Opinion ID: 2634577
Heading Depth: 1
Heading Rank: 6

Heading: Exceeding authority

Text: The Nevada Arbitration Act provides specific grounds for invalidating an arbitration award. [15] NRS 38.241(1)(d) dictates that a court shall vacate an arbitration award if the arbitrator exceeded his powers. Courts presume that arbitrators are acting within the scope of their authority. [16] Parties moving to vacate an award on the ground that an arbitrator exceeded his or her authority have the burden of demonstrating by clear and convincing evidence how the arbitrator exceeded that authority. Absent such a showing, courts will assume that the arbitrator acted within the scope of his or her authority and confirm the award. [17] Arbitrators exceed their powers when they address issues or make awards outside the scope of the governing contract. [18] The broader the arbitration clause in a contract, the greater the scope of an arbitrator's powers. [19] However, allegations that an arbitrator misinterpreted the agreement or made factual or legal errors do not support vacating an award as being in excess of the arbitrator's powers. [20] Arbitrators do not exceed their powers if their interpretation of an agreement, even if erroneous, is rationally grounded in the agreement. [21] The question is whether the arbitrator had the authority under the agreement to decide an issue, not whether the issue was correctly decided. [22] Review under excess-of-authority grounds is limited and only granted in very unusual circumstances. [23] An award should be enforced so long as the arbitrator is arguably construing or applying the contract. [24] If there is a colorable justification for the outcome, the award should be confirmed. [25] HPN claims that the arbitrator exceeded his authority because one portion of the 24-page decision mentioned that HPN had a duty to mentor Rainbow. HPN asserts that no partnership or mentoring duty is contained in the agreement and, therefore, the arbitrator went beyond the scope of the agreement. We disagree. The arbitration clause in the contract provided that all disputes regarding the contract would be arbitrated. It was a general, broad arbitration clause. The parties disputed whether Rainbow was entitled to a capitation rate increase, the size of the territory to be served and whether Rainbow's performance excused HPN from paying any increase due. These were the issues decided by the arbitrator. HPN takes the mentoring statement out of context. The arbitrator found that because HPN knew it was contracting with a novice firm with no pharmaceutical provider experience, it was aware that Rainbow would take some time to come up to speed. The arbitrator considered the personal relationships and discussions of the principles in reaching this conclusion. The arbitrator also found that the parties anticipated that Rainbow would have to learn on the job and that HPN expected, and was prepared to deal with, transition difficulties due to Rainbow's lack of experience. The arbitrator discussed the mentoring concept to the extent that HPN was prepared to work with Rainbow and that the problems HPN experienced initially were anticipated and cured. The arbitrator's total findings demonstrate that he was construing the contract, and the record supports more than a colorable justification for the outcome. Given this background, the arbitrator found that HPN was not acting in good faith when it denied a capitation rate increase on the grounds of Rainbow's inadequate performance and that Rainbow's performance was being used as an improper excuse to deny an increase in violation of HPN's duty of good faith and fair dealing. Finally, the arbitrator concluded that HPN's other contentions were based on its interpretation of an ambiguous contract, and the arbitrator noted that as HPN had drafted the contract, any ambiguity must be construed in Rainbow's favor. When read as a whole, the arbitrator's decision reflects that he did not convert the contract into a partnership or impose burdens outside of the contract. Instead, he applied the facts of the dispute to the contract, reasonably construing the contract and HPN's duty of good faith and fair dealing. HPN has failed to clearly demonstrate that the arbitrator exceeded his powers. We now turn to the issue of manifest disregard of the law.