Unison Co., Ltd. v. Juhl Energy Development, Inc.

Background

Unison Co., Ltd. and Juhl Energy Development, Inc. were parties to contracts concerning the design, manufacture, and sale of wind turbine generators for a community wind-farm project in Winona County, Minnesota. Unison’s amended complaint asserted 16 claims arising largely from a financing agreement. The Eighth Circuit ordered the claims to arbitration, and the district court stayed the case while arbitration proceeded.

Both Unison and Juhl Energy Development submitted claims and defenses to the arbitration panel. Unison claimed that Juhl Energy Development had fraudulently changed its ownership structure without Unison’s consent. Juhl Energy Development claimed that the turbines sold by Unison lacked an essential cold-weather package needed to produce wind power in Minnesota.

The panel’s March 26, 2018 Final Award concluded that neither side had proven its claims. It found that both sides were mutually mistaken about whether the turbines were suitable for the project and that neither had exercised sufficient and reasonable diligence to confirm that belief. The panel rescinded all contracts between the parties. It ordered Unison to dismantle the turbines or, if Unison declined, to pay Juhl Energy Development $350,000 for decommissioning. It also ordered Unison to pay $285,000 for construction and related costs and $76,000 for additional freight costs, with interest, totaling $442,720. Thus, the award required payment of either $442,720 or $792,720, depending on whether Unison dismantled the turbines.

Unison’s Motion to Modify or Vacate

Unison asked the court to modify or correct the award under Section 11 of the Federal Arbitration Act and to vacate it under Section 10. Unison argued that the award did not fairly restore the parties to their pre-contract positions because Unison alone had to bear the listed costs. Unison also argued that the panel exceeded its authority by awarding more than the contracts’ liability limits, ordering rescission even though it was not listed as an exclusive remedy, and granting relief that no party had requested.

The court explained that judicial review of arbitration awards is highly deferential. A court may vacate an award only on the grounds listed in Section 10, such as fraud, arbitrator misconduct, or the arbitrators’ exceeding their authority. Section 11 permits modification or correction for an evident calculation or description error, an award on a matter not submitted, or an imperfection in form that does not affect the merits. The court may not reconsider the merits merely because it believes the arbitrators made a factual or legal error.

The court rejected Unison’s argument that the award should be modified because of the way the panel allocated costs. The panel had expressly sought to place the parties as nearly as possible in their pre-contract positions. The court held that it could not substitute its own judgment for the panel’s approach, particularly because arbitrators are not required to explain every part of their reasoning. Unison’s Section 11 challenge was denied.

The court also rejected Unison’s argument that the award violated the contracts’ liability limits. It stated that Unison had not raised that argument during arbitration and had not included it in its opening district-court filing. In addition, because rescission undoes a contract from the beginning, the court held that the contractual liability limitation did not restrict how the parties could be restored to their pre-contract positions.

The court further held that the panel had not exceeded its authority by ordering rescission. The court noted that one agreement arguably gave the panel authority to provide all other legal or equitable remedies after a breach of a representation or warranty. It also held that the arbitration clauses broadly covered disputes arising from the agreements. The court found that the defendants had in fact sought rescission in their initial arbitration position paper. Unison’s challenges under Sections 10 and 11 were therefore denied.

Confirmation, Dismissal, and Fees

Because the award had not been vacated, modified, or corrected, the court granted the defendants’ motion to confirm it. The court also granted the defendants’ motion to dismiss Unison’s amended complaint and ordered that the amended complaint be dismissed.

The defendants separately sought more than $2 million in attorneys’ fees and costs. The court denied that motion. It reasoned that the arbitration panel had denied all claims and had ordered Unison to pay costs to restore the parties to their pre-contract positions, rather than because the defendants had prevailed on their claims. The court also found that the district-court litigation had been limited and that determining the reasonableness of arbitration-related hours would require speculation. The panel’s decision that each side should bear its own attorneys’ fees was not disturbed.

Judge Ann D. Montgomery ordered that judgment be entered accordingly. The final dispositions were: Unison’s motion to modify and correct the arbitration award was denied; the defendants’ motion to confirm the arbitration award and dismiss was granted; the defendants’ motion for attorneys’ fees and costs was denied; and the amended complaint was dismissed.