SIGNAL Corp. v. Keane Federal Systems, Inc.

Present: All the Justices

SIGNAL CORPORATION
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 020339 January 10, 2003

KEANE FEDERAL SYSTEMS, INC.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Kathleen H. MacKay, Judge

I.

In this appeal of a judgment confirming an arbitration

award, the primary issue that we consider is whether the

arbitrators exceeded their powers within the intendment of

Code § 8.01-581.010(3).

II.

Keane Federal Systems, Inc., initiated an arbitration

proceeding against SIGNAL Corporation (SIGNAL). Keane Federal

Systems alleged that SIGNAL wrongfully terminated its

subcontract and sought damages for breach of contract. Keane

Federal Systems also alleged in the arbitration proceeding

that SIGNAL conspired with Keane Federal Systems' former

employees in violation of Code §§ 18.2-499 through -501,

Virginia's civil conspiracy statutes, and sought treble

damages and attorney's fees as permitted by those statutes.

As required by a subcontract executed by the litigants,

their dispute was submitted to "binding arbitration" before a

panel of three arbitrators, who conducted a lengthy hearing
and unanimously concluded that SIGNAL breached its subcontract

with Keane Federal Systems. A majority of the panel concluded

that SIGNAL violated the civil conspiracy statutes. One

arbitrator dissented from that portion of the panel's

"memorandum opinion, order and award." The panel awarded

Keane Federal Systems treble damages in the amount of

$6,883,029 and attorney's fees.

As permitted by Code § 8.01-581.010, SIGNAL filed an

application in the circuit court to vacate, or in the

alternative, modify or correct the arbitration award. SIGNAL

asserted in a memorandum in support of its application that

the arbitration panel ignored the plain language of a

termination clause contained in the subcontract, that the

arbitration panel disregarded the requirements of Virginia's

civil conspiracy statutes, and that the arbitration panel's

"damages award is arbitrary and irrational." Keane Federal

Systems also filed a memorandum and requested that the circuit

court confirm the arbitrators' award. The circuit court

considered the memoranda submitted by counsel, the decision of

the panel, and oral argument of counsel. The court denied

SIGNAL's motion to vacate and entered an order that confirmed

the arbitrators' award. SIGNAL appeals.

III.

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 Even though the arbitration panel conducted a hearing

over the course of five days, considered 139 exhibits, and

issued a very lengthy opinion, only a brief recitation of the

facts is necessary for our resolution of this appeal. In

September 1996, the Federal Highway Administration awarded a

contract to SIGNAL. Pursuant to the terms of that contract,

SIGNAL agreed to provide certain information technology

services to the Federal Highway Administration. The prime

contract contained a paragraph entitled "key personnel," which

required SIGNAL to identify certain persons who served in "key

positions," the replacement of whom was subject to the prior

written approval of the Federal Highway Administration.

SIGNAL and ANSTEC, Inc., signed a subcontract and

pursuant to its terms, ANSTEC agreed to provide certain

information technology services to SIGNAL. ANSTEC was

subsequently acquired by Keane Federal Systems and, therefore,

will be referred to as Keane Federal Systems for the remainder

of this opinion. The subcontract contained the following

termination provision:

"In the event of a breach of a material term or
condition of the subcontract, the Buyer [SIGNAL] may
terminate this Subcontract in whole or in part for
default. If Seller [Keane Federal Systems] fails to
cure the default within 10 days after receiving a
notice specifying the default, such termination may
require the Buyer to reprocure the goods and
services and Subcontractor will be liable for

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 Buyer's costs for such reprocurement, to the extent
not reimbursed by the Government."

Even though Keane Federal Systems was required to submit

its invoices to SIGNAL on the 11th day of each month, Keane

Federal Systems failed to do so on numerous occasions. SIGNAL

issued a notice to cure defects to Keane Federal Systems on

May 18, 2000, and Keane Federal Systems responded the next day

with a "cure plan." However, Keane Federal Systems continued

to submit untimely invoices after that date. On September 15,

2000, SIGNAL informed the Federal Highway Administration that

SIGNAL's subcontract with Keane Federal Systems would be

terminated "for default effective the close of business on

September 30, 2000. This termination is a result of [Keane

Federal Systems'] failure to comply with material subcontract

requirements. This failure has negatively affected SIGNAL's

ability to comply with prime contract requirements and to

serve [the Federal Highway Administration] to our standards."

SIGNAL also informed Keane Federal Systems on September 15,

2000 that SIGNAL intended to terminate the subcontract.

The subcontract contained the following "no-hire

provision" which stated:

"During the period of performance of this
subcontract, and for a period of one (1) year
thereafter, neither party shall solicit or engage
the services of any employee of the other party
engaged in performance of work related to this

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 subcontract, without expressed written notification
to and acceptance by the other party."

Keane Federal Systems' employees provided computer

services to SIGNAL pursuant to the terms of the subcontract.

