Court Opinion

ID: 9786331
Source: CourtListenerOpinion
Date Created: 2023-08-30 23:53:42.688075+00
Date Added: 2024-06-11T15:44:28.416282
License: Public Domain

Judge GABRIEL
concurring in part and dissenting in part.
In my view, the question of whether the arbitrator's award of fees under the Colorado Consumer Protection Act (CCPA) was authorized by the parties' arbitration agreement, which expressly limited the grounds on which fees could be awarded, goes to the scope of the arbitrator's powers and, therefore, is properly reviewable by this court. Accordingly, although I concur in Part II(B)(1) of the majority opinion, concerning the prejudgment interest award, I respectfully dissent from the remainder of that opinion.
I. Discussion
The majority opines that:
® Judicial deference to arbitrators is so great that "judicial review" may be something of a "misnomer" and judicial review of an arbitration award under section 183-22-223(1), C.R.S.2009, involves only "specific instances of outrageous [arbitral] conduct" and "egregious departures from the parties' agreed-upon arbitration";
e Courts may not review the merits of an arbitration award, including issues of contract interpretation like that at issue here;
e Because the parties here delegated to the arbitrator the power to determine whether to award fees and she did so, the fee award is not subject to judicial review; and
® The arbitrator's award of fees under the CCPA is not properly reviewable because the arbitrator may have reasoned that the CCPA violations were egregious *404or that an egregiousness showing was required only for non-statutory fees.
I disagree with each of these premises, or the assumptions underlying them.
First, the majority's statement as to the limitations of judicial review, which relies on a United States Supreme Court interpretation of the Federal Arbitration Act, Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008), is not, in my view, a correct statement of Colorado law. In Colorado, a district court may properly vacate an arbitration award when, among other things, the court finds that there was no agreement between the parties to arbitrate or the arbitrator exceeded his or her powers. § 13-22-228(1)(d)-(e). Accordingly, I do not believe that Colorado law is so stringent as to limit judicial review of arbitration awards to circumstances in which the arbitrator's conduct was outrageous or in which the arbitrator egregiously departed from the parties' agreed upon arbitration.
Second, although I agree that courts generally may not review the merits of an arbitration award, including issues of contract interpretation, interpretation of an arbitration agreement or clause is different from interpretation of a contract that is the subject of a breach of contract dispute before an arbitrator. As to the former, our supreme court has consistently held that the interpretation of an arbitration agreement is a matter of law that a reviewing court reviews de novo. Allien v. Pacheco, 71 P.3d 375, 378 (Colo.2003).
Container Technology Corp. v. J. Gadsden Pty., Ltd., 781 P.2d 119 (Colo.App.1989), on which the majority relies, does not suggest otherwise. Container Technology did not involve a dispute regarding the interpretation of an arbitration provision or the seope of the arbitrator's authority thereunder. Rather, it involved construction of the contract that was at issue in the arbitration. Id. at 121-22. It is in that context that the division observed that the interpretation of a contract is an unreviewable merits issue. Id. at 121. I perceive nothing in Container Technology, nor am I aware of any other case, that deprives a reviewing court of the authority to interpret an arbitration agreement or to determine the scope of the arbitrator's powers.
Third, I disagree that a court's review of an arbitrator's authority is limited to deciding whether the underlying dispute was properly arbitrable. An arbitrator's powers are derived from the terms of the arbitration agreement between the parties, regardless of whether the arbitration provision is a standalone agreement or, as here, is embedded in a contract. Magenis v. Bruner, 187 P.3d 1222, 1224-25 (Colo.App.2008). To determine whether the arbitrator exceeded his or her authority within the meaning of section 13-22-2283(1)(d), the court must determine the scope of the arbitration agreement. Farmers Ins. Exchange v. Taylor, 45 P.3d 759, 761 (Colo.App.2001). An arbitrator exceeds his or her authority not only when the arbitrator decides an issue that is not properly arbitrable, but also when the arbitrator refuses to apply or ignores a legal standard agreed upon by the parties for resolution of their dispute. Giraldi v. Morrell, 892 P.2d 422, 424 (Colo.App.1994) (in a medical malpractice case involving a child plaintiff, reviewing court rejects the plaintiffs assertion that the arbitrator applied an "experienced adult" standard of care to measure the defendant's conduct, rather than the "pediatric" standard of care agreed on in the arbitration agreement); see also City & County of Denver v. Denver Firefighters Local No. 858, 663 P.2d 1032, 1039-40 (Colo.1983) (when an arbitrator exceeds his or her authority by going beyond the terms of the arbitration agreement, a dissatisfied party may properly apply to the district court to vacate the award).
