Court Opinion

ID: 3152495
Source: CourtListenerOpinion
Date Created: 2015-11-05 19:09:21.660289+00
Date Added: 2024-06-11T12:15:28.098726
License: Public Domain

131 Nev., Advance Opinion   go
       IN THE SUPREME COURT OF THE STATE OF NEVADA

WPH ARCHITECTURE, INC., A
NEVADA CORPORATION,
Appellant,
vs.
VEGAS VP, LP, A NEVADA LIMITED
PARTNERSHIP,
Respondent.

           Appeal from a district court order denying a motion to confirm
in part, modify, or correct an arbitration award. Eighth Judicial District
Court, Clark County; Jessie Elizabeth Walsh, Judge.
           Affirmed.

Weil & Drage, APC, and Jean A. Weil and Trevor 0. Resurreccion,
Henderson,
for Appellant.

Greenberg Traurig and Tami D. Cowden and Mark E. Ferrario, Las Vegas,
for Respondent.

BEFORE SAITTA, GIBBONS and PICKERING, JJ.

                                OPINION

By the Court, SAITTA, J.:
            In Nevada, it is well settled that a party who makes an
unimproved upon offer of judgment in a district court action may recover
                attorney fees and costs incurred after the offer of judgment was made.
                This opinion addresses whether this is also true when the statutory offer
                of judgment takes place in an arbitration proceeding.
                            We hold that because the award of fees and costs by an
                arbitrator is discretionary, appellant WPH Architecture, Inc., has not
                demonstrated that the arbitrator manifestly disregarded Nevada law by
                refusing to award it fees and costs.
                                FACTUAL AND PROCEDURAL HISTORY
                            Respondent Vegas VP, LP, hired WPH to perform
                architectural services for a condominium project that Vegas VP was
                building in Las Vegas. Vegas VP brought an action against WPH for
                professional negligence relating to the services that WPH performed for
                Vegas VP. The contract provided that any disagreement between Vegas
                VP and WPH would be resolved by mediation and, if that were
                unsuccessful, binding arbitration before the American Arbitration
                Association (AAA).
                             After an unsuccessful attempt at mediation, Vegas VP filed a
                demand for arbitration. Prior to arbitration, WPH submitted what it
                claimed to be two statutory offers of judgment under NRCP 68 and NRS
                17.115 to Vegas VP. 1 Vegas VP did not accept either offer.
                             The case proceeded to arbitration, and an AAA panel of
                arbitrators ruled in favor of WPH. The arbitration order also stated that

                      1NRS   17.115 was repealed by the 2015 Nevada Legislature. 2015
                Nev. Stat., ch. 442, § , at ; A.B. 69, 78th Leg. (Nev. 2015). Because
                NRS 17.115 was still in effect at the time of the arbitration, its subsequent
                repeal does not affect our disposition in this case.

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                each party would bear its own fees and costs. WPH then filed a post-
                award motion for costs, fees, and interest, claiming that as the prevailing
                party it was entitled to fees and costs under Nevada law. The arbitration
                panel denied WPH's motion, stating that no caselaw existed which held
                that offers of judgment are available in arbitration proceedings in Nevada.
                Therefore, "[w]ithout express authority to grant fees and costs incidental
                to a declined offer of judgment, [the arbitration] Panel [was] disinclined to
                rule in favor of WPH."
                            WPH subsequently filed a motion in the district court to
                confirm in part, modify, or correct the arbitration award to order Vegas VP
                to pay WPH's attorney fees, costs, and interest. The district court denied
                WPH's motion. This appeal follows.
                                               DISCUSSION
                            WPH argues that because the arbitration panel manifestly
                disregarded Nevada law regarding the awarding of attorney fees and
                costs, the district court erred in denying WPH's motion to confirm in part,
                modify, or correct the arbitration award. Specifically, WPH argues that
                the arbitration panel disregarded NRCP 68 and NRS 17.115, which
                provide for a party who makes an offer of judgment that its adversary does
                not improve upon to recover the reasonable attorney fees and costs it
                incurs, see NRCP 68(f)(2); NRS 17.115(4)(c)-(d), and NRS 18.020, which
                requires costs to be awarded to the prevailing party in an action alleging
                more than $2,500 in damages, see NRS 18.020(3).
                            "We review a district court's confirmation of an arbitration
                award de novo." Sylver v. Regents Bank, N.A.,    129 Nev., Adv. Op. 30, 300
P.3d 718, 721 (2013). An arbitration award "may be vacated based on
                statutory grounds and certain limited common-law grounds."        Bohlmann

