Lead Opinion
Opinion by
This case highlights the great deference that courts owe to arbitration rulings-even where the arbitrators do not fully explain their reasoning. Defendant, Village Homes of Colorado, Inc. (Village Homes), appeals a district court judgment confirming an arbitration award of attorney fees, costs, and post-and pre-judgment interest in favor of plaintiffs (the homeowners). We affirm.
Village Homes sold the homeowners (seven couples and one individual) residences in a planned community. Each of the standard-form sales agreements contained an arbitration clause.
The arbitration clause provided that "(alll disputes" regarding the sales agreement or underlying transaction "shall be determined by final, binding arbitration ... and not by a court of law." It defined such disputes to include without limitation any controversies "related to the interpretation or meaning of any terms" of the agreement. It stated that "each party shall pay its own attorneys' fees; provided, however, upon a showing of egregious conduct the arbitrator(s) may award to the prevailing party reasonable attorneys' fees and expenses."
The underlying dispute was triggered by a water district's construction of a well site and water treatment facility on an easement adjacent to the planned community. © The homeowners alleged that Village Homes had made misrepresentations that the easement would remain recreational open space and, in so doing, had violated the Colorado Consumer Protection Act (CCPA), §§ 6-1-101 to -115, C©.R.8.2009.
The dispute proceeded to a week-long arbitration hearing in April 2007. In May 2007, the parties' agreed-upon arbitrator issued a written award finding that Village Homes had made negligent misrepresentations and violated the CCPA. The homeowners were awarded a total of $525,000 in damages together with attorney fees and costs (in amounts to be determined) pursuant to the CCPA. This initial award did not mention statutory interest. In July 2007, after a further hearing, the arbitrator issued a "Final Arbitration Award," awarding the homeowners $164,478.50 in attorney fees, $28,447.98 in costs, and $105,387.25 in prejudgment interest. As had the initial award, this final award stated that the fees and costs were awarded pursuant to the CCPA.
The homeowners filed a motion in the district court to confirm the arbitration award. Village Homes ultimately paid the $525,000 damages, but it disputed the roughly $300,000 awarded as attorney fees, costs, and interest. The district court confirmed the arbitration award and also awarded post-judgment interest on the unsatisfied portion of the award.
II. Discussion
Village Homes contends the "arbitrator exceeded the arbitrator's powers." § 18-22-228(1)(d), C.R.8.2009. We disagree.
Courts independently review whether an arbitrator had power to resolve a dispute. Allen v. Pacheco,
A. The Arbitrator's Award of Attorney Fees and Costs
The agreement here indisputably empowered the arbitrator to decide whether to award attorney fees and costs. We hold that the ultimate award involved the merits of the dispute (not an issue of empowerment), and that it cannot be overturned just because the arbitrator did not fully explain her reasoning.
The "merits of the award"-not subject to judicial review-"include the arbitrators' interpretation of the contract." Container Technology,
Courts "may decline to confirm an arbitration award only in limited cireum-stances." Barrett,
The line between the unreviewable merits of arbitral awards and the enforceable limits upon arbitrators' powers is most easily blurred where arbitrators must interpret and apply contractual language. Because parties do not empower arbitrators to misconstrue contracts, losing parties could always claim the arbitrators exceeded their powers by failing to follow the contractual preconditions to the challenged awards.
In drawing this line, we must be mindful of the benefits of arbitration and the consequences of judicial review. See Hall Street, 552 U.S. at --,
Village Homes' challenge falls on the merits rather than empowerment side of the line. Because the arbitrator indisputably had power to award fees and costs, Village Homes' challenge goes not to what the arbitrator did but rather to why she did it (and more precisely, to her explanation or lack of explanation for why she did it). We decline to hold the arbitrator exceeded her powers by entering the award without expressly finding that Village Homes engaged in egregious conduct. ,
The parties can require arbitrators to issue written findings and, where agreements so require, arbitrators exceed their powers by not making such findings. See Western Employers Ins. Co. v. Jefferies & Co.,
Federal courts have uniformly held that absent some requirement in the agreement, "[alrbitrators are not required to set forth their reasoning supporting an award." In re Arbitration of Bosack v. Soward,
We similarly hold as a matter of Colorado law that arbitrators are not required to explain their reasons for issuing awards authorized by an agreement. Thus, absent an affirmative showing of invalidity, arbitration awards may not be set aside "for want of explanation (or, what is in effect almost the same thing, remanded for an explanation)." Sargent v. Paine Webber Jackson & Curtis, Inc.,
Given that the award cannot be invalidated or remanded because the arbitrator said too little to justify it, we would have to confirm it had the arbitrator simply written: "Homeowners are awarded [X amount] in fees and costs." Village Homes' challenge may actually be that the arbitrator said too much rather than too little by essentially writing: "Homeowners are awarded [X amount] in fees and costs, pursuant to the CCPA." Regardless, the challenge ultimately is that the arbitrator inadequately justified the award.
