Arbitration in Louisiana: Does a calculating error mean an award can be struck down?

By Glenn Minnis | Dec 18, 2016

NEW ORLEANS — A Louisiana court has declined to vacate a recent award where the arbitrator admitted that a mistaken calculation resulted in one of the party’s receiving a larger award than what they were entitled to or asked for in their original filing.

Mack Energy Co. and ExPert Oil & Gas, LLC had entered into a participation agreement to exercise the former’s mineral rights and to drill for oil before a dispute over unauthorized expenditures resulted in legal action that led to an eight-day arbitration hearing The hearing ended with ExPert being ordered to credit the joint account of the one-time business associates in the amount of $1.5 million.

The arrangement called for ExPert to oversee drilling and production while deducting costs against Mack’s earnings. As a dispute between the two over unauthorized billings widened Mack ordered an audit where $1.4 million in unsubstantiated charges were discovered.

During mediation, Mack submitted a claim pinpointing 52 unsubstantiated charges totaling $977, 598.44. In the end, the arbitrator actually awarded Mack $1,596,269, using a formula that also took into account various employment documents that had been requested at some point during the proceedings.

The arbitration decision and the award amount were all later confirmed and upheld by the District Court, First Circuit and Louisiana Supreme courts.

But soon after that, the arbitrator assigned to the case admitted errors and “gross professional negligence when performing the calculation,” instantly sending ExPert back to court in an “ill practices” suit. The lawsuit claimed the charged credits used to tabulate the award amount should have totaled no more than $434,000.

“Ill practices” are legally defined as any improper practice or procedure that operates, even innocently, to deprive a litigant of a legal right.

The criteria for proving such an injustice are the rendered judgment had resulted in deprivation of legal rights of the litigant seeking relief and the enforcement of said judgment would reasonably be inequitable.

“I wasn’t at all surprised that the court ruled the way that they did,” Charles Sartain, a veteran attorney with Gray Reed Attorneys & Counselors, told the Louisiana Record. “It’s unfortunate for the appellant but based on what the law stipulates the court absolutely got it right.”

In rendering its ruling, the court ruled the parties in any such arbitration are “presumed to accept the risk of procedural and substantive mistakes by the arbitrator of either fact or law, which are not reviewable by the courts.”

The ruling also stipulated that ExPert representatives had failed to state or pinpoint any other cause of action that would justify nullifying the original action.

As for the work of the arbitrator, Sartain also had an opinion.

“Some lawyers may question the person’s credibility from here on out, but others who actually know the person may just chalk it up to a mistake and the fact that everyone makes them," he said. "I would have to know the arbitrator and [if] they are prone to such mistakes to say how much of a credibility hit they might suffer.”

Still others are openly questioning if Mack officials should have stepped up to do the right thing by offering or agreeing to return the portion of the award they were never entitled to in the first place.

“Some might say it’s the right thing to do, but they are in no way obligated to do it and chances are they won’t be doing it,” Sartain said.




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