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Arbitration Award Affirmed By Alabama Supreme Court

Arbitration in construction and design disputes can be a tempting alternative to resolving disputes outside of the traditional setting of a courtroom. However, once an arbitration award is issued, there is a high bar to be cleared should a disgruntled party move to have it vacated.

Escapes! To the Shores Condo. Ass’n, Inc. v. Hoar Constr., LLC, No. 1210378, 2023 WL 2053895 (Ala. Feb. 17, 2023) involved a condominium association that filed suit against a general contractor, a subcontractor, and an architect involved in constructing the “Escapes! To the Shores” condominiums located in Orange Beach, AL. Specifically, the condominium association sought damages that arose due to stucco blistering and water intrusion in several units. The condominium association opted to arbitrate its claims against the general contractor and subcontractor under the Federal Arbitration Act. 9 U.S.C. §1 et seq.

The arbitration panel issued an award in favor of the general contractor and subcontractor. The condominium association appealed the award to the Baldwin County Circuit Court pursuant to Alabama Rule of Civil Procedure 71B, and then moved to have the award vacated pursuant to Alabama Rules of Civil Procedure, Rule 59. The trial court denied the motion to vacate, and the condominium association appealed to the Alabama Supreme Court. The condominium association alleged the arbitration panel engaged in “misconduct” as defined by 9 U.S.C. §10(a)(3) of Federal Arbitration Act, when it declined to consider certain photographs offered as evidence in the arbitration.

On appeal, the Alabama Supreme Court pointed out that evidentiary considerations in arbitrations are rarely subject to appellate review. The Court noted that in order to constitute “misconduct” there must be circumstances demonstrating the arbitration proceedings were fundamentally unfair. Amongst other cases laying out when an arbitration award should be vacated, the Court cited Hoteles Condado Beach, La Concha & Convention Ctr. v. Union De Tronquistas Local 901, 763 F.2d 34, 39 (1st Cir. 1985) (noting that arbitrators are “not bound to hear all of the evidence tendered by the parties” but rather, are required only to “give each of the parties to the dispute an adequate opportunity to present its evidence and arguments”).  The Court affirmed the trial court’s denial of the condominium associations motion to vacate and declined to find “misconduct” as contemplated by the Federal Arbitration Act.

The Escapes! To the Shores Condo. Ass’n, Inc. should serve as a cautionary tale to parties seeking to resolve construction and design disputes via arbitration. Once an arbitrator issues an award, a dissatisfied party has a high burden to clear having the award vacated pursuant to 9 U.S.C. §10(a)(3).