Thereafter, on or around June 18, 1998, JMB entered into a subcontract
with Respondent Allstar Drywall & Acoustics, Inc. ("Allstar") whereby
Allstar would furnish the labor, materials, equipment and other
incidentals necessary to complete the drywall installation, rough
carpentry work, taping and acoustical ceiling installation in exchange
for payment by JMB of the sum of $880,000.
On or about October 8, 1999, JMB commenced suit against Allstar in the
Court of Common Pleas of Philadelphia County for breach of contract and
breach of warranty alleging that Allstar had failed to perform its
obligations under the agreement and that this failure caused JMB to
retain other subcontractors to finish the job costing it an additional
$323,664. JMB further alleged that it overpaid Allstar for work which it
did not perform in the amount of $312,104. Allstar counter-claimed
against JMB, alleging that it was still owed the balance due on the
revised contract price in the amount of $158,207 and that as a
consequence of JMB's failure to perform its obligations under the
agreement, Allstar incurred additional labor and other costs in the
amount of $358,809.
In August, 2000, the parties agreed to submit their dispute to binding
arbitration to be conducted in accordance with the rules of the American
Arbitration Association and "other state and federal rules," and filed an
Order to mark the Philadelphia action discontinued and ended. Following
some nine hearings between August 21 and October 5, 2001, the arbitrator
issued his decision on January 2, 2002 in which he found in favor of
Allstar in the net amount of $173,341.*fn1 It is this award which JMB
now seeks to vacate and Allstar seeks to confirm.
By its petition, JMB avers that the arbitration award should be vacated
because the arbitrator erred in (1) not awarding JMB its attorneys' fees
on its affirmative claims, (2) failing to find that the several partial
releases barred Allstar's claims for an equitable adjustment, and (3)
failing to find that Allstar's claim for inefficiencies was devoid of
It is clear and the parties agree that this action is governed by the
provisions of the Federal Arbitration Act, 9 U.S.C. § 1, et. seq.
Confirmation and vacation of arbitration awards are determined under
Sections 9 and 10 of the Act, which reads as follows in relevant part:
§ 9. Award of arbitrators; confirmation; jurisdiction; procedure
If the parties in their agreement have agreed that a judgment of the
court shall be entered upon the award made pursuant to the arbitration,
and shall specify the court, then at any time within one year after the
award is made any party to the arbitration may apply to the court so
specified for an order confirming the award, and thereupon the court must
grant such an order confirming the award, and thereupon the court must
grant such an order unless the award is vacated, modified, or corrected
as prescribed in sections 10 and 11 of this title. If no court is
specified in the agreement of the parties, then such application may be
made to the United States court in and for the district within which such
award was made. Notice of the application shall be served upon the
party, and thereupon the court shall have jurisdiction of such
party as though he had appeared generally in the proceeding. . . .
§ 10 Same; vacation; grounds; rehearing
(a) In any of the following cases the United States
court in and for the district wherein the award was
made may make an order vacating the award upon the
application of any party to the arbitration —
(1) Where the award was procured by corruption,
fraud, or undue means.
(2) Where there was evident partiality or corruption
in the arbitrators, or either of them.
(3) Where the arbitrators were guilty of misconduct
in refusing to postpone the hearing, upon sufficient
cause shown, or in refusing to hear evidence
pertinent and material to the controversy; or of any
other misbehavior by which the rights to any party
have been prejudiced.
(4) Where the arbitrators exceeded their powers, or
so imperfectly executed them that a mutual, final,
and definite award upon the subject matter submitted
was not made.
(5) Where an award is vacated and the time within
which the agreement required the award to be made
has not expired the court may, in its discretion,
direct a rehearing by the arbitrators. . . .
Some courts, including the Third Circuit Court of Appeals and others in
this district, have also recognized additional, nonstatutory bases upon
which a reviewing court may vacate an arbitrator's award under the FAA.
Roadway Package System, Inc. v. Kayser, 257 F.3d 287, 291, n. 2 (3d Cir.
2001). Such additional grounds include where the award is "in manifest
disregard of the law," or is not "fundamentally rational." Id., quoting
Tanoma Mining Co. v. Local Union No. 1269, 896 F.2d 745, 749 (3d Cir.
1990) and Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125, 1134
(3d Cir. 1972).
It is thus patently clear that judicial review of an arbitration award
is extremely narrow and severely limited. Coltec Industries, Inc. v.
Elliott Turbocharger Group, Inc., Nos. Civ. A. 99-1400, 99-MC-36, 1999 WL
695870, at *3 (E.D.Pa. Sept. 9, 1999), citing, inter alia, Mutual Fire,
Marine & Inland Ins. Co. v. Norad Reinsurance Co., Ltd., 868 F.2d 52, 56
(3d Cir. 1989), and Amalgamated Meat Cutters & Butcher Workmen of North
America v. Cross Bros. Meat Packers, Inc., 518 F.2d 1113, 1121 (3d Cir.