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v. Printz, 120 Nev. 543, 546, 96 P.3d 1155, 1157 (2004), overruled on other
grounds by Bass Davis v. Davis, 122 Nev. 442, 452 n.32, 134 P.3d 103, 109
                  -

n.32 (2006). At common law, "an arbitration award may be vacated if it is
'arbitrary, capricious, or unsupported by the agreement' or when an
arbitrator has 'manifestly disregard[ed] the law."        Id. (alteration in
original) (quoting Wichinsky v. Mosa, 109 Nev. 84, 89-90, 847 P.2d 727,
731 (1993)).
The arbitration was substantively governed by Nevada law
               WPH argues that the contract between it and Vegas VP
contained a choice-of-law agreement stating that any arbitration arising
from the contract would be substantively governed by Nevada law. Vegas
VP argues that the contract contained a choice-of-law agreement stating
that the arbitration would be substantively governed by AAA rules.
Contract interpretation is reviewed de novo. Bielar v. Washoe Health Sys.,
Inc., 129 Nev., Adv. Op. 49, 306 P.3d 360, 364 (2013).
               The contract between Vegas VP and WPH contains two choice-
of-law clauses. The first clause (AAA rules clause), found under the
contract's "Arbitration" section, states that the arbitration, "unless the
parties mutually agree otherwise, shall be in accordance with the
Construction Industry Arbitration Rules of the [AAA]." The second clause
(Nevada laws clause), found in the contract's "Miscellaneous Provisions"
section, states that the contract itself would be "governed by the law of the
principal place of business of the Architect, unless otherwise provided."
The principle place of business of WPH is Nevada.
               The United States Supreme Court has ruled on this issue in a
case with facts very similar to the current case. In Mastrobuono V.
Shearson Lehman Hutton, Inc., two parties disputed how a choice-of-law

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                provision applied to their arbitration. 514 U.S. 52, 53 (1995). The
                contract governing the parties' dispute had both a clause stating that "any
                controversy' arising out of the transactions between the parties 'shall be
                settled by arbitration' in accordance with the rules of the National
                Association of Securities Dealers (NASD)" and a clause stating that "the
                entire agreement 'shall be governed by the laws of the State of New York."
                Id. at 58-59. The Court reasoned that reading the agreement as choosing
                New York law to apply for both the procedural and substantive law
                governing the arbitration would violate a "cardinal principle of contract
                construction: that a document should be read to give effect to all its
                provisions and to render them consistent with each other."       Id. at 63.
                Thus, the Court found that "the best way to harmonize the choice-of-law
                provision with the arbitration provision is to read the laws of the State of
                New York to encompass substantive principles" and the NASD rules to
                govern the procedural aspect of the arbitration.     Id. at 63-64 (internal
                quotations omitted).
                            Similar to Mastrobuono, a finding here that the Nevada law
                clause supersedes the AAA rules clause would require this court to violate
                a well-established tenet of contract interpretation by rendering the AAA
                rules clause meaningless. See Bielar, 129 Nev., Adv. Op. 49, 306 P.3d at
                364 (holding that this court interprets a contract so as to give effect to
                each of its words and to not render any terms meaningless). We also find
                that such a finding would not express the parties' intentions when they
                entered into the Agreement.     See Galardi v. Naples Polaris, LLC, 129
                Nev., Adv. Op. 33, 301 P.3d 364, 367 (2013) ("Contract interpretation
                strives to discern and give effect to the parties' intended meaning."). The
                parties' extensively blacked out portions of the contract, which was

