In reversing a trial court's decision to "modify" an arbitration award, the Vermont Supreme Court held that a court is not authorized to review the legal or factual conclusions of the arbitrator when determining whether an arbitrator exceeded its powers.

In Vermont Built, Inc. v. Krolick, No. 2007-177, 2008 WL 4756892 (Vt. Oct. 31, 2008), homeowner Krolick and Vermont Built (VB) entered into a construction contract containing an arbitration agreement. After a dispute arose between the parties, they commenced arbitration pursuant to the agreement.

The arbitrator held that VB was entitled to damages for the value of work completed, minus the amount Krolick incurred to correct VB's defective work. The award specifically denied VB interest and denied both parties attorney's fees.

VB then moved to "vacate or modify" the award, arguing that the arbitrator exceeded his powers by refusing to award attorney's fees. In a bizarre sequence of events, the trial court remanded the issue of attorney's fees back to the arbitrator, who then explained his decision not to award attorney's fees to VB. The trial court then overruled the arbitrator and awarded VB nearly $20,000 in attorney's fees and $5,000 in interest because the arbitrator had not "explained what was decided and why" and "did not find a good faith basis for [Krolick] to withhold payment." Krolick appealed.

On appeal, Krolick argued that the trial court abused its discretion because it had no legal authority to modify or vacate the award. Citing precedent based on both the Uniform Arbitration Act and Federal Arbitration Act, the Court held that "the vacatur ground that the arbitrator exceeded his powers does not authorize the court to review the legal or factual conclusions of the arbitrator." Rather, the proper inquiry would focus on whether the arbitrator had the power, based on the arbitration agreement or parties' submissions, to reach a certain issue, not whether the arbitrator correctly decided the issue.

The Court then found that the parties had submitted both the attorney's fees and interest issues to the arbitrator, and the arbitrator had decided both of those issues in his original award. Consequently, the Court held that the arbitrator did not exceed his powers.

Furthermore, the Court held that the trial court erred by requiring the arbitrator to explain his decision, emphasizing that "the arbitrator has no responsibility to explain the grounds for his decision or to make findings of fact or conclusions of law." Thus, the trial court made two errors – treating errors of fact and law as actions that exceed the power of the arbitrator, and demanding an explanation of the award from the arbitrator. The Court observed that the lower court had "acted like an appellate court reviewing the decision of a trial court," which was an "unauthorized substantive review of an explanation that it had improperly required."

Accordingly, the Court reversed the trial court's order because it "could not review the merits of the arbitrator's decision and erred in doing so."