These services were described as "scarce and unusual" due to

the obsolescence of the Federal Highway Administration's

equipment and software. In an effort to acquire personnel who

could provide these services to SIGNAL after it had terminated

the subcontract with Keane Federal Systems, SIGNAL posted the

job descriptions of Keane Federal Systems employees on the

SIGNAL website as "job vacancies," and placed job vacancy

notices outside SIGNAL's project manager's office at the

Federal Highway Administration's work area.

Arthur Hazel III, Keane Federal Systems' project manager

for the subcontract, had extensive interaction with Nelson

Ebersole, SIGNAL's project manager on the prime contract.

Hazel purportedly had a secret meeting with certain Keane

Federal Systems employees, and "it became 'common knowledge'

through Hazel that SIGNAL would give [Keane Federal Systems]

employees who resigned from [Keane Federal Systems] prior to

September 30, 2000, their present job assignments, a signing

bonus of $1,500, negotiated raises, reimbursements of

educational expenses owed to [Keane Federal Systems], and

other benefits. Hazel relayed these offers through the team

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leaders, carried draft resignation letters for each [Keane

Federal Systems] employee to the various team locations and

repeatedly followed up on each [Keane Federal Systems]

employee who had not given him a signed resignation letter.

During this period, Hazel told [Keane Federal Systems]

management that he would not support [Keane Federal Systems]

in discussions with [the Federal Highway Administration]

because he 'did not want to rock the boat.' Meanwhile, Hazel

negotiated details of SIGNAL offers to individual [Keane

Federal Systems] employees."

The arbitrators made a factual finding that on September

28, 2000, Hazel surprised his Keane Federal Systems superiors

by presenting them with 22 resignation letters that contained

either identical or substantially similar language. These 22

employees were hired by SIGNAL at its "job fair open house,"

and they received bonuses, negotiated increases in

compensation, and other benefits.

IV.

A.

SIGNAL argues that "the circuit court erred as a matter

of law by failing to vacate [the] arbitration award [because]

the arbitrators exceeded their powers by rewriting the

subcontract." Continuing, SIGNAL contends that the

arbitration panel erroneously applied "the general law of

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contracts" to determine whether SIGNAL's termination of the

subcontract was proper. SIGNAL asserts that the arbitration

panel failed to apply the unambiguous standard for termination

expressly contained in the termination clause of the

subcontract. SIGNAL states that the unambiguous provision in

the subcontract permitted it to terminate Keane Federal

Systems "in the event of a breach of a material term" and that

the subcontract's invoice and payment requirement was a

material term of the subcontract.

SIGNAL also argues that the arbitrators exceeded their

authority by rewriting the option clause of the subcontract.

SIGNAL contends that the arbitration award "includes

[$1,988,896.50] ($662,965.50 trebled) representing revenues

that [Keane Federal Systems] purportedly would have received

if the subcontract were extended into Option Period Four,

which would have begun after the termination date. . . . The

option clause of the subcontract required SIGNAL to exercise

the option if, and only if, [Keane Federal Systems] 'has

continually provided timely, quality, and within cost

performance.' It is undisputed in this case, and the panel

[of arbitrators] specifically found, that there were

timeliness and quality problems with [Keane Federal Systems']

invoices." Continuing, SIGNAL contends that the arbitration

panel failed to apply "the plain language of the option clause

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and imposed the same common law 'material breach' standard"

that it applied when the panel considered the termination

clause of the subcontract.

Keane Federal Systems responds that the arbitrators did

not exceed their powers and that the parties' contract

conferred upon the arbitration panel the broad authority to

decide "[a]ny dispute arising under or related to this

subcontract with respect to the rights, duties or obligations

of the parties. . . ." We agree with Keane Federal Systems.

Code § 8.01-581.010, which is a part of Virginia's

Uniform Arbitration Act, states 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 postpone the
hearing upon sufficient cause being shown therefor
or refused to hear evidence material to the
controversy or otherwise so conducted the hearing,
contrary to the provisions of § 8.01-581.04, in such
a way as to substantially prejudice the rights of a
party; or
"5. There was no arbitration agreement and the
issue was not adversely determined in proceedings
under § 8.01-581.02 and the party did not
participate in the arbitration hearing without
raising the objection.

. . . .

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 "If the application to vacate is denied and no
motion to modify or correct the award is pending,
the court shall confirm the award."

A circuit court's review of an arbitration award is limited to

the specific statutory criteria contained in Virginia's

Uniform Arbitration Act. See Trustees of Asbury United

Methodist Church v. Taylor & Parrish, Inc., 249 Va. 144, 153,

452 S.E.2d 847, 852 (1995).

Essentially, SIGNAL argues that the arbitrators exceeded

their powers because they purportedly applied the wrong legal

standard in the resolution of the contract claim. We express

no opinion regarding the correctness of the arbitrators' legal

analysis. The issue before this Court is not whether the

arbitrators' conclusions were legally correct, but rather,

whether the arbitrators had the power to resolve the parties'

contractual claims.

We hold that the arbitrators did not exceed their powers

because the issues that they resolved were within the scope of

the powers conferred upon the arbitrators by the subcontract.

