THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, December 15, 1995 TAG: 9512150491
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 111 lines
First the Sandbridge bulkhead failed, wrecked by a nasty coastal storm.
Then arbitration failed, wrecked by nasty claims and counterclaims between homeowners and the company that built the bulkhead.
Now the twin failures are the subject of an important dispute at Virginia's highest court.
On one level, the feud between 22 Sandbridge homeowners and Waterfront Marine Construction Inc. will test this question: Who is to blame for the wrecked bulkhead that was supposed to protect oceanfront homes?
On another level, the case will test a fundamental legal question: Who is to blame for the wrecked arbitration that was supposed to protect the parties from expensive, time-consuming litigation?
Both sides have run up large legal bills. Both say they are sick of the 4-year-old litigation. Each blames the other for dragging it out.
``It cost my client five times as much as if he had gone to court,'' said lawyer Gregory A. Giordano, who represents the bulkhead company. ``As a result of this case, I don't recommend people go to arbitration . . . It's costing everybody an arm and a leg.''
John S. Norris Jr., the homeowners' lawyer, agreed.
``What is the point of arbitrating?'' Norris asked. ``You have a much more burdensome, time-consuming process.''
Already the case has gone to two arbitration panels, to a Circuit Court judge several times, and now it is headed for the Virginia Supreme Court, which took the case on appeal in October.
Records from all those hearings fill five or six cardboard boxes. The appendix alone - a summary for the Supreme Court - takes up 2,093 pages.
The court's decision in this case may have legal implications beyond the mechanical issue over the bulkhead.
``If nothing else,'' Norris said, ``it's going to affect how parties present claims in arbitration.''
The 22 homeowners called themselves the North End 49ers. All owned homes on the ocean, just north of Sandbridge Road.
Together, they hired Waterfront Marine to build a steel wall to protect their houses from pounding surf. It cost $850,740 - about $38,670 per homeowner.
Up went the bulkhead in 1988.
But trouble came quickly.
Early in 1989, a winter storm battered Sandbridge, collapsing a bulkhead farther south that was built by the same company. The 49ers wondered: How safe is our own bulkhead? Will it fail, too?
The homeowners hired an engineer to check their seawall and received the bad news. The wall was defective, the engineer said. At about the same time, city inspectors also found the wall faulty.
Litigation followed.
The 49ers sued Waterfront Marine for $1.2 million. But instead of going to court, the case wound up before three arbitrators. The process, a scaled-down version of full-blown litigation, is supposed to save time and money and promote common sense.
In 1991, the panel ruled against the homeowners, denying them money damages. The panel ordered the homeowners to pay $178,328, which was owed from the original construction contract.
Then the arbitrators ordered Waterfront Marine to uncover the bulkhead's buried tie rods, have them inspected by an independent engineer and fixed, if necessary.
But it never happened.
Instead, the two sides squabbled for nine months. They couldn't agree on an engineer. The homeowners paid most of the bill, but not all of it. And the repair work wasn't done.
Then came the final disaster: The infamous Halloween storm of 1991.
While both sides argued, the northeaster struck. Happily, the Sandbridge bulkhead held. Unhappily, a 600-foot section - about one-quarter of the wall - fell five days later, in an after-storm.
Fingers pointed back and forth.
``We went to them time and time again and said, `Let's get on,' '' Giordano said. ``But they never paid the remainder and they never got a third-party engineer. . . . They couldn't agree. They were squabbling among themselves.''
The homeowners argued back: We paid 85 percent of the overdue bill, but you did none of the overdue work.
Again, the homeowners took their case to arbitration.
This time, company officials fought it. How, they demanded, can you arbitrate the same case twice?
The company asked a judge to stop the second arbitration, and at first, he agreed. ``The issue between the parties in this case . . . has been arbitrated. . . . It would simply fly in the face of the intent of arbitration to send these parties back to arbitration again,'' Judge Thomas Shadrick ruled.
Soon after, though, the judge changed his mind. Maybe, he decided, there is a case for second arbitration. Let the arbitrators decide.
So they did.
The same three-man panel met again, this time ruling against Waterfront Marine. The company was ordered in July 1994 to pay the homeowners $491,795, including $24,974 for one damaged house. The homeowners, in turn, had to pay the remaining $29,697 from the original contract.
The decision was appealed to Circuit Court, then appealed again to the Supreme Court.
That's unusual, said David J. McDonald, a certified mediator/arbitrator with the Mediation Center of Hampton Roads. Usually arbitration is much shorter and clear-cut.
If the North End 49ers' theory is upheld,'' Giordano wrote in his appeal brief, ``this matter could keep on going indefinitely. Another storm could come a month from now and knock down another section of the wall.''
The homeowners say the company should never have appealed the second arbitration award.
``The purpose of arbitration is to provide a less costly and more efficient form for dispute resolution,'' Norris wrote in his appeal brief. ``As one court has noted, however, `Arbitration will not work if legal contests are its bookends. . . . Arbitration then becomes more costly than litigation.''
The Supreme Court will hear oral arguments in February or March and probably will rule this summer. by CNB