Court Opinion

ID: 161813
Source: CourtListenerOpinion
Date Created: 2010-08-14 07:18:28+00
Date Added: 2024-06-11T17:24:38.289222
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                    UNITED STATES COURT OF APPEALS
                                                                          DEC 3 2001
                                 TENTH CIRCUIT
                                                                    PATRICK FISHER
                                                                             Clerk

 CURTISS SIMMONS CAPITAL
 RESOURCES, INC., a Colorado
 corporation,

               Plaintiff-Appellant/
               Cross-Appellee,                         Nos. 00-1487
                                                       and 00-1511
          v.                                           (D. Colorado)
 EDWARD KRAEMER & SONS,                             (D.C. No. 97-D-643)
 INC.,

               Defendant-Appellee/
               Cross-Appellant,

 NATIONAL UNION FIRE
 INSURANCE COMPANY OF
 PITTSBURGH,

               Defendant.

                            ORDER AND JUDGMENT          *

Before TACHA , Chief Circuit Judge , McKAY and ANDERSON , Circuit Judges.

      *
       This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      Curtiss Simmons Capital Resources, Inc. appeals from the grant of a motion

for confirmation of, and the denial of its own motion to vacate, an arbitration

award in favor of Edward Kraemer & Sons, Inc. Kraemer cross-appeals the

denial of its motion for attorney’s fees incurred in seeking confirmation of the

award. We affirm.

                                 BACKGROUND

      The origin of this case is a subcontract between Kraemer and Consolidated

Landscaping, Inc., dated March 2, 1992, pursuant to which Consolidated agreed

to perform certain landscaping work for Kraemer, who was the general contractor

for the construction of the Twentieth Street Viaduct in Denver, Colorado, a

project supervised by the Regional Transportation District (“RTD”). The

subcontract contained a dispute resolution paragraph providing for arbitration to

resolve any disputes between Kraemer and Consolidated, and it contained an

attorney’s fees provision providing for attorney’s fees and costs for the prevailing

party in any legal action.

      On November 2, 1994, pursuant to Colo. Rev. Stat. § 38-26-107(1),

Consolidated filed a statement of claim with the RTD, alleging that Kraemer was

liable to Consolidated for $281,058.09 for damages purportedly caused by delays

in the viaduct project. In accordance with § 38-26-107(2), the RTD withheld

                                         -2-
contract funds from Kraemer to cover that amount, pending resolution of the

claim. On March 1, 1995, Consolidated filed an amended claim in the amount of

$358,605.60 and the RTD withheld $366,637.40 to cover that amended amount.

      In October 1995, Consolidated received a $500,000 loan from Curtiss

Simmons, payable on or before April 24, 1996. In connection therewith,

Consolidated executed a security agreement granting Curtiss Simmons a security

interest in the following:

      All accounts and accounts receivable now owned, or hereafter
      acquired, together with all increases to and replacement thereof,
      insurance proceeds, contract rights and general intangibles now
      owned or hereafter acquired.

      The security interest extends to any and all proceeds of the property
      described herein, including, but not limited to account, chattel paper,
      documents, deposit accounts, and goods.

Appellant’s App. at 172. Curtiss Simmons loaned additional funds so that

Consolidated’s total indebtedness exceeded $700,000.

      On April 17, 1996, Curtiss Simmons notified Kraemer of its loan to

Consolidated and its security interest, told Kraemer that Consolidated had

defaulted on the loan, and demanded that Kraemer pay Curtiss Simmons any

money owed Consolidated under the subcontract.

      At about this same time, Consolidated also defaulted on its contractual

obligations to Kraemer. Kraemer then made a demand on Consolidated’s surety,

United Pacific Insurance Company, to perform Consolidated’s remaining

                                         -3-
obligations under the subcontract. In May 1996, United Pacific assumed

Consolidated’s subcontract obligations and hired a replacement to perform all of

Consolidated’s remaining work on the viaduct project.

      A dispute then arose between Curtiss Simmons and Union Pacific over

priority to any balances left under the subcontract. They ultimately reached an

agreement whereby Curtiss Simmons disclaimed any interest in the subcontract

balance but retained the right to pursue Consolidated’s claim for delay damages

against Kraemer.

      On March 7, 1997, Curtiss Simmons filed this suit in Colorado state court

against Kraemer and its surety, National Union Fire Insurance Co., seeking

$364,678.40 in damages plus attorney’s fees and interest. Citing diversity

jurisdiction, Kraemer and National Union subsequently removed the case to

federal district court in Colorado. After some discovery, Curtiss Simmons sought

to invoke the arbitration clause in the subcontract and filed a stay in federal court

pending arbitration. The magistrate judge eventually granted the stay. On

November 21, 1997, Curtiss Simmons filed a demand for arbitration against

Kraemer in the amount of $768,310, representing Curtiss Simmons’ asserted

damages in connection with its delay claim.

      Kraemer filed a counterclaim against Curtiss Simmons for damages

incurred by Kraemer because of Curtiss Simmons’ pursuit of the delay claim. The

                                          -4-
damages, styled “Lost Interest on Escrow Funds,” Appellant’s App. at 70,

represented the interest allegedly lost by Kraemer on the funds held in escrow by

the RTD pending resolution of the delay claim.

      Kraemer and Curtiss Simmons agreed to a bifurcated proceeding in which

the merits of the claims between Kraemer and Curtiss Simmons would be

determined in the first phase and the determination of attorney’s fees to be

awarded the prevailing party, if any, would be determined in the second phase.        1

      The claims between Kraemer and Curtiss Simmons were argued to a panel

of arbitrators August 2-6, 1999. On August 9, the panel entered a partial award

denying Curtiss Simmons’ claims against Kraemer and awarding Kraemer

$15,326.78 on its counterclaim against Curtiss Simmons. On October 21-22 the

panel heard argument on the attorney’s fees issue. Kraemer sought $302,000 in

attorney’s fees, costs and expenses. On November 19, 1999, the panel entered a

final award granting Kraemer $171,856.00 for attorney’s fees plus costs and

expenses in the amount of $58,464.70, for a total of $230,321.10.      2
                                                                           Combined

      1
        Kraemer had joined Union Pacific, Consolidated’s surety, in the
arbitration. Accordingly, the parties actually initially agreed to a tri-partite
proceeding in which the claims between Kraemer and Curtiss Simmons would be
determined in the first phase, the claims between Kraemer and Union Pacific
would be determined in the second phase, and the attorney’s fees issue would be
resolved in the third phase. Kraemer and Union Pacific settled their claims
following the first phase.
      2
          We note there is a discrepancy of $0.40 between the amount appearing in
                                                                      (continued...)

                                           -5-
with the damage award, the total award against Curtiss Simmons was $245,647.88

plus interest.   3

       Kraemer subsequently filed a motion to confirm the arbitrators’ award.

Curtiss Simmons responded to the motion and filed its own motion to vacate the

award. At the conclusion of a hearing before the federal district court, Kraemer

made an oral motion that, if the court confirmed the award, it be permitted to seek

attorney’s fees incurred in pursuing confirmation of the award in federal court.

On November 1, 2000, the court issued a final judgment in favor of Kraemer,

confirming the arbitral award and denying Kraemer’s motion for additional

attorney’s fees incurred in pursuing confirmation. Curtiss Simmons appeals the

order confirming the arbitral award, as well as the denial of its motion to vacate

the award, and Kraemer cross-appeals the district court’s denial of attorney’s fees

Kraemer incurred in obtaining confirmation.

       (...continued)
       2

the arbitration award and the actual amount of fees and costs expended by
Kraemer. We rely on the figures found in the actual arbitration award.

       Additionally, as part of the arbitration panel’s award, it determined that
       3

Curtiss Simmons must pay Kraemer $1,389.22 to reimburse Kraemer for
administrative fees and expenses Kraemer had previously paid to the American
Arbitration Association, as well as $6,660.84 for its share of the compensation
and expenses due the arbitrators.

                                        -6-
                                    DISCUSSION

      “Our standard of review in cases confirming arbitration awards is the same

as for any other district court decision, ‘accepting findings of fact that are not

“clearly erroneous” but deciding questions of law       de novo .’” Kelley v. Michaels ,

59 F.3d 1050, 1053 (10th Cir. 1995) (quoting        First Options of Chicago, Inc. v.

Kaplan , 514 U.S. 938, 948 (1995)) (further quotation omitted). The district

court’s standard of review, in turn, which we apply as well in our own de novo

review of the district court’s application of the law, is extremely narrow and “has

been described as ‘among the narrowest known to the law.’”          Bowen v. Amoco

Pipeline Co. , 254 F.3d 925, 932 (10th Cir. 2001) (quoting      ARW Expl. Corp. v.

Aguirre , 45 F.3d 1455, 1462 (10th Cir. 1995)). A court may vacate an arbitration

award “only in the limited circumstances provided in § 10 of the [Federal

Arbitration Act], 9 U.S.C. § 10, or in accordance with a few judicially created

exceptions.”   Id.

      Curtiss Simmons argues that we should vacate the arbitration award in this

case under one of those judicially created exceptions which permits vacation of an

award which is in “‘manifest disregard’ of the law.”       ARW Expl. Corp. , 45 F.3d

at 1463 (quoting Wilko v. Swan , 346 U.S. 427, 436-37 (1953)). Our court has

interpreted the manifest disregard standard to require “‘willful inattentiveness to

the governing law.’”   Bowen , 245 F.3d at 932 (quoting      ARW Exploration Corp. ,

                                           -7-
45 F.3d at 1463). “Requiring more than error or misunderstanding of the law, . . .

a finding of manifest disregard means the record will show the arbitrators knew

the law and explicitly disregarded it.”      Id. (citation omitted). “‘[E]rrors in either

the arbitrator’s factual findings or his interpretation[s] of the law . . . do not

justify review or reversal. . . .’”   Sheldon v. Vermonty , No. 00-3337, 2001 WL

1338399 at *2 (10th Cir. Oct. 31, 2001) (quoting       Denver & Rio Grand W. R.R. v.

Union Pac. R.R. , 119 F.3d 847, 849 (10th Cir. 1997)).

       Further, arbitrators need not explain their reasons for an award.       See Wilko

v. Swan , 346 U.S. 427, 436 (1953),       overruled on other grounds by    Rodriguez de

Quijas v. Shearson/American Express, Inc.        , 490 U.S. 477 (1989). Finally, an

arbitration award may be based only upon those theories or matters which may

“fairly be read” as included in the arbitration submissions.      Kelley , 59 F.3d at

1054. Applying this exceedingly narrow standard of review, we turn first to

Curtiss Simmons’ appeal of the district court’s order confirming the award and

denying its motion to vacate. We then address Kraemer’s cross-appeal of the

denial of attorney’s fees incurred in pursuing confirmation of the arbitral award.

       I. Curtiss Simmons’ Appeal

       Curtiss Simmons argues that the arbitrators manifestly disregarded

Colorado law clearly establishing that Curtiss Simmons was merely a secured

                                              -8-
party assignee “attempt[ing] to collect on its debt by asserting claims that

belonged to the debtor [Consolidated],” Appellant’s Opening Br. at 16, and, as

such, protected by Article 9 of the Uniform Commercial Code, as implemented in

Colo. Rev. Stats. § 4-9-317 and 318,     4
                                             from being affirmatively liable for damages

to Kraemer. Curtiss Simmons relies upon those statutory provisions, along with

the case of Farmers Accept. Corp. v. DeLozier        , 496 P.2d 1016 (Colo. 1972):

“[t]he inquiry into whether Curtiss Simmons, as an assignee, could be held liable

on Kraemer’s counterclaim begins and ends with a review of C.R.S. § 4-9-317

and Delozier .” Appellant’s Opening Br. at 23. A review of those authorities,

however, convinces us that the arbitrators did not manifestly disregard applicable

law.

       Colo. Rev. Stat. § 4-9-317 provided at the time that “[t]he existence of a

security interest . . . given to a debtor to dispose of or use collateral, without

more, does not subject a secured party to liability in contract or tort for the

debtor’s acts or omissions.” Colo. Rev. Stat. § 4-9-318 provided in part that “the

rights of an assignee are subject to: (a) [a]ll the terms of the contract between the

account debtor and the assignor and any defense or claim arising therefrom . . . .”

Those provisions were applied in       DeLozier . 496 P.2d at 1018. Curtiss Simmons

       Colorado has recently revised its UCC statutes. Section 4-9-317 is now
       4

§ 4-9-402, and § 4-9-318 is now §§ 4-9-404, 405 and 406.

                                               -9-
argues that, under those statutes, as interpreted in   DeLozier , in pursuing the delay

claim initially filed by its assignor, Consolidated, Curtiss Simmons did “nothing

more than . . . act[] as a secured party to collect money owed to Consolidated.”

Appellant’s Reply Br. at 12. As a secured party assignee, Curtiss Simmons

argues, it could only be subject to defensive claims in the nature of an offset to its

claim against Kraemer, but it could not be liable for an independent claim for

damages like Kraemer’s counterclaim and an award of contractually-based

attorney’s fees. Kraemer responds that Curtiss Simmons, in actively pursuing the

delay claim and by seeking an award of attorney’s fees if it prevailed, was not

merely a secured party assignee collecting a debt, but, rather, by its conduct,

affirmatively assumed all the contractual liabilities of the Kraemer/Consolidated

subcontract and was, indeed, vulnerable to both the counterclaim and the award of

attorney’s fees.

       Because DeLozier is the primary Colorado case cited to us by both parties,

we examine it in some detail.     DeLozier involved an action by a general

contractor (DeLozier) against the assignee (Farmers Acceptance Corporation

“FAC”) of DeLozier’s subcontractor, who had failed to fulfill its contractual

obligations. DeLozier sought payments DeLozier had made to FAC, but which

FAC had not, in turn, paid to the company who supplied materials to the

subcontractor. The Colorado Supreme Court began by announcing:

                                             -10-
       It is a general rule that an assignee of contract rights stands in the
       shoes of the assignor and has no greater rights against the debtor than
       did the assignor. The assignee is also subject to all the equities and
       defenses which could have been raised by the debtor against the
       assignor, with the exception of those claims and defenses which are
       both unrelated to the underlying contract and arise after the debtor is
       notified of the assignment.

DeLozier , 496 P.2d at 1018. The court noted that the word “claim” in section 318

“no doubt includes set-offs and counterclaims.”       DeLozier , 496 P.2d at 1018.

       Citing § 4-9-317, the court then observed that “an assignee of contract

rights is not subject to the contract or tort liabilities imposed by the contract on

the assignor, in the absence of an assumption of such liabilities.”     Id. Applying

those general principles to the particular facts of the case, the court held:

       In instances such as this, where the assignee obtains money which
       the assignor could only retain upon performance of a contract, the
       following rule applies: “(W)here the assignor fails to perform the
       contract, the assignee cannot retain mistaken, or even negligent,
       payments made to it by the (debtor) unless there has been a
       subsequent change of position by the assignee.”

Id. at 1018-19 (quoting Gilmore,     The Assignee of Contract Rights and His

Precarious Security , 74 Yale L.J. 217, 235 n.35 (1964-65)). After finding that

FAC had not relied to its detriment on the payment made to it by DeLozier, the

court held it could not retain the money so paid. Thus, in      DeLozier , the court

allowed an affirmative claim against the assignee, and allowed the recovery of

payments made to the assignee, because the assignor had failed to fulfill its

contractual obligations. The court did not, however, hold FAC, as assignee, liable

                                            -11-
for any damages arising out of the subcontractor’s contractual default other than

the repayment of funds mistakenly paid to it.

      As Curtiss Simmons acknowledges,         DeLozier , and sections 9-318 and

9-317, have been subject to both narrow and more expansive interpretations.

“Some courts interpret [section 9-318] narrowly, permitting an account debtor to

assert a claim only as an affirmative defense and not as the basis for an

independent claim against an assignee.”       Lydig Constr., Inc. v. Rainier Nat’l

Bank , 697 P.2d 1019, 1020 (Wash. App. 1985) (citing cases). Other courts

construe it more broadly to permit affirmative claims against assignees in certain

situations. Id. at 1021 (citing cases).

      Similarly, DeLozier has been interpreted both narrowly and expansively.

Compare , e.g. , Massey-Ferguson Credit Corp. v. Brown       , 567 P.2d 440, 443

(Mont. 1977) (discussing   DeLozier and noting that “[u]nder certain circumstances

an assignee has been held to have impliedly assumed the contractual obligations

of the assignor,” and finding in the case before it that the “close relationship and

participation between the assignor and assignee” rendered the assignee vulnerable

to damages in counterclaim);   and K Mart Corp. v. First Pa. Bank , 29 UCC Rep.

