Federated Department Stores, Inc. v. J.V.B. Industries, Inc.

894 F.2d 862, 1990 U.S. App. LEXIS 1184
CourtCourt of Appeals for the Sixth Circuit
DecidedFebruary 1, 1990
Docket88-3716, 89-3081
StatusPublished
Cited by63 cases

This text of 894 F.2d 862 (Federated Department Stores, Inc. v. J.V.B. Industries, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Federated Department Stores, Inc. v. J.V.B. Industries, Inc., 894 F.2d 862, 1990 U.S. App. LEXIS 1184 (6th Cir. 1990).

Opinions

BOGGS, Circuit Judge.

Federated Department Stores (Federated) appeals three orders of the district court modifying an arbitration award rendered in favor of J.V.B. Industries, Inc. (JVB), as assignee of TAB Industries, Inc. (TAB). For the reasons that follow, we affirm the district court’s orders.

I

TAB was the drywall and ceiling contractor for renovation projects in two department stores owned by Federated in Columbus, Ohio and Indianapolis, Indiana. TAB is a corporate shell for JVB. Both companies were owned and operated by Thomas A. Brusca.

This dispute concerns the interpretation of construction contracts, executed on February 28, 1986, for the two renovation projects. Federated hired Associated Project Control (APC) as project manager; Ames, Elzey, Thomas and Partners (Ames, Elzey) as architects; the Walker Group/CNI, Inc. (Walker) as interior designers; and TAB as the drywall and ceiling builder. JVB and Federated disagree about the scope of work which the contracts required TAB to perform.

Both Walker, as interior designer, and Ames, Elzey, as architect, produced drawings for the renovations. The Walker drawings generally related to interior construction work, such as fixturing, floor coverings, partitioning, and decorative ceiling work. The Ames, Elzey drawings generally related to structural work, such as heating and cooling, plumbing, electrical, concrete, and masonry work. Each set of design documents contained nearly identical lists of General Conditions,1 which defined the terms of the agreements between the parties. The contracts between Federated and TAB incorporated by reference these General Conditions.

On May 7, 1986, TAB informed project manager APC that its bid was limited to performing the work specified in the Walker drawings and did not include any of the work specified in the Ames, Elzey drawings. Federated maintained that TAB’s bid reflected its full price for performing all of the drywall and ceiling work specified in either set of drawings.

The disputed work is that contained in the Ames, Elzey drawings but not in the Walker drawings: storefronts, escalator well columns, atriums, entrances, and much of the acoustical ceilings. At the demand of APC, TAB went ahead and performed the Ames, Elzey work, fearing termination. TAB demanded payment of an additional $516,000 for the Ames, Elzey work, which was completed on time at the Indianapolis [865]*865store but not at the Columbus store.2 The contracts stated that time was of the essence. Pursuant to Section 1.38(A)(3) of the General Conditions, governing the failure to complete the work within the time limits, Federated terminated TAB’s contract for the Columbus store on September 9, 1986.

JVB, as TAB’s assignee, sued Federated on November 19,1986 for compensation for work performed, damages for breach of contract and willful interference with TAB’s performance,3 interest, costs and attorney fees. Federated exercised its contractual right to arbitrate, rather than litigate, the claim, and also sought to recover through arbitration the costs Federated had incurred in completing the job at Columbus. On January 30, 1987, the District Court for the Eastern District of New York, where JVB filed its complaint, stayed the action pending arbitration. Before arbitration proceedings began, JVB went out of business.

At the arbitration hearings, JVB sought $1.91 million in contract claims, less $195,-579.04 for a payment of materialmen’s liens that Federated made directly to the lienholders. On the opening day of arbitration, JVB surprised Federated by submitting additional claims for the destruction of both TAB’s and JVB’s businesses. JVB claimed that, as a result of Federated’s refusal to pay TAB the extra amounts claimed for the Ames, Elzey work, TAB could not meet its financial obligations to JVB and others, leaving both TAB and JVB unable to bid on other jobs and forcing them into financial ruin. Federated objected to the arbitrability of the tort claims for business termination and refused to arbitrate these claims. The arbitrators agreed to hear the tort claims at a later, as yet unscheduled, date if the claims were determined to be arbitrable.

On November 1, 1987, the arbitration panel awarded JVB $1,789,957.89, plus attorney fees and costs, only on the contract claims. JVB filed a Motion to Confirm Arbitration Award with the District Court for the Eastern District of New York, and the case was then transferred to the District Court for the Southern District of Ohio. On July 5, 1988, the district court issued its first order, remanding the award to the arbitrators with instructions to reduce the award by an amount the arbitrators wrongly included for certain tax liens. On July 7, 1988, the district court issued its second order, holding that the business termination claims were properly arbitrable.

Federated appealed the July 5 and July 7 orders, and the district court stayed the arbitration of the business destruction claims pending the outcome of that appeal. JVB moved to dismiss the appeal, asserting that the July 5 and July 7 orders were not final appealable orders. On December 22, 1988, while JVB’s motion to dismiss was pending, the district court issued its third order, stating that the arbitrators, on remand, had erred in their recalculation of the award minus the tax lien, and the court entered judgment for JVB in the amount of $1,617,089.51. Federated then filed an appeal of the December 22, 1988 order. JVB withdrew its motion to dismiss, and Federated’s two appeals (of the July 5 and July 7 orders (88-3716) and of the December 22 order (89-3081)) have been consolidated here. Essentially six issues — four involving the proper construction of the contracts and two involving the arbitrability of the business destruction claims — are presented for our review. We consider them in that order.

II

Federated first asserts that the arbitrators exceeded their authority in construing the contracts in JVB’s favor. The Arbitration Act, 9 U.S.C. § 1 et seq., provides the statutory basis for a district court’s review of an arbitration award. 9 U.S.C. § 10 sets out the four grounds on which an award may be vacated. Three of the grounds deal with misconduct by the parties or the [866]*866arbitrators. As no misconduct is alleged here, only the fourth ground, § 10(d), may provide a basis for vacating this award. According to § 10(d), the party seeking review must prove that “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.”

Given the strong federal policy in favor of enforcing arbitration agreements, see Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983), the burden of proving that the arbitrators exceeded their powers is very great. In United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct.

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Bluebook (online)
894 F.2d 862, 1990 U.S. App. LEXIS 1184, Counsel Stack Legal Research, https://law.counselstack.com/opinion/federated-department-stores-inc-v-jvb-industries-inc-ca6-1990.