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Priority One Services, Inc v. W&T Travel Services

August 23, 2011

PRIORITY ONE SERVICES, INC.,
PETITIONER,
v.
W&T TRAVEL SERVICES, LLC,
RESPONDENT.



The opinion of the court was delivered by: Judge Beryl A. Howell

MEMORANDUM OPINION

Pending before the Court is Priority One Services, Inc.'s (hereinafter "Priority One") petition to confirm an arbitration award, and respondent W&T Travel Services, LLC's (hereinafter "W&T") motion to vacate, modify, and correct this award. Priority One alleges that W&T materially breached and improperly terminated a contract between the parties. As agreed to under the terms of the contract, the parties' dispute was presented to the American Arbitration Association, and a panel of three arbitrators (hereinafter "the Panel") entered an award in favor of Priority One. W&T now seeks to vacate, modify, and correct the Panel's decision, arguing that the Panel exceeded its power, manifestly disregarded the law, and, in any event, miscalculated the damages awarded to Priority One.*fn1 As explained below, the Court denies in part and grants in part the respondent's motion, correcting only the period of prejudgment interest awarded to Priority One. In all other respects, the petitioner's request to confirm the Panel's award is granted.*fn2

I.BACKGROUND

Respondent W&T is a Maryland limited liability company that maintains its principal place of business in Maryland. Pet'r Mem. Supp. Pet. Confirm Arbitration Award (hereinafter "Pet'r Mem. Confirm"), ECF No. 1, at 2. On August 20, 2008, the National Institutes of Health (hereinafter "NIH") awarded W&T a contract (hereinafter "the Prime Contract") to operate shuttle buses for NIH employees and patients between the NIH campus in Bethesda, Maryland and other NIH locations, including those in Washington, D.C. and Virginia. *fn3 Statement P. & A. Supp. Resp't Mot. Vacate, Modify & Correct Arbitration Award (hereinafter "Resp't Mot. Vacate"), ECF No. 6, at 6-7. The Prime Contract provided for one base year of services, and was renewable by NIH for four additional one-year terms. Id. at 7. Including all option years, this contract was valued at approximately $34 million. Id.

At about the same time that NIH awarded W&T the Prime Contract, W&T entered into an agreement (hereinafter "the Subcontract"), on August 27, 2008, with Priority One, a Virginia corporation with its principal place of business in Virginia, under which Priority One would be responsible for managing the NIH patient shuttle bus services. Id. at 9; Pet'r Mem. Confirm, at

2. W&T retained responsibility under the Prime Contract for managing the NIH employee shuttle buses. Resp't Mot. Vacate, at 7.

Like the Prime Contract, the Subcontract provided for one year of services, but stated that the contract was automatically renewed if NIH renewed the Prime Contract for the option years. Pet. Confirm Arbitration Award, ECF No. 1, Ex. 1, Subcontract between W&T and Priority One (hereinafter "Subcontract"), at 2. The Subcontract additionally stated that "[a]ll claims, disputes and matters in question arising out of, or relating to, this Subcontract Agreement or the breach thereof . . . shall be decided by arbitration." Id. § 12. The agreement contained a termination clause that, in relevant part, read:

This Agreement may be terminated by Contractor upon a material breach by the Subcontractor to perform its obligation hereunder in accordance with the terms and conditions set forth in this Agreement. Upon giving the Subcontractor written notice of such breach, the Subcontractor will have ten (10) days to cure such breach. Termination of this Agreement shall be effective after ten (10) days, only if the breach is not cured.

Id. at § 9. Furthermore, in addition to its own terms, the Subcontract "incorporated by reference" the Prime Contract between W&T and NIH. Id. at § 11.

Under the Prime Contract, NIH had the option of requiring W&T to install NextBus (or similar) technology on employee shuttle buses. Resp't Mot. Vacate,at 7. This technology electronically tracks the buses on which it is installed and relays arrival and departure times to waiting passengers. Id. If NIH requested this technology, in addition to Priority One's other responsibilities under the Subcontract, Priority One was responsible for installing the NextBus technology on W&T's employee shuttle buses. Id.

On January 5, 2009, NIH exercised the NextBus technology option and allegedly gave W&T until September 30, 2009 to get it installed.*fn4 Id. at 9. W&T then informed Priority One that it needed to comply with the September 30, 2009 deadline to install the technology. Id.

