NORDLUND & ASSOC INC V VILLAGE OF HESPERIA
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STATE OF MICHIGAN
COURT OF APPEALS
NORDLUND & ASSOCIATES, INC.,
FOR PUBLICATION
April 20, 2010
9:05 a.m.
Plaintiff/CounterdefendantAppellant,
V
No. 289304
Oceana Circuit Court
LC No. 05-004843-CK
VILLAGE OF HESPERIA and NEWAYGO
COUNTY DRAIN COMMISSIONER,
Defendants/CounterplaintiffsAppellees.
Advanced Sheets Version
Before: OWENS, P.J., and SAWYER and O’CONNELL, JJ.
PER CURIAM.
Plaintiff, Nordlund & Associates, Inc., appeals as of right the circuit court’s order
confirming an arbitration award and denying plaintiff’s motion to vacate or modify the
arbitration award. We affirm.
I. FACTS
On January 7, 2005, plaintiff filed a breach of contract action against the village of
Hesperia.1 Defendant filed a counterclaim alleging breach of contract and demanding
indemnification.
On January 22, 2007, the circuit court entered a stipulation and order for arbitration
pursuant to MCL 600.5001 et seq. The order provided that the parties would submit “all issues
in this action which are subject to the jurisdiction of this court” to binding arbitration. Pursuant
to the circuit court’s order, the parties executed an arbitration agreement, which stated that “[a]ll
theories/defenses and affirmative defenses raised in the pleadings of the parties during the course
of these proceedings and associated damages, offsets, and failure to mitigate claims” would be
submitted for arbitration.
1
Because the village of Hesperia is the only defendant with an interest in this appeal, for
purposes of this opinion the singular “defendant” will refer to it exclusively.
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Before this dispute, plaintiff acted as defendant’s engineer for roughly 22 years. Two
projects are relevant to this appeal: (1) the Sunset Boulevard/Family Dollar water main project
and (2) improvements to the sewer system and wastewater treatment plant, known as “the SRF
project” for its connection to the State Revolving Fund.
A. SUNSET BOULEVARD/FAMILY DOLLAR PROJECT
Innovative Construction hired plaintiff to do work in relation to the opening of a Family
Dollar store near Sunset Boulevard. In furtherance of this project, plaintiff filed an application
on behalf of defendant, seeking authorization to extend a water main along Sunset Boulevard.
Plaintiff billed defendant $600 for this work, but never received payment.
Plaintiff also prepared additional permit applications and gave them to defendant to
submit to the proper authorities. These permits, which were subsequently denied, required
approval by the Michigan Department of Environmental Quality (MDEQ) before the water main
could be installed. However, Innovative Construction installed the water main before any
permits were approved. As a result, the MDEQ fined defendant $12,140. Defendant sought
reimbursement from plaintiff for that amount, charging that plaintiff was responsible for the
premature installation.
B. SRF PROJECT
On November 10, 2003, by written contract, defendant hired plaintiff to perform
professional services. On August 5, 2004, defendant terminated the contract. The contract
provided that it could be terminated without cause and that, upon termination, “[a]n equitable
adjustment shall be made in the contract price.” Defendant argued that because only 65 percent
of plaintiff’s work was salvageable by the engineering firm that replaced plaintiff, the “equitable
adjustment” should equal that percentage of the fees plaintiff earned, reduced by any payment
already made. Defendant claimed that it had paid plaintiff $10,000. Plaintiff disagreed, claiming
that it should be paid the full amount of $39,677.18. Plaintiff also disputed the $10,000
reduction, on the ground that defendant’s $10,000 payment was for work performed on another,
unrelated job, the Division Street Bridge project.
