Fundamentals of Construction Contracts in Louisiana

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August 16, 2018
Author: Robert Robertson
Organization: Allen & Gooch, A Law Corporation


Introduction

Submission of a dispute to impartial third party

Arbitration is the submission of a dispute to an impartial person or persons chosen by the parties who in advance agree to abide by the award made by the arbitrator or arbitrators issued after a hearing at which both parties have an opportunity to be heard. 1

Favored because it can be quick and thus less expensive

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Arbitration has become a favored means by which disputes are resolved in construction matters. Most commercial and industrial contracts and many residential contracts include arbitration provisions either requiring arbitration between the parties or at the least giving the parties a choice to arbitrate any dispute that may arise from the contract. One of the primary reasons arbitration has become popular is because it is viewed as a less expensive and more expedient process for resolving disputes. 2

Complex construction issues can be resolved by someone with experience in this area.

Also, in construction matters, the issues can be complex and specific to a particular specialty or trade. Arbitration gives the parties an opportunity to select an arbitrator or arbitrators to preside over the proceeding that have experience in construction matters and in some cases experience in the particular construction issues in question.

In this section, we will address the legal issues surrounding arbitration provisions and their enforceability, arbitration procedure, arbitration awards and the costs and benefits of arbitration.

I. Arbitration provision and its enforceability.

Arbitration provision is usually a contractual provision
Governed by the terms of the contract

Sometimes it is evaluated separate and distinct from other contract provisons.

Generally, arbitration is governed by rules of contract in which parties cannot be forced to arbitrate. Accordingly, the parties must agree to arbitrate their dispute, which agreement is usually represented by a provision in the contract.

A. Laws Governing Arbitration

State statutory law governs arbitration LSA-C.C. Art. 3099 – 3132 and LSA-R.S. 9:4201 et. seq.

Also federal statutory law can govern arbitration.

Both State and Federal favor arbitration

Both State and Federal agree that the arbitration provision should be enforced unless some issue exists that would allow revocation. Primary issue is fraud. But in some cases it can be lack of consideration.

The difference exists when there is a claim regarding the validity of the contract itself as to whether the court or the arbitrator should decide that issue.

Arbitration is governed by both the Louisiana Civil Code and Louisiana Statutory Law, which in most cases complement each other.3 Both provide a comprehensive framework for the arbitration process.

LSA-R.S. 9:4201 reads:

A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

Accordingly, arbitration provisions are governed by contract law and are binding and enforceable unless they violate some provision which allows for revocation of the specific agreement to arbitrate. The primary principal followed by the courts is that 3 C.C. Arts. 3099 to 3132; C.C. Art. 3110; 1A LACIVL § 13.2 arbitration by law is favored and any contractual provision providing for arbitration should be interpreted in such a manner.4

Also, the arbitrator’s decision is binding and subject to limited judicial review, except where the arbitration is court-ordered or part of a court annexed alternate dispute resolution. 5 Regardless, even when subject to review, Louisiana courts likewise resolve any doubts or issues in favor of the arbitration decision.6

In some cases the contract may specifically require that the arbitration provision be governed by the Federal Arbitration Act (FAA). 7 With regard to such matter, whether a claim is brought in state or federal court, and whether a claim is based on state or federal law, courts must enforce arbitration agreements in contracts covered by the FAA, notwithstanding any state statutory or jurisprudential rules to the contrary. 8

Also, if the contract is related to interstate commerce, the FAA preempt state law and must be applied when enforcing the arbitration provision. 9 The phrase “involving commerce” has been interpreted as the functional equivalent of “affecting commerce.” 10

T
he same favorable treatment provided in Louisiana Law, is echoed in the FAA. 11 Section 2 of the FAA provides:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

Unquestionably, the FAA embodies a liberal federal policy favoring arbitration agreements.12

This favorable treatment continues as well in the United States Supreme Court jurisprudence in which the Court has instructed that the effect of Section 2 is to create a body of federal substantive law of arbitrability and any doubt concerning the scope of arbitrable issues should be resolved in favor of arbitration. 13 This construction is applicable “whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” 14

B. Parties and Claims Subject to Arbitration

Those who sign the contract

Those who adopt the arbitration provision by their actions or inactions.

Fifth circuit in In Re Succssion of Taravelle, 734 So.2d 149, 98-834 (La.App. 5 Cir.,1999) held Correspondence between counsels regarding search for appropriate arbitration firm did not constitute written agreement to arbitrate between parties.

If the agreement between the parties is written, the provisions of the statute are satisfied even though the writing is not signed by the parties. Hurley v. Fox 520 So.2d 467, 469 (La.App. 4 Cir.,1988)

If a contract exists which includes an arbitration provision, if the parties have been abiding by the terms and conditions of the contract, it is likely the arbitration provision will be enforceable.

