request a modification of the Second Award at some future date. The CPLR does not provide for the unilateral extension of the twenty day statutory deadline. Strange, contends that Melun did not stake an application for modification until submission of the April 30 letter, two weeks after the statutory deadline.
Second, Strange contends that the arbitrator failed to dispose of the application within thirty days after Strange served an objection upon him. Strange's objections were served upon the arbitrator on May 9, 1991, giving the arbitrator until June 8, 1991 to address the application. The parties never extended that deadline. The Third Award was not rendered until July 3, 1991, almost one month after the statutory deadline.
Finally, Strange contends that the modification was not based on the narrow grounds permitted by the statute. Strange contends that the CPLR allows only for minor corrections and modifications, not for the sort of wholesale revision evident in the Third Award. See Weinstein, Korn & Miller, New York Practice - CPLR, para. 7509.01, pp. 75-215 - 75-216 ("a modification which merely corrects a minor matter, such as an award of interest, is permissible, while one which affects the merits is not").
Melun has not responded to these arguments in its written submissions nor during oral argument.
I find (for the reasons argued by Strange) that the modification of the Second Award was not in accordance with New York law. Melun did not apply for modification within 20 days. The arbitrator's modification was not timely. And the modification was a total revision of the reasoning of the earlier award, which is not permitted by § 7509. Consequently, the arbitrator's purported modification of the Second Award was unauthorized and the Third Award was a nullity.
The FAA provides that a court may vacate an arbitration award "where the arbitrators exceeded their powers or so imperfectly executed them that an appropriate award was not made." 9 U.S.C. § 10(d). Because the Third Award was an impermissible modification of the Second Award, Strange's motion to vacate the Third Award should be granted.
III. Should the Second Award be Vacated or Confirmed?
The question remains whether the Second Award should be vacated or confirmed. Melun contends that the Second Award must be vacated for two reasons. Neither of Melun's arguments is meritorious.
First, Melun contends that in rendering the Second Award the arbitrator exceeded the scope of his power by deciding an issue not submitted -- the loss of contract profitability on the Three Contracts attributable to unadjusted book loss. The Second Award recognized a loss of profitability on the Three Contracts in Melun's favor for a total of $ 26,914. Melun contends that the loss of profitability on the Three Contracts was already accounted for in the category of Unadjusted Book Loss that was accepted by Strange in his May 18, 1987 letter. Melun contends that because this loss was not disputed by Melun, and only disputed adjustments were to be submitted to arbitration under the Agreement, see Agreement para. 1(d) (iii), the arbitrator exceeded the scope of his authority in considering it.
In sum, Melun contends that because the arbitrator improperly awarded it $ 26,914 too much, the entire Second Award must be scrapped, and all issues, including those that were properly decided by the arbitrator, thrown open to reexamination. The argument goes too far. The FAA is designed to enforce arbitration agreements, not thwart them. Even if the arbitrator exceeded his authority in considering the issue that led him to award Melun $ 26,914, Melun would not be entitled to have the Second Award vacated in toto. At best Melun would be entitled to vacatur of that portion of the Second Award that was beyond the arbitrator's authority, that is, the part that granted Melun $ 26,914, leaving the remainder of the award intact. See, e.g., Barbier v. Shearson Lehman Hutton, Inc., 948 F.2d 117 (2d Cir. Oct. 31 1991) ("portion of the award [granting punitive damages in excess of arbitrator's authority] should have been vacated by the district court pursuant to 9 U.S.C. § 10(a)(4)"). Needless to say, Melun is not asking to vacate the award to it of $ 26,914, the only part of the Second Award it claims was rendered in excess of the arbitrator's authority.
In addition, Melun contends that the Second Award should be vacated because it did not decide the submitted issue of contract profitability estimates on contracts other than the Three Contracts. Melun's argument is unfounded. The arbitrator did rule on these issues. On the issue of contract profitability estimates, the Second Award states:
The contract progress reports made available to us indicated that the profitability on three contracts (Amoco - 6188, Georgia Gulf - 6901, and Accurate - 6129) deteriorated by $ 26,914 during the period form August 31, 1986 to November 30, 1986. We were presented no convincing evidence that the profitability of any other contracts deteriorated solely from the events of the period from August 31, 1986 to closing. Accordingly we find in favor of Strange in the amount of $ 237,952 and in favor of Melun in the amount of $ 26,914.
Second Award at 2 (emphasis added). The clear inference from this statement is that the arbitrator considered the submitted issue of contract profitability estimates in full, but determined that Melun was not entitled to an adjustment on the other contracts, beyond the Three Contracts on which the award was rendered.
Melun's contention that the arbitrator did not rule on the submitted issue of contract profitability is merely wishful thinking.
Melun has presented no reason for vacating the Second Award.
Strange's motion for an order confirming the Second Award must be granted. 9 U.S.C. § 9 ("the court must grant [an application for an order confirming an arbitration award] unless the award is vacated, modified, or corrected"); Ottley v. Schwartzberg, 819 F.2d 373, 375 (2d Cir. 1987) ("the district court must grant a petition to confirm an arbitration award if it properly is brought . . . unless one of the statutory bases for vacating or modifying the award is established"). Melun's motion to dismiss Strange's first counterclaim (seeking to confirm the Second Award) must be denied.
IV. Strange's Second Counterclaim
Although Strange acknowledges his obligation to pay Melun $ 28,564 under the Second Award, he seeks summary judgment refunding $ 83,676 out of the $ 160,458 that he paid to Melun, as undisputed, with his May 18 letter. The $ 83,676 which he seeks to have refunded pertained to Unadjusted Book Loss. Netting his obligation ($ 28,564) with his alleged entitlement to refund ($ 83,676), he asks summary judgment in the amount of $ 55,112.
He contends his concession of this obligation by his May 18 letter should not be binding, as it was made on the incorrect understanding that the Melun's January 26, 1987, draft constituted the only valid post-closing statement, rather than its May 6, 1987 submission. He contends he made the concession only on the assumption that it would settle those issues. Because the court ruled against him, allowing Melun's May 6, 1987 Post-Closing Statement, he contends he should be relieved of his concession that was based on an assumption that the court rejected. Strange also contends the Unadjusted Book Loss could not be an undisputed adjustment within the meaning of the Agreement because it was not asserted by Melun in its May 6 Post-Closing Statement.
Melun counters that it is entitled to summary judgment dismissing Strange's second counterclaim because Strange accepted adjustments of $ 160,458 in the May 18 letter, including an adjustment for Unadjusted Book Loss in the amount of $ 83,676.
Melun concedes that $ 26,914 of the Second Award representing adjustments on the Three Contracts was already paid by Strange to Melun as part of the Unadjusted Book Loss. If Melun were to retain the $ 26,914 it already received for the Three Contracts as part of the Unadjusted Book Loss, as well as $ 26,914 for the same item as part of the Second Award, it would reap an unjustified double recovery on the same adjustment. Therefore, even if Melun is correct in asserting that Strange conceded the Unadjusted Book Loss, Strange is entitled to an adjustment protecting him from paying the same adjustment twice.
There remains $ 56,762 in dispute. Melun contends this liability was conceded by Strange's May 18 letter and accompanying check. Strange contends it was neither a binding concession, nor an undisputed item according to the adjustment procedures prescribed by the agreement.
Although Strange is correct in arguing that this adjustment did not result from the prescribed adjustment process, his arguments do not overcome -- at least at the summary judgment stage -- Melun's contention that this amount was removed from the dispute by agreement of the parties, regardless whether the agreement was done in the manner prescribed by the governing contract. Strange is therefore not entitled to summary judgment as to the remaining $ 56,762.
Nor has Melun shown that it is entitled to summary judgment for this amount. It is not clear beyond dispute that Melun reached agreement with Strange on the proposed adjustment for Unadjusted Book Loss. In its May 6 Post-Closing Statement, Melun identified three adjustments from Strange's February 2, 1987 letter as "mutually agreed to" and "resolved." It did not mention the Unadjusted Book Loss.
It remains unclear whether Melun is entitled to retain $ 56,762 out of Strange's May 18, 1987 payment or Strange is entitled to have it refunded. As to that amount, summary judgment must be denied to both sides.
It is clear, however, that Strange is obligated to Melun in the amount of $ 28,564, as awarded in the Second Award, and that, upon making such payment, Strange would be entitled to the return of $ 26,914 from his May 18, 1987 payment to avoid double payment.
The Second Award is hereby confirmed, obligating Strange to pay Melun $ 28,564.
Partial summary judgment is granted to Strange for the refund of $ 26,914 out of his May 18, 1987 payment to Melun.
Setting off these two items, Strange must pay $ 1650 to Melun.
There remains a triable issue as to which party is entitled to $ 56,762 paid by Strange to Melun on May 18, 1987.
1. Strange's application to confirm the Second Award and vacate the Third Award is granted.
2. Melun's application to confirm the Third Award and vacate the Second Award is denied.
3. Strange's motion for summary judgment on the second counterclaim is partially granted as to $ 26,914, and otherwise denied.
4. Melun's motion to dismiss Strange's counterclaims is denied.
Dated: New York, New York
January 10, 1992
Pierre N. Leval, U.S.D.J.