NOTICE: NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL

AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

MELLCELL, LLC, Plaintiff/Appellee,

v.

LINDA ALLEN, et al., Defendants/Appellants.

No. 1 CA-CV 20-0530 

Appeal from the Superior Court in Maricopa County

No. CV2019-014220

The Honorable Danielle J. Viola, Judge

AFFIRMED

COUNSEL

Messner Reeves, LLP, Phoenix

By David A. Selden, Julie A. Pace, Daniel L. Marks

Counsel for Plaintiff/Appellee

McGill Law Firm, Scottsdale

By Gregory G. McGill

Counsel for Defendants/Appellants

FILED 5-17-2022
MELLCELL v. ALLEN et al.

Decision of the Court

2

MEMORANDUM DECISION

Judge Jennifer M. Perkins delivered the decision of the Court, in which 

Presiding Judge David D. Weinzweig and Judge Brian Y. Furuya joined.

P E R K I N S, Judge:

¶1 Linda Allen and Michael Judy (collectively “Defendants”) 

appeal the superior court’s ruling that confirmed an arbitration award in 

favor of Preferred Spectrum Investments, LLC (“Preferred Investments”). 

For the following reasons, we affirm. 

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Preferred Investments formed in 2009 to provide 

telecommunications services and to fund a lawsuit against Preferred 

Spectrum Communications, Inc. (“Preferred Communications”). Through 

its operating agreement, Preferred Investments established a five-member 

management committee (“Committee”) to conduct the corporation’s 

affairs. Judy served as the Committee’s president from July 2009 to August 

2014, and Allen served as treasurer from May 2010 to August 2014. Section 

7.20 of the operating agreement enabled Committee members to receive 

“reasonable compensation” for their services but only by agreements 

“approved by a concurrent Majority-In-Interest vote of the Members.”

¶3 In September 2011, the Committee reduced its managers’

monthly salaries from $3,500 to $1,500. But the Committee voted to 

continue paying Judy $5,000 per month, and Allen $3,500 per month. Three 

months later, the Committee suspended all monthly salary payments “until 

funds [became] available,” except for Judy, who continued to receive $5,000 

per month. 

¶4 In July 2014, the Committee’s secretary, Carole Downs, wrote

to all Preferred Investments members and identified a conflict of interest 

from all managers owning investment interests in Preferred 

Communications, which remained in litigation with Preferred Investments.

Downs recommended the Committee add two to three new managers who 

held no investment in Preferred Communications to facilitate negotiations 

between the two companies. Downs then called an annual meeting of 

Preferred Investments’ members to elect new managers to the Committee. 
MELLCELL v. ALLEN et al.

Decision of the Court

3

¶5 On August 6, 2014, the Committee met and approved 

payment of its managers’ salaries from December 2011 through December 

2012. The Committee also approved withholding manager salaries owed 

from January 2013 through August 6, 2014, except Allen’s. On or after 

August 7, 2014, Preferred Investments started issuing checks to managers.

Judy received $10,000, and Allen received $119,000. Downs returned her 

$45,000 check because Section 7.20 of the operating agreement required a 

majority of all shareholders to approve the Committee Members’ 

“reasonable compensation.”

¶6 Preferred Investments members elected four new managers 

to the Committee in late August or early September 2014 and re-elected 

Downs. Neither Allen nor Judy sought re-election. The Committee then 

sought repayment of salaries paid pursuant to the August 6, 2014 meeting. 

All former managers, except Defendants, settled with Preferred 

Investments. Defendants refused to settle or repay the money they received.

¶7 Thereafter, Preferred Investments initiated arbitration,

claiming breach of contract, breach of fiduciary duty, breach of the duty of 

care, breach of the duty of loyalty, and unjust enrichment. Defendants 

asserted counterclaims for breach of contract, fraudulent concealment, and 

negligent misrepresentation. 

¶8 The arbitrator issued a final award (“Award”) on August 26, 

2019, concluding Defendants breached Section 7.20 of the operating 

agreement by compensating themselves without the requisite membership 

approval. The Award required Judy to repay $10,000, and Allen $119,000, 

to Preferred Investments and held Defendants jointly and severally liable 

for $170,425.83 in arbitration fees and costs. 

