Georgia Court of Appeals Rejects Challenge to Arbitration Award

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.

The importance of licensing

A 2008 Georgia case illustrates the importance of proper licensing for certain subcontractors, including those performing electrical work. Some subcontractors perform great work, but for whatever reason their principal failed to obtain an appropriate license. For electrical subcontractors, this would be from the Division of Electrical Contractors. Regulation of certain trades, and licensing requirements, applies the contracting work affects "the public interest."

The 2008 case, JR Construction/Electric v. Ordner Construction, 669 S.E. 2d 224 (Ga. App. 2008), involved an out of state electrical subcontractor who sought to satisfy the licensing requirement by joint venturing with a local, licensed subcontractor. The Court found that this was inadequate because of the limited services performed by the licensed individual--he showed up, according to the evidence, only to provide the license. As a result, the Court invalidated the lien, and held that the subcontract was unenforceable. The subcontract was void because it violated public policy.

Based on this case, subcontractors lacking a proper license may be able to protect themselves by joint venturing, but only if the licensed individual observes and supervises the work.

Critical filing date for a claim of lien

In D.C. Ecker Constr. Inc. v. Ponce Inv. LLC (Case No. A08A107 November 25, 2008), the Georgia Court of Appeals issued an interesting opinion concerning the timeliness of a lien claim. Ecker filed a claim of lien which recited that the claim became due on June 16, 2006, three months and five days before the lien was filed. The trial court, based on the owner's motion to dismiss, ruled that the lien was untimely filed (it was not filed within three months as required by the mechanic's lien statute) and dismissed the action. The Court of Appeals reversed, explaining that the lien claimant had inserted both the June 16, 2006 date, as well as a statement that the lien was filed within three months since the furnishing of the lien claimant's services, labor and materials.
The Court of Appeals explained that the crucial date is the last date that materials or labor was furnished to the project, not the date the claim became due. The Court stressed that the claim could become due after the materials, labor or services were last provided. Previously, many courts treated those two dates as one and the same. The Court distinguished previous cases in which liens were deemed untimely, because they contained only the date, and not a boilerplate statement that the lien was filed within three months after the last date that materials or labor were furnished. Certainly this is an interesting case showing the importance of a boilerplate statement, and giving some benefit of the doubt to the claimant (in an area of the law that sometimes shows no mercy for the unwary).