257 P.3d 1182
Ariz. Ct. App.2011Background
- WB, an Idaho LLC, was formed to manage Wright Brothers’ residential projects; Wright Brothers is the sole guarantor and member of WB.
- In March 2006, WB and Appellees entered a construction contract for real property in Santa Cruz County, Arizona, including an arbitration clause and mediation prerequisites.
- An amendment signed by Robert A. Wright (as Wright Brothers’ president) listed WB as the contractor; it is unclear whether Wright Brothers was acting in its own capacity or for WB.
- WB lacked an Arizona contractor’s license when the contract and arbitration agreement were executed; license status remained unresolved for months after contract signing.
- Appellees moved to void the contract and arbitration and sought summary judgment; the trial court lifted the stay and granted summary judgment against WB.
- The appellate court ultimately held the arbitration clause void/voidable due to licensing defects, affirmed the summary judgment, but vacated and remanded on attorneys’ fees and costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of arbitration clause | WB contends arbitration should proceed if valid. | Appellees contend arbitration clause void due to lack of license. | Arbitration clause void or voidable; not enforceable. |
| Court vs. arbitrator on contract validity | Arbitrator should determine contract validity; court should compel arbitration if clause valid. | Court may determine arbitration clause validity and grant summary judgment if invalid. | Court properly decided arbitration clause invalid and granted summary judgment. |
| Substantial compliance with licensing | WB substantially complied with licensing requirements to avoid § 32-1153 bar. | WB failed to prove substantial compliance; knowledge of licensing requirements implied. | WB failed to show substantial compliance as a matter of law; license knowledge imputed from Wright Brothers. |
| Whether Wright Brothers was party to the contract | Wright Brothers may be de facto party; should be considered for license purposes. | Contract identifies WB as the contractor; Wright Brothers not a party. | Wright Brothers was not an actual or de facto party to the contract. |
| Attorneys’ fees and costs awards | Arbitration-related fees may be recoverable under § 12-341.01 if intertwined with court fees. | Arbitration is not an action; fees/costs should be limited or remanded. | Arbitration fees were not intertwined with court fees; awards vacated and remanded for reconsideration. |
Key Cases Cited
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (arbitration clause severable; validity question resolved by arbitrator unless challenge to clause itself)
- Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010) (court considers challenge to arbitration clause before enforcing it)
- Stevens/Leinweber/Sullens, Inc. v. Holm Dev. & Mgmt., Inc., 165 Ariz. 25 (App. 1990) (enforcement of arbitration provisions; separability from contract)
- U.S. Insulation, Inc. v. Hilro Const. Co., Inc., 146 Ariz. 250 (App. 1985) (contract defenses may invalidate arbitration agreements)
- City of Cottonwood v. James L. Fann Contracting, Inc., 179 Ariz. 185 (App. 1994) (fees/arbitration context; related to fee awards when arbitration involved)
- Aesthetic Prop. Maint., Inc. v. Capitol Indem. Corp., 183 Ariz. 74 (App. 1995) (substantial compliance principle; licensing defenses)
- Semple v. Tri-City Drywall, Inc., 172 Ariz. 608 (App. 1992) (arbitration fees generally not recoverable under § 12-341.01)
- Canon Sch. Dist. No. 50 v. W.E.S. Const. Co., Inc., 180 Ariz. 148 (App. 1994) (precedent on fee awards and arbitration; related reasoning)
- Mathews ex rel. Mathews v. Life Care Centers of America, Inc., 217 Ariz. 606 (App. 2008) (arbitration as alternative forum; not a civil remedy under APSA)
- Yeung v. Maric, 224 Ariz. 499 (App. 2010) (arbitration proceedings are quasi-judicial in nature)