Court Opinion

ID: 4378217
Source: CourtListenerOpinion
Date Created: 2019-03-18 21:45:14.846666+00
Date Added: 2024-06-11T13:31:08.281577
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

SIMEON J. OSBORN and MONICA                     No. 77871-4-1
OSBORN, and the marital community
composed thereof,                               DIVISION ONE

                 Respondents,

                   V.

MICHAEL CALLAHAN and ROBIN
CALLAHAN, individually, and the marital
community composed thereof,                     UNPUBLISHED OPINION

                 Appellants,

OSBORN MACHLER, PLLC, a
Washington professional limited liability
company,

                 Third Party Defendant.         FILED: March 18, 2019

       SCHINDLER, J. — Michael Callahan and Robin Callahan appeal a superior court

order denying the motion to vacate the arbitrator's award, entry of judgment on the

award, and the award of attorney fees. We affirm.

                                            FACTS

       Simeon Osborn and Michael Callahan are attorneys and had been close friends

since 1976.
No. 77871-4-1/2

        On September 16, 2016, Osborn and his spouse Monica Osborn (collectively,

Osborn)filed a lawsuit against Callahan and his spouse Robin Callahan (collectively,

Callahan). The lawsuit alleged Callahan owed Osborn more than $700,000 in personal

loans Osborn made to Callahan between 2007 and 2009.

       On March 20, 2017, Callahan filed an answer and counterclaims against Osborn

and the Osborn Machler PLLC law firm.1 Callahan claimed he was entitled to offsets

and asserted claims of breach of contract, breach of fiduciary duty, accounting, and

conversion. Callahan alleged that while acting as his lawyer, Osborn learned about

artwork Callahan held in a storage facility as collateral for a debt. Callahan alleged

Osborn or his law firm misappropriated three works of art valued at approximately $3

million. The amended answer and counterclaims did not allege misappropriation of

artwork.

       In September 2017, the parties participated in a mediation and entered into a CR

2A settlement agreement. Callahan agreed to pay Osborn $315,000 "in full and final

settlement of the lawsuit pending between them." The parties stipulated to a schedule

of payments by Callahan, a significant reduction of the debt if Callahan paid early, and

acceleration of the debt if Callahan did not make certain scheduled payments.2 The

parties agreed to execute a "confession of judgment" to secure payment of the debt and

"[m]utual releases for all claims." The CR 2A agreement states the mediator, retired

King County Superior Court Judge Bruce Hilyer, "is appointed as arbitrator should any

        I Three minutes after filing the answer and counterclaims on March 20, Callahan filed an
amended answer and counterclaims. Callahan's attorney failed to serve the law firm as a third party
defendant. At some point prior to the mediation, Callahan began representing himself pro se in this
matter.
        2 The debt accelerated because Callahan made only the first payment required under the CR 2A
agreement.

                                                     2
No. 77871-4-1/3

issue or dispute arise regarding the performance, interpretation or enforcement of this

agreement."

       With Callahan's consent, Osborn filed a notice of settlement, stating, "[A]ll claims

against all parties in this action have been resolved."

       Osborn's attorney drafted and sent a confession of judgment to Callahan. The

confession of judgment addressed mutual releases as follows:

       The Settlement Agreement contemplates mutual releases of all claims,
       asserted or unasserted, known or unknown, and the dismissal of the
       lawsuit with prejudice. Such dismissal shall not however affect Osborn's
       rights to enter this Confession of Judgment upon the occurrence of
       Callahan's default in faithfully performing the obligations set forth in the
       Settlement Agreement.

Callahan objected to signing a release of "all claims, asserted or unasserted, known   Or

unknown."

       Osborn requested arbitration to resolve the dispute. At the direction of the

arbitrator, Osborn and Callahan each provided a written submission and a proposed

confession of judgment.

       Callahan argued the parties agreed to settle only claims asserted in the

pleadings and dismissal of the lawsuit. Callahan asserted that during discovery, he

asked Osborn about "all dealings with the art" and in response, Osborn produced

documentation related to four works of art. Callahan claimed that shortly after the

mediation, he learned that Osborn had taken possession of two additional works of art

that belonged to him with an "appraised value in the millions of dollars." Callahan

submitted a confession of judgment that provided for "mutual releases between the

parties of only the claims asserted in the pleadings and settled in the Settlement

                                                3
No. 77871-4-1/4

Agreement, together with a dismissal of the lawsuit with prejudice of the subject

lawsuit."

