Court Opinion

ID: 3205437
Source: CourtListenerOpinion
Date Created: 2016-05-20 15:06:31.499905+00
Date Added: 2024-06-11T14:03:09.918079
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF NEVADA

                DR PARTNERS, A NEVADA GENERAL                           No. 68700
                PARTNERSHIP, D/B/A STEPHENS
                MEDIA GROUP,
                Appellant,
                vs.
                                                                              FILED
                LAS VEGAS SUN, INC., A NEVADA                                 MAY 1 9 2016
                CORPORATION,                                                TRACIE K. LINDEMAN
                                                                         CLERK OF SUPREME COURT
                Respondent.
                                                                         BY

                                    ORDER OF REVERSAL AND REMAND

                               This is an appeal from a district court order denying a motion
                to compel arbitration. Eighth Judicial District Court, Clark County;
                Elizabeth Goff Gonzalez, Judge.
                               Respondent Las Vegas Sun, Inc. (the Sun) publishes the Las
                Vegas Sun newspaper. Appellant DR Partners, d/b/a Stephens Media
                Group (Stephens), publishes the Las Vegas Review Journal newspaper
                (the RJ). In 1989, the Sun and Stephens' predecessor-in-interest, Donrey
                of Nevada, Inc., entered into a joint operating agreement (JOA) to produce
                and distribute the two newspapers. The 1989 JOA required the RJ to pay
                the Sun a portion of the RJ's operating profit. In 2005, the Sun and
                Stephens amended and restated the JOA, which has been in effect since
                that time. The amended JOA required each newspaper to bear its own
                editorial costs. It also set out a new formula for calculating the amount
                that the RJ would pay the Sun, provided a mechanism for the Sun to audit
                the books and records used by the RJ to calculate those payments, and
                required disputes regarding the amount of those payments to be subject to
                arbitration.

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                                In March 2015, the Sun filed a complaint against Stephens for
                 declaratory relief and specific performance of the JOA. After the district
                 court granted a motion by Stephens to compel arbitration, the Sun
                 amended its complaint, this time seeking only declaratory relief as to the
                 meaning of the provision of the JOA requiring the newspapers to bear
                 their own editorial costs. The Sun then filed a motion for summary
                 judgment on its amended complaint.
                                On the same day that the Sun filed its motion for summary
                 judgment, Stephens filed a renewed motion to compel arbitration. The
                 district court denied Stephens' motion but stayed the proceedings to allow
                 Stephens to appeal.
                                On appeal, Stephens raises the following issue: whether the
                 district court erred by denying Stephens' motion to compel arbitration
                 because the issue raised by the Sun in its amended complaint is arbitrable
                 under the JOA.
                 The dispute is subject to arbitration
                                Stephens argues that the Sun's amended complaint falls
                 within the arbitration clause of the JOA, which requires arbitration of
                 disputes over the amount paid to the Sun under the JOA. Therefore, the
                 district court erred when it denied Stephens' renewed motion to compel
                 arbitration.
                                The Sun argues that the arbitration provision is narrowly
                 tailored to factual accounting disputes, and the current dispute, which
                 involves legal questions of contract interpretation, is outside the scope of
                 the provision.
                                Section 4.2 of the JOA states:
                                News and Editorial Allocations. The [RJ] and the
                                Sun shall each bear their own respective editorial
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                             costs and shall establish whatever budgets each
                             deems appropriate.
                 The Sun's amended complaint seeks declaratory judgment as to the
                 meaning of Section 4.2.
                            Appendix D of the JOA refers to the payments that are owed
                 to the Sun by the lid under the JOA, including how those payments are to
                 be calculated, how the Sun can audit the books and records used to
                 calculate those payments, and how disputes regarding the calculation of
                 those payments may be resolved. In relevant part, Appendix D states:
                             [The RJ] shall calculate the percentage
                             change . . between the earnings, before interest,
                             taxes, depreciation and amortization ("EBITDA")
                             [of the prior year and the year before the prior
                             year]. . . .
                                    . . . [The] Sun shall have the right. . . to
                             appoint [a] certified public accounting firm or law
                             firm as [the] Sun's representative to examine and
                             audit the books and records of the [RJ] and the
                             other publications whose earnings are included in
                             EBITDA for purposes of verifying the
                             determinations of the changes to the Annual Profit
                             Payments. . . . If as a result of such an audit, there
                             is a dispute between [the] Sun and the [RJ] as to
                             amounts owed to [the] Sun and they are not able
                             to resolve the dispute within 30 days, they shall
                             select a certified public accountant to arbitrate the
                             dispute. . . . The arbitrator shall make an award to
                             [the] Sun in the amount of the arrearage, if any,
                             found to exist . . . .
                             Whether a dispute is subject to arbitration is an issue of
                 contract interpretation that this court reviews de novo.      Clark Cty. Pub.
                 Emps. Ass'n ii Pearson, 106 Nev. 587, 590, 798 P.2d 136, 137 (1990). "In
                               .

                 Nevada, disputes concerning the arbitrability of a subject matter are
                 resolved under a presumption in favor of arbitration."    City of Reno v. Int?

