C.R. Calderon Construction, Inc. v. Grunley Construction Company, Inc.

Citation: Not availableDocket: 20-CV-15, 20-CV-229, 20-CV-243 & 20-CV-244

Court: District of Columbia Court of Appeals; August 26, 2021; District Of Columbia; State Supreme Court

Original Court Document: View Document

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This legal opinion pertains to appeals from the Superior Court of the District of Columbia concerning an arbitration award stemming from a dispute between C.R. Calderon Construction, Inc. (Calderon), a subcontractor, and Grunley Construction Company, Inc. (Grunley), the general contractor for the Watergate Hotel renovation. Calderon seeks to overturn the trial court's confirmation of the arbitration award favoring Grunley, while Grunley cross-appeals the denial of its motion for attorney’s fees incurred during subsequent litigation. 

The court affirms the decision to confirm the arbitration award, which granted Grunley $1,527,122, plus interest and $700,000 in attorney's fees and expenses. However, it reverses the trial court’s denial of attorney's fees for Grunley and remands the request for further consideration. 

The factual background reveals that Euro Capital Properties, LLC engaged Grunley as the general contractor in 2014, who then subcontracted Calderon. After Calderon defaulted on the project, leaving it unfinished, Grunley and Euro had to enter a new agreement to hire additional subcontractors. Calderon initiated the lawsuit in 2016 for unpaid work, leading to Grunley’s counterclaim for damages due to Calderon’s default and a third-party complaint against Allegheny Casualty Company for a performance bond. 

The arbitration, agreed upon by the parties in 2018, involved a panel with a neutral arbitrator selected by each party. Grunley’s chosen arbitrator, Stephen Shapiro, did not disclose potential conflicts stemming from his association with AGC and his law firm's prior representation of Euro. Calderon and Allegheny later argued that Shapiro's nondisclosure violated D.C. Code 16-4412(a).

Calderon contends that the arbitrators exceeded their authority and disregarded the law by awarding excessive damages, attorney's fees, and expenses. The Superior Court, presided over by Judge Anthony C. Epstein, confirmed the arbitration award and issued a judgment, which Grunley sought to augment with a motion for attorney’s fees, a request the court denied. Both Calderon and Allegheny appealed the judgment, with Grunley cross-appealing the denial of attorney’s fees. After settling with Grunley, Allegheny withdrew its appeal. Calderon argues that the arbitration award should be vacated for two reasons: (1) arbitrator Stephen Shapiro's failure to disclose information undermining his impartiality, and (2) the arbitrators' manifest disregard for the law. Grunley argues that the court wrongly denied its attorney's fees related to post-award litigation.

Calderon claims the trial court misapplied the Revised Uniform Arbitration Act (RUAA), asserting that Shapiro's nondisclosure of his concurrent board membership with Grunley employees and of his law firm's representation of a Euro affiliate violated D.C. Code 16-4412, necessitating vacatur of the award. The statutory obligation mandates arbitrators to conduct a reasonable inquiry and disclose any facts that a reasonable person would deem likely to affect their impartiality. The RUAA outlines two types of disclosures: financial or personal interests in the arbitration outcome, and existing or past relationships with any parties involved. Failure to disclose can lead to vacatur of the arbitration award at the court's discretion, and a failure to disclose specific information raises a presumption of evident partiality, which, if unrefuted, mandates vacatur under D.C. Code 16-4423(a)(2)(A).

Judge Epstein, in examining the trial court's order, applied the standards of a ‘reasonable person’ and ‘likely to affect the impartiality’ as outlined in D.C. Code 16-4412(a). He determined that Mr. Shapiro’s relationships were not likely to affect his impartiality and thus were not subject to disclosure requirements. Even if there were violations of the disclosure obligation, Judge Epstein would not vacate the arbitration award, as the undisclosed relationships did not create a reasonable likelihood of bias. The court found that Mr. Shapiro lacked a substantial relationship with Grunley and had no known, direct, and material interest in the arbitration's outcome, negating any presumption of evident partiality under D.C. Code 16-4423(a)(2).

