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Ebasco Construction, Inc., v. Ahtna, Inc. (2/28/97), 932 P 2d 1312
Notice: This opinion is subject to correction before publication in the Pacific Reporter.
Readers are requested to bring errors to the attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0607, fax (907)
THE SUPREME COURT OF THE STATE OF ALASKA
EBASCO CONSTRUCTORS, INC., )
f/k/a FRANK MOOLIN AND ) Supreme Court No. S-7476
ASSOCIATES, INC., f/k/a )
ENSERCH ALASKA SERVICES, ) Superior Court No.
INC., ) 3AN-92-07806 CI
) O P I N I O N
AHTNA, INC., )
Appellee. ) [No. 4789 - February 28, 1997]
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage,
Milton M. Souter, Judge.
Appearances: Robert J. Dickson, Atkinson, Conway & Gagnon,
Anchorage, for Appellant. Herbert A. Viergutz, John P. Ahlers,
Craig Holley, Barokas & Martin, Anchorage, for Appellee.
Before: Compton, Chief Justice, Rabinowitz, Matthews,
Eastaugh, and Fabe, Justices.
This is an appeal of the superior court's confirmation of
an arbitration proceeding and of its decision to add prejudgment
interest to the arbitrator's award. We affirm in part and reverse
I. FACTS & PROCEEDINGS
The arbitration proceeding at issue involved a dispute
concerning a joint venture agreement ("JVA") between Ahtna and
Enserch, a predecessor to Ebasco Constructors, Inc. (Ebasco). The
JVA was formed as part of an effort by Ebasco to win a subcontract
with General Electric Company for work on an Air Force project.
The project eventually was canceled. The JVA provided that "[a]ll
disputes arising out of this Agreement shall be resolved by
arbitration under the Commercial Rules of the American Arbitration
Association and subject to the provisions of Alaska's Uniform
Arbitration Act . . . ." Ahtna submitted for arbitration a claim
against Ebasco for proposal costs it incurred in connection with
the JVA. The arbitrator determined that Ebasco was liable to
We have already decided some issues relating to the
validity of the arbitration proceeding. In Ahtna v. Ebasco
Constructors, Inc., 894 P.2d 657 (Alaska 1995) (hereinafter "Ahtna
I"), we reversed the superior court's determination that the
dispute was not arbitrable. We remanded the case to allow the
superior court to determine whether
under 09.43.120(a)(4) . . . the award should
be vacated (1) because the arbitrator refused
to postpone the hearing after sufficient cause
had been shown; and (2) because Ebasco did not
receive a specific explanation of Ahtna's
complaint until approximately one month before
Id. at 660 n.4. On remand, the superior court decided that the
arbitrator's award should not be vacated. The superior court also
awarded "Pre- and Post-Judgment Interest on Ahtna's claim . . .
from March 4, 1991 [the date of Ahtna's claim] through August 25,
1995 [the date of the superior court's judgment confirming the
arbitration award]." Finally, the superior court awarded "Post-
Judgment Interest on the Arbitration Award of Attorneys Fees . . .
from September 1, 1992 through August 25, 1995." Ebasco appeals
all three rulings of the superior court.
A. Facts Related to the Claim that the Arbitrator's Refusal
to Postpone the Hearing Was Improper
On February 13, 1992, the American Arbitration
Association issued an order confirming that Wayne White, senior
counsel for Ebasco, would be "representing Ebasco"in the
arbitration proceeding. White participated in a number of pre-
arbitration proceedings. On April 1, 1992, the arbitrator
scheduled the arbitration proceedings to begin on July 13, 1992.
Ebasco had a long relationship with the law firm of Burr,
Pease & Kurtz and consulted with the firm on various matters
related to the arbitration. On May 29, 1992, Ebasco asked J.W.
Sedwick of Burr, Pease & Kurtz to serve as its trial counsel for
the arbitration. Burr, Pease & Kurtz undertook the representation
of Ebasco the same day.
On June 19, Burr, Pease & Kurtz advised Ebasco that,
because a conflict of interest had arisen, it would withdraw as
Ebasco's trial counsel for the arbitration. The same day, Burr,
Pease & Kurtz moved to postpone the arbitration. Shortly
thereafter, Ebasco retained John Conway as substitute trial counsel
for the arbitration.
