Supreme Court of Louisiana FOR IMMEDIATE NEWS RELEASE NEWS RELEASE #004
FROM: CLERK OF SUPREME COURT OF LOUISIANA
The Opinions handed down on the 28th day of January, 2015, are as follows:
BY GUIDRY, J.:
2014-C -0969 CRESCENT PROPERTY PARTNERS, L.L.C. v. AMERICAN MANUFACTURERS C/W MUTUAL INSURANCE COMPANY, BISON BUILDING MATERIALS OF TEXAS, 2014-C -0973 INC., ET AL. C/W GREYSTAR DEVELOPMENT AND CONSTRUCTION, LP v. CRESCENT PROPERTY PARTNERS, LLC, BISON BUILDING MATERIALS OF TEXAS, INC., ET AL. C/W BISON BUILDING MATERIALS OF TEXAS, INC., BISTROL FIBERLITE INDUSTRIES, INC., CHAMPION WINDOW, INC., ET AL. v. GREYSTAR DEVELOPMENT AND CONSTRUCTION, LP. (Parish of Orleans)
Judge Scott J. Crichton, assigned as Justice ad hoc, sitting for Justice Jeffrey P. Victory for oral argument. He now sits as an elected Justice at the time this opinion is rendered.
For the reasons set forth above, we find the court of appeal erred in reversing the district court’s judgment confirming the arbitration panel’s award. Crescent has failed to carry its burden of proving the existence of any of the statutory bases set forth in La. Rev. Stat. 9:4210 mandating vacatur of the arbitration panel’s decision. Accordingly, the court of appeal’s judgment is reversed, and the district court’s judgment confirming the arbitration panel’s award is reinstated. REVERSED.
JOHNSON, C.J., concurs and assigns reasons. 01/28/2015 SUPREME COURT OF LOUISIANA
NO. 2014-C-0969
CONSOLIDATED WITH
NO. 2014-C-0973
CRESCENT PROPERTY PARTNERS, LLC
VERSUS
AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, BISON BUILDING MATERIALS OF TEXAS, INC., ET AL.
GREYSTAR DEVELOPMENT AND CONSTRUCTION, LP
CRESCENT PROPERTY PARTNERS, LLC, BISON BUILDING MATERIALS OF TEXAS, INC., ET AL.
BISON BUILDING MATERIALS OF TEXAS, INC., BISTROL FIBERLITE INDUSTRIES, INC., CHAMPION WINDOW, INC., ET AL.
GREYSTAR DEVELOPMENT AND CONSTRUCTION, LP.
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, FOURTH CIRCUIT, PARISH OF ORLEANS
GUIDRY, Justice*
We granted writs in these consolidated matters to consider whether the court
of appeal correctly vacated the arbitration award, which had been confirmed by the
district court. The court of appeal vacated the award on the basis the arbitration
panel, in applying a statute of peremption incorrectly, disturbed a vested right of the
plaintiff and, thus, the panel violated the plaintiff’s due process rights. The court of
* Judge Scott J. Crichton, assigned as Justice ad hoc, sitting for Victory, J., for oral argument. He sits as an elected Justice at the time this opinion is rendered.
1 appeal found the arbitration panel’s interpretation of the law placed an impossible
burden on the plaintiff, a burden the panel deemed fundamentally unfair, thereby
requiring vacatur of the arbitration panel’s award. For the following reasons, we
find the court of appeal essentially misinterpreted the laws concerning arbitration,
and, thus, erred in failing to limit its review to the factors mandating vacatur
articulated in La. Rev. Stat. 9:4210. In reversing the court of appeal’s decision, we
reiterate well-settled law that otherwise fairly and honestly obtained arbitration
awards may not be overturned merely for errors of fact or law.
FACTS AND PROCEDURAL HISTORY
A property owner, Crescent City Property Partners, L.L.C. (hereinafter
“Crescent”), and a builder, Greystar Development and Construction, LP (hereinafter
“Greystar”), entered into a contract in March of 2002 for the construction of a
mixed-use development in Lafayette, Louisiana. This development was completed
in phases and consisted of multiple structures. A Certificate of Occupancy issued
upon the completion of each of the five buildings, with the first issuing on February
28, 2003, and the last issuing on July 24, 2003. A Certificate of Substantial
Completion was executed on July 31, 2003, but was not recorded into the mortgage
records in Lafayette Parish.
