wins. Complete letter ruling of beloved Benton-Franklin
Counties Superior Court Judge Albert J. Yencopal.
Inc., a blasting contractor, asked the superior court to
vacate an arbitration award issued in a contract dispute
between Barnes and a party hiring its services. The superior
court instead confirmed the arbitration award. Because the
award shows no facial error, we affirm.
arbitrated dispute arises from a commercial contract for the
mining and crushing of rock. The parties recite facts in
their briefs despite the lack of a record from the
arbitration hearing. Therefore, we are unable to confirm the
accuracy of the facts. We recite some of those facts behind
the dispute despite a conclusion that most of those facts
lack relevance to this appeal. In the end, we consider only
the arbitrator's award important.
Rock & Ballast, Inc. (Mainline Rock) develops and
operates rock quarries to extract, crush, and sell ballast,
rock material used as the footing or base for railroad
tracks. Mainline Rock's principal place of business is
Washington State. Between 2004 and 2017, Mainline Rock owned
and operated a rock quarry in Torrance County, New Mexico,
near Encino. Mainline Rock intended to sell ballast from the
Torrance site to BNSF Railway.
process of generating ballast, the crushing operation creates
by-product aggregate material and waste or reject material.
Some by-product rock material may be sold for use in road
construction and other infrastructure projects. The waste
material, generally not commercially sellable, consists of
dirt screened during the crushing process. Mainline Rock
stockpiled the Torrance waste for later use in reclamation of
the pit at the quarry.
Inc. (Barnes) works as a drilling and blasting contractor
with its principal place of business in Idaho. On July 27,
2004, through a cryptic letter of understanding (LOU),
Mainline Rock retained Barnes to drill and blast solid rock
at the Torrance, New Mexico site. The LOU declared that
Barnes would drill and blast material for railroad and retail
sales at a rate of $0.78 per ton. The price included
"anticipated rejects [waste material] of approximately
10 [percent] of the material blasted." Clerk's
Papers (CP) at 20. This contract provision suggested Barnes
would be paid a small amount for waste, but not an amount
separate from the price paid for the other blasted material.
The contract does not explicitly state that the waste will be
separated from the ballast and byproduct. Nevertheless,
according to the LOU, Mainline Rock expected that BNSF
Railway would purchase the waste produced during the first
year of operation. We assume a railway occasionally needs
fill dirt to shore up its rail lines, but still the record
does not explain why BNSF Railway would purchase dirt from
Mainline Rock. Under the LOU, if the waste amount proved to
be higher than anticipated, Mainline Rock would renegotiate
the 2004 LOU, Mainline Rock also agreed to pay Barnes a rate
of $1.56 per solid cubic yard of material blasted for site
development. The record does not clarify the need, nature,
and extent of site development, but we assume site
development entailed blasting commercially nonviable areas in
order to gain access to the sellable ballast and by-product.
parties operated under the 2004 LOU until 2008, when the
parties executed a master blasting agreement (MBA) for all
locations at which Barnes would perform services for Mainline
Rock. The 2008 agreement outlined the basic terms and
conditions for the drilling and blasting to be performed by
Barnes. The MBA did not include terms and conditions for
services performed at a specific location, since the parties
would include those details in work orders. The MBA read:
Upon acceptance and agreement of a Work Order, Mainline
hereby authorizes Barnes to occupy Mainline Locations to
operate its Drilling and Blasting operations for Mainline in
accordance with the Work Order and this Agreement.
CP at 22.
MBA's term was three years, but the agreement could be
renewed by the parties. The MBA stated that Mainline Rock
would pay Barnes for blasted rock materials when Mainline
Rock sold the rock to a third party:
9. Payment Terms: Unless otherwise noted
herein, Mainline agrees to pay for all materials sold and
invoiced, in full, within 20 days at the end of the
month in which the rock is sold and invoiced. A late
fee computed by a periodic rate of 1.5% per month will be
applied to any overdue balance. If Products are for resale,
no sales tax will apply.
CP at 23 (bold print in original; italics added). Individual
work orders would determine the rate of payment.
