No
No. 98-522
IN THE SUPREME COURT OF THE STATE OF MONTANA
1999 MT 116
294 Mont. 408
981 P.2d 1185
BRUCE NELSON,
Plaintiff and Appellant,
v.
LIVINGSTON REBUILD CENTER, INC.,
L.R.C. SALES, INC., and RANDOLPH PETERSON,
Defendants and Respondents.
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APPEAL FROM: District Court of the Sixth Judicial District,
In and for the County of Park,
The Honorable Wm. Nels Swandal, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Monte D. Beck and John J. Richardson; Beck & Richardson, PLLC;
Bozeman, Montana
For Respondents:
Kenneth D. Tolliver and Virginia A. Bryan; Wright,
Tolliver and Guthals, P.C.; Billings, Montana
Submitted on Briefs: February 18, 1999
Decided: May 28, 1999
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Filed:
__________________________________________
Clerk
Justice Terry N. Trieweiler delivered the opinion of the Court.
¶1. The plaintiff, Bruce Nelson, brought this action in the District Court for the Sixth
Judicial District in Park County to recover damages from the defendants Livingston
Rebuild Center, Inc., L.R.C. Sales, Inc., and Randolph Peterson, pursuant to the
Wrongful Discharge From Employment Act. The parties, except Peterson, stipulated
to arbitration. Following the arbitrator's decision, the defendants moved the District
Court to vacate parts of the decision. The District Court remanded to the arbitrator
to consider that motion, and the arbitrator made an amended award. Nelson appeals
from the District Court's entry of judgment pursuant to the arbitrator's amended
award. We reverse the judgment of the District Court.
¶2. The sole issue presented on appeal is whether the District Court erred when it
remanded this case to the arbitrator for reconsideration of damages.
FACTUAL BACKGROUND
¶3. Bruce Nelson was hired as a manager by Livingston Rebuild Center, Inc. in 1988.
LRC operates a railroad maintenance and repair facility in Livingston, Montana.
Through a series of promotions, Nelson became vice-president of sales and marketing
for LRC and president of L.R.C. Sales, Inc., a subsidiary of LRC. Nelson's
employment was summarily terminated by LRC president Randolph Peterson on
September 20, 1996, based on Peterson's belief that Nelson had caused LRC to
underbid a locomotive maintenance and repair contract, and had subsequently
refused to accept responsibility for his mistake.
¶4. On February 19 and 20, 1997, the Department of Labor and Industry held a
hearing to review a Department determination that Nelson had been discharged for
misconduct, which disqualified him from unemployment insurance benefits. Peterson
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and other LRC executives testified at the hearing. The hearing examiner concluded
that Nelson was discharged for reasons other than misconduct and reinstated his
benefits.
¶5. Nelson was unable to obtain other employment in Montana. He initiated a nation-
wide job search and eventually found a comparable position in Chicago. Nelson's
wife was employed in Livingston, and the two owned a small ranch in the Paradise
Valley. Instead of relocating the household to Illinois, Nelson maintained an
apartment in Chicago and commuted between his job there and his home in
Montana.
¶6. Nelson filed a complaint for wrongful discharge against LRC which included an
allegation that it and Peterson intentionally and maliciously interfered with his right
to receive unemployment benefits. Nelson and LRC stipulated to binding arbitration,
pursuant to the Wrongful Discharge From Employment Act and the Montana
Uniform Arbitration Act. The arbitrator concluded that Nelson's discharge was
unlawful and awarded Nelson the following damages:
1. Out-of-pocket losses $ 46,309
2. Loss of fringe benefits 85,750
3. Extra living expenses 64,890
4. Loss of base salary 229,250
TOTAL LOSS 426,199
Less reemployment mitigation (331,630)
NET LOSS 94,569
The arbitrator also concluded that Nelson had not proven his claim for interference with
his unemployment benefits. The arbitrator issued a written decision and award on
November 28, 1997.
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¶7. On December 10, 1997, LRC moved the District Court to vacate the extra living
expenses portion of the award, as well as those out-of-pocket losses which consisted of
attorney fees for the unemployment hearing. The District Court did not decide the
motion, but instead re-appointed the arbitrator to consider any motions to modify or
vacate the award. The arbitrator subsequently considered LRC's motion, as well as a
motion submitted by Nelson for reimbursement for the arbitrator's fees and costs.
The arbitrator issued a modified award which vacated the portions of the original
award related to extra living expenses and attorney fees from the unemployment
hearing, but which awarded Nelson reimbursement for his share of the arbitrator's
fees and costs. The amended award reduced Nelson's net recovery to $28,673.34.
¶8. Nelson moved the District Court for entry of judgment in the amount of the
original award and LRC moved for entry of judgment in the amount of the amended
award. Nelson appeals from the District Court's order entering judgment for the
amended award.
DISCUSSION
¶9. Did the District Court err when it remanded the case to the arbitrator for
reconsideration of damages?
¶10. Nelson contends that the District Court could not enter judgment for the
amended award because it erred when it remanded the case to the arbitrator. He
argues that the arbitrator did not have the authority to amend the award. LRC
contends that the arbitrator "exceeded his powers" when he made the first award
and that the District Court properly gave the arbitrator the authority to vacate
portions of the first award pursuant to § 27-5-312, MCA.
¶11. Judicial review of arbitration awards is strictly limited by statute. See Geissler v.
Sanem (1997), 285 Mont. 411, 414-15, 949 P.2d 234, 237; Stockade Enters. v. Ahl
(1995), 273 Mont. 520, 522, 905 P.2d 156, 157; Duchscher v. Vaile (1994), 269 Mont. 1,
4, 887 P.2d 181, 183; May v. First Nat'l Pawn Brokers, Ltd. (1994), 269 Mont. 19, 22,
887 P.2d 185, 187. When a matter has been submitted to binding arbitration, courts
are not permitted to review the merits of the controversy, but may only vacate,
modify, or correct an arbitration award pursuant to §§ 27-5-312 and -313, MCA. See
Stockade, 273 Mont. at 523, 905 P.2d at 157. The modification of an award by an
arbitrator is further limited by § 27-5-217, MCA, which provides in pertinent part:
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On the application of a party or, if an application to the court is pending under 27-5-311,
27-5-312, or 27-5-313, on submission to the arbitrators by the court under such conditions
as the court may order, the arbitrators may modify or correct the award upon the grounds
stated in 27-5-313(1)(a) and (1)(c) or for the purpose of clarifying the award.
(Emphasis added.) Section 27-5-313(1)(a), MCA, provides for the modification or
correction of an award for an evident miscalculation of figures or a mistake in the
description of a person, thing, or property. Section 27-5-313(1)(c), MCA, provides for
modification or correction of an award if it is imperfect in a matter of form which does not
affect the merits of the controversy.
¶12. In this case, LRC moved the District Court to vacate a portion of the arbitration
award, or in the alternative, to vacate the entire award. The basis for the motion was
its contention that the arbitrator had awarded damages which were not provided for
by the WDFEA and that he had thereby exceeded his powers. The provision of the
MUAA which permits a district court to review and vacate an award upon a finding
that the arbitrator has exceeded his powers is § 27-4-312(1)(c), MCA. It is not one of
the provisions enumerated in § 27-5-217, MCA, pursuant to which an arbitrator may
modify or correct an award.
¶13. When the arbitrator granted LRC's motion to vacate portions of the original
damage award, he made substantive modifications to the original award, rather than
the corrections or clarifications which he was authorized to make pursuant to § 27-5-
217, MCA. Therefore, based on the plain language of the MUAA, we conclude that
the District Court erred when it remanded LRC's motion to vacate the award to the
arbitrator, and when it entered judgment for the amount of the amended award. The
arbitrator was without statutory authority to make substantive changes to the
original award.
¶14. Furthermore, the District Court was without authority to vacate or modify the
award except for the statutory bases set forth in §§ 27-5-312 and -313, MCA. LRC
contends that the court could properly have done so pursuant to § 27-5-312(1)(c),
MCA, which provides that an arbitration award may be set aside when an arbitrator
has exceeded his powers.
¶15. LRC cites to Azcon Construction Co. v. Golden Hills Resorts, Inc. (S.D. 1993), 498
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N.W.2d 630, in support of its argument. However, the rule from cases like Azcon and
other "excess of powers" cases cited by LRC is that "[a]n arbitrator's authority is
limited by the bounds of the agreement, and courts may vacate awards that extend
beyond the contractual scope of arbitration. An arbitrator exceeds his powers when
he decides matters which were not submitted to him." JBC of Wyoming Corp. v. City
of Cheyenne (Wyo. 1992), 843 P.2d 1190, 1196 (citations omitted).