Applying these principles here, I disagree with the majority's conclusion that because the arbitrator indisputably had power to award fees, our inquiry is at its end. The parties did not merely agree that the arbitrator could award fees here. Rather, they agreed that the arbitrator could award fees only upon a showing of egregious conduct. Thus, to me, the question is not merely whether the arbitrator was empowered to award fees, which no one denies. The issue is whether the arbitrator was empowered to award fees under the CCPA. In my view, this question goes to the scope of the arbitrator's *405powers, it requires interpretation of the arbitration agreement, and, thus, it is an issue for the reviewing court to determine de novo.
In this regard, I believe that Magenis, 187 P.3d at 1224-26, is indistinguishable from this case. In Magenis, the parties agreed that the arbitrator "shall award fees and expenses (including reasonable attorneys' fees) to the prevailing party." Id. at 1223. The plaintiff prevailed in the underlying dispute and sought an award of fees. The arbitrator stated that although he had "considered the matter of attorney's fees," he "declined" to award them, offering several reasons for his decision. Id. at 1224. The plaintiff appealed, and a division of this court reversed. Id. at 1225-26.
The division began its analysis by noting that the district court "was required to determine de novo whether the arbitrator's refusal to award attorney fees to plaintiff as the prevailing party was a determination beyond the seope of the parties' arbitration agreement." Id. at 1225. The division then rejected the defendants' argument that even if the district court erred by deferring to the arbitrator's determination of the scope of the arbitration agreement, the parties nevertheless gave the arbitrator discretion to deny an award of fees. Id. The division concluded that under the plain terms of the arbitration clause at issue, the only power that the arbitrator had was to determine the reasonable amount of fees to be awarded. Id. at 1225-26. The division thus rejected the defendants' argument that the arbitrator had simply decided that the reasonable attorney fees were $0.00. Id.
Magenis supports my view that the dispute here relates to the scope of the arbitrator's power and that it is for the court to construe the limits of that power. Just as the district court in Magentis was required to determine de novo whether the arbitrator's refusal to award fees to the plaintiff was a determination beyond the scope of the parties' arbitration agreement, we are required here to determine de novo whether the arbitrator's award of fees under the CCPA was a determination beyond the scope of the parties' arbitration agreement.
Conversely, in my view, Magenis is inconsistent with the majority's analysis here. Indeed, applying the majority's analysis to the facts in Magenis would have required the division there to reach a different result. Specifically, under the majority's rationale, the Magenis division should have gone no further than to decide that the arbitrator was empowered to decide the fees question. Anything beyond that would have been a matter of contract interpretation (e.g., the arbitrator's determination that the arbitration clause gave him discretion to award fees or to choose to award $0.00) and would not have been reviewable.
For these reasons, I would conclude that the issue presented here is one that goes to the scope of the arbitrator's authority. I would then hold that the fees provision was clear and unambiguous and authorized the arbitrator to award fees only upon a showing of egregious conduct, regardless of whether fees were being awarded pursuant to statute, rule, or other provision of law. Thus, I would conclude that the award of fees under the CCPA was erroneous, absent a showing of egregious conduct.
Finally, although I agree with the majority that absent a provision in the arbitration agreement requiring the arbitrator to make findings, the arbitrator could properly have awarded fees with no explanation, it does not necessarily follow that the arbitration award is likewise unreviewable because the arbitrator may have "said too much." The majority states that the arbitrator might have decided, as a matter of contract interpretation, that an egregiousness showing was required only for non-statutory fees, which interpretation would be unreviewable. The majority further states that the arbitrator might have decided to award fees pursuant to the CCPA because the CCPA violations here were egregious in fact or as a matter of law. I disagree with both points.
For the reasons noted above, I believe that the first statement is inconsistent with settled Colorado case law holding that interpretation of an arbitration agreement is an issue of law that the court reviews de novo. See, e.g., Allen, 71 P.3d at 378.
*406The second statement is inconsistent with the record. Here, the homeowners expressly argued that the arbitrator could award fees under the CCPA without a showing of egregious conduct by Village Homes. Village Homes countered that the arbitrator could not do so, because she was only empowered to award fees upon a showing of egregious conduct. Although the homeowners ultimately asked the arbitrator to determine whether they had shown egregious conduct, the arbitrator apparently agreed with the homeowners' initial argument and awarded fees under the CCPA without addressing the question of whether the homeowners had shown that Village Homes' conduct was egregious.
Unlike the majority, I1 do not believe that these facts allow us to conclude that the arbitrator "might" have determined that the homeowners had established that Village Homes' conduct was egregious. If anything, these facts compel the opposite conclusion. The parties asked the arbitrator to conclude either that fees could be awarded under the CCPA without a showing of egregious conduct or that fees could be awarded only upon a showing of egregious conduct. The arbitrator appears to have agreed with the former and rejected the latter.
