Court Opinion

ID: 3196895
Source: CourtListenerOpinion
Date Created: 2016-04-22 15:05:51.24206+00
Date Added: 2024-06-11T14:37:10.274225
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF NEVADA

SUMMA EMERGENCY ASSOCIATES,                          No. 67124
INC., A FOREIGN CORPORATION,
Appellant,
vs.                                                        FILED
EMERGENCY PHYSICIANS
INSURANCE COMPANY, RISK                                     APR 2 1 2016
RETENTION GROUP, A NEVADA
CAPTIVE RECIPROCAL INSURANCE
COMPANY,
Respondent.

                ORDER OF REVERSAL AND REMAND

           This is an appeal from an order confirming in part an
arbitrator's award and an order for attorney's fees. Second Judicial
District Court, Washoe County; Connie J. Steinheimer, Judge.
           Appellant Summa Emergency Associates, Inc. (Summa),
contracted with Emergency Physicians Insurance Company (EPIC) for
medical insurance in 2004. As part of the contract, EPIC, a new company,
required its members to contribute surplus funds in addition to insurance
premiums. The agreement did not guarantee that EPIC would ever repay
the surplus contribution, and it explicitly prohibited Summa from
demanding such a refund.
           Years later, after EPIC disclosed to all of its partners that it
had dismissed its management group because the group had
misappropriated funds, Summa chose not to renew its coverage with
EPIC. A year after leaving EPIC, Summa demanded a refund of its
surplus contribution; EPIC refused.
            Pursuant to the contract, the two parties arbitrated in
Nevada. Although the arbitrator found that EPIC dealt in good faith, did
not commit fraud, and did not breach the agreement, the arbitrator
awarded Summa half of its surplus contribution. The arbitrator found
that the contract was an adhesion contract, it lacked readily ascertainable
terms and it became substantively unconscionable due to changed
circumstances.
            EPIC petitioned the district court to confirm the portions of
the award absolving it from any wrongdoing and vacate the portion
awarding a refund due to unconscionability. The district court agreed
with EPIC and vacated the award because it found that the arbitrator
manifestly disregarded the law and acted arbitrarily and capriciously
when making the award. The district court also ordered attorney's fees
and costs in favor of EPIC. Summa argues that the district court
essentially reweighed the evidence to come to its conclusion, thus
overstepping its authority. We agree.
            This court reviews a district court's decision to vacate or
confirm an arbitration award de novo.       Thomas v. City of N. Las Vegas,
122 Nev. 82, 97, 127 P.3d 1057, 1067 (2006). The scope of a district court's
review of an arbitration award, however, is limited. 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.

                                        2
                            The Nevada Arbitration Act provides specific statutory
                grounds for invalidating an arbitration award.' Additionally, there are
                two common-law grounds that a district court may utilize to vacate an
                arbitrator's award: (1) if "the award is arbitrary, capricious, or
                unsupported by the agreement:" or (2) if "the arbitrator manifestly
                disregarded the law." Clark Cty. Educ. Ass'n v. Clark Cty. Sch. Dist., 122
Nev. 337, 341, 131 P.3d 5, 8 (2006).
                            An arbitrator's finding is not arbitrary and capricious when it
                is a mere misinterpretation of the law, but only when it is a finding that is
                not supported by substantial evidence in the record.        Id. at 343-44, 131

                P.3d at 9-10. "Substantial evidence is evidence that a reasonable mind
                might accept as adequate to support a conclusion."              Wh,itemaine v.

                Aniskovich, 124 Nev. 302, 308, 183 P.3d 137, 141 (2008).
                            "Judicial inquiry under the manifest-disregard-of-the-law
                standard is extremely limited."     Bohlmann v. Byron John Printz & Ash,
                Inc., 120 Nev. 543, 547, 96 P.3d 1155, 1158 (2004), overruled on other
                grounds by Bass-Davis v. Davis, 122 Nev. 442, 134 P.3d 103 (2006).
                Arbitrators are given great deference and "even if the arbitrator made an
                error of fact or misapplied the law," it is not in and of itself enough to label
                it a manifest disregard of the law.    Health Plan of Nev., 120 Nev. at 699,
                100 P.3d at 179. "Manifest disregard of the law goes beyond whether the
                law was correctly interpreted, it encompasses a conscious disregard of
                applicable law." Id.

                      See NRS 38.241. EPIC did not seek to vacate under the statutory
                      1
                grounds, thus, the district court focused solely on the common-law
                grounds.

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                            Essentially, neither standard permits a district court to vacate
                an award based upon what it considers to be a mere misinterpretation of
                the law or upon reweighing the evidence. Clark Cty. Educ. Ass'n, 122 Nev.
                at 343, 131 P.3d at 9; Bohlmann, 120 Nev. at 547, 96 P.3d at 1158. From
                a policy standpoint, to allow the reviewing court to do so would defeat the
                purpose of arbitration because it would waste the parties' time and
                resources at arbitration, just to have the district court decide the issues
                anew. The record suggests, however, that is precisely what the district
                court did here.
                            Here, there was no clear and convincing evidence that the
                arbitrator either acted arbitrarily or capriciously or manifestly
                disregarded the law. The arbitrator relied upon evidence, including the
                fact that EPIC would eliminate the surplus requirement for new members
                without crediting existing members, that was not readily ascertainable at
                the time Summa contracted with EPIC. He also found that EPIC
                presented Summa with a pre-printed adhesion contract with instructions
                to accept by signing, rather than negotiating a contract unique to the
                parties. Finally, the arbitrator correctly stated that Nevada law does not
                foreclose upon use of changed circumstances to render an agreement
                unconscionable. See e.g., Coury v. Robison, 115 Nev. 84, 88-89, 976 P.2d
518, 520-21 (1999) (stating that conditions that are not void as a matter of
                law may become void in particular circumstances if changed
                circumstances so dictate). 2

                      2Although   Coury's circumstances are not the same as those in this
                case, the arbitrator was correct that the changed circumstances doctrine is
                a possibility in Nevada, and thus he did not manifestly disregard the law
                on unconscionability.

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                            It is neither the district court's place nor ours to determine
                whether the arbitrator came down on the right side of this dispute. The
                issue before the district court was whether, by clear and convincing
                evidence, the arbitrator lacked either substantial evidence or rules of law
                to support his conclusions. He lacked neither. Accordingly we
                            ORDER the judgment of the district court 'REVERSED AND
                REMAND this matter to the district court with instructions to confirm the
                arbitrator's award. 3

                                                   Gibbons

                cc:   Hon. Connie J. Steinheimer, District Judge
                      James Georgeson, Settlement Judge
                      Niekamp Weisensell, Mutersbaugh & Mastrantonio, LLP
                      Parsons Behle & Latimer/Reno
                      Holland & Hart LLP/Las Vegas
                      Washoe District Court Clerk

                      3 Because   we vacate the district court's decision to vacate the
                arbitrator's award, we necessarily vacate the award of attorney's fees and
                costs as well, without specifically reaching Summa's arguments regarding
                attorney's fees and costs.

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