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Board of Trustees of Municipal Electric Utility of City of Cedar Falls v. Miron Construction Co., Inc.

United States District Court, N.D. Iowa, Eastern Division

February 26, 2014

BOARD OF TRUSTEES OF THE MUNICIPAL ELECTRIC UTILITY OF THE CITY OF CEDAR FALLS, IOWA, Plaintiff,
v.
MIRON CONSTRUCTION CO., INC. and CONTINENTAL CASUALTY CO., Defendants. MIRON CONSTRUCTION CO., INC. and CONTINENTAL CASUALTY CO., Counter Claimants,
v.
BOARD OF TRUSTEES OF THE MUNICIPAL ELECTRIC UTILITY OF THE CITY OF CEDAR FALLS, IOWA. Counter Defendant.

ORDER

LINDA R. READE, Chief District Judge.

I. INTRODUCTION

The matters before the court are Plaintiff and Counter Defendant Board of Trustees of the Municipal Electric Utility of the City of Cedar Falls, Iowa's ("CFU") "Motion to Confirm Arbitration Award" ("Motion to Confirm") (docket no. 12) and Defendants and Counter Claimants Miron Construction Co., Inc. ("Miron") and Continental Casualty Company's ("CNA") "Motion to Vacate Arbitration Award" ("Motion to Vacate") (docket no. 19).

II. PROCEDURAL HISTORY

On November 8, 2013, CFU filed a Petition in the Iowa District Court for Black Hawk County ("Complaint") (docket no. 10), Case No. EQCV123297. On December 3, 2013, Miron and CNA removed this action on the basis of federal question jurisdiction and diversity jurisdiction. Notice of Removal (docket no. 8).

On December 6, 2013, CFU filed the Motion to Confirm. On December 9, 2013, Miron and CNA filed an Answer (docket no. 13). On December 30, 2013, Miron and CNA filed a Resistance to the Motion to Confirm (docket no. 20). On January 6, 2014, CFU filed a Reply to the Resistance to the Motion to Confirm (docket no. 21). None of the parties request oral argument on the Motion to Confirm and the court finds that oral argument is unnecessary. The Motion to Confirm is fully submitted and ready for decision.

On December 30, 2013, Miron and CNA filed the Motion to Vacate. On January 13, 2014, CFU filed a Resistance to the Motion to Vacate (docket no. 22). On January 23, 2014, Miron and CNA filed a Reply to the Resistance to the Motion to Vacate (docket no. 24). None of the parties request oral argument on the Motion to Vacate and the court finds that oral argument is unnecessary. The Motion to Vacate is fully submitted and ready for decision.

III. SUBJECT MATTER JURISDICTION

The parties do not dispute that the court has diversity jurisdiction over the instant matter. The parties to an arbitration agreement must have an affirmative agreement providing for judicial confirmation of an arbitration award in order for a federal court to have confirmation authority under 9 U.S.C. § 9. The Contract between CFU and Miron (docket no. 12-4) provides the following:

All claims, disputes and other matters in question between [CFU] and [Miron] arising out of or relating to the Contract... or the breach thereof... will be decided by arbitration.... The award rendered by the arbitrators will be final, judgment may be entered upon it in any court having jurisdiction thereof.

Contract at 80. The court is satisfied that it has diversity jurisdiction over this case because complete diversity exists between the parties and the amount in controversy exceeds $75, 000. See 28 U.S.C. § 1332 ("The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between... citizens of different States...."). For purposes of diversity jurisdiction, CFU is a citizen of Iowa. Miron is a Wisconsin corporation with its principle place of business in Neenah, Wisconsin. CNA is an Illinois corporation with its principle place of business in Chicago, Illinois.

IV. STANDARD OF REVIEW

The Federal Arbitration Act ("FAA") provides courts with the authority to confirm or vacate an arbitration award:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.

9 U.S.C. § 9. 9 U.S.C. § 10 provides the "exclusive ground[]" for vacating an arbitration award. Hall Street Assocs. v. Mattel, Inc., 552 U.S. 576, 584 (2008). Section 10(a) provides:

(a) In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration-
(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 any other misbehavior by which the rights of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S.C. § 10(a).