¶16. Such cases are distinguishable from the present case. They stand for the
principle that an arbitrator exceeds his powers when he acts in excess of the
authority granted to him by the arbitration agreement, as when he decides issues
which have not been submitted to him. See Azcon, 498 N.W.2d at 633-34.
¶17. LRC contends that the dispute was submitted to arbitration pursuant to the
WDFEA; that § 39-2-914(2)(b), MCA, provides that where the MUAA and the
WDFEA are inconsistent, the WDFEA applies; and that the arbitrator's powers
were, therefore, limited by the terms of the WDFEA.
¶18. Nelson responds that his costs to disprove allegations of misconduct, and to live
in and commute from Chicago, were recoverable pursuant to § 39-2-905, MCA, as
amounts necessary to obtain and relocate to new employment, but that even if this
Court held otherwise, the arbitrator awarded the damages on that basis and did not
exceed his powers merely because his legal conclusion may have been incorrect.
Without reaching the merits of whether the damages were correctly awarded in the
first instance, we agree that the arbitrator did not exceed his powers by awarding
them. The fact that the damages might not have been awarded by a court of law is
not grounds for vacating the award. See Section 27-5-312(2), MCA; Duchscher, 269
Mont. at 5, 887 P.2d at 184. "Courts . . . do not sit to hear claims of factual and legal
error by an arbitrator as an appellate court does in reviewing decisions of lower
courts . . . . If courts were free to intervene on these grounds, the speedy resolution of
grievances by private mechanisms would be greatly undermined." United
Pepperworkers Int'l Union v. Misco, Inc. (1987), 484 U.S. 29, 38, 108 S. Ct. 364, 370-
71, 98 L. Ed. 2d 286, 299.
¶19. "If the remedy fashioned by the arbitrator has been rationally derived from the
[arbitration] agreement it will be upheld on review." Savage Educ. Ass'n v. Trustees
of Richland County (1984), 214 Mont. 289, 297, 692 P.2d 1237, 1241. Whether legally
correct or incorrect, we conclude that the arbitrator's original award was rationally
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derived from the agreement to arbitrate entered into by the parties.
¶20. We conclude that the District Court erred when it remanded the motion to
vacate portions of the award to the arbitrator. We further conclude that the District
Court erred when it entered judgment for the amount of the amended arbitration
award. We reverse the judgment of the District Court and remand this case with
instructions to enter judgment for the amount of the original arbitration award.
/S/ TERRY N. TRIEWEILER
We Concur:
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
/S/ JAMES C. NELSON
Justice Karla M. Gray, dissenting.
¶21. While I agree with the Court's conclusion that the District Court erred in
remanding to the arbitrator in this case, I would approach that question somewhat
differently. In addition, I respectfully dissent from the Court's conclusion that the
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original arbitration award could not be vacated and, thereafter, amended to comply
with the WDFEA.
¶22. It is clear that, on application by a party, a district court must vacate an
arbitration award if--among other things--the arbitrator exceeded his powers.
Section 27-5-312(1)(c), MCA. Thus, when the District Court was faced with LRC's
motion to vacate the original arbitration award pursuant to § 27-5-312(1)(c), MCA,
the issue of whether the arbitrator exceeded his powers was squarely before it.
Moreover, because nothing in the statute authorizes the court to remand such a
motion to the arbitrator for decision, the District Court itself was compelled to rule
on the motion. Indeed, § 27-5-312(4), MCA, clarifies that the court may order a
rehearing before the arbitrator "if the award is vacated on grounds set forth in subsection (1)
(c) . . . ." (Emphasis added.) In other words, the court must determine the motion to vacate and may order
a rehearing in the event it vacates the award. On these bases, I join the Court in concluding that the
District Court erred in remanding LRC's motion to vacate to the arbitrator for decision.
