CONAGRA POULTRY COMPANY v. GRISSOM TRANSPORTATION, INC.
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RENDERED:
MARCH 3, 2006; 10:00 A.M.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-002609-MR
CONAGRA POULTRY COMPANY
APPELLANT
APPEAL FROM MCCRACKEN CIRCUIT COURT
HONORABLE R. JEFFREY HINES, JUDGE
ACTION NO. 04-CI-00760
v.
GRISSOM TRANSPORTATION, INC.
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, CHIEF JUDGE; DYCHE AND HENRY, JUDGES.
COMBS, CHIEF JUDGE:
ConAgra Poultry Company (ConAgra) appeals
from an order of the McCracken Circuit Court that confirmed an
arbitrator’s award of $101,605.41, in favor of the appellee,
Grissom Transportation, Inc. (Grissom).
ConAgra argues that the
circuit court denied its rights of procedural due process by
refusing to consider documentary evidence presented to the
arbitrator.
ConAgra also contends that the court erred in
failing to vacate or modify the arbitrator’s award, which it
alleged was the product and result of the arbitrator’s disregard
of the law applicable to damages for breach of contract.
Finding no error, we affirm.
In July 2000, ConAgra entered into an exclusive
contract with Grissom for transportation services.
In exchange
for a monthly payment equal to its actual cost plus twenty-two
percent, Grissom agreed to transport ConAgra’s employees to and
from their work site.
The agreement was not to expire until
October 31, 2002; however, ConAgra terminated its relationship
with Grissom at the end of May 2002.
The parties’ written agreement required that they
arbitrate any disputes arising between them.
Accordingly,
Grissom initiated arbitration proceedings to recover
approximately $126,000 in amounts owed under the contract.
ConAgra filed a counterclaim, seeking $54,000 for alleged
overcharges that it had paid to Grissom.
A hearing was conducted before an arbitrator in May
2004.
The proceedings were not transcribed.
Neither party
requested that the arbitrator render a “reasoned opinion”
pursuant to the rules governing the arbitration.
On June 17,
2004, the arbitrator awarded Grissom the sum of $101,605.41
without stating his reasons and denied ConAgra’s counterclaim in
its entirety.
On July 23, 2004, ConAgra filed a complaint in the
circuit court seeking to modify or vacate the award.
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It alleged
that the award was incorrect because:
(1) damages are not
legally allowable for the termination of a “cost-plus” contract;
(2) Grissom’s initial breach (in overcharging ConAgra) excused
ConAgra from further performance under the contract; (3) Grissom
was not entitled to “expectancy damages”; (4) the arbitrator
erroneously applied the contract in determining damages; and
(5) the arbitrator erred in failing to award ConAgra damages for
Grissom’s overcharges.
Grissom responded to the complaint and
filed an application to confirm the arbitrator’s award.
ConAgra tendered a number of exhibits to the circuit
court accompanied by an affidavit stating that the materials
constituted true and correct copies of exhibits that had been
submitted to the arbitrator.
Grissom objected to the
consideration of the documents by the court, and the circuit
court entered an order striking them from the record.
On
November 24, 2004, the court entered a final order denying
ConAgra’s petition and granting Grissom’s application for
confirmation of the arbitrator’s award.
This appeal followed.
ConAgra acknowledges in its brief that judicial review
of a decision rendered by an arbitrator must be highly
deferential.
See, 3D Enterprises Contracting Corporation v.
Lexington-Fayette Urban County Government, 134 S.W.3d 558 (Ky.
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2004).
KRS1 417.160, the relevant portion of the Kentucky
Uniform Arbitration Act, limits the grounds for vacating an
arbitration award to the following situations:
(a)
(b)
(c)
(d)
(e)
The award was procured by corruption,
fraud or other undue means;
There was evident partiality by an
arbitrator appointed as a neutral or
corruption in any of the arbitrators or
misconduct prejudicing the rights of
any party;
The arbitrators exceeded their powers;
The arbitrators refused to postpone the
hearing upon sufficient cause being
shown therefore or refused to hear
evidence material to the controversy or
otherwise so conducted the hearing,
contrary to the provisions of
KRS 417.090, as to prejudice
substantially the rights of a party; or
There was no arbitration agreement and
the issue was not adversely determined
in proceedings under KRS 417.060 and
the party did not participate in the
arbitration hearing without raising the
objection; but the fact that the relief
was such that it could not or would not
be granted by a court is not ground for
vacating or refusing to confirm the
award.
