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Meyne Co. v. Edward E. Gillen Co.

October 27, 2010

THE MEYNE COMPANY, A DIVISION OF BULLY & ANDREWS, LLC, AN ILLINOIS LIMITED LIABILITY COMPANY, PETITIONER,
v.
EDWARD E. GILLEN COMPANY, A WISCONSIN CORPORATION, RESPONDENT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

The Meyne Company filed a petition seeking confirmation of an arbitration award against Edward E. Gillen Company and has moved for an order granting the petition. In response, Gillen seeks an order vacating the award in part and modifying it in part. For the reasons stated below, the Court grants in part and denies in part both Meyne's and Gillen's motions.

Procedural History

The case concerns a construction project at Latin Middle School in Chicago. Meyne, the general contractor, alleged that Gillen, a subcontractor, breached their contract.

Under the subcontract, Gillen agreed to provide earth retention work in connection with the construction project. The subcontract contained a provision requiring arbitration of disputes.

After an evidentiary hearing, a panel of three arbitrators found that Gillen negligently caused a delay in the project and thus breached the subcontract. The panel held Gillen liable for damages of $2,163,369.08, including $648,970.37 that Meyne claimed it owed other subcontractors due to the delay (the "Subcontractor Claims"). The panel also found in favor of Gillen on its counterclaim in the amount of $380,040.61. The panel set this off against Meyne's award, resulting in a net award to Meyne of $1,783,328.47. The award also required Gillen to reimburse Meyne for $1,375 in expenses associated with the arbitration.

Discussion

In response to Meyne's petition to confirm the award in its entirety, Gillen asks the Court to vacate the Subcontractor Claims portion of the award. Gillen argues that Meyne's standard subcontract did not require it to reimburse its subcontractors for damages from delay, so any such payments Meyne made were voluntary. Gillen argues that it cannot be held liable for sums that Meyne paid voluntarily. In response, Meyne argues that the arbitrators appropriately and plausibly interpreted the subcontract to require Meyne to pay damages to its subcontractors for delay caused by Gillen.

Gillen's second contention concerns the arbitrators' decision to set off each party's individual awards, resulting in a net award for Meyne. Gillen argues that the setoff will cause unnecessary insurance issues that negatively affect Gillen. It asks the Court to modify the award so that it includes separate awards for each party. In response, Meyne argues that the arbitrators had the authority to set off the awards and that the Court should not substitute its will for that of the arbitrators.

1. Subcontractor Claims

Under section 9 of the Federal Arbitration Act ("FAA"), If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration . . . then at any time within one year after the award is made any party to the arbitration may apply to the court so specified 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(a) provides the grounds upon which a court can vacate an arbitration award. Gillen asks the Court to vacate the Subcontract Claims portion of the arbitrators' award pursuant to section 10(a)(4) on the ground that the arbitrators exceeded their powers. See 9 U.S.C. § 10(a)(4).

"[J]udicial review of arbitration awards is extremely limited." Chameleon Dental Products v. Jackson, 925 F.2d 223, 225 (7th Cir. 1991). An arbitrator exceeds her powers if she ignores the contract she is interpreting. First Commercial Financial Group v. Baghdoian, 812 F. Supp. 837, 839 (N.D. Ill. 1993). In deciding whether to confirm or vacate an award, however, courts only "determine whether or not the arbitrator interpreted the agreement, not if the arbitrators' interpretation of the agreement is correct." Chicago & Northwestern Transp. Co. v. United Transp. Union, 905 F.2d 171, 173 (7th Cir. 1990). An award can be confirmed even if it contains gross legal and factual errors. Gingiss Intern., Inc. v. Bormet, 58 F.3d 328, 333 (7th Cir. 1995). To confirm an arbitration award, a court need only find some "possible interpretive route" that leads to the award. Prostyakov v. Masco Corp., 513 F.3d 716, 723 (7th Cir. 2008).

An arbitrator also exceeds his power if he "deliberately disregards what he knows to be the law." Eljer Mfg., Inc. v. Kowin Development Corp., 14 F.3d 1250, 1254 (7th Cir. 1994). "[M]ere error in the interpretation of law," ...


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