This appeal concerns an arbitration panel’s award of postaward interest on amounts owed to a general contractor for work on a public construction project. The Massachusetts Highway Department and Massachusetts Turnpike Authority (collectively, CA/T), filed these actions, later consolidated, seeking to vacate two arbitration awards in favor of Perini Corporation, Kiewit Construction Company, Inc., and Jay Cash-man, Inc. (collectively, PKC), joint venturers, in connection with work PKC performed on the Central Artery/Tunnel project (project) in Boston, under the parties’ 1995 public construction contract (construction contract). CA/T subsequently moved to dismiss the action as moot, arguing that CA/T already had paid the awards on time, by means of interim funding provided to PKC over the course of the work, and that no postaward interest was due. CA/T also raised issues of equity, public policy, and sovereign immunity in opposing confirmation of the award. For the reasons laid out below, we affirm the arbitration awards in all respects.
Factual background.® The matter before us arises in connection with PKC’s claims for additional compensation, or change proposals, in two of several such disputes between the parties that were submitted to arbitration.
At issue in this appeal are DRB orders 11A and 16, both of which include an award of postaward interest on amounts not paid within sixty days of the awards. Pivotal to the dispute is certain interim funding paid by CA/T to PKC over the course of the project. According to the record, CA/T modified the construction contract on occasion to provide PKC with interim funding, i.e., provisional payments for change proposals for which PKC had incurred costs, but for which no final agreement about payment had been reached. The time between PKC’s completion of the work and final agreement regarding payment sometimes took several years; the interim funding provided PKC with money to operate, pending final payment.
CA/T provided the interim funding by making modifications to the construction contract.
Arbitration proceedings. In deciding the parties’ various disputed claims involving payment for change proposals, the DRB issued five orders between August 31, 2001 and December 2, 2005, and awarded PKC a total of $56,529,000 in additional payments. All five awards provided for postaward interest. Three of the orders, DRB orders 3, 5, and 10, were confirmed in Superior Court and affirmed on appeal, and are not at issue here.
On May 13, 2005, the DRB issued order 11A, awarding PKC the amount of $10,763,000, and providing that “interest should be added to the . . . Award Amount at the rate of nine percent (9%) compounded per annum for any delay in payment beyond sixty (60) days after the date of the Award.” On December 2, 2005, the DRB issued order 16, awarding PKC the amount of $12,226,000, and again providing for postaward interest at nine percent, compounded annually, for any delay in payment. In 2008, CA/T allocated sufficient amounts from the interim funding previously paid to PKC, pursuant to modification 950, IG and IH, to pay the award amounts in orders 11A and 16. However, CA/T did not allocate funds to cover postaward interest for either award.
The judge confirmed orders 11A and 16 to the extent they required CA/T to pay postaward interest, but imposed a different interest rate, the rate established by G. L. c. 30, § 39G, and ruled that the award of compound interest was contrary to the controlling statute. Both parties appeal.
Discussion, a. Interim funding. CA/T does not appear to challenge the general proposition that an arbitrator has the authority to award postaward interest. “An arbitrator’s award of interest, when made as a component of an award, is an integral part of the total remedy that he fashions and, as such, is not subject to the statutory provisions which apply to court-awarded interest on contract claims.” Blue Hills Regional Dist. Sch. Comm. v. Flight, 10 Mass. App. Ct. 459, 472 (1980), reversed in part on other grounds, 383 Mass. 642, 644 (1981) (“For the reasons given by the Appeals Court, we uphold the power of the arbitrator to commence the accumulation of interest”); Baxter Health Care, Corp. v. Harvard Apparatus, Inc., 35 Mass. App. Ct. 204, 207 (1993). The Supreme Judicial Court has upheld postaward interest on arbitration awards as a means of encouraging compliance. See Watertown Firefighters, Local 1347 v. Watertown, 376 Mass. 706, 717-718 (1978).
CA/T, however, argues that it owes no postaward interest on the amounts awarded in DRB orders 11A and 16 because it paid PKC in full, within the time ordered by the DRB, by way of the interim funding that was already in PKC’s possession. The question, then, is whether the interim funding constituted final and timely payment of the award amounts.