Alleging defects in the builder’s performance, and pursuant to the arbitration
clause in the construction contract, Crescent filed an arbitration claim against
Greystar on July 28, 2008, also naming as a defendant Greystar’s surety, American
Manufacturers Mutual Insurance Company. In response, Greystar filed a third
party demand against various subcontractors, including SLI Framing, Inc.,
Champion Windows, Floorcrete Enterprises, Southern Stucco, Inc., Delta
Construction, Bison Building Materials of Texas, Inc., Nationwide Gutter, Inc., and
Panel Truss of Texas (Longview), Inc. (hereinafter “the subcontractors” and the
2 applicants in No. 2014-C-0973).
At the time the last Certificate of Occupancy and the Certificate of Substantial
Completion issued in July 2003, La. Rev. Stat. 9:2772 provided for a seven-year
period of peremption for construction claims. However, on August 15, 2003, the
legislature amended La. Rev. Stat. 9:2772 to provide for a peremptive period of five
years rather than seven years.1 On July 11, 2011, shortly before the matter was to
be arbitrated, this court handed down Ebinger v. Venus Construction Corp., 10-2516
(La. 7/1/11), 65 So.3d 1279, discussing the retroactivity of the 2003 amendment to
La. Rev. Stat. 9:2772.
Relying on language in Ebinger, Greystar, the builder, and its subcontractors
filed separate motions for summary judgment with the arbitration panel respectively
alleging that Crescent’s claims, as well as Greystar’s third party claims, were
perempted because they were not filed within five years of the issuance of the
Certificate of Occupancy. Meanwhile, in response to Ebinger, Greystar had filed
1 La. Rev. Stat. 9:2772, as amended by Acts 2003, No. 919, § 1, eff. August 15, 2003, is entitled “Peremptive period for actions involving deficiencies in surveying, design, supervision, or construction of immovables or improvements thereon,” and provided in pertinent part:
A. No action, whether ex contractu, ex delicto, or otherwise, including but not limited to an action for failure to warn, to recover on a contract, or to recover damages, or otherwise arising out of an engagement of planning, construction, design, or building immovable or movable property which may include, without limitation, consultation, planning, designs, drawings, specification, investigation, evaluation, measuring, or administration related to any building, construction, demolition, or work, shall be brought against any person performing or furnishing land surveying services, as such term is defined in R.S. 37:682, including but not limited to those services preparatory to construction, or against any person performing or furnishing the design, planning, supervision, inspection, or observation of construction or the construction of immovables, or improvement to immovable property, including but not limited to a residential building contractor as defined in R.S. 37:2150.1(9):
(1)(a) More than five years after the date of registry in the mortgage office of acceptance of the work by owner.
(b) If no such acceptance is recorded within six months from the date the owner has occupied or taken possession of the improvement, in whole or in part, more than five years after the improvement has been thus occupied by the owner.
3 an action in the district court seeking to have that court decide the effect of Ebinger
on the issue of peremption. Crescent objected, arguing the arbitration panel was
“the only entity that may rule on the peremption issue because the issue requires a
decision on the merits of the claims in arbitration.” The district court granted
Crescent’s exceptions of lack of subject matter jurisdiction, dismissed Greystar’s
action, and returned the case to the arbitration panel.
The arbitration panel thereafter established a briefing schedule, conducted a
hearing on October 7, 2011, and issued its ruling on November 7, 2011. Finding
that Ebinger dictated the retroactive application of the 2003 amendment to La. Rev.
Stat. 9:2772 to Crescent’s claims against Greystar, the panel concluded Crescent’s
claims were untimely asserted outside the five-year period and thus were perempted.
The panel also found that Greystar’s third party claims were perempted under La.
Rev. Stat. 9:2772 as interpreted by Ebinger. The panel dismissed all of the claims.