Also based on equity a non-signature can be obligated to arbitrate its claim when the dispute is so closely related to the arbitration matter.

St. Romain v. Cappaert Manufactured Housing, Inc., 903 So.2d 1186 Formerly 33k6.2 ARBITRATION

La.App.3.Cir.,2005

Arbitration agreement did not exist between manufacturer of mobile home and purchaser of home, and, thus, purchaser's suit in redhibition against manufacturer did not have to first be submitted to arbitration; there was no evidence that arbitration agreement formed part of the consideration for the original purchase agreement, nor could manufacturer unilaterally assign additional consideration for the perfection of the sale, there was no evidence that purchaser agreed to be bound by arbitration agreement, arbitration was not discussed at time of sale, and purchaser was not even aware of the owner's manual containing the arbitration agreement until two years after sale.

Regardless the easy rule to follow is to make sure you have a signed copy of the agreement

As mentioned above, the arbitration provision is governed by the rules of contract. Likewise, the parties and claims subject to the arbitration provision will be determined by the language contained in the contract.

Whether a party is obligated to arbitrate is a matter of contract and, thus, the question of who is bound by an arbitration agreement is a function of the intent of the parties, as expressed in the terms of the agreement.15 Generally, in order to be subject to arbitral jurisdiction, the party must be a signatory to a contract containing an arbitration clause.16 However, in some situations, when arbitration agreement lacks signature, the actions and the conduct of the party or parties, who did not sign, may confirm the agreement to arbitrate. 17 Accordingly, if by action, the non-signing party adopts the arbitration provision, he/she could be forced to arbitrate a dispute governed by the agreement.

Also, some courts have held that non-signing parties could be subject to arbitration based upon principals of equity or fairness. Courts have reasoned that parties who are nonsignatories can be subject to arbitration when their claim is so intertwined with the contract that fairness requires they be made parties to the arbitration. 18

Whether a claim is subject to arbitration is likewise usually determined by the scope of the particular arbitration provision. When addressing this issue, as provided above, courts read arbitration clauses broadly.19

However, because arbitration is a matter of contract, a party cannot be required to arbitrate a dispute which the party has not agreed to submit to arbitration.20 As a result, if the arbitration agreement is narrow in its scope, the parties may be limited with regard to the type of claim that may be arbitrated. Thus, it is important that when drafting the arbitration provision, the parties insure that the provision encompasses the claims the parties wish to submit to arbitration.

In many cases parties wish to include broad language in the agreement to insure any claim that arises between the parties would be subject to arbitration. For example, the contract may include language which provides that “any and all claims, issues or disputes of any nature arising out of the contract”, and/or arising out of any and all interaction between the parties is subject to arbitration. 21 Likewise it may be necessary to list the  specific types of claims that will be arbitrated such as “claims under tort law, contract law, statutory law, or common law.” 22

C. Enforceability of the Arbitration Provision – Who Decides

Federal law provides that court can decide whether an arbitration provision exists and is enforceable thereafter the arbitrator decides if the contract is enforceable Louisiana law holds the opposite. Court can determine whether the contract is valid.

As provided above both the Federal and the State Arbitration Acts are similar in many respects in governing issues related to arbitration. However, these provisions are applied differently when it comes to answering the question of who decides the validity of a contract which includes and arbitration provision.

For example, even if a contract exists between the owner and contractor which includes an arbitration clause, a party could allege that he/she where induced by fraud to enter into the agreement. If the party can prove inducement by fraud, the contract will be deemed null and void. However, the question is whether the court or whether the arbitrator should decide the enforceability of the contract.

The United States Supreme Court, in First Options of Chicago, Inc. v. Kaplan, 23addressed this issue under the Federal Arbitration Act. The Court reasoned that the arbitration dispute usually includes three issues. The first issue relates to the actual merits of the claim; the second issue is whether the parties entered into an agreement to arbitrate the claims (arbitrability); and the third issue is the jurisdictional question of who has authority to decide if a binding agreement exists. Regarding the third issue, the Supreme Court found that arbitrability turns upon the actual agreement between the parties, meaning the arbitration provision must explicitly give the arbitrator the power to decide arbitrability, otherwise, there is a presumption the court will make that decision. However, regarding the validity of the whole contract, the Court reasoned that once it is determined that the arbitration provision (as opposed to the entire contract) is valid, the validity of the contract itself becomes a question for the arbitrator. Accordingly, if the court finds that the arbitration provision is valid and the parties agreed to arbitrate then disputes, any claim regarding the validity of the contract is resolved by the arbitrator. 24 In contrast, the Louisiana Supreme Court in George Engine Co., Inc. v. Southern Shipbuilding Corp., held that the court, not the arbitrator, should decide the validity of the parent contract, which contains an arbitration provision, because “[i]t would be an absurdity to compel arbitration of the conditions in a contract which does not exist in its entirety in legal contemplation.” 25 Although, George Engine “has never been overruled, it has been criticized and questioned” by numerous courts.26 Also, a concern expressed by the courts is that parties would attempt to avoid subjecting a claim to arbitration by simply alleging fraud in the inducement.