As an initial matter, the parties dispute the appropriate standard
After review of the record, we are satisfied that the DRB decided the issue whether the interim funding constituted final payment of the awards when it ordered postaward interest. The merits of that decision are not revisited on appeal. Sheriff of Suffolk County v. AFSCME Council 93, Local 419, 67 Mass. App. Ct. 702, 705 (2006), citing School Dist. of Beverly v. Getter, 435 Mass. 223, 228 (2001).
Viewing DRB orders 11A and 16 together, it becomes apparent that the DRB treated preaward and postaward interest differently; that is, it found that the provisional nature of the interim funding satisfied the purposes of one and not the other. To place orders 11A and 16 in context, we begin with DRB order 10. In order 10, the DRB explained the effect of interim funding on final payment of that award as follows:
“No Offset Taken For Interim Funding Payments: The board has made no reduction in the Award Amount to account for Interim Funding made by CA/T for underpinning. The total amount of final payment (if any) made by CA/T for [change proposals] listed by PKC in its Presentation Document, ‘Allocation of $26.3M Interim Funding to Underpinning Changes’ (attached) shall be deducted from CA/T’s final payment of the Award Amount stated under (8) below.”
From this passage and the supporting documents, we understand the DRB to mean that no offset in the award amount would be made on account of the interim funding previously paid to PKC, but that any final payment made by CA/T, allocating interim funding to specific change proposals, should be deducted from the award amount.
We turn to order 11 A, the first of the two orders on appeal here. In order 11 A, the DRB expressly deferred a determination regarding preaward interest so as to “consider the Parties’ positions including consideration of the effects of any advance/ interim payments made to the contractor.” At the same time, the DRB ordered postaward interest on the award amount if not paid within sixty days.
The DRB returned to the issue of interim funding in order 16, the second order on appeal. With respect to interim funding and preaward interest, the DRB ruled that “with payment of the
On January 27, 2006, at PKC’s request, the DRB issued a clarification, in essence confirming its determination that the interim funding did not satisfy final and timely payment of the award amounts. When specifically questioned by PKC whether the DRB intended by order 16 to offset any of the interim funding against the award amounts for purposes of postaward interest,
CA/T insists that the precise issue whether the interim funding constituted final payment of the awards was not before the DRB and was only decided later by the judge. On the contrary,
The DRB’s determinations in this regard “are impregnable ‘short of fraud, arbitrary conduct, or significant procedural irregularity.’ ” Dadak v. Commerce Ins. Co., 53 Mass. App. Ct. 302, 306 (2001), quoting from Grobet File Co. of America, Inc. v. RTC Sys., Inc., 26 Mass. App. Ct. 132, 135 (1988). It was within the DRB’s authority to construe the significance of the evidence, including the parties’ contracts and CA/T’s payment practices, in deciding that the interim funding did not satisfy final payment of the amounts owed to PKC for the disputed claims. See Grobet File Co. of America, Inc. v. RTC Sys., Inc., supra.
Nevertheless, in orders 11A and 16, the DRB did not specifically explain the manner in which CA/T might satisfy the awards or what actions were required to render the interim funding final, and that issue was taken up by the judge. Based on the distinction drawn by the DRB between offset for interim payments for purposes of preaward and postaward interest in orders 11A and 16, and as further explained in the clarification, the judge determined that, in order to satisfy payment of the awards, CA/T was required to convert the interim funding to final payment through allocation to specific change proposals. Once allocated, the judge reasoned, CA/T could neither seek to rescind the interim funding nor withhold amounts against future pay
We concur. Considering the record as a whole, the only reasonable interpretation of the DRB’s orders 11A and 16 is that, to make the interim funding final and thus stop the accrual of postaward interest, it was necessary for CA/T to pay the award amounts with funds that were no longer subject to CA/T’s control. So long as CA/T had the contractual right to reconsider PKC’s entitlement to be paid, to make adjustments in the amounts already paid, or to deduct amounts against future payments, final payment of the award amounts was not effectuated in accordance with the DRB’s orders.
Contrary to CA/T’s argument, CA/T’s contractual right to control the interim funding through adjustments or deductions against future payments distinguishes the provisional character of the payments here from installment payments on a judgment or payments into a registry of a court, which, in the cases upon which CA/T relies, stopped the accrual of interest. See, e.g., Bogosian v. Woloohojian, 158 F.3d 1, 9 (1st Cir. 1998) (defendant’s payment into court’s registry stopped running of interest for amount paid, as defendant “completely gave up control of the money”); Illini FS, Inc. v. Myerscough, 137 Ill. App. 3d 861, 863-864 (1985) (judgment debtor made installment payments that judgment creditor agreed to apply to judgment).
