Following the construction industry and related legal topics in the United States.

Wednesday, November 15, 2006

Arbitration Award Overturned

The result is right but the implications of cases like this continue to suggest that if you choose arbitration you may be in for the long haul. See Construction, where City of Bridgeport v. Kasper Group, Inc., 899 A.2d 523 (Conn. 2006) is reviewed.

What the Court Considered: After the scope of a public school project was expanded to include two more grades, the city decided to repeat the proposal and selection process for a design firm. The design firm who had earlier been awarded the project filed a breach of contract action against the city. The parties agreed to submit the dispute to arbitration. The city argued that the contract was void from the beginning because the majority owner of the design firm had admitted to engaging in a bribery scheme with the mayor. After the hearing, the city asked the arbitrator to stay the proceedings until the conclusion of testimony in the mayor's trial so that the trial transcript may be entered into evidence. The arbitrator denied this request and entered an award in favor of the design firm.

What the Court Said: Because the exclusion of the transcript substantially prejudiced the city, the arbitration decision was reversed.

What the Opinion Means: Although an arbitrator is accorded substantial discretion in determining the admissibility of evidence, he may be guilty of misconduct if he refuses to hear evidence pertinent and material to the controversy. The court reviewed both the evidence presented and the excluded transcript. It concluded that the arbitrator's decision amounted to misconduct because the transcript was highly probative and very likely would have altered the outcome of the arbitration.
Care should be taken before unconditionally committing to arbitration as your alternative dispute resolution procedure. There may be many instances where litigation may provide more appropriate relief. Giving yourself the right to choose may be well worth it. You can then manage the risk as it more clearly presents itself for resolution. (This entry was published by John Springer of Womble Carlyle's construction and real estate development group.)


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