Present: All the Justices
FRANK X. LACKMAN, T/A
FRANK X. LACKMAN, BROKER
v. Record No. 021985 OPINION BY JUSTICE ELIZABETH B. LACY
June 6, 2003
LONG & FOSTER REAL
ESTATE, INC., ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Arthur B. Vieregg, Jr., Judge
In this appeal, Frank X. Lackman, t/a Frank X. Lackman,
Broker, (Lackman) seeks reversal of a judgment confirming an
arbitration award and granting a motion for attorneys' fees.
Because none of the various grounds Lackman asserts in support
of reversal is meritorious, we will affirm the judgment of the
trial court.
BACKGROUND
Long & Foster Real Estate, Inc., Patricia Lawless, Reggie
Copeland (collectively "Long & Foster"), and Lackman are real
estate brokers and members of the Northern Virginia
Association of Realtors, Inc. (the Association). Members of
that Association agree to submit disputes arising out of the
real estate business to arbitration in accordance with the
rules and regulations of the Association. In January 2001,
Long & Foster filed a Request and Agreement to Arbitrate with
the Association claiming that they were entitled to a $19,500
commission which Lackman received in connection with an
earlier sale of property. Lackman filed a Response and
Agreement to Arbitrate, denying that Long & Foster was
entitled to any commission. The issue presented to the
arbitration panel was whether Lackman was the procuring agent
in the sale of the property which generated the contested
commission. Following an evidentiary hearing, the arbitration
panel entered an AWARD OF ARBITRATORS, directing Lackman to
pay Long & Foster the $19,500 commission.
Lackman filed an amended bill of complaint against Long &
Foster seeking vacation of the arbitration award. In Counts I
through V, Lackman asserted that the award should be vacated
on four of the statutory grounds enumerated in Code § 8.01-
581.010. 1 In Count VI, Lackman asserted that the trial court
should use its equity powers to enjoin enforcement of the
award because the arbitrators' actions prevented him from
1
Code § 8.01-581.010 provides in pertinent part:
Upon application of a party, the court shall
vacate an award where:
1. The 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 of the
arbitrators, or misconduct prejudicing the rights
of any party;
3. The arbitrators exceeded their powers;
4. The arbitrators refused to . . . hear evidence
material to the controversy or otherwise so
conducted the hearing . . . in such a way as to
2
relying on his theory that the defendants engaged in
fraudulent conduct and from relying on principles of estoppel
and unclean hands.
Prior to trial, the trial court struck Count VI, holding
that Code § 8.01-581.010 was the exclusive means for vacating
an arbitration award. Following an evidentiary hearing, the
trial court found the evidence insufficient to support
vacation of the arbitration award under any of the grounds
identified in subsections (1) through (4) of Code § 8.01-
581.010, and entered an order confirming the award. The trial
court also awarded attorneys' fees to Long & Foster.
In this appeal, in addition to the contentions raised in
the trial court, Lackman challenges the constitutionality of
Code § 8.01-581.010, as interpreted by the trial court, and
asserts that the trial court erred in striking Count VI and in
awarding attorneys' fees.
DISCUSSION
Code § 8.01-581.010
Lackman first claims that Long & Foster engaged in
fraudulent conduct in conjunction with the sale of the
property and that such fraudulent conduct supports vacation of
the award under subsection (1) of Code § 8.01-581.010. That
substantially prejudice the rights of a party;
. . .
3
provision, however, allows vacation of an award if the award
was procured by fraud. Lackman's allegation regarding
fraudulent conduct in connection with the sale of the property
does not address procurement of the arbitration award and,
therefore, cannot form a basis for vacation of the award under
subsection (1) of Code § 8.01-581.010.
Lackman next argues that the arbitrators were not
impartial, refused to hear material evidence, and refused to
allow certain cross-examination. This conduct, Lackman
asserts, rises to the level of misconduct and supports
vacation of the award under subsections (2) and (4) of Code
§ 8.01-581.010, and violates Code § 8.01-581.04(2). 2 The
record of the arbitration hearing, however, precludes Lackman
from prevailing on these claims.
