Southgate Penthouses, LLC & Southgate Residential Towers, LLC VS Mapp Construction, Inc.

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NOT DESIGNATED FOR PUBLICATION STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NO 2012 CA 1242 SOUTHGATE PENTHOUSES LLC AND SOUTHGATE RESIDENTIAL TOWERS LLC VERSUS MAPP CONSTRUCTION Judgment Rendered APR 2 6 2013 x Appealed from the 19th Judicial District Court In and for the Parish of East Bato Rouge State of Louisiana Case No 548119 The Honorable Todd Hernandez Judge Presiding David K Persons Counsel for Defendant Appellant Concrete Coatings Southern Metairie Louisiana Division Inc Mathew J Ungarino Daniel G Collarini Counsel for Defendant Appellant The Stained Floor LLC Metairie Louisiana Counsel for Defendant Appellant Southern States Plumbing Inc W Evan Plauche Justin E Alsterberg David C Bach Metairie Louisiana 2 il or1CU0 li Gti 7 t u i Phillip W Preis Charles M Crystal Gordon Jr D Burkhalter Counsel for Plaintiff Appellees Southgate Penthouses LLC and Southgate Residential Towers LLC Caroline D Preis Charles M Thompson Jennifer R Dietz Baton Rouge Louisiana x BEFORE GUIDRY CRAIN AND THERIOT JJ 2 THERIOT J This appeal consists of three separate matters each appealed by three The appellees in each matter are Southgate appellants individual Penthouses LLC and Southgate Residential Towers LLC collectively Southgate The appellants are Concrete Coatings Southern Division Inc Concrete Coatings The Stained Floor LLC The Stained Floor and Southern States Plumbing Inc Southern States The matters between each appellant and the appellees were submitted to arbitration with the arbitration ruling confirmed by the Nineteenth Judicial District Court in favor of Southgate and against all three appellants For the following reasons we affirm the trial court rulings against Concrete Coatings and s The Stained Floor and reverse the ruling against Southern States FACTUAL BACKGROUND The litigation history of this case is long and complex In August of 2003 Southgate entered into a contract with MAPP Construction Inc MAPP to build an apartment complex consisting of an eight story retail apartment compleX two retail stores a cabana a guardhouse and a parking garage ali located on Nicholson Drive south of the Louisiana State University campus Due to the enormity of this project dozens of subcontractors were hired by MAPP in order to complete the wark by the construction deadline The three appellants in the instant case were subcontractors hired by MAPP among many others ln 2005 a dispute arose over monies owed on the project Through settlement Southgate signed a promissory note in favor of MAPP for five million dollars however Southgate subsequently stopped payment on the note after citing various construction defects MAPP filed suit in July 2006 demanding payment on the note Southgate countersued for the numerous 3 construction defects As the cited defects involved many different parts of the construction project a vast majority of the subcontractors became involved when MAPP filed a third party demand to include them in the lawsuit The contract between Southgate and MAPP called for contractual disputes to be resolved through arbitration pursuant to the rules of the American Arbitration Association AAA After a lengthy arbitration hearing the arbitration panel rendered a decision in December of 2010 After the decision was rendered Southgate petitioned the trial court to review the panel findings pursuant to La R 9 which also requires s S 4209 notice to be served on the adverse parties or their attorneys and far the arbitration decision to be filed into the court record s Writs had been taken to this court on a previous ruling by the trial court in which it was decided that under the contracts between MAPP and the subcontractors the subcontractors were also bound to resolve contractual disputes through arbitration and would be subject to the decision rendered by the arbitration panel Arbitration awards in favor of Southgate and against the various subcontractors were subsequently confirmed by the trial court Far the purpose of this appeal we are only concerned with the awards regarding the three appellants Concrete Coatings Subsequent to the filing of the third party demand MAPP attempted to serve all the subcontractors involved In the service instructions regarding Concrete Coatings MAPP requested the Sheriff serve Concrete Coatings See M Drywal nc v MAPP Conslruclion L et al 2009 CW 0898 and 0943 taken from R C Southgate Residential Towers L e al v MAPP Cons lnc et al No 529 consolidated C ructron 351 with 550 l9 JDC 534 Prior to the panePs rendering a decision and award Sou and MAPP had reached a setUement in hgate which MAPP assigned all of its claims against the subcontractors to Southgate 4 lnc Southern Division through its registered agent in Hammond Louisiana correct It was later discovered that this service information was not Concrete Coating correct agent was located in Gonzales s Louisiana evidenced by the recards of the Louisiana Secretary of State At the time MAPP had filed its third party demand on February 27 2009 Concrete Coatings had already been dissolved for two years and service through the sheriff could never be perfected However Concrete Coatings did receive notices of arbitration through the AAA Nevertheless Concrete Coatings did not attend the