The arbitrator might have decided to award fees and costs pursuant to the CCPA by reasoning (1) as a matter of fact, the CCPA violations here were egregious; (2) as a matter of law, CCPA violations are always egregious; or (8) as a matter of contract interpretation, an egregiousness showing is required only for non-statutory fees. Each reason would suffice: the first because courts have "no authority to reweigh thie] evidence," Giraldi v. Morrell,
We do not know whether the arbitrator relied on one, all, or none of these reasons. But as long as there was a reason that could have justified the award, an award will not exceed the arbitrator's power just because its explanation was lacking or even mistaken. See Barrett,
Because there were grounds on which the arbitrator properly could have based her award, we will not invalidate it or remand for further explanation. This case is unlike Ma-genis v. Brumer, where a division of this court concluded that an arbitrator had exceeded his authority by denying attorney fees to the prevailing party even though the contract plainly required such fees and limited the arbitrator to determining their reasonableness. 187 P.8d at 1224-26. Here, unlike in Magenis, the agreement gave the arbitrator the power to determine whether to award fees.
We conclude that Village Homes' challenge goes to the merits of that award and not to the arbitrator's power to issue it. Consistent with Allen and Magenis, we have independently reviewed the agreement and concluded that it empowered the arbitrator to decide whether to award fees. Village Homes' challenge, however, is dependent not on what the arbitrator did-issue an award plainly within her power-but rather than on what she said (or didn't say) in issuing that award. The present case, therefore, is controlled by cases such as Enterprise Wheel, Barrett, and Container Technology that preclude review of arbitral merits.
For reasons set forth above, we will not review the merits of the arbitrator's award of fees and costs. We thus do not, indeed we cannot, consider its ultimate correctness.
We need not decide whether an award may be set aside where an arbitrator manifestly disregards an agreement. A prior division has held that manifest disregard is not an independent basis under Colorado law for vacating awards, Coors Brewing,
1. Prejudgment Interest
Village Homes also contends the arbitrator exceeded her power by including prejudgment interest in the final award issued some two and one-half months after the initial award. We disagree.
Colorado law allows an award to be amended if "the arbitrator has not made a final and definite award upon a claim submitted by the parties to the arbitration proceeding." § 18-22-220(1)(b), C.R.S.2009. Village Homes contends this section was inapplicable because the initial award was not denominated an "interim award" and did not expressly reserve the determination of prejudgment interest. We conclude these contentions elevate form over substance. While not called an interim award, the initial award plainly envisioned further proceedings. And while it specifically referenced only the issues of fees and costs, the parties previously had signed a stipulation providing that the arbitrator could consider issues regarding fees, costs, and statutory interest after the initial award. Accordingly, we hold that the arbitrator did not exceed her powers by awarding prejudgment interest in the final award.
2. Postjudgment Interest and Appellate Attorney Fees
We finally hold that the homeowners are entitled to postjudgment interest on the unsatisfied portion of the arbitration award and to their appellate attorney fees pursuant to § 13-22-225(8), C.R.S8.2009. Village Homes' challenges to such interest and fees are predicated on its challenge to the underlying award itself. Because we have held that this underlying award was properly confirmed, we hold the homeowners are entitled to post-judgment interest and appellate attorney fees for successfully defending the arbitrator's award. We remand the case to the district court for it to calculate and award this postjudgment interest and reasonable appellate attorney fees to the homeowners.
III Conclusion
The district court judgment confirming the arbitrator's award of attorney fees, costs, and prejudgment interest is affirmed. The case is remanded to the district court for it to award postjudgment interest and reasonable appellate attorney fees to the homeowners.
