In a recent decision by the Fourth Circuit Court of Appeals, MCI Constructors, LLC v. City of Greensboro, No. 09-1600 (4th Cir. July 1, 2010), the court held that the district court did not err in denying motions to vacate certain arbitration awards.
The appeal arose from a contract dispute between the City of Greensboro, North Carolina (the “City”) and MCI Constructors, LLC (“MCI”) relating to the construction of a wastewater treatment plant. National Union Fire Insurance Company (“National Union”) provided a performance bond to MCI.
After an arbitration bifurcated into liability and damages phases, the arbitration panel found that the City was entitled to recover $14,939,004 from MCI. The City moved to have the liability and damages awards confirmed by the district court, and MCI and National Union moved to vacate. The district court granted the City’s motion and entered an order confirming the arbitration awards. On appeal, MCI and National Union argued that vacatur was warranted because the liability award was “obtained through undue means,” and that the damages award did not “draw its essence from the parties’ contract” and was the product of the panel having exceeded its powers.
The Fourth Circuit affirmed, finding that there was no evidence that the arbitration panel’s determination involved “undue means.” The court also ruled that the panel did not exceed its powers in issuing the damages award, noting that as long as arbitrators are even arguably construing or applying a contract, an award should not be disturbed. Finally, the court disagreed with MCI and National Union that the damages award must be vacated because the panel allegedly disregarded unambiguous provisions of the contract at issue and failed to provide a reasoned basis for its decision. The court stated it was possible to square certain articles of the contract with the panel’s awards, and that the panel was not required to discuss the basis for its decision. Because it found that MCI and National Union’s arguments did not entitle them to relief, the court stated that it need not decide whether courts may still vacate an award that is the result of manifest disregard of the law, or if that doctrine exists after the U.S. Supreme Court’s decision in Hall Street v. Mattel Inc.