We conclude that CA/T could satisfy the awards, and stop the accrual of postaward interest, by converting the interim funding already paid to PKC to final payment through allocation or, as the judge reasoned, by paying PKC with new monies that were free of all contractual constraints. Until CA/T paid PKC in such a manner, in sums sufficient to pay the awards, together with postaward interest, postaward interest would continue to run.
b. Equitable considerations and public policy. CA/T also asks that, as part of our review, we consider the equities of postaward interest, stressing that PKC suffered no loss of the use of the money pending the outcome of arbitration, since it had full use of the interim funding throughout the proceedings. We note, first, that the equitable considerations referenced in
Nonetheless, CA/T maintains that its position as a public entity requires that we take into account the equities of the arbitrator’s award as a matter of public policy. CA/T reasons that, because the purpose of interest is to compensate for loss of use of money, and since PKC had the use of the interim funding pending the outcome of the dispute, the award of postaward interest in these circumstances serves only to penalize CA/T, rather than to compensate PKC for any loss.
In support of its argument, CA/T points to M. O’Connor Contr., Inc. v. Brockton, 61 Mass. App. Ct. 278, 285 (2004), a case that this court described as “one of those rare cases where an arbitration award must be vacated on the ground that it offends public policy.” In that case, we vacated an arbitration
This case is very different.
We regard the strong public policy favoring arbitration and timely compliance with arbitration awards as more significant than the concerns raised by CA/T with respect to its status as a public entity. Whether public or private, “[ajbsent contrary statutory direction, the strong public policy in favor of arbitration of commercial disputes should be given effect.” Minton Constr. Corp. v. Commonwealth, 397 Mass. 879, 880 (1986). See Commonwealth v. Philip Morris, 448 Mass. 836, 844 (2007). “The policy of limited judicial review is reflective of the strong public policy favoring arbitration as an expeditious alternative to litigation for settling commercial disputes.” Plymouth-Carver Regional Sch. Dist. v. J. Farmer & Co., 407 Mass. at 1007. See
c. Sovereign immunity. CA/T also raised before the motion judge the defense of sovereign immunity, arguing that it did not consent to pay postaward interest as part of an arbitration award. We find no support for this contention.
CA/T correctly points out that “[sjovereign immunity prohibits liability against the ‘Commonwealth [and] ... its instrumentalities . . . except with [the Commonwealth’s] consent, and, when that consent is granted . . . only in the manner and to the extent expressed ... by statute.” Todino v. Wellfleet, 448 Mass. 234, 238 (2007), quoting from DeRoche v. Massachusetts Commn. Against Discrimination, 447 Mass. 1, 12 (2006). See Boxford v. Massachusetts Hy. Dept., 458 Mass. 596, 601-602 (2010). The present matter, however, concerns rights and obligations undertaken by CA/T pursuant to contract, and “[t]he Commonwealth long ago waived its sovereign immunity against actions brought to enforce obligations it assumed through contracts.” Minton Constr. Corp. v. Commonwealth, 397 Mass. at 880. See Monadnock Display Fireworks, Inc. v. Andover, 388 Mass. 153, 156-157 (1983). CA/T consented to be sued for obligations it assumed pursuant to the construction contract, and it also consented to be bound by the DRB’s resolution of the claims involved here, pursuant to the 1999 agreement.
Moreover, once CA/T agreed to arbitrate the disputed claims, the arbitration statute does not differentiate between public and private entities for purposes of our review. “The Legislature has identified the extremely limited grounds on which courts may vacate or modify arbitration awards, and it has not, in those statutory provisions, drawn any distinction between public and private sector arbitration.” Lynn v. Thomas, 435 Mass. at 62 n.13. In the absence of limiting statutory directive, CA/T’s contractual obligation to be bound by the DRB’s resolution of these claims should be given effect, regardless of CA/T’s status as a public entity. See Minton Constr. Corp. v. Commonwealth, 397 Mass. at 880.
