Letke Security Contractors, Inc. v. United States Surety Co.

IRMA S. RAKER, J., Retired, specially assigned. This dispute arises out of a voluntary, non-judicial, binding arbitration held in Maryland pursuant to the parties’ agreement to arbitrate. The arbitrator issued an award in favor of appellee, United States Surety Company (hereinafter USSC). Appellant Letke Security Contractors (hereinafter Letke), a construction subcontractor, appeals from the order of the Circuit Court for Baltimore City confirming the arbitration award in favor of appellee, USSC.

Appellant asks this Court to reverse the order of the circuit court denying Letke’s petition to vacate the arbitration award pursuant to the provisions of the Maryland Uniform Arbitration Act (hereinafter MUAA), Maryland Code (1974, 2006 Repl. Vol., 2009 Cum. Supp.), Courts and Judicial Proceedings Article, §§ 3-201 el seq. 1 We shall affirm the judgment of the Circuit Court for Baltimore City denying appellant’s petition to vacate the arbitration award and affirming the award. I. This case arises from a public construction project on the City of Baltimore’s Black River Wastewater Treatment Plant.

Letke acted as a subcontractor for the principal contractor, Shaney Construction Company (hereinafter Shaney). Under Maryland’s “Little Miller Act,” Maryland Code (1985, 2006 Repl. Vol., 2008 Cum. Supp.), State Finance and Procurement Article, §§ 17-101 el seq., Shaney was required to secure the payment of its obligations to its subcontractor by obtaining a performance and payment bond.

Shaney contracted with USSC for those bonds. ⁴⁶⁶ For reasons not germane to this litigation, the relationship between appellant and Shaney Construction Company came to an early end. The parties agreed to arbitrate the matter before Robert M. Wright, Esq. On August 6, 2007, the arbitrator conducted a conference call to set administrative deadlines and the date of the arbitration hearing. Both parties were represented by counsel, and Letke, through counsel, agreed to the dates of January 3 and 4, 2008, for the hearing.

On October 31, 2007, appellant’s counsel withdrew from the case. Letke’s counsel requested Shaney to consent to a postponement of the hearing if new counsel needed it, and Shaney agreed. No new counsel entered an appearance in the case. There was no further communication on this topic until December 21, 2007, thirteen days before the scheduled merits hearing.

Shaney wrote to the arbitrator to determine whether Letke would be retaining counsel; whether Letke would be permitted to proceed pro se; whether Letke would meet the December 28, 2007, deadline for the exchange of witness lists and exhibits; and whether the hearing would proceed as scheduled on January 3 and 4, 2008. At that time, Shaney was still willing to agree to a postponement, and stated in its letter as follows: “[I]f the arbitration is to be postponed, we would ask that we make a decision in that regard without further delay. While we remain willing to extend courtesies to opposing counsel with regard to the scheduling of the date, this case needs to come to a resolution within a reasonable time.” The letter further read in relevant part as follows: “As you may recall, on October 31, 2007, Louis J. Kozlakowski, Jr., Esquire notified you that he was no longer serving as legal counsel for the Claimant.... Nearly 60 days have passed since Mr. Kozlakowski’s letter and no new counsel has yet entered their appearance for the Claimant....

While Shaney is prepared to proceed with this case and meet [the January 3 and 4] deadlines, when Mr. Kozlakowski advised that he was stepping out of this case he asked that Shaney agree to a postponement of the hearing dates ⁴⁶⁷ once Letke secured new counsel. As a matter of courtesy and professionalism, we agreed to Mr. Kozlakowski’s request. Of course, at the time Shaney did so it expected Letke would secure new counsel in a reasonable time. At this point, we need to know what the Claimant intends to do with this case.” In response to appellee’s letter, the arbitrator contacted appellant, and on December 21, Kimberly Letke responded with a letter on behalf of her company, which was faxed to both appellee and the arbitrator.

The letter stated in relevant part: “I believe I have secured counsel. I still intend to proceed with the Arbitration on January 3, 2008. If the attorney to whom I believe will take the case is away til January 2, 2008. If [he] does not enter his appearance, then I have the right to represent my business, Letke Security Contractors, Inc. Therefore, so we do not delay I will forward you and Mr. Bob Wright the exhibits.... ” On the same day, the arbitrator responded to Ms. Letke’s letter, confirming that Ms. Letke would be permitted to represent her company without counsel, at her election.

On December 28, Ms. Letke sent a letter to the arbitrator requesting a postponement of the January 3, hearing, arguing that she did not receive appellee’s exhibits until 6:30 p.m. on December 28, after the agreed upon deadline of 5:00 p.m. Ms. Letke further argued that appellant’s new attorney would not have time to review the case. The attorney had not entered an appearance on behalf of appellant, and this December 28 communication was the first indication of any plan for him to represent appellant. Appellee opposed Ms. Letke’s request, arguing that it had incurred expenses in preparation for the early January hearing.

