Requip v. Raintree

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE REQUIP, L.L.C., an Arizona limited liability company, ) ) ) Plaintiff/Counterdefendant/ ) Appellant, ) ) v. ) ) JEFFREY C. STONE, INC., an ) Arizona corporation dba SUMMIT ) BUILDERS CONSTRUCTION COMPANY, ) ) Defendant/Counterclaimant/ ) Appellee, ) ) and ) ) RAINTREE CORPORATE CENTER ) HOLDINGS, L.L.C., an Arizona ) limited liability company; and ) SAFECO INSURANCE COMPANY OF ) AMERICA, a Washington ) corporation, ) ) Defendants/Appellees. ) __________________________________) DIVISION ONE FILED: 03-23-2010 PHILIP G. URRY,CLERK BY: DN No. 1 CA-CV 09-0091 DEPARTMENT A MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV 2006-008043 The Honorable J. Kenneth Mangum, Judge VACATED AND REMANDED Cheifetz, Iannitelli, Marcolini, P.C. By Steven W. Cheifetz Matthew A. Klopp Attorneys for Plaintiff/Counterdefendant/Appellant Phoenix Fennemore, Craig, P.C. By Douglas C. Northup Louis D. Lopez Attorneys for Defendants/Counterclaimant/Appellees Phoenix D O W N I E, Judge ¶1 ReQuip, L.L.C. appeals from the superior court s award of $240,596.02 in attorneys fees and $20,481.79 in costs to appellee Jeffrey C. Stone, Inc., Construction Company ( Summit ). d/b/a Summit Builders For the following reasons, we vacate the judgment and remand for further proceedings in the superior court. FACTS AND PROCEDURAL HISTORY ¶2 Raintree Corporate Center Holdings, L.L.C. ( Raintree ) retained Summit to serve as general contractor for a construction project at the Raintree Corporate Center in Scottsdale. Summit and ReQuip entered into a subcontract for excavation, grading, ReQuip ceased work and on paving the work project in ( the subcontract ). December 2005 and thereafter sued Summit, Raintree, and Safeco Insurance Company of America (Summit s surety), asserting claims against the bond and counts for breach of contract and unjust enrichment. counterclaimed for breach of contract. 2 Summit ¶3 for The parties litigated their disputes in superior court almost two years, with no one invoking the alternative dispute resolution (ADR) terms set forth in the subcontract.1 After private mediation proved unsuccessful, the parties agreed to submit to binding arbitration and executed a Binding Arbitration Agreement ( Arbitration Agreement ). ¶4 After favor of an extended Summit, hearing, awarding the $102,408.09 arbitrator in ruled in on the damages counterclaim. Appellees asked the arbitrator for an award of attorneys fees and costs pursuant to the subcontract s provisions, and also requested pre-judgment interest. fee By order dated July 24, 2008, the arbitrator declined to make such an award. 1 That same day, Appellees filed, with minor The subcontract included an arbitration clause that read: [D]ispute will be resolved through binding arbitration in accordance with the Construction Industry Rules of the American Arbitration Association. . . . In any arbitration, action, or proceeding regarding this agreement, the prevailing party shall be entitled to recover its attorneys and expert fees and costs and to have final judgment entered in any court having jurisdiction over the parties based upon the final award. As we discuss infra, when the parties ultimately agreed to mediate and arbitrate their claims, they did not adopt or follow the subcontract s ADR terms. 3 modifications, the same application for fees, costs, and prejudgment interest in the superior court.2 Over Requip s objection, the superior court awarded fees and costs, stating: IT IS ORDERED granting the Application for Attorney s Fees and Costs in the amount of $240,596.02, plus costs in the amount of $20,481.79. THE COURT CONCLUDES that the failure of the Arbitrator to award fees does not preclude this Court s award of attorney s fees and costs. THE COURT ALSO CONCLUDES that prejudgment interest is not awardable as it was not awarded by the Arbitrator, and if awardable at all, the Arbitrator would have to make that award. ¶5 Two weeks later, Appellees asked the superior court to confirm the arbitration award. $358,088.68, which included They requested a judgment for the damages awarded by arbitrator and the fees and costs awarded by the court.3 responded in opposition. the ReQuip On December 12, 2008, the superior court entered judgment, confirming the arbitration award in its entirety $240,596.02 and and awarding costs of Summit its $20,481.79. attorneys The signed fees of judgment included Arizona Rule of Civil Procedure 54(b) language. This 2 Raintree and Summit sought fees under Arizona Revised Statute ( A.R.S. ) section 12-341.01(A) (2003); Summit also relied on fee provisions in the subcontract. 3 ReQuip was entitled to an offset of $5,397.22, representing a damage award in its favor regarding a different project. 4 timely appeal followed. We have jurisdiction pursuant to Arizona Revised Statute ( A.R.S. ) section 12-2101(B) (2003). DISCUSSION ¶6 Appellees contend the subcontract and A.R.S. § 12- 341.01 authorized the superior court to award fees and costs.4 ReQuip disagrees, arguing that once the parties executed the Arbitration Agreement, the court merely had authority to confirm or deny the ensuing award, but instead acted as a de facto arbitration appellate tribunal during the confirmation proceedings. 