Court Opinion

ID: 3167552
Source: CourtListenerOpinion
Date Created: 2016-01-06 17:08:42.640611+00
Date Added: 2024-06-11T12:02:48.804526
License: Public Domain

FILED
                This opinion is subject to revision before final   UTAH APPELLATE COURTS
                     publication in the Pacific Reporter
                                                                      JANUARY 5, 2016
                                2016 UT 2

                                   IN THE
       SUPREME COURT OF THE STATE OF UTAH

                      WESTGATE RESORTS, LTD.,
                            Appellant,
                                      v.
      SHAUN S. ADEL and CONSUMER PROTECTION GROUP, LLC,
                           Appellee.

                             No. 20131086
                         Filed January 5, 2016

                   Fourth District, Provo Dep’t
                  The Honorable Lynn W. Davis
                         No. 020404068

                                Attorneys:
     Michael D. Zimmerman, Troy L. Booher, Noella Sudbury,
 Salt Lake City, Richard W. Epstein, Michael Marder, Orlando, FL,
                           for appellant
      L. Rich Humpherys, Karra J. Porter, Kristen C. Kiburtz,
                  Salt Lake City, for appellee

    JUSTICE DURHAM authored the opinion of the Court, in which
        CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
                    and JUSTICE HIMONAS joined.
    JUSTICE PARRISH sat for oral argument. However, due to her
     resignation from this court, she did not participate herein.

   JUSTICE DURHAM, opinion of the Court:
                          INTRODUCTION
   ¶1     This is the second appeal arising out of a claim against
Westgate Resorts under the Utah Pattern of Unlawful Activity Act.
In the first appeal, we confirmed an arbitration panel’s award of
damages against Westgate. Westgate Resorts, Ltd. v. Consumer Prot.
Grp., LLC, 2012 UT 56, ¶ 34, 289 P.3d 420. Westgate now challenges
             WESTGATE v. CONSUMER PROTECTION GROUP
                      Opinion of the Court
another decision by the same panel, namely its award of attorney
fees to Mr. Adel and Consumer Protection Group (collectively, CPG).
    ¶2     Westgate alleges two distinct errors in the panel’s fee
award. First, it argues that the arbitration panel had no authority to
award attorney fees for the court proceedings that confirmed the
panel’s decision on the merits. Second, it argues that the arbitration
panel manifestly disregarded the law by awarding attorney fees in
excess of the amount the prevailing plaintiffs were actually obligated
to pay their lawyers.
    ¶3     We agree with Westgate’s first argument, but not its
second. The Utah Uniform Arbitration Act does not authorize an
arbitration panel to award attorney fees for court proceedings
confirming the panel’s own decisions, so the panel’s award of fees
for those proceedings is void. 1 But because the Utah Pattern of
Unlawful Activity Act allows prevailing plaintiffs to recover a
reasonable attorney fee—without regard to the amount the plaintiffs
have actually contracted to pay—we confirm the panel’s award of
attorney fees expended during arbitration. We also grant CPG’s
request for attorney fees for this appeal.
                          BACKGROUND
   ¶4     This litigation has now lasted more than a decade. 2 It
began in 2002, when Westgate sued CPG for various alleged torts
and breaches of contract. It expanded in 2005 when CPG raised
counterclaims for fraud under the Utah Pattern of Unlawful Activity
Act (UPUAA). The UPUAA contains a provision allowing a party to
force arbitration of UPUAA fraud claims, UTAH CODE § 76-10-
1605(3), and Westgate took advantage of this provision in 2008.
Westgate Resorts, Ltd. v. Consumer Prot. Grp., LLC, 2012 UT 56, ¶ 2, 289
P.3d 420.
   ¶5      In 2010, the arbitration panel decided the UPUAA claims
in CPG’s favor. But before the arbitration panel had ruled on CPG’s
request for attorney fees, Westgate discovered that one of the
arbitrators was the first cousin of a shareholder at the law firm
representing CPG. Id. ¶ 1. Claiming this relationship constituted