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                     Ass'n of Firefighters, Local 731, 130 Nev., Adv. Op. 100, 340 P.3d 589, 593
                     (2014). "Courts should therefore order arbitration of particular grievances
                     unless it may be said with positive assurance that the arbitration clause is
                     not susceptible of an interpretation that covers the asserted dispute."   Id.
                     (internal quotations omitted).
                           Shy v. Navistar International Corp.
                                 In deciding this case, we find the Sixth Circuit Court of
                     Appeals' decision in Shy v. Navistar International Corp., 781 F.3d 820 (6th
                     Cir. 2015), to be instructive. In Shy, Navistar entered into an agreement
                     and consent decree that obligated it to make yearly profit-sharing
                     payments to a trust for retired Navistar employees.          Id. at 822. The
                     methods for calculating and enforcing Navistar's obligation were outlined
                     in an appendix to the agreement and decree. Id. Within the appendix was
                     a section requiring "a regular report by Navistar to the [trust] of financial
                     information necessary to confirm that Navistar was making contributions
                     in the amounts required by the [appendix]."      Id. at 822-23. That section
                     also contained an arbitration provision requiring disputes over the
                     information or calculations provided by Navistar to be subject to binding
                     arbitration by an accountant.     Id. at 823. The trust filed a complaint
                     against Navistar, alleging that "Navistar had manipulated its corporate
                     structure and accounting analysis to eliminate its profit-sharing
                     obligations" in violation of the appendix to the agreement and consent
                     decree. Id. at 824. Navistar moved to dismiss the complaint, arguing that
                     all of the trust's claims were subject to arbitration. Id.
                                 The Sixth Circuit held that because the claims in the trust's
                     complaint were "disput[ing] the categorization of various aspects of
                     Navistar's business in the reports Navistar provide[d]," the trust was
                     essentially "disputing the 'information' provided by Navistar." Id. at 825.
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                 Therefore, because the arbitration agreement applied to disputes of
                 information or calculations, the trust's complaints were subject to
                 arbitration. Id.
                             The Sixth Circuit also weighed in on whether the fact that the
                 terms of the arbitration provision, which stated that an accountant would
                 be selected as arbitrator, indicated that the provision only applied to
                 questions of accounting and not to questions of contract interpretation,
                 which would involve questions of law.      Id. at 825-26. First, it held that
                 while
                             the accountant-based nature of the dispute
                             resolution procedure at most creates some
                             ambiguity as to whether the scope of disputes over
                             "information or calculation[s]" was intended to be
                             restricted to disputes in which no legal analysis
                             whatsoever might be necessary[,] . . . the
                             otherwise unqualified language of the agreement
                             trumps any assumption that the parties would not
                             have committed legal disputes to an accountant's
                             resolution.
                 Id. (first alteration in original). Second, the Shy court held that "the
                 contract disputes involved in the [trust]'s classification-based arguments
                 are relatively simple and closely related to [the subject of] accounting; it is
                 reasonable to suppose that the parties to the agreement intended such
                 disputes to be arbitrated." Id. at 826. Therefore, because the issues raised
                 by the trust "were at least arguably included in the arbitration clause[,]"
                 "the strong federal policy in favor of arbitration resolves any doubts as to
                 the parties' intentions in favor of arbitration." Id. at 827.
                             The contract in Shy is very similar to that of the JOA in the
                 current case in that (1) both require yearly payments according to a
                 formula provided in an appendix; (2) both allow for the information used
                 to calculate the payments to be provided to the party receiving the
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                payments—the trust in Shy automatically received a report containing
                this information every year while in the current case the Sun must
                request an audit to be performed of the RJ's books; (3) both require that
                disputes arising from the report or audit are to be arbitrated, although in
                Shy the clause referred to disputes over information or calculations while
                the clause in the current case refers to disputes "as to amounts owed to
                [the] Sun"; and (4) both state that an accountant shall act as the
                arbitrator. Id. at 822-23, 825.
                             We therefore hold that, like Shy, by disputing the meaning of
                the provision of the JOA requiring the newspapers to bear their own
                editorial costs, the Sun is essentially disputing the "amounts owed to [the]
                Sun" pursuant to an audit under Appendix D of the JOA. We also hold
                that this dispute is "relatively simple and closely related to [the subject of]
                accounting' and that "it is reasonable to suppose that the parties to the
                agreement intended such disputes to be arbitrated."         Id. at 826. Thus,
                although the accountant-based arbitration provision in the JOA creates
                some ambiguity as to whether it "was intended to be restricted to disputes
                in which no legal analysis whatsoever might be necessary," we conclude
                that the "otherwise unqualified language of the agreement" and "the
                strong federal policy in favor of arbitration" suggest that the current
                dispute is subject to arbitration. Id. at 825, 827.
                Conclusion
                             By disputing whether each newspaper should bear its own
                editorial costs, the Sun is essentially disputing the amounts owed to it
                under the JOA and therefore the dispute falls within the scope of the
                JOA's arbitration provision. Furthermore, because this dispute is
                relatively simple and closely related to the subject of accounting, it is
                reasonable that the parties to the agreement intended it to be arbitrated.
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                Lastly, any ambiguity in the arbitration provision should be resolved in
                favor of arbitration. Therefore, we
                               ORDER the judgment of the district court REVERSED AND
                REMAND this matter to the district court for proceedings consistent with
                this order.'

                                                                             ,   J.
                                                      Hardesty

                                                                                 J.
                                                      Douglas

                                                      Gibbons

                cc: Hon. Elizabeth Goff Gonzalez, District Judge
                     Ara H. Shirinian, Settlement Judge
                     Morris Law Group
                     Lewis Roca Rothgerber Christie LLP/Reno
                     Moran Brandon Bendavid Moran
                     Eighth District Court Clerk

                      1 The Honorable Ron D. Parraguirre, Chief Justice, and the
                Honorable Kristina Pickering, Justice, voluntarily recused themselves
                from participation in the decision of this matter.

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