Title: News+Media Capital Group LLC v. Las Vegas Sun, Inc.

State: nevada

Issuer: Nevada Supreme Court

Document:

4137 Nev, Advance Opinion AS
IN THE SUPREME COURT OF THE STATE OF NEVADA

NEWS+MEDIA CAPITAL GROUP LLC, No. 80511
A DELAWARE LIMITED LIABILITY

COMPANY; AND LAS VEGAS REVIEW-

JOURNAL, INC., A DELAWARE,

LIMITED LIABILITY COMPANY,
Appellants/Cross-Respondents, FILED
vs. SEP 16

LAS VEGAS SUN, INC., A NEVADA

CORPORATION, SE
Respondent/Cross-Appellant. © fer caRVEER

 

Appeal and cross-appeal from a district court judgment

confirming an arbitration award in a commercial contract matter. Eighth

Judicial District Court, Clark County; Timothy C. Williams, Judge.
Affirmed.

  

Kemp Jones, LLP, and J. Randall Jones, Michael J. Gayan, and Mona
Kaveh, Las Vegas; Jenner & Block LLP and Richard L. Stone, David R.
Singer, and Amy M. Gallegos, Los Angeles, California,

for Appellants/Cross-Respondents.

Lewis Roca Rothgerber Christie LLP and E. Leif Reid, Kristen L. Martini,
and Nicole S. Scott, Reno; Pisanelli Bice PLLC and James J. Pisanelli, Todd
L. Bice, and Jordan T. Smith, Las Vegas,

for Respondent/Cross-Appellant.

ZI Wetee

 

 

 
BEFORE THE SUPREME COURT, EN BANC."
OPINION
By the Court, STIGLICH, J.

This appeal and cross-appeal concern the standard of review a
court should apply when asked to overturn the result of a private
arbitration, The parties are two newspapers with an extensive contractual
relationship. In their contract, they elected to submit disputes arising out
of the contract to binding private arbitration, instead of the court system.
When a dispute arose over amounts owed under the contract, the parties
submitted the dispute to arbitration, and the arbitrator rendered an award.
Neither party was fully satisfied with the award, so they both turned to the
district court to seek vacatur of the portions they perceived as unfavorable
to their respective sides. They had high bars to clear. Under well-settled
law, an arbitration award can only be overturned for very limited reasons,
and a mere error is not one of those reasons. Here, both parties argued in
essence that the arbitrator’s award was not simply wrong, but so
egregiously wrong that it was clear the arbitrator had failed to apply the
contract at all. The district court was not persuaded. Nor are we. We
affirm.

FACTS

In 1989, the Las Vegas Sun newspaper was struggling to stay
afloat financially. Pursuant to the federal Newspaper Preservation Act, the
Sun entered into a joint operating agreement (JOA) with its larger

 

*The Honorable Kristina Pickering, Justice, did not participate in the
decision of this matter.

 

 
so ee

competitor, the Las Vegas Review-Journal (RJ).? Under the agreement, the
‘two newspapers continued their separate news and editorial operations, but
the RJ took over production, distribution, and advertising. Because the RJ
handled distribution and advertising, it also collected all revenue. Thus,
the original agreement required the RJ to pay the Sun a sum each month
to cover the Sun’s news and editorial expenses.

Further, the agreement required the RJ to pay the Sun a fixed
percentage of total operating profits. Operating profits were defined as
“Agency Revenues" minus “Agency Expenses,” where “Agency” referred to
the joint venture. The original agreement was relatively clear as to what
costs could properly be considered deductible Agency Expenses. The
agreement allocated each newspaper a budget for news and editorial
expenses and a separate budget for promotional activities. The allocated
budgets were considered Agency Expenses. If a newspaper desired to
exceed its budget for promotional activities, the agreement was clear that it
could choose to do so, but additional costs would not be included in Agency
Expenses and would instead be borne by the respective newspaper.

In 2005, the parties entered into an amended agreement, which
tracked the structure of the 1989 agreement but included several important
changes. In particular, the new agreement did not refer to “Agency
Expenses.” It eliminated the existing allocations for news, editorial, and

 

?The Newspaper Preservation Act permits joint operating agreements
between competing newspapers—agreements that might otherwise violate
antitrust laws—when the United States Attorney General approves the
arrangement. 15 U.S.C. § 1803(b). This furthers the public interest in an
“editorially and reportorially independent” press, id. § 1801, by allowing
newspapers to create cost-saving synergies rather than fail. Appellant
News+Media Capital Group LLC is the parent company of the RJ.

 
promotional expenses. Instead, it simply stated that the parties would bear
their own editorial costs; that promotions of the RJ must “include mention
of equal prominence for the Sun” but either newspaper “may undertake
additional promotional activities for their respective newspaper at their
‘own expense”; and that “falll costs, including capital expenditures, of
operations under this Restated Agreement, except the operation of the Sun's
news and editorial department, shall be borne by the Review-Journal.”

‘The 2005 agreement also changed the formula for calculating
the profits payment. Whereas the 1989 agreement required a simple
monthly payment of a fixed percentage of operating profits, the 2005
agreement was somewhat more complicated. The payment for the year
2005 was set at $12 million. Going forward, this was to be adjusted on an
annual basis by the percentage change in earnings before interest, taxes,
depreciation, and amortization (EBITDA), which is an accounting term
roughly similar to operating profit. The 2005 agreement stated that, in
calculating EBITDA for any period that included earnings prior to April 1,
2005, such earnings must not be reduced by any amounts that would have
been deducted from earnings under the 1989 agreement's Appendix A.1—
which apparently meant that news and editorial allocations were not
deductible for that period. The 2005 agreement also listed certain items
that could not be deducted from EBITDA at any time. Importantly, the
agreement stated that “[tJhe Parties intend that EBITDA be calculated in a
manner consistent with the computation of ‘Retention’ as that line item
appears on the profit and loss statement for Stephens Media Group"! for
the period ended December 31, 2004.” The referenced profit-and-loss

 

8Stephens Media Group was a former owner of the RJ.

 
statement is in the record and shows that editorial expenses were among
the costs deducted to compute “Retention.”

Finally, the 2005 agreement contained a mandatory arbitration
clause covering any dispute as to amounts owed by the RJ to the Sun. The
clause stated that the arbitrator “shall also make an award of the fees and
costs of arbitration, which may include a division of such fees and costs
among the parties in a manner determined by the arbitrator to be
reasonable.”

PROCEDURAL HISTORY

The instant dispute boiled over in 2018, and the Sun sued the
RJ for breach of contract. The Sun alleged that the RJ had been improperly
deducting its own editorial and promotional expenses from its calculation of
EBITDA, thus reducing the profits payment to the Sun. Consistent with
the arbitration clause, the court compelled arbitration.

During arbitration, the Sun argued that the 2005 agreement
did not permit the RJ to deduct its own editorial and individual promotional
expenses before distributing profits to the Sun. The Sun supported this
argument by pointing to the elimination of the editorial allocation, the

 

exclusion of editorial costs for the first year, and the distinction between
deductible “equal prominence” promotional expenses versus non-deductible
separate promotional expenses. The RJ, of course, argued that it was
allowed to deduct its editorial expenses. The RJ relied heavily on the
Stephens Media Group profit-and-loss statement. In its view, editorial
expenses were deductible because that statement showed a deduction for
editorial expenses. With respect to the promotional expenses, the RJ
argued that the Sun had failed to prove that any particular promotional
activities did not benefit the Sun. The RJ further argued that, under
generally accepted accounting principles, even promotional activities that

5

 
only benefited the RJ would be deductible if the activities’ associated
revenues were included in EBITDA.

After hearing evidence and argument, the arbitrator issued a
decision in which he found that editorial expenses were not deductible and
that the Sun had proven damages. He wrote:

At issue here are multiple readings of the JOA. On

‘one hand the JOA includes language in Appendix D

indicating that the EBITDA calculation should be

performed in a manner akin to the computation of

“Retention” (a newspaper term of art used by a

prior owner of the RJ in preparing financial

statements). The term “Retention” was very

similar to earnings before interest, taxes,

depreciation and amortization (EBITDA). The

prior (pre-2005) computation of “Retention”

included Editorial Expenses of the RJ as allowable

deductible expenses. On the other hand, a specific

provision of the JOA (4.2), a provision which was

new to the calculation in the 2005 JOA, specifically

indicates that the RJ and Sun would each bear

their own editorial costs meaning that the RJ would

not, in keeping the books of the JOA, be permitted

to deduct editorial expenses of the RJ in computing

EBITDA of the JOA and the subsequent annual

profits payments (if any) to the Sun. The weight of

the evidence leads to the conclusion that the RJ has

improperly deducted the RJ editorial expenses

reducing the EBITDA of the JOA resulting in

improperly low annual profits payments to the Sun,
He also found that, while promotional expenses were not deductible if they
did not feature the Sun in equal prominence, the Sun had failed to prove its
damages. Finally, although both parties expressly requested attorney fees
in their post-hearing briefs, the arbitrator declined to award either party

attorney fees. He stated that, in his opinion, the JOA’s provision for “fees

 

 

   
 

and costs of arbitration” included the arbitrator's fee and the American
Arbitration Association's (AAA) fee but did not include attorney fees.

‘The Sun moved the district court to confirm the substance of
the award relating to editorial and promotional costs but to vacate the
arbitrator's denial of attorney fees. In the alternative, it asked the district
court to modify or correct the award to include $39,800 in expenses related
to the hearing and transcription, in addition to the sum paid to the AAA.
‘The RJ cross-moved the district court to vacate the award in its entirety. It
argued that the award was “so irrational and so inconsistent with the
parties’ contract and fundamental legal principles that vacating it is the
only option.... [T]he Arbitrator recognized that the parties’ contract
required editorial expenses to be deducted, but he did the opposite ....”
‘The RJ again insisted that editorial and promotional expenses should be
deductible.

‘The district court denied both motions and confirmed the
award. It found that there was no clear and convincing evidence that the
arbitrator had exceeded his powers, acted arbitrarily and capri
manifestly disregarded the law. Both as to the underlying dispute and as
to attorney fees, the district court found that the arbitrator based his rulings
on his interpretations of the parties’ contract. The parties cross-appealed.

DISCUSSION

‘Nevada has adopted the Uniform Arbitration Act of 2000, which
is consistent with this state's long-standing public policy in favor of
“efficient and expeditious enforcement of agreements to arbitrate.”
Tallman v. Eighth Judicial Dist. Court, 131 Nev. 713, 718, 359 P.3d 113,
117 (2015); see Phillips v. Parker, 106 Nev. 415, 417, 794 P.2d 716, 718
(1990). Arbitration has numerous benefits that lead parties to choose it over
litigation, It is faster and permits the parties to rely on an arbitrator with

 

sly, or

7

 
0 8 Ae

“specialized knowledge and competence.” Clark Cty. Pub. Emps. Ass'n v.
Pearson, 106 Nev. 587, 597, 798 P.2d 136, 142 (1990) (quoting Exber, Inc. v.
Sletten Constr. Co., 92 Nev. 721, 729, 558 P.2d 517, 522 (1976)). It is also
usually less expensive than litigation. See Burch v. Second Judicial Dist.
Court, 118 Nev. 438, 442, 49 P.3d 647, 650 (2002). And arbitration typically
enjoys a “presumption of privacy and confidentiality."* See Stolt-Nielsen

 

Indeed, in this very case, the parties agreed the arbitration would be
confidential. When the matter was brought to district court, the RJ then
sought and obtained an order sealing all materials filed or generated in the
arbitration, including the final award that was the subject of judicial
review. In a prior unpublished order, this court maintained those
documents under seal over the Sun’s objections. News+Media Capital Grp.
LLC v. Las Vegas Sun, Inc., Docket No. 80511 (Order, June 18, 2020). We
do not now have occasion to revisit that order. But see Howard v. State, 128
Nev. 736, 740, 291 P.3d 137, 139-40 (2012) (noting that documents “filed
with the court as part of the permanent record of a case and relied on in the
course of judicial decision-making” are presumptively public (internal
quotation marks omitted)); see also Jankula v. Carnival Corp., No. 18-cv-
24670-UU, 2019 WL 8051719, at *2 (S.D. Fla. Sept. 5, 2019) (unsealing
arbitration award after finding that confidentiality agreement did not
‘overcome “strong” presumption of public access to documents “integral to
resolving the merits of the parties’ dispute”).

 

Although the documents themselves remain sealed pursuant to this
court's prior order, we necessarily discuss the arbitrator's final award in
writing this opinion, The district court, too, quoted portions of the
arbitration award that were necessary to its decision. Such quotation is
proper because, otherwise, readers would be unable to discern “what the
Court has done.” See Glob. Reins. Corp. v. Argonaut Ins. Co., Nos. 07 Civ.
8196 (PKC), 07 Civ. 8350 (PKC), 2008 WL 1805459, at *2 (S.D.N.Y. Apr. 21,
2008), as amended (Apr. 24, 2008). While the parties may have chosen
arbitration in part to preserve their privacy and confidentiality, they both
then chose to seek judicial review and so necessarily gave up some measure
of confidentiality. ‘The fact that litigation arises from an arbitration does
not entitle the parties to “transfer the privileges of their private arbitration

 

 
on

S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 686 (2010) internal quotation
marks omitted). In the context of a dispute about arbitrabil
repeatedly held that courts must err on the side of arbitration and cannot
lightly deprive parties of those benefits. See, eg., Clark Cty. Pub. Emps.
Ass'n, 106 Nev. at 597, 798 P.2d at 142. Courts must respect (and enforce)

 

ty, we have

the contractual choice, especially by legally sophisticated businesses, to
agree to submit a dispute to binding private arbitration instead of the
judiciary.

For similar reasons, courts are properly reluctant: to overturn
an arbitration award once rendered. Although “{tJhis court reviews a
district court's decision to vacate or confirm an arbitration award de novo,”
Washoe Cty. Sch. Dist. v. White, 133 Nev. 301, 303, 396 P.3d 834, 838 (2017),
“the scope of judicial review of [the underlying] arbitration award is limited
and is nothing like the scope of an appellate court's review of a trial court's
decision,” Health Plan of Nev., Inc. v. Rainbow Med., LLC, 120 Nev. 689,
695, 100 P.3d 172, 176 (2004). “The party seeking to attack the validity of
an arbitration award has the burden of proving, by clear and convincing
evidence, the statutory or common-law ground relied upon for challenging
the award.” Id. ‘Those grounds do not include “that the [arbitrator]
committed an error—or even a serious error.” See Stolt-Nielsen, 559 U.S.
at 671. Rather, the grounds are quite narrow and present a “high hurdle”

to a public judicial forum.” Standard Chartered Bank Int'l (Americas) Ltd.
v. Calvo, 757 F. Supp. 2d 258, 260 (S.D.N.Y. 2010). We agree with the
Seventh Circuit that “[pleople who want secrecy should opt for arbitration.

When they call on the courts, they must accept the openness that goes with
subsidized dispute resolution by public (and publicly accountable) officials.”
Union Oil Co. of Cal. v. Leavell, 220 F.3d 562, 568 (7th Cir. 2000). We add
that that principle remains true even if the parties first arbitrate in secrecy
and subsequently “call on the courts” to review the arbitration.

 

 
for petitioners to clear. See id. The limited availability of appellate review
helps, in part, to preserve the efficiency and other benefits of arbitration.
We keep this purpose in mind as we analyze the grounds for review in this
matter.

‘There are three grounds upon which we are urged to overturn
or modify various parts of the award: one statutory and two common-law.
Statutorily, the parties argue that the “arbitrator exceeded his or her
powers.” NRS 38.241(1Xd). Turning to the common-law grounds, the
parties argue that the arbitrator's award was “arbitrary, capricious, or
unsupported by the agreement” and that the arbitrator “manifestly
disregarded the law.” See White, 133 Nev. at 306, 396 P.3d at 839 (quoting
Clark Cty. Educ. Ass'n v. Clark Cty. Sch. Dist., 122 Nev. 337, 341, 131 P.3d
5, 8 (2006). We consider each ground in turn and use this opportunity to
clarify the differences between them.

The arbitrator did not exceed his powers

The statutory grounds for vacatur are delineated in NRS
38.241. The only one arguably relevant here is that the “arbitrator exceeded
his or her powers.” NRS 38.241(1Xd). “Arbitrators exceed their powers
when they address issues or make awards outside the scope of the governing
contract... [But alrbitrators do not exceed their powers if their
interpretation of an agreement, even if erroneous, is rationally grounded in
the agreement.” Health Plan, 120 Nev. at 697-98, 100 P.3d at 178. “The
question is whether the arbitrator had the authority under the agreement

‘Other statutory grounds in NRS 38.241—which involve the
arbitrator's alleged partiality or misconduct, prejudicial procedural errors,
or the lack of an agreement to arbitrate in the first place—are not at issue
in this case.

