855 N.W.2d 407
S.D.2014Background
- BHSP Arbitration Agreement requires binding arbitration for disputes between a Member and BHSP and shared costs; attorney’s fees to be paid by each side; derivative action pursued by Setliff on BHSP’s behalf; arbitrator awarded Setliff attorney’s fees and costs; circuit court affirmed award and BHSP sought vacatur; Setliff cross-appealed sealing order; court reverses in part and remands.
- Setliff filed derivative action in SD circuit court alleging Managers breached fiduciary duties; arbitration proceedings were held, awards issued in December 2012; arbitrator treated claim as derivative but ordered Setliff to recover attorneys’ fees and costs; parties argued over whether the arbitration agreement allowed such fees.
- Arbitration proceeding record was to be kept confidential except for issues related to fees; circuit court sealed unredacted portions; BHSP sought vacatur of attorney’s fees portion.
- Arbitrator’s award followed a derivative-action framing but did not analyze the attorney’s fees clause; ultimately awarded Setliff fees contrary to Section 15.11(B) of the Operating Agreement.
- This appeal concerns whether the arbitrator exceeded her powers by awarding fees in violation of the arbitration clause; standard of review applicable to excess-powers determinations is de novo; court reverses the award on this basis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did arbitrator exceed powers by awarding attorney’s fees contrary to the arbitration clause? | BHSP argues the award violated the fee-shifting provision. | Setliff argues deferential review supports the award as within contract interpretation. | Yes; arbitrator exceeded powers by awarding fees. |
| What is the proper standard of review for excess-powers determinations? | BHSP contends de novo review should apply. | Setliff contends standard is deferential under arbitration policy. | De novo review governs excess-powers determinations. |
| Was the sealing order properly upheld or reversed given the fee dispute focus? | Setliff appeals sealing; argues insufficient justification. | BHSP asserts sealing was appropriate for trade secrets and related issues. | Part affirmed, part reversed; remanded on sealing issue. |
Key Cases Cited
- Azcon Constr. Co., Inc. v. Golden Hills Resort, Inc., 498 N.W.2d 630 (S.D. 1993) (arbitration awards reviewed for abuse of power; limited vacation rights)
- Aamot v. Eneboe, 352 N.W.2d 647 (S.D. 1984) (arbitrators exceed powers when not within agreement)
- Spiska Eng’g, Inc. v. SPM Thermo-Shield, Inc., 730 N.W.2d 638 (S.D. 2007) (examine submission and award for contract conformity)
- United Steelworkers of Am. v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960) (awards upholdability when within contract, even if malinterpreted)
- AMD v. Intel Corp., 885 P.2d 994 (Cal. 1994) (remedies derived from contract interpretation; extraneous sources not allowed)
- Ethyl Corp. v. United Steelworkers of Am., 768 F.2d 180 (7th Cir. 1985) (awards may be within scope if not outside contract framework)
- Vold v. Broin & Assocs., Inc., 2005 SD 80, 699 N.W.2d 482 (S.D. 2005) (deferential vs. non-deferential review in arbitration context)
- W. Cas. & Sur. Co. v. Gridley, 362 N.W.2d 100 (S.D. 1985) (limits on vacation of arbitration awards; deference to arbitral decisions)