1975). A court may not overrule an arbitrator simply because it disagrees
with the arbitrator's construction of the contract or because it believes
its interpretation of the contract is better than that of the
arbitrator. News America Publications, Inc. v. Newark Typographical
Union, Local 103, 918 F.2d 21, 24 (3d Cir. 1990). To be sure, district
courts have very little authority to upset arbitrators' awards and an
award will be properly vacated only if there is absolutely no support at
all in the record justifying the arbitrator's determinations. United
Transp. Union Local 1589 v. Suburban Transit Corp., 51 F.3d 376, 379 (3d
Cir. 1995); Personnel Data Systems, Inc. v. OpenPlus Holdings PTY Ltd.,
No. Civ. A. 00-MC-166, 2001 WL 52546 at *1 (E.D.Pa. Jan. 18, 2001).
Indeed, "manifest disregard of the law" means more than error or
misunderstanding with respect to the law. Rather, "Manifest disregard of
the law" encompasses situations in which it is evident from the record
that the arbitrator recognized the applicable law, yet chose to ignore
it. Aetna Casualty and Surety Co. v. Dravo Corporation, No. Civ. A.
97-149, 1997 WL 560134 at *1 (E.D.Pa. July 31, 1997). Other courts have
held that the
"manifest disregard" principle means that the correct legal
standard must have been so obvious that the typical arbitrator would
readily and instantly have perceived it, the arbitrator must have been
subjectively aware of that standard, and he must have proceeded to ignore
that standard in fashioning the award. Coltec, 1999 WL 695870 at *5.
Accordingly, as long as the arbitrator has arguably construed or applied
the contract, the award must be enforced, regardless of the fact that a
court is convinced that the arbitrator has committed a serious error.
United Transportation, 51 F.3d at 379, quoting News America
In this case, JMB argues that by refusing to award it counsel fees and
to give credit for the partial releases, the arbitrator here manifestly
disregarded both the language of the agreement between it and Allstar and
the legal principle that a fact finder must enforce the clear and
unambiguous terms of an agreement. Petitioner further claims that by
improperly crediting the allegedly flawed testimony of Allstar's
inefficiency expert witness, the arbitrator acted in manifest disregard
of the law. In partial support for these arguments, JMB points to the
arbitrator's written decision of August 1, 2001 which rejected its
argument that Allstar's claim for an equitable adjustment was barred by
the execution of partial releases during construction of the project:
After careful review of all documents, including contract language and
briefs written by each Counsel, I do not find that the process of signing
partial releases, as part of the requisition payment process, during the
construction of the project, bars respondent's request. I will agree with
respondent's position that until the work is fully or nearly completed,
assessment of impact of delays, work out of sequence, stacking of
trades, limitation of work areas, and other affecting conditions that
have an impact on productivity and schedule can not be properly
I have studied the legal arguments stated within Claimant's brief and,
although not an attorney, I do understand the strictness of legal
interpretation contained therein. In my opinion, however, it appears that
these cases take a very narrow view and would not take into consideration
the complexity of the work in performance of the contract on this
Considering the contract requirement for final payment, and that the
subcontractor has not yet furnished to the contractor a full and complete
release and discharge of all liens, claims and other demands relating to
the subcontract work, including materials furnished and work performed
with equipment used, and further considering that notices were made by
the subcontractor to the contractor, I will allow damages relating to
inefficiencies to be submitted in the Arbitration proceedings by the
Contrary to Petitioner's position, we find that this language evinces
that the arbitrator carefully considered its legal arguments and the
cited authority, but concluded that the caselaw on which JMB relied was
not on point with the instant case. Likewise, we believe that the
arbitrator acted within his purview in considering the testimony of
Allstar's inefficiency witness, Mr. Munster. Indeed, our review of Mr.
Munster's testimony indicates that he was quite ably cross-examined by
JMB's counsel and it was therefore up to the arbitrator, as the finder of
fact, to determine the weight, if any, to be given his testimony. Again,
so long as there is some support in the record for the arbitrator's
determinations, the award must be upheld. Given that we find that such
sufficient support exists here, we do not find that the arbitrator in
this case manifestly disregarded the law in rendering his decision.
Accordingly, the arbitration award shall be confirmed and the petition to
An order follows.
AND NOW, this day of April, 2002, upon consideration of Jeffrey M.
Brown Associates, Inc.'s Petition to Vacate Arbitration Award and the
Cross-Motion to Confirm Arbitration Award of Allstar Drywall &
Acoustics, Inc., it is hereby ORDERED that the Petition to Vacate Award
is DENIED and the Cross-Motion to Confirm the Arbitration Award entered
on January 2, 2002 is GRANTED for the reasons set forth in the preceding