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In re Arbitration of Nordic PCL Construction Inc.

Intermediate Court of Appeals of Hawaii

February 14, 2014

In the Matter of the Arbitration of NORDIC PCL CONSTRUCTION, INC., fka NORDIC CONSTRUCTION, LTD., Claimant/Counterclaim Respondent-Appellant,
v.
LPIHGC, LLC, Respondent/Counterclaimant-Appellee

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (S.P. NO. 10-1-0346).

Kenneth R. Kupchak, Anna H. Oshiro, Chief Judge Mark M. Murakami, and Christi-Anne H. Kudo Chock (Damon Key Leong Kupchak Hastert) for Claimant/Counterclaim Respondent-Appellant.

Terence J. Judith Ann Pavey, and Zachary N. Gershuni (Starn O'Toole Marcus & Fisher) and John P. Manaut (Carlsmith Ball LLP) for Respondent/Counterclaimant- Appellee.

Nakamura, C.J., Foley and Reifurth, JJ.

MEMORANDUM OPINION

This case involves a dispute concerning the performance of Claimant/Counterclaim Respondent-Appellant Nordic PCL Construction, Inc., fka Nordic Construction, Ltd. ("Nordic"), a subcontractor under a subcontract ("Subcontract") with Respondent/Counterclaimant-Appellee LPIHGC, LLC ("General Contractor") for concrete work on the Honua Kai South Enclave condominium resort property in West Maui ("Project"). Pursuant to the terms of the Subcontract, the parties mutually selected Retired Judge Patrick K.S.L. Yim ("Judge Yim") as a neutral arbitrator to arbitrate their dispute. Upon General Contractor's motion, the Circuit Court of the First Circuit ("Circuit Court")[1]confirmed the award issued by Judge Yim ("Award") and entered judgment accordingly.

On appeal, Nordic asserts that the Circuit Court erred by not vacating the Award because (1) "[Judge Yim] did not disclose his numerous financial and fiduciary relationships with the lawyers for one of the parties to the arbitration"; (2) the Award "was procured by false testimony and hidden evidence, " which, at a minimum, required an evidentiary hearing; and (3) the Award "exceeded [Judge Yim's] authority".

Nordic appeals from the following orders and judgment entered in the Circuit Court: (1) the "Order Granting Respondent/Counterclaimant LPIHGC, LLC's Motion to Confirm Partial Final Arbitration Award of Arbitrator Filed on November 22, 2010 and Final Award of Arbitrator Dated December 15, 2010, " filed on March 24, 2011; (2) the "Order Denying Claimant [Nordic's] Motion to Vacate Award of Arbitrator Filed on December 29, 2010, " filed on March 24, 2011; and (3) the "Judgment, " filed on March 24, 2 011.

On the basis of Judge Yim's failure to disclose certain financial and other relationships with counsel, we vacate the Circuit Court's confirmation of the Award and its resulting Judgment, and remand the case for further proceedings.

I. BACKGROUND

In May of 2006, Nordic and General Contractor entered into the Subcontract for Nordic to perform concrete-related work on the Project owned by the Maui Beach Resort Limited Partnership ("Owner"). General Contractor was, in essence, a separately-incorporated aspect of the Owner, although it remained a distinct entity, and, functionally, was the Owner's construction entity. The Subcontract incorporated by reference the prime contract executed between the Owner and General Contractor.

As the concrete work progressed, General Contractor disputed whether much of Nordic's concrete work was adequately flat and level. Eventually, the parties entered into arbitration, [2] which the Subcontract prescribed as the exclusive remedy for disputes. The Subcontract specified that arbitration would proceed according to Hawaii Revised Statutes ("HRS") Chapter 658A (with certain exceptions not relevant here) and the Arbitration Rules, Procedures & Protocols adopted by the dispute agency, Dispute Prevention & Resolution, Inc. ("DPR") ("DPR Rules"). Pursuant to the DPR Rules, the parties mutually selected Judge Yim to resolve their dispute.

Consistent with HRS Chapter 658A, the DPR Rules impose certain disclosure requirements upon arbitrators:

Neutral Arbitrators appointed pursuant to [DPR] Rules shall disclose in writing any circumstance, situation, or event which is likely to affect their ability to be impartial. Arbitrators must disclose (and under the [Revised Uniform Arbitration Act], Section 12(b), have a continuing obligation to disclose) any past, present, or possible future relationship with the parties, their witnesses, their counsel or another arbitrator including any bias or any financial or personal interest in the result of the arbitration.

Prior to his confirmation, Judge Yim, through a DPR case manager, provided the following disclosure to counsels for the parties by email dated March 17, 2009:

1. While serving oh the bench, counsel and members of their law firms appeared before me;
2. Since retirement, I have served as a neutral for counsel and members of their law firms;
3. To the best of my knowledge, I do not know anyone involved with [General Contractor];
4. I served as a neutral in a matter where Nordic was a party. That matter was concluded at least five years ago;
5. I will provide additional disclosures as necessary throughout this proceeding;
6. These disclosures will in no way affect my ability to serve as a neutral and unbiased Arbitrator.

Prior to the Award, at no point did either party seek additional information from Judge Yim or object to having him serve, or continue to serve, as arbitrator.

The parties contested which of two concrete flatness and levelness standards applied to Nordic's work. Ultimately, Judge Yim found that Nordic had contracted to meet the more exacting of the two standards, although the parties had subsequently agreed to an alternate remediation standard in light of Nordic's deficient work.

Also at issue was whether Nordic had proven its satisfaction of the applicable standard; this implicated measurements taken as work was performed. In relevant part, Judge Yim made the following findings:

95.The Subcontract required that Nordic, not the [General Contractor], measure the flatness and the levelness of the elevated slabs before the shores were struck, and to document that the specified standards were achieved.
96.The [General Contractor] was not required to do so.
97.Nordic was aware of the fact that Pete Allen Ardry ("Ardry"), its quality control engineer on the Project, was inexperienced in concrete construction.
98.When Nordic decided to utilize the F-meter to measure whether it had achieved the specified concrete flatness and levelness, Nordic was aware, prior to assigning Ardry as its quality control engineer on the ...

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