As noted by the trial court, at the close of the
arbitration hearing the panel chairperson asked both parties
whether the hearing had been conducted fairly. Lackman
responded affirmatively. Similarly, Lackman raised no
objection when the chairperson stated at the end of the
proceeding that "the claimant and the respondent have
2
Code § 8.01-581.04 provides
Unless otherwise provided by the agreement:
4
indicated that they have had an adequate opportunity to
testify and present evidence and witnesses, and conduct cross
examination." Moreover, review of the colloquy involving the
disputed cross-examination testimony shows that the
arbitration panel thought that the disputed testimony
implicated an ethics violation, a matter not relevant to the
arbitration proceeding. The record is devoid of any final
ruling by the panel on that issue, any further questioning by
Lackman following the colloquy, or any objection by Lackman to
the panel's actions or failure to rule on the matter. This
record clearly supports the trial court's determination that
Lackman did not carry his burden to demonstrate that the
arbitrators showed evident partiality or that he was precluded
from presenting material evidence or engaging in cross-
examination.
Finally, Lackman asserts that in making the award, the
arbitration panel disregarded provisions of the underlying
contract between the parties. 3 This failure, according to
Lackman, was "tantamount to fraud," and exceeded the powers of
the arbitration panel.
2. The parties are entitled to be heard, to
present evidence material to the controversy and to
cross-examine witnesses appearing at the hearing.
3
The "contract" on which Lackman relies includes the
listing agreement for the property, a short listing agreement,
5
Lackman relies on a number of cases for the proposition
that arbitrators exceed their powers, or engage in fraud or
misconduct, if they fail to apply the terms of the underlying
contract. These cases are neither dispositive nor persuasive
because they either were decided prior to the enactment of
Code § 8.01-581.010 or involved questions not presented in
this case. 4
Included in Code § 8.01-581.010, adopted in 1986, is the
statement that "[t]he fact that the relief was such that it
could not or would not be granted by a court of law or equity
is not grounds for vacating . . . the award." Therefore,
whether an arbitration panel applies the contract between the
parties in a manner consistent with its terms is not a matter
for consideration by the trial court or this Court when
reviewing an arbitration award. "A contrary conclusion would
a regional sales contract, and the settlement statement for
the property.
4
Vulcan Chem. Techs., Inc. v. Barker, 167 F.Supp.2d 867,
871 (W.D. Va. 2001) (applying Federal Arbitration Act, 9 U.S.C
§ 10, and federal law allowing vacation of arbitration award
"if it shows manifest disregard of applicable law"), vacated
and remanded sub nom. Vulcan Chem. Techs., Inc. v. Barker, 297
F.3d 332 (4th Cir. 2002); Trustees of Asbury United Methodist
Church v. Taylor & Parrish, Inc., 249 Va. 144, 153, 452 S.E.2d
847, 852 (1995) (basing award on "quantum meruit," a basis not
within the parties agreement); United Paperworkers Int'l Union
v. Chase Bag Co., 222 Va. 324, 328, 281 S.E.2d 807, 810 (1981)
(applying former Code § 8.01-580 which allowed vacation of
award for "errors apparent on its face"); and Mills & Fairfax
v. Norfolk & Western R.R. Co., 90 Va. 523, 531-32, 19 S.E.
6
permit a dissatisfied party, who by agreement voluntarily
submitted to arbitration, to invoke the jurisdiction of a
circuit court in an effort to relitigate the merits of the
controversy already decided by the arbitrators." Signal Corp.
v. Keane Fed. Sys., Inc., 265 Va. 38, 45, 574 S.E.2d 253, 257
(2003). Correct application of the contract terms pertaining
to that sale, while perhaps pertinent to the result reached by
the arbitrators, is not pertinent to determining whether the
arbitrators exceeded their powers under Code § 8.01-
581.010(3). The relevant inquiry for that determination is
whether the issues resolved were within the scope of authority
granted the arbitrators in the agreement to arbitrate. No
such claim has been made in this case.