A court's review of a motion to vacate an arbitration award is limited to the grounds listed in § 10. "Congress did not authorize de novo review of [an arbitration] award on its merits; it commanded that when the exceptions do not apply, a federal court has no choice but confirm." UHC Mgmt. Co., v. Computer Scis. Corp., 148 F.3d 992, 997 (8th Cir. 1998). "[R]eview of an arbitration award under the Federal Arbitration Act is exceedingly limited and deferential." St. John's Mercy Med. Ctr. v. Delfino, 414 F.3d 882, 884 (8th Cir. 2005). A court may not "reconsider the merits of an award even though the parties may allege that the award rests on errors of fact or on misinterpretation of the contract." United Paperworkers International Union v. Misco, Inc., 484 U.S. 29, 36 (1987); accord Med. Shoppe Int'l, Inc. v. Turner Inv., Inc., 614 F.3d 485, 488 (8th Cir. 2010) ("Courts have no authority to reconsider the merits of an arbitration award, even when the parties allege that the award rests on factual errors or on a misinterpretation of the underlying contract."). "The district court affords the arbitrator's decisions an extraordinary level of deference and confirms so long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority.'" Wells Fargo Bank, N.A. v. WMR e-PIN, LLC, 653 F.3d 702, 710 (8th Cir. 2011) (quoting Crawford Grp., Inc. v. Holekamp, 543 F.3d 971, 976 (8th Cir. 2008)); see also Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 671 (2010) ("It is not enough for petitioners to show that the [arbitration] panel committed an error-or even a serious error."); McGrann v. First Albany Corp., 424 F.3d 743, 748 (8th Cir. 2005) ("The bottom line is [w]e will confirm the arbitrator's award even if we are convinced that the arbitrator committed serious error, so long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority.'" (alteration in original) (quoting Schoch v. InfoUSA, Inc., 341 F.3d 785, 788 (8th Cir. 2003))); Ace Elec. Contractors, Inc. v. International Brotherhood of Electrical Workers, Local Union No. 292, 414 F.3d 896, 899 (8th Cir. 2005) ("Where the parties have contemplated that an arbitrator will give meaning to the language of the contract and determine the remedies for the violations it finds, courts have no authority to disagree with [the arbitrator's] honest judgment' and a court may not reject an arbitrator's fact-findings or interpretation of contract simply because it disagrees with them.'" (alteration in original) (quoting United Paperworkers International Union, 484 U.S. at 38)); Inter-City Gas Corp. v. Boise Cascade Corp., 845 F.2d 184, 187 (8th Cir. 1988) (providing that "contract interpretation is left to the arbitrator").

Section 10(a)(4) of the FAA allows a district court to vacate an arbitration decision "where the arbitrators exceeded their powers." 9 U.S.C. § 10(a)(4). However, "[a] party seeking relief under [9 U.S.C. § 10(a)(4)] bears a heavy burden." Oxford Health Plans LLC v. Sutter, ___ U.S. ___, ___, 133 S.Ct. 2064, 2068 (2013). "[C]onvincing a court of an arbitrator's error-even his grave error-is not enough" for a court to vacate an arbitration decision. Id. at 2070. "So long as the arbitrator was arguably construing' the contract... a court may not correct his mistakes under § 10(a)(4)." Id. (quoting E. Associated Coal Corp. v. United Mine Workers of America, District 17, 531 U.S. 57, 62 (2000)). "It is only when [an] arbitrator strays from interpretation and application of the agreement and effectively dispense[s] his own brand of industrial justice that his decision may be unenforceable." Stolt-Nielsen S.A., 559 U.S. at 671 (alterations in original) (quoting Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509 (2001)) (internal quotation marks omitted). "The potential for those mistakes is the price of agreeing to arbitration." Oxford Health Plans LLC, ___ U.S. ___, 133 S.Ct. at 2070. "It is the arbitrator's construction [of the contract] which was bargained for; and so far as the arbitrator's decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his.'" Id. (alteration in original) (quoting United Steelworkers of America v. Enter. Wheel & Car Corp., 363 U.S. 593, 599 (1960)).

V. FACTUAL BACKGROUND

The court accepts the arbitration panel's findings of facts. See Arbitration Award (docket no. 12-3) at 1-5. The facts of this case are summarized as follows:

The underlying dispute arises from a project to furnish a new filter system for the exhaust-gas stream from a stoker-fired boiler (Unit #6) ("the project"). CFU entered into a contract with Brown Engineering Co. ("Brown") on April 13, 2005, for Brown to "provide professional services relating to the engineering design and construction management involved in a project to install a fabric filter (baghouse) on Streeter Unit 6." Cedar Falls Utilities Professional Services Agreement (docket no. 19-5) at 1.

In 2006, CFU initiated public bidding for a contractor to build the project. Miron submitted a bid that included a proposal from Dustex, its subcontractor. On August 10, 2006, based on the drawings and specifications that Brown created, CFU entered into the Contract with Miron to complete the project for a price of $3, 350, 000. Arbitration Award at 2. The Contract provides that Miron, referred to as CONTRACTOR in the Contract, shall

complete all Work as specified in the Contract Documents. The Work is generally described as follows: streeter station unit no. 6 environmental upgrade-fabric type dust collector addition[.]

Contract at 1 (emphasis omitted). In addition, the Contract states:

The Project has been designed by the engineering staff of Brown Engineering Company, Des Moines, Iowa, who are hereinafter called ENGINEER and who assumes all duties and responsibilities and have the rights and authority assigned to ENGINEER in the Contract Documents in connection with completion of the Work in accordance with the Contract Documents.

Id. at 1. The Contract Documents "comprise the entire agreement" between CFU and Miron, consisting of the eleven items enumerated in the Contract. Id. at 4.

The Contract Documents also provide for the resolution of "[a]ll claims, disputes and other matters in question between [CFU] and [Miron] arising out of or relating to the Contract Documents or the breach thereof" to be "decided by arbitration." Id. at 80. Additionally, "[t]he award rendered by the arbitrators will be final, judgment may be entered upon it in any ...


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