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Lasco Inc. v. Inman Construction Corp.

Court of Appeals of Tennessee, Jackson

January 9, 2015

LASCO INC.
v.
INMAN CONSTRUCTION CORP., ET AL

Session November 13, 2014

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and Remanded. Appeal from the Chancery Court for Shelby County. No. CH1200201. Walter L. Evans, Chancellor.

Judgment of the Chancery Court Reversed and Remanded.

Vic L. McConnell, Nashville, Tennessee, for the appellants, Inman Construction Corp. and Travelers Casualty Surety Company of America.

Elizabeth B. Stengel and Joseph T. Getz, Memphis, Tennessee, for the appellee, Lasco Inc.

J. STEVEN STAFFORD, P.J., W.S., delivered the opinion of the Court, in which BRANDON O. GIBSON, J., and KENNY ARMSTRONG, J., joined.

OPINION

STEVEN STAFFORD, J.

Page 468

The trial court vacated an arbitration award of attorney's fees in favor of the defendant general contractor and its surety, concluding that such award exceeded the power of the arbitrator. We reverse and remand to the trial court for the entry of an order confirming the arbitration award and a determination of the reasonable attorney's fees of the general contractor and its surety.

OPINION

Background

This appeal concerns a dispute between subcontractor, Plaintiff/Appellee Lasco Inc. (" Lasco" ) and general contractor, Inman Construction Corp. (" Inman" ). Lasco and Inman entered into a contract (" the Subcontract" ) on or around October 16, 2007 for the construction of a College of Pharmacy Building at the University of Tennessee Health Science Center. Specifically, the Subcontract provides that:

§ 6.2.1 Any claim arising out of or related to this Subcontract . . . shall be subject to arbitration.[1] Prior to arbitration, the parties may, at the Contractor's sole discretion, endeavor to resolve disputes by mediation in accordance with the provisions of Section 6.1.

Page 469

§ 6.2.2 Claims not resolved by mediation shall be decided by arbitration which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect. Demand for arbitration shall be filed in writing with the other party to this Subcontract and with the American Arbitration Association, and a copy shall be filed with the Architect.[2]

Travelers Casualty Surety Company of America (" Travelers," together with Inman, " Appellants" ) issued a nearly $50,000,000.00 surety bond on the Subcontract.

The parties began work on the project in Spring 2009. A dispute soon arose between Lasco and Inman concerning the installation of temporary fire protection equipment. As such, Inman allegedly sent a letter to Lasco on April 24, 2009, informing Lasco that it was in breach of the Subcontract. This action set off a series of disputes between the parties, wherein both parties asserted that the other was preventing the project from being completed and in material breach of the Subcontract. Despite these disputes, the project was allegedly substantially completed in July 2011. Thereafter, Lasco demanded payment pursuant to the Subcontract. Inman, however, allegedly failed to remit payment to Lasco for the remaining balance on the contract amount, as well as change order work.

Due to the alleged non-payment, Lasco filed a complaint for damages against the Appellants on January 6, 2012, seeking $376,544.95 in compensatory damages for breach of contract, unjust enrichment, breach of the duty of good faith and fair dealing, violations of the Prompt Pay Act, and conversion. Inman filed a motion to dismiss the complaint, or alternatively, to compel arbitration, on February 13, 2012. Travelers joined in Inman's motion on February 16, 2012. On February 20, 2012, the parties entered into an agreed order referring the matter to arbitration.

The parties participated in arbitration on November 19, 2013 through November 23, 2013. The arbitrator issued his written award on February 10, 2014, denying Lasco's claim in its entirety and awarding Inman $162,333.44 in attorney's fees. Additionally, the arbitrator ordered Lasco to reimburse Appellants the sum of $12,112.20, representing that portion of the fees and expenses in excess of the apportioned costs previously incurred by Inman. Accordingly, the arbitrator awarded Appellants a total award of $174,445.65 against Lasco.

On March 6, 2014, Lasco filed a motion to vacate the arbitration award of attorney's fees awarded to Appellants. Lasco argued that the arbitrator exceeded his authority in awarding the fees because an award of attorney's fees was not authorized by the parties' contract. On the same day, the Appellants filed their own motion for confirmation of the arbitration award and entry of a final judgment. Thereafter, on March 31, 2014, the Appellants also filed a response in opposition to Lasco's motion to vacate the award.

The trial court heard arguments on the fee and expense dispute on April 2, 2014. On April 11, 2014, the parties entered into a consent order allowing the confirmation of the $12,112.20 in expenses that were awarded to the Appellants in arbitration. The order provided that the Appellants " are entitled to ...


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