The parties submitted to the arbitrator an “arbitration summary,” in which they fully
briefed the issues to be decided. Following a hearing, the arbitrator issued an opinion setting
forth the following findings: (1) plaintiff was entitled to $14,787.29 for the use of its plans and
specifications on the SRF project, (2) defendant was entitled to $19,787.42 in compensation for
plaintiff’s breach of the SRF project contract (that amount being the difference between
plaintiff’s contract price and what defendant ultimately paid another party to complete the
contract), (3) defendant failed to prove that it had paid plaintiff $10,000 on the SRF project, (4)
defendant was not entitled to recover any damages attributable to the Sunset Boulevard/Family
Dollar project, and (5) plaintiff was entitled to payment of its overdue $600 invoice relating to
the Sunset Boulevard/Family Dollar project. After calculating all offsets, the arbitrator awarded
defendant a total of approximately $4,400.
Plaintiff moved to vacate or modify the arbitration award, arguing that the arbitrator had
“miscalculated” the award of damages, MCR 3.602(K)(2)(a), and exceeded his powers by
deciding an issue that had not been submitted to arbitration, MCR 3.602(J)(2)(c). Specifically,
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plaintiff argued that the breach of contract claim, which the arbitrator found entitled defendant to
$19,787.42 in compensation, was never brought or argued at arbitration, and that the arbitrator’s
decision thus reached “beyond the boundaries of the submission” and should be vacated.
In response, defendant argued that there was no mathematical “miscalculation” as
envisioned by MCR 3.602(K)(2)(a) and that the arbitrator did not exceed his powers because no
express limit was placed on those powers under the arbitration agreement. The motion was
heard on November 10, 2008, and the circuit court ruled from the bench as follows:
I thought the arbitrator was quite thorough relative to the matter and the
Court would not intervene and set aside. I agree that none of the statutory bases
were clearly struck which would cause this Court to . . . intervene relative to the
settlement and the Order and the findings of the arbitrator.
For that reason, I deny your Motion.
The circuit court thereafter issued a written order confirming the arbitration award and denying
plaintiff’s motion.
II. ANALYSIS
Plaintiff argues that the trial court erred by confirming the arbitration award because the
arbitrator both exceeded his powers when he rendered a decision on an issue that had not been
submitted to arbitration and “miscalculated” the award of damages. We disagree. A trial court’s
decision to enforce, vacate, or modify an arbitration award is reviewed de novo. Saveski v Tiseo
Architects, Inc, 261 Mich App 553, 554; 682 NW2d 542 (2004).
If an agreement to arbitrate provides that judgment may be entered on the arbitration
award, then it is considered a statutory arbitration. Gordon Sel-Way, Inc v Spence Bros, Inc, 438
Mich 488, 495; 475 NW2d 704 (1991). Here, the parties’ arbitration agreement stated that a
party could move to enforce the award and that the circuit court could enforce the arbitration
award. Therefore, the agreement is for statutory arbitration.
MCR 3.602 governs judicial review and enforcement of statutory arbitration agreements.
MCR 3.602(A). MCR 3.602(K) sets forth the reasons for which a trial court may correct or
modify an arbitration award:
(2) On motion of a party filed within 91 days after the date of the award,
the court shall modify or correct the award if:
(a) there is an evident miscalculation of figures or an evident mistake in
the description of a person, a thing, or property referred to in the award;
(b) the arbitrator has awarded on a matter not submitted to the arbitrator,
and the award may be corrected without affecting the merits of the decision on the
issues submitted; or
(c) the award is imperfect in a matter of form, not affecting the merits of
the controversy.
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In addition, a trial court must vacate an arbitration award if a party has filed a motion
requesting it and one of the following has occurred:
(a) the award was procured by corruption, fraud, or other undue means;
(b) there was evident partiality by an arbitrator appointed as a neutral,
corruption of an arbitrator, or misconduct prejudicing a party’s rights;
(c) the arbitrator exceeded his or her powers; or
(d) the arbitrator refused to postpone the hearing on a showing of
sufficient cause, refused to hear evidence material to the controversy, or otherwise
conducted the hearing to prejudice substantially a party’s rights. [MCR
3.602(J)(2).]