1. ¶7 The Arbitration Agreement Arizona public policy favors arbitration as a means of disposing of controversies. Clarke v. ASARCO Inc., 123 Ariz. 587, 589 589, 601 P.2d 587, (1979) (citation omitted). Arbitration agreements are construed liberally and any doubts about whether a matter is subject to arbitration are resolved in favor of arbitration. City of Cottonwood v. James L. Fann Contracting, Inc., 179 Ariz. 185, 189, 877 P.2d 284, 288 (App. 1994) (citation omitted). An arbitrator s decision generally is final and conclusive; the [Uniform Arbitration] act provides 4 In addition to the ADR terms quoted supra, there is a separate fee provision in the subcontract that reads: General Contractor also shall be entitled to recover any expenses, attorneys fees, and costs incurred and any and all other damages sustained by General Contractor by reason of Subcontractor s default. 5 very limited grounds for a trial court to deny confirmation of an arbitration award. Fisher v. Nat l Gen. Ins. Co., 192 Ariz. 366, 369, ¶ 11, 965 P.2d 100, 103 (App. 1998). ¶8 To place the parties divergent views in context, we first consider the Arbitration Agreement. to submit an existing controversy to A written agreement arbitration is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract. 12-1501 (2003). A.R.S. § The Arbitration Agreement here provided, inter alia: ï · The parties would submit to binding arbitration before an agreed-upon arbitrator; ï · ReQuip would withdraw all pending motions to compel or for sanctions ; ï · No further discovery would occur, though certain supplemental disclosures were contemplated; and ï · Summit would defer its alter ego claim (which was the subject of a proposed third party complaint) until the underlying complaint and counterclaim were resolved. The Arbitration Agreement further stated: [E]ach party may present their entire claim to the arbitration [sic], unless the parties during agree the to resolution mediation. mention attorneys fees. The of one or more Arbitration separate Agreement claims did not It also said nothing about reserving 6 any claims or issues for the superior court s resolution. ¶9 We conclude that, by agreeing they could present their entire claim to the [arbitrator], the parties removed their entire claim[s] from the superior court and placed them in the hands of their chosen arbitrator.5 Cf. Creative Builders, Inc. v. Avenue Devs., Inc., 148 Ariz. 452, 456, 715 P.2d 308, 312 (App. 1986) (reversing award of pre-judgment interest because parties submitted their entire claim to arbitration, and [a]ny claim which [appellee] might have had for pre-award interest must award. ). be deemed to have merged in the arbitration The Arbitration Agreement did not provide for hybrid- type resolution, whereby certain claims would be decided by the arbitrator Even and others would alter ego Summit s be litigated claim was in superior preserved for court. future arbitration proceedings, not judicial resolution. ¶10 Our decision in City of Cottonwood does not compel a contrary conclusion. 179 Ariz. 185, 877 P.2d 284. That case does not stand for the proposition that the superior court may award attorneys fees incurred in litigating merits of a dispute before arbitration occurs. the substantive Our holding was narrow, allowing Fann (the prevailing party in arbitration) to recover fees it incurred in the superior court for defending 5 As we discuss infra, Raintree s claim for fees and costs merits different treatment. 7 against the City s attempt to stay arbitration that had already commenced pursuant to the parties contractual agreement. Id. at 293-94, 877 P.2d at 194-95. ¶11 In the case at bar, the arbitrator denied Appellees request for attorneys fees, costs, and prejudgment interest. He cited various legal bases for that decision. As with his determination regarding prejudgment interest, the correctness of the arbitrator s ruling is not subject to review by the superior court or this Court. See Smitty s Super-Valu v. Pasqualetti, 22 Ariz. App. 178, 180-81, 525 P.2d 309, 311 (App. 1974) (within the boundaries of the arbitrator s powers, his or her decisions are final both as to questions of fact and law) (citations omitted); Pawlicki v. Farmers Ins. Co., 127 Ariz. 170, 171, 618 P.2d 1096, 1097 (App. 1980) (superior court may not decline to confirm arbitration award because it believes award is unsupported by the evidence or that arbitrator committed errors of law). ¶12 The superior court may refuse arbitration award under limited circumstances. 1512(A) (2003). None of those 6 to confirm an See A.R.S. § 12- situations exist here.6 Summit may not attack the arbitrator s ruling by claiming he exceeded his authority in denying the fee application, when it affirmatively sought a ruling on fees and also moved to confirm the award under A.R.S. § 12-1511 (2003). In reality, Summit is attacking the arbitrator s rationale for his ruling, not his authority. An arbitration award is not subject to 8 Similarly, none correcting an of the arbitration statutory award bases has been for modifying established. or See A.R.S. § 12-1513(A). ¶13 In Steer v. Eggleston, we held that a trial court is prohibited from merely tacking fees onto the [arbitration] award during confirmation. 202 Ariz. 523, 527, ¶ 18, 47 P.3d 1161, 1165 (App. 2002) (citation omitted). To do so, we noted, would subