Case Title: DOUGLAS MORRISON, CHARLES W. SMITH, and RONALD HANSEN, in their representative capacities as Trustees of the Newell B. Sargent 1990 Living Trust V. FORREST L. CLAY and F. KELLY CLAY

Citation: 

Docket Number: 05-281

State: wyoming

Court: Wyoming Supreme Court

Date: 2006-12-28T00:00:00Z

Document:
DOUGLAS MORRISON, CHARLES W. SMITH, and RONALD HANSEN, in their representative capacities as Trustees of the Newell B. Sargent 1990 Living Trust V. FORREST L. CLAY and F. KELLY CLAY2006 WY 161149 P.3d 696Case Number: 05-281, 06-21Decided: 12/28/2006
OCTOBER 
TERM, A.D. 2006

 
 
DOUGLAS MORRISON, CHARLES W. 
SMITH, and RONALD HANSEN, in their representative capacities as Trustees of the 
Newell B. Sargent 1990 Living Trust,

 
 
Appellants

(Plaintiffs),

 
 
v.

 
 
FORREST L. CLAY and F. KELLY 
CLAY,

 
 
Appellees

(Defendants/Counterclaimants).

 
 
Appeal from the 
DistrictCourtofNatronaCounty

The Honorable W. Thomas 
Sullins, Judge

 
 
Representing 
Appellants:

Judith Studer and Rick L. Koehmstedt, of Schwartz, 
Bon, Walker & Studer, LLC, Casper, Wyoming.

 
 
Representing Appellees:

Patrick Murphy, of Williams, Porter, Day & 
Neville, P.C., Casper, 
Wyoming. 

            

Before 
VOIGT, C.J., and GOLDEN, HILL*, and BURKE, JJ, and STEBNER, D.J., 
Retired.

 
 
* Chief 
Justice at time of oral argument.

 
 
BURKE, 
Justice.

 
 
[¶1]      Douglas Morrison, 
Charles W. Smith, and Ronald Hansen, in their representative capacities as 
Trustees of the Newell B. Sargent 1990 Living Trust, appeal a district court 
order confirming an arbitration award.  
The district court affirmed the award on its merits and ruled that the 
parties had agreed that the arbitration award would be final and binding.  The court also determined that the 
parties had waived the right to challenge the selection and identity of the 
arbitrators and the arbitration process.  On appeal, the Trust does not challenge 
those rulings.  Because those 
rulings are dispositive, the issues raised concerning the arbitration award are 
moot.  The Trust also appeals from 
the district court's order granting attorneys' fees to Appellees, the 
Clays.  Finding no abuse of 
discretion, we affirm the award of attorneys' fees.   

 
 
ISSUES

 
 
[¶2]      The Trust 
identifies the following issues for review:

 
 

1.                  
Should an unsigned 
arbitration award that violated Wyoming Statutes and the parties' agreement be 
vacated? 

 

2.                  
Do clear violations of 
the code of ethics governing the arbitration [constitute] "undue means" and/or 
"misconduct" that requires the arbitration award be 
vacated?

 
 

A.                 
Did the court apply an 
incorrect standard by requiring the plaintiffs show actual prejudice by clear 
and convincing evidence?

 
 

B.                 
Did the court abuse its 
discretion in not allowing Professor Burman to opine the arbitrator's failure to 
make the necessary disclosures as a violation of the code of 
ethics?

 
 

3.                  
Did the arbitrators 
exceed their authority? If so, does such action require that the award be 
vacated?

 
 

A.                 
Did the failure to 
conduct the arbitration in accordance with the American Arbitration Association 
Rules, as agreed to by the parties, constitute a basis to vacate the 
award?

 
 

B.                 
Did the use of minority 
and marketing discounts to determine value of the stock, in violation of the 
stock purchase agreement, exceed the authority of the arbitrators, and therefore 
require the court to vacate the award?

 
 

4.                  
Did the court improperly 
award attorneys' fees?

 
 

A.                 
Did the limited provision 
in the settlement agreement that allowed for recovery of attorneys' fees 
apply?

 
 

B.                 
Did defendants' failure 
to identify and segregate attorneys' fees and costs prohibit an award of 
fees?

 
 
The Clays state several 
issues.  Two are pertinent to our 
resolution:

 
 

1.                  
Is this appeal moot 
because appellants failed to challenge the district court's determination that 
they had contractually waived their right to appeal the arbitration 
award?

 
 

2.                  
If this appeal is not 
moot, does appellants' waiver of any right to appeal the arbitration award 
nonetheless require summary affirmation of the district court's 
order?

 
 
FACTS

 
 
[¶3]      The Newell B. 
Sargent 1990 Living Trust ("the Trust") was created by Newell B. Sargent to hold 
his shares in Wyoming Beverages, Inc. ("WBI").  Mr. Sargent passed away in April of 
2001.  At the time of this 
litigation, Forrest L. Clay, F. Kelly Clay and the Trust were the sole 
shareholders of WBI.

 
 
[¶4]      In 1985, Mr. 
Sargent and the Clays entered into a Stock Purchase Agreement.  Under the terms of that agreement, at 
the time of Mr. Sargent's death, the Clays were entitled to purchase Mr. 
Sargent's stock in WBI.  If no 
agreement could be reached as to the shares' value, the "value, interest rate 
and [payment] period" were to be determined by arbitration.  The Stock Purchase Agreement also 
provided that if arbitration is elected, then "each stockholder shall name an 
arbitrator and the decision of the majority shall be binding on all parties." 

 
 
[¶5]      After Mr. 
Sargent's death, the Clays elected to purchase all of the WBI stock held by the 
Trust.  The parties were unable to 
agree on the value of the stock.  On 
August 2, 2001, the Clays made a written demand for arbitration pursuant to the 
1985 Stock Purchase Agreement.  The 
Clays notified the Trust of their choice of arbitrators.  The Trust initially refused to choose an 
arbitrator and challenged the validity of the arbitrator selection clause.  In response, on August 31, 2001, the 
Clays filed a Complaint for Declaratory Judgment seeking a judicial 
determination as to the validity of the arbitrator selection clause.  In an attempt to resolve the Declaratory 
Judgment action, the parties entered into a settlement agreement containing the 
following pertinent provisions:

 
 
2.         
. . . (a) Forrest Clay, F. Kelly Clay and the Newell B. Sargent 1990 
Trust  have each selected one 
arbitrator; and (b) the decision of a majority of the arbitrators as to the 
value of the Trust's stock in Wyoming Beverages and on any other matters before 
the arbitrators shall be final and binding on all parties.  Any decision or award of a majority of 
the arbitrators shall be enforceable in any federal or state court having 
jurisdiction thereof.  The parties 
hereby expressly waive and release any challenge to the enforceability of any 
arbitrators' award or decision based on the arbitrator selection process or the 
identity of the arbitrators, or the submission of these matters to arbitration 
under the Stock Purchase Agreement.  
The parties further expressly acknowledge the enforceability of any award 
or decision by the arbitrators as provided by Wyoming law.

 
 
. . 
.

 
 
12.       . . . Any 
dispute arising out of or relating in any way to this Agreement shall be 
resolved by a majority of the arbitrators agreed to in this Agreement through 
final, binding and non-appealable arbitration in accordance with the arbitration 
rules of the American Arbitration Association. . . . 

 
 
[¶6]      Prior to 
dismissal of the Declaratory Judgment litigation, the Trust advised, by letter, 
that it would not attend the scheduled arbitration and that the Trustees, 
"hereby rescind and withdraw their signatures to the proposed Settlement 
Agreement . . . ."  Additionally, 
the Trust filed counterclaims in the Declaratory Judgment action in which it 
contended that the arbitrator selection clause was "unconscionable and 
unenforceable."  

 
 
[¶7]      While the 
Declaratory Judgment litigation was still pending, the arbitration panel issued 
an order which provided that:

 
 
. . . On or before 
January 14, 2002, counsel for each party shall submit a Statement of Position 
which identifies any issues that counsel wishes to raise relating to (i) the 
validity or enforceability of the arbitration agreement or any portions thereof; 
(ii) the jurisdiction of the arbitration panel to proceed; (iii) and the rules 
and procedures which should govern the arbitration proceedings.  The Statements of Position should be 
accompanied by applicable legal authority and any pertinent 
documentation.

 
 
Subsequently, in 
accordance with the settlement agreement, the arbitration panel entered an Order 
which stated in pertinent part:

 
 
The parties, through 
their counsel, have agreed that the arbitration agreements are fully enforceable 
and binding; that in the event of a dispute, all issues relating to the 
procedures for the arbitration, discovery, and management of the arbitration 
process will be resolved by the arbitrators; and that the action now pending in 
the Wyoming state court will be dismissed.

 
 
The Declaratory Judgment 
litigation was dismissed with prejudice on March 1, 2002.  

 
 
[¶8]      A three day 
arbitration hearing was held beginning March 25, 2002.  At the conclusion of the hearing, the 
arbitration panel issued a unanimous written award valuing the stock of the 
Trust at $8 million and establishing a payment period and interest rate.  The Trust filed an Application to Vacate 
Award and Complaint for Declaratory Judgment with the district court challenging 
the amount of the award, the procedure by which the arbitration was conducted, 
and asserting a conflict of interest of one of the arbitrators.  In a counterclaim, the Clays requested 
attorneys' fees for breach of the Settlement Agreement.

 
 
[¶9]      A trial was 
held.  The district court issued its 
Findings of Fact, Conclusions of Law, and Judgment, confirming the arbitration 
award and finding that the Clays' request for attorney fees should be 
granted.  The Trust appealed from 
the district court's Findings of Fact, Conclusions of Law, and Judgment and the 
subsequent Order Awarding Attorney's Fees and Costs.  We consolidated the two appeals for 
briefing and decision.

 
 
DISCUSSION

 
 
No. 05-281 Arbitration 
Award

 
 
[¶10]   In its Findings of Fact, 
Conclusions of Law, and Judgment, the district court found, in pertinent 
part:

 
 

49.             
The provisions of the 
Settlement Agreement included the following:      

 
 
            
2.         
. . . the parties agree to conduct a final, binding arbitration . . . 
.  In particular: (a) Forrest Clay, 
F. Kelly Clay and the Newell B. Sargent 1990 Trust have each selected one 
arbitrator; and (b) the decision of a majority of the arbitrators as to the 
value of the Trust's stock in Wyoming Beverages and on any other matters before 
the arbitrators shall be final and binding on all parties.  Any decision or award of a majority of 
the arbitrators shall be enforceable in any federal or state court having 
jurisdiction thereof.  The 
parties hereby expressly waive and release any challenge to the enforceability 
of any arbitrators' award or decision based on the arbitrator selection process 
or the identity of the arbitrators, or the submission of these matters to 
arbitration under the Stock Purchase Agreement.  [T]he parties further expressly 
acknowledge the enforceability of any award or decision by the arbitrators as 
provided by Wyoming law.  

 
 
            
3.         
The Trust and the Trustees hereby agree and consent to Forrest Clay's 
selection of Bruce D. Pringle as arbitrator and to F. Kelly Clay's selection of 
H. Alan Dill as arbitrator.

 
 
            
4.         
The Clays hereby agree and consent to the Trust's selection of Michael D. 
Zimmerman as arbitrator. 

 
 
            
* * *

 
 
            
6.         
The Trust and the Trustees hereby expressly agree and acknowledge that 
the Stock Purchase Agreement and the arbitrator selection clause contained 
therein are enforceable as written, are not unconscionable and are not otherwise 
void or voidable based on any legal or equitable theory or claim, and hereby 
waive any challenge to the arbitrators selected or to the arbitration 
process.  

