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D. W. Caldwell, Inc. v. W.G. Yates & Sons Construction Co.

Supreme Court of Mississippi

May 10, 2018


          DATE OF JUDGMENT: 01/10/2017






          BEAM, JUSTICE.

         ¶1. This Court adheres to the widely recognized standards providing for a trial court's amendment of an arbitration award under limited conditions. Importantly, those standards provide that a court may modify an arbitrator's award to correct an evident miscalculation of figures before entering its judgment. See Miss. Code Ann. § 11-15-135 (Rev. 2004). However, this Court has yet to determine what qualifies as an evident miscalculation and to what extent a judge may inquire to determine whether such a miscalculation exists.

         ¶2. Through the analysis below, we find first that the miscalculations alleged in this matter are not evident from the award itself, nor are they apparent from the agreed-upon record. Additionally, we find that the judge erred when he allowed the parties to present witness testimony regarding the extent of any alleged miscalculations, rather than relying on the award and the arbitration record as the relevant law suggests. Finding error, we reverse the circuit court's decision and remand this case to the circuit court with directions to confirm the December 8, 2015, arbitration award. Furthermore, because the subcontract between the parties provides that each contractor will be responsible for his own fees and costs, the Court declines to assess costs to one party over the other, and instead, enforces their bargained-for agreement.


         ¶3. Yates Construction, LLC, and D.W. Caldwell, Inc., entered into a construction sub- contract for the roof installation on a residential dormitory at Auburn University in Auburn, Alabama. Caldwell-the roofing subcontractor-began work on the roof in October 2012. Early on, Caldwell employees identified structural issues with the building, preventing the company from moving forward with the roof installation. Caldwell notified Yates of the issues, and after some discussion about the repairs needed, Caldwell agreed to repair the building prior to installing the roof. Rather than amending the existing subcontract or creating a new contract for the repair expenses, Yates urged Caldwell to bill against "unperformed work" for those costs related to the extra work completed. Although the arrangement was unconventional, Caldwell orally agreed to the billing scheme, requiring that it be paid weekly, on a "cost plus overhead and profit basis."

         ¶4. When Caldwell completed both the repairs and the roof installation, it had yet to receive total payment for the structural repairs. The companies disputed the scope and expense of these repairs and quickly negotiated their way to an impasse. Thereafter, Caldwell filed a claim against Yates for causing delay and increased costs by failing to pay for work performed, which was in breach of the agreements between the parties.

         ¶5. The parties proceeded to arbitration. Although the arbitration record was neither recorded nor transcribed, the parties concede that the arbitrator considered arguments, reviewed evidence, and heard witness testimony over the course of three days. He then reopened the proceedings for additional documentation, before issuing his thirteen-page award on December 8, 2015. Shortly thereafter, Yates timely filed its motion for clarification and/or correction of the arbitration award, which was summarily dismissed by the arbitrator. Noting that the award included no clerical, typographical, technical, or computational errors, the arbitrator determined he lacked the authority to re-evaluate the merits of any claim already decided, under the circumstances.

         ¶6. Within two weeks of the arbitrator's decision to deny Yates's motion, Caldwell requested that the circuit court confirm the award under Mississippi Code Section 11-15-125. One month later, Yates moved the trial court to alter, amend, or vacate the award under Mississippi Code Section 11-15-25.[1] With the understanding that Yates would provide oral argument on its motion at the award confirmation hearing, Caldwell filed a request to limit the presentation of proof before the circuit court.

         ¶7. The hearing on all three motions was held on December 1, 2016. The circuit court judge began by requesting arguments on Caldwell's motion to limit proof. Throughout the presentations, the court asked questions of the parties' representatives and heard arguments on several issues under discussion. Believing that an evident miscalculation was present as it related to the retainage amounts[2] included in both the subcontract and the final award, the court overruled Caldwell's request to limit proof and permitted the parties to proceed on Yates's motion to alter, amend, or vacate the arbitration award. During this second phase of the hearing, the trial court allowed the parties to introduce evidence and witness testimony. Though Caldwell's attorneys objected on the basis of whether such evidence was on the record during the arbitration and whether such testimony was considered by the arbitrator in his ultimate decision, the court allowed counsel for Yates to continue with his witness examination and evidence presentation.

         ¶8. Ultimately, the trial court reviewed fourteen exhibits and the testimony of one witness in making its decision. Based on this evidence, the court issued its order modifying the arbitrator's award on January 10, 2017. Under Mississippi Code Section 11-15-135 and the Federal Arbitration Act, the court determined that the award contained a "facially evident miscalculation which permitted . . . Caldwell to receive double payment." Finding that the arbitrator had duplicated the labor costs for shingle installation in its award-once under the original subcontract and once under the oral agreement to repair the structural damage (referred to as the Repair Agreement)-it amended the award, reducing the total by $104, 507.

         ¶9. On appeal, Caldwell argues that the trial court erred when it denied the motion to limit proof and allowed Yates to present evidence and witness testimony. Caldwell also contends that the trial court erred in finding that the arbitrator's award contained a facially evident miscalculation. We agree. Based on the analysis below, this Court finds that the arbitrator's award contained no evident miscalculations which would merit modification. Moreover, the circuit court erred by allowing Yates to present witnesses before the court. Therefore, we reverse the decision of the Neshoba County Circuit Court and remand for the court to confirm the arbitration award.


