Highland Pellets Hit with $10M Order

Highland Pellets LLC in Pine Bluff (Mark Friedman)

A federal judge last month confirmed a $10.1 million arbitration award to a contractor for work done on Highland Pellets LLC’s plant in Pine Bluff.

MOR PPM Inc. of Society Hill, South Carolina, went to court last year to confirm an American Arbitration Association award against the wood pellet manufacturer.

Highland Pellets had asked U.S. District Court Judge Kristine Baker to throw out the award on grounds that the three-member arbitration panel ignored provisions of the construction contract.

“The Court cannot conclude based on the record before it that the Panel did not consider Highland’s arguments or that it ignored the parties’ Contract,” Baker wrote in her 10-page order filed Sept. 24. “Instead, the Panel assessed the Contract and the circumstance of the matter and even quoted specific language in the Contract in making its Final Award. The fact that the Final Award did not favor Highland’s interpretation is not cause for the Court to reconsider the Panel’s decision.”

The dispute between the two companies started in 2020 after Highland hired PPM to upgrade and increase production at Highland’s wood pellet plant in Pine Bluff. The plant supplies wood pellets used as fuel for electricity production at a converted coal power plant.

PPM on its website said it is a leading provider of mechanical, electrical and civil construction for the power generation, pulp and paper, chemical and general manufacturing industries.

The Highland contract carried a guaranteed max price of $20 million.

“PPM began to recognize that newly issued designs for concrete and steel required the placement or installation of quantities significantly greater than the ‘maximum’ quantities identified in its pre-Contract proposals,” the AAA award filing said.

PPM claims for damages included 53 unpaid change order requests that totaled $7.9 million.

In January 2022, PPM sought arbitration and wanted a total of $15.3 million in damages against Highland. Highland, in return, denied PPM’s claims and sought $3.3 million in damages against PPM, according to the final award from the AAA.

The AAA denied Highland’s claims and awarded $7.6 million to PPM, plus nearly $800,000 in interest and $1.7 million in attorneys fees and costs for a total of $10.1 million. The contract between Highland and PPM said any claim not worked out in mediation would be subject to a binding arbitration decision.

Baker confirmed the award and ordered post-judgment interest at 3.95% annually.

The law firm of McElroy Deutsch Mulvaney & Carpenter LLP of Hartford, Connecticut, filed PPM’s complaint with the AAA.

Attorneys James R. Baxter of the Baxter Law Firm of Benton, and David M. Donovan of Watts Donovan Tilley & Carson of Little Rock, filed the complaint for PPM in federal court.

Highland was represented at the arbitration proceeding by the Linklaters LLP law firm, which has offices in New York and Washington, D.C. Attorney Matthew Finch of Gill Ragon Owen of Little Rock, who was not involved in the arbitration phase, served as Highland’s local counsel.

The pellet plant is a success story for Pine Bluff, producing 675,000 metric tons of wood pellets annually for the European market, the company’s website said.

The Arkansas Teacher Retirement System has invested about $270 million in the Highland plant since 2016.

“The court decision doesn’t change our analysis,” ATRS Executive Director Mark White told Arkansas Business. “Highland’s operations are still moving and trending in the right direction and we continue to believe that they have a good chance of success.”