Reinsurance Focus

C.R. Klewin Northeast (“Klewin”) entered into a contract with the city of Bridgeport (“the City”) for the construction of a multipurpose sports arena. After construction was completed, a dispute arose regarding whether Klewin was entitled to additional compensation due to design changes. The dispute was submitted to an arbitration panel pursuant to the contract. Under the applicable AAA rules, the dispute would ordinarily be heard by a panel of three arbitrators. However, when one of the arbitrators resigned due to illness, the two remaining arbitrators chose to proceed with the arbitration over the City’s objection. After 37 days of hearings, the arbitration panel awarded Klewin $6,020,231, plus interest. The trial court confirmed the award.

The City raised several issues on appeal. First, the City argued that the arbitration panel lacked jurisdiction because the underlying contract was procured illegally and thus void. The Court rejected this argument, holding that the defense of contract illegality was a question for the arbitrators, at least in the first instance, because the challenge related to the entire contract rather than just its arbitration clause.

Second, the City challenged the trail court’s ruling that the City waived the defense of contract illegality though its conduct in the arbitration. In upholding this ruling, the Court explained that the City’s attempt to raise the defense on the 20th day of hearings was, in essence, “too little, too late.”

Finally, the City argued that the arbitration panel lacked jurisdiction because it had only two members. In rejecting this argument, the Court noted that in the event of a vacancy, the AAA rules authorize the remaining arbitrators to continue with the hearing “unless the parties agree otherwise.” C.R. Klewin Northeast, LLC v. City of Bridgeport, Case No. 17590 (Conn. Apr. 17, 2007).