Plaintiff first argues that the arbitrator exceeded his powers, MCR 3.602(J)(2)(c), when
he rendered a decision on an issue that had not been submitted to arbitration. Specifically,
plaintiff claims the arbitrator exceeded his powers in ruling that defendant was entitled to
$19,787.42 in damages for plaintiff’s breach of the contract for the SRF project.
The scope of an arbitrator’s remedial authority is “limited to the contractual agreement of
the parties.” Ehresman v Bultynck & Co, PC, 203 Mich App 350, 355; 511 NW2d 724 (1994).
Thus, “[a]rbitrators exceed their power when they ‘act beyond the material terms of the contract
from which they primarily draw their authority, or in contravention of controlling principles of
law.’” Saveski, 261 Mich App at 554, quoting DAIIE v Gavin, 416 Mich 407, 434; 331 NW2d
418 (1982).
In this case, the parties’ arbitration agreement provided that “[a]ll theories/defenses and
affirmative defenses raised in the pleadings of the parties during the course of these proceedings
and associated damages, offsets, and failure to mitigate claims” shall be submitted for arbitration.
Defendant’s amended counterclaim included the following allegations:
1. That a contract for professional services was signed between the parties
to this action.
2. That Paragraph XV, entitled “Professional Standards,” required
Nordlund to perform contractual services at a competency level maintained by
other participating professional engineers.
3. That Nordlund breached this contract in that contractual services were
delivered at less than the competency level maintained by other professional
engineers, as neither the design plan, nor the project plan were adequate, both of
which had to be redone by other engineers.
4. That as a proximate result of the breach by Nordlund, the Village has
been damaged in that they were forced to hire another engineer to complete the
services required by the contract.
5. That Nordlund is liable to the Village for damages for their breach of
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the agreement.
It is clear from these allegations that defendant was seeking damages for breach of the
SRF project contract. Thus, the arbitrator did not exceed his powers by concluding that
defendant was entitled to $19,787.42 in compensation for plaintiff’s breach of the SRF project.
See Saveski, 261 Mich App at 554. The terms of the agreement limited the scope of arbitration
to those issues raised in the pleadings, and defendant raised the issue of damages for breach of
the SRF project contract in its pleadings. That this issue was not raised in the parties’ subsequent
arbitration summaries is irrelevant to whether the arbitrator exceeded his powers when rendering
the award. Therefore, the arbitrator did not exceed his powers as set forth in the arbitration
agreement, see Ehresman, 203 Mich App at 355; Saveski, 261 Mich App at 554, and the trial
court therefore did not err by confirming the arbitration award and denying plaintiff’s motion to
vacate or modify it.
Plaintiff’s final argument on appeal is that the arbitrator miscalculated the award of
damages, asserting that the calculation was faulty because the arbitrator failed to grasp the clear
and concise meaning of the contract. Plaintiff contends that this Court must review various
valuations and contract interpretations made by the arbitrator by characterizing them as a
miscalculation of the award. We disagree.
MCR 3.602(K)(2)(a) states that a court must modify an arbitration award if “there is an
evident miscalculation of figures or an evident mistake in the description of a person, a thing, or
property referred to in the award.” This Court has repeatedly emphasized that it must carefully
evaluate claims of arbitrator error to ensure that they are not being used as a ruse to induce this
Court to review the merits of the arbitrator’s decision. Gordon Sel-Way, Inc, 438 Mich at 497;
Washington v Washington, 283 Mich App 667, 675; 770 NW2d 908 (2009). MCR
3.602(K)(2)(a) allows for modification or correction of an award only when it is based on a
mathematical miscalculation, such as where an arbitrator erred in adding a column of numbers,
or an evident mistake in a description. Because plaintiff’s alleged error concerns the
interpretation of the underlying contract, and not descriptions or mathematical calculations, it
cannot be said that there was an evident mistake for purposes of MCR 3.602(K)(2)(a).
Therefore, the circuit court properly refused to modify the arbitration award on that basis.
Affirmed.
/s/ Donald S. Owens
/s/ David H. Sawyer
/s/ Peter D. O’Connell
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