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SEVENSON ENVIRONMENTAL SERVICE v. SAPP BATTERY SITE GROUP

April 29, 2004.

SEVENSON ENVIRONMENTAL SERVICES, INC., Petitioner,
v.
SAPP BATTERY SITE GROUP, Respondent



The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge

ORDER & OPINION

Procedural Background

Presently before the Court are cross-petitions relating to a December, 2003 arbitration award. Petitioner Sevenson Environmental Services, Inc. ("Sevenson") seeks to have the award modified in part and the balance vacated. Respondent Sapp Battery Site Group ("Sapp Group") has cross-petitioned to have the award confirmed.

  Facts

  This action stems from a dispute over costs and fees related to the cleanup and remediation of the Sapp Battery Site ("Site"). The Site, located in Cottondale, Florida, was utilized to break apart batteries and dispose of the battery casings and acids. Not surprisingly, the Site became contaminated and the United States Environmental Protection Agency ("EPA") and the Florida Department of Environmental Protection ("DEP") sought to have the Site remediated and to appropriate liability for the remediation. The EPA designated several companies as Potentially Responsible Parties ("PRPs") and charged them with the responsibility of remediating the Site. The PRPs joined together to form the Sapp Group. Once formed, the Sapp Group entered into a federal court ordered consent decree with the EPA and DEP requiring the Sapp Group to clean the Site. The Sapp Group hired TriAD Environmental Services, Inc. ("TriAD") to serve as the Supervising Contractor for the remediation project. To serve as the Remediation Contractor, the Sapp Group hired Sevenson. Sevenson and the Sapp Group's relationship was memorialized by a contract entered into on September 15, 1998 ("Contract"). In essence, Sevenson was responsible for the excavation of approximately 78,000 cubic yards of contaminated soil, inclusive of ebonite and polypropylene battery casings. In order to accomplish this task, Sevenson was to reduce the size of the soil and battery casing materials and then treat the soil and materials.

  The Contract called for TriAD to test soil samples daily. If these tests revealed a failure to properly treat the soil and materials, the Sapp Group was empowered to issue a Stop Work Order ("SWO"). In February of 1999, the Sapp Group issued such an SWO on the basis that Sevenson's work was defective. As a result of the SWO, cleanup at the Site temporarily stalled to a stop. Eventually, the EPA signed off on a resumption of work, but required it be done at a slower rate.

  As could be expected, the delay resulted in increased costs and a fee dispute between the Sapp Group and Sevenson. Pursuant to the terms of their Contract, the dispute was submitted to arbitration. A panel of three mutually agreed upon experts (the "Panel") was selected to serve as arbitrators. The Panel, whose expertise and qualification is not challenged by Sevenson, was comprised of the President of the American Society of Civil Engineers and two experienced environmental lawyers. The Panel held 18 days of hearings, received testimony from 17 witnesses and reviewed more than 250 exhibits.

  Ultimately, by a decision dated December 21, 2003 (the "Award"), the Panel awarded Sevenson $61,339, plus interest, for sums due under the contract and $513,332 in retainage withheld under the contract. Payment of this retainage was made subject to the EPA certifying that the work at the Site was complete and Sevenson demonstrating an absence of liens on the property. Because these conditions were set and the payment was not considered presently due, the Panel did not award interest on the retainage. In addition, the Panel awarded the Sapp Group $424,373, plus interest, for certain failures and deficiencies it attributed to Sevenson.

  Sevenson would like the Court to remove the conditions precedent to payment of the retainage enunciated in the Award. In addition, Sevenson requests that it be awarded interest on the retainage fee. Finally, Sevenson asks the Court to vacate the portion of the award inuring to the Sapp Group's benefit. The Sapp Group opposes Sevenson's requests and wants the Court to confirm the Award as is. Discussion

  Standard of Review

  This case is governed by the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1-16 (1988), because federal subject matter jurisdiction exists and the contract that contained the arbitration clause related to a transaction involving interstate commerce. See 9 U.S.C. § 2; Barbier v. Shearson Lehman Hutton. Inc., 948 F.2d 117, 120 (2d Cir. 1991). Typically, under the FAA, confirmation of an award is a ministerial act. See Sperry lnt'l Trade, Inc. v. Gov't of Israel, 532 F. Supp. 901, 905 (S.D.N.Y. 1982). In order to prevent the twin goals of arbitration — efficient dispute resolution and avoidance of long and costly litigation — from being undermined, judicial review of arbitration awards is severely limited and narrow in scope. See Folkways Music Publishers. Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993). As such, a party seeking to prevent an award from being confirmed must clear a high bar and bears the burden of proof. See Willemij in Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997).

  Sections 10 and 11 of the FAA set forth the grounds on which an arbitration award can be vacated, modified or corrected. Section 10 provides, in essence, four grounds for vacating an award: (1) fraud, corruption or undue means in procuring the award; (2) partiality on the part of the arbitrator; (3) misconduct by the arbitrator that prejudiced one of the parties; and (4) where the arbitrator exceeds his powers. 9 U.S.C. § 10. In order to have an award modified or corrected, the petitioner must demonstrate that: (a) 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) 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; or (c) the award is imperfect in a matter of form not affecting the merits of the controversy. 9 U.S.C. § 11.

  In addition to these statutorily created bases for vacating or otherwise altering an arbitration award, courts have created one other ground on which to vacate an award. Courts may vacate an award when they find the arbitrators to have acted in "manifest disregard" of the law. See Wilko v. Swan, 346 U.S. 427, 436-37 (1953); Merrill Lynch, Pierce. Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986). Under the doctrine of "manifest disregard" courts are instructed to vacate awards when they find that the arbitrators knew of a governing legal principle, yet either refused to apply it or simply ignored it. See Folkways Music Publishers, Inc., 989 F.2d at 112. "The governing law alleged to have been ignored by the arbitrators must be well defined, explicit, and clearly ...


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