The express language contained in the subcontract that the

parties executed specifically conferred upon the arbitrators

the authority to resolve "[a]ny dispute arising under or

related to this subcontract with respect to the rights, duties

or obligations of the parties, which is not disposed of by

mutual agreement . . . ." The parties' contractual dispute is

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within the scope of this broad language. Therefore, neither

the circuit court nor this Court may review the merits of the

arbitrators' decision. A contrary conclusion would 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.

We recognize that in Trustees v. Taylor & Parrish, Inc.,

we held that an arbitrator exceeded his power because he acted

beyond the terms of a contract that contained the arbitration

agreement by resolving a claim that did not relate to the

contract. We applied Code § 8.01-581.010 and invalidated the

arbitration award. 249 Va. at 153-54, 452 S.E.2d at 852-53.

In the present appeal, unlike the circumstances in Trustees v.

Taylor & Parrish, Inc., SIGNAL does not assert that the

arbitrators resolved a dispute that was beyond the scope of

the arbitration agreement contained in the subcontract.

We also observe, with approval, the Supreme Court of

Michigan's admonition that "an allegation that the arbitrators

have exceeded their powers must be carefully evaluated in

order to assure that this claim is not used as a ruse to

induce the court to review the merits of the arbitrators'

decision." Gordon Sel-Way, Inc. v. Spence Bros., Inc., 475

N.W.2d 704, 710 (Mich. 1991).

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 B.

SIGNAL argues that "the circuit court erred by failing to

vacate the trebling of the award based upon the majority's

exceeding its authority and its manifest disregard of the

Virginia Conspiracy Statute." SIGNAL argues that the panel

exhibited a " 'manifest disregard of the law' in finding

statutory conspiracy in the absence of concerted action." We

disagree with SIGNAL.

As we have already held, pursuant to the arbitration

provision contained in the subcontract, the arbitrators had

the power to adjudicate any dispute arising under or related

to the performance of the subcontract. This provision is

broad enough to include Keane Federal Systems' civil

conspiracy claims. And, as we have already stated, even

though we may not agree with the arbitration panel's

application of the law, the issue before this Court is whether

the arbitrators exceeded their powers, and we are compelled to

conclude that they did not do so.

Even though courts in other jurisdictions have vacated

arbitration awards when there has been a "manifest disregard

of the law," we refuse to adopt that standard in this case

because to do so would require that this Court add words to

Code § 8.01-581.010, which enumerates the bases on which a

court shall vacate an arbitration award. Conspicuously

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missing from this statute is a provision that permits a court

to vacate a judicial award when the arbitration panel has

exhibited a "manifest disregard of the law." In this

Commonwealth, courts are required to apply the plain meaning

of statutes, and we are not free to add language, nor to

ignore language, contained in statutes. We have repeatedly

stated that:

"While in the construction of statutes the
constant endeavor of the courts is to ascertain and
give effect to the intention of the legislature,
that intention must be gathered from the words used,
unless a literal construction would involve a
manifest absurdity. Where the legislature has used
words of a plain and definite import the courts
cannot put upon them a construction which amounts to
holding the legislature did not mean what it has
actually expressed."

Halifax Corp. v. First Union Nat'l Bank, 262 Va. 91, 99-100,

546 S.E.2d 696, 702 (2001); Watkins v. Hall, 161 Va. 924, 930,

172 S.E. 445, 447 (1934); accord Haislip v. Southern Heritage

Ins. Co., 254 Va. 265, 268, 492 S.E.2d 135, 137 (1997);

Weinberg v. Given, 252 Va. 221, 225, 476 S.E.2d 502, 504

(1996); Turner v. Wexler, 244 Va. 124, 127, 418 S.E.2d 886,

887 (1992); Grillo v. Montebello Condo. Unit Owners Ass'n, 243

Va. 475, 477, 416 S.E.2d 444, 445 (1992); Barr v. Town &

Country Prop., Inc., 240 Va. 292, 295, 396 S.E.2d 672, 674

(1990).

C.

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 SIGNAL assigns as error that "the Circuit Court erred by

not modifying or correcting an arbitration decision that

included damages based upon evident miscalculations of figures

and evident mistakes in the description of the damages

referred to in the award." SIGNAL, however, did not make this

argument in its motion to vacate or in its memorandum

submitted in the circuit court. SIGNAL argued in the circuit

court that "the panel's damages award is arbitrary and

irrational." In this Court, SIGNAL argues that the circuit

court was required to modify or correct the arbitrators' award

because the award "contains evident mistakes and palpable

errors with no rational basis."

We will not consider SIGNAL's arguments because we

conclude that they are procedurally barred. Code § 8.01-

581.011 permits a circuit court to modify or correct an award

when "[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." SIGNAL, however, did not

raise this issue in the circuit court and, therefore, may not

raise this issue for the first time on appeal. Rule 5:25.

SIGNAL may not raise its contention that the panel's award is

arbitrary and irrational because that argument is not the

subject of an assignment of error.

V.

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 We conclude that SIGNAL's arguments lack merit and,

therefore, we will affirm the judgment of the circuit court.

Affirmed.

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