Arbitration – Unreasoned Decision – Scope of Authority – Damages – Real Property – Failed Developments

Trilogy Capital Partners, LLC v. Killian (Lawyers Weekly No. 15-15-1045, 17 pp.) (Gregory McGuire, J.) 2015 NCBC 103

Holding: Although the parties’ contracts required respondents to make certain capital contributions that they failed to make, an arbitration award did not have to be limited to the uncontributed capital.

The court confirms the arbitration award of $4,181,740.

The parties’ agreement required respondents to make capital contributions in certain situations, and respondents’ failure to make those contributions allegedly led to the failure of the parties’ real estate projects during the Great Recession.

The court’s ability to review the award is severely curtailed by the parties’ agreement to accept an unreasoned award from the arbitrator. The court has no means of objectively determining how the arbitrator arrived at the amount of the award.

In the arbitration, the claimant presented evidence of preferred distributions and return of capital contributions it claims it would have received had respondents made the required additional contribution and had the projects been successfully completed as planned. The claimant sought total damages of approximately $12,000,000. The additional capital contribution that respondent Killian/Simonini, LLC was required to make, and which respondents Killian and Simonini guaranteed, was $7,738,835. Ultimately, the arbitrator awarded the claimant $4,181,740.

While it is true that the figure awarded by the arbitrator is the sum of the expectation damages sought by the claimant for the failure of two of the projects, that figure also was well within the amount of the additional capital contribution that respondents concede the arbitrator had authority to award. The arbitrator’s authority certainly included the ability to determine, for any number of reasons including equitable considerations, that an award of the full amount of the additional capital contribution was not warranted, but that an award of a lesser amount was proper. Absent an explanation by the arbitrator, the conclusion that the award was for expectation damages, and not for the additional capital contribution, would be no more than speculation.

Even if the arbitrator awarded the claimant contract expectation damages, the court is not convinced that it was beyond the arbitrator’s authority to grant such damages, given the breadth of the arbitration clause. In addition, even if the arbitrator awarded damages outside of those available under the North Carolina Limited Liability Act, such an award amounts to no more than an error of law insufficient to vacate the award.

Confirmation granted.