10

 

 
to decide an issue, not whether the issue was correctly decided.” Id. at 698,
100 P.8d at 178. The award should be confirmed “so long as the arbitrator
is arguably construing or applying the contract” and the outcome has a
“colorable justification.” Id. After all, “lit is the arbitrator's construction
which was bargained for; and so far as the arbitrator's decision concerns
construction of the contract, the courts have no business overruling him
because their interpretation of the contract is different from his.” United
Steelworkers of Am. v. Enter, Wheel & Car Corp., 363 U.S. 593, 599 (1960).

However, “[t}he deference afforded an arbitrator... is not
limitless; he is not free to contradict the express language of the contract.”
White, 133 Nev. at 304, 396 P.3d at 838 (alterations in original) (quoting
Int'l Ass'n of Firefighters, Local 1285 v. City of Las Vegas, 107 Nev. 906, 910,
823 P.2d 877, 879 (1991); ef. Stolt-Nielsen, 559 U.S. at 671-72 (explaining
that an arbitrator exceeds his powers if he “strays from interpretation and
application of the agreement and effectively ‘dispense(s] his own brand of
industrial justice” (alteration in original) (quoting Major League Baseball
Players Ass'n v. Garvey, 532 U.S. 504, 509 (2001))). When an arbitrator
directly contradicts express contract language or adopts an interpretation
that is not at least “colorable,” he is not “arguably construing or applying
the contract.” See White, 133 Nev. at 304, 396 P.3d at 838 (internal
quotation marks omitted). In order to determine whether the arbitrator's
award is “colorable,” a reviewing court necessarily has to engage in at least
some of its own analysis of the contract's language. See id. at 305, 396 P.3d
at 839 (analyzing contract). We reiterate, however, that the court's analysis
is not plenary. The court's own conclusions about the contract’s meaning
are irrelevant—the parties bargained for the arbitrator's interpretation.
United Steelworkers, 363 U.S. at 599. Thus, the court should conduct an

ul

 

 
abbreviated review limited to determining whether the award, on its face,
(1) directly contradicts the express language of the contract, or (2) appears
fanciful or otherwise not “colorable.” A court will not find that the arbitrator
exceeded his or her powers by misinterpreting the contract unless there is
not even a minimally plausible argument to support the arbitrator's
decision.

Here, the arbitrator determined that the agreement did not
permit the RJ to deduct its editorial expenses from EBITDA. He stated that
there were “multiple readings” of the JOA and that different provisions
weighed in favor of different readings. Both parties presented at least
‘minimally plausible arguments in favor of their preferred reading. The
weight of the evidence led the arbitrator to adopt the Sun’s reading. We
cannot immediately perceive an express contradiction or an
extracontractual invention, The arbitrator simply decided an arguable
question—which is to say he performed the job he was hired to do.

‘The RJ's argument to the contrary is without merit, but we
address it here to further illustrate what is not an excess of authority. The
RJ contends that the provision in the contract referencing the Stephens
Media profit-and-loss statement is dispositive of this case. In its view,
because that statement shows editorial expenses were deducted from
Retention, editorial expenses must be deducted from EBITDA, full stop. We
agree that the RJ's contention appears to be one facially plausible
interpretation of the contract. But, as the arbitrator recognized, other
provisions appear to weigh in the opposite direction, including the provision
that each side will bear its own editorial costs. Both parties have offered
this court extensive briefing in support of their preferred interpretations.
We need not, and do not, decide which interpretation we would find more

12

 

 

 
persuasive if we were reviewing this matter afresh. We are satisfied that
the Sun's interpretation, adopted by the arbitrator, was at least minimally
plausible.

