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Sun Ship Inc. v. Matson Navigation Co.

March 4, 1986


On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil No. 85-0141)

Author: Gibbons

Before SEITZ and GIBBONS, Circuit Judges and GERRY, District Judge*fn*

GIBBONS, Circuit Judge:

Sun Ship, Inc. (Sun) appeals, and Matson Navigation Co. (Matson) cross-appeals from a final judgment affirming an arbitration award. Sun contends that the district court should not have confirmed the award because the arbitrators resolved a dispute they had no authority to consider and because they included in the award interest to the date of the awards at the prime rate instead of the Pennsylvania statutory rate. Matson contends that the district court erred in refusing to include in the judgment interest from the date of the award to the date of the judgment and in refusing to award legal fees. Matson also contends that it should be awarded fees, pursuant to Rule 38 of the Federal Rules of Appellate Procedure, for resisting Sun's appeal in this court. We affirm in Sun's appeal, reverse in Matson's appeal, and remand for the determination of a proper award of interest and attorneys fees.


District Court Proceedings

Sun is shipbuilder. Matson owns and operates vessels. The parties entered into a contract under which Sun agreed to reconstruct one of Matson's vessels to make it suitable for carrying containerized cargo. This reconstruction involved cutting the vessel in half and inserting an additional center section. The contract price was $30,624,500, but it allowed Matson to make changes in the work to be performed. A redelivery date of December 31, 1981 was specified but because Matson could make changes in the work to be performed the contract provided for increases in price and extensions of the redelivery date. The contract also provided that, if Sun and Matson could not agree as to the effect of a specification change, Matson would make progress payments in accordance with Sun's estimate leaving the final price to be determined by arbitration. The arbitration clause also covered disputes over adjustment of the redelivery date. That date was significant because the contract required Sun to pay Matson $10,000 per day in liquidated damages for every day of unexcused delay. The arbitration clause provides in relevant part,

In the event of any dispute or difference as to any matter or thing between Matson and Shipbuilder arising out of or relating to the Contract or any stipulation in the Contract which cannot be settled by Matson and Shipbuilder, Matson and Shipbuilder shall submit the matter in dispute to arbitration. Any such arbitration shall be conducted in accordance with the procedure set forth in the Federal Arbitration Act, 9 U.S.C. section 1 et seq....The decision of the three arbitrators... shall be final, conclusive, and binding upon Matson and Shipbuilder.

Joint Appendix at 44-45 (emphasis supplied).

Matson made a number of specification changes. Disputes over three of these changes required resolution by arbitration and gave rise to the present appeal. Following an intensely contested arbitration, a three-member arbitration panel found that Matson had overpaid Sun $1,794,157 for the cost of the contract changes and that Sun had been 145 days late in redelivering the vessel. Joint Appendix at 25-26. The arbitrators therefore awarded Matson $1,794,157 plus interest at the prime rate from the time of Matson's overpayment of progress payments and $1,450.000 plus interest at the prime rate from thirty days after June 11, 1982 - the redelivery date. Joint Appendix at 26-27.

Sun petitioned the district court to vacate the arbitration award, arguing that the arbitrators had exceeded their authority in several respects. Matson cross-petitioned seeking enforcement of the award, an award of prejudiced interest, and an award of counsel fees incurred at the district court proceedings. The district court enforced the award but denied both Matson's request for legal fees and its request for prejudgment interest for the period of time between the award and the judgment enforcing it. See Sun Ship, Inc. v. Matson Navigation Co., 604 F. Supp. 1223 (E.D. Pa. 1985). This appeal and cross-appeal followed.


Sun's Appeal

Although Sun objected to the arbitrator's award on several grounds, it pursues only two grounds here. First, it contends that in awarding prejudgment interest at the prime rate the arbitrators exceeded their authority. Prejudgment interest, under Pennsylvania law, Sun urges, is limited to the statutory rate, see Pa. Stat. Ann. tit. 41, ยง 202 (Purdon Supp. 1985), on both the overpayment and the liquidated damages awards. Second, Sun contends that the arbitrators exceeded their authority in awarding any pre-award ...

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