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Uretek, ICR Midatlantic, Inc. v. Adams Robinson Enterprises, Inc.

United States District Court, W.D. Virginia, Charlottesville Division

December 14, 2017

URETEK, ICR MIDATLANTIC, INC., Plaintiff/Counterclaim Defendant,
v.
ADAMS ROBINSON ENTERPRISES, INC., Defendant/Counterclaim Plaintiff, and LIBERTY MUTUAL INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION

          Hon. Glen E. Conrad Senior United States District Judge.

         In this contract dispute, the parties agreed to stay litigation in this court pending arbitration. On March 20, 2017, an arbitration panel issued an award in favor of plaintiff Uretek, ICR Midatlantic, Inc. ("Uretek") against defendant Adams Robinson Enterprises, Inc. ("Adams Robinson"). The matter is currently before the court on Uretek's motion to lift the stay and confirm the arbitration award against Adams Robinson and its surety, defendant Liberty Mutual Insurance Company ("Liberty Mutual"). For the reasons stated below, the court will grant Uretek's motion.

         Background

         Adams Robinson, a Kentucky corporation with its principal place of business in Ohio, and Uretek, a North Carolina corporation, entered into a subcontract (the "Subcontract"), under which Uretek agreed to perform certain work for a construction project in Charlottesville, Virginia. Adams Robinson also secured a payment bond from Liberty Mutual, a Massachusetts corporation.

         As relevant here, the Subcontract provided that:

[I]f [Uretek] fails to supply enough properly skilled workmen or proper materials or refuses to prosecute the work or any part thereof with promptness and diligence, or otherwise violates the terms of this subcontract, then [Adams Robinson] may, after giving [Uretek] forty-eight (48) hours written notice, declare [Uretek] in default of contract, terminate the employment of [Uretek], and take possession of [Uretek's] materials on the Job Site and employ or contract with any other person or persons and to buy any material necessary to complete all work required by this Subcontract. In case [Adams Robinson] shall so take possession of said work or employ or contract with any other person or persons to finish the same, [Uretek] shall not be entitled to receive any further payment under this Subcontract until the said work shall be wholly finished, at which time, if the unpaid balance of the amount to be paid on this Subcontract shall exceed the expenses incurred by [Adams Robinson] in finishing the work, such unpaid balance, after deducting any loss or damage by reason of the premises, including damages for delays and attorney fees, shall be paid to [Uretek] by [Adams Robinson]. In case the cost and expense of such work, including attorney fees, exceeds the unpaid balance, [Uretek] and its surety shall forthwith pay the amount of such excess to [Adams Robinson.]

         Subcontract ¶ 3A, Docket No. 18-1. The parties agreed that Ohio law would govern the Subcontract and that they would submit any dispute arising under the Subcontract to arbitration. Id. ¶ 25.

         On December 19, 2014, in reliance on Subcontract ¶ 3A, as set forth above, 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. Adams Robinson removed the action to this court.

         In February 2016, Adams Robinson and Liberty Mutual, with Uretek's consent, filed a motion to stay the proceedings in this court, pending arbitration. The court granted the motion, and the arbitration proceeded from February 21, 2017 to February 24, 2017 in Dayton, Ohio, before three arbitrators, including two non-lawyers from the construction industry. Liberty Mutual did not participate in the arbitration.

         On March 20, 2017, the arbitration panel issued a standard award in Uretek's favor. As a standard, and not a reasoned, award, the arbitrators cautioned that they did not include all of their analysis in the award. See Arbitration Award 5, Docket No. 18-2. However, they did explain that they believed Adams Robinson had properly terminated the Subcontract. Id. at 5. Despite that finding, the arbitrators declined to award Adams Robinson its costs to complete the work under the Subcontract because the balance of good faith between the parties weighed in Uretek's favor. Id. While the parties did not raise Uretek's good faith as a substantial issue during the hearing, the arbitrators found that Uretek employees "put forth a good faith effort to complete their work as designers and builders albeit not adequately or efficiently enough for th[e] panel in fairness to approve [Uretek's] collection of lost profits." Id. As to Adams Robinson, however, the arbitrators found several indications of bad faith, including that Adams Robinson had failed to appropriately notify Uretek of soil issues, withheld payment on at least five properly submitted and approved Uretek pay applications, and inadequately mitigated its damages after terminating the Subcontract. Id. at 5-6.

         After addressing all the claims presented by the parties, the arbitrators awarded Adams Robinson $44, 538.77 for engineering fees and costs and materials not paid by Uretek and $1, 750.00 for arbitration expenses. Id. at 2, 9. The arbitrators expressly declined to award Adams Robinson any amount for its claimed completion costs. Id. at 3. As to Uretek, the arbitrators declined to award lost profits because Uretek did not adequately or efficiently complete its work under the Subcontract, but awarded $305, 257.39 for withheld payments and change order requests. Id. at 2, 5, 8.

         Adams Robinson sought to vacate the award by filing an action in the Southern District of Ohio. Uretek then moved in this court to lift the stay, confirm the arbitration award, and enter judgment against Adams Robinson and Liberty Mutual. Adams Robinson moved to strike Uretek's motion to confirm the arbitration award or to transfer venue to the Southern District of Ohio. The court denied the motion, and on October 11, 2017, the Southern District of Ohio transferred Adams Robinson's motion to vacate the arbitration award to this court.

         The parties appeared before the court for a hearing on Uretek's motion to confirm the award on November 13, 2017. The defendants conceded at the hearing that if the court confirms the arbitration award, it will be enforceable against both Adams ...


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