Crescent applied for an order to vacate the arbitration decision in the district
court under La. Rev. Stat. 9:4210, naming Greystar, its surety American
Manufacturers, and the subcontractors. Greystar and the subcontractors applied for
orders confirming the arbitration award under La. Rev. Stat. 9:4209. The actions
were consolidated. After briefing and oral argument, the district court denied
Crescent’s application to vacate the award and granted Greystar’s and the
subcontractors’ applications for an order to confirm the arbitration award. The
district court then decreed the November 7, 2011 order of the arbitration panel be
made the judgment of the district court.2
Crescent sought review in the court of appeal, which reversed the district
court’s judgment. Crescent Property Partners, LLC v. American Mfrs. Mutual Ins.
2 Greystar’s surety, American Manufacturers, in 2012 had entered rehabilitation in the Circuit Court of Cook County, Illinois, which court had stayed and enjoined any actions against the surety not brought within the rehabilitation proceeding. The district court granted the surety’s motion to recognize foreign judgment and dismiss or stay the claims against it. The district court also denied as moot the subcontractors’ exception of no cause of action. 4 Co., 13-0661, 13-0662, 13-0663 (La. App. 4 Cir. 2/28/14), 134 So.3d 85. The court
of appeal acknowledged that La. Rev. Stat. 9:4210 provided the exclusive grounds
for challenging an arbitration award, but noted the factors therein were broad in
scope and provided sufficient leeway to correct fundamental due process violations.
134 So.3d at 89 (citing Pittman Construction Co., Inc. v. Charles Pittman, 96-1498,
96-1079 (La. App. 4 Cir. 3/12/97), 691 So.2d 268). The court of appeal found the
arbitration panel had incorrectly concluded the 2003 amendment reducing the time
limitation of seven years to five years could be retroactively applied to perempt
Crescent’s claims. The court of appeal found Ebinger, relied upon by the
arbitration panel, not to be controlling. The appellate court reasoned the panel had
violated Crescent’s due process rights when it retroactively applied the five-year
peremptive period to its cause of action, which had vested before the 2003
amendment became effective. Thus, the appellate court concluded the trial court
had erred in confirming the arbitration panel’s award. The court then reversed the
trial court’s judgment, vacated the arbitration award, and dismissed the
subcontractor’s motion to dismiss the appeal as moot.
We granted the writ applications of Greystar and the subcontractors to
determine whether the court of appeal properly applied La. Rev. Stat. 9:4210 to
upset the arbitration panel’s award. Crescent Property Partners, LLC v. American
Mfrs. Mutual Ins. Co., 14-0969, 14-0973 (La. 9/19/14), ___ So.3d ___.
APPLICABLE LAW
Under the Louisiana Arbitration Law, La. Rev. Stat. 9:4201 et seq., a party to
an arbitration proceeding may, within one year after the award is made, apply to the
district court for confirmation of the award, and the court must confirm the award
unless the award is vacated, modified, or corrected. La. Rev. Stat. 9:4209. The
exclusive grounds for vacating an award are set out in La. Rev. Stat. 9:4210, which
5 states:
In any of the following cases the court in and for the parish wherein the award was made shall issue an order vacating the award upon the application of any party to the arbitration.
A. Where the award was procured by corruption, fraud, or undue means.
B. Where there was evident partiality or corruption on the part of the arbitrators or any of them.
C. Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy, or of any other misbehavior by which the rights of any party have been prejudiced.
D. Where the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
Arbitration is a mode of resolving differences through the investigation and
determination by one or more individuals appointed for that purpose. The object of
arbitration is the speedy disposition of differences through informal procedures
without resort to court action. Firmin v. Garber, 353 So.2d 975, 977 (La. 1977).
Because of the strong public policy favoring arbitration, arbitration awards are
presumed to be valid. Judges are not entitled to substitute their judgment for that of
the arbitrators chosen by the parties. National Tea Co. v. Richmond, 548 So.2d 930,
932-33 (La. 1989). It is well-settled in both state and federal courts that an award
may be challenged only on the grounds specified in the applicable arbitration
statutes, here La. Rev. Stats. 9:4210 and 9:4211. Firmin, 353 So.2d at 977.3
3 The parties discuss to some extent an additional basis for vacating an arbitration award, the “manifest disregard of the law” ground, which has been described as non-statutory and judicially-created. See, e.g., Webb v. Massiha, 08-226 (La. App. 5 9/30/08), 993 So.2d 345; see also Colchoneria Jiron, S.A. v. Blumenthal Print Works, Inc., 629 So.2d 1288, 1290 (La. App. 4 Cir. 1993), writ denied, 94-0145 (La. 3/11/94), 634 So.2d 391. “Manifest disregard of the law” refers to an error by the arbitration panel that is obvious and capable of being readily and instantly perceived by an average person qualified to serve as an arbitrator. Webb, p. 4 n. 3, 993 So.2d at 347 n. 3. The jurisprudential rule implies the arbitrator appreciates the existence of a clearly governing legal principle but decides to ignore or pay no attention to it. Id.
