Opinion ID: 1583125
Heading Depth: 1
Heading Rank: 4

Heading: analysis

Text: A. Substantial Evidence. The first two issues argued by Ales on appeal concern whether substantial evidence supports the arbitrator's decision. With exceptions not applicable here, chapter 679A allows the district court to vacate an arbitration award when substantial evidence on the record as a whole does not support the award. [1] Iowa Code § 679A.12(1)( f ). Generally, evidence is substantial if a reasonable person would accept the evidence as sufficient to reach a conclusion. Humphreys, 491 N.W.2d at 516 (citation omitted). This court does not consider evidence to be insubstantial merely because different conclusions can be drawn from the evidence. State v. Dohlman, 725 N.W.2d 428, 430 (Iowa 2006). [T]he ultimate question is whether the evidence supports the finding actually made, not whether the evidence would support a different finding. Id. (citations omitted). Our review of the record reveals substantial evidence supports the arbitrator's decision that Ales violated the covenant not to compete and that the arbitrator properly calculated AGLW's damages attributable to the Premier Properties group of corporations and Dr. Kendall. Although there was conflicting testimony as to the extent of control Ales had over Artioli's accounting practice, there was ample evidence in the record to support the arbitrator's decision that: (1) Ales controlled, financially supported, and associated with Artioli's accounting practice; (2) Artioli was providing services prohibited by the covenant not to compete; and (3) this conduct was a violation of the covenant not to compete. The evidence supports the arbitrator's finding that Ales controlled and associated with Artioli. Artioli held herself out as vice president of Signature Construction Company, one of Ales' companies, as Ales' vice president of finance, and as Ales' chief financial officer. Artioli was involved in the day-to-day management of some of Ales' companies. She testified she provide[d] assistance to the accounting staff, and generally oversaw Ales' staff. Artioli described her duties to Ales as an expansive list and that she [did not] know that [she] could list everything that [she] do[es] for Ales' companies. Artioli assisted in the hiring of staff and participated in the interview process for Ales' office managers and a compliance regional manager. When one of Ales' companies contested paying unemployment compensation for a former employee, Artioli represented the company at the appellate hearing. She also handled banking matters and held signature authority for Ales and his companies. Her authority encompassed the ability to negotiate or discuss some contracts for Ales and his companies. When applying for funding from the Iowa finance authority, Ales included Artioli as one of his staff. Ales testified Artioli works at his behest and that he had the right to define the role she would play on his behalf. Importantly, sixty-four percent of Artioli's gross revenues came from Ales and his companies. Additionally, Ales and Artioli shared a filing system at Renwick House. Both Artioli and Ales had access to each other's files. There was no separation between Ales' files and Artioli's files, or between old files transferred from AGLW and new files created by Ales or Artioli at Renwick House. The record also shows that by February 2002 Artioli was doing public accounting work for almost all of AGLW's former clients that AGLW claimed Ales was servicing and that Ales was servicing these clients through his control and association with Artioli. Artioli did not advertise her business. Her company was not listed in the yellow pages. Instead, Artioli testified she relied on networking and word-of-mouth to promote her business. Although Artioli claims she was not told how these former-AGLW clients happened to walk through her door when they became her clients, she stated she later became aware Ales referred these former-AGLW clients to her. Factually, Ales referred numerous AGLW clients to Artioli. Ales testified he believed because he had known these clients for years, his referral lent some weight to these clients' decisions to leave AGLW and go to Artioli. Finally, the evidence demonstrates Ales lent considerable financial support to Artioli. Artioli's office was located in Renwick House, which Ales owns. Ales and Artioli had an oral lease agreement and Artioli paid $1200 per month in rent. Included in the lease price was the use of Renwick House's telephone service, fax machine, copier, internet service, and general office supplies. Additionally, Artioli was able to utilize the services of Ales' employees at a rate of $40 per hour. However, from the time Artioli opened her office at Renwick House until the time of the arbitration hearing, a period of fifteen months, Artioli only paid Ales $4500 for these services. Ales also hired certain employees with Artioli's needs in mind. As to the evidence supporting the damages the arbitrator awarded for the Premier Properties group of corporations and Dr. Kendall, the record shows Artioli provided accounting services for Eagle Properties, Cheyenne Properties, Breckenridge Properties, and Quality Properties. Golden Properties and LeAnn Equities also paid Artioli. Ales concedes Dr. Kendall owns all of these entities, including Premier Properties. Bill Gabelmann, a partner with AGLW, described Premier Properties as a group of approximately eight corporations with different properties associated with each one. These eight corporations include Breckenridge Properties, Quality Properties, Cheyenne Properties, Eagle Properties, Golden Properties, and LeAnn Equities. Breckenridge Properties, Quality Properties, Cheyenne Properties, Eagle Properties, and Premier Properties all registered with the Iowa secretary of state and listed the home office as 1318 4th Avenue, Moline, Illinois. Further, when Artioli billed Breckenridge Properties, Quality Properties, Cheyenne Properties, and Eagle Properties she always billed the same person  Mark Nelson, who worked for Premier Properties. The record supports that Premier Properties was the umbrella name for a group of entities all run by Dr. Kendall, all in the business or related-business of property management. The agreement provided damages for a breach of the covenant not to compete in an amount equal to the last two (2) year's fees collected by [AGLW] from the client with whom Ales is alleged to have violated the Covenant Not to Compete. The arbitrator allowed damages to be calculated using fees generated by AGLW from 1997 to 1999, the last