2008 MBA did not reference the 2004 LOU. The 2008 agreement
contained an integration or merger clause that declared:
26. Entire Agreement: This writing is
intended by the parties to be the final, complete and
exclusive statement of their Agreement relating to the
matters covered herein. There are no other oral
understandings, representations or warranties affecting it.
CP at 29. Paragraph 27 of the agreement read:
Governing Law: This Agreement shall be
governed by, construed and enforced in accordance with the
laws of the State of Washington. Or as required by law to be
in the state of a specific operation.
CP at 29. The MBA included an arbitration clause that read,
25. Arbitration and Waiver of Jury Trial:
The parties hereby select binding arbitration as the
exclusive method for resolving any dispute arising out of or
otherwise relating to this Agreement, whether based on
contract, tort, statute, or otherwise. To the extent not
inconsistent herewith, arbitration shall be conducted in
accordance with the Washington State Arbitration Act, RCW
7.04 et seq.
CP at 28. Finally, paragraph 29 of the MBA declared:
Attorney Fees: If any action at law or in
equity (including arbitration) is necessary to enforce or
interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorney fees, court costs
and out-of-pocket costs, in addition to any other relief to
which the party may be entitled. The provisions of this
section shall survive the termination or expiration of this
CP at 29.
1, 2008, Mainline Rock and Barnes entered a work order
authorization for blasting work at the Torrance County
location. The work order would be continued "as
needed." CP at 31. The 2008 work order directed Mainline
Rock to pay Barnes for its drilling and blasting services at
$ 0.87 per ton. The work order further declared:
7.0 Special Terms and Conditions. Quantity
shall be measured and paid as sold. Barnes retains the
Drilling and Blasting interest in byproducts stockpiled
on-site to be sold at a later date. Barnes['] interest in
by-products survives the termination of the Master Drilling
and Blasting contract for materials produced from Barnes
blasted rock. This is a continuation of Blasting services at
an ongoing quarry. The prices paid for blasting of ballast
and by-product shall escalate (deescalate) at the same
percentage rate as applicable to Mainline's ballast
supply agreement with BNSF. The value of the blasting
interest in by-products or other carried materials shall be
equal to the adjusted price at the time of sale. Inventories
carried beyond the termination of the master agreement shall
be purchased [sic] paid for within 5 years of termination by
CP at 31. Neither the MBA nor the work authorization
mentioned rejects or waste materials.
2016, the parties executed an amendment to the MBA and 2008
Work Order relating to the Torrance County site. The
amendment created two different prices for materials.
Mainline Rock would pay Barnes the amount of $1.20 per ton
for a category of material labeled "Drilling and
Blasting 2016 (includes non-rail by-product)." CP at 44.
Mainline Rock would pay Barnes $1.00 per ton for a second
category of material entitled "Commercial by-product by
rail shipped to CSA and Vulcan." CP at 44. The amendment
did not identify "CSA." The first category
constituted ballast Mainline Rock could sell to BNSF and rock
by-product that could be sold as commercial aggregate
products for delivery by truck. The second category included
rock by-product blasted by Barnes and sold by Mainline Rock
as commercial aggregate products that could be sold and
delivered in large volumes by rail car.
to Mainline Rock, Barnes drilled and blasted for Mainline
Rock, between 2004 and 2017, and Mainline Rock paid Barnes
based on the blasted materials actually sold. During the
thirteen years, Mainline Rock never paid Barnes for reject or
waste material, and Barnes never made a request for such
payment. According to Barnes, it never requested payment for
the waste because the waste had yet to be sold.
December 2016, Mainline Rock notified Barnes of an
anticipated sale of its Torrance County operation site.
Mainline Rock disclosed that it planned to include in the
sale stockpiled materials, which sale would trigger a payment
to Barnes for the stored commercially sellable materials.
Mainline Rock conducted three discrete drone surveys of the
stockpiled materials, each which calculated a quantity of 2.8
million tons of material. Mainline Rock announced that, on
closing of the sale, it would pay Barnes $2.8 million based
on a rate of $1.00 per ton. In response, Barnes, based on
pre-blast measurements, expressed its belief that Mainline
Rock possessed 6 million tons of stockpiled materials. Barnes
demanded to be paid based on a quantity of 6 million tons.
According to Mainline Rock, Barnes unreasonably demanded
payment for waste and reject materials.
April 7, 2017, Mainline Rock sold its Torrance County
operation site to Vulcan Materials Corporation. The sale
included all stockpiled commercially sellable aggregate
inventory. Barnes suggests the sale also included stockpiled
waste, which makes sense since the waste probably sat on the
sold real estate. Barnes further suggests that the waste had
been separated from rock by the time of the sale.
Nevertheless, neither party provides any evidence to show
that the separated rejects or waste sat on the land at the
time of sale. Barnes' contentions imply that the purchase
price of the quarry reflected a sum for the stockpiled waste,
although neither party provides evidence as to whether or not
the buyer paid a separate sum for waste material.
17, 2017, Mainline Rock sent Barnes payment of $908, 596.
Mainline Rock lowered the sum from its anticipated payment of
$2.8 million based on its unilateral determination that 1.9
million tons of stockpiled material was unsellable waste.
Barnes responded that Mainline Rock owed it payment for 5.65
million tons of stockpiled material at $1.25 per ton because
the unit price per ton increased to $1.25 in 2017. In short,
Barnes demanded payment of $7, 062, 500. The parties differed
in amount owed by $6, 156, 904.
to their 2008 master blasting agreement, the parties
submitted their dispute to arbitration before a three-member
panel of arbitrators. A majority of the panel determined that
Barnes was entitled to an additional payment of $354, 839.50
beyond the $908, 596.00 already tendered. The language of the
majority's ruling looms critical for this appeal. The
This matter having come before the arbitration panel for
hearing on May 22-24, 2017, and the arbitration panel having
considered the evidence presented by both Mainline Rock &
Ballast, Inc., the Claimant, and Barnes, Inc., the
Respondent, the arbitration panel presents its majority
arbitration award as follows:
1. By-Product Inventory On-Hand (original): The panel awards
Barnes Inc. the amount of $206, 848.50 calculated (827, 394
tons x $0.25/ton).
2. By-Product Inventory On-Hand (corrected): The panel awards
Barnes, Inc. the amount of $78, 872.50 calculated as follows:
(65, 158 tons by-product x $1.25 = $81, 447.50) less ballast
overpay calculated as: (2, 060 tons x $1.25 = <$2,
575.00>) for adjusted total calculated: ($81, 447.50 -$2,
3. By-Product Inventory Loose Under Jaw: $40, 547.50 (32, 438
tons x $1.25/ton).
4. Drilling Holes by Barnes: The panel awards Barnes, Inc.
the amount of $28, 571.00 for 109 drill holes drilled but not
shot prior to the Vulcan sale calculated as follow: ($41,
400.00 billed by Barnes, Inc. less $12, 829.00 paid by
Mainline = $28, 571.00).
5. Attorneys Fees and Costs: Under the facts and
circumstances, the arbitration panel determines that neither
party is a prevailing party and, therefore awards no
attorney's fees or costs to either party.
6. Total Majority Award to Barnes, Inc: $354,
A summary of the majority's award is as follows:
1. The majority concludes that the unit price negotiated
between Mainline and Barnes in June 2008 was inclusive of
anticipated reject material. This conclusion is supported by
the parties' course of performance and treatment of
reject material from the time the quarry was established in
2004 up through the sale to Vulcan in April 2017. In
particular, by letter dated July 27, 2004, Barnes
specifically noted that its negotiated unit price was
inclusive of anticipated reject material. Barnes re-affirmed
this understanding in its February 7, 2006 letter.
Accordingly, the unit price Barnes negotiated and agreed to
in June 1, 2008 Work Order Authorization (i.e., $0.87/ton)
was inclusive of anticipated reject material. This was the
purpose for having a unit price based on tons sold as opposed
to a contract based on solid cubic yards blasted.
2. The majority concludes that Barnes was owed $1.25/ton for
the rock by-product inventoried and on-hand. Although
Mainline argued that the price should be $1.00/ton based on a
volume sale to Vulcan, the majority finds that the unit price
of $1.00/ton would only have applied had that by-product
inventory been actually rail shipped to Vulcan (or CSA). As
it was, the by-product remained stockpiled and inventoried at
the quarry on the date ...