Likewise, the arbitrator’s decision that the contract did not
permit him to award attorney fees was not in excess of his authority. The
contract stated that the arbitrator “shall also make an award of the fees and
costs of arbitration, which may include a division of such fees and costs
among the parties in a manner determined by the arbitrator to be
reasonable.”* The phrase “fees and costs of arbitration” does not obviously
either include or exclude attorney fees.’ ‘There is at least some support for
the proposition that it excludes such fees, as contracts sometimes expressly
contrast “fees and costs of arbitration” with attorney fees. E.g., Rosenthal
v. Rosenblatt, A-3753-12T2, 2014 WL 5393243, at *6, *8 (N.J. Super. Ct.
App. Div., Oct. 24, 2014). But, again, it does not matter whether or not this

“It is clear from this language that the arbitrator was not required to
award attorney fees. He could have determined that it was reasonable for
each party to pay its own attorneys. The Sun contends the arbitrator erred,
not by failing to award fees, but by failing to recognize that he could award
fees under the contract. Because we find that the arbitrator's construction
of the contract was plausible, we do not consider whether an award can be
vacated for stating implausible reasons when the result is clearly
permissible.

"The Sun contends that “li}f there was any ambiguity regarding the
meaning of fees and costs, the parties’ course of dealing”—i.e., the fact that
both parties requested attorney fees—“settles the question.” That is plainly
wrong. If there was any ambiguity regarding the meaning of fees and costs,
then the arbitrator did not exceed his powers by choosing one reasonable
interpretation over another. We decline the Sun’s invitation to reweigh
evidence of the parties’ course of dealing.

 

13

 

 
court or a district court would have awarded attorney fees in a similar case;
nor does it matter whether there might be persuasive authority to support
an award of fees. What matters is that the arbitrator's interpretation was
an arguable construction of the contract that was at least minimally
plausible. We readily conclude that his interpretation met this standard.
‘The arbitrator’s decision was not arbitrary or capricious

We now turn to the common-law grounds for vacatur. The first
of these grounds provides that an award may be vacated if it is “arbitrary,
capricious, or unsupported by the agreement.” White, 133 Nev. at 306, 396
P.3d at 839 (internal quotation marks omitted). This standard “ensures
that the arbitrator does not disregard the facts or the terms of the
arbitration agreement.” Id. (internal quotation marks omitted). An award
is arbitrary and capricious if the arbitrator's factual findings are not
supported by substantial evidence in the record. Id. at 308, 396 P.3d at 841.

We take this opportunity to note that there is significant
overlap between the third part of this common-law ground, which asks
whether the award is “unsupported by the agreement,” and the statutory

"The Sun also contends that the JOA incorporated the AAA’s
Commercial Rules, which provide that an award “may include . .. an award
of attorneys’ fees if all parties have requested such an award ....” Am. Arb.
Ass'n, Commercial Arbitration Rules & Mediation Procedures, R-A7(AXii),
at 28 (Oct. 1, 2013), https://adr.org/sites/default/files/CommercialRules_
Web-Final.pdf. But it goes without saying that in rules, as in statutes, the
word “may’ is permissive.” Arnold v. Kip, 123 Nev. 410, 414 n.7, 168 P.3d
1050, 1052 n.7 (2007). We are accordingly unpersuaded that the AAA's
rules required the arbitrator to award attorney fees. Similarly, the Sun's
argument that the parties agreed to an award of attorney fees when they
both requested fees is misguided. While the Sun cites authority that
arbitrators may award fees when both parties request them, see, e.g.,
Hollern v. Wachovia Secs., Inc., 458 F.3d 1169, 1174 (10th Cir. 2006), the
Sun cites no authority showing that an arbitrator must do so.

 

 

14

 

 
ground provided by NRS 38.241(1)(4). As explained above, an arbitrator
exceeds his or her powers under that statute by contradicting the express
language of the agreement or otherwise adopting a fanciful or non-colorable
interpretation of the agreement. We see no meaningful distinction between
this standard and the common-law “unsupported by the agreement”
standard. Ifa court has already analyzed the contract under the statutory
ground and found the arbitrator was arguably construing or applying the
contract, then it is not necessary to redundantly analyze whether the award
is “supported by the agreement.” Accordingly, in this section, we simply