Lackman also asserts that interpreting Code § 8.01-
581.010 to allow the arbitrators to "ignore the contract
between the parties," renders the statute unconstitutional.
This assertion again ignores the fact that the issue before
the arbitration panel was whether Lackman was the procuring
source for the sale of the property. Moreover, when agreeing
to submit a claim to arbitration, the parties also agree that
the decision reached by the arbitrators will not be set aside
by a court based on traditional legal principles but only on
171, 174 (1894) (applying instructions in contract for making
arbitration decision).
7
those grounds set out in the statute. A contractual agreement
by the parties to abide by both the rules of arbitration and
the arbitrators' decision does not render Code § 8.01-581.010
unconstitutional.
Accordingly, the trial court did not err in rejecting
Lackman's contention that the award should be vacated because
it was procured by fraud, because the arbitrators engaged in
misconduct, or because the arbitrators exceeded their powers.
Equity Power
Lackman asserts that the procedure in Code § 8.01-581.010
is not the exclusive method for vacating an arbitration award,
and, therefore, the trial court erred in striking Count VI of
his amended bill of complaint in which he invoked the trial
court's equity powers to enjoin enforcement of the arbitration
award based on his equitable defenses of fraud, estoppel, and
unclean hands. We disagree.
The predecessor to the current statute, former Code
§ 8.01-580, specifically stated that the section "shall not be
construed to take away the power of courts of equity over
awards." This provision continued the traditional authority
of equity courts to review arbitration awards based on a
"submission in pais." See e.g. Edge Hill Stock Farm, Inc. v.
Morris, Gray & Hunter, 155 Va. 103, 108, 154 S.E. 473, 474
(1930). The General Assembly eliminated this provision when
8
it enacted Code § 8.01-581.010 in 1986. Elimination of the
provision terminated the ability of a court to invoke its
equity powers when reviewing an arbitration award.
Thus, Code § 8.01-581.010 provides the exclusive means
for setting aside an arbitration award, and the trial court
correctly struck Count VI of Lackman's amended bill of
complaint. See Signal Corp., 265 Va. at 45, 574 S.E.2d at
257.
Attorneys' Fees
Lackman's last assignment of error challenges the award
of attorneys' fees entered in favor of Long & Foster. His
objections relate to the trial court's refusal to admit
certain documents regarding the Association's arbitration
rules and its refusal to allow Lackman to produce an
authenticating witness prior to entry of the order awarding
attorneys' fees.
The documents Lackman sought to admit apparently were in
support of his assertion that he complied with the rules
governing arbitration and, therefore, was not liable for
attorneys' fees. This argument however must be considered in
light of the following provision contained in Lackman's
Response and Agreement to Arbitrate:
If I do not comply with the arbitration award and
it is necessary for any party to this arbitration
to obtain judicial confirmation and enforcement of
9
the arbitration award against me, I agree to pay
the party obtaining such confirmation the costs
and reasonable attorney's fees incurred in
obtaining such confirmation and enforcement.
The right to attorneys' fees and costs is invoked when there
is non-compliance with the arbitration award. Recovery of
attorneys' fees under this provision is not dependant on
compliance with the rules governing this arbitration.
Therefore, evidence regarding such compliance is not relevant
to an award of attorneys' fees under this paragraph.
In this case, the arbitration award was not paid, Lackman
instituted suit to vacate the award, and an order was entered
confirming the arbitration award. Long & Foster incurred
attorneys' fees in obtaining an order confirming the award.
Under these circumstances, we cannot say that the trial court
abused its discretion in awarding attorneys' fees to Long &
Foster.
For the reasons stated above, we will affirm the order of
the trial court.
Affirmed.
10