Calderon contends that the trial court incorrectly applied the presumption of evident partiality in D.C. Code 16-4412(e), asserting that Mr. Shapiro’s undisclosed relationship with Grunley and connections to other Grunley employees were substantial. Calderon emphasized Mr. Shapiro’s significant tenure on the AGC board and argued that this involvement indicated a material interest in the arbitration's outcome. He posited that any non-disclosure should trigger a rebuttable presumption of evident partiality, claiming that an arbitrator's failure to disclose relationships infringes on a party's right to assess neutrality. Calderon further argued that the burden of proof regarding the trivial nature of undisclosed relationships should fall on the arbitrator rather than the party seeking to vacate the award. He concluded that the trial court's analysis should focus on the failure to disclose, leading to a presumption of evident partiality that requires rebuttal by the arbitrator or associated parties.

The RUAA imposes affirmative duties on arbitrators to conduct reasonable inquiries and disclose relevant information as per D.C. Code 16-4412(a). However, Calderon's argument is flawed because the Council of the District of Columbia enacted a statute recognizing that not all undisclosed facts warrant vacating an arbitration award. The statute distinguishes between general disclosure obligations and specific non-disclosure scenarios that do not invoke a presumption of evident partiality. Additionally, the importance of arbitrators' familiarity with the relevant industry is emphasized, as highlighted in case law, which suggests that experienced arbitrators may have overlapping interests without automatically being disqualified for perceived bias. The parties had agreed on the qualifications for arbitrators, specifying at least 15 years in construction and representation of both contractors and subcontractors, implying that mere acquaintance with parties is not disqualifying. 

In evaluating the presumption of evident partiality, the trial court found no error as Calderon failed to demonstrate that arbitrator Mr. Shapiro had a known, direct, and material interest in the arbitration's outcome. The court concluded that the alleged indirect interest based on networking did not meet the criteria for disqualification under D.C. Code 16-4412(e).

The trial court's determination that the appellant did not provide sufficient facts to move his assertion beyond speculation was upheld. A speculative interest fails to qualify as a ‘known, direct, and material interest,’ leading to the conclusion that the trial court applied the law correctly. Mr. Shapiro’s nondisclosure of his service on the AGC board with Mr. Grunley and connections through his law firm to Euro or its affiliates did not demonstrate the required ‘known, existing, and substantial relationship’ under 4412(e). Mr. Grunley, while sharing a name with Grunley Construction, was not a party to the arbitration, and there was no evidence linking him to the arbitration as a representative or observer of Grunley Construction. The court also noted that Mr. Shapiro's relationship with AGC lacked substantiality in relation to Grunley. Furthermore, previous representation by Mr. Shapiro’s law firm did not establish his personal involvement or relevance to the arbitration issues, especially since that representation concluded two years prior to the arbitration. Even if Mr. Shapiro's colleagues had represented Euro, this relationship predates the arbitration, failing to meet the ‘existing’ requirement in 4412(e). The trial court concluded that a presumption of evident partiality did not arise. 

Calderon contended that the trial court effectively required proof of evident partiality to benefit from a presumption, and that the RUAA altered the legal framework regarding evident partiality. However, the court disagreed, stating that while the RUAA established a presumption, it did not redefine evident partiality or invalidate existing precedents. The criteria set forth in 4412(e) provide a specific avenue for demonstrating evident partiality, while other precedents can still apply. The evaluation of nondisclosure by an arbitrator includes examining the relationship's nature. In the precedent case Umana, a long-ago, sporadic relationship with a party did not justify vacating an arbitral award due to bias.

A reviewing court must evaluate relationships that may create a sense of loyalty towards one party in a dispute or relationships that are sufficiently intimate to raise questions about an arbitrator's impartiality. While professional connections may not inherently undermine an arbitrator's neutrality, close personal relationships are more concerning. Adam Grunley's declaration indicates that he had minimal personal interaction with Mr. Shapiro, having met him only once or twice and never discussing the arbitration. Grunley denied any communication with Shapiro during the arbitration, including at social events or regarding unrelated legal matters. This relationship does not suggest any loyalty owed to one side. Unlike in prior cases, there is no evidence of financial ties between Grunley and Shapiro, and the relationship is further weakened by the lack of direct participation in the arbitration. 

Additionally, Calderon claims Shapiro exhibited bias by focusing on witnesses supporting Grunley and suggesting that crucial case information was in a binder provided by Grunley’s counsel. However, without a transcript to substantiate these claims, the court will not entertain such vague allegations. The law firm's past representation of Euro, which ended two years before the arbitration, is characterized as a distant relationship and does not indicate Shapiro's evident partiality. Consequently, Calderon has failed to demonstrate any substantial evidence of bias against Mr. Shapiro.