   1 This opinion does not foreclose CPG’s ability to raise a claim for
post-arbitration attorney fees in the district court. We are not
deciding this issue on the merits, however, as it has not been briefed
to us.
   2 For a summary of the facts underlying the litigation, see
Westgate Resorts, Ltd. v. Consumer Protection Group, LLC, 2012 UT 55,
¶¶ 2–5, 285 P.3d 1219.
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                         Opinion of the Court

bias, Westgate moved the district court to vacate the panel’s
decision. The court granted the motion, CPG appealed, and we
reversed without ruling on CPG’s request for attorney fees. Id. ¶ 34.
   ¶6      The case then went back to the arbitration panel, where
CPG again requested attorney fees: fees for three years of litigation
before Westgate compelled arbitration, fees for the arbitration
proceedings themselves, and fees for the judicial proceedings that
confirmed the arbitrators’ decision on the merits. The panel rejected
the first part of the request, declining to award fees for pre-
arbitration litigation. But it granted the rest of the request and
entered two separate attorney fee awards: $558,810.30 for work
performed during arbitration and $88,829.50 for work in what the
panel called “post-arbitration proceedings.”
    ¶7     Westgate again moved for the district court to vacate the
panel’s decision, challenging the fee awards on two separate
grounds. First, Westgate argued, the panel lacked authority to award
attorney fees for the vacatur proceedings and appeal because the
Utah Uniform Arbitration Act (UUAA) allows arbitrators to award
“reasonable attorney fees” only to the extent that they are
“reasonable expenses of arbitration.” UTAH CODE § 78B-11-122(2)
(emphasis added). Second, Westgate argued that the panel
manifestly disregarded controlling law by awarding attorney fees in
excess of the amount CPG was contractually obligated to pay its
attorneys.
   ¶8     The district court denied Westgate’s motion, and Westgate
appealed.
                      STANDARD OF REVIEW
    ¶9     When we hear an appeal from a district court’s review of
an arbitration award, “[t]here are two standards of review at issue”:
the standard of review for our review of the district court’s decision,
and the standard of review that district courts should apply to
arbitrators’ decisions. Buzas Baseball, Inc. v. Salt Lake Trappers, Inc.,
925 P.2d 941, 947 (Utah 1996). As to the first standard, we review the
district court’s interpretation of the UUAA and the UPUAA for
correctness, without deference to its legal conclusions. See Westgate
Resorts, Ltd. v. Consumer Prot. Grp., LLC, 2012 UT 56, ¶ 10, 289 P.3d
420.
    ¶10 As to the second standard, a district court may disturb an
arbitrator’s decision “only in certain narrow circumstances.”
Softsolutions, Inc. v. Brigham Young Univ., 2000 UT 46, ¶ 10, 1 P.3d
1095 (citation omitted). Two such circumstances concern us here: a
court may vacate an arbitration panel’s award if the panel “exceeded
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             WESTGATE v. CONSUMER PROTECTION GROUP
                      Opinion of the Court
[its] authority,” UTAH CODE § 78B-11-124(1)(d), or if its decision
demonstrates a manifest disregard of the law. See Pac. Dev., L.C. v.
Orton, 2001 UT 36, ¶ 7 n.3, 23 P.3d 1035. And although the “manifest
disregard” doctrine derives from the “exceeded its authority” rule,3
the two entail different standards of review.
    ¶11 On the one hand, “manifest disregard” is an extremely
deferential standard. It allows us to vacate the panel’s decision only
if three conditions are fulfilled. First, the panel’s decision must
actually be in error. Second, the error “must have been obvious and
capable of being readily and instantly perceived by the average
person qualified to serve as an arbitrator.” Buzas Baseball, 925 P.2d at
951 (citation omitted). Third, the panel must have “appreciate[d] the
existence of a clearly governing legal principle but decide[d] to
ignore or pay no attention to it.” Id. (citation omitted).
    ¶12 On the other hand, we see no reason to defer to the panel’s
construction of the UUAA sections that govern the panel’s own
powers. The panel’s authority in this case derives from two statutes:
the UPUAA, which allowed Westgate to compel arbitration, and the
UUAA, which authorized the panel to award attorney fees. And
where an arbitrator’s authority derives entirely from statutes, we see
no reason to defer to the arbitrator’s interpretation of those statutes.4
After all, “[i]t is emphatically the . . . duty of the judicial department
to say what the law is,” Marbury v. Madison, 5 U.S. (1 Cranch) 137,
177 (1803), and without de novo review of the scope of arbitrators’
authority under the arbitration act, we will have difficulty fulfilling
our duty to interpret that act and guide the decisions of future
arbitrators.

   3 We acknowledge that several scholars and courts have raised
concerns about the manifest disregard standard, concluding it has
“turned the law into a puzzle.” See, e.g., Kenneth R. Davis, The End of
an Error: Replacing “Manifest Disregard” with a New Framework for
Reviewing Arbitration Awards, 60 CLEV. ST. L. REV. 87, 131 (2012). We
recognize there may be issues with the standard’s compatibility with
the UUAA, but render no decision on the matter in this case as the
parties have not asked us to abandon the standard and Westgate’s
challenge to the arbitration award fails even under the manifest
disregard standard. See infra ¶¶ 23–30.
   4  We note that there may be a question regarding the
constitutionality of a statute that could be read as forcing a non-
consenting party into arbitration. The issue has not been raised or
briefed in this case, and we therefore offer no views thereon.
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                         Opinion of the Court

                             ANALYSIS
    ¶13 The panel’s authority to award attorney fees in this case
derives from a combination of two statutes. The first, section 122 of
the UUAA, provides that an “arbitrator may award reasonable
attorney fees and other reasonable expenses of arbitration if the
award is authorized by law in a civil action involving the same
claim.” UTAH CODE § 78B-11-122(2). The second is the UPUAA,
which authorizes attorney fees by providing that a “party who
prevails on a cause of action brought under this section recovers the
cost of the suit, including reasonable attorney fees.” Id. § 76-10-
1605(2). In order for the panel’s award of attorney fees to be valid, it
must satisfy the requirements of each of these statutes: the attorney
fees awarded must be “expenses of arbitration” as required by the
UUAA, and they must be awarded in an amount and under
circumstances permitted by the UPUAA.
   ¶14 Westgate does not dispute that the circumstances justified
an attorney fee award: because CPG “prevail[ed] on a cause of action
brought under” the UPUAA, the UPUAA entitles it to recover
“reasonable attorney fees.” See id. But Westgate does dispute that the
fees the panel awarded for post-arbitration proceedings were
“expenses of arbitration,” as required by the UUAA. See id. § 78B-11-
122(2). Further, Westgate argues that both attorney fee awards were
higher than the UPUAA permits—that “reasonable attorney fees” in
the UPUAA cannot be greater than the amount the prevailing
plaintiff is obligated to pay its attorneys. See id. § 76-10-1605(2).
   ¶15    We address these arguments in order.
   I. THE ARBITRATION PANEL EXCEEDED ITS AUTHORITY
            IN AWARDING ATTORNEY FEES FOR
             POST-ARBITRATION PROCEEDINGS
    ¶16 We determine first whether, under the UUAA,
“reasonable attorney fees and other reasonable expenses of
arbitration” includes attorney fees for work performed in judicial
proceedings reviewing an arbitration award. See UTAH CODE § 78B-
11-122(2). We conclude that post-arbitration attorney fees are outside
of the scope of section 122 of the UUAA.
    ¶17 The text of section 122 provides some support for our
conclusion, though perhaps not enough to decide the issue entirely.
The key statutory phrase “expenses of arbitration,” id., could
plausibly be read to include either all expenses involved in obtaining
and enforcing an arbitration award—the same way “the cost of a
suit” would normally include the costs of appeal—or it may include
only the expenses involved in presenting one’s case to the arbitration
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             WESTGATE v. CONSUMER PROTECTION GROUP
                      Opinion of the Court
panel. But this second, narrower interpretation is supported by
section 122’s title: “Remedies—Fees and expenses of arbitration
proceeding.” Id. § 78B-11-122 (emphasis added).
    ¶18 Seeking further support for the narrow interpretation, we
turn to the statute’s legislative history but find it unhelpful. The
relevant language was passed in 2002 and was taken almost word
for word from the 2000 Revised Uniform Arbitration Act. See 2002
Utah Laws 1573, 1578; Uniform Arbitration Act—2000 (Last Revisions
Completed Year 2000), 3 PEPP. DISP. RESOL. L.J. 323, 392 (2003). When
we look to the comments in the uniform act, we find that they do not
elaborate on the crucial phrase “expenses of arbitration.” Uniform
Arbitration Act—2000, supra, at 393–96. When we review the other
jurisdictions that have adopted the uniform act—eighteen states and
the District of Columbia—we find that none of their cases
interpreting the statute have considered this question either.
    ¶19 But we do find support in another section of the Utah
statute. Section 126, though it does not mention arbitrators’ authority
to award attorney fees, specifically gives district courts authority to
award the attorney fees at issue here: “On application of a prevailing
party to a contested judicial proceeding under [the sections
governing confirmation, vacatur, and modification of an arbitrator’s
award], the court may add reasonable attorney fees and other
reasonable expenses of litigation incurred in [such a proceeding].”
UTAH CODE § 78B-11-126(3) (emphasis added).
    ¶20 Admittedly, this section does not say, “only the court may
add reasonable attorney fees,” and there is no reason why the
legislature could not, if it chose, give the authority to award these
fees both to the district court and to the arbitration panel. But we are
persuaded that it has not done so. The statute appears to reflect an
assumption that the judicial proceedings confirming an arbitrator’s
award will begin after the arbitrator’s work is complete, and
consequently that the arbitrator will have no opportunity to award
attorney fees incurred in confirmation proceedings. 5 From this we
surmise that if the legislature never imagined that arbitrators might
have the opportunity to award fees for confirmation proceedings,
then it had no reason to give them the authority to award such fees.
   ¶21 Finally, our conclusion is also supported by policy
concerns that have long guided Utah’s attorney fee jurisprudence.