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                originally a boilerplate architecture agreement entitled "Abbreviated
                Standard Form of Agreement Between Owner and Architect." By blacking
                out portions of the contract, the parties indicated that they did not intend
                for those portions to be part of the contract. Yet the AAA rules clause was
                not similarly repudiated, indicating that the parties intended for that
                clause to be included in the contract. Therefore, we hold that the
                arbitration was substantively governed by Nevada law and procedurally
                governed by the AAA rules.
                NRCP 68, NRS 17.115, and NRS 18.020 are substantive laws
                            Vegas VP argues that this court previously held attorney fees
                to be procedural in Tipton v. Heeren, 109 Nev. 920, 859 P.2d 465 (1993).
                In Tipton, the court stated in a footnote that it agreed with the parties'
                assessment that under a choice-of-law provision in a promissory note,
                Wyoming law would govern substantive issues and Nevada law would
                govern procedural issues. Id. at 922 n.3, 859 P.2d at 466 n.3. The court
                then, without making an express finding or performing any analysis on
                the issue of whether attorney fees is a procedural issue, applied Nevada
                law to the issue of attorney fees. Id. at 924, 859 P.2d at 467. Because the
                court in Tipton did not analyze the issue of whether attorney fees statutes
                are substantive law, we hold that Tipton is not controlling in this case.
                Thus, the issue of whether attorney fees laws are procedural or
                substantive is one of first impression.
                            Federal courts have found state laws awarding attorney fees
                to be substantive. For example, the Ninth Circuit Court of Appeals has
                stated that "[s]tate laws awarding attorney[ ] fees are generally considered
                to be substantive laws." Northon v. Rule, 637 F.3d 937, 938 (9th Cir.
                2011). Indeed, federal district courts in Nevada have found NRCP 68,

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NRS 17.115, and NRS 18.020 to all be substantive laws. See Walsh v.
Kelly, 203 F.R.D. 597, 598-99 (D. Nev. 2001) (holding that NRCP 68 and
NRS 17.115 are substantive laws); see also In re USA Commercial Mortg.
Co., 802 F. Supp. 2d 1147, 1178 (D. Nev. 2011) (holding NRS 18.020 to be
a substantive law).
            We see no reason to disagree with the federal courts on this
issue. Therefore, we hold that NRCP 68, NRS 17.115, and NRS 18.020 are
substantive laws that apply to the arbitration proceedings in the current
case.
The award of attorney fees and costs is discretionary by an arbitrator
            It is well settled that NRCP 68 and NRS 17.115 provide that
attorney fees and costs may be awarded when a party fails to improve
upon a rejected statutory offer of judgment in an action before the district
court. See RTTC Commc'ns, LLC v. Saratoga Flier, Inc., 121 Nev. 34, 40         -

41, 110 P.3d 24, 28 (2005). We have similarly ruled that NRS 18.020
requires the award of costs to the prevailing party in several types of
district court actions. See Schwartz v. Estate of Greenspun, 110 Nev. 1042,
1050, 881 P.2d 638, 643 (1994); see also Campbell v. Campbell, 101 Nev.
380, 383, 705 P.2d 154, 156 (1985). However, we have never ruled as to
whether the statutes or the rule create a similar requirement when a
dispute is decided in private arbitration proceedings.
            NRCP 68 and NRS 117.115 contain no references to
arbitration, awards, or arbitrators. Similarly, NRS 18.020 also contains
no reference to arbitration proceedings. Therefore, NRCP 68, NRS 17.115,
and NRS 18.020(3) by their plain language do not expressly require the

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                award of fees and costs in an arbitration proceeding. 2 Furthermore, no
                Nevada caselaw exists holding that those statutes apply to arbitration
                proceedings. Therefore, we conclude that these statutes do not require an
                arbitrator to award attorney fees or costs.
                             NRS 38.238(1) states that "[am n arbitrator may award
                reasonable attorney's fees and other reasonable expenses of arbitration if
                such an award is authorized by law in a civil action involving the same
                claim or by the agreement of the parties to the arbitral proceeding." WPH
                argues that because NRS 38.238(1) expressly allows an arbitrator to
                award any attorney fees and costs that would be authorized by law in a
                civil action involving the same claim, the AAA panel was therefore
                required to award attorney fees and costs mandated by NRCP 68, NRS
                17.115, and NRS 18.020. However, in making its argument, WPH ignores
                the operative word in NRS 38.238(1): that "[a]n arbitrator may award"
                fees and costs. (Emphasis added.) Thus, the statute merely gives an
                arbitrator the discretion to award fees; it is not a requirement to do so.
                See NRS 0.025(1)(a) ("May' confers a right, privilege or power."); see also
                Tarango v. State Indus. Ins. Sys., 117 Nev. 444, 451 n.20, 25 P.3d 175, 180
                n.20 (2001) ("In statutes, 'may' is permissive and 'shall' is mandatory
                unless the statute demands a different construction to carry out the clear
                intent of the legislature." (internal quotations omitted)).