 
 
            
* * *

 
 
            
12.       
. . . Any dispute arising out of or relating in any way to this 
Agreement shall be resolved by a majority of the arbitrators agreed to in this 
Agreement through final, binding and non-appealable arbitration in 
accordance with the arbitration rules of the American Arbitration 
Association.  The prevailing party 
in any such dispute shall be entitled to recover its reasonable attorneys' fees 
and costs (including, without limitation, any arbitration fees and costs) from 
the other party, in addition to any other relief to which the prevailing party 
may be entitled.  

 
 
53.       After 
additional settlement discussions, legal counsel for The Newell B. Sargent 1990 
Living Trust and legal counsel for Forrest L. Clay and F. Kelly Clay agreed to 
recognize the validity and enforceability of the Settlement Agreement, to go 
forward with the arbitration provided for thereunder, and to dismiss the pending 
litigation.

 
 
* * 
*

 
 
55.       On February 
12, 2002, an Arbitration Management Order was entered by the selected, agreed 
upon, and retained arbitrators, which documented that:

 
 
            
12.       
The parties, through their counsel, have agreed that the arbitration 
agreements are fully enforceable and binding; that in the event of a dispute, 
all issues relating to the procedures for the arbitration, discovery, and 
management of the arbitration process will be resolved by the arbitrators; 
and that the action now pending in the Wyoming state court will be 
dismissed.

 
 
* * 
*

 
 
111.    Competent and persuasive evidence was 
presented at trial to establish by a preponderance of the evidence that 
Plaintiffs breached the material provisions of paragraphs 2, 3, 6, and 12 of the 
Settlement Agreement in (1) refusing to comply with and disputing the 
provisions of paragraph 2 thereof, which provide: "(b) the decision of the majority of the 
arbitrators as to the value of the Trust's stock in Wyoming Beverages and on any 
other matters before the arbitrators shall be final and binding on all 
parties.  Any decision or 
award of a majority of the arbitrators shall be enforceable in any federal or 
state court having jurisdiction thereof.  
The parties hereby expressly waive and release any challenge to the 
enforceability of any arbitrators' award or decision based on the arbitrator 
selection process or the identity of the arbitrators, or the submission of these 
matters to arbitration under the Stock Purchase Agreement."; (2) refusing to 
close on the sale of the subject Wyoming Beverages, Inc. stock in accord with 
the Arbitration Award; (3) challenging the award based, in part, on the identity 
of the arbitrators, to whom Plaintiffs expressly agreed in the Settlement 
Agreement; and (4) not bringing disputes arising out of and relating to the 
Settlement Agreement to be resolved by a majority of the arbitrators agreed to 
in the Settlement Agreement.  

 
 
(Emphasis 
added.)

 
 
[¶11]   The Trust challenges the district 
court's decision confirming the arbitration award.  Significantly, as the Clays point out, 
the Trust does not dispute the district court's findings that the Trust breached 
the settlement agreement by refusing to comply with the provision providing that 
"the decision of the majority of the arbitrators as to the value of the Trust's 
stock in Wyoming Beverages and on any other matters before the arbitrators shall 
be final and binding on all parties."  
Nor did the Trust contest the district court's finding that it had waived 
the right to seek judicial review of the identity of and selection of the 
arbitrators, or the arbitration process.  
The Clays, relying on our holding in Ultra Resources, Inc. v. McMurry Energy 
Co., 2004 WY 121, 99 P.3d 959 (Wyo. 2004), contend that the failure to 
challenge those rulings is fatal to the Trust's appeal.  We agree.

