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Mastec North America, Inc. v. Power Systems

July 8, 2008

MASTEC NORTH AMERICA, INC., PETITIONER,
v.
POWER SYSTEMS, INC., RESPONDENT.



The opinion of the court was delivered by: Thomas J. McAVOY, Senior United States District Judge

DECISION & ORDER

I. INTRODUCTION

MasTec North America, Inc. (MasTec) commenced this action under the Court's diversity jurisdiction seeking to confirm an Arbitration Award pursuant to Section 9 of the Federal Arbitration Act. See Pet. [dkt. # 1].*fn1 MSE Power Systems, Inc. (MSE) cross-moves to vacate the Arbitration Award. Cross Mot. [dkt. # 7].

II. BACKGROUND

MSE was the designer/builder on two constructions projects, one in Waymart, Pennsylvania ("Waymart Project"), and the other in Mayersdale, Pennsylvania ("Mayersdale Project"). MasTec entered into Subcontractor Agreements with MSE on both projects under which MasTec provided labor, material and other servies to MSE.

During the course of the two projects, disputes arose concerning MSE's payment for labor, material and other services rendered by MasTec. On August 4, 2004, MSE filed and served MasTec with a Demand to Arbitrate with the American Arbitration Association ("AAA") concerning the disputes. MasTec consented to arbitration and served a counterclaim.

The parties agreed to be bound by the AAA's Construction Industry Arbitration Rules, and selected a panel of three arbitrators. They then engaged in discovery that included the exchange of over 10,000 pages of documents, the service and reply of dozens of interrogatories, and the videotaped deposition of 12 witnesses. At the conclusion of discovery, eight days of hearings were conducted before the Arbitration Panel during which both parties presented documentary and testimonial evidence. At the conclusion of the hearings, the parties submitted post-arbitration hearing briefs.

On January 8, 2008, the Arbitration Panel rendered a unanimous award in MasTec's favor against MSE. In the Arbitration Award, MSE was ordered to pay MasTec $2,629,235.03 plus an additional amount of $23,184.09 for administrative fees, arbitrator compensation and expenses for a total Arbitration Award of $2,652,419.12. MasTec commenced this action on January 12, 2008 seeking an order confirming the January 8, 2008 Arbitration Award and a judgment against MSE in the amount of $2,652,419.12 plus statutory interest from the date of the award. On March 28, 2008, MSE filed a cross-motion to vacate the Arbitration Award, contending that MSE was denied a full and fair opportunity to present evidence at the hearing, and that the Arbitration Panel exceeded their authority by rendering an "irrational" award. After receiving briefing, reply briefing, affidavits and exhibits from the parties on the petition and cross-motion, the matter is now before the Court on the parties' submissions.

III. STANDARD OF REVIEW

Petitioner argues that the Arbitration Award should be confirmed pursuant to Section 9 of the Federal Arbitration Act (FAA or Act). See 9 U.S.C. § 1, et seq. Respondent argues that the Arbitration Award should be vacated pursuant to the authority of both federal and New York State law.*fn2 MSE's arguments for vacatur are the same under federal or state law, and, as addressed below (and acknowledged by MSE), the standards of review under federal and New York law are substantially the same. Thus, there is no reason to determine whether federal of state law applies. See Wise v. Marriott Intern., Inc., 2007 WL 2780395, at * 2 (S.D.N.Y. Sep 24, 2007) ("[B]ecause, as discussed below, it does not affect the outcome here, the Court need not decide whether the FAA governs. . . . Accordingly, the Court will apply the relevant provisions of the FAA and New York's arbitration statute in determining the validity of the Award.").

The FAA represents a strong federal policy favoring arbitration agreements. "Congress enacted the [FAA] to replace judicial indisposition to arbitration with a 'national policy favoring [it] and plac[ing] arbitration agreements on equal footing with all other contracts.'" Hall Street Associates, L.L.C. v. Mattel, Inc., - - U.S. - -, - -, 128 S.Ct. 1396, 1402, 170 L.Ed.2d 254 (2008)(quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006)).

The Act [ ] supplies mechanisms for enforcing arbitration awards: a judicial decree confirming an award, an order vacating it, or an order modifying or correcting it. §§ 9-11. An application for any of these orders will get streamlined treatment as a motion, obviating the separate contract action that would usually be necessary to enforce or tinker with an arbitral award in court. § 6. Under the terms of § 9, a court "must" confirm an arbitration award "unless" it is vacated, modified, or corrected "as prescribed" in §§ 10 and 11. Section 10 lists grounds for vacating an award, while § 11 names those for modifying or correcting one.

Id. (footnotes omitted)

Confirmation of an arbitration award under the FAA is generally "a summary proceeding that merely makes what is already a final arbitration award a judgment of the court, and the court must grant the award unless the award is vacated, modified, or corrected." D.H. Blair & Co. v. Gottdienier, 462 F.3d 95, 110 (2d Cir. 2006)(internal citations omitted). Given the public policy favoring arbitration, a court's review of an arbitration award under the FAA is extremely deferential. Porzig v. Dresdner, Kleinwort, Benson, North America LLC, 497 F.3d 133, 139-139 (2d Cir. 2007).*fn3 "The arbitrator's rationale for an award need not be explained, and the award should be confirmed if a ground for the arbitrator's decision can be inferred from the facts of the case." D.H. Blair, 426 F.3d at 110. "Only a barely colorable justification for the outcome reached" is necessary to confirm the award. Id. (quoting Landy Michaels Realty Corp. v. Local 32B-32J, Serv. Employees Int'l Union, 954 F.2d 794, 797 (2d Cir. 1992)).

A party seeking vacatur "bears the heavy burden of showing that the award falls within a very narrow set of circumstances delineated by statute and case law." Duferco Intern. Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003). In the Second Circuit, courts will "vacate an award only upon finding a violation of one of the four statutory bases [enumerated in Section 10(a) of the FAA ], or, more rarely, if we find a panel has acted in manifest disregard of the law." Porzig v. Dresdner, Kleinwort, Benson, N.A. LLC, 497 F.3d 133, 139 (2d Cir. 2007).

"Section 10 . . . provides for vacatur of an arbitration award in four situations, all of which address 'egregious departures from the parties' agreed-upon arbitration.'" Wellpoint Health Networks, Inc. v. John Hancock Life Insurance Co., 2008 WL 1839014 (N. D. Ill. April 24, 2008) (quoting Hall Street, 128 S.Ct. at 1404). Specifically, Section 10(a) allows vacatur:

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior ...


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