This court has not adopted such a ground, and at least one circuit has declined to do so. 6 Those grounds do not include errors of law or fact, which we have reiterated are
insufficient to invalidate an award fairly and honestly made. St. Tammany Manor,
Inc. v. Spartan Building Corp., 509 So.2d 424, 427 (La. 1987). A court does not
ordinarily sit in an appellate capacity over an arbitration panel, but instead must
confine its determination to whether there exists one or more of the specific grounds
for invalidation as provided by the applicable statute, here, La. Rev. Stat. 9:4210.
Woodrow Wilson Const. Co., Inc. v. MMR-Radon Constructors, Inc., 96-0618 (La.
App. 1 Cir. 12/20/96), 684 So.2d 1125, 1127, writ denied, 97-0152 (La. 3/7/97), 689
So.2d 1379. The burden of proof rests upon the party attacking the award. Hill v.
Cloud, 26,391 (La. App. 2 Cir. 1/25/95), 648 So.2d 1383, 1388, writ dismissed,
95-0486 (La. 3/17/95), 651 So.2d 260. As we explained in National Tea Co., 548
So.2d at 933:
Arbitration is a substitute for litigation. The purpose of arbitration is settlement of differences in a fast, inexpensive manner before a tribunal chosen by the parties. That purpose is thwarted when parties seek judicial review of an arbitration award.
DISCUSSION
The arbitration panel and the court of appeal have differently interpreted our
decision in Ebinger, regarding the retroactive application of the 2003 amendment to
La. Rev. Stat. 9:2772. Accordingly, we commence our analysis with a summary of
the Ebinger case and its reasoning.
See JK Developments, L.L.C. v. Amtek of Louisiana, Inc., 07-1825 (La. App. 1 Cir. 3/26/08), 985 So.2d 199. Furthermore, its viability as a separate, common-law basis for upsetting an arbitration award has been called into question by Hall Street Associates, L.L.C. v. Mattel, Inc., 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008). See Citigroup Global Markets, Inc. v. Bacon, 562 F.3d. 349 (5th Cir. 2009) (holding that “manifest disregard of the law” after Hall Street is no longer an independent ground for vacatur of an arbitration award under the Federal Arbitration Act; however, if the arbitrator is fully aware of the controlling principle of law and does not apply it, instead of merely erroneously applying the principle, his conduct may exceed his powers and thus constitute one of the circumstances under which an award may be vacated, modified, or corrected).
The court of appeal in this case did not cite “manifest disregard of the law” as the basis for vacating the arbitration award, nor did it discuss such a ground, and Crescent argues that, whatever standard is applied, the basic facts and analysis are the same under the applicable statutory grounds. Accordingly, we decline to address the applicability of this non-statutory ground. 7 The peremptive period prescribed by La. Rev. Stat. 9:2772 has been shortened
twice, by amendments in 1999 and 2003. Acts 1999, No. 1024, § 1 substituted
“seven” for “ten” years in subsection (A)(1)(a), while Acts 2003, No. 919, § 1
substituted “five” for “seven” years in that subsection. In Ebinger, the builder
sought indemnification from a subcontractor for the construction defect claims
asserted by the homeowners. The certificate of occupancy was recorded in 1997,
and the homeowners filed suit in October 2003. The builder filed its third-party
claim in September 2006, to which the subcontractor excepted on the basis the
indemnity claim was perempted under the 2003 amendment to La. Rev. Stat. 9:2772.
The court of appeal had found the ten-year period of peremption applied, because
the certificate of occupancy was executed when the ten-year period was in effect and
because the builder had acquired a vested right against the subcontractor at that time.
The Ebinger court reversed, first noting the 2003 amendment, unlike the 1999
amendment, did not provide for prospective application only. Therefore, the court
reasoned, it could be applied retroactively so long as it did not disturb vested rights.