The arbitrator denied the postponement request, ruling as follows: “With regard to the most recent postponement request, there has yet to be any entry of appearance or other indication from Mr. Baker that he desires to represent ⁴⁶⁸ Letke. As to any agreement by [appellee] with [appellant’s outgoing counsel] to postpone the hearings at the request of new counsel, that obviously assumed an engagement of new counsel within a reasonable period of time so that the proceedings would not be unduly delayed. A reasonable time has long since passed. A fundamental premise of an agreement to arbitrate is the speedy resolution of disputes.

In light of all of the above, the Hearings will commence on Thursday, January 3, 2008 as scheduled.... ” The hearings occurred according to the original schedule, on January 3 and 4, 2008, with all parties present and participating. Ms. Letke appeared at the hearing, made arguments, provided testimony, introduced documents, and cross-examined witnesses. On January 23, 2008, the arbitrator issued an award in favor of USSC, mailing it to the parties by regular mail. Appellant sent an undated letter to the arbitrator, seeking “reconsideration” of the award. 2 The letter was postmarked February 19 and received by the arbitrator on February 21, 2008.

On May 16, 2008, appellee filed a motion in the Circuit Court for Baltimore City to confirm the arbitration award and for entry of judgment in its favor. Appellant responded, stating that appellee’s motion to confirm the award was premature because appellant had requested the arbitrator “to modify or correct his decision.” On July 14, 2008, the circuit court denied appellee’s motion on the grounds that “plaintiff asserts that it filed a timely request for modification of the arbitration award and, there being no final determination from the arbiter at this time, the Court may not act on defendant’s motion to confirm the award or enter judgment.” On the same day, July 14, the arbitrator denied appellant’s motion for modification. The Order, signed by Robert M. Wright, stated as follows: ⁴⁶⁹ “The Award in this case was transmitted by ordinary mail to the parties on January 23, 2008. Letke Security Contractors sent a letter to the undersigned postmarked February 19, 2008 which was received February 21, 2008 requesting a reconsideration of the Award.

The request is denied upon the grounds that the request was untimely pursuant to both the Maryland Arbitration Law and the Commercial Arbitration Rules of the American Arbitration Association and, alternatively, that no sufficient grounds have been shown to justify a modification of the Award.” Appellant filed a motion in the circuit court, requesting that the court vacate the arbitration award. It argued that it had been prejudiced by the arbitrator’s refusal to postpone the hearing. Appellee filed an opposition to the motion to vacate, and asked the court to confirm the Award and enter final judgment in favor of USSC. Appellee presented two arguments to the circuit court — the first, that the motion to vacate the award was untimely filed, 3 and the second, that the arbitrator did not abuse his discretion in denying the request to postpone the hearing.

The circuit court ruled that the motion to vacate was timely filed but denied the motion on the grounds that the arbitrator did not abuse his discretion in denying the postponement and requiring the parties to go forward with the hearing that was previously scheduled and agreed upon. The court issued an order denying the motion to vacate, confirming the January 23, 2008 arbitration award, and entering judgment in favor of USSC. Appellant noted a timely appeal to this Court, and presents two issues: first, whether the arbitrator’s refusal to postpone ⁴⁷⁰ the hearing was arbitrary and an abuse of discretion, and second, whether appellant was substantially prejudiced and denied fundamental fairness when it was required to proceed at the arbitration hearing without counsel. Before this Court, appellant argues that the arbitrator abused his discretion in denying its motion to postpone the participatory hearing.

It maintains that it was prejudiced by Ms. Letke’s having to proceed on behalf of appellant without an attorney, and that because appellee had indicated that it was willing to postpone the hearing to allow new counsel to prepare, appellee unfairly withdrew its offer. Appellee argues that the arbitrator’s decision whether to continue the hearing was a discretionary one, and that he did not abuse his discretion. Appellee asserts that when it indicated it would agree to a continuance in October, it did not contemplate a last-minute attempt by appellant to invoke the offer for a continuance. In Maryland, as in perhaps every state in the country, the public policy of the State, as reflected in C.J. §§ 3-201 et seq. is for the resolution of disputes through arbitration.

Until 1965, when the MUAA was enacted by the Legislature, arbitration in Maryland was governed by the common law rules. The Uniform Arbitration Act is the product of the National Conference of Commissioners on Uniform State Laws, and was promulgated in 1955. It has now been adopted by the District of Columbia and thirty-five states, including Maryland. Judge Rita C. Davidson, writing for this Court in Bel Pre Medical Center v. Frederick Contractors Inc., discussed this State’s public policy towards arbitration, stating as follows: “The Uniform Arbitration Act constitutes a radical departure from the common law.

