D.C. Court of Appeals Affirms Construction Arbitration Award Despite Alleged Material Non-Disclosures of Arbitrator

On August 26, 2021, the Court of Appeals of the District of Columbia issued a decision on the C. R. Calderon Construction, Inc. v. Grunley Construction Company, Inc. case, involving issues surrounding the validity of an arbitration award in a construction dispute.

Grunley Construction was hired as the general contractor for renovation of the Watergate Hotel.  Calderon Construction was hired as a subcontractor but left the project before it was completed, leaving Grunley and the property owner, Euro Capital Properties, to hire additional subcontractors to finish the job. Calderon sued Grunley for payment for work it did before leaving. Grunley countersued for additional costs incurred due to Calderon’s default and filed a third-party complaint against Allegheny Casualty Company, who held a performance bond for Calderon. The parties agreed to arbitration. Grunley chose Stephen Shapiro as its arbitrator (Calderon chose another person and then the two chosen by the parties chose the third arbitrator to form a panel). 

Following hearings, the arbitration panel awarded Grunley $1,527,122.00 plus interest as well as $700,000 in attorney fees. Grunley filed a motion to confirm the award with the trial court and Calderon filed a motion to vacate it. Calderon argued that Mr. Shapiro failed to disclose that he served on the board of Associated General Contractors of DC with various employees of Grunley and that other attorneys at the law firm where he worked also previously represented the owner Euro Capital or its affiliates. The Superior Court affirmed the arbitration award. Grunley moved for attorney fees for post-arbitration work but the court denied the request for fees. Both Calderon and Grunley appealed these rulings.

Calderon argued the arbitration award should be set aside because one of the arbitrators failed to disclose potential conflict information and also because the arbitrators allegedly “manifestly disregarded the law in making the award.” Grunley claimed the court erred in denying its motion for attorney fees in the post-award litigation.

The Court of Appeals discussed the Revised Uniform Arbitration Act (RUAA), the District’s body of statutes concerning arbitration. Under D.C. Code Sections 16-4401 to 16-4432, an arbitrator is required to disclose any known facts that “a reasonable person” would consider could affect the impartiality standards incorporated into the statutes. Calderon argued that a failure to disclose should trigger a presumption of partiality that the arbitrator must rebut. The Court of Appeals rejected this argument and noted that the D.C. Code reserves such presumptions only where there is a very particular type of non-disclosure (when an arbitrator does not disclose “a known, direct and material interest in the outcome of the arbitration proceeding or a known, existing, and substantial relationship with a party.”) The Court concluded there was no evidence the facts surrounding Mr. Shapiro presented such a non-disclosure. Moreover, the Court concluded that Calderon failed to prove evident partiality for Mr. Shapiro.

As for the second argument (that the arbitrators allegedly “manifestly disregarded the law in making the award.”), the Court stated at the outset that a party seeking to set aside an arbitration award “has a heavy burden.” Calderon did not demonstrate that the instant case presented such an extreme situation as to rise to the level of “manifest disregard.” Consequently, the Court rejected the second challenge as well.

As to Grunley’s appeal of the denial of post-arbitration attorney fees, the Court found that the trial court erred in denying the request and remanded the case to the trial court for further consideration of Grunley’s motion for attorney fees.