 

consider whether the award is arbitrary and capricious, in the sense that it
is based on factual findings that are not supported by substantial evidence.
Importantly, the disputed decisions in this case were matters of
pure contract interpretation. ‘The parties’ briefing and the record do not
show any significant factual disputes. “When the facts are not in dispute,
contract interpretation is a question of law.” Fed. Ins. Co. v. Am. Hardware
Mut. Ins. Co., 124 Nev. 319, 322, 184 P.3d 390, 392 (2008). The “arbitrary
and capricious” standard, being concerned with the sufficiency of evidence
to support factual findings, simply does not apply to invalidate the
arbitrator's legal conclusions as to the meaning of the contract language.
As discussed above, we conclude that the arbitrator's substantive findings
on the contract's interpretation are not reversible under this justification.
‘The Sun does also contend that the arbitrator acted arbitrarily
and capriciously by excluding from the award certain expenses other than
attorney fees, such as transcription costs, which the Sun asserts totaled
“almost $40,000." If supported by evidence, that could constitute a factual
dispute as to the amount of costs actually incurred. But the Sun's only
record citation for the amount of those costs refers to a brief it filed in the

15

 

 
 

istrict court, which simply asserted the amount of those costs without any
citation to evidence. We have nevertheless reviewed the record and have
not found evidence to support the Sun's assertion. ‘The “[alrguments of
counsel... are not evidence” and, standing alone, are categorically
insufficient to prove the existence or amount of those costs. Nev. Ass'n
Servs., Inc. v. Bighth Judicial Dist. Court, 180 Nev. 949, 957, 338 P.34 1250,
1255-56 (2014) (quoting Jain v. McFarland, 109 Nev. 465, 475-76, 851 P.24
450, 457 (1993). Thus, the Sun has not met its burden to prove this ground
for vacatur with “clear and convincing evidence.” Health Plan, 120 Nev. at
695, 100 P.3d at 176.
The arbitrator did not manifestly disregard the law

Finally, we may vacate an arbitration award if the arbitrator
“manifestly disregard[s] the law.” White, 133 Nev. at 306, 396 P.3d at 839,
“Manifest disregard of the law goes beyond whether the law was correctly
interpreted, it encompasses a conscious disregard of applicable law.” Health
Plan, 120 Nev. at 699, 100 P.3d at 179; see White, 133 Nev. at 307-08, 396
P.3d at 840-41 (finding no manifest disregard where arbitrator did not
“willfully ignore{ |” applicable collective bargaining agreement's terms). In
this sense, “manifest disregard” requires something approaching
intentional misconduct: the arbitrator must not only reach a legally
incorrect result, but must also do so deliberately. Cf. Montes v. Shearson

We reach the same conclusion under NRS 38.242(1\a), which
permits a court to modify or correct, rather than vacate, an award. Even if
the arbitrator made a “mathematical miscalculation” by failing to include
the Sun’s transcription and related costs, such mistake is not “evident” in
the absence of evidence showing the amount of those costs.

16

 

 

 
on

Lehman Bros., Inc., 128 F.3d 1456, 1459-62 (11th Cir. 1997) (finding
manifest disregard of the law where counsel expressly urged arbitrators
“not to follow” the relevant statute, and it appeared arbitrators likely
followed counsel's suggestion). This standard strikes a careful balance.
Vacatur in these narrow circumstances preserves the rule of law by
preventing private arbitrations from becoming a parallel legal system
subject to different rules of decision at the whim of individual decision-
makers. At the same time, this standard preserves the abbreviated
character of judicial review of arbitrations—recognizing that the parties
agreed to abide by the arbitrator’s honest, even if mistaken, decision.

‘The RJ points out that we have occasionally treated “manifest
disregard” as requiring something less than conscious, deliberate error. In
Coblentz v. Hotel Employees & Restaurant Employees Union Welfare Fund,
112 Nev. 1161, 925 P.2d 496 (1998), we held that an arbitration panel
manifestly disregarded the law when its conclusion “rendered one of the
contract] provisions meaningless” in violation of the general rule of
contract law that “[ilf at all possible, we should give effect to every word in
the contract.” Id. at 1169, 925 P.2d at 501 (quoting Caldwell v. Consol.
Realty & Mgmt. Co., 99 Nev. 635, 639, 668 P.2d 284, 287 (1983)). The RJ

 

argues that under Codlentz, an arbitrator manifestly disregards the law

‘We note that some federal courts have recently come to reject
manifest disregard as a basis for vacatur under the Federal Arbitration Act.
Gherardi v. Citigroup Glob. Mkts. Inc., 975 F.3d 1232, 1236 n.3 (11th Cir.
2020) (recognizing abrogation of Montes); accord Jones v. Michaels Stores,
Inc., 991 F.3d 614, 615 (6th Cir. 2021); see also Stolt-Nielsen, 559 U.S. at
672 n.3 (assuming without deciding that manifest disregard remains viable
basis for vacatur). Whatever the status of manifest disregard under the
FAA, it is firmly established in Nevada law as a ground for vacatur—albeit
an “extremely limited” one. See White, 133 Nev. at 306, 396 P.3d at 840.

