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Eastern Seaboard Const. Co. v. Gray Const., Inc.

Issue Discussed: Functus Officio

Submitted by Linsey M. Routledge, Kyley Knoerzer

Date Promulgated: December 31, 2008

 

Eastern Seaboard Const. Co. v. Gray Const., Inc., (553 F.3d 1 (2008))

Case Number: 08-1679

Filed: May 29, 2008

Court: U.S. Court of Appeals, First Circuit

In a December 31, 2008 opinion, the U.S. Court of Appeals for the First Circuit held that an arbitrator did not exceed his authority by revisiting an initial award for the purposes of clarifying it.

Defendant Gray Construction (“Gray”) contracted with plaintiff, Eastern Seaboard Construction (“Eastern”), on a construction project at the Portsmouth Naval Shipyard in Kittery, Maine.  A dispute arose when unexpected conditions came to light that increased the project’s scope and workload, for which the Navy refused to pay Gray, and Gray in turn refused to pay Eastern.  Gray then hired replacement subcontractors to complete Eastern’s scope of the work.  Eastern filed a complaint premised on the Miller Act, 40 U.S.C. § 3131, which requires surety bonds on federal construction projects.  After Gray counterclaimed and sought to stay the proceedings, the parties agreed to submit the case to arbitration pursuant to the arbitration clause in their contract.

The arbitrator issued a nine-page award on September 21, 2007 in favor of Eastern on all but one of its claims, determining that Eastern breached its contract by abandoning its work and awarded Gray $77,000 for the completion of the contract to be deducted from the award paid to Eastern.  In addition, the award stated that, “to the extent that an issue or claim is not explicitly discussed and resolved, it is denied.”  Eastern then filed an Application for Clarification of the Arbitration Award seeking to have the $77,000 award to Gray reduced by $66,613.89, the amount remaining on the parties’ subcontract.

Acknowledging that the award could have been clearer, the arbitrator issued an amended award and adopted Eastern’s request to reduce the amount of the award.  Gray moved to vacate and the district court affirmed the magistrate judge’s recommendation to do so, finding that AAA Rule R-47, which the parties agreed applied to the arbitration, prohibited substantive modifications to the award.

The Court of Appeals disagreed and found that the functus officio doctrine did not prevent the arbitrator from correcting the award because the arbitrator’s omission was the type of clerical or technical error that the AAA R-47 permits him to amend or clarify.

 

 

[1] Linsey M. Routledge is Senior Counsel and Kyley Knoerzer is an associate at Clyde & Co US LLP.