       The arbitrator issued a two-page "Arbitrator's Award" that set forth findings and

conclusions. The arbitrator concluded the confession of judgment submitted by Osborn

conformed to the CR 2A agreement. The Arbitrator's Award sets forth the following

findings and conclusions:

              FINDINGS
                      1.     With regard to the lawsuit entitled Osborn v. Callahan,
      King County Superior Court Cause No. 16-2-22333-8 SEA, a "CR2A"
      settlement agreement dated September 8, 2017, was negotiated and
      signed by and on behalf of all the parties, in which the parties appointed
      the undersigned to act as arbitrator and authorized the arbitrator to resolve
      any issues regarding the performance, interpretation and enforcement of
      the settlement.
                     2.      The underlying lawsuit included counterclaims against
      petitioners Osborn and a third party complaint against Osborn Machler,
      PLLC, including claims and affirmative defenses for offset, breach of
      contract, breach of fiduciary duty, claims related to ownership of artwork,
      and for an accounting.
                     2. [sic] An issue has arisen between the parties regarding
      the form and execution of a confession of judgment. Respondent
      Callahan also contends that certain of his claims against petitioner Osborn
      were left unresolved by the settlement agreement. While the CR2A does
      not explicitly mention Osborn Machler, PLLC, it was clearly intended to
      resolve all claims including claims against Osborn Machler, PLLC, and
      that was clearly explained by the undersigned to Mr. Callahan.
                     3.      Respondent Callahan has failed and refused to sign
      the form of confession of judgment prepared by counsel for petition, and
      petitioner Osborn has refused to sign the form of confession of judgment
      prepared by Callahan.
                     4.      Pursuant to my preliminary order, both forms of
      confession of judgment have been submitted to me to decide the form of
      confession of judgment best conforming to the CR2A settlement
      agreement.
              CONCLUSIONS AND AWARD
                     5.      The form of confession of judgment submitted by
      petitioner Osborn, attached hereto as Exhibit "A" and incorporated herein
      by this reference, best conforms with the terms of the CR2A settlement,
      and I direct that respondents Michael Callahan and Robin Callahan,

                                                4
No. 77871-4-1/5

         husband and wife, forthwith execute that confession of judgment before a
         notary.
                        6.     All claims by respondent Callahan against petitioner
         Osborn, including without limitation claims against the law firm of Osborn
         Machler PLLC and claims related to the ownership of artwork, were fully
         and finally settled and compromised by the CR2A settlement agreement.

The arbitrator attached the confession of judgment submitted by Osborn and directed

Callahan to "execute that confession of judgment before a notary."

         Callahan did not execute the confession of judgment. On November 13, 2017,

Osborn obtained a superior court order confirming the Arbitrator's Award.

         Callahan filed a motion in superior court to modify or vacate the Arbitrator's

Award. As he previously argued to the arbitrator, Callahan claimed (1) he entered into

the settlement based on deceptive information Osborn provided in discovery and (2) the

settlement agreement contemplated a release of only the claims expressly asserted in

the pleadings.

         Osborn filed a motion to enforce the arbitration award. The superior court denied

Callahan's motion to modify or vacate the arbitration award and granted the motion to

enforce the Arbitrator's Award.

         Callahan did not comply with the court order enforcing the Arbitrator's Award.

The court entered judgment on the award and an order awarding attorney fees and

costs.

                                         ANALYSIS

         Callahan contends the court erred by enforcing the Arbitrator's Award, entering

the confession of judgment, and awarding attorney fees.

         Washington courts accord substantial finality to the decision of an arbitrator

rendered in accordance with the parties' agreement and Washington's uniform

                                                  5
No. 77871-4-1/6

arbitration act, chapter 7.04A RCW. Davidson v. Hensen, 135 Wash. 2d 112, 118, 954
P.2d 1327 (1998). Judicial review of arbitration awards is controlled by statute and

permits vacation of an arbitration award only upon specific grounds enumerated in RCW

7.04A.230.3 Such review is extremely limited and does not encompass a review of the

merits of the case. Boyd v. Davis, 127 Wash. 2d 256, 267-68, 897 P.2d 1239 (1995)

(Utter, J., concurring). Absent an error of law on the face of the award, the trial court

will not modify or vacate it. Boyd, 127 Wash. 2d at 263. "[C]ourts may not search the

arbitral proceedings for any legal error; courts do not look to the merits of the case, and

they do not reexamine evidence." Broom v. Morgan Stanley DW, Inc., 169 Wash. 2d 231,

239, 236 P.3d 182(2010).4 Accordingly, "[r]arely is it possible to have an arbitration

award vacated for [obvious] error of law on the face of the award." Cummings v. Budget

Tank Removal & Envtl. Servs., LLC, 163 Wash. App. 379, 382, 260 P.3d 220 (2011).

       3 RCW   7.04A.230(1) provides:
       Upon motion of a party to the arbitration proceeding, the court shall vacate an award if:
               (a) The award was procured by corruption, fraud, or other undue means;
               (b) There was:
                (i) Evident partiality by an arbitrator appointed as a neutral;
                (ii) Corruption by an arbitrator; or
                (iii) Misconduct by an arbitrator prejudicing the rights of a party to the arbitration
       proceeding;
               (c) An arbitrator refused to postpone the hearing upon showing of sufficient
       cause for postponement, refused to consider evidence material to the controversy, or
       otherwise conducted the hearing contrary to RCW 7.04A.150, so as to prejudice
       substantially the rights of a party to the arbitration proceeding;
               (d) An arbitrator exceeded the arbitrator's powers;
               (e) There was no agreement to arbitrate, unless the person participated in the
       arbitration proceeding without raising the objection under RCW 7.04A.150(3) not later
       than the commencement of the arbitration hearing; or
                (f) The arbitration was conducted without proper notice of the initiation of an
       arbitration as required in RCW 7.04A.090 so as to prejudice substantially the rights of a
       party to the arbitration proceeding.
       4 Emphasis in original.