Concurrence Opinion
concurring in part and dissenting in part.
In my view, the question of whether the arbitrator's award of fees under the Colorado Consumer Protection Act (CCPA) was authorized by the parties' arbitration agreement, which expressly limited the grounds on which fees could be awarded, goes to the scope of the arbitrator's powers and, therefore, is properly reviewable by this court. Accordingly, although I concur in Part II(B)(1) of the majority opinion, concerning the prejudgment interest award, I respectfully dissent from the remainder of that opinion.
I. Discussion
The majority opines that:
® Judicial deference to arbitrators is so great that "judicial review" may be something of a "misnomer" and judicial review of an arbitration award under section 183-22-223(1), C.R.S.2009, involves only "specific instances of outrageous [arbitral] conduct" and "egregious departures from the parties' agreed-upon arbitration";
e Courts may not review the merits of an arbitration award, including issues of contract interpretation like that at issue here;
e Because the parties here delegated to the arbitrator the power to determine whether to award fees and she did so, the fee award is not subject to judicial review; and
® The arbitrator's award of fees under the CCPA is not properly reviewable because the arbitrator may have reasoned that the CCPA violations were egregious*404 or that an egregiousness showing was required only for non-statutory fees.
I disagree with each of these premises, or the assumptions underlying them.
First, the majority's statement as to the limitations of judicial review, which relies on a United States Supreme Court interpretation of the Federal Arbitration Act, Hall Street Associates, L.L.C. v. Mattel, Inc.,
Second, although I agree that courts generally may not review the merits of an arbitration award, including issues of contract interpretation, interpretation of an arbitration agreement or clause is different from interpretation of a contract that is the subject of a breach of contract dispute before an arbitrator. As to the former, our supreme court has consistently held that the interpretation of an arbitration agreement is a matter of law that a reviewing court reviews de novo. Allien v. Pacheco,
Container Technology Corp. v. J. Gadsden Pty., Ltd.,
Third, I disagree that a court's review of an arbitrator's authority is limited to deciding whether the underlying dispute was properly arbitrable. An arbitrator's powers are derived from the terms of the arbitration agreement between the parties, regardless of whether the arbitration provision is a standalone agreement or, as here, is embedded in a contract. Magenis v. Bruner,
Applying these principles here, I disagree with the majority's conclusion that because the arbitrator indisputably had power to award fees, our inquiry is at its end. The parties did not merely agree that the arbitrator could award fees here. Rather, they agreed that the arbitrator could award fees only upon a showing of egregious conduct. Thus, to me, the question is not merely whether the arbitrator was empowered to award fees, which no one denies. The issue is whether the arbitrator was empowered to award fees under the CCPA. In my view, this question goes to the scope of the arbitrator's
In this regard, I believe that Magenis,
The division began its analysis by noting that the district court "was required to determine de novo whether the arbitrator's refusal to award attorney fees to plaintiff as the prevailing party was a determination beyond the seope of the parties' arbitration agreement." Id. at 1225. The division then rejected the defendants' argument that even if the district court erred by deferring to the arbitrator's determination of the scope of the arbitration agreement, the parties nevertheless gave the arbitrator discretion to deny an award of fees. Id. The division concluded that under the plain terms of the arbitration clause at issue, the only power that the arbitrator had was to determine the reasonable amount of fees to be awarded. Id. at 1225-26. The division thus rejected the defendants' argument that the arbitrator had simply decided that the reasonable attorney fees were $0.00. Id.
Magenis supports my view that the dispute here relates to the scope of the arbitrator's power and that it is for the court to construe the limits of that power. Just as the district court in Magentis was required to determine de novo whether the arbitrator's refusal to award fees to the plaintiff was a determination beyond the scope of the parties' arbitration agreement, we are required here to determine de novo whether the arbitrator's award of fees under the CCPA was a determination beyond the scope of the parties' arbitration agreement.
Conversely, in my view, Magenis is inconsistent with the majority's analysis here. Indeed, applying the majority's analysis to the facts in Magenis would have required the division there to reach a different result. Specifically, under the majority's rationale, the Magenis division should have gone no further than to decide that the arbitrator was empowered to decide the fees question. Anything beyond that would have been a matter of contract interpretation (e.g., the arbitrator's determination that the arbitration clause gave him discretion to award fees or to choose to award $0.00) and would not have been reviewable.
For these reasons, I would conclude that the issue presented here is one that goes to the scope of the arbitrator's authority. I would then hold that the fees provision was clear and unambiguous and authorized the arbitrator to award fees only upon a showing of egregious conduct, regardless of whether fees were being awarded pursuant to statute, rule, or other provision of law. Thus, I would conclude that the award of fees under the CCPA was erroneous, absent a showing of egregious conduct.
Finally, although I agree with the majority that absent a provision in the arbitration agreement requiring the arbitrator to make findings, the arbitrator could properly have awarded fees with no explanation, it does not necessarily follow that the arbitration award is likewise unreviewable because the arbitrator may have "said too much." The majority states that the arbitrator might have decided, as a matter of contract interpretation, that an egregiousness showing was required only for non-statutory fees, which interpretation would be unreviewable. The majority further states that the arbitrator might have decided to award fees pursuant to the CCPA because the CCPA violations here were egregious in fact or as a matter of law. I disagree with both points.
For the reasons noted above, I believe that the first statement is inconsistent with settled Colorado case law holding that interpretation of an arbitration agreement is an issue of law that the court reviews de novo. See, e.g., Allen,
Unlike the majority, I1 do not believe that these facts allow us to conclude that the arbitrator "might" have determined that the homeowners had established that Village Homes' conduct was egregious. If anything, these facts compel the opposite conclusion. The parties asked the arbitrator to conclude either that fees could be awarded under the CCPA without a showing of egregious conduct or that fees could be awarded only upon a showing of egregious conduct. The arbitrator appears to have agreed with the former and rejected the latter.
Barrett v. Investment Management Consultants, Ltd.,
Unlike here, nothing in the arbitrator's award in Barrett was inconsistent with the parties' arbitration provision. To the contrary, the award in Barrett was consistent with the express terms of the arbitration provision. Accordingly, the Barrett division did not confront the issue presented here, namely, whether we can presume that the arbitrator acted within her powers when she issued an award that appeared facially inconsistent with them.
Notwithstanding the foregoing, I do not believe that the record before us is sufficient to allow me to conclude, as Village Homes requests, that the arbitrator found that its conduct was not egregious. Accordingly, in the particular circumstances presented here, I would remand this case to the arbitrator to clarify her findings.
Colorado courts have remanded arbitration awards to arbitrators when an award was ambiguous and in need of clarification. See Osborn v. Packard,
Courts in other jurisdictions have also determined that a remand is appropriate when it is unclear to the reviewing court whether or not the arbitrator has resolved a certain issue. See, e.g., Galt v. Libbey-Owens-Ford Glass Co.,
Finally, at least one court has remanded a case to an arbitration panel when the panel's findings were insufficient to allow the court to determine whether an award of attorney fees was warranted or not. See Moser v. Barron Chase Securities, Inc.,
The foregoing authorities persuade me that a remand would be appropriate on the unique facts of this case. "Only the arbitrator absolutely knows what was intended in the award. And, it is the arbitrator's intent, not the court's, for which the parties bargained." Sooper Credit Union v. Sholar Group Architects, P.C.,
II,. Conclusion
In its opinion, the majority recites the benefits of arbitration and the adverse consequences of judicial review, particularly in terms of cost and delay, in support of the limitations on judicial review that it adopts today. I agree that arbitration is favored and that judicial review of arbitration awards is-and should be-limited. These principles must give way, however, when, as here, an arbitrator exceeds the powers granted him or her in an arbitration agreement. Moreover, unlike the majority, I do not believe that judicial review of arbitration awards is so restrictive as to prevent a court from vacating an arbitration award when, as here, the arbitrator refuses to apply or ignores a legal standard agreed upon by the parties for resolution of their dispute. In my view, such a rule undermines parties' right to contract and renders "judicial review" of arbitration awards the "misnomer" that the majority perceives it to be, because any dispute over an arbitrator's application of a legal standard agreed to by the parties could readily be viewed as a matter of contract interpretation that is not subject to review.
For these reasons, I concur in Part II(B)(1) and dissent from the remainder of the majority opinion.