 
 
[¶12]   In Ultra Resources, appellant challenged 
the district court's confirmation of an arbitration award where the district 
court held that: (1) the parties had agreed, in a settlement agreement, that the 
outcome of the arbitration would be binding and non-appealable; and (2) the 
appellant had failed to prove the merits of its arguments in favor of vacating 
the award.  On appeal, the appellant 
designated for review only the merits of the decision not to vacate.  Id., ¶ 1, 99 P.3d  at 960.  We held 
that:

 
 
Rule 7.01 of the Wyoming 
Rules of Appellate Procedure requires an appellant to include in its opening 
brief a statement of the issues presented for review.  W.R.A.P. 7.01(d).  Rule 7.01(f), W.R.A.P., requires an 
appellant to present argument on every issue it is requesting this Court to 
review on appeal. 

 
 
. . . 

 
 
Presenting argument in a 
reply brief is not equivalent to framing the issues in an opening brief.  A reply brief is not a second chance to 
raise an issue or present argument that the appellant had the responsibility, 
but failed, to address in its opening brief.

 
 
. . . 

 
 
Since Ultra failed in its 
opening brief to designate or argue the issue of the propriety of the holding by 
the district court that it contractually waived its right to seek judicial 
review of the arbitration award, the holding is uncontested.  The points presented in this court on 
behalf of the plaintiff in error are very limited and it is, of course, 
elementary that points not urged in this court are deemed to be waived.  Ultra's opening brief raises no issue 
that would support reversal of the district court order.  Ultra's issue regarding the merits of 
its motion to vacate the arbitration award is moot.

 
 

Ultra 
Resources, ¶¶ 7, 11, 13, 99 P.3d  
at 962-64 (internal citation and quotation marks omitted).  

 
 
[¶13]   Here, the Trust failed to challenge 
dispositive rulings of the district court.  
As a result, all issues presented by the Trust concerning the arbitration 
award are moot.  The appeal in No. 
05-281 is dismissed.

 
 
No. 06-21 Attorneys' 
Fees

 
 
[¶14]   After the district court confirmed 
the arbitration award, the Clays submitted billing records and affidavits 
supporting the reasonableness of their request for attorneys' fees.  The Trust objected, claiming that 
attorneys' fees were not authorized, or alternatively, that the request for fees 
was excessive, and that the fees incurred should be allocated among the various 
claims the Clays asserted.  The 
Clays requested and obtained leave to file a reply.  In their reply, the Clays made efforts 
to defend the hourly rates charged by out-of-state attorneys, the involvement of 
multiple attorneys, and argued that the interrelationship between all the claims 
made allocation unnecessary in this case.  
To further address the Trust's allocation argument, the Clays identified 
a portion of the fees that could be attributed solely to the litigation of their 
other counterclaims or to the representation of WBI as 
intervenor.

 
 
[¶15]   After hearing argument and taking 
the matter under advisement, the district court issued a decision letter and its 
Order Awarding Attorney's Fees and Costs.  
The district court considered the federal lodestar test and the factors 
set forth in Wyo. Stat. Ann. § 1-14-126(b) (LexisNexis 2005).1  The district court found it appropriate 
to award a lesser amount than requested by the Clays in order to: 1) account for 
charges attributable to representation of WBI and the pursuit of the Clays' 
other counterclaims; and 2) adjust for reasonable rates and 
hours.

 
 
[¶16]   The Trust challenges the award as 
unauthorized and unreasonable.  We 
review a district court's decision awarding attorneys' fees under an abuse of 
discretion standard.  Askvig v. Wells Fargo Bank Wyo., N.A., 2005 WY 
138, ¶ 22, 121 P.3d 783, 789 (Wyo. 2005).  
The Trust bears the burden of establishing that the trial court abused 
its discretion.  Id.  Generally, Wyoming subscribes to the 
American rule regarding recovery of attorneys' fees, making each party 
responsible for his own attorneys' fees.  Schlesinger v. Woodcock, 2001 WY 120, ¶ 
21, 35 P.3d 1232, 1239 (Wyo. 2001).  
However, a contract may expressly authorize an award of attorneys' fees 
to a prevailing party.  Id.  