         ¶10. This matter involves a contract's choice-of-law provision and the applicability of federal and state statutes, as well as trade-association regulations. Caldwell (a Georgia-based company) and Yates (a Mississippi corporation) entered into a subcontract in Mississippi to be performed in Alabama. It is undisputed that, between the two companies, their employees, and their distributors, both labor and materials crossed state lines. Unquestionably, these facts affect interstate commerce, creating the need to continue under the mandate of the Federal Arbitration Act. See 9 U.S.C.A. §§ 1, 2. Therefore, Yates correctly argues that the Federal Arbitration Act applies to this matter. See MS Credit Ctr., Inc. v. Horton, 926 So.2d 167, 173 (Miss. 2006) (quoting Guinness Harp Corp. v. Jos. Schlitz Brewing Co., 613 F.2d 468 (2d Cir. 1980) (requiring that "[w]hen a commercial transaction involving interstate commerce includes an agreement to arbitrate disputes, federal law controls the enforcement of the arbitration agreement." (emphasis added))).

         ¶11. However, "[w]here . . . parties have agreed to abide by state arbitration rules, enforcing those rules according to the terms of the agreement is fully consistent with the FAA . . .". Volt Info. Sci., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ., 489 U.S. 468, 469 (1989), 109 S.Ct. 1248, 1250, 103 L.Ed.2d 488 (United States Supreme Court determined that the parties' contractual agreement to pursue arbitration under their state rules of arbitration was not preempted by the Federal Arbitration Act when those rules did not "undermine the goals and policies of the FAA.") Article XIV of the parties' subcontract, titled "Dispute Resolution, " begins as follows:

This Subcontract shall be deemed entered into in Philadelphia, Mississippi, upon execution by the parties. The laws of the state of Mississippi govern this Subcontract . . . .

         Although the FAA applies directly to the matter, the parties knowingly and willingly contracted for the laws of this state to govern any disputes related to their agreement. Furthermore, neither party objected to the role of Mississippi law in the contract, nor did either insist on adherence to the FAA prior to the arbitration award's disclosure. Because this Court previously has provided that parties may limit contractually the issues which they will arbitrate (see Doe v. Hallmark Partners, LP, 227 So.3d 1052, 1055 (Miss. 2017)), this Court will not hesitate to extend that provision-as the United States Supreme Court has-to allow parties to specify by contract the laws and rules under which that arbitration will be conducted. After all, "[a]rbitration under the Act is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit." Volt Info. Sci., Inc., 489 U.S. at 479, 109 S.Ct. at 1250, 103 L.Ed.2d 488.

         ¶12. Based on their agreement, the parties' intent to proceed under Mississippi law is clear, and this Court therefore will apply the same. As a result, we continue our analysis under the provisions in Mississippi Code Sections 11-15-101 through 143. Titled "Arbitration of Controversies Arising from Construction Contracts and Related Agreements, " this section of Mississippi's Arbitration Act applies "to any agreement for the . . . engineering, construction, erection, repair or alteration of any building, structure, fixture, . . . or any part thereof . . . ". Miss. Code Ann. § 11-15-101 (Rev. 2004). Because the underlying dispute concerns the installation of a roof and a subcontract between two contractors, the laws under this section control the discussion below.

         I. Whether the trial court erred in finding that the arbitrator's award contained an "evident miscalculation" of figures, justifying the award's modification.

         ¶13. A defining characteristic of arbitration is its finality and the binding disposition of a controversy. See Schaefer v. Allstate Ins. Co.,63 Ohio St.3d 708, 590 N.E.2d 1242 (1992). Parties to an arbitration enter the process knowing that the arbitrator's award will signal the factual end of their dispute, rather than leaving open the door to the possibility of future appeals. With this in mind, courts asked to review, confirm, or modify an arbitrator's award do so through an extremely limited lens. See Wilson v. Greyhound Bus Lines, Inc.,830 So.2d 1151, 1155 (Miss. 2002). In this regard, "[t]he scope of judicial review of an arbitration award is quite narrow, and 'every reasonable presumption will be indulged in favor of the validity of arbitration proceedings."' Id. (quoting Craig v. Barber, 524 So.2d 974, 977 (Miss. 1988)) (see also Hutto v. Jordan,36 So.2d 809, 811 (Miss. 1948)). Specifically, judicial review of an arbitrator's award is limited to Sections 10 and 11 of the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and Sections 11-15-23, -25, -133 and -135 of the Mississippi Code. See Forsythe Int'l, S.A. v. Gibbs Oil Co. of Texas, 915 F.2d 1017, 1020 (5th Cir. 1990). Accordingly, a circuit court has no authority to modify a construction-related arbitration award unless the exceptions outlined under Mississippi Code Section 11-15-135(1)(a) and (2), or its nearly identical, sister provision, found in United States Code Chapter 9, Section 11(a), are met. See generally Margerum v. Bud's ...

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