The court explained:
The Louisiana Revised Statutes are not applied retroactively “unless it is expressly so stated.” La. R.S. 1:2. However, the Louisiana Civil Code makes clear that this rule of statutory construction applies to substantive laws only. In the absence of contrary legislative expression, procedural and interpretive laws apply both prospectively and retroactively. La. C.C. art. 6. “[S]tatutes of limitation [the common-law analog to statutes of peremption or prescription] are remedial in nature and as such are generally accorded retroactive application.” Lott v. Haley, 370 So.2d 521, 523 (La. 1979). La. R.S. 9:2772 [as amended in 2003] does not expressly state that it may be applied retroactively. However, it is a procedural law, establishing a period after which a plaintiff may no longer assert a claim. Subject to the caveat that it may not operate to disturb a vested right, § 2772 may be applied retroactively.
Despite the trial court and court of appeal's rulings in this case, we do not find it necessary to accord the statute retroactive application. The 2003 amendment became effective August 15, 2003, approximately two months before the Ebingers filed suit against Venus. Therefore, its application in this matter is not necessarily retroactive. 8 Although the applicable peremptive period commenced in 1997, before the amendment took effect and before the suit was filed, this antecedent does not in itself require retroactivity. “[A]pplying a legislative act to conduct antedating the statute's enactment or upsetting a party’s expectations based upon prior law does not mean the statute is impermissibly ‘operating retroactively.’” Elevating Boats, Inc. v. St. Bernard Parish, 00-3518 (La. 9/5/01), 795 So.2d 1153, 1163.
As Marcel Planiol explained, a law is retroactive “when it goes back to the past either to evaluate the conditions of the legality of an act, or to modify or suppress the effects of a right already acquired. Outside of those conditions, there is no retroactivity.” Id. (quoting 1 Marcel Planiol, Treatise on the Civil Law, § 243 (La. State Law Inst. Trans.1959) (12th ed.1939)). In the instant matter, § 2772 “goes back to the past” not to evaluate the legality of an act but to begin the peremptive stopwatch. Therefore, it is retroactive only if it affects a right already acquired, i.e. vested.
10-2516, pp. 7-8, 65 So.3d at 1285.
The Ebinger court went on to find that the builder’s indemnification claim
was only conditional when the homeowners observed cracks in their slab and their
suit was filed, and absent a judgment against the builder, that cause of action had not
accrued, and thus the right was not vested, at the time the 2003 amendment came
into effect. The Ebinger court found the 2003 amendment shortening the
peremptive period thus did not disturb a vested right of the builder. Because the
peremptive period commenced in 1997 when the certificate of occupancy was
recorded, and the five-year period of peremption applied, the Ebinger court
concluded the builder’s indemnity claim filed in 2006 had been perempted in 2002.
The arbitration panel cited the reasoning in Ebinger that La. Rev. Stat. 9:2772,
as amended in 2003, a peremptive statute which did not specify a grace period, could
be applied retroactively so long as it did not disturb a vested right. The panel
acknowledged that up until Ebinger, “it had been assumed by some courts that a
peremptive statute which shortened the time periods for filing suit could not be
applied retroactively unless it provided in the statute itself a specific grace period.”
9 The panel then distinguished Maltby v. Gauthier, 506 So.2d 1190 (La. 1987), and
Lott v. Haley, 370 So.2d 521 (La. 1979), which held the medical malpractice statute
of limitations could not be applied retroactively, on the basis that in those cases,
according to the panel, the statute had immediately extinguished vested causes of
action as of the effective date of the statute. Here, the panel reasoned, when the
amended statute became effective on August 15, 2003, Crescent was not divested of
its cause of action against the builder -- a cause of action that had accrued as early as
October 2002 but no later than July 24, 2003 -- because it still possessed that cause
of action and had almost another five years from the effective date of the legislation
in which to exercise that right. The panel cited the reasoning in Ramirez v. St. Paul
Fire & Marine Ins. Co., 433 So.2d 219 (La. App. 3rd Cir. 1983), and Saucier v. Drs.