Serv. 701 (Pa. Comm. Pl. 1980) (noting that      DeLozier and another case “stand for

the proposition that, in the appropriate circumstances, an assignee can be

affirmatively required to return monies held by it as a result of mistaken or

                                          -12-
negligent payment, as long as it has not changed its position adversely in reliance

on the monies received,” and further observing that “[t]his rule particularly

applies when an assignee bears the greater responsibility for allowing improper

overpayments to be made”)      with Michelin Tires (Canada) Ltd. v. First Nat’l Bank

of Boston , 666 F.2d 673, 679 (1st Cir. 1981) (reading      DeLozier and section 9-318

narrowly and stating “to the extent that     DeLozier can be read to permit an

affirmative suit against a lender who is completely unrelated to the underlying

contract, we decline to follow this departure from traditional common law

principles of restitution”).

       Further, as all parties acknowledge, neither      DeLozier nor any other cases

cited are factually similar to this case. And, while     DeLozier recognizes the

possibility that an assignee can assume “liabilities imposed by the contract on the

assignor,” 496 P.2d at 1018, it fails to further develop the ways in which an

assignee could assume such liabilities, nor the scope of such liabilities, outside of

the specific factual context of that case. Nor, however, does it imply that an

assumption of such liabilities is only possible in the particular factual setting of

that case. Thus, it could very well be that the     DeLozier court would have

concluded, were it presented to it, that Curtiss Simmons affirmatively assumed all

contractual obligations by pursuing the delay claim and seeking an award of

attorney’s fees if it prevailed. Additionally, as the    Michelin court observed in

                                             -13-
analyzing section 9-318, “[t]he key statutory language is ambiguous.”      Michelin ,

666 F.2d at 677. In short, we do not discern a clear expression of Colorado law

on the issue of whether and how an assignee like Curtiss Simmons, in the

circumstances of this case, can become liable for, or be absolutely immune from

liability for, damages and attorney’s fees arising out of a delay claim and a

counterclaim like those presented in this case.

       In the absence of any such clear expression, we cannot conclude that the

arbitrators willfully disregarded applicable Colorado law.   5
                                                                 Furthermore, as the

district court found, the arbitrators evidently made some crucial factual findings,

concluding that Kraemer’s counterclaim against Curtiss Simmons was based upon

Curtiss Simmons’ own conduct in the way it pursued the delay claim, not simply

upon its status as an assignee. Even if erroneous, that does not permit vacation of

the award. We therefore affirm the judgment of the district court enforcing the

arbitration award and denying Curtiss Simmons’ motion to vacate it.

       5
        Curtiss Simmons urges us to review various portions of the transcript of
the proceedings before the arbitrators which, it argues, show that the arbitrators
expressed a willingness to disregard the law as Curtiss Simmons’ articulated it
because of a perception that the result would be unfair. We have carefully read
the entire transcript contained in the record on appeal, and we cannot discern any
such willingness by the arbitrators. Rather, they carefully questioned each party
as to their arguments about what the law required, and expressed a desire to make
sure that they understood both the arguments of the parties and the law before
they made their decision.

                                           -14-
       II. Kraemer’s Cross-Appeal

       As indicated, at the conclusion of the hearing before the district court,

Kraemer sought attorney’s fees it incurred in seeking enforcement of the award.

The district court subsequently denied those fees. Kraemer appeals that denial.

       Kraemer concedes that an award of fees incurred in obtaining enforcement

of an arbitration award is discretionary.     See United Steelworkers of Am. v. Ideal

Cement Co. , 762 F.2d 837, 843 (10th Cir. 1985) (“In an action to enforce an

arbitration award, the allowance of attorney’s fees is discretionary.”);    see also

Fabricut, Inc. v. Tulsa Gen. Drivers, Local 523      , 597 F.2d 227, 230 (10th Cir.

1979). We therefore review the court’s denial of such fees for an abuse of

discretion. We find no abuse of discretion in this case.

       For the foregoing reasons, we AFFIRM the judgment of the district court.

                                                   ENTERED FOR THE COURT

                                                   Stephen H. Anderson
                                                   Circuit Judge

                                            -15-