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Bsc-C&C Jv v. The Louis Berger Group, Inc.

United States District Court, D. New Jersey

July 15, 2014

BSC-C&C JV, Petitioner,
v.
THE LOUIS BERGER GROUP, INC., et al., Respondents.

OPINION

WILLIAM J. MARTINI, District Judge.

Petitioner BSC-C&C JV ("BSC") filed this action against The Louis Berger Group, Inc. ("LBG"), Black & Veatch Special Projects Corp. ("Black & Veatch"), and The Louis Berger Group, Inc./Black & Veatch Special Projects Corp. Joint Venture (the "Joint Venture, " and together with LBG and Black & Veatch, "Respondents"). This matter comes before the Court on BSC's motion to confirm an October 10, 2013 arbitration award (the "Award") issued by Arbitrators A.H. Gaede, Jr., John P. Madden, and Thomas H. Welby (the "Panel"). In return, Respondents filed a cross-motion seeking to vacate the Award. In response to the cross-motion to vacate the Award, Petitioner appears to request sanctions under Federal Rule of Civil Procedure 11. There was no oral argument. Fed.R.Civ.P. 78(b). For the reasons set forth below, Petitioner's motion to confirm is GRANTED, and Respondents' cross-motion to vacate is DENIED. Petitioner's request for sanctions is DENIED.

I. BACKGROUND

On April 26, 2008, BSC and the Joint Venture entered into a subcontract (the "Contract") under which BSC agreed to perform work on a road from Gardez to Khost in Afghanistan (the "Project"). Decl. of Michael S. Zicherman ("Zicherman Decl.") Ex. E. ¶ 35, ECF No. 12-3. The Panel's exhaustive 96-page Award, issued after a 15-day hearing including testimony from 18 witnesses, deals with numerous issues arising from the Project. This factual summary will focus on the facts relevant to the alleged errors raised in Respondents' cross-motion to vacate the Award.

The Project was one of several that the Joint Venture undertook in Afghanistan. Zicherman Decl. Ex. E ¶ 35. The Joint Venture was responsible for the road's design, and BSC participated in the road's construction. Id. ¶¶ 37-38. BSC had until December 17, 2009 to complete the Contract work, which was 600 calendar days. Id. ¶ 39. The Contract contained an arbitration provision. Zicherman Decl. Ex. C.

Following the Contract's execution, BSC began the tasks necessary to mobilize to perform the work. Zicherman Decl. Ex. E ¶ 43. BSC planned the work in three sections: Section 1, Section 2, and Section 3. Id. A large part of this dispute stems from issues with Section 1. BSC constructed the road in layers. The Contract originally specified that, when constructing the road, BSC should place a 30 cm drainage layer of material with 0-8% fines immediately below the crushed aggregate base (the "CAB"). Id. ¶¶ 158-59. Following difficulties locating the material necessary to create this layer, the Joint Venture deleted that requirement. Id. The Joint Venture did not specify what material BSC should use instead, so BSC used unclassified borrow, a material with significantly greater fines content (up to 35% fines). Id. ¶ 159. In the fall of 2008, BSC proceeded to construct Section 1 without the 0-8% layer, and had performed substantial work before stopping for the winter weather. Id. ¶¶ 158-59.

In December of 2008 cracks in the roadway became apparent, and further cracks appeared in April 2009. Zicherman Decl. Ex. E ¶ 160. On May 16, 2009, the Joint Venture reinstated the requirement for the 0-8% layer. Id. BSC then began to manufacture the 0-8% material and used that material below the CAB in kilometers 10-27 of Section 1. Id. ¶ 161. Accordingly, Section 1 was finally constructed as follows: (1) 0-10 km, no 0-8% layer but instead repaired at specific spots and given an overlay of asphalt, (b) 10-20 km, existing work removed and replaced with the 0-8% layer included, and (c) 20-27 km, constructed with the 0-8% layer. Id. ¶ 162. The Panel found that before the remedial work, the cracks were extensive from 0-20 kilometers, but were not everywhere. Id. ¶ 165. The Panel further found that after the remedial work there continued to be a substantial number of cracks from 1-10 kilometers, which had no 0-8% material. Id. On the other hand, only a limited number of cracks appeared in kilometers 10-27, where the 0-8% material was placed. Id.