Houston, Roy, Faust & Erwin, 446 So.2d 877 (La. App. 4th Cir. 1984), for the
proposition that retroactive application of a time limitation did not
unconstitutionally divest a plaintiff of a vested right when, after the legislation came
into effect, there remained a reasonable period of time in which the plaintiff could
have nonetheless brought his action. The panel then quoted language in Ebinger
suggesting to the panel, at least, that a statute shortening a period of peremption
could be permissible even absent a specified period of time in which to assert the
cause of action, so long as there was a reasonable period of time in which the
plaintiff could have exercised his right.4 The panel reasoned:
4 The court of appeal in Ebinger held the 2003 amendment did not apply to perempt the builder’s indemnity claim against the subcontractor. The appellate court had noted:
Furthermore, this case falls outside of the general concept that a law modifying the duration of prescription will be inapplicable in cases where prescription has accrued, but may be applicable to those which are running. See Elevating Boats, Inc. v. St. Bernard Parish, 00-3518 (La. 9/5/01), 795 So.2d 1153. This jurisprudence is inapplicable in cases in which a statute shortens a prescriptive period, as here. Id. at 1163, n. 12. Instead, the supreme court has remarked that "[p]rinciples of fairness and equity combined with constitutional considerations have led us to find that statutes shortening a prescriptive period may be impermissible absent a transitional period sufficient to permit a claimant to seek judicial enforcement of a claim otherwise adversely affected by the new prescriptive period." Id. 10 Therefore, reading all of these cases, along with Ebinger, the Supreme Court has clearly said that the Louisiana and United States Constitution[s] preclude the retroactive application of any statute which would cut off a vested cause of action. However, if the statute does nothing but shorten the time limits, it is constitutionally permissible. In light of Ebinger’s clear statement that the limitation as set forth [in] Maltby and Lott did not apply to peremptive statutes, and could be permissible, the Ebinger case clearly dictates that in a situation like this, where Crescent had almost five years to sue from the effective date of the amendment of the statute, no rights were divested, and there is no constitutional prohibition against applying the statute retroactively.
The court of appeal ultimately disagreed with the reasoning of the arbitration
panel. After acknowledging that an arbitration award can be challenged only on the
statutory grounds as set forth in La. Rev. Stat. 9:4210, the court of appeal noted that
the reviewing court’s function is to determine whether the arbitration proceedings
have been fundamentally fair. 134 So.3d at 89 (citing Southern Tire v. Virtual
Point Development, 00-2301 (La. App. 4 Cir. 9/26/01), 798 So.2d 303). Although
it further acknowledged that arbitration awards could not be overturned for errors of
fact or law, the court of appeal noted that due process violations may require a
Ebinger v. Venus Const. Corp., 10-194, pp. 7-8 (La. App. 3 Cir. 10/6/10), 48 So.3d 375, 380 (“Ebinger II”).
This court, in reviewing the lower court’s reasoning in Ebinger II, had stated:
The Third Circuit also relied on our holding that "statutes shortening a prescriptive period may be impermissible absent a transitional period sufficient to permit a claimant to seek judicial enforcement of a claim otherwise adversely affected by the new prescriptive period." Ebinger II, 48 So.3d 375, 380 (quoting Elevating Boats, supra, 795 So.2d at 1163, n. 12) (emphasis in original). The court of appeal's reliance on this dictum is misplaced for several reasons. First, the statement applies to statutes that shorten prescriptive periods, not peremptive periods. Second, the statement is conditional, indicating that such statutes are not necessarily impermissible. Third, and most important, to conclude [the builder’s] claim was adversely affected by the new peremptive period is to mistakenly assume [the builder] could have sought judicial enforcement of that claim. If [the builder’s] cause of action for indemnity did not accrue before the 2003 amendment, as we discussed earlier, its claim did not yet exist. A non-existent claim cannot be adversely affected by a change in the law.
Ebinger, 10-2516 pp. 11-12, 65 So.3d at 1287. The arbitration panel quoted the underscored language in its ruling.
11 reviewing court to vacate the award. Id. (citing Johnson v. 1425 Dauphine, L.L.C.,
10 793 (La. App. 4 Cir. 12/1/10), 52 So.3d 962, 968 69, writ denied, 11-0001 (La.