 
 
[¶17]   First, the Trust argues the 
Settlement Agreement does not provide for attorneys' fees.  The Trust does not dispute that the 
district court matter was one "arising out of or related" to the Settlement 
Agreement.  However, it asserts that 
the attorneys' fees provision requires that disputes arising from the Settlement 
Agreement be arbitrated.  The Trust 
reasons that because the district court action was not arbitration, that the 
agreement does not authorize an award of attorneys' fees by the district 
court.  We reject this reasoning 
because the obvious intent of the Settlement Agreement was to foreclose future 
litigation between the parties and to award attorneys' fees to the prevailing 
party in any dispute involving the Settlement Agreement.  The district court properly found that 
the Clays could recover attorneys' fees.

 
 
[¶18]   The Trust also asserts that the 
Clays did not meet their burden of proof in segregating attorneys' fees and 
establishing the reasonableness of those fees.  We have recognized that when possible, 
fees should be segregated between multiple clients and/or multiple claims.  Cline v. Rocky Mt., Inc., 998 P.2d 946, 
952 (Wyo. 2000).  The Clays 
submitted detailed billing records along with affidavits explaining the 
complexity of the litigation to support the reasonableness of their fee 
request.  Although the Clays did not 
concede that allocation was appropriate in this case, they identified a 
significant portion of the fees that might be properly allocated to other 
aspects of the litigation.  We 
conclude that the district court had ample evidence to determine the 
reasonableness of the fees and to make a proper allocation.  

 
 

[¶19]   The district court declined a 
portion of the fees incurred by the Clays, finding that some allocation among 
claims and parties was appropriate.  
The court's decision letter reflects thorough and thoughtful 
consideration of the parties' submissions and the factors in Wyo. Stat. Ann. § 
1-14-126(b).  It analyzed 
reasonableness according to the lodestar test: (1) whether the fee charged 
represents the product of reasonable hours times a reasonable rate; and (2) 
whether other factors of discretionary application should be considered to 
adjust the fee either upward or downward.  
Schlesinger, ¶ 21, 
35 P.3d  at 1239.  The district court concluded that 
downward adjustments were "necessary to establish an award of attorney's fees 
that represent[ed] the product of reasonable hours times a reasonable 
rate.'"  The district court rejected 
the Clays' contention that it was reasonable for four attorneys and two 
paralegals to attend the trial, limiting the hours to those charged by two 
attorneys and one paralegal.  
Additionally, the district court found that certain hourly rates charged 
by out-of-state attorneys did not represent "a reasonable rate" and should be 
limited to $200 per hour.  Overall, 
the district court awarded 36% less than the Clays requested for attorneys' 
fees.  We find no abuse of 
discretion and affirm the district court's award of attorneys' fees to the 
Clays.

 
 
FOOTNOTES

 
 

1Wyo. Stat. Ann. § 1-14-126(b) 
(LexisNexis 2005) provides:

 
 

(b) 
In civil actions for which an award of attorney's fees is authorized, the court 
in its discretion may award reasonable attorney's fees to the prevailing party 
without requiring expert testimony. In exercising its discretion the court may 
consider the following factors: 

 

(i) 
The time and labor required, the novelty and difficulty of the questions 
involved, and the skill requisite to perform the legal service properly; 

 

(ii) 
The likelihood that the acceptance of the particular employment precluded other 
employment by the lawyer; 

 

(iii) 
The fee customarily charged in the locality for similar legal services; 

 

(iv) 
The amount involved and the results obtained; 

 

(v) 
The time limitations imposed by the client or by the circumstances; 

 

(vi) 
The nature and length of the professional relationship with the client; 

 

(vii) 
The experience, reputation and ability of the lawyer or lawyers performing the 
services; and 

 

(viii) 
Whether the fee is fixed or contingent.