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Metro Tech Service Corp. v. Payless Shoe Source

July 6, 2007

METRO TECH SERVICE CORP., PETITIONER,
v.
PAYLESS SHOE SOURCE, INC., RESPONDENT.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Metro Tech Service Corp. ("Metro Tech") petitions this Court, pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., to confirm an arbitration award ("the Award") entered in its favor against Payless Shoe Source, Inc. ("Payless"). In response, Payless applies to modify the Award based upon an alleged miscalculation in the amount of Metro Tech's outstanding invoices--a calculation that Payless stipulated to in the underlying arbitration and now seeks to challenge. Because Metro Tech did not contest the amount of the invoices during the arbitration proceeding and because the alleged miscalculation of the invoices is not "evident," there are no grounds under the FAA to modify the Award and no genuine issues of material fact exist that preclude a judgment confirming the Award.

Background

On April 1, 2004, Metro Tech and Payless entered into an agreement in which Metro Tech agreed to service the heating, ventilation and air conditioning ("HVAC") units at the vast majority of Payless' more than 4,000 retail outlets. (Answer to Petition to Confirm Arbitration Award ("Confirm"), ¶¶ 1, 7.) Paragraph 9 of the services agreement contained an arbitration clause providing that "all controversies or claims arising out of or relating to this Agreement . . . shall be finally resolved by binding arbitration in accordance with the commercial rules then in force of the American Arbitration Association." (Exhibit A to Petition to Confirm Arbitration Award, ¶ 9.) The clause stated further that "[a]ll orders, injunctions or judgments rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof and shall be final and binding upon the parties." (Id.)

In July 2005, Payless terminated its contractual relationship with Metro Tech and refused to pay any outstanding invoices because it believed that Metro Tech had committed fraud against Payless. (Confirm, ¶ 9.) On November 29, 2005, Metro Tech filed a demand for arbitration seeking payment of the outstanding invoices. (Id., ¶ 10.) Payless filed a $3 million counterclaim based on Metro Tech's alleged fraud. (Reasoned Final Award, p. 2.) From September 11-14, 2005, Metro Tech and Payless participated in an evidentiary hearing before a panel of three arbitrators of the American Arbitration Association. (Confirm, ¶ 11.) On December 12, 2006, the arbitration panel entered its Reasoned Final Award in Metro Tech's favor and against Payless. (Id., ¶ 12.) Based on the parties' stipulation as to the amount of the outstanding invoices, the panel awarded Metro Tech $1,493,617.53. (Application to Modify Arbitration Award ("Modify"), ¶ 7; Reasoned Final Award, pp. 5-6.) Payless now contends that the parties made a mistake in calculating the outstanding invoices. (Modify, ¶ 9.) As a consequence of the parties' miscalculation, the stipulation allegedly overstated the amount of the invoices by $105,773.50. (Modify, ¶ 13.) To date, Payless has paid Metro Tech $1,204,321.54. (Confirm, ¶ 12.)

Standard of Review

A party may move for judgment on the pleadings under Rule 12(c) after an answer to the complaint has been filed. McMillan v. Collection Professionals Inc., 455 F.3d 754, 757 (7th Cir. 2006). The party moving for judgment under Rule 12(c) must demonstrate that there are no material issues of fact to be resolved and that it is entitled to judgment as a matter of law. Brunt v. Service Employees Intern. Union, 284 F.3d 715, 718-719 (7th Cir. 2002).

Discussion

The FAA provides that "any party to the arbitration may apply to the court . . . for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title." 9 U.S.C. § 9. Section 10 lists several grounds for vacating or modifying an award where the award was obtained through fraud or other misconduct. See 9 U.S.C. § 10(a)(1)-(4). Section 11 provides:

In either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration--

(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.

(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.

(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.

The order may modify and correct the award, so as to effect the intent thereof and promote ...


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