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If You Hire Your Own Judge, Are You Stuck With the Result?
Steve and Lisa (Owners) hired Vermont Built Inc. (Contractor) to construct a house for them. The construction contract provided (1) that if either party breached, any dispute would be resolved by arbitration though the American Arbitration Association (AAA) and (2) that if owners failed to pay, the contract could be terminated and they would have to pay amounts due, costs, and attorney’s fees. Owners refused to pay for what they regarded as substandard work. Contractor declared the contract ended, and initiated arbitration.
The standard AAA form allows the parties to select what they want to arbitrator to do: make an award, make an award with reasons, or make an award with findings of fact and conclusions of law. They selected the “standard award” which simply makes a conclusion. The Arbitrator awarded Contractor $20,747, but refused to award attorney’s fees or interest on the award.
Contractor appealed to the Superior Court. He argued that Vermont Law, the “Prompt Pay Act” made an award of attorney’s fees and interest mandatory, and the arbitrator exceeded his authority by failing to do so. The Superior Court ordered the Arbitrator to give reasons for his award, which he did saying Contractor caused much of the problem and wasn’t entitled to attorney’s fees. The Court then overruled the arbitrator and ordered owners to pay $19,188.50 in attorney’s fees as required by Vermont law.
Owners appealed arguing the Superior Court had no authority to overrule the arbitrator. The Supreme Court agreed. It ruled the trial judge’s handling of the case was all wrong. Once the parties agree to arbitration, it decided, the Court cannot second guess the arbitrator, even if the Court believes he incorrectly interpreted the law. Nor can a judge order an arbitrator to give reasons for his decision if the parties did not ask him to. It wrote: “If courts were accorded a broad scope of review, then arbitration would become merely another expensive and time consuming layer to the already complex litigation process.”
When people voluntarily agree to arbitrate they select and pay their own judge and Supreme Court. They bypass the judicial selection process, a Governor’s power to appoint judges, rights to legislative review of judicial competence, and right to appeal. In return they can hire a person in whose wisdom they have confidence to resolve their dispute, and get an inexpensive, quick and final decision. Vermont Built Inc. v. Steve Krolick and Lisa Stickney 2008 VT 131.
See www.cheneycolumn.com.
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