcement of that contract against them violated an explicit, well-defined, and dominant public policy of this state. On that score, the court expressly noted that the plaintiffs could not provide any case law that held that ‘‘the starting date and/or completion date need to be fixed calendar dates rather than dates to be determined upon the occurrence of certain events. (E.g., the completion of plans; issuance of a building permit; notification of closing on construction financing.)’’
The plaintiffs again claim on appeal that enforcement against them of a home improvement contract that is noncompliant with the starting date and completion date requirement of the HIA violates public policy. We are bound by the arbitrator’s factual findings; AFSCME, Council 4, Local 1565 v. Dept. of Correction, supra, 298 Conn. 837; including the finding that ‘‘the start date and the completion date can be readily adduced by looking at the entire contract.’’ On the basis of those findings, the arbitrator concluded that the parties’ contract was compliant with the HIA requirement that it contain a starting date and completion date. Accordingly, the plaintiffs’ claim on appeal fails, for even if strict enforcement of the starting date and completion date requirement of the statute were an explicit, well-defined, and dominant public policy of this state, the contract here at issue does not violate that requirement or the public policy it is designed to promote.
II
The plaintiffs next claim that the arbitrator’s enforcement of a contract that is noncompliant with
‘‘[Section] 52-418 (a) (4) provides that an arbitration award shall be vacated if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made. . . . [A]n award that manifests an egregious or patently irrational application of the law is an award that should be set aside pursuant to
‘‘So delimited, the principle of vacating an award because of a manifest disregard of the law is an important safeguard of the integrity of alternate dispute resolution mechanisms. Judicial approval of arbitration decisions that so egregiously depart from established law that they border on the irrational would undermine society’s confidence in the legitimacy of the arbitration process. . . . Furthermore, although the discretion conferred on the arbitrator by the contracting parties is exceedingly broad, modern contract principles of good faith and fair dealing recognize that even contractual discretion must be exercised for purposes reasonably within the contemplation of the contracting parties. . .
‘‘In Garrity [v. McCaskey, 223 Conn. 1, 9, 612 A.2d 742 (1992)], we adopted the test enunciated by the United States Court of Appeals for the Second Circuit in interpreting the federal equivalent of
The plaintiffs argue that the contract does not comply strictly with the HIA and the HSSA, and that mandatory strict compliance with the HIA and the HSSA is a well-defined, explicit, and clearly applicable law. Moreover, the plaintiffs argue that the arbitrator recognized the existence of the requirements of
The arbitrator found that the notice of cancellation in the contract here at issue deviated from the strict requirements of the HIA in only a minor and technical manner, and concluded that the contract complied fully with the HIA’s requirement that the contract contain a starting date and completion date. As for the latter determination, it completely undermines the plaintiffs’ claim that by enforcing a contract that failed to contain a starting and completion date, the arbitrator issued his award in manifest disregard of the law. The relevant provisions of the HIA simply were not violated at all. As for the former determination, although the court determined that the location of the cancellation notice in the parties’ contract constituted a minor and technical deviation from the requirements of the HIA, we already have determined that no such deviation required the nonenforcement of the contract unless it was shown to have deprived the plaintiffs of notice of their statutory cancellation rights under the contract. By failing to plead and prove such a deprivation of notice of their statutory cancellation rights as a result of the minor and technical deviation here at issue, the plaintiffs have failed to prove that the arbitrator ignored the requirements of a well-defined, explicit, and clearly applicable law, or that he thereby demonstrated an ‘‘extraordinary lack of fidelity to established legal prin-ciples’’; (internal quotation marks omitted.) id., 306; as required to establish a manifest disregard of the law within the meaning of
The judgment is affirmed.
In this opinion the other judges concurred.