¶9 In October 2019, Preferred Investments applied to confirm the 

Award in superior court. Defendants asked the court to dismiss the 

application, vacate the Award, and set the matter for rehearing. Defendants 

argued: (1) Preferred Investments obtained the Award through fraud and 

other undue means; (2) the lengthy arbitration process violated “settled 

principles of arbitration efficiency;” and (3) the arbitrator improperly

disregarded Delaware law. 

¶10 The superior court confirmed the Award and ordered

Defendants to pay Preferred Investments’ attorneys’ fees and costs. The 

court found, “the alleged fraud does not withstand scrutiny as a basis to 

vacate the award.” Rejecting Defendants’ other arguments, the court found
MELLCELL v. ALLEN et al.

Decision of the Court

4

the length of the arbitration proceedings provided no valid basis to vacate 

the Award, and the arbitrator did not ignore Delaware law.

¶11 Defendants timely appealed, and we have jurisdiction under 

A.R.S. § 12-2101(A)(1). During the pendency of this appeal, Preferred 

Investments filed for bankruptcy. MellCell, LLC (“MellCell”) bought 

Preferred Investments’ assets, which included the Award and associated 

judgment, and is now the real party in interest.

DISCUSSION

¶12 The legislature has substantially limited judicial review of an 

arbitration award because of the state’s interest in supporting speedy and 

inexpensive dispositions of disputes. Atreus Cmtys. Grp. of Ariz. v. Stardust 

Dev., Inc., 229 Ariz. 503, 506, ¶ 13 (App. 2012). Defendants bear the burden 

of proving the existence of any asserted statutory ground to vacate the 

Award. See Fisher v. USAA Cas. Ins. Co., 245 Ariz. 270, 272, ¶ 9 (App. 2018). 

We review the confirmation of the Award for an abuse of discretion. See id.

¶13 Arizona’s Revised Uniform Arbitration Act (the “Act”) 

governs all arbitration agreements in the state. A.R.S. § 12-3003(A)(3). 

Defendants essentially raise two statutory arguments: Preferred 

Investments obtained the Award by fraud, § 12-3023(A)(1), and the 

arbitrator exceeded his powers, § 12-3023(A)(4).

¶14 “A court may refuse to confirm an arbitration award because 

of undue means only when the undue means are (1) not discoverable upon 

the exercise of due diligence prior to the arbitration, (2) materially related 

to an issue in the arbitration, and (3) established by clear and convincing 

evidence.” Nolan v. Kenner, 226 Ariz. 459, 462, ¶ 7 (App. 2011) (cleaned up). 

¶15 Defendants contend that Downs withheld necessary 

information, namely her involvement in financial dealings with Preferred 

Investments and Preferred Communications, and this information would 

have revealed Downs acted out of self-interest—and not as a 

whistleblower—when she reported her concerns about manager

compensation. But Downs’s alleged motivation was not materially related 

to the issue in arbitration: whether the Committee violated Section 7.20 of 

the operating agreement when its members paid themselves without first 

receiving majority shareholder approval. The superior court thus correctly 

determined Defendants failed to establish Preferred Investments obtained 

the Award by fraud.
MELLCELL v. ALLEN et al.

Decision of the Court

5

¶16 Defendants’ other statutory ground for objecting to the 

Award is that the arbitrator exceeded his authority by “refusing to apply 

Delaware law” on the applicable statute of limitations and in interpreting 

the contract. But the record establishes that the arbitrator explicitly applied 

Delaware law. Defendants merely disagree with his conclusions. Judicial 

review is not available on this basis. See Smitty’s Super-Valu, Inc. v.

Pasqualetti, 22 Ariz. App. 178, 180 (App. 1974) (within the boundaries of the 

parties’ agreement, “the arbitrators’ decision is final both as to questions of 

fact and law”).

¶17 The superior court did not abuse its discretion when it 

confirmed the Award. 

¶18 MellCell requests attorneys’ fees and costs on appeal under 

the operating agreement, and A.R.S. §§ 12-349, 12-2106, and 12-3025. 

MellCell also requests attorneys’ fees and costs incurred while preparing a 

response to Defendants’ motion to supplement the record. Section 12.5 of 

the operating agreement explicitly authorizes recovery of “reasonable 

attorneys’ fees and court and other costs.” MellCell, as the prevailing party, 

is entitled to its reasonable attorneys’ fees and costs on appeal, upon 

compliance with ARCAP 21. Its recoverable fees and costs include 

responding to Defendants’ motion to supplement the record.

CONCLUSION

¶19 We affirm.