David Co. v. Jim Miller Construction

David Company (David) (plaintiff) hired real estate developer and general contractor Jim Miller Construction, Inc. (Miller) (defendant) to build luxury townhomes on land owned by David, for David to sell. However, the first set of townhomes were plagued by serious construction defects. The contract between David and Miller required arbitration of all disputes arising out of the contract but was silent about what remedies would or would not be available in an arbitration. The construction-defect dispute was submitted to a panel of three arbitrators. David requested monetary damages, but neither party mentioned or requested any remedy limitations in the arbitration submission. During the arbitration, David expressed concern that the possible future discovery of additional defects created unknown liability for David as the seller of the townhomes. On their own, the arbitrators decided to order Miller to buy the townhomes and land from David in order to make Miller legally responsible for any future liability created by its own construction defects. Miller moved to vacate the award on the grounds that the arbitrators did not have the authority to issue this type of equitable relief. The state district court and court of appeals both affirmed the arbitration award. Miller appealed the issue of the arbitrators’ authority to the Minnesota Supreme Court.