In Williams v. Litton, 2003-805 (La. App. 3 Cir. 12/23/03), 865 So.2d 838, rehearing denied (Feb. 11, 2004).the Louisiana Third Circuit Court of Appeals specifically addressed the difference between the Federal and Louisiana law as well as the problem that exists when a party alleges fraud in the inducement for the purpose of defeating an otherwise valid arbitration clause. The Third Circuit reasoned that if Louisiana law governed the contract at issue which contract includes an arbitration provision, the Louisiana Supreme Court’s ruling in George Engine would require that the arbitration provision be treated as part of the overall “parent contract”, and the Louisiana courts must examine the parent contract’s validity before determining whether arbitration is to be compelled. However, Citing TRCM, LLC v. Twilight Partnership, the court reasoned that:

“to allow a judicial resolution with inherent delays and appeals of all
disputes as to the validity of the contract in those instances where a
contracting party alleges the substantive contract containing the
arbitration clause is vitiated by a vice unrelated to the arbitration
proceeding in the contract obviously defeats federal and state policy
favoring contractual extrajudicial and expeditious arbitration to avoid
prolonging resolution of contractual disputes.”
27

Recognizing its obligation to decide the validity of the parent contract, the Williams court, addressing in part a question raised by the Fourth Circuit in Sun Drilling Products Corp. v. Rayborn, 97-2112 (La. App. 4 Cir. 12/3/97), 703 So.2d 818, 819, provided the following guidance:

“Furthermore, in response to the fourth circuit's concern, “[W]hat is to
stop anyone from making the allegation of fraud or invalidity of the
contract to avoid an [arbitration] provision in the contract[?],”we find
that state law, regulating fraud pleadings, provides some limitation on a
party's ability to use an allegation of fraud as a dilatory tactic.
Therefore, we should carefully scrutinize claims of fraud, particularly,
in circumstances like the instant case, in which Plaintiffs do not allege
fraud in their original petition but, instead, add the allegation, only,
after the other side files a motion to compel arbitration.”
28

Accordingly, although Louisiana Courts are tasked with the responsibility of determining the validity of the parent contract, the Courts have the obligation and authority to scrutinize fraud claims that are not alleged until a demand for arbitration is issued.

II. Waiving Arbitration

Contractual provision, purposeful action to relinquish a known right.

Waiving arbitration almost impossible. Have to catch a judge on a bad day to have him rule you waived your rights.

As with any contractual provision, parties can waive their right to arbitrate. With regard to this issue, the Louisiana Supreme Court in International River Center v. Johns- Manville Sales Corp. 861 So.2d 139, 144, 2002-3060 (La.,2003), held that “ the legislature has determined that it is the arbitrator who will make that decision and it is not the province of this court to second guess such policy decisions.” However, the Court further noted that, “If . . . the parties to an arbitration agreement wish for the courts, rather than the arbitrator, to determine the issue of waiver, they may certainly construct the arbitration clause in such a manner as to so allow.”29

However, issues regarding who will decide waiver can still exist when contractual question are at issue. For example in In Conagra Poultry Co. v. Collingsworth, 30,155 (La. App. 2 Cir. 1/21/98), 705 So.2d 128, the Second Circuit held that the issue of whether a contract required the party to request arbitration within a certain period of time and whether one party waived his right to arbitrate is to be determined by the arbitrator rather than the court because those issues arose out of the contract, and the party had an agreement to arbitrate such disputes.

Also, courts have held that in cases in which the question of enforcement of an arbitration agreement is introduced into a preexisting matter, the trial court has subject matter jurisdiction to consider the waiver or lack thereof.
30

With regard to the issue of waiver, the Second Circuit, in Lincoln Builders, Inc. v. Raintree Investment Corporation Thirteen,31 noted:

The parties are required, therefore, to resolve the dispute through
arbitration, unless a party waives their right to arbitrate the matter.
Waiver of arbitration has been defined by our supreme court as a
“voluntary and intentional relinquishment of a known claim. . . .” In
Louisiana, waiver of arbitration is not a favored finding, and there is a
presumption against it. A party asserting waiver bears a heavy burden
of proof to show that the opponent has waived a right to arbitrate. . . .
There is a strong policy in Louisiana favoring arbitration when it has
been agreed to by the parties. Courts in Louisiana have found waiver of
arbitration only in extreme cases.