                      2 E1contrast, California's offer of judgment statute explicitly states
                that it applies to both trial and arbitration proceedings. See Cal. Civ.
                Proc. Code § 998 (West 2009).

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                WPH has not shown that the AAA panel manifestly disregarded Nevada
                law
                            In determining whether an arbitrator has manifestly
                disregarded the law, "the issue is not whether the arbitrator correctly
                interpreted the law, but whether the arbitrator, knowing the law and
                recognizing that the law required a particular result, simply disregarded
                the law." Clark Cnty. Educ. Ass'n v. Clark Cnty. Sch. Dist., 122 Nev. 337,
                342, 131 P.3d 5, 8 (2006) (internal quotations omitted).
                            Here, the arbitration panel considered whether Nevada's offer
                of judgment and costs statutes required the award of fees and costs in an
                arbitration proceeding before finding that no judicial or statutory
                authority mandated such an award. The arbitration panel also considered
                whether it had the authority under AAA rules to grant post-award fees
                and costs incidental to a declined offer of judgment, and it concluded that
                AAA rules did not grant that authority.
                            As discussed above, NRCP 68, NRS 17.115, and NRS 18.020(3)
                do not by their plain language require the award of fees and costs in an
                arbitration proceeding. Furthermore, no Nevada caselaw exists holding
                that those statutes apply to arbitration proceedings. Lastly, NRS
                38.238(1) provides an arbitrator with the discretion to award attorney fees
                and costs in an arbitration proceeding but does not require the arbitrator
                to do so. Therefore, no clear statute or authority exists that would require
                the award of attorney fees and costs in an arbitration proceeding. As such,
                WPH has not demonstrated that the arbitration panel knew of any statute
                or authority that required the panel to award attorney fees and costs to

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WPH. We therefore hold that WPH has failed to demonstrate that the
arbitrator manifestly disregarded Nevada law.
                              CONCLUSION
            Because the award of fees and costs by an arbitrator is
discretionary, WPH has not demonstrated that the AAA panel manifestly
disregarded Nevada law when it refused to award them to WPH. Thus,
we affirm the district court's denial of WPH's motion to confirm in part,
modify, or correct the arbitration award.

                                                                 J
                                    Saitta

Gibbons

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                PICKERING, J., concurring:
                           I concur but only in the result. The arbitrators considered and
                rejected the limited arguments the appellant made to them to support its
                post-award request for attorney fees and costs. Those arguments did not
                include the choice-of-law and Erie-based substance v. procedure
                distinctions on which the majority focuses. Since no authority was cited to
                the arbitrators to suggest, much less establish, that NRS 17.115 and
                NRCP 68 apply in the arbitration setting, the arbitrators did not act in
                manifest disregard of law in declining to award fees and costs based on
                those provisions of Nevada law. See Graber v. Comstock Bank, 111 Nev.
1421, 1428, 905 P.2d 1112, 1116 (1995) ("[When searching for a manifest
                disregard for the law, a court should attempt to locate arbitrators who
                appreciate the significance of clearly governing legal principles but decide
                to ignore or pay no attention to those principles."). The record before the
                arbitrators likewise does not establish appellant's entitlement to costs
                pursuant to "NRS 18.010, et. seq.," to which appellant generically referred
                the arbitrators. While I would affirm, therefore, I would do so on the
                grounds that the arbitrators did not manifestly disregard the law that was
                presented to them, without reaching the more complex and uncertain
                questions the majority undertakes to resolve.

                                                         Pida2,1   my'

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