The Georgia Court of Appeals recently adhered to its deferential attitude towards arbitration decisions in America’s Home Place, Inc. v. Cassidy, A09A1148 (November 10, 2009). In a dispute between a contractor and homeowners, the Court ruled on both a substantive challenge to the award and the homeowners’ challenge of procedure.
Procedurally, the homeowners complained that the arbitrator failed to require the contractor to submit a pre-hearing witness list, and failed to issue a requested witness subpoena. Interestingly the Court found that the arbitration code providing that the arbitrator “may issue subpoenas for the attendance of witnesses” simply provided the arbitrator discretion to do so, but did not mandate that a subpoena be issued. Moreover, the Court found that the homeowners waived any potential challenge by proceeding with the arbitration hearing, and by pursuing their counterclaim (including filing a post hearing brief seeking recovery on their counterclaim). The Court noted that the code allows for vacating an award where the rights of a party were prejudiced by a “failure to follow the procedure of this part, unless the party applying to vacate the award continued with the arbitration with notice of this failure and without objection.” O.C.G.A. § 9-9-13(b) (4). The Court found that the homeowners waived any objection by anxiously proceeding with the arbitration.
The homeowners also challenged the arbitrator’s decision, arguing that the arbitrator failed to follow the party’s contract when he ruled that the contractor had substantially completed the work. The Court handled this argument as a manifest disregard of the law issue, noting that manifest disregard requires that the arbitrator be conscious of the law and deliberately ignored it. A simple mistake in interpretation of the law, or the contract, does not suffice. Here, the homeowners argued that the contract required that a Certificate of Occupancy be issued in order to find substantial completion. The arbitrator--and the Court--disagreed with this interpretation of the contract. Interestingly, the opinion does not quote the language from the contract on the substantial completion/CO issue.
It will be interesting to see if future challenges are pursued, based on the Court’s admonition that an arbitrator may not decline to follow the parties’ contract. Arguable, that might provide ammunition for a manifest disregard argument. In this case, however, the Court not only deferred to the arbitrator’s interpretation, but also seemingly agreed with it.It will be interesting to see if litigants pursue future challenges premised on the Court’s admonition that an arbitrator may not decline to follow the parties’ contract. Arguably, that might provide ammunition for a manifest disregard argument. In this case, however, the Court not only deferred to the arbitrator’s interpretation, but also seemingly agreed with it.