Barrett v. Investment Management Consultants, Ltd., 190 P.3d 800 (Colo.App.2008), on which the majority relies, is distinguishable from the present case. In Barrett, the arbitration clause did not address whether the arbitrator was empowered to award fees. Id. at 801. The clause provided, however, that the dispute was to be determined in accordance with federal law, including the Federal Arbitration Act (FAA), which specifically provided for an award of fees to the prevailing party. Id. Construing the arbitration clause de novo, the division determined that fees were properly awarded because the FAA, which governed the arbitration proceedings, provided for such an award. Id. at 808. This was true notwithstanding the fact that the arbitrator mistakenly cited the Uniform Arbitration Act, rather than the FAA, in making the fee award. Id. at 802-08.
Unlike here, nothing in the arbitrator's award in Barrett was inconsistent with the parties' arbitration provision. To the contrary, the award in Barrett was consistent with the express terms of the arbitration provision. Accordingly, the Barrett division did not confront the issue presented here, namely, whether we can presume that the arbitrator acted within her powers when she issued an award that appeared facially inconsistent with them.
Notwithstanding the foregoing, I do not believe that the record before us is sufficient to allow me to conclude, as Village Homes requests, that the arbitrator found that its conduct was not egregious. Accordingly, in the particular circumstances presented here, I would remand this case to the arbitrator to clarify her findings.
Colorado courts have remanded arbitration awards to arbitrators when an award was ambiguous and in need of clarification. See Osborn v. Packard, 117 P.3d 77, 83 (Colo. App.2004). Although no Colorado appellate court appears to have squarely addressed the question of whether a remand is appropriate when the award is not ambiguous on its face but when the arbitrator arguably did not resolve an issue that was properly submitted for determination, courts in other jurisdictions 'have held that a remand is proper in these circumstances. See, e.g., La Vale Plaza, Inc. v. R.S. Noonan, Inc., 378 F.2d 569, 573 (3d Cir.1967) ("[Where the award does not adjudicate an issue which has been submitted, then as to such issue the arbitrator has not exhausted his function and it remains open to him for subsequent determination."); United Paperworkers Int'l Union v. White Pigeon Paper Co., 815 F.Supp. 1061, 1065 (W.D.Mich.1993) ("[Aln issue may be remanded to the arbitrator if the arbitrator failed to decide an issue.").
Courts in other jurisdictions have also determined that a remand is appropriate when it is unclear to the reviewing court whether or not the arbitrator has resolved a certain issue. See, e.g., Galt v. Libbey-Owens-Ford Glass Co., 397 F.2d 439, 442 (7th Cir.1968) (the district court properly remanded the case for additional explanation rather than guessing at the meaning of the arbitrator's award); La Vale Plaza, Inc., 378 F.2d at 573 ("Where the award, although seemingly com*407plete, leaves doubt whether the submission has been fully executed, an ambiguity arises which the arbitrator is entitled to clarify.").
Finally, at least one court has remanded a case to an arbitration panel when the panel's findings were insufficient to allow the court to determine whether an award of attorney fees was warranted or not. See Moser v. Barron Chase Securities, Inc., 783 So.2d 231, 236-37 (Fla.2001) (where arbitrators found for claimants who had sued on several claims, only one of which provided for an award of fees, but the arbitrators failed to indicate the claims on which they were ruling, a remand to the arbitrators to clarify the basis for their award was appropriate, so that the circuit court, which was tasked with deciding the fees issue, could make its determination).
The foregoing authorities persuade me that a remand would be appropriate on the unique facts of this case. "Only the arbitrator absolutely knows what was intended in the award. And, it is the arbitrator's intent, not the court's, for which the parties bargained." Sooper Credit Union v. Sholar Group Architects, P.C., 113 P.3d 768, 772 (Colo.2005).
II,. Conclusion
In its opinion, the majority recites the benefits of arbitration and the adverse consequences of judicial review, particularly in terms of cost and delay, in support of the limitations on judicial review that it adopts today. I agree that arbitration is favored and that judicial review of arbitration awards is-and should be-limited. These principles must give way, however, when, as here, an arbitrator exceeds the powers granted him or her in an arbitration agreement. Moreover, unlike the majority, I do not believe that judicial review of arbitration awards is so restrictive as to prevent a court from vacating an arbitration award when, as here, the arbitrator refuses to apply or ignores a legal standard agreed upon by the parties for resolution of their dispute. In my view, such a rule undermines parties' right to contract and renders "judicial review" of arbitration awards the "misnomer" that the majority perceives it to be, because any dispute over an arbitrator's application of a legal standard agreed to by the parties could readily be viewed as a matter of contract interpretation that is not subject to review.
For these reasons, I concur in Part II(B)(1) and dissent from the remainder of the majority opinion.