   5 This seems to be the ordinary procedure, which explains why
we are unable to find any cases where an arbitrator has awarded
attorney fees for judicial proceedings confirming the arbitrator’s own
order.
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                         Opinion of the Court

The court of appeals has held repeatedly that a trial court may not
award attorney fees arising from appellate proceedings unless the
appellate court has explicitly directed the trial court to do so. See
Anderson v. Thompson, 2010 UT App 359, ¶ 4, 248 P.3d 981; Cache Cty.
v. Beus, 2005 UT App 503, ¶ 17 n.7, 128 P.3d 63; Slattery v. Covey &
Co., 909 P.2d 925, 929 (Utah Ct. App. 1995); TS 1 P’ship v. Allred, 877
P.2d 156, 160 n.2 (Utah Ct. App. 1994). As other jurisdictions have
recognized, the basis for this doctrine is that the appellate court is
best qualified to determine whether an award is justified:
       An appellate court is in a far better position to evaluate
       the worth of the appellate work than the trial judge. . . .
       An appellate Justice . . . develops a knowledge of the
       case and the value of the work of the attorney who
       seeks compensation. A trial judge simply cannot bring
       to bear this familiarity with the appellate work.
Yorke Mgmt. v. Castro, 546 N.E.2d 342, 344 (Mass. 1989).
   ¶22 The same principle applies here. The decision-makers
most familiar with CPG’s attorneys’ work during the confirmation
proceedings and resulting appeal were the courts that presided over
those confirmation proceedings and resulting appeal. We think it
best to assign those courts sole responsibility for granting attorney
fees in those proceedings, and we therefore conclude that the panel
exceeded its authority when it ordered Westgate to pay post-
arbitration attorney fees. 6
  II. THE PANEL DID NOT ACT IN MANIFEST DISREGARD OF
 THE LAW BY ALLOWING CPG TO COLLECT ATTORNEY FEES
          IN EXCESS OF THE CONTRACTED AMOUNT
    ¶23 Westgate does not challenge the panel’s authority to
award attorney fees for the arbitration proceedings. Under the
UUAA, “[a]n arbitrator may award reasonable attorney fees . . . if the
award is authorized by law.” UTAH CODE § 78B-11-122(2). And the
UPUAA clearly authorizes the award, providing that a prevailing
party “recovers the cost of the suit, including reasonable attorney
fees.” Id. § 76-10-1605(2). Because the panel determined that CPG

