Uretek, ICR Midatlantic, Inc. v. Adams Robins Enters., 2017 U.S. Dist. LEXIS 205740, 2017 WL 6391489 (W.D. Va. Dec. 14, 2017)
Adams Robinson Enterprises, Inc. (“Adams Robinson”), a Kentucky corporation with its principal place of business in Ohio, and Uretek, ICR Midatlantic, Inc. (“Uretek”), a North Carolina corporation, entered into a subcontract, under which Uretek agreed to perform certain work for a construction project in Charlottesville. Adams Robinson also secured a payment bond from Liberty Mutual. The parties agreed that Ohio law would govern the subcontract and that they would submit any dispute arising under the subcontract to arbitration.
In December 2014, Adams Robinson terminated Uretek’s subcontract for default. In December 2015, Uretek filed a complaint in state court against Adams Robinson and Liberty Mutual to recover payments for its work under the subcontract. In February 2016, Adams Robinson and Liberty Mutual, with Uretek’s consent, filed a motion to stay the proceedings in this court, pending arbitration. In March 2017, the arbitration panel issued a standard award in Uretek’s favor. The parties appeared before the court for a hearing on Uretek’s motion to confirm the award on November 13, 2017.
Adams Robinson sought vacatur of the arbitration award because the arbitrators did not award Adams Robinson its excess costs of completion after finding that Adams Robinson had properly terminated the Subcontract for default. However, the court concluded that Adams Robinson had not established any grounds under the Federal Arbitration Act for vacating the arbitration award, as it found the arbitrators did not exceed their authority, that the award did not fail to draw its essence from the subcontract, and that the arbitrators did not manifestly disregard controlling law.
Adams Robinson argued that arbitrators impermissibly looked beyond the express provisions of the subcontract in order to interpret the subcontract. The court found that the Fourth Circuit has recognized that arbitrators do not exceed their authority in failing to base an arbitration award on the express terms of a contract because such an error is one of misinterpretation, which does not justify vacatur. Further, the court held that it was not irrational for the arbitrators to rely on evidence in the record of Adams Robinson’s bad faith. While the duty of good faith and fair dealing was not an express term in the subcontract, the court held it to be implied in all contracts under Ohio law. The court concluded that the arbitrators were at least arguably construing the subcontract, both express and implied terms, and so declined to vacate the award for failing to draw its essence from the parties’ agreement.