The Supreme Court of Mississippi issued a new opinion that sheds light on a topic that doesn’t come up often: when can an arbitration award be modified due to miscalculation? D.W. Caldwell, Inc. v. W.G. Yates & Sons Construction Co., 2018 WL 2146355 (Miss. May 10, 2018).
The context for the case was a construction dispute between a general contractor and a roofing subcontractor. The arbitrator awarded damages to the subcontractor, and the general contractor filed a motion to the arbitrator to have the award modified. The arbitrator denied the motion.
The contractor then made a motion in court to modify the award. After taking testimony and exhibits in an evidentiary hearing, the court granted the motion to modify the award, reducing the subcontractor’s damages by over $100,000. The contractor argued that the arbitrator “miscalculated” in two ways: first, by declaring that the amount of retainage was not ripe for decision; and second by double-counting some labor costs.
On appeal, the Mississippi Supreme Court reversed the trial court decision and instructed that the original award be confirmed.
In doing so, it established some guidelines for handling these types of motions in the future. (It applied Mississippi statutes, finding that while the FAA would otherwise govern, the parties contracted for application of the state arbitration statutes. But, it looked to federal precedent to inform its analysis.)
Importantly, it held that an evident miscalculation “must be apparent from nothing more than the four corners of the award and the contents of the arbitration record.”
Therefore, the district court erred by taking new evidence during the appeal. In addition, the court found that the face of the award (and the arbitration record) did not show any mathematical error, and therefore there was “insufficient proof of an evident miscalculation.”
This case confirms that not only are the bases for vacatur under Section 10 of the FAA (and its state counterparts) interpreted very narrowly, but the bases for modification in Section 11 are just as hard to prove, if not more so.
By Liz Kramer
Liz is a partner at Leonard, Street and Deinard, one of the largest law firms in Minnesota. She has specialty in litigating complex business and construction disputes.