On June 26, the arbitrator held a hearing on the motion
to postpone, and rendered a decision denying the motion the same
day. The arbitrator found that
there was no notification to the Arbitrator
that the firm of Burr, Pease & Kurtz was
involved in this case on behalf of Ebasco
until June 10, 1992 and that substitute
counsel, John Conway has sufficient time to
familiarize himself with the case as Alaska
counsel before July 13, 1992 given the fact
that Wayne White has been primary counsel for
Ebasco throughout these proceedings since the
initial hearing on April 1, 1992.
B. Facts Related to the Claim that the Arbitration Award
Should Be Vacated because Ebasco Did Not Receive a
Sufficiently Specific Explanation of Ahtna's Complaint
Prior to the Arbitration Proceeding
In a letter dated November 15, 1990, Ebasco requested
that General Electric reimburse Ebasco for its proposal costs. The
We feel that recovery of our proposal costs is
justified due to the unreasonable delays and
changes in the program and because we devoted
extensive resources to the . . . proposal
effort based on the anticipation of receiving
a sole source contract for the work and in
accordance with the various GE RFQ requests.
On January 17, 1992, Ahtna filed a demand for the
arbitration proceeding at issue in this case. Ahtna indicated on
the demand for arbitration form that the "nature of the dispute"
was "Breach of Contract"and that the relief sought was "[i]n an
amount to be proven at the time of arbitration."
In a letter dated April 1, 1992, the arbitrator stated
that Ahtna had agreed to "file a statement of . . . [its] claim
within seven (7) days." The same day, Ahtna filed a claim for
proposal costs totaling 1.7 million dollars. It also filed certain
supporting materials. These documents did not explain the legal
theory underlying Ahtna's claim against Ebasco.
On June 10, 1992, the arbitrator ordered Ahtna to
provide, by June 18, 1992, a brief written statement outlining its
claim. On June 18, Ahtna provided a "statement of issues." The
statement of issues asserts, among other things, that "[t]he issues
of this arbitration concern, in general, the failure of Ebasco to
fulfill its partnership duties to Ahtna since cancellation of . . .
[the Air Force project] and, in particular, Ebasco's failure to
properly forward the Ahtna/Ebasco Joint Venture claim to General
Electric."(Emphasis supplied.) Ahtna later submitted a memorandum
in opposition to Ebasco's motion to reschedule the hearing. That
document was dated June 22, 1992. It stated, in part, that
"[e]ither Ebasco passed the claim through or they did not . . . .
Further, provided Ebasco passed this claim through to the
government as they have repeatedly asserted, the Contract Disputes
Act requires that such a claim be certified." (Emphasis supplied.)
On July 13, 1992, the first day of the arbitration
hearing on the merits, Ahtna asserted that it was entitled to an
award from Ebasco on the basis of a previously unarticulated theory
Notwithstanding some cautionary language
in the Ebasco/GE Teaming Agreement and the
Ebasco/Ahtna Joint Venture, Ahtna was never
advised that the Project would not be awarded.
In fact, Ahtna was repeatedly assured that
things were on track and that it should
continue to work to assist Ebasco to provide
GE and the Air Force with proposals and to
prepare for an imminent award.
Ebasco did not argue before the arbitrator that it was prejudiced
by Ahtna's introduction at the hearing of its new theory of
liability and did not renew its motion to postpone the proceedings.
A. The Arbitration Proceedings Should Not Be Vacated
1. Standard of review.
In Ahtna I, we stated:
Under AS 09.43.120, a number of the
arbitrator's procedural decisions -- such as
his decision to deny Ebasco a continuance --
are also subject to review. As explained in
n. 4 supra, Ebasco's claim under AS
09.43.120(a)(4) should be considered by the
trial court on remand. Again, this is an area
where the policies in favor of arbitration
dictate a deferential review. See, e.g.,
Storey v. Searle Blatt, Ltd., 685 F. Supp. 80,
82 (S.D.N.Y. 1988) ("The granting or denying
of an adjournment falls within the broad
discretion of appointed arbitrators.").
Id. at 622, n.6.
Ebasco, however, makes two arguments that, contrary to
our statement in Ahtna I, the arbitrator's decision to refuse to
postpone the hearing should not be reviewed deferentially.