Executory agreements to arbitrate are to be deemed ‘valid, irrevocable and enforceable,’ and suits to compel arbitration or to stay the action of a court pending arbitration may now be brought. The prime purpose of these provisions is to discourage litigation and to foster voluntary resolution of disputes in a forum created, ⁴⁷¹ controlled and administered according to the parties’ agreement to arbitrate. Thus, by its enactment, the General Assembly established a policy in favor of the settlement of disputes through the arbitration process and ended the ambivalence of courts under the common law. Not only suits to enforce an arbitrator’s award, but also suits to compel arbitration and suits to stay court action pending arbitration, are now to be viewed as ‘favored’ actions.” Bel Pre Medical Center, Inc. v. Frederick Contractors, Inc., 21 Md.App. 307, 319-20 , 320 A.2d 558, 565 (1974), vacated on other grounds, 274 Md. 307, 314 , 334 A.2d 526, 530 (1975) (noting that “the Court of Special Appeals, in a scholarly opinion, traced the history of arbitration in this country....”).

A party may file a petition to vacate an arbitration award in the courts of this State pursuant to the MUAA. C.J. § 3-224 sets forth the narrow grounds upon which an award may be vacated. Accordingly, arbitration awards are subject to extremely narrow judicial review. The Act provides the grounds for setting aside an award in C.J. § 3-224, as follows: (a) Petition.— (1) Except as provided in paragraph (2), a petition to vacate the award shall be filed within 30 days after delivery of a copy of the award to the petitioner.

(2) If a petition alleges corruption, fraud, or other undue means it shall be filed within 30 days after the grounds become known or should have been known to the petitioner. (b) Grounds. — The court shall vacate an award if: (1) An award was procured by corruption, fraud, or other undue means; (2) There was evident partiality by an arbitrator appointed as a neutral, corruption in any arbitrator, or misconduct prejudicing the rights of any party; (3) The arbitrators exceeded their powers; (4) The arbitrators refused to postpone the hearing upon sufficient cause being shown for the postponement, refused to hear evidence material to the controversy, or ⁴⁷² otherwise so conducted the hearing, contrary to the provisions of § 3-213 of this subtitle, as to prejudice substantially the rights of a party; or (5) There was no arbitration agreement as described in § 3 -206 of this subtitle, the issue was not adversely determined in proceedings under § 3-208 of this subtitle, and the party did not participate in the arbitration hearing without raising the objection. (c) When award not to be vacated. — The court shall not vacate the award or refuse to confirm the award on the ground that a court of law or equity could not or would not grant the same relief. A party is entitled to be represented by counsel at an arbitration hearing under the MUAA, C.J. § 3-216(a).

That section provides, in relevant part, as follows: (a) Representation by attorney. — A party has the right to be represented by an attorney at any proceeding or hearing under this subtitle. (b) When waiver ineffective. — A waiver of the right to be represented by an attorney prior to the proceeding or hearing is ineffective. Judicial review of an arbitrator’s decision is extremely limited, and a party seeking to set it aside has a heavy burden. See Kovacs v. Kovacs, 98 Md.App. 289, 303 , 633 A.2d 425, 432-33 (1993) (stating that “[a] party asserting that error was committed by an arbitration panel bears the burden of showing, by the record, that the error occurred.”); Southern Maryland Hosp.

Ctr. v. Edward M. Crough, Inc., 48 Md.App. 401, 407 , 427 A.2d 1051, 1055 (1981) (stating that “the courts’ function in confirming or vacating a commercial award is ‘severely limited.’”); see also MUAA § 3-222 (limiting the grounds for vacating an arbitration award). In fact, the standard of review of arbitral awards “is among the narrowest known to the law.” Litvak Packing Co. v. United Food & Commercial Workers, Local Union No. 7, 886 F.2d 275, 276 (10th Cir.1989). We will not vacate an arbitration award simply because the court would not have made the same ⁴⁷³ award as the arbitrator, or for mere legal error. MCR v. Greene, 148 Md.App. 91, 117 , 811 A.2d 381 , 346 (2002); Southern, Maryland Hosp.

Ctr., 48 Md.App. at 407 , 427 A.2d at 1055 . Significantly, the General Assembly has “expressly proscribed any possibility of substitution of a reviewing court’s judgment for that of the arbitrator.” Nick-George Ltd. P’ship v. Ames-Ennis, Inc., 279 Md. 385, 389 , 368 A.2d 1001, 1003 (1977). This limited review serves to strike a balance between the need for efficient, speedy, and economical dispute resolution, and the need to establish justified confidence in arbitration among the public. See Brandon v. Hines, 439 A.2d 496, 509 (D.C.1981).

Appellant presents two arguments. First, that the arbitrator’s denial of the postponement request was arbitrary and an abuse of discretion. Letke maintains that the arbitrator was willing to postpone the hearing if his fee had not been paid or if exhibits had not been exchanged, but he refused to continue the hearing for a short time to permit the corporation to be represented by counsel. Second, Letke argues that it was substantially prejudiced and denied fundamental fairness when it was required to proceed at the arbitration hearing without counsel.

Because this matter was a complicated one, appellant continues, forcing it to go forward without counsel denied it fundamental fairness. Appellant claims that the arbitrator should have granted the motion for postponement because it did not have defense counsel. Section 3-224 of the MUAA is an exception to the general rule that decisions of the arbitrator are not subject to judicial review. Section 3-224(b)(4) requires a court to vacate an award if the arbitrator refused to postpone the hearing upon sufficient cause being shown for the postponement and