Usually the issue of waiver arises when a party has participated in the judicial process contrary to an arbitration provision. Even in such situations, Courts have held that limited participation in the judicial process will not result in a waiver of the rights provided in a valid arbitration provision. For example in Matthews-McCracken Rutland Corp. v. City of Plaquemine, 414 So.2d 756 (La. 1982), the court held that filing an answer in a judicial demand did not constitute a waiver of arbitration.

Also, in Electrical & Instrumentation Unlimited, Inc. v. McDermott Intern., Inc. 627 So.2d 702 (La.App. 4 Cir.,1993), the court held that the plaintiff did not voluntarily and intentionally relinquish the right to arbitrate the dispute arising from the subcontract with the defendant even though the plaintiff litigated the matter for several years. The Court reasoned that due to a hurricane which caused the plaintiff to evacuate the site and the defendant's later banishment of the plaintiff from the site, the plaintiff did not have knowledge of the arbitration provisions until the parties exchanged exhibits in preparation for trial, and the enforcement of arbitration provisions would come as no surprise to the defendant for its own purchase orders required such a result.

Courts have reasoned that seeking relief from the court before demanding arbitration is not determinative of whether the right to demand arbitration has been waived, but is only a factor to be considered. 32Waiver of a party's right to require arbitration by instituting a court action will depend on the circumstances of each case, and whether the party indeed abandoned his right to insist upon arbitration by resorting to court procedure. 33 For example, courts have found waiver to exist when the party, who has knowledge of the arbitration provision, proceeds with the litigation process for an extended period without requesting arbitration. In Albert K. Newlin, Inc. v. Morris, 1999-1093 (La. App. 3 Cir. 1/5/00), 758 So.2d 222, writ denied, 2001-0875 (La. 5/25/01), 793 So.2d 164, the general contractor did not raise the issue of arbitration as an affirmative defense in his answer to the subcontractor’s suit, continued the matter in court three times, specifically asked the court to fix the matter for trial, and did not assert his right to arbitration in a motion to stay until five days prior to trial, which was nineteen months after the suit was filed. Accordingly, a court will likely not find a party has waived his right to arbitrate unless the litigation has proceeded for an extended period, in which the parties have filed pleading and perform discovery, and the court would find that allowing arbitration at this stage in the litigation would result in an undue burden or prejudice the opposing party.

III. Arbitration Procedure

There is no procedure. Basically a claim is filed by issuing a correspondence to the breaching party listing the claim and requiring that the party respond within a time period to select an arbitrator.

Arbitrator makes the rules

Louisiana contract provides for selecting arbitrator and party doesn’t abide or no provision can motion the court to force the selection of an arbitrator.

Can compel arbitration

Louisiana law have three months to decide issue. However, this time period can be extended.

AAA most common

Serve AAA with the claim

AAA sets deadline in which to respond

Select arbitrator from a list

Any action by the administrator is basically non-reviewable.

Issue regarding venue. Administrator contacted opposing party, listed the venue, gave him an opportunity to object no word for months, finally opposing party wakes up one day and reads the contract and finds out the arbitration has a venue provision which allows it to take place in another area. Contacts AAA and states I object to venue, administrator changes the venue. Again no procedural rules. In court if you answer without objecting to venue you waive the objection.

No response no default just a denial.

Control witnesses, subpoena documents and witnesses, allow for discovery unless fast track.

As provided, arbitration is governed by the terms of the contract. Likewise the arbitration procedure is governed by specific provisions of the arbitration clause outlining or referencing the procedure that will be followed. There are two basic types of arbitration clauses which govern procedure. “The first requires the parties to arbitrate any disputes relating to contract without specifying a particular set of rules to be used in the arbitration proceeding and/or without naming an arbitration forum, such as the American Arbitration Association or the National Arbitration Forum, to administer the arbitration proceeding.”34 “The second requires arbitration and specifies the rules and/or arbitration forum to be used for the arbitration proceeding.”35

Regardless of the procedure designated in the arbitration provision, any party to the contract can initiate arbitration by sending a written demand to the other party or parties. If a specific arbitration forum is dictated by the arbitration agreement, that arbitration forum will provide the parties with a form to be used to demand arbitration and initiate the arbitration proceeding. If no forum is in the contract, a simple letter demanding arbitration should be sent to the opposing party. The letter demanding arbitration should be sent by certified mail.

The letter should contain the names and addresses of the parties to the arbitration, a reference to the contract and a brief description of the dispute between the parties, and the relief or remedy sought by the party demanding arbitration. A copy of the contract containing the arbitration clause, or, at a minimum, the arbitration clause contained in the contract, should be attached to the arbitration demand. The letter demanding arbitration should also state that any condition precedent to demanding arbitration contained in the contract (such as mediation) has been fulfilled, and that the arbitration demand has been made within the time limit, if any, allowed by the arbitration clause.