First, Ebasco argues that, as a matter of policy,
deferential review of an arbitrator's procedural decisions is
undesirable. According to Ebasco, because judicial review of an
arbitrator's factual and legal findings is so limited, "the
integrity of the [arbitration] process . . . [should] be zealously
safeguarded . . . . The utility of arbitration . . . will be
substantially prejudiced if commercial enterprises understand that
an agreement to arbitrate . . . subjects them to essentially
unreviewable procedural decisions by the arbitrator."
As indicated by the footnote in Ahtna I, we do not agree
with the proposition that an arbitrator's procedural decisions
should not be accorded deferential review because its legal and
factual findings are reviewed deferentially. Instead, our view is
that the rationale for a deferential standard of review with
respect to an arbitrator's substantive decisions also requires that
an arbitrator's procedural decisions be reviewed deferentially.
The rationale is that "[p]arties resort to arbitration to resolve
disputes in a quicker and less expensive way than litigation,"City
of Fairbanks Mun. Util. Sys. v. Lees, 705 P.2d 457, 459-60 (Alaska
1985), despite the possibility that arbitrators may sometimes make
substantive or procedural decisions which diverge from the
decisions that courts would make. See State v. Public Safety
Employees Ass'n, 798 P.2d 1281, 1287 (Alaska 1990). "Zealous"
appellate review of an arbitrator's procedural decisions is neither
speedy nor inexpensive. Indeed, meticulously reviewing a
procedural decision of an arbitrator may require a court to delve
deeply into the merits of an already arbitrated dispute. Contrary
to Ebasco's argument, therefore, the "utility of arbitration . . .
will be substantially prejudiced"if courts closely scrutinize the
procedural decisions of an arbitrator.
Ebasco's second contention may be summarized as follows:
(1) the footnote in Ahtna I "relies on the federal case of Storey
v. Searle Blatt, Ltd., 685 F. Supp. 80 (S.D.N.Y. 1988),"(2) there
are "material differences between the federal statutory language
and that of the Alaska Uniform Arbitration Act,"and (3) the
language of the Alaska statute indicates that deferential review of
the arbitrator's decision to postpone the hearing would be
Two of the premises underlying Ebasco's second contention
are incorrect. First, the footnote in Ahtna I did not "rely"on
Storey as though that case were controlling authority. Instead,
the footnote in Ahtna I was based upon the functional consider-
ations discussed above. Second, contrary to Ebasco's suggestion,
a deferential standard of review of the arbitrator's decision to
postpone a hearing is entirely consistent with the language of AS
09.43.120(a), which provides in pertinent part:
On application of a party, the court
shall vacate an award if
. . . .
(3) the arbitrators exceeded their
(4) the arbitrators refused to postpone
the hearing upon sufficient cause being shown
for postponement. . . .
The statute indicates the grounds on which a court must vacate an
award of an arbitrator. It does not specify the applicable
standard of review. We held in Ahtna I that the standard of review
applicable to questions arising under AS 09.43.120(a)(3) is an
extremely deferential one. 894 P.2d at 662. Nothing in the
language of the statute suggests that the standard of review for
situations implicating AS 09.43.120(a)(4) should be less
deferential and, as discussed above, there is no persuasive policy
reason for making such a distinction.
Against this backdrop, in order to support a claim that
an arbitration proceeding should be vacated because of an
arbitrator's refusal to grant a postponement, we hold that a
litigant should be required to show that the arbitrator committed
gross error in his determination that a litigant did not show
"sufficient cause"for postponement. See City of Fairbanks Mun.
Util. Sys. v. Lees, 705 P.2d 457, 462 (Alaska 1985) (In upholding
an arbitrator's decision to exclude certain witnesses, we stated
that "[u]nder these circumstances, we find that the arbitrator's
decision was not gross error.").
In contrast to the standard of review applicable to the
arbitrator's determination, the decision of the superior court is
reviewed de novo. Ahtna, 894 P.2d at 657.
2. The arbitrator's decision refusing to grant Ebasco
a postponement was not gross error. Ebasco waived
its claim that it was denied due process.