¶23. Having reached that conclusion, however, it is not altogether clear to me
whether we should remand this case to the District Court for a decision on LRC's
motion to vacate under § 27-5-312(1)(c), MCA, or whether we properly can address
the merits of whether the arbitrator exceeded his powers in the original award and,
as a result, whether LRC's motion to vacate should have been granted. The former
may be the more technically correct answer. The Court having proceeded to address
the merits of the arbitrator's amendment of the original award, however, I will do
the same and in doing so, respectfully dissent from the Court's conclusion that the
arbitrator did not exceed his powers in the original arbitration award.
¶24. The Court correctly cites JBC of Wyoming Corp. for the principles that an
arbitrator's authority is limited by the bounds of the arbitration agreement and that,
when an award extends beyond the contractual scope of arbitration, a court may
vacate the award. Applying those principles to the case before us mandates a
conclusion that the original award exceeded the arbitrator's authority.
¶25. Here, there is no question that Nelson's claim was being pursued under the
WDFEA, §§ 39-2-901, et seq., MCA, and, indeed, the parties' stipulation and
agreement for arbitration expressly states that the submission to arbitration was
pursuant to both the WDFEA and the UAA. Under the stipulation and agreement,
then, and pursuant to the express terms of § 39-2-914, MCA, the provisions of the
WDFEA are incorporated into the arbitration process. In pertinent part, those
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provisions are that 1) while the arbitration is governed by the UAA, in the event of
any conflict between the UAA and the WDFEA, the WDFEA controls; and 2) the
arbitrator is bound by the WDFEA. See §§ 39-2-914(2)(b) and (2)(c), MCA.
¶26. Under § 39-2-905, MCA, recovery by an employee who has been wrongfully
discharged from employment is limited to lost wages and fringe benefits for a limited
period, together with interest thereon. In addition, interim earnings must be
deducted from lost wages but, before such deduction, reasonable amounts expended
in searching for, obtaining, or relocating to new employment are deducted from the
interim earnings. Except for the recovery of punitive damages under delineated
circumstances, no other damages for wrongful discharge are available.
¶27. Here, the arbitrator's original award determined that LRC's discharge of
Nelson was wrongful, and that portion of the award--which went to the merits of
Nelson's claim--has not been questioned or disputed by LRC. The original award
then itemized Nelson's total damages--including out-of-pocket loss, loss of fringe
benefits, extra living expenses and loss of base salary--and deducted interim
earnings, resulting in a total damage award to Nelson of $94,569.
¶28. LRC's motion to vacate was premised on the arbitrator having exceeded his
powers in awarding two items of damages: 1) expected future costs of maintaining
two homes and commuting between them; and 2) attorney fees incurred by Nelson in
related unemployment compensation proceedings. According to LRC, these damages
were not recoverable under the WDFEA. On remand from the District Court, the
arbitrator agreed and so do I. The arbitrator also concluded that, while an
arbitrator's failure to apply the law correctly or his grant of relief which could not be
granted by a court is not reversible under the UAA, the UAA must give way to the
specific mandates of the WDFEA in this case. I agree and I respectfully dissent from
the Court's conclusion to the contrary.
¶29. The Court correctly posits that, in the ordinary case, the fact that damages
awarded could not have been awarded by a court is not grounds for vacating an
arbitration award. See § 27-5-312(2), MCA. It is equally true, however, that that
provision is located in the UAA and that § 39-2-914, MCA, and the parties'
stipulation for arbitration, rendered the arbitrator bound by the WDFEA in this
case. That is, since the UAA provision that an award cannot be vacated for granting
relief which could not have been granted by a court is inconsistent with the
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provisions of the WDFEA that the arbitrator is bound by the WDFEA and that, in
the event of any conflict between the WDFEA and the UAA, the WDFEA applies, the
§ 39-2-914(2)(c), MCA, provision that the arbitrator is bound by the WDFEA--and,
therefore, by its limitations on remedies--governs. As a result, in granting relief in the
original award that was not available under the WDFEA, the arbitrator exceeded his
powers and LRC was entitled to have the arbitration award vacated.
¶30. I would conclude that the arbitrator exceeded his powers in the original
arbitration award and that, while the District Court should have vacated the award
on that basis rather than remanding to the arbitrator to do so, LRC was entitled to
have the original award vacated and judgment entered on the amended award. For
those reasons, I would affirm the District Court and I respectfully dissent from the
Court's failure to do so.
/S/ KARLA M. GRAY
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