arbitration and a default hearing was held on August 3 2010 At that hearing the arbitration panel concluded that Concrete Coatings had been properly served on February 28 2008 through mailing to the last known address Through evidence presented by Southgate the panel decided that the cost of repair to the project concrete s 00 000 335 flooring totaled 2 It was further decided that Concrete Coatings and The Stained Floor were liable for 20 of the damages equaling 467 00 000 Southgate filed a motion to confirm the award against Concrete Coatings with the 19 JDC on February 1 2011 Concrete Coatings filed declinatory exceptions of insufficient service and citation of process of s MAPP third party demand and a memorandum in opposition to smotion to confirm the award The court confirmed the award on Southgate December 9 2011 and mooted Concrete Coatings exceptions s The final judgment was signed on February 1 2012 Concrete Coatings filed a motion for new trial on February 9 2012 demanding a ruling on its exception and a written finding of fact from the court Concrete Coatings also wanted the court to determine whether it was solidarily liable with The Stained Floor for This is the corrected figure after the panel had at first calculated the percentage incorrectly The panel s order was thus modified on January 27 2011 5 00or 000 467 separately liable meaning each party was individually liable for 467 The motion for new triai was denied on February 16 2012 00 000 and Concrete Coatings appealed timely ASSIGNMENTS OF ERROR Concrete Coatings states the trial court erred in confirming the arbitration award against it and in rendering judgment in Southgate favor s after Southgate failed to serve Concrete Coatings with a citation from the sheriff Further Concrete Coatings states the trial court erred by upholding the arbitration panel award despite the fact that Southgate and MAPP s failed to obtain a court arder compelling Concrete Coatings to participate in the arbitration proceeding Concrete Coatings also claims the triai court erred as a matter of law in upholding the arbitration panel ruling since according to Concrete s Coatings Southgate and MAPP failed to present any competent evidence that Concrete Coatings breached its obligations under the subcontract agreement sufficient to confirm the default judgment Finally Concrete Coatings claims the trial court erred in confirming the arbitration award and in rendering judgment in Southgate sfavor as the arbitrators made significant errors of calculation in the damages award and after modifying the award failed to determine what amount was attributable to Concrete Coatings based on the evidence before the arbitration panel STANDARD OF REVIEW Since a declinatoty exception involves a question of law it should receive a de novo standard of review See Premier podge L v C Perrilloux 2005 p 2 App 4 Cir 1 926 So 576 577 0554 La 06 25 2d As to the award of an arbitrator it is res judicata and unless grounds are 6 established in accordance with arbitration law for the vacation modification or correction of the award it must be affirmed Hill v Cloud 391 26 p 6 App 4 Cir 1 648 So 1383 1387 writ not La 95 25 2d 2d 0486 95 17 considered 95 La 3 651 So 260 More specifically absent the existence of one of the specified grounds for vacating an arbitration award found in Louisiana Revised Statutes 9 the reviewing 4210 court is prohibited from reviewing the merits of the arbitrator decision s Pennington v Cuna Brokerage Securities Inc 2008 p 6 App 1 0589 La Cir 10 5 So 172 176 writ denied 2008 La 1 998 08 1 3d 2600 09 9 2d So 723 DISCUSSION It is well that a defendant actual knowledge of a legal accepted s action cannot supply the want of citation because proper citation is the foundation of all actions Naquin v Titan Indem Co 2000 La 1585 Ol 21 2 779 So 704 710 Concrete Coatings is carrect in its assertion 2d that it never received a court order to appear at the arbitration proceeding as other defendants had however we must examine first if a court order to compel appearance at the arbitration hearing is necessary and second if some other form of notice or citation can be considered proper as Naquin requires Concrete Coatings admitted to receiving a notice in the mail conforming with the requirements of AAA Rule 41 which pertains to service of notice for arbitration proceedings However Concrete Coatings asserts that the trial court erred in denying its declinatory exception raising Concrete Coatings received this notice at its proper business address in Gonzales rather than the incorrect address in Hammond where service was attempted by the Sheriff The Gonzales address is also the proper business address for The Stained Floor who also received notice for the arbitration proceeding and attended 7 the objections of insufficiency of citation and service of process because it did not receive notice through the Sheriff Concrete Coatings was named in the third party demand and because of our previous ruling in M Drywall Inc v MAPP Construction L R C et al was required to have its dispute resolved through arbitration As the dispute was handled by the AAA this made all the parties subject to the s AAA rules and procedures Once parties have entered into an enforceable agreement which provides for arbitration it is binding as law upon them When there is doubt the general rule is that it