                                                          6
No. 77871-4-1/7

       Likewise, "in the case of an appeal from an arbitrator's award, an appellate court

is strictly proscribed from the traditional full review." Barnett v. Hicks, 119 Wash. 2d 151,

157, 829 P.2d 1087(1992). Our review of an arbitrator's award is confined to a review

of the decision by the court that confirmed, vacated, modified, or corrected that award.

Expert Drywall, Inc. v. Ellis-Don Constr., Inc., 86 Wash. App. 884, 888, 939 P.2d 1258

(1997).

       Callahan claims the arbitrator exceeded his authority by adding terms to the CR

2A agreement. Callahan contends (1)there was no evidence the parties contemplated,

much less agreed to, a mutual release of all claims, including those unknown to the

parties and unasserted in the pleadings and (2) the arbitrator ignored his claim that he

was induced to settle because Osborn provided false or misleading information in

discovery.

      An arbitrator exceeds his or her powers within the meaning of RCW

7.04A.230(1)(d) when the arbitration award exhibits a facial legal error. Broom, 169
Wash. 2d at 240. The error, if any, must be recognizable from the language of the award.

Federated Servs. Ins. Co. v. Pers. Representative of Estate of Norberq, 101 Wash. App.
119, 124,4 P.3d 844 (2000). Where, as here, the Arbitrator's Award sets forth the

arbitrator's factual findings and conclusions, we consider any issues of law evident in

those findings and conclusions as part of the "face of the award." Cumminqs, 163 Wn.

App. at 389.

       Callahan fails to identify any facial legal error in the Arbitrator's Award. The

arbitrator resolved a dispute "regarding the form and execution of a confession of

judgment." The arbitrator considered and rejected Callahan's claim that certain claims

                                                 7
No. 77871-4-1/8

were "left unresolved by the settlement agreement." The arbitrator concluded the

confession of judgment drafted by Osborn conformed to the CR 2A agreement that

resolved 101 claims," including and "without limitation" the claims "related to the

ownership of artwork." We conclude the face of the Arbitrator's Award exhibits no

erroneous or mistaken application of law.

       Callahan also contends the arbitrator erred by resolving the dispute based on

written submissions without a full evidentiary hearing, depriving him of his right to due

process. The statute Callahan cites, RCW 7.04A.150, does not require an evidentiary

hearing.

       RCW 7.04A.150(1) states the arbitrator "may conduct the arbitration in such

manner as the arbitrator considers appropriate so as to aid in the fair and expeditious

disposition of the proceeding." The record does not show that Callahan requested an

arbitration hearing, objected to the procedure, or that the arbitrator denied any request

to consider evidence. Callahan fails to establish a violation of his constitutional right to

due process.

       Callahan also claims the court erred by refusing to modify the arbitration award to

exclude his spouse because she did not sign and was not a party to the CR 2A

agreement. But the CR 2A settlement agreement states the agreement is "between Mr.

and Mrs. Michael Callahan (`Callahan) and Mr. and Mrs. Osborn ('Osborn')." Both

Callahan and Osborne signed and entered into the CR 2A agreement on behalf of the

marital community.

                                                 8
No. 77871-4-1/9

        Callahan argues the superior court erred in awarding attorney fees to Osborn

because the parties did not incur fees as a result of a "contested arbitration" and the CR

2A agreement did not include a fee provision.

        RCW 7.04A.250(3) allows the trial court to award the "prevailing party to a

contested judicial proceeding" reasonable fees. Because there were contested judicial

proceedings following entry of the arbitration award and Osborn prevailed in those

proceedings, he was entitled to reasonable attorney fees.

        Callahan also challenges the amount of the attorney fee award. We review the

reasonableness of an award of attorney fees for an abuse of discretion. Rettkowski v.

Dep't of Ecology, 128 Wash. 2d 508, 519, 910 P.2d 462(1996). Osborn's attorney

submitted a detailed fee request that set forth the time spent by two attorneys on

various tasks related to responding to the motion to vacate, enforcing the arbitration

award, and securing the judgment. Osborn requested $15,240 in attorney fees and the

court awarded a total of $10,000 in fees and costs. Callahan's conclusory assertion that

the amount of fees was unwarranted fails to demonstrate an abuse of discretion.

        Osborn seeks an award of attorney fees on appeal. Osborn is the prevailing

party on appeal. Subject to compliance with RAP 18.1(d), we grant the request under

RCW 7.04A.250(3).5

        5 Although Callahan suggests the arbitrator was biased, he points to nothing beyond his
disagreement with the arbitrator's ruling to support the claim. In evaluating partiality, we do not look to
the merits of the arbitrator's decision or the evidence. See Broom, 169 Wash. 2d at 239.

                                                          9
No. 77871-4-1/10

      We affirm the superior court order denying the motion to vacate the Arbitrator's

Award, entry of the judgment on the award, and the award of attorney fees.

WE CONCUR:
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                                             10