The arbitrator's decision refusing to grant Ebasco a
postponement was not gross error. It is hardly apparent that the
withdrawal of Burr, Pease & Kurtz only twenty-one days after
undertaking representation of Ebasco on this matter established
"sufficient cause"for a postponement, particularly considering
Wayne White's availability and familiarity with the case. Burr,
Pease & Kurtz withdrew twenty-five days before the arbitration
hearing, and there were sixteen days between the postponement
hearing and the commencement of the hearing on the merits. Many
cases from other courts support the conclusion that the
arbitrator's refusal to grant a postponement under these
circumstances does not warrant vacatur. (EN1)
It is also not obvious that what Ebasco terms "Ahtna's
late and changing statement of its claim"established "sufficient
cause"for postponing the hearing. It is true that Ahtna's initial
explanations of its claim were unclear. Unquestionably, moreover,
Ahtna's initial explanations of its claim were inconsistent in
certain respects with its subsequent explanations of its claim.
However, it was not gross error for the arbitrator to conclude at
the postponement hearing that Ebasco had sufficient time to respond
to any changes which Ahtna had made to its claim up to the time of
the postponement hearing.
Finally, as mentioned above, on the first day of the
arbitration proceeding, Ahtna asserted that it was entitled to
recovery on the basis of a previously unarticulated theory of
liability. Ebasco maintains that, because the arbitrator
apparently considered Ahtna's new theory, Ebasco was denied due
process. This argument merits only brief discussion. Counsel for
Ebasco failed to make an objection before the arbitrator concerning
Ahtna's introduction at the arbitration hearing of its new theory
of liability and failed to renew Ebasco's motion for a
postponement. Ebasco's claim that the arbitrator should not have
considered the new argument is therefore waived. See Alaska State
Hous. v. Riley Pleas, Inc., 586 P.2d 1244 (Alaska 1978) (holding
that, where State Housing Authority did not raise objection to
alleged bias of arbitrator at arbitration hearing, it waived its
right to object, even though it believed that challenge would be
ineffective and would only serve to worsen its chances of obtaining
a favorable result).
B. Prejudgment Interest
1. Standard of review.
Whether it is appropriate for a court to award
prejudgment interest on an arbitration award is a question of law.
Review of the lower court's decision therefore is de novo. Langdon
v. Champion, 752 P.2d 999, 1001 (Alaska 1988).
2. The award of prejudgment interest should be
affirmed in part and reversed in part.
a. The award of pre-award interest should be
In contrast to the approach taken in a number of other
jurisdictions, prejudgment interest in Alaska is awarded "largely
as a matter of course." Hoffman v. von Wirth, 907 P.2d 454, 455
(Alaska 1995) (quoting Tookalook Sales & Serv. v. McGahan, 846 P.2d
127, 129 (Alaska 1993)). The rationale underlying our policy of
routinely awarding prejudgment interest is "the economic fact that
money awarded for any reason is worth less the later it is
received." Farnsworth v. Steiner, 638 P.2d 181, 184 (Alaska 1991)
(quoting State v. Phillips, 470 P.2d 266, 273 (Alaska 1970)).
Notwithstanding our policy of routinely awarding prejudg-
ment interest, we reverse the superior court's award of prejudgment
interest accruing prior to the arbitration award and announce a
rule for future cases that any such awards must be made by
arbitrators. We have never directly addressed the question of
whether it is appropriate for a court reviewing an arbitration
award to add prejudgment interest to the award. However, we
consider persuasive the point that permitting a reviewing court to
add pre-award interest to an arbitration award would be
inconsistent with the policy of allowing the arbitrator to
determine all arbitrable aspects of a dispute. Failure to place
the onus on an arbitrator to determine whether prejudgment interest
is appropriate may needlessly put a reviewing court in the position
of having to delve into the merits of a dispute. For example, in
order to determine the appropriate start date for prejudgment
interest, a court reviewing the decision of an arbitrator
presumably would have to determine the date of the breach or injury
on which the award was based.
Reversing the superior court's award of pre-award
interest is also consistent with the decisions of many other courts
which have considered the question -- including the decisions of
courts in some states which routinely award prejudgment interest.
See e.g., Wanschura v. Western Nat. Mut. Ins. Co., 389 N.W.2d 927
(Minn. App. 1986); Maubausch v. Lemke, 866 P.2d 1146 (Nev. 1994)
(Nevada has a statute which allowed prejudgment interest to be
added as a matter of course to all judgments); Borough of Dunmore
v. Dunmore Police Dep't, 526 A.2d 1250 (Pa. Commw. 1987); Paola v.