Unsurprisingly, the parties had differing viewpoints as to who should bear responsibility for the cracks in the roadway. The Joint Venture's expert, Mr. Geoffery Rowe, opined that the roadway failure in Section 1 had multiple causes, including a high percentage of fines and poor drainage. Zicherman Decl. Ex. E ¶ 209. Based on photographs, another expert for the Joint Venture, Mr. John D'Angelo, concluded that the roadway failure was caused by a lack of ditches. Id. ¶ 210. BSC maintained that the primary cause of the failure was the lack of a 0-8% layer. Id. ¶ 208. The Joint Venture also provided evidence showing that BSC had failed to provide the required binder course thickness in some areas. Id. ¶ 211. The Panel discounted Mr. Rowe's testimony on the grounds that "Mr. Rowe had previously worked with BSC with regard to the failures in Section 1" and was therefore "in an obvious conflict situation." Id. ¶ 209 n.10. The Panel further found that the Joint Venture had failed to establish that under-thickness was a factor in the extensive pavement failures. Id. ¶ 211. The Panel ultimately concluded that the Joint Venture's deletion of the 0-8% layer was responsible for the pavement failures in Section 1. Id. ¶ 215.

The Panel also considered issues stemming from worksite security. Security was a major concern, and the Joint Venture contracted with separate companies to provide security for the Project. Zicherman Decl. Ex. E ¶ 40. Security became a major issue between BSC and the Joint Venture. The Panel found that the Joint Venture was slow in providing security, causing delay to the work in all sections during 2008. Id. ¶ 44. Additionally, under the Contract the Joint Venture was liable for any deteriorating security conditions, and security conditions significantly deteriorated as the Project progressed. Id. ¶¶ 71-76. From 2008 until BSC left the Project in early 2011, many security incidents caused damages to property, injury and death to persons, and delays in work progress. Id. ¶¶ 46-47. Pursuant to the Contract, BSC submitted claims to the Joint Venture for costs and damages associated with the security incidents and other delays. Id. ¶ 47. However, the parties disagreed regarding BSC's compensation for those delays. Id. ¶¶ 48-49.

The Panel evaluated the various delays, determining which delays were compensable and the amount due to BSC for the compensable delays. The Panel ultimately awarded $3, 710, 265 for the delay claims. Zicherman Decl. Ex. E ¶ 358. In doing so, the Panel noted that the "scheduling experts were of little, if any, help" in reaching its decision. Id. ¶ 330. Instead, it relied on the documentary evidence, which included the Joint Venture's own internal documents, to make its determination. Id.

Finally, BSC alleged that it had experienced cash flow problems because (i) the Joint Venture did not timely pay some periodic contract payments, (ii) the Joint Venture did not timely address and pay for BSC's claims, and (iii) the significant project delays without compensation for fixed costs increased BSC's costs and depleted its cash flow. Id. ¶ 359. The Panel found that the Joint Venture's conduct contributed to BSC's cash flow problems, but that the evidence did not support BSC's claim for $4, 109, 750. Id. ¶ 372. Instead, the Panel accepted the calculations of the Joint Venture's expert witness, Mr. Stephen Bennett, and awarded $983, 000 to BSC. Id.

II. LEGAL STANDARD

Courts rarely disturb arbitration awards, and the presumption is that the award is enforceable. Freeman v. Pittsburgh Glass Works, LLC, 709 F.3d 240, 251 (3d Cir. 2013). A court will vacate an award only under the "exceedingly narrow" circumstances listed in Section 10(a) of the Federal Arbitration Act (the "FAA"). Dluhos v. Strasberg, 321 F.3d ...


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