should be resolved in favor of and not against arbitration Parker v St Tammany Parish Hosp Service Dist 94 La App 1 Cir 2 670 So 531 534 writ denied 2278 96 27 2d 0805 96 La 5 672 So 925 96 10 2d There is a similar scenario in Commercial Renovations Inc v s Shoney of Boutte Inc 2000 La App 4 Cir 10 797 So 2319 O1 2d 183 writ denied 2001 La 2 808 So 351 As in the instant 3185 02 8 2d case Shoney dealt with a defendant who failed to appear at an arbitration s proceeding because a citation was not served on its registered agent Id at 184 The Fourth Circuit ruled that when a party agrees to be bound by arbitration they also agree to be bound by all the procedural rules of the arbitrator and contract conditions regarding arbitration Id at 184 185 While in the instant case there is no per se agreemenY given by Concrete Coatings to submit to the AAA rules of arbitration our previous s ruling in M Drywall makes Concrete Coatings bound to the arbitration R process With the AAA overseeing the arbitration all parties named in the third party demand are subject to its procedural rules including the rules of giving proper notice under Rule 41 Whether Concrete Coatings was properly served by citation through the sheriff becomes irrelevant at this 8 point because Concrete Coatings did receive proper notice of the arbitration hearing at its business address in accordance with the AAA rules We s therefore find that Concrete Coatings did receive proper notice of the arbitration proceeding and was compelled to attend In its third assignment of error Concrete Coatings challenges the arbitration panel decision itself claiming that it is not based on competent s evidence Accarding to La R 9 a court may vacate an arbitration S 4210 award only A Where the award was procured by corruption fraud or undue means B Where there was evident partiality ar corruption on the part of the arbitrators C 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 of any party have been prejudiced D 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 An arbitrator saward can only be vacated when at least one of the four conditions listed above are present See JK Developments LLC v Amtek of Louisiana Inc 2007 p 2 App 1 Cir 3 985 1825 La 08 26 2d So 199 200 writ denied 2008 La 6 983 So 1276 201 0889 08 20 2d Alleging that the arbitrators decision is not based on competent evidence does not come within any of the enumerated grounds for vacating and arbitration award Accordingly absent such grounds the arbitration award must be confirmed See Hill 648 So at 1387 2d In the final assignment of error Concrete Coatings alleges the arbitration panel miscalculated the award and erred in the attribution of fault making Concrete coatings and The Stained Floor each liable for 20 of the entire award which Concrete Coatings claims is contrary to the evidence presented Here we must still follow the standard put forth in Pennington 9 and we note that while Concrete Coatings does not name La R 9 S 2410 D specifically the assignment of error suggests that the arbitration panel may have imperfectly executed its powers such that a definite award was not made It is true that the arbitration panel initially miscalculated the percentage of fault allocated to Concrete Coatings and The Stained Floor Louisiana Revised Statutes 9 1 requires a court to correct an evident 42 A material miscalculation of figures in an arbitration award and this was done The panel corrected the mistake and modified the award Again we cannot overturn an arbitrator factual determination on the evidence presented s unless one of the grounds of La R 9 is met After its second review S 4210 of the evidence the panel made its award accordingly and we can find no compelling reason to vacate its confirmation with the trial court Furthermore La R 9 gives a party aggrieved by a confirmed S 4213 arbitration award three months to file a motion to vacate or modify an award after the award has been filed Concrete Coatings filed no such motion within the prescribed time period Therefore aside from the reasons we have given above Concrete Coatings failed to timely move the trial court to vacate or modify the award which they consider erroneous For the foregoing reasons we affirm the trial court confirmation of the default s award against Concrete Coatings The Stained Floor Through the evidence provided by Southgate at the arbitration proceeding the panel ruled that the cost of repair to the concrete flooring of the wark project totaled 2 The Stained Floor and Concrete 00 000 335 Coatings were found to be 20 liable for the total figure After an initial miscalculation that was corrected The Stained Floor share of the liability s 10 equaled 467 After this award was confirmed by the 19 JDC The 00 000 Stained Floor appealed ASSIGNMENT OF ERROR The Stained Floor claims the trial court erred when it failed to modify or vacate the reasoned award ofthe arbitration panel as it is flawed contains contradictions and is not a fair assessment of damages against The Stained Floor STANDARD OF REVIEW The accepted standard of reviewing the reasonableness of an arbitration award is found in Pennington v Cuna Brokerage Securities Inc 0589 2008 p 6 App 1 Cir 10 5 So3d 172 176 writ denied La 08 1 2600 2008 La 1 998 So 723 09 9 2d DISCUSSION The Stained Floor sole assignment of error questions the fairness of s the final allocation