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Fette v. Peters Construction Co.

Court of Appeals of Michigan

May 21, 2015

DANIEL FETTE and BERRIEN COUNTY BOARD OF PUBLIC WORKS, Plaintiffs/Counter-Defendants-Appellants/Cross-Appellees,
v.
PETERS CONSTRUCTION CO., Defendant/Counter-Plaintiff-Appellee/Cross-Appellant.

Berrien Circuit Court LC No. 13-000288-CZ

Before: Donofrio, P.J., and O'Connell and Ronayne Krause, JJ.

PER CURIAM.

In this contract dispute, plaintiffs, Daniel Fette and the Berrien County Board of Public Works, appeal as of right from the trial court's order confirming an arbitrator's award of approximately $45, 300 in favor of defendant. Defendant, Peters Construction Co., cross-appeals from that same order. We affirm.

I. BASIC FACTS

Defendant and plaintiffs entered into a contract for a construction project, which included installing a water main underneath railroad tracks. During the project, defendant encountered some "unforeseen subsurface conditions" that, according to it, were not anticipated in the agreement and required extra expense in completing the job. Defendant tried to get plaintiffs to agree to pay this extra amount, but plaintiffs declined. Citing the arbitration clause in the contract, [1] defendant filed a claim for arbitration.[2]

On February 12, 2013, the arbitrator issued a scheduling order, which provided that the parties would exchange witness lists and proposed exhibits by March 8, 2013. On March 8, 2013, defendant (the claimant) submitted electronic copies of its 19 exhibits to the arbitrator and to plaintiffs. On that same day, plaintiffs (respondents) also submitted their electronic copies of their exhibits to the arbitrator and to defendant. Plaintiffs submitted 19 exhibits as well, and while most of the exhibits matched those submitted by defendant, a few were different.

The arbitration hearing eventually was held on August 12, 2013. At the hearing, defendant did not formally offer into evidence its previously submitted exhibits. Instead, defendant called two witnesses, one of which was disallowed by the arbitrator for lack of personal knowledge. After which, defendant closed its case. Plaintiffs then took testimony from their witnesses and formally submitted their previously disclosed exhibits to the arbitrator.

The parties did not request a reasoned award; therefore, as is not unusual in arbitrations, the arbitrator made no findings of fact or conclusions of law in the award. See Saveski v Tiseo Architects, Inc, 261 Mich.App. 553, 555; 682 N.W.2d 542 (2004), citing DAIIE v Gavin, 416 Mich. 407, 428; 331 N.W.2d 418 (1982). Instead, the award, in pertinent part, simply provided that "Respondents shall pay to Claimant Forty Five Thousand Three Hundred One Dollar and Twelve Cents ($45, 301.12)."

On October 11, 2013, plaintiffs filed the instant lawsuit in circuit court, seeking to vacate the arbitration award. On November 12, 2013, defendant filed a counter-claim, seeking to confirm the award. On November 25, 2013, plaintiffs filed an amended complaint, and on December 4, 2013, defendant filed an amended counter-claim.

In their amended complaint, plaintiffs alleged that the award should be vacated because the arbitrator exceeded his authority and because the arbitrator conducted a hearing that substantially prejudiced their rights. The basis for both of these allegations was that while defendant identified its proposed exhibits in accordance with the arbitrator's scheduling order, it never actually submitted those exhibits at the hearing. As a result, plaintiffs averred that, with defendant presenting no evidence in support of its claim, the arbitrator could not as a matter of law find for defendant.

Defendant argued that there were no legal grounds to vacate the award and, as a result, sought sanctions for plaintiffs' alleged frivolous action.

The trial court denied plaintiffs' request to vacate the award and, instead, granted defendant's request to confirm the award. The trial court noted that defendant did supply evidence at the arbitration hearing in the form of testimony from its one witness and that it was prohibited from evaluating the merits of the arbitrator's decision. The trial court also noted that the arbitrator is vested with discretion to direct the order of proofs at the hearing. Moreover, the trial court noted that plaintiffs' main argument-that the arbitrator must have based the amount of damages on documents submitted outside the presence of the parties-must fail because even if the court were not precluded from speculating on the reasons for the arbitrator's decision, the arbitrator had evidence of damages from the evidence submitted by plaintiffs. However, the court denied defendant's request for sanctions, finding that plaintiffs presented a good-faith argument.

After the amended complaint was filed, but before the trial court ruled on the disposition of the case, plaintiffs issued a subpoena for the deposition of Douglas Needham. Needham was employed by the Michigan Infrastructure & Transportation Association (MITA), a construction trade association, and was at the arbitration hearing in Berrien County assisting defendant. When questioned by defendant about what purpose deposing Needham would accomplish, plaintiffs responded, "We want to establish Mr. Needham's version of what occurred at the arbitration hearing."

Defendant moved to quash the subpoena on two grounds. Defendant first relied on MCR 2.305(C)(1), which provides that a person may be required to attend a deposition "in the county where the deponent resides, is employed, or transacts business in person, or at another convenient place specified by order of the court." Defendant explained that Needham did not reside in Berrien County and does not transact business in Berrien County "in person." Defendant also relied on MCR 2.305(A)(4) and MCR 2.302(C), which allow for a protective order to be issued if the deposition would result in "undue burden or expense." Defendant claimed that since Needham's version of what transpired at the arbitration hearing would have no bearing on the disposition of the case, it clearly would subject him to an undue burden or expense.

The trial court agreed with defendant and quashed the subpoena. The court explained, in part, that because there was no real dispute regarding the fact that defendant never submitted its exhibits at the arbitration hearing, Needham's testimony would not "add" anything to plaintiffs' defense against confirming the arbitration award.

II. PLAINTIFFS' APPEAL

A. ARBITRATION AWARD

While we review a trial court's decision to vacate or enforce an arbitration award de novo, judicial review of an arbitration award nonetheless is extremely limited. Washington v Washington, 283 Mich.App. 667, 671; 770 N.W.2d 908 (2009).

"A court may not review an arbitrator's factual findings or decision on the merits. Rather, a court may only decide whether the arbitrator's award 'draws its essence' from the contract. If the arbitrator in granting the award did not disregard the terms of his employment and the scope of his authority as expressly circumscribed in the contract, judicial review effectively ceases." [Police ...

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