KRS 417.170 severely restricts a court’s ability to
enter a judgment which deviates from the arbitrator’s award.
This statute permits judicial modification of an award only in
the following circumstances:
(a)
1
There was an evident miscalculation of
figures or an evident mistake in the
description of any person, thing or
property referred to in the award;
Kentucky Revised Statutes.
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(b)
The arbitrators have awarded upon a
matter not submitted to them and the
award may be corrected without
affecting the merits of the decision
upon the issues submitted; or
(c)
The award is imperfect in a matter of
form, not affecting the merits of the
controversy.
An examination of ConAgra’s complaint reveals that it
did not allege the existence of any of the statutory grounds for
vacating or modifying the arbitrator’s award.
Instead, it
sought to be relieved of the arbitrator’s award on the basis
either that the arbitrator misapplied the law of damages
relative to breach of contract or that he erred in failing to
resolve the facts in its favor.
However, an arbitrator’s
resolution of factual disputes and his application of the law
are not subject to review by the courts.
3D Enterprises, supra.
Even if we were not circumscribed by this highly
limited standard of review, we would affirm the court’s
judgment.
Without a transcript of the arbitration proceedings,
the court was required to assume that the evidence supported the
arbitrator’s decision.
137 (Ky.App. 1993).
See, Dillard v. Dillard, 859 S.W.2d 134,
Additionally, we are not persuaded that any
error of law is reflected in the arbitrator’s award.
Although ConAgra has cited several cases from other
jurisdictions concerning the proper measure of damages in the
context of the breach of a cost-plus contract, it has not cited
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a case from this jurisdiction in support of its argument that
the arbitrator’s award is out of line.
Because ConAgra opted
not to be provided with a reasoned decision authored by the
arbitrator and because the arbitrator did not award Grissom all
the damages that it requested, we are not able to determine
exactly what elements of damage were awarded.
Absent some
foundation in the record as to the rationale for the award, we
cannot assume or speculate that the award is inappropriate as a
matter of law.
ConAgra relies on Carrs Fork Corp. v. Kodak Mining
Company, 809 S.W.2d 699, 703 (Ky. 1991) as authorizing the court
to review the arbitrator’s award for mistakes of law.
In that
case, the Kentucky Supreme Court discussed a previous version of
KRS 417.180 and observed that a court could vacate an
arbitration award and correct legal errors pursuant to its
equitable powers.
On page 16 of its brief, ConAgra recites the
following persuasive language from the concurring opinion in
Carrs Fork to support its contention that an error of law
justifies the reversal of an arbitrator’s award:
There is a need to expedite the termination
of controversies. Arbitration may be one
such vehicle. But under our constitution
neither the parties nor the arbitrators can
tie the hands of the court on questions of
law.
Id. at 703.
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However, in 3D Enterprises Contracting Corporation,
supra, a much more recent case, our highest court stated
emphatically that the equitable powers doctrine invoked in Carrs
Fork has no application to contracts requiring arbitration that
were “entered into after [July 13, 1984], the effective date of
the [Kentucky Uniform Arbitration] Act.”
Id., at 562-563.
It
also held:
[A]ll arbitration awards arising from
agreements entered into after the effective
date of the Act may only be set aside by a
court pursuant to those grounds listed in
the Act.”
Id., (emphasis added).
As there was no suggestion presented to
the circuit court that the award was tainted as required by KRS
417.160 or miscalculated as contemplated by KRS 417.170, the
court did not err in confirming the award.
Finally, ConAgra contends that for it to have had any
meaningful chance of prevailing in the circuit court, a review
of the exhibits that it tendered was required.
Because ConAgra
failed to assert any of the statutory grounds necessary for a
substantive review of the award, we conclude that this issue is
moot.
In undertaking our own independent review of the
documents, we discovered no evidence of fraud, misconduct, or
bias on the part of the arbitrator.
Thus, the exhibits were not
relevant to the court’s inquiry, and the court did not abuse its
discretion in striking the exhibits from the record.
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Additionally, without a transcript of the evidence to assist in
putting the exhibits in a proper context, we cannot comprehend
or appreciate their impact on the evidence examined by the
arbitrator.
Thus, we are constrained from speculation.
The judgment of the McCracken Circuit Court is
affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Kerry D. Smith
Paducah, Kentucky
David L. Kelly
Paducah, Kentucky
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