In our review to determine whether the DRB acted within its authority, we note in particular the parties’ 1999 agreement to arbitrate “any and all disputes.” The law is clear that when a party has agreed to refer any and all disputes to arbitration, a party’s specific consent to a particular remedy is not necessary. “[Arbitrators, unless expressly restricted by the agreement or the submission to arbitration, have substantial discretion to determine the scope of their contractual authority to fashion remedies.” Superadio Ltd. Partnership v. Winstar Radio Prods., LLC, 446 Mass. 330, 339 (2006), quoting from Advanced Micro Devices, Inc. v. Intel Corp., 9 Cal. 4th 362, 367, 376 (1994). (discovery sanction ordered by arbitrator upheld under broad arbitration clause; specific consent not necessary to bind parties). See Drywall Sys., Inc. v. ZVI Constr. Co., 435 Mass. 664, 669-671 (2002) (arbitration clause deemed sufficiently broad to permit the arbitrator to award multiple damages, even though multiple damages were not specifically authorized). We think this holds true whether the parties to the arbitration agreement are public or private.
In the context of interest on damage awards imposed against
d. General Laws c. 30, § 39G. CA/T further argues that, by incorporating G. L. c. 30, § 39G, into the parties’ construction contract, CA/T indicated its consent to pay penalty interest only pursuant to that statutory payment scheme, and no other. However, § 39G does not, by its terms, control interest owed on disputed amounts awarded in dispute resolution proceedings. In D. Federico Co. v. New Bedford Redev. Authy., 9 Mass. App. Ct. 141, 146-147 (1980), we explained that the policy objective of the penalty interest provisions in c. 30, § 39G, is to promote a public agency’s prompt payment of undisputed amounts; we determined that those provisions did not apply to a contract
e. Compound interest. In DRB orders 11A and 16, the arbitrator awarded postaward interest at nine percent, compounded annually. The judge, citing both equitable and statutory grounds, substituted the statutory rate of interest in G. L. c. 30, § 39G, as the only postaward rate the DRB was authorized by law to impose in the equitable adjustment context and as the rate that would have applied had the parties not disputed the claims. As previously discussed, we do not consider the parties’ incorporation of G. L. c. 30, § 39G, into the construction contract, for undisputed claims, as applicable to the interest rate awarded here in the context of a dispute resolution. Moreover, any correlation between the procedure set out in G. L. c. 30, § 39G, governing late payment of undisputed amounts, and the late payment of an arbitration award resolving disputed claims, is too remote to render the interest provisions of the former controlling of the latter. See D. Federico Co. v. New Bedford Redev. Authy., 9 Mass. App. Ct. at 146-147.
Accordingly, we see no basis, in law or equity, for the interest rate set out in c. 30, § 39G, or the prohibition against interest on interest therein, to curtail the DRB’s authority to set the interest rate or to award compound interest on disputed amounts resolved by arbitration. See generally Bureau of Special Investi
f. Prejudgment interest. As a final matter, CA/T appeals from the judge’s addition of prejudgment interest to the awards. Under Connecticut Valley Sanitary Waste Disposal, Inc. v. Ze-lenski, 436 Mass. 263, 270-271 (2002), prejudgment interest is to be added on the entire amount of the arbitration award, which includes principal as well as interest awarded by the arbitrator. See Murphy v. National Union Fire Ins. Co., 438 Mass. 529, 533-534 (2003). In accordance with Blue Hills Regional Dist. Sch. Comm. v. Flight, 10 Mass. App. Ct. at 472, the DRB’s award of postaward interest was an integral part of the remedy ordered and, together with the award, formed the basis of the judgment. There was no error.
Based on the foregoing, the judgment is modified to allow the award of interest by the method and at the rates ordered by the arbitrator. As so modified, the judgment is affirmed.
So ordered.
For additional background regarding the project and prior arbitration proceedings, see generally Massachusetts Hy. Dept. v. Perini Corp., 444 Mass. 366 (2005).
From time to time, during the course of the project, PKC sought payment
Pursuant to contract modification 507 (Mod 507), part IA, CA/T provided $13.1 million to PKC as “an interim funding amount for payment of Direct Costs already incurred by the Contractor for changes for which an interim determination of entitlement has been made.” Mod 507, part IA, also provided that the interim amount was “subject to adjustment by” CA/T and that “[tjhis amount may be modified upward or downward by [CA/T] in a subsequent Modification.” The modification also stated: “This shall not be considered as a determination of merit for all such Change Proposals by [CA/T]; and [CA/T] reserves all defenses, substantive and procedural which it may have to entitlement or quantum on any given Change Proposal.”