2/18/11), 57 So.3d 334; Hennecke v. Canepa, 96-772 (La. App. 4 Cir. 5/21/97), 700
So.2d 521, 522, writ denied, 97-1686 (La. 10/3/97), 701 So.2d 210). The court of
appeal noted: “‘An arbitrator should be constantly vigilant of basic due process
requirements, the first and foremost of which is the opportunity to present evidence
and to be heard.’” Id. (quoting Pittman Construction Co., Inc. v. Pittman, 96-1079
(La. App. 4 Cir. 3/12/97), 691 So.2d 268, 274, writ denied, 97-0960 (La. 5/16/97),
693 So.2d 803). The court of appeal opined the four grounds for vacatur in La.
Rev. Stat. 9:4210 are broad in scope and provide sufficient leeway to correct
fundamental due process violations. Id. (citing Pittman Construction, supra).
The court of appeal next turned to the panel’s interpretation of Ebinger as to
the retroactive application of the 2003 amendment to La. Rev. Stat. 9:2772. The
court of appeal cited Maltby and Lott for the proposition that courts must refrain
from supplying a reasonable grace period where the legislature has not done so.
Those cases, rather than Ebinger, controlled, the court of appeal found, because they
were in effect at the time Crescent’s claims against Greystar accrued, and Ebinger
concerned only the builder’s indemnity claims against a subcontractor, claims which
were not vested rights at the time of the 2003 amendment to La. Rev. Stat. 9:2772.
To require Crescent to anticipate the application of Ebinger to its vested rights, and
thus shortening the time limitation to exercise those rights from seven years to five
years, the court of appeal reasoned, was fundamentally unfair. Because a
reviewing court must insure the fundamental fairness of an arbitration proceeding,
the court of appeal vacated the arbitration panel’s ruling, finding the arbitration
panel, in applying the amendment retroactively, had violated Crescent’s due process
rights.
12 We find the court of appeal erred in vacating the arbitration panel’s award, as
there exist no statutory grounds for doing so. We initially note there is no dispute
that Crescent and Greystar had voluntarily consented to submit the peremption issue
to the arbitration panel for its consideration. Indeed, Crescent had strenuously and
successfully objected to Greystar’s attempt to have the district court, rather than the
arbitration panel, decide the peremption issue and the effect of Ebinger on the
retroactivity of the amendment to La. Rev. Stat. 9:2772. Thus, the peremption issue
was clearly within the scope of the arbitration panel’s authority to decide. See
AT&T Tech., Inc. v. Comm. Workers of America, 475 U.S. 643, 648-49 (1986)
(“[A]rbitrators derive their authority to resolve disputes only because the parties
have agreed in advance to submit such grievances to arbitration.”).
Assuming for the sake of argument the arbitration panel wrongly interpreted
and applied Ebinger, and we take no position thereon, such an error of law does not
permit vacatur of the arbitration panel’s award. There has been no showing by
Crescent that the award was procured by corruption, fraud, or undue means. La.
Rev. Stat. 9:4210(A). Nor has there been any showing of evidence of partiality or
corruption on the part of the arbitrators. La. Rev. Stat. 9:4210(B). Crescent has
not asserted that the arbitrators are guilty of misconduct in refusing to postpone the
hearing or in refusing to hear evidence pertinent and material to the controversy.
La. Rev. Stat. 9:4210(C). Indeed, the record clearly establishes the parties were
allowed to brief the peremption issue thoroughly and to argue their positions before
the panel.
Instead, Crescent asserts, the arbitrators are guilty of misbehavior by which
the rights of a party have been prejudiced and the arbitrators exceeded their powers
or so imperfectly executed them that a mutual, final and definite award upon the
subject matter was not made. La. Rev. Stat. 9:4210(C) and (D). Crescent
13 contends the panel misrepresented the facts of this court’s controlling opinion in
Maltby in order to manufacture a distinction and evade its holding. According to
Crescent, the vested cause of action in the Maltby case was not immediately
extinguished by the legislation as asserted by the arbitration panel in its written
reasons, and thus does not support the panel’s reasoning. Further, although the
panel accurately related the holding of Ebinger, Crescent argues, the panel went on
to ignore that holding and to mischaracterize isolated dicta to extract a rule that is not
even arguably present in Ebinger. According to Crescent, the arbitration panel
“selectively and deceptively” quoted language from Ebinger, omitting statements
that would have exposed its mischaracterization. All of these actions, Crescent
contends, go beyond a simple “good faith” error of law, and instead reveal that, to
avoid a hearing on the merits of the underlying construction claims, the arbitrators
engaged in “misbehavior” and exceeded their legitimate powers by refusing to apply
the law agreed to by the parties. In effect, Crescent asserts, the arbitrators
impermissibly imposed their own policy choice as to the retroactivity of the
legislative amendment. Further, Crescent asserts it was fundamentally unfair of the
arbitration panel to apply Ebinger so as to overrule clear precedent when to do so
would produce substantial inequitable results. Thus, Crescent argues, the court of
appeal properly vacated the arbitration award because such wilful misbehavior
resulted in the denial of its due process rights.