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Semen

4

whenever the award renders language without effect and, here, the
arbitrator rendered the sentence about the Stephens Media profit-and-loss
statement meaningless, because the editorial costs are not being deducted
consistent with that sentence. As explained above, we disagree
substantively that that sentence is necessarily dispositive. But we take this
opportunity to clarify that the Coblentz court failed to recognize that a
manifest disregard necessarily involves a knowing disregard of the law.
Coblentz wrongly suggests that errors in applying the law, without more,
can suffice to overturn an award. Since that is inconsistent with our other
precedents, we overrule Coblentz to this extent only."

Returning to the instant case, while the parties put forth
several arguments that the arbitrator manifestly disregarded the law, most
of these are reducible to assertions that the arbitrator incorrectly applied
the law. They do not allege the requisite subjective intent and accordingly
do not comprise “manifest disregard.” One allegation does merit further
discussion: the RJ argues that the arbitrator manifestly disregarded the law
because he “clearly acknowledgled] that the [RJ's] editorial costs were
allowable deductions under the EBITDA formula in the 2005 JOA” but

 

issued an award inconsistent with that formula. If this assertion were true,

We note that the result in Coblentz nevertheless appears
supportable under the statutory “exceeded his or her powers” ground. See
NRS 38.241(1X¢). The contract in Coblentz required a tenant to obtain
insurance covering damages ‘in or upon the [leased] Premises or the
remainder of the Property,” but the arbitration panel ruled that the
contract's insurance requirement was limited only to the Premises and not
the remainder of the Property. 112 Nev. at 1167, 925 P.2d at 500 (emphasis
omitted). That is at least arguably the kind of express contradiction that is
not even minimally plausible and that a court can properly vacate as
exceeding the arbitrator's authority. As explained above, that is not the
situation here.

18

 

 

 
it might constitute a manifest disregard of the law since the arbitrator
would have disallowed something he subjectively knew was allowable. But
the RJ's assertion is simply belied by the record. As explained above, the
arbitrator expressly found that the JOA was subject to “multiple readings”
and that different provisions weighed in favor of different readings. The
arbitrator concluded that although the editorial costs were allowable
deductions under the 2004 Stephens Media profit-and-loss statement, they
were nevertheless not deductible under the 2005 agreement's EBITDA
formula. We see nothing in the award that suggests the arbitrator
knowingly reached a result contrary to his own understanding of what the
law required. We agree with the district court that the arbitrator “based
his rulings on his interpretations of the JOA.”

CONCLUSION

Nevada law permits contracting parties to agree to binding
private arbitration in order to take advantage of the benefits thereof: speed,
privacy, lower cost, and adjudicators expert in a particular subject matter.
Abbreviated judicial review is a feature, not a bug, of those parties’ choice.
If the parties or their counsel anticipate desiring substantive judicial
review, that is something they must consider before agreeing to arbitration
in the first place. Plenary judicial review of the merits would transform
binding arbitration into little more than mediation and would make lengthy
and expensive appeals common—as this case illustrates well.

We reaffirm that the grounds for overturning an arbitration
award are extremely limited and that errors of fact or law—even arguably
serious ones—do not justify vacating an award. An arbitrator's
misinterpretation of an agreement constitutes an excess of authority only if

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om

the adopted interpretation is not even minimally plausible. A factual
finding is arbitrary and capricious only if it is not supported by substantial
evidence in the record. And an arbitrator manifestly disregards the law
only when he or she knowingly disregards clearly controlling law. Here, the
parties alleged numerous errors, but none of those errors support vacatur
or modification under the narrow statutory or common-law grounds stated

above. Thus, the district court's order confirming the arbitration award is,

 

 

affirmed.

atin

Stiglich

We concur:
Ae tct os ote
Hardesty Parraguirre
abe Ute
Cadish

 

Herndon

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