   6 In so holding, we note that section 122 of the UUAA is not
among the statute’s nonwaivable provisions. See UTAH CODE § 78B-
11-105 (listing nonwaivable provisions). If parties to an arbitration
agreement wish to give their arbitrators authority to award attorney
fees for post-arbitration proceedings, then nothing in this opinion
should be construed to prevent them.
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             WESTGATE v. CONSUMER PROTECTION GROUP
                      Opinion of the Court
was the prevailing party, it was not merely allowed but compelled to
award CPG attorney fees for the arbitration proceedings.
    ¶24 Instead of challenging the panel’s authority to award fees
for arbitration, Westgate challenges the method the panel used to
calculate those fees. The panel awarded CPG what it determined to
be “reasonable” attorney fees of $558,810.30, arriving at this figure
by multiplying reasonable hours by a reasonable market rate. The
panel slightly adjusted the fee amount to reflect some other factors it
considered, but it did not limit the fees to the amount CPG had
actually contracted to pay its attorneys. Westgate asserts that this
was error and that Utah law required the panel to cap the attorney
fees at the amount CPG contracted to pay for representation.
    ¶25 Because Westgate thus alleges that the panel committed an
error of law—and not that it acted ultra vires—we may vacate the
first fee award only if it meets the three requirements of the
“manifest disregard” standard: (1) that it was an error, (2) that the
error should have been obvious to the average person qualified to be
an arbitrator, and (3) that the panel was actually aware of the
controlling law and chose to disobey it.
    ¶26 We conclude that the manifest disregard requirements are
not met because the panel did not make an obvious error in its
interpretation of controlling law. CPG’s right to attorney fees is
created by the UPUAA, UTAH CODE § 76-10-1605(2), and it is
therefore a question of statutory interpretation whether those fees
are limited to the fees CPG actually incurred during the arbitration
proceedings. Because the UPUAA does not expressly limit plaintiffs’
recovery of “reasonable attorney fees” to the fees they are
contractually obligated to pay, and there is no controlling Utah case
law interpreting the UPUAA to require this limitation, we affirm the
panel’s award of attorney fees.
    ¶27 Westgate argues that attorney fees should be limited to
those actually incurred, citing two Utah cases for this proposition—
Strohm v. ClearOne Communications, Inc., 2013 UT 21, ¶ 16, 308 P.3d
424, and Softsolutions, Inc. v. Brigham Young University, 2000 UT 46,
¶ 52, 1 P.3d 1095. But the statute involved in Strohm expressly
limited attorney fees to incurred expenses. 2013 UT 21, ¶ 10. And
Softsolutions involved the interpretation of a contract to determine
fees. 2000 UT 46, ¶¶ 3, 41. Neither case interpreted the language of
the UPUAA.
    ¶28 CPG also argues that these cases are distinguishable
because of the purpose of the UPUAA, which is to encourage
attorneys to take UPUAA cases and thereby help enforce the laws of
Utah. CPG notes that the UPUAA is modeled after and almost
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                         Opinion of the Court

