In TSP Services, Inc. v National-Standard, LLC, a published Michigan Court of Appeals opinion, National-Standard contracted with TSP for TSP to provide asbestos abatement, demolition, and waste removal services. The parties understood that TSP would attempt to sell scrap steel salvaged from the project, but did not expressly so state in the contract. After work was commenced but before it was completed, National-Standard required TSP to stop work. TSP filed a construction lien. The parties arbitrated the dispute.
The arbitrator found in favor of TSP and awarded (1) $141,083 for the contract balance, (2) interest of $46,557 on that balance, (3) $391,809 for lost profits on the steel, (4) $33,793 in interest on the lost profits, and (5) $269,226 in attorney fees. The arbitrator further determined that the construction lien was valid and could be enforced for the entire award. National-Standard requested the circuit court vacate the award, but the motion was denied. National-Standard appealed to the Michigan Court of Appeals.
A court is limited in its review of an arbitrator’s award; it may only review the award for a clear error of law. The court of appeals held that such a clear error occurred here. The MI Construction Lien Act provides that "A construction lien acquired pursuant to this act shall not exceed the amount of the lien claimant’s contract less payments made on the contract.” While a party may be entitled to consequential damages for breach of a contract, the lien only secures payment of the contract balance less payments made. Because the aribtrator approved a construction lien for an amount in excess of the contract balance, the arbitrator made a clear error of law. The appeals court vacated the portion of the award which provided that the lien secured the entire amount of damages.
UPDATE: the Court of Appeals vacated the earlier opinion and issued a new opinion. However, the result is the same.