On December 22, 1998 and April 16, 1999, CA/T added $13.2 million to the interim funding, pursuant to Mod 507, parts IC and ID, for a total of $26.3
On January 16, 2003, CA/T issued another modification, 950 IA (Mod 950), to provide further interim funding in the amount of $25 million. Together with an additional $1.5 million that had been transferred to PKC in April, 1999, the total interim funding transferred to PKC through 2003 was $46,589,149.
Orders 3 and 5 were affirmed by the Supreme Judicial Court on May 26, 2005, and order 10, by this court, on May 30, 2006. See Massachusetts Hy. Dept. v. Perini Corp., 444 Mass. 366, 367 (2005); Massachusetts Hy. Dept. v. Perini Corp., 66 Mass. App. Ct. 1109 (2006).
The standard is well established. “A matter submitted to arbitration is subject to a very narrow scope of review.” Plymouth-Carver Regional Sch. Dist. v. J. Farmer & Co., 407 Mass. 1006, 1007 (1990). In essence, courts inquire into arbitration decisions “only to determine if the arbitrator exceeded the scope of his authority, or decided the matter based on ‘fraud, arbitrary conduct, or procedural irregularity in the hearings.’ ” Ibid., quoting from Marino v. Tagaris, 395 Mass. 397, 400 (1985). “An arbitrator exceeds his authority by granting relief beyond that to which the parties bound themselves . . . or by awarding relief prohibited by law.” Lynn v. Lynn Police Assn., 455 Mass. 590, 596 (2010), quoting from Plymouth-Carver Regional Sch. Dist. v. J. Farmer & Co., supra.
PKC’s inquiry, in relevant part, was posed as follows: “With respect to pre-award interest, the DRB ruled that ‘with the payment of the Awards as stipulated in all previous Orders together with this Order,’ no further compensation is due. PKC interprets payment of ‘the Awards as stipulated’ to mean the prior awards with all post-award interest up to the date of payment of those awards (and the Order 16 award). PKC requests confirmation of this interpretation or, if its interpretation is incorrect, clarification of what is meant by this phrase, because the DRB heard evidence and argument on whether CA/T’s interim payments should offset any pre-award or post-award interest on the DRB Orders.”
Before the DRB, PKC disputed CA/T’s argument that PKC suffered no loss of use of funds, claiming that its costs far exceeded the amounts it received in interim funding.
Indeed, awards that “so offend public policy that they should be set aside are not readily to be found.” Bureau of Special Investigations v. Coalition of Pub. Safety, 430 Mass. 601, 604 n.4 (2000), quoting from Delta Air Lines, Inc. v. Air Line Pilots Assn., Inti., 861 F.2d 665, 670 (11th Cir. 1988), cert, denied, 493 U.S. 871 (1989).
CA/T additionally argues, as an equitable consideration, that the provisional character of the interim funding was a red herring because CA/T never actually sought a downward adjustment in funding already advanced under Mod 507. The fact that CA/T retained the contractual right to do so undercuts its argument that interim funding was the equivalent, for PKC’s purposes, of final payment. CA/T also argues in passing that failure to credit the interim funding as final payment, in accordance with the parties’ contract, amounts to treating the interim funding as a gift, which is prohibited as a matter of public policy. This argument is not sufficiently articulated in CA/T’s brief to warrant discussion.
Relying on Snaxin, Inc. v. Underground Storage Tank Petroleum Cleanup
The court in Todino went on to explain: “While G. L. c. 150E, § 11, does not expressly provide for interest, an award of interest on any money paid in connection with the commission’s order, arises by necessary implication from the terms of § 11. . . .An award of interest on monetary relief is a necessary remedial component of the statute. A contrary rule would deprive the affected employee of a make-whole remedy, and might also have a deleterious effect on the settlement of cases and encourage delay in securing compliance with G. L. c. 150E.” Todino v. Wellfleet, 448 Mass. at 240, quoting from Brookfield v. Labor Relations Commn., 443 Mass. 315, 325-326 (2005).
CA/T also argues, by way of footnote in its brief, that if we uphold the award of postaward interest, the appropriate rate to impose in a controversy involving a public works contract is that set forth in G. L. c. 231, § 61. Again, in accordance with Blue Hills Regional Dist. School Comm. v. Flight, 10 Mass. App. Ct. at 472, the award of interest by the DRB as part of its award was not dictated by the laws applicable to judicial proceedings.