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Coastal Caisson Corp. v. E.E. Cruz/NAB/Frontier-Kemper

August 10, 2007

COASTAL CAISSON CORP., AS SUCCESSOR IN INTEREST TO BAUER OF AMERICA CORP., PETITIONER,
v.
E.E. CRUZ/NAB/FRONTIER-KEMPER, A JOINT VENTURE, E.E. CRUZ & CO., INC., NAB CONSTRUCTION CORPORATION, FRONTIER- KEMPER CONSTRUCTION, INC., AETNA CASUALTY AND SURETY COMPANY AND TRAVELERS CASUALTY AND SURETY COMPANY, RESPONDENTS.
E.E. CRUZ/NAB/FRONTIER-KEMPER, A JOINT VENTURE, E.E. CRUZ & CO., INC., NAB CONSTRUCTION CORPORATION, FRONTIER- KEMPER CONSTRUCTION, INC., AETNA CASUALTY AND SURETY COMPANY AND TRAVELERS CASUALTY AND SURETY COMPANY, PETITIONERS,
v.
COASTAL CAISSON CORP., AS SUCCESSOR IN INTEREST TO BAUER OF AMERICA CORP., RESPONDENT.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION AND ORDER

This Opinion addresses two petitions, both of which arise from an April 13, 2007 arbitration award ("Second Award") in favor of Coastal Caisson Corp. ("Coastal") and against E.E. Cruz and related parties (the "Joint Venture"). This Second Award was issued after a much smaller June 24, 2005 award in favor of Coastal ("First Award") was vacated.

Coastal moves pursuant to 9 U.S.C. § 9 to confirm the Second Award and pursuant to 9 U.S.C. § 10 to vacate and correct the award as to its denial of prejudgment interest. The Joint Venture moves to vacate the Second Award and to modify and confirm the First Award pursuant to N.Y. C.P.L.R. § 7511(b)-(c), or in the alternative, 9 U.S.C. §§ 9-11. For the following reasons, Coastal's motion to confirm the Second Award is granted. Its motion to modify the Second Award as to interest is denied. The Joint Venture's motions to vacate the Second Award and to confirm and modify the First Award as to interest are also denied.

BACKGROUND

The following facts underlying this dispute were described in an October 14, 2005 Opinion by this Court delivered from the bench, Transcript of Bench Opinion, Coastal Caisson Corp. v. E.E. Cruz/NAB/Frontier-Kemper, No. 05 Civ. 7462, 7466 (DLC) (S.D.N.Y. Oct. 14, 2005) ("Bench Opinion"), and in Coastal Caisson Corp. v. E.E. Cruz/NAB/Frontier-Kemper, No. 05 Civ. 7462, 7466 (DLC), 2006 WL 1593615 (S.D.N.Y. June 8, 2006), which are incorporated by reference. The dispute arose out of a contract between the Joint Venture, a contractor consisting of companies incorporated in New York, New Jersey and Indiana, and Bauer of America Corp. ("Bauer"), to construct Earth Support System walls for the Flushing Bay Combined Sewer Overflow Retention Facility. Coastal is a Florida corporation and the successor in interest to Bauer. Although Coastal initiated litigation in August 1999, Coastal Caisson Corp. v. E.E. Cruz/NAB/Frontier-Kemper, No. 99 Civ. 8852 (SAS), the parties agreed in July 2001 to submit their dispute to arbitration ("Agreement"). The Agreement provides that the American Arbitration Association Construction Industry Rules ("AAA Constr. Indus. R.") apply and that "[t]he laws of the State of New York shall govern this submission to arbitration."

On June 24, 2005, the arbitrators granted Coastal the First Award of $791,731.21,*fn1 which was the contract balance that the Joint Venture owed Coastal. Coastal moved to vacate the award in part for manifest disregard of the law and to confirm the remainder on August 23. The Joint Venture moved to modify the award for a material miscalculation on August 24. The two petitions were consolidated.

This Court granted Coastal's petition to vacate the First Award for manifest disregard of the law. In an opinion delivered from the bench on October 15, it found that

[t]he award assumes and the parties don't dispute that the arbitrators found that the [J]oint [V]enture breached its contract with Bauer thereby delaying the completion of Bauer's work, [f]inding that the parties had agreed that the [sic] Bauer's work would be completed by June 1999 but that "by the [J]oint [V]enture[']s conduct" that date became "unrealistic" and that Bauer's work was not completed until November 1999. The award concentrated on determining the amount of damages owed to Bauer.

The Bench Opinion held that the decision by the arbitration panel not to apply total cost damages because of the difficulty in apportioning fault was "clear error" and constituted "the rare case in which it is sufficiently clear that the arbitrators did manifestly disregard the law." Bench Opinion at 12, 14. It vacated and remanded the First Award for an allocation of damages. The Bench Opinion denied as moot Coastal's second claim, that the arbitrators manifestly disregarded law when they refused to award prejudgment interest on its contract claims. It also denied as moot the Joint Venture's petition to confirm the award and to correct it for a material miscalculation. On October 18, the matter was remanded to the arbitrators for an award conforming to the Bench Opinion. Coastal Caisson Corp. v. E.E. Cruz/NAB/Frontier-Kemper, No. 05 Civ. 7462, 7466 (DLC), (S.D.N.Y. Oct. 18, 2005) (order vacating and remanding) ("October 18, 2005 Order").

The Joint Venture appealed the October 18, 2005 Order. The United States Court of Appeals for the Second Circuit dismissed the appeal on March 29, 2006, for lack of appellate jurisdiction. Coastal Caisson Corp. v. E.E. Cruz/NAB/Frontier-Kemper, No. 05-6179-cv (2d Cir. Mar. 29, 2006). The mandate enforcing the dismissal was issued on April 19. The Joint Venture subsequently applied for certification of an appeal pursuant to 28 U.S.C. § 1292(b). On June 8, the motion was denied and Coastal's cross-motion to compel the arbitrators to complete their work pursuant to the October 18, 2005 Order was granted.

On April 13, 2007, the arbitrators issued the Second Award, granting Coastal $1,989,466.94 without interest, an amount almost three times that of the First Award.*fn2 In adjusting the award, the arbitrators followed the direction of the Bench Opinion.

Because the Court disagreed with only one part of the First Award, to wit, that we did not apportion the relative fault of the parties and thereby were unable to award to Bauer a portion of its total costs, we incorporate by reference all the balance of the First Award and make it part of this award (the "Second Award"). . . .

The Court's opinion has no quarrel with any other aspect of our award. Both we and the parties assume that it was only the damage apportionment issue which needed to be addressed in the current proceedings.

On this basis, the Second Award incorporated by reference all "findings and conclusion on the Joint Venture's Counterclaim" from the First Award. The arbitrators considered two rounds of briefs on the issue of apportionment and the parties' submission of "voluminous extracts" from the original record.*fn3

Noting the Bench Opinion's finding that uncertainty as to the determination of damages and apportionment of fault are not acceptable reasons to refuse to apply the total cost approach, the arbitrators applied the total cost method to compute damages for Bauer. To calculate Bauer's total cost, the Second Award first determined its actual cost. It then determined the portion of Bauer's excess costs that were caused by acts or omissions of the Joint Venture and by Bauer itself. The arbitrators reduced Bauer's alleged actual costs by 10% and awarded 15% overhead and profit. They then found that "Bauer's work was impacted by twelve separate items," and that its "excess costs were a result of the fault of both parties." They concluded that the Joint Venture was responsible for only 40% of the excess costs, which when added to the amount owed to Coastal under the contract left a balance due of $3,379,268.92. The arbitrators found that ...


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