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RBMN Gets Favorable Decision from the Utah Court of Appeals

Lincoln Harris
June 2017

Denison Mines (USA) Corporation et al. v. KGL Associates, Inc.

In 2009, Denison entered into a construction contract with KGL for the construction of a mill tailings cell at the White Mesa Mill in Blanding Utah. Including change orders, the construction contract price exceeded $5,000,000. During construction, Denison accelerated payments to KGL in order to assist KGL with its cash flow problems. However, when Denison refused to issue additional change orders, KGL unilaterally terminated the parties’ contract, abandoned the project prior to completion and placed a lien on Denison’s property. When KGL abandoned the project, Denison had paid KGL all but about $450,000 of the $5,000,000 contract price, but at the same time, KGL owed more than $2,000,000 to its subcontractors and suppliers. Denison ultimately paid KGL’s subcontractors and suppliers more than $1,800,000 and spent another $350,000 completing the project.

After both parties brought competing claims against one another (Denison alleged nine claims and KGL raised three), they eventually agreed to submit their dispute to binding arbitration. After a two week arbitration hearing, the arbitrator ruled in favor of Denison determining that 1) KGL had mismanaged its work on the project, had abandoned the project and had materially breached the parties’ contract, 2) Denison’s completion actions and decisions were justified, 3) Denison was entitled to its reasonable costs of completion following KGL’s abandonment, 4) KGL was not entitled to a monetary award and 5) Denison was entitled to damages and interest totalling almost $4,000,000 ($4,800,000 after attorneys’ fees and costs).

Following the arbitrator’s award, Denison filed a motion in the district court to confirm the Final Award and KGL filed a counter-motion to vacate the Final Award. After the district court dismissed KGL’s countermotion and entered the Final Award, KGL appealed to The Utah Court of Appeals.

In its appeal, KGL contended that the district court erred in confirming the final award because 1) the arbitrator exceeded his authority and 2) the arbitrator exhibited evident partiality in favor of Denison. The Utah Court of Appeals rejected KGL’s arguments and held that the arbitrator did not exceed his authority and did not exhibit evident partiality. Thus, the Utah Court of Appeals let stand the district court’s decision confirming the arbitrator’s award of approximately $5 million dollars.

RBMN is pleased with the tremendous effort put forth by its team of highly qualified construction attorneys, Craig Coburn, Lincoln Harris and Brian Bolinder. Their skill, coupled with hard work and dedication garnered a very successful outcome for their client. If you have a construction dispute that needs resolution, please contact one of our experienced construction attorneys to assist you.

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