2014 COA 153
Colo. Ct. App.2014Background
- Harper Hofer provided expert services to Northwest Direct entities under multiple engagement letters that included an AAA-style arbitration clause.
- Parties exchanged revised engagement letters; defendants disputed whether a valid, executed contract ever existed containing the arbitration clause.
- Harper Hofer initiated arbitration in 2012 for unpaid fees; defendants asked the arbitrator to decide whether a contract existed but then fully participated in the arbitration after an adverse preliminary ruling.
- The arbitrator awarded Harper Hofer roughly $27,982; plaintiff filed to convert the award to a civil judgment in district court and sought additional collection costs and fees.
- Defendants moved to vacate the award arguing (1) only a court could decide whether an agreement existed, (2) the arbitrator exceeded powers by awarding fees, and (3) evidentiary/counterclaim errors; the district court denied vacatur and confirmed the award.
- On appeal the Colorado Court of Appeals affirmed, holding defendants waived their challenge to the existence of the contract by participating in arbitration without timely seeking judicial relief under the CUAA; remanded to calculate appellate attorney fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants waived objection that no contract (and thus no arbitration agreement) existed | Defendants consented to arbitrator deciding arbitrability and by participating they waived judicial challenge under the CUAA | Only a court may decide existence of a contract; defendants preserved objection and never accepted arbitration | Participation without seeking summary judicial determination under CUAA waived the objection; appeal denied |
| Whether the arbitrator exceeded authority by awarding attorney fees contrary to clause | Award and contract permitted recovery of fees; CUAA and award support fees | Arbitrator lacked authority to award fees per arbitration clause or rules | Court held fee award enforceable; district court properly approved collection costs; appellate court remanded to determine amount of fees |
| Standard for who decides arbitrability under CUAA and separability doctrine | Arbitrator may resolve contract validity issues if parties submit; but court decides if agreement to arbitrate exists unless parties clearly agreed otherwise | Defendants argued substantive contract existence is for court to decide, distinct from arbitration-clause validity | CUAA assigns certain arbitrability questions to court, others to arbitrator; but a party may waive court determination by participating in arbitration without timely court challenge |
Key Cases Cited
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (recognizes separability doctrine: arbitrability challenges vs. contract-wide challenges)
- J.A. Walker Co., Inc. v. Cambria Corp., 159 P.3d 126 (Colo. 2007) (Colorado favors arbitration and CUAA framework)
- Taubman Cherry Creek Shopping Ctr., LLC v. Neiman-Marcus Grp., 251 P.3d 1091 (Colo. App. 2010) (court decides existence of agreement to arbitrate absent clear waiver)
- Ingold v. AIMCO/Bluffs, L.L.C., 159 P.3d 116 (Colo. 2007) (distinguishes challenges to arbitration clause versus entire contract)
- Commerce & Indus. Ins. Co. v. Nester, 90 N.Y.2d 255 (N.Y. 1997) (party who participates in arbitration without seeking available judicial remedies waives later challenge to arbitrability)
- Glass-Pendery Consol. Mining Co. v. Meyer Mining Co., 1 P. 443 (Colo. 1883) (historic rule: objections to arbitration must be seasonably made or are waived)