of damages based on the evidence presented It should be noted that The Stained Floor does not attack the competency of the evidence presented at the arbitration but the reasonableness of the award itself The Stained Floor claims the panel erred by holding it liable for the cleanup of the improperly stained concrete flooring as this was not one of its responsibilities in its subcontract with MAPP The Stained Floor also claims the panel erred when it did not allocate comparative fault with the other subcontractors who were responsible for the concrete flooring Neither of these assertions resemble any of the grounds listed in La R 9 S 4210 The panel based its decision on the evidence presented and while The Stained Floor appeared at the arbitration proceeding it presented no evidence in its defense The panel only had evidence presented by tl Southgate to render its decision Further unlike Concrete Coatings The Stained Floor does not dispute that they agreed to submit to the arbitration When parties agree to arbitration they are presumed to accept the risk of procedural and substantive mistakes of either fact or law In re Arbitration Between U Turnkey Exploration Inc and PSI Inc 577 So 1131 1134 S 2d La 1991 Therefore we find no error in the trial court confirmation of s the arbitration award against The Stained Floor Southern States At the beginning of the construction project MAPP had initially subcontracted with a plumbing company other than Southern States which went out of business before the plumbing work could be completed MAPP subcontracted with Southern States to complete the plumbing with the completion deadline for the project fast approaching time Southem States was unable to obtain a Due to the limited bond for its wark An agreement was thus reached that MAPP would not be held liable by Southgate far cost overruns should Southern States default on the work The contract between MAPP and Southem States also included a clause that transferred the same rights and remedies the contractor MAPP had against the owner Southgate to the subcontractor Southern States This included the binding agreement to arbitrate contract disputes Southern States was unable to complete the plumbing work before the completion deadline and defaulted MAPP released Southern States from the contract on May 7 2004 and retained another plumbing subcontractor to complete the wark The project was completed on or about March 25 2005 Southern States alleged it never received notice of a claim for contractual default from either Southgate or MAPP at this time when MAPP and Southgate were commencing litigation against the other subcontractors 12 On August 22 2005 Southgate and MAPP settled several claims including claims relating to cost overruns with the plumbing MAPP assigned whatever rights it had in these claims to Southgate On October 5 2007 Southgate filed a petition for damages and declaratory judgment against Southern States for defective plumbing Prior to then work Southern States was never named as a defendant by MAPP or Southgate in any previous petition MAPP filed a motion to join Southern States in its third party demand on January 21 2008 to hold Southern States liable for costs MAPP may owe Southgate associated with the plumbing As the litigation proceeded to arbitration the panel ordered Southgate on July 31 2009 to specify the work it claimed was defective with respect to each named subc On April 30 2010 Southgate and MAPP settled ntractor all their remaining claims with MAPP assigning all of its claims against the subcontractors to Southgate On une 4 2010 Southgate submitted a pre hearing brief to the arbitration panel in which it asserted that cost overruns associated with the plumbing were a result of Southern States contractual s default Southern States objected to being brought into the arbitration proceeding asserting the claim far default brought by Southgate was perempted under La S R 2772 9 Southern States claims the panel also ignored its own scheduling order which stated that no new claims may be asserted by any party after the filing of the pre hearing order on or before May 14 2010 but allowed Southgate to make its new claim for default almost one month after that deadline s MAPP own expert acimitted in the arbitration proceeding that MAPP had not made an initial claim for default priar to settling with Southgate Southern States claimed the panel incorrectly applied the ten prescriptive period of La year 13 C art 3500 instead of the proper five peremptive period of La R year S 2772 9 After the panel reached the decision to find Southern States liable for contractual defaulY Southern States filed a motion with the 19 7DC to vacate the award The court denied the motion reasoning that the correctness of the arbitration award was not reviewable After the court rendered a final judgment based on the arbitration award which totaled 00 263 356 1 against Southern States Southern States filed a timely devolutive appeal ASSIGNMENTS OF ERROR First Southern States claims the district court erred in failing to vacate the arbitration award when the arbitrators manifestly disregarded clear and binding Louisiana law imposing a preemptive period on Southgate sclaim for default Second Southem States claims the district court erred in failing to vacate the arbitration award for the arbitrators misconduct in disregarding