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American University of Antigua College of Medicine v. Leeward Construction Company, Ltd.

United States District Court, S.D. New York

May 1, 2015

AMERICAN UNIVERSITY OF ANTIGUA COLLEGE OF MEDICINE, Petitioner,
v.
LEEWARD CONSTRUCTION COMPANY, LTD., Respondent.

Leonard A. Sclafani, LAW OFFICES OF LEONARD A. SCLAFANI, ESQ., New York, NY, for petitioners American University of Antigua College of Medicine.

Veronica A. McMillan, J. Scott Greer, LEWIS & GREER, P.C., Poughkeepsie, NY for respondent Leeward Construction Company, Ltd.

OPINION & ORDER

DENISE COTE, District Judge.

Petitioner American University of Antigua College of Medicine ("AUA") moves to confirm an international arbitral award against respondent Leeward Construction Company, Ltd. ("Leeward"). Leeward cross-moves to deny enforcement of, vacate, or modify the arbitral award, arguing that the award is non-final and ambiguous; that the Arbitration Tribunal ("Tribunal") exceeded its authority; and that the award constitutes a "manifest disregard for the law." AUA also moves for an order of attachment and a preliminary injunction regarding a related arbitral award against it that is currently on appeal. For the reasons stated below, AUA's petition to confirm is granted; Leeward's motion to deny enforcement of, vacate, or modify the award is denied; and AUA's motion for an order of prejudgment attachment is denied as moot.

BACKGROUND

AUA and Leeward are corporations organized under the laws of Antigua and Barbuda. On September 25, 2008, AUA and Leeward executed a contract for the construction of a medical school ("Contract"). Two sections of the Contract set out arbitration provisions (the "Arbitration Provisions"): Section 4.6.1, which provided that "[a]ny claim arising out of or related to the Contract... shall... be subject to arbitration, " and Section 4.6.2, which provided that any arbitration "shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect."

The medical school was constructed in the Antigua and Barbuda Free Trade and Processing Zone, where certain business activities were by law exempt from Antigua and Barbuda Sales Tax ("ABST"). During the period of construction, it was unclear whether AUA's construction project would be subject to ABST; if so, that tax would be paid by Leeward, which was transacting business in the Zone. Accordingly, with each invoice submitted to AUA, Leeward included a sum - 15% of the amount invoiced - intended to pay any ABST assessed against it. Ultimately, AUA paid $1, 338, 712 to Leeward for this purpose.[1]

Unbeknownst to AUA, however, Leeward never filed ABST tax returns with nor remitted corresponding ABST tax to the tax authorities at any time during or after construction. In December 2009, after it had paid Leeward the amount above, AUA concluded on the basis of its communications with the government that the construction project was, in fact, exempt from ABST. Although informed at that time that the proper recourse was to recoup the ABST amounts it had paid to its vendors from those vendors, including Leeward, AUA intended to seek a tax refund from the government because it believed that its vendors, including Leeward, had been paying ABST to the government all along. By the end of 2009, Leeward had ceased all business operations.

I. The First Arbitration

In February 2011, Leeward initiated arbitration proceedings against AUA before the American Arbitration Association, alleging that AUA breached the Contract by withholding money owed Leeward for elements of the project AUA unilaterally struck from the construction plans; that it was due a "mobilization" fee; and that it was owed penalties for delays occasioned by AUA (the "First Arbitration"). AUA counterclaimed for liquidated delay damages. During the course of the arbitration, AUA discovered an apparent mistake in Leeward's ABST invoicing - one that would have benefitted Leeward in the amount of $30, 762.80 - and brought it to Leeward's attention. In June 2012, the arbitration tribunal awarded Leeward $976, 421.37 plus 7% interest per annum and awarded AUA $58, 500 in liquidated damages plus 7% interest per annum (the "First Award").[2] The tribunal refused, however, to include the apparent $30, 762.80 discrepancy in its award.

Leeward subsequently sought confirmation of the First Award in the United States District Court for the Southern District of New York. On March 26, 2013, the Hon. Judge Lewis A. Kaplan granted Leeward's petition, Leeward Const. Co. v. Am. Univ. of Antigua-Coll. of Med., No. 12cv6280 (LAK), 2013 WL 1245549, at *5 (S.D.N.Y. Mar. 26, 2013), entering judgment for Leeward in the amount of $966, 026.79. AUA filed a notice of appeal on April 29. On May 8, 2013, the parties executed an agreement staying enforcement of Leeward's judgment for the First Award (the "Stay Agreement") pending resolution of a second arbitration proceeding begun earlier that year (the "Second Arbitration"). Under the terms of that Agreement, AUA filed a payment bond in the amount of $1, 073, 000 to secure Leeward's judgment and waived its appellate rights as to the First Award.

Almost immediately, Leeward repudiated the Stay Agreement, claiming AUA had not adequately informed it of the nature of AUA's counterclaims in the Second Arbitration, and obtained a Writ of Execution. On June 29, AUA sought a stay of Leeward's judgment from the court, pursuant to either the Stay Agreement or the court's inherent powers. Before this motion was resolved, however, the parties entered into a Standstill Agreement, by which terms AUA withdrew its motion to stay and converted its existing bond into a supersedeas bond, and Leeward agreed not to seek enforcement of the First Award pending the outcome of AUA's appeal. On August 13, 2013, the court entered a Stipulation and Consent Order staying enforcement of the judgment. Pursuant to Local Rule 42.1, the parties agreed that AUA would withdraw its appeal without prejudice and subject to reinstatement. AUA reinstated its appeal on February 2, 2015, and appellate briefs were fully submitted on March 30. Oral argument has not yet been scheduled.

II. The Second Arbitration

On February 7, 2013, Leeward commenced a Second Arbitration proceeding against AUA to recover the purportedly mis-tabulated $30, 762.80 it was unable to obtain in the First Arbitration ("Leeward's ABST Claim"). On February 27, AUA counterclaimed, seeking to recover the $1, 338, 712 it had paid to Leeward for ABST on the grounds of fraud or misrepresentation, mutual mistake, and unjust enrichment ("AUA's ABST Counterclaim"). AUA subsequently amended its answer to include a counterclaim seeking $978, 685.18 in damages for numerous alleged construction defects ("Defects ...


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