Commercial Union Assur. Cos., 461 A.2d 935 (R.I. 1983); Westmark
Properties, Inc. v. McGuire, 766 P.2d 1146 (Wash. App. 1989).
b. The superior court's award of post-award
interest should be affirmed.
We affirm the superior court's award of interest accruing
after the arbitration award. Two reasons supporting our decision
warrant emphasis. First, computation of post-award interest will
almost always be straightforward -- interest can simply be computed
from the date of the award -- and therefore will not enmesh the
court in the complications which the award of pre-award interest
may entail. Second, at the time of an arbitration award, an
arbitrator cannot determine the appropriate amount of post-award
interest, and there would appear to be no advantage to requiring a
litigant to return to the arbitrator for a determination of post-
A ruling affirming the superior court's decision ordering
post-award interest is also consistent with the holdings of many
courts which have considered the question. (EN2)
c. The superior court's award of post-award
interest on attorney's fees should be
The superior court awarded Ahtna interest on the
arbitrator's award of attorney's fees. Interest was computed from
the day of the arbitrator's award. We have never had occasion to
consider the question of whether such an award is appropriate. We
now answer the question in the affirmative. For purposes of
determining whether post-award interest is permissible, there is no
persuasive reason to treat attorney's fees differently than other
parts of an arbitrator's award. An award of interest simply
"places an injured plaintiff in the same position as if he had been
compensated immediately for his loss." City & Borough of Juneau v.
Commercial Union Ins. Co., 598 P.2d 957 (Alaska 1979).
We AFFIRM the superior court's decision confirming the
arbitrator's award. We also AFFIRM the superior court's award of
post-arbitration award interest on the arbitration award, including
the attorney's fees awarded by the arbitrator. We REVERSE the
superior court's award of pre-arbitration award interest on the
arbitration award. Finally, we REMAND the case to permit the
superior court to recalculate the total amount of the judgment in
conformity with this opinion.
1. Courts have rejected most claims that an arbitration
proceeding should be vacated because of an arbitrator's refusal to
postpone the hearing. See e.g., Ceco Concrete Const. v. J.T.
Schrimsher Const. Co., Inc., 792 F. Supp. 109 (N.D. Ga. 1992)
(Arbitrators were not guilty of misconduct in refusing to postpone
arbitration of a dispute between two construction companies despite
one company's claim that it would otherwise likely be exposed to
the possibility of conflicting results as between the owner and the
second company in related administrative proceedings.); Concourse
Beauty School, Inc. v. Polakov, 685 F. Supp. 1311 (S.D.N.Y. 1989)
(Arbitrators' refusal to postpone final arbitration session when
plaintiff's principal witness was unable to attend did not rise to
level of misconduct necessary to vacate arbitration award. Absent
witness had opportunity to fully present his story, and plaintiff's
interests were adequately represented by its two attorneys who were
present during all arbitration sessions.); Storey v. Searle Blatt
Ltd., 685 F. Supp. 80 (S.D.N.Y. 1988) (Arbitration proceeding
upheld despite arbitrators' decision to deny adjournment on morning
of hearing because of death in family of witness. Arbitrators had
previously granted two adjournments.). See also DVC-JPW Investors
v. Gershman, 5 F.3d 1172 (8th Cir. 1993); Agrawal v. Agrawal, 775
F.Supp. 588 (E.D.N.Y. 1991); Berlacher v. PaineWebber, Inc., 759 F.
Supp. 21 (D.D.C. 1991); Roche v. Local 32B-32J Service Employees
Intern, 755 F. Supp. 622 (S.D.N.Y. 1991).
2. See, e.g., Creative Builders, Inc. v. Avenue Dev., 715 P.2d
308, 312-23 (Ariz. App. 1986); McDaniel v. Berhalter, 405 So.2d
1027, 1030 (Fla. App. 1981); Holloway Constr. Co. v. Oakland County
Bd., 543 N.W.2d 923 (Mich. 1996) (allowing an award only of post-
award interest); Gordon Sel-Way v. Spence Bros., Inc., 475 N.W.2d
704 (Mich. 1991) (interest permitted only from the date of the
arbitration award); Leach v. O'Neill, 568 A.2d 1189, 1190-91 (N.H.
1990); Rivers v. General Acc. Group, 470 A.2d 19, 21 (N.J. Super.
A.D. 1983); Kermacy v. First Unitarian Church, 361 S.W.2d 734, 735
(Tex. Civ. App. 1962).