On September 22, 2009, eight days before NIH's deadline, W&T alleges that the NextBus technology was not fully installed on all employee shuttle buses. Id. Pursuant to the Subcontract, on that date W&T sent Priority One a notice to cure. Id. Ten days later, after the NIH deadline had passed, W&T states that the NextBus Technology was still not completely installed in the employee shuttle buses. Id. W&T considered this a material breach of the Subcontract, and, on October 6, 2009, sent Priority One a letter notifying it that W&T was terminating the agreement as of November 30, 2009.*fn5 Id. at 9-10. W&T directed Priority One to stop immediately work on the NextBus Technology, and gave Priority One "until November 30, 2009 to phase out the rest of its activities" under the Subcontract. Id.; see also Resp't Mot. Vacate, Ex. D, Notice of Termination of Subcontract. According to W&T, Priority One was paid for all work up to the contract termination date of November 30, 2009. Resp't Mot. Vacate, at 10.

On December 15, 2009, Priority One filed a demand for arbitration with the American Arbitration Association (hereinafter "AAA"), arguing that W&T's termination of the Subcontract was improper and a material breach of the contract terms. Pet'r Opp'n Mot. Vacate, ECF No. 7, at 2. As compensation for breach of contract, Priority One sought "damages for the nine months remaining in option year one and the additional three option years." Id.

From August 10 to August 12, 2010, the parties presented their claims to a panel of three arbitrators in Washington, D.C. Id. at 2-3.*fn6 In lieu of a final oral argument, the parties agreed to submit written post-trial briefs. Id. at 3; Resp't Mot. Vacate, at 10. The Panel requested that the parties focus their briefs on, inter alia, the applicability of Maryland law and the issue of damages.*fn7 Resp't Mot. Vacate, at 10.

After receiving the parties' post-hearing briefs, on October 18, 2010, the Panel unanimously entered an award in favor of Priority One, determining that Priority One did not materially breach the subcontract because "NIH did not view the [September 30, 2009] deadline as significant," the NextBus technology was operating properly on 13 of 14 employee shuttle buses on the deadline date, and W&T's "unreasonable conduct" prevented Priority One from completing installation and correcting any malfunctions. Pet. Confirm Arbitration Award, Ex. 3, Award of Arbitrators (hereinafter "Award of Arbitrators"), ¶¶ 7-8, 11-12. The Panel awarded Priority One lost profit in the amount of $546,839 for the last nine months of the first option year, plus 6% per annum prejudgment interest beginning October 7, 2009. Id. at 7. The Panel further awarded Priority One lost profit in the amount of $588,181, plus 6% per annum interest beginning thirty days after the date of the Panel's decision, for the entire second option year after concluding that, because NIH had renewed the Prime Contract for the second option year on September 1, 2010 before the alleged breach, Priority One was entitled to the profits that it would have realized for year two as well. Id. ¶ 21. The Panel did not award Priority One lost profits for the third and fourth option years. Id. ¶ 28.

On November 3, 2010, pursuant to 9 U.S.C. § 9,*fn8 Priority One filed a petition in this Court to confirm the Panel's arbitration award. Pet. Confirm Arbitration Award, ECF No. 1. Two days later, W&T filed a notice that it would contest the petition. Resp't Notice Vacate, Modify & Correct Arbitration Award, ECF No. 4. On January 18, 2011, W&T moved to vacate, modify, and correct the arbitration Panel's award, arguing that the Panel exceeded its power, manifestly disregarded the law, and, in any event, made a material miscalculation when calculating the damages award. Resp't Mot. Vacate, at 1-2; see 9 U.S.C. § 10(a)(4) (authorizing the Court to vacate an arbitration award "where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made."); 9 U.S.C. § 11(a) (authorizing the Court to modify or correct an arbitration award "[w]here there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.").

Both Priority One's petition to confirm the arbitration award and W&T's motion to vacate, modify, and correct the award are pending before the Court.*fn9 For the following reasons, W&T's motion to vacate, modify, and correct the Panel's award is granted in part and denied in part. The Court concludes that there is no basis to vacate the award, but concludes that the Panel miscalculated the prejudgment interest. In all other respects, Priority One's petition to confirm the award is granted.

II.STANDARD OF REVIEW

FOR MODIFYING, VACATING OR CORRECTING AN ARBITRATION AWARD "Judicial review of arbitral awards is extremely limited," Kurke v. Oscar Gruss & Son, Inc., 454 F.3d 350, 354, (D.C. Cir. 2006) (quoting Teamsters Local Union No. 61 v. United Parcel Serv., Inc., 272 F.3d 600, 604 (D.C. Cir. 2001)), and the court "must confirm an arbitration award where some colorable support for the award can be gleaned from the record." LaPrade v. Kidder, Peabody & Co., Inc., 94 F. Supp. 2d 2, 4 (D.D.C. 2000). A proceeding to confirm an arbitration award is "intended to be summary." Adkins v. Teseo, 180 F. Supp. 2d 15, 18 (D.D.C. 2001) (quoting Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir. 1986)). The party challenging the award faces a "high hurdle." Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758, 1767 ...


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