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Stempien v. Marnie Properties, LLC

Court of Chancery of Delaware

November 3, 2017

RICHARD W. STEMPIEN and EVELYN T. MULDER, Plaintiffs,
v.
MARNIE PROPERTIES, LLC, a Delaware Limited Liability Company, Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

          TAMIKA MONTGOMERY-REEVES, VICE CHANCELLOR.

         WHEREAS, Plaintiffs Richard W. Stempien and Evelyn T. Mulder and Defendant Marnie Properties, LLC went to arbitration in September 2015;

         WHEREAS, the arbitrator issued a final award on December 7, 2016 and awarded Defendant $67, 434.19 in damages and $225, 755.17 in attorneys' fees;

         WHEREAS, Plaintiffs filed a Verified Complaint on January 13, 2017 seeking to vacate or modify the award in this Court;

         WHEREAS, Defendant moved to dismiss the Complaint for failure to state a claim on May 15, 2017;

         NOW, THEREFORE, THE COURT HEREBY FINDS AND ORDERS AS FOLLOWS:

         1. The Court has reviewed the parties' briefs, supporting submissions, and applicable law.

         2. The Motion to Dismiss is GRANTED in part and DENIED in part.

         3. When considering a motion to dismiss for failure to state a claim under Court of Chancery Rule 12(b)(6), a court must accept all well-pleaded factual allegations in the complaint as true, accept even vague allegations in the complaint as "well-pleaded" if they provide the defendant notice of the claim, "draw all reasonable inferences in favor of the non-moving party, " and deny the motion unless the plaintiff could not recover "under any reasonably conceivable set of circumstances susceptible of proof." Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002).

         4. Under 10 Del. C. § 5714(a)(3), "the Court shall vacate an award where . . . [t]he [arbitrator] exceeded [his] powers or so imperfectly executed them that a final and definite award upon the subject matter submitted was not made." In order to vacate an arbitration award under this section there must be "evidence that the arbitrator acted in 'manifest disregard' of the law." Roncone v. Phoenix Payment Sys., Inc., 2014 WL 6735210, at *4 (Del. Ch. Nov. 26, 2014). "In other words, the Court must find 'an error that is so obvious that it would be instantly perceived as such by the average person qualified to serve as an arbitrator.'" Id. (quoting Travelers Ins. Co. v. Nationwide Mut. Ins. Co., 886 A.2d 46, 49 (Del. Ch. 2005)).

         5. For a court to find that an arbitrator showed manifest disregard of the law, "a court must find that the arbitrator consciously chose to ignore a legal principle, or contract term, that is so clear that it is not subject to reasonable debate." SPX Corp. v. Garda USA, Inc., 94 A.3d 745, 747 (Del. 2014). "[A]s long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced that he committed serious error does not suffice to overturn his decision." United Paperworkers Int'l Union, AFL-CIO v. Misco Inc., 484 U.S. 29, 38 (1987). "To successfully convince the Court to vacate [an arbitration award], the movant must show 'something beyond and different from a mere error in the law or failure on the part of the arbitrator to understand or apply the law.'" TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Sec., Inc., 953 A.2d 726, 732-33 (Del. Ch. 2008) (quoting Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 208 (2d Cir. 2002)).

         6. Under 10 Del. C. § 5715, "the Court shall modify or correct the award where . . . [t]here was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award." An "evident miscalculation" is one "of mathematical or computational error" rather than "a substantive conclusion of the arbitrator" that is "largely based on fact." Roncone, 2014 WL 6735210, at *7. If there is evidence "the arbitrator implemented the award he intended, and without any miscalculation, " then any argument under Section 5715(a) must fail. Id. Under 10 Del. C. § 5715(c) "[a]n application to modify or correct an award may be joined in the alternative with an application to vacate the award."

         7. Plaintiffs argue that the arbitrator ignored the provisions of 25 Del. C. § 2705, which rose to the level of manifest disregard of the law. Section 2705 provides:

The owner of any structure built, repaired or altered by any contractor or subcontractor may require such contractor or subcontractor from time to time to furnish and submit to the owner complete and accurate list in writing of all persons who have furnished labor or material, or both, in connection therewith, and who may be entitled to avail themselves of the provisions of this chapter. Should any such contractor or subcontractor fail to furnish such list for 10 days after demand made there for by such owner, the contractor or subcontractor shall be entitled to receive no further ...

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