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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