two years AGLW collected fees from the Premier Properties group of corporations and Dr. Kendall. Ales argues, [t]his sentence clearly refers to the last two calendar years' fees, not fees that were billed and collected four to six years before the violation allegedly occurred. On our limited review, every reasonable presumption will be indulged in favor of the legality of an arbitration award. Humphreys, 491 N.W.2d at 514; see also Iowa Code § 679A.12(2) (stating [t]he fact that the relief awarded could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award). Further, when an arbitrator interprets an agreement, the arbitrator is able to draw from the essence of the agreement and `as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority' even a court's conviction that the arbitrator committed error does not suffice to overturn the decision. Domke on Commercial Arbitration, § 39:12, at 24 (3d ed. 2005) (quoting United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 371, 98 L.Ed.2d 286, 299 (1987)). Under this standard, the arbitrator's interpretation of the language in the covenant not to compete allowed him to calculate the damages using fees generated by AGLW from 1997 to 1999, the last two years AGLW collected fees from the Premier Properties group of corporations and Dr. Kendall rather than from the last two calendar years of fees. Accordingly, we find substantial evidence supports the arbitrator's decision that Ales violated the covenant not to compete and the entry of damages with respect to the Premier Properties group of corporations and Dr. Kendall. B. Attorney's Fees and Costs. The agreement between the parties stated, the prevailing party shall be entitled to reimbursement from the non-prevailing party of the actual attorneys' fees and costs incurred in pursuing or defending a claim or dispute brought to arbitration or to a court of competent jurisdiction under the agreement. The arbitrator reduced AGLW's claim for attorney's fees and costs twice. The arbitrator made the first reduction because some of the claimed fees and costs were incurred prior to the arbitration, some were unrelated to the arbitration, some were excessive, and some were duplicative. The arbitrator made the second reduction in order to balance the attorney's fees and costs each party had to pay. The district court found the arbitrator should not have made either reduction stating [t]he arbitrator's use of `reasonable and necessary' legal fees and expenses and the application of a reasonableness standard are not supported by substantial evidence and do exceed the arbitrator's power and authority based upon the specific terms of the parties' agreement. The district court then vacated the attorney's fees and costs award and remanded the dispute back to the arbitrator to determine the attorney's fees and costs in accordance with the court's ruling. A party's disagreement with the arbitrator's conclusion is not grounds for vacating the award. Iowa City Cmty. Sch. Dist. v. Iowa City Educ. Ass'n, 343 N.W.2d 139, 144 (Iowa 1983). In discussing the arbitrator's authority, we have said: Unless the parties specifically limit the powers of the arbitrator in deciding various aspects of the issue submitted to him, it is often presumed that they intend to make him the final judge on any questions which arise in the disposition of the issue, including not only questions of fact but also questions of contract interpretation, rules of interpretation, and questions, if any, with respect to substantive law. Id. at 143 (citation omitted). The agreement between the parties gave the arbitrator the authority, without limitation, to decide any dispute between the parties concerning the agreement. Thus, the arbitrator had the authority to decide the attorney's fees and costs dispute and make any reductions as allowed by his interpretation of the agreement and the evidence. We disagree with the district court's determination that substantial evidence did not support the arbitrator's decision to make the first reduction in AGLW's claim for attorney's fees and costs. This reduction reduced AGLW's claim of over $115,000 to $83,485.08. When a written contract allows for the recovery of attorney's fees, the award must be for reasonable attorney's fees. Iowa Code § 625.22. The burden is on the party seeking to recover fees `to prove both that the services were reasonably necessary and that the charges were reasonable in amount.' Lynch v. City of Des Moines, 464 N.W.2d 236, 238 (Iowa 1990) (citation omitted). The factors to consider when awarding reasonably necessary attorney's fees include the time necessarily spent, the nature and extent of the service, the amount involved, the difficulty of handling and importance of the issues, the responsibility assumed and results obtained, the standing and experience of the attorney in the profession, and the customary charges for similar service. The district court must look at the whole picture and, using independent judgment with the benefit of hindsight, decide on a total fee appropriate for handling the complete case. Id. (citation omitted). The arbitrator first reduced AGLW's claim for attorney's fees and costs because the claimed fees and costs contained items that were incurred prior to the arbitration, were unrelated to the arbitration, were excessive, or were duplicative. This first adjustment is supported by substantial evidence and represents the reasonably necessary attorney's fees and costs AGLW expended in defending itself in the arbitration proceeding and the district court proceeding regarding Ales' request for acceleration of the New Note. We do agree, however, with the district court that substantial evidence does not support the second reduction made by the arbitrator to balance the fees and costs between the parties. The agreement states the prevailing party is entitled to recover its attorney's fees and costs. In interpreting the agreement, the arbitrator had the authority to determine what fees and costs were reasonably necessary and award that amount to the prevailing party. The evidence only supported the arbitrator's reduction of AGLW's claimed fees and costs that were incurred prior to the arbitration, were unrelated to the arbitration, were excessive, or were duplicative. Accordingly, neither the agreement, the evidence, nor the reasonably necessary standard for awarding attorney's fees allowed the arbitrator to balance the fees and costs between the parties. Consequently, we must vacate that part of the arbitrator's decision reducing the award of attorney's fees and costs to AGLW from $83,458.08 to $41,742.54.