Opinion ID: 2582592
Heading Depth: 2
Heading Rank: 1

Heading: the arbitrator's consideration of plat b issues

Text: ¶ 8 The written arbitration agreement provided that [the parties] acknowledge that the issues relating to the above-referenced Plat B of Riderwood Village have been resolved, and that, therefore, the arbitration will focus on the remaining issues of the dispute, those which relate to Plat C, thereby resolving all remaining issues in the case. In other words, payments for Plat B were not in dispute and, once the issues relating to Plat C had been resolved, all disputes would be at an end. The only reasonable interpretation of the agreement is that Plat B issues would not be submitted for resolution by the arbitrator. ¶ 9 We have previously held that only written arbitration agreements are enforceable under the Act. See Jenkins v. Percival, 962 P.2d 796, 799-800 (Utah 1998). [4] Further, the written agreement defines the scope of the arbitrator's authority. An arbitration award purporting to resolve questions beyond [the] jurisdictional boundary [of the agreement] is not valid. For a court to find that an arbitrator has exceeded his or her delegated authority, the court must determine that the arbitrator's award covers areas not contemplated by the submission agreement.' Intermountain Power v. Union Pacific R.R., 961 P.2d 320, 323 (Utah 1998) (quoting Buzas Baseball, 925 P.2d at 949). As noted above, the arbitration agreement in this case limited the arbitrator's authority to issuing an award for the Plat C dispute and also specifically precluded an award for the Plat B dispute. The arbitrator nevertheless issued an award for both plats. Therefore, the arbitrator exceeded his delegated authority unless the agreement was modified to allow an award for Plat B. ¶ 10 Both parties agree that evidence relating to Plat B issues was presented to the arbitrator, and Pacific concedes that it presented some evidence in its own case in chief. However, Pacific maintains that it presented evidence relating to Plat B for the sole purpose of establishing a course of dealing relevant to Pacific's arguments concerning its Plat C evidence. Orton responds that Pacific opened the door to Plat B issues and that Pacific's own evidence made clear that Plat B issues were in dispute. Orton thus contends that the parties' course of conduct at the arbitration hearing invited and necessitated a modification in the scope of that hearing. Neither party alleges an express agreement to modify the hearing, either orally or in writing. The issue we must resolve, then, is the level of proof necessary to demonstrate a mutual decision by the parties to modify the scope of the arbitration originally established by a formal written agreement to arbitrate. The court of appeals held that the initial written agreement could be modified by implication, that is, by the conduct of the parties in presenting evidence relating to a dispute outside the scope of the initial agreement. See Orton, 1999 UT App 217, ¶¶ 12-13, 982 P.2d 94. We disagree. ¶ 11 Notwithstanding the fact that an arbitration agreement is, in its essence, a contract between the parties, it is governed by a statute that imposes requirements not found in ordinary common law contracts. As prior cases make clear, arbitration agreements, unlike ordinary contracts, must be contained in a written document setting forth the scope of the dispute to be arbitrated. See Percival, 962 P.2d at 799-800 (holding agreement must be in writing to be enforceable under the Act); Intermountain Power, 961 P.2d at 323 (holding arbitrator's authority limited by scope of arbitration agreement); Buzas Baseball, 925 P.2d at 949 (same). This requirement at once enhances predictability and seeks to ensure that the parties are deliberately waiving their substantial rights to judicial review. It also seeks to relieve the parties and the judiciary of the burden of revisiting disputes that have been submitted to binding arbitration. ¶ 12 In this regard, we have frequently stated that the goal of the Act is to encourage extra-judicial settlement of legal disputes. As observed in Buzas Baseball, the Utah Arbitration Act `reflects long-standing public policy favoring speedy and inexpensive methods of adjudicating disputes.' 925 P.2d at 946 (quoting Allred v. Educators Mut. Ins. Ass'n, 909 P.2d 1263, 1265 (Utah 1996)); see also Intermountain Power, 961 P.2d at 323. That policy, however, would not be furthered by a doctrine that simply seeks to affirm the maximum possible number of arbitration awards. Parties contemplating arbitration must be assured that the arbitration will proceed according to established standards that both sides deem to be fair and just. To the extent rules that govern arbitration can be rendered more clear and less susceptible to contested interpretation, the policy of promoting arbitration will be advanced because there will be fewer opportunities to contest an arbitrator's award at the district court or the appellate level. A policy that refuses to overturn an arbitration award that has clearly departed from governing standards established at the outset will, in the long run, simply discourage other prospective litigants from submitting their disputes to binding arbitration. Furthermore, we have held that no formal record of arbitration proceedings may properly be considered by any court. In Buzas Baseball, we held that the trial court and [appellate courts] must rely solely upon the arbitration award itself and the memorandum of agreement which binds the parties and limits the scope of issues to be determined by the arbitration. 925 P.2d at 946 n. 2. Accordingly, the rules governing the arbitration proceeding must be sufficient in themselves to provide the evidence necessary for a court to either confirm, modify, or vacate an arbitrator's award pursuant to the statute. ¶ 13 The scope of the arbitration is a governing standard that is fundamental to the expectations of the parties to the arbitration. The parties must know the boundaries of the subject matter of the dispute submitted and the potential liabilities flowing therefrom before they are able to intelligently waive their rights to submit their disputes to formal litigation. And because the authority of the arbitrator derives from the arbitration agreement itself, see Buzas Baseball, 925 P.2d at 949, it follows that the scope of an agreement to arbitrate cannot be modified except by proper concurrence of the parties to the arbitration. ¶ 14 The court of appeals concluded that a written arbitration agreement may be implicitly modified merely by the parties' actions in bringing evidence of matters outside the scope of the agreement. We disagree. The decision of the court of appeals is contrary to the statutory criteria governing arbitration and to our decisions construing those criteria. Where the statute and our case law have held that arbitration agreements must be in writing, the preference for an explicit expression of the intent of the parties regarding the scope of arbitration is well-established. To allow modification of an express written agreement by less than a similarly explicit intent would simply circumvent the statutory requirements and the policies they vindicate. In this case, no express written agreement to modify the scope of the arbitration has been alleged, let alone proven. We therefore reverse and hold that the arbitrator exceeded the authority granted to him when he issued an award for Plat B.