The demand for arbitration should provide for a deadline for the recipient to agree to arbitration and an advisement that if no written agreement to arbitrate is received on or before the deadline, a civil court proceeding will be initiated, compelling the opposing party to submit to arbitration, at that party's cost.
36

LSA-R.S. 9:4204 provides the procedure for the appointment of the arbitrators. Where the arbitration agreement provides a method of appointing arbitrators, that method will be followed. If no method is addressed in the agreement, or if the method in the agreement is not followed, then upon application of either party, the court will appoint an arbitrator or arbitrators to decide the case. 37

Likewise, La. R.S. 9:4206 grants the arbitrator authority to issue summons for the production of documents or for the appearance of witnesses. Also, the arbitrators can allow for the taking of depositions and the performance of other discovery in preparation of the arbitration proceeding. 38

Also, the arbitrators have authority to manage and control the matter, which includes providing deadlines for pleadings, discovery and motions, and scheduling hearings and the actual arbitration proceeding.

Louisiana law provides that the arbitration must be completed within three months of the submission.39 An award made after the expiration of the term fixed for arbitration is null.40 However, the term may be extended by the parties. 41

The American Arbitration Association (AAA) is a primary forum referenced in many construction contracts. The appointment process for arbitrators is somewhat different under the AAA rules. A claim under the AAA rules is initiated by one of the parties filing a claim with the other and serving the AAA with a notice of claim.42 That notice is served upon the opposing party, who is given an opportunity to respond or file a counterclaim.  Therefore a party cannot obtain a default judgment under the AAA rules. If the party fails to respond to the demand this failure will be considered a denial of the claim.43 The selection of arbitrators is not unlike a selection of a jury panel. The parties to the arbitration are sent a list from the panel of arbitrators maintained by the AAA, which list includes biographical information on the proposed arbitrators.44 Each party then sends back, in confidence, the list to the AAA, striking out those that are unacceptable to them.

Each side then ranks the remaining arbitrators in terms of preference. The AAA uses those lists to come up with an arbitrator or arbitrators for the dispute. Large disputes, certainly those in excess of $1 million, will typically have a panel of three arbitrators, though the parties can always designate that only one arbitrator hear the dispute.

The AAA rules provide arbitrators with considerable control over determining the witnesses to be subpoenaed, documents to be produced, and discovery allowed by the parties, including depositions.45 One of the perceived advantages of arbitration is that it is a streamlined process, where discovery is limited. However, the reality of most construction arbitrations in Louisiana is that the arbitrators will often allow whatever discovery is agreed upon by the parties, and often that discovery is not unlike what would be conducted in a normal litigation proceeding.

In summary, arbitrators are clothed with wide authority in managing a claim. As provided, arbitrators will schedule status and scheduling conferences, set deadlines for discovery and production of documents, and make whatever other rulings are necessary to move these cases along in an economical and expeditious manner. Courts will not interfere with arbitrators in those functions. The arbitration hearing itself is similar to trial, but with less formality. Arbitrators are not required to strictly enforce the rules of evidence. Further, it is within the arbitrator’s discretion to rule as to the admissibility, relevancy, and materiality of any evidence offered. The AAA rules specifically state that “conformity to legal rules of evidence shall not be necessary.” The arbitrator must take into account applicable principles of legal privilege. The arbitrator is not only authorized to subpoena witnesses or documents upon the request of any to the party, but may do so independently.

IV. Arbitration Award

After an arbitration award has been issued, a party may seek to modify, nullify or enforce the arbitration award in the district court in the parish in which the award was made.46 In order to enforce the award, the party must bring an action in the district court to confirm the award within one year from the date the award was issued. 47

The enforcement of the award is a summary proceeding in which the opposing party must be provided notice of the said proceeding at least five days prior to the hearing.48 If the court grants the request and the award is affirmed, the court will issue a judgment. The judgment should contain the same relief as the award, and this judgment is enforceable in the same manner as if the court had issued the actual award. 49

If a party seeks to modify the arbitration award, the party must file a motion within three months from when the award was filed or delivered. 50 With the motion the party must include the following documents.

(1) The agreement, the selection or appointment, if any, of an additional arbitrator or umpire, and each written extension of the time, if any, within which to make the award;
(2) The award; and
(3) Each notice, affidavit, or other paper used upon an application to confirm, modify, or correct the award, and a copy of each order of the court upon such an application.
51

In order to obtain a modification of the award, the party must be able to show one of the following:

(1) “evident material miscalculation …. (or) evident material mistake” in descriptions:52
(2) a particular determination was included in the award which was not submitted to the arbitration, and which could affect the merits of the decision upon the matters properly submitted;53 or
(3) error in form of the arbitration award.
54

Also, within three months after the award is filed or delivered, an aggrieved party may move to vacate the award. However, the award will be vacated only upon the following limited grounds:

(1) the award was procured by corruption, fraud or undue means;55
(2) there was evident partiality or corruption on the part of an arbitrator,56
(3) there was arbitrator misbehavior in refusing to postpone the hearing or consider relevant evidence, or “any other misbehavior by which the rights of any party have been prejudiced,”;57 or
(4) the arbitrators exceeded their powers or so imperfectly executed their power that a “mutual, final, and definite award upon the subject matter submitted was not made.”
58

Accordingly, the Louisiana Arbitration Law, R.S. 9:4201, et seq., does not permit a court to invalidate an arbitration award for errors of law or fact if the award is fairly and honestly made.59

Under federal and Louisiana law, “manifest disregard of the law” is a jurisprudentially created ground for overturning an arbitration award. 60The ground applies where the error was obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator; the implication is that the arbitrator appreciated the evidence of a clearly governing legal principle, yet chose to ignore it. An award cannot be set aside on “manifest disregard” grounds for erroneous findings of fact or for misinterpretations of law. 61 Accordingly, the arbitration award is presumed by law to be valid and the party attacking the award bears the burden of proof that the award is a manifest disregard of the law. However, should a court vacate an award, and the time limit within which the award was to be issued has not expired, the court may resubmit the matter to the arbitrators.62

Although an arbitration award is not subject to appeal, An appeal may be taken from an order confirming, vacating or modifying an award in the same manner as appeal from an ordinary proceeding in district court.63

V.
General Overview of the Costs and Benefits of Arbitration

Arbitration has become a popular alternative to filing litigation for several primary reasons. In general, arbitration is more flexible than litigation. The parties are often encouraged to participate in the resolution process. Also, arbitration is some cases can be cheaper than traditional litigation. An arbitration case can be resolved more quickly than a lawsuit. Arbitration hearings can be scheduled to meet the needs of busy participants, including evenings and weekends. Litigation in a public court of law is subject to the limitations of a rigid court calendar. Unlike traditional litigation, complex legal procedures and rules of evidence are not usually utilized and enforced in an arbitration case. Procedures such as discovery and depositions are often used to delay legal proceedings in a court of law, such discovery can be limited in an arbitration. An arbitration case provides more privacy than litigation, in which arbitration participants can agree to keep the final resolution and sensitive information completely private.

In contrast, the parties to an arbitration agreement have limited recourse in overturning or even modifying the arbitrators ruling. If the arbitrator's award is unfair or illogical, a party may well be stuck with it and barred forever from airing the underlying claim in court. Also, as provided above, arbitration hearings are generally held in private rather than in an open courtroom, and decisions are usually not publicly accessible. Although this may benefit some, this also could lend to a lack of transparency which could result in the process being tainted or biased, which may result in an erroneous ruling. Further, while arbitration can be less costly if the matter is resolved quickly, this is not always the case. In many instances the arbitrator provides the parties an opportunity to perform discovery and file motions and pleadings that can extend the time in which the matter is heard. Parties must pay the arbitrator for his/her services, which fees can run between $2,000 and $4,000 a day. Also, usually in construction matters, the parties are represented by counsel and retain experts, all of which can result in a substantial cost to each of the parties.

Accordingly, prior to including and/or agreeing to an arbitration provision in a construction contract, the parties should consider both the costs and benefits to arbitration, keeping in mind the primary benefit of arbitration likely will not be realized unless the dispute subject to the provision is resolved expeditiously.