Calderon asserts that Mr. Shapiro, under Rule 1.10 of the Rules of Professional Conduct, had a duty of loyalty to his former client, Euro, and should not have served as a neutral arbitrator. However, this claim is rejected since Mr. Shapiro did not represent any party in the arbitration, and Judge Epstein determined that any duty to Euro was not relevant to this unrelated arbitration. Calderon also claims arbitrator misconduct, specifically alleging ex parte communications between Mr. Shapiro and Mr. Grunley during AGC meetings and a social event. Judge Epstein found this argument lacking both factually and legally, noting no evidence of communication during the arbitration, and Grunley provided an affidavit stating he did not recall speaking with Shapiro at that time. Furthermore, Judge Epstein highlighted that the prohibition on ex parte communications did not apply to non-arbitration-related discussions between Shapiro and Grunley, as Grunley was not a party to the arbitration.

The court upheld Judge Epstein’s conclusion that Mr. Shapiro’s undisclosed relationships did not create a reasonable likelihood of bias, thus exercising discretion not to vacate the arbitration award. Calderon further contends that the arbitrators disregarded facts and law, resulting in an arbitrary and capricious award, arguing that Grunley did not incur damages attributable to Calderon since Euro was obligated to cover Grunley’s costs. Calderon supports this claim by comparing the costs incurred with the settlement amount received from Euro, asserting that Grunley received more than it spent, which would lead to an undeserved windfall from the arbitration award.

Grunley contends that its losses from subcontractor costs significantly surpassed its settlement with Euro, indicating unreimbursed losses linked to Calderon. Judge Epstein ruled that Calderon cannot reargue this issue, as it was previously presented to the arbitrators. Calderon also disputes the arbitrators' award of attorney’s fees, claiming a lack of evidence for the awarded fees and their reasonableness. Grunley insists the award should stand, noting the arbitrators likely deemed $700,000 reasonable since Grunley had requested $982,748. The trial court refrained from questioning the arbitrators' expertise in determining reasonable fees. Judicial review of arbitration decisions is severely restricted, only allowing challenges based on specific statutory grounds in D.C. Code 16-4423, which do not include ‘manifest disregard’ of the law, although courts may review for such disregard under rare circumstances. Calderon failed to establish that this was an exceptional case warranting review. The essence of arbitration is to serve as an alternative to litigation, and the court declined to speculate on the arbitrators' reasoning or substitute its judgment for theirs.

After confirming the arbitration award, Grunley sought attorney's fees and expenses under D.C. Code 16-4425(c), adhering to the requirements of Rule 54(d) of the Superior Court Rules. This rule mandates a motion be filed within 14 days of judgment, specify the grounds for the fee request, state the amount sought or estimate it, and disclose any fee agreements if requested by the court. The court denied Grunley's motion, citing a lack of detailed information necessary for an independent assessment of the claimed hours, referencing Tenants of 710 Jefferson Street v. District of Columbia Rental Hous. Comm’n. In its cross-appeal, Grunley argues that the absence of supporting documents at the time of filing should not have been a valid reason for denial, asserting compliance with Rule 54(d).

Interpretation of Superior Court rules often draws from the advisory committee notes of corresponding federal rules. In this case, the advisory notes for Rule 54 of the Federal Rules of Civil Procedure clarify that a motion does not need to be supported with evidentiary material at the time of filing, but must be submitted later as directed by the court. The relevant D.C. statute, 16-4425(c), allows for the addition of reasonable attorney’s fees and expenses, yet the trial court did not exercise its discretion regarding a fee award, stating it did not need to decide on that matter due to the denial of the motion on other grounds. This led to a de novo review rather than a discretionary one that would typically receive deference. Grunley’s motion was found to meet the requirements of Rule 54(d), being timely and requesting a specific amount in fees. The rule does not mandate full documentary support at the time of filing; it only requires specification of the grounds for the fee request and the amount sought. Although the court desired more information before ruling, it incorrectly denied the motion without allowing Grunley the chance to provide additional records. Consequently, the order denying attorney’s fees was vacated, and the case was remanded for further consideration, while affirming the court's confirmation of the arbitration award. The decision is affirmed in part and reversed in part.