However, we discern no such wilful misbehavior on the part of the arbitration
panel, as alleged by Crescent, nor did the panel’s alleged error amount to an
imperfect execution of its authority that resulted in a denial of Crescent’s due
process rights. At most, Crescent has alleged the panel made a plain error of law
which resulted in its claims being improperly dismissed on grounds of peremption.
The record contains no evidence whatsoever that the arbitrators wilfully misbehaved
14 or that they imperfectly executed their authority. Instead, the record shows the
panel permitted the parties to brief the issue and to argue that issue before it. There
was no denial of due process in that regard. Thereafter, the panel issued lengthy
reasons setting forth the law it relied upon and its interpretation thereof. It is readily
evident from those reasons that the panel assiduously considered all of the
applicable law and jurisprudence on the issue of peremption and La. Rev. Stat.
9:2772. The upshot of both the court of appeal’s reasoning and the arguments of
Crescent is that the panel just got it wrong on the law. We reiterate our long line of
jurisprudence that an error of fact or law will not invalidate an otherwise fair and
honest arbitration award. See National Tea, supra. Other than allegations,
Crescent has failed to establish any proof of dishonesty, bias, bad faith, wilful
misconduct, or any conscious attempt of the panel to disregard Louisiana law. As
we explained in Firmin v. Garber, supra, arbitrators are not guilty of misconduct
merely because a different award could have been rendered. “To hold otherwise
would defeat the purpose of arbitration: the speedy resolution of disputes outside the
court system.” 353 So.2d at 977.
DECREE
For the reasons set forth above, we find the court of appeal erred in reversing
the district court’s judgment confirming the arbitration panel’s award. Crescent has
failed to carry its burden of proving the existence of any of the statutory bases set
forth in La. Rev. Stat. 9:4210 mandating vacatur of the arbitration panel’s decision.
Accordingly, the court of appeal’s judgment is reversed, and the district court’s
judgment confirming the arbitration panel’s award is reinstated.
REVERSED
15 01/28/2015
SUPREME COURT OF LOUISIANA
AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, BISON BUILDING MATERIALS OF TEXAS, INC., ET AL.
CRESCENT PROPERTY PARTNERS, LLC, BISON BUILDING MATERIALS OF TEXAS, INC., ET AL.
BISON BUILDING MATERIALS OF TEXAS, INC., BISTROL FIBERLITE INDUSTRIES, INC., CHAMPION WINDOW, INC., ET AL.
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, FOURTH CIRCUIT, PARISH OF ORLEANS
JOHNSON, Chief Justice, concurs and assigns reasons.
I reluctantly concur with the majority opinion. In my view, there is no
question that the arbitration panel committed an error of law in concluding that the
2003 amendment to La. R.S. 9:2772, reducing the period of peremption for
construction claims from seven years to five years, could be retroactively applied
to perempt Crescent’s claims. However, as recognized by the majority, such an
error of law does not permit vacatur of the arbitration panel’s award. This court has long held that an arbitration award can only be challenged on the specific grounds
set forth in the arbitration statutes.1 And, these specific grounds do not include
“good faith” errors of law. Thus, despite the error committed by the arbitration
panel, I must agree with the majority’s conclusion that the court of appeal erred in
reversing the district court’s judgment confirming the arbitration panel’s award.
1 See, e.g., Firmin v. Garber, 353 So. 2d 976 (La. 1977); National Tea Co. v. Richmond, 548 So. 2d 930 (La. 1989).