binding Louisiana law resulting in prejudice against Southern States Third Southern States claims the district court erred in failing to vacate the arbitration award as an improper exercise of the arbitrators power in excess of their contractually granted authority STANDARD OF REVIEW We must apply the standard ofPennington where we can only reverse or modify the arbitration award under one of the four grounds in La S R 4210 9 Although arbitration proceedings are not held to the same strict rules as are the courts nonetheless an arbitrator must be vigilant in affording basic due process function is to determine Pennington at 176 if the arbitration 14 The appellate court s proceedings have been fundamentally fair Id The standard of review of arbitration procedures is whether a party to an arbitration has been denied a fundamentally fair hearing DISCUSSION Southem States assignments of error with respect to the arbitration s award go beyond those of Concrete Coatings and The Stained Floor in that they do not merely complain of the arbitration panel rulings on law and s fact Southem States contends that the actions of the panel constituted prejudicial misconduct and an improper exercise of contractually granted authority Such allegations should they be true would constitute a fundamentally unfair proceeding against Southem States Louisiana Revised Statutes 9 requires a court to vacate an arbitration award when the D 4210 arbitrators exceed their powers or so imperfectly execute them that a mutual final and definite award upon the subject matter submitted was not made The arbitration panel exceeded its authority and prejudiced Southern States by violating its own scheduling order and allowing Southgate to make the contractual claim against Southern States after the deadline for doing so in the scheduling order had expired These actions by the arbitrator come within La 9 which required the district court to vacate the S D R 4210 award against Southern States in its entirety CONCLUSION All the parties in the instant case were bound by contract and court order to resolve their contractual disputes through arbitration by the AAA Therefore the rules of the AAA and not the court govern all procedure and 5 While other circuit courts have adopted a disregard for the law as an additional basis for manifest modifying or vacating an arbitration award we have consistenNy and strictly adhered to the statutory standard established by La 9 JK Devefopmenls LLC v Amtek of Louisianu lnc 07p 5 S R4210 1825 La 6 App 1 Cir 3 985 So 199 202 writ denied 08 La 6YL0 983 So I276 08 26 2d 0889 08 2d Since the arbitration award against Southern States can be vacated pursuant to La R 9the S 4210 D issue of peremption becomes moot and is unnecessary to discuss 15 factfinding The arbitration process however still must be fundamentally fair Concrete Coatings and The Stained Floor were subject to those arbitration rules and the awards against them were made accordingly Southern States would also be bound to the AAA rules if a matter against s it were properly raised before the arbitration panel but if the arbitration panel acts outside its scope of authority and makes an award the award has no legal validity before the district court and must be vacated DECREE The judgment of the 19 JDC is affirmed with respect to the awards in favor of appellees Southgate Penthouses LLC and Southgate Residential Towers LLC and against Concrete Coatings Southern Division Inc and The Stained Floor LLC The judgment is reversed with respect to the award in favor of the appellees and against Southern States Plumbing Inc Costs of the appeal regarding Concrete Coatings is assessed to the appellant Concrete Coatings Southern Division Ina Costs of the appeal regarding The Stained Floor are assessed to the appellant The Stained Floor LLC Costs of the appeal regarding Southern States are assessed to the appellees Southgate Penthouses LLC and Southgate Residential Towers AFFIRMED IN PART REVERSED IN PART 16 SOUTHGATE PENTHOUSES LLC AND SOUTHGATE RESIDENTIAL FIRST CIRCUIT TOWERS LLC COURT OF APPEAL VERSUS STATE OF LOUISIANA MAPP CONSTRUCTION 2012CA 1242 CRAIN J concurring in the result Southgate moved to confirm the arbitratar award and supplied the s documentation required by Louisiana Revised Statutes 9 The subcontractor 4214 agreement with Concrete Coatings was filed in connection with the motion to confirm and requires arbitration See M R Drywall Inc v MAPP Construction LLC 09 La App 1 Cir 8unpublished writ action writ denied 09 0898 09 24 2079 La 11 22 So 3d 167 M R Drywall Inc v MAPP Construction 09 25 LLC 09 La App 1 Cir 8 unpublished writ action writ denied 09 0943 09 24 2079 La 11 22 So 3d 168 Section 4214 does not require proof of a court 09 25 order ordering participation in the arbitration proceedings Concrete Coatings did not move to vacate the arbitration award pursuant to Louisiana Revised Statutes 4213 9 and the record does not support any of the grounds for vacating an arbitration award set forth in Louisiana Revised Statutes 9 Accordingly I 4210 concur in affirming the judgment confirming the arbitration award against Concrete Coatings Additionally I concur in affirming the judgment confirming the arbitration award against The Stained Floor and reversing the judgment as to Southern States

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