identical to the federal Racketeer Influenced and Corrupt
Organizations Act (RICO). RICO is a federal fee-shifting statute,
under which victorious plaintiffs but not victorious defendants are
entitled to recover attorney fees, and plaintiffs are awarded the
market value of their attorney’s services regardless of the attorney’s
contracted rate.
    ¶29 Westgate disputes CPG’s arguments, arguing that the
UPUAA is not a fee-shifting statute like RICO because—unlike
RICO—the UPUAA also provides reasonable attorney fees for
prevailing defendants, making the UPUAA a “loser pays” statute
instead of a fee-shifting statute.
    ¶30 Ultimately, because the UPUAA does not expressly limit a
plaintiff’s attorney fees to those actually incurred and there is no
controlling Utah case law interpreting this specific question, the
arbitration panel did not commit an obvious error in its calculation
of reasonable attorney fees. The district court’s order confirming the
panel’s award of $558,810.30 is affirmed.
   III. CPG’S REQUEST FOR COSTS AND ATTORNEY FEES ON
                    APPEAL IS GRANTED
    ¶31 Finally, we grant CPG’s request for attorney fees on this
appeal. The UPUAA provides that a “party who prevails on a cause
of action brought under this section recovers the cost of the suit,
including reasonable attorney fees.” UTAH CODE § 76-10-1605(2).
CPG has prevailed on a cause of action under the UPUAA—the
panel necessarily decided as much when it awarded attorney fees,
and Westgate has not contested that decision. Further, “the cost of
the suit, including reasonable attorney fees” plainly includes the cost
of an appeal, including reasonable appellate attorney fees. CPG,
however, “did not retain all of [its arbitration] victory on appeal, and
some adjustment may be necessary so that [it does] not recover fees
attributable to issues on which [it] did not prevail.” Valcarce v.
Fitzgerald, 961 P.2d 305, 319 (Utah 1998) (plurality opinion).
   ¶32 Westgate disputes this conclusion, citing Meadowbrook,
LLC v. Flower, 959 P.2d 115, 117–19 (Utah 1998), for the proposition
that a party waives its right to attorney fees if it fails to request fees
before the entry of final judgment. But this misstates Meadowbrook,
which did not concern appellate fees but merely whether trial fees
could be requested by “timely post-trial motions.” Id. at 117. Indeed,
Meadowbrook is based on Cabrera v. Cottrell, 694 P.2d 622 (Utah 1985),
whose holding Meadowbrook summarizes as follows:
       [A] party who failed to request all attorney fees
       incurred for trial work during the “trial phase” of a
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             WESTGATE v. CONSUMER PROTECTION GROUP
                      Opinion of the Court
      case could not request such fees for the first time after
      the case had been remanded to the trial court for the
      sole purpose of determining attorney fees incurred in
      defending the case on appeal.
Meadowbrook, 959 P.2d at 117 (emphasis added). Meadowbrook thus
explicitly recognized that a party who has waived his right to fees
incurred at trial could nevertheless recover fees incurred on appeal.
    ¶33 Westgate’s brief also claims that Valcarce “explain[ed] that
only a party who received attorney fees below and prevails on appeal
is entitled to fees incurred on appeal.” (emphasis added). But
Valcarce “explained” no such thing. It did hold that “when a party
who received attorney fees below prevails on appeal, ‘the party is
also entitled to fees reasonably incurred on appeal.’” Valcarce, 961
P.2d at 319 (citation omitted). But the crucial word “only”—on which
Westgate’s entire argument hangs—does not appear in the relevant
passage, and the very paragraph that Westgate cites suggests that
there are other grounds on which an appellate court may award
attorney fees: “This court has interpreted attorney fee statutes
broadly so as to award attorney fees on appeal where a statute
initially authorizes them.” Id. (citation omitted). The UPUAA
authorizes such attorney fees, and so we award them here.
                           CONCLUSION
    ¶34 The district court’s confirmation of the panel’s award of
$558,810.30 is affirmed. Its confirmation of the award of $88,829.50 is
reversed, and the case is remanded for further proceedings
consistent with this opinion. On remand, the district court shall
calculate and award a reasonable attorney fee for this appeal
pursuant to section 1605(2) of the UPUAA.

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