1 C.C. Art. 3099; La. R.S. 9:4201; General Motors Corp. v. Pamela Equities Corp., 146 F.3d 242 (5th Cir. 1998); Firmin v. Garber, 353 So.2d 975 (La. 1977); 1A LACIVL § 13.2
2 D & B Framing, Inc. v. Harris Builders, L.L.C., App. 4 Cir.2010, 47 So.3d 634, 2010-0591 (La.App. 4 Cir. 8/27/10) (The Louisiana Binding Arbitration Law (LBAL), and Louisiana Civil Code embody the principle that arbitration is favored in Louisiana; the purpose of arbitration is the settlement of differences in a fast, inexpensive manner, before a tribunal chosen by the parties.)
4 General Motors Corp. v. Pamela Equities Corp., note 1, supra; Lakeland Anesthesia, Inc. v. United Healthcare of Louisiana, Inc., 871 So.2d 380 (4th Cir. 2004); Superior Oil Co. v. Transco Energy Co., 616 F.Supp. 98 (W.D. La. 1985); J. Caldarera & Co. v. Louisiana Stadium and Exposition District, 725 So.2d 549 (5th Cir. 1998); 1A LACIVL § 13.2
5 La. R.S. 9:4209 to 9:4215. See also, McKee v. Home Buyers Warranty Corp. II., 45 F.3d 981 (5th Cir. 1995).
6 Belleville Historic Development, L.L.C. v. GCI Constr. Inc., 807 So.2d 335 (4th Cir. 2002)
7 See, generally, A & A Mechanical, Inc. v. Satterfield & Pontikes Const. Group, LLC 83 So.3d 363, 2011- 0784 (La.App. 4 Cir.,2012)
8 Collins v. Prudential Ins. Co. of America, 99-1423, p. 2 (La.1/19/00), 752 So.2d 825, 827, citing Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984)
9 Collins v. Prudential Ins. Co. of America, 99-1423, p. 2 (La.1/19/00), 752 So.2d 825, 827.
10 Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 277, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995).
11 9 U.S.C. § 1, et seq.
12 See Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
13 See Moses, 460 U.S. at 24, 103 S.Ct. 927.
14 Id. at 25, 103 S.Ct. 927.
15 Prasad v. Bullard, App. 5 Cir.2010, 51 So.3d 35, 10-291 (La.App. 5 Cir. 10/12/10).
16 Id.
17 In re Succession of Taravella, 734 So.2d 149, 98-834 (La.App. 5 Cir.,1999)
18 Grigson v. Creative Artists Agency L.L.C., 210 F.3d 524, 527 (C.A.5 (Tex.),2000) (First, equitable estoppel applies when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the nonsignatory. When each of a signatory's claims against a nonsignatory makes reference to or presumes the existence of the written agreement, the signatory's claims arise out of and relate directly to the written agreement, and arbitration is appropriate. Second, application of equitable estoppel is warranted when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract. Otherwise the arbitration proceedings between the two signatories would be rendered meaningless and the federal policy in favor of arbitration effectively thwarted.)
19 Ventura Maritime Co., Ltd. v. ADM Export Co., E.D.La.1999, 44 F.Supp.2d 804
20 AT & T Technologies, Inc. v. Communications Workers of America., 475 U.S. 643, 648, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648(1986)(quoting United Steelworkers of America v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960)); United Steelworkers of America v. American Mfg. Co., 363 U.S. 564, 570–571, 80 S.Ct. 1363, 1364–1365, 4 L.Ed.2d 1432 (1960) (Brennan, J., concurring); see also Billieson v. City of New Orleans, 2002–1993, p. 6 (La.App. 4 Cir. 9/17/03), 863 So.2d 557, 561, writ denied, 2004–0563 (La.4/23/04), 870 So.2d 303; A & A Mechanical, Inc. v. Satterfield & Pontikes Const. Group, LLC 83 So.3d 363, 368, 2011-0784 , 7 (La.App. 4 Cir.,2012)
21 See generally, Mechanical, Inc., 83 So.3d 363, 368
22 Id.
23 514 US 938, 115 S.Ct. 1920, 131 L.Ed. 2d 985 (1995)
24 Id. at 944-45, 115 S.Ct. 1920; (Courts should not assume that the parties agreed to arbitrate arbitrability unless there is “clea[r] and unmistakabl[e]” evidence that they did so. In this manner the law treats silence or ambiguity about the question “ who (primarily) should decide arbitrability” differently from the way it treats silence or ambiguity about the question “ whether a particular*844 merits-related dispute is arbitrable because it is within the scope of a valid arbitration agreement”-for in respect to this latter question the law reverses the presumption.) ; See also, Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.E.2d 1038 (2006),
25 350 So.2d 881, 884 (La.1977).
26 Long v. Jeb Breithaupt Design Build Inc., 44,002 (La. App. 2 Cir. 2/25/09), 4 So.3d 930, 939.
27 865 So.2d at 847 (emphasis added).
28 Williams, 865 So.2d at 848.
29 Id. at 144.
30 Albert K. Newlin, Inc. v. Morris 758 So.2d 222, 226, 1999-1093 , 6 (La.App. 3 Cir.,2000)
31 37,965 (La. App. 2 Cir. 1/28/04), 866 So.2d 326, 330-31 (citing Standard Company of New Orleans, Inc. v. Elliot Constr. Co., Inc., 363 So.2d 671 (La. 1978); Lorusso v. Landrieu Enterprises, Inc., 02-2346 (La. App. 4th Cir. 5/21/03), 848 So.2d 656; Electrical & Instrumentation Unlimited, Inc. v. McDermott Init’l, Inc., 627 So.2d 702 (La. App. 4th Cir. 1993); Matthew-McCraken Rutland Corp. v. City of Plaquemines, 414 So.2d 756 (La. 1982)).
32 Big River Construction and Remodeling Co. v. University Club I Apartments, 598 So.2d 542, 544 (La.App. 1st Cir.1992).
33 Standard Company of New Orleans, Inc. v. Elliott Construction Company, Inc., 363 So.2d 671, 675 (La.1978).
34 12 LACIVL § 27:55
35 Supra.
36 Supra.
37 LSA-R.S. 9:4204
38 La. R.S. 9:4207.
39 LSA-C.C. Art. 3105.
40 LSA-C.C. Art. 3123
41 LSA-C.C. Art. 3124.
42 Construction Industry Arbitration Rules attached hereto, AAA Rule R-4(a).
43 AAA Rule R-31.
44 AAA Rule R-14.
45 AAA Rules R-31 & 32.
46 LSA-R.S. 9:4210; 4209, 4211.
47 LSA-R.S. 9:4209
48 Id.
49 LSA-R.S. 9:4214
50 LSA-R.S. 9:4213
51 LSA-R.S. 9:4214
52 LSA-R.S. 9:4211(A)
53 LSA-R.S. 9:4211(B)
54 LSA-R.S. 9:4211(C)
55 La. R.S. 9:4210(A). See also, Firmin v. Garber, 353 So.2d 975 (La. 1977) (“undue means” denotes use of misconduct or other gross deviation from normal arbitration to procure an award, and does not embrace a questionable conclusion drawn from conflicting evidence).
56 La. R.S. 9:4210(B). See also, C.C. Art. 3121; Ad-Med, Inc. v. Iteld, 728 So.2d 556 (4th Cir. 1999) (the arbitration agreement provided that Louisiana law would apply to matters not specifically addressed in the agreement, but that any dispute as to the interpretation or construction of the arbitration provision of the agreement would be settled in accordance with the rules of the American Arbitration Association. The arbitrator appointed by one of the parties allegedly had an undisclosed, ongoing attorney-client relationship with the president and sole shareholder of the party which appointed him. Held, the arbitrator was not disqualified for evident partiality under R.S. 9:4210(B). The agreement to abide by the rules of the American Arbitration Association was not against public policy and should be treated as the law between the parties; those rules provide that unless the parties agree otherwise, an arbitrator selected unilaterally by one party is not subject to disqualification for lack of impartiality).
57 La R.S. 9:4210(C). See also, Montelepre v. Waring Architects, 787 So.2d 1127 (4th Cir. 2001) (arbitrator granted a continuance in violation of the arbitration rules and arguably erred in admitting an expert's testimony. Held, arbitrator's actions did not amount to misconduct or deprive a party of a fair hearing; thus the arbitration award should not be set aside under R.S. 9:4210 to 9:4211). Compare, American Eagle Airlines, Inc. v. Air Line Pilots Association, International, 343 F.3d 401 (5th Cir. 2003) (arbitrator acted beyond his authority in crafting a remedy different from that provided by the plain language of the arbitration agreement). - Powers v. Royal Manufactured Homes, LLC, 50 So. 3d 254 (La. Ct. App. 3d Cir. 2010) (arbitrator had a close personal and business relationship with the law firm representing a defendant, was aware of his own ethical conflict yet accepted the assignment, met with an attorney whom he had once employed, and then ruled on a critical discovery conflict in defendant's favor. Held, these circumstances tainted the proceeding and thus judicial review of the arbitration award is proper).
- See also, Polimaster Ltd. v. RAE Systems, Inc., 623 F.3d 832 (9th Cir. 2010) (an ambiguous provision that the parties will arbitrate their disputes at the site of the defendant's primary place of business applies to counterclaims, even if the result is that the claims may be arbitrated in different countries). 1A LACIVL § 13.7
58 La. R.S. 9:4210(D). - See, e.g., KeyClick Outsourcing, Inc. v. Ochsner Health Plan, Inc., 946 So. 2d 174 (La. Ct. App. 5th Cir. 2006), holding that an arbitrator's ruling making “material errors of law” and “refus(ing) to enforce any agreements between the parties” exceeds the arbitrator's powers and may be attacked under R.S. 9:4210(D); 1A LACIVL § 13.7
59 National Tea Co. v. Richmond, 548 So.2d 930 (La. 1989); St. Tammany Manor, Inc. v. Spartan Building Corp., 509 So.2d 424 (La. 1987) 1A LACIVL § 13.7
60 Welch v. A.G. Edwards & Sons, Inc., 677 So.2d 520 (4th Cir. 1996); Belleville Historical Development, L.L.C. v. GCI Construction, Inc., 807 So.2d 335 (4th Cir. 2002)
61 Production Wireline Services, Inc. v. Trans?Tech International Wireline Services, Inc., 685 So.2d 480 (3d Cir. 1996)
62 La. R.S. 9:4210. - See, e.g., Webb v. Massiha, 993 So. 2d 345 (La. Ct. App. 5th Cir. 2008) (there is no statutory authority that would allow an appellate court to disqualify an arbitrator for improper handling of the record or for ineptitude. If an arbitration panel commits reversible error, the case should be remanded to the arbitration panel that erred to allow that panel an opportunity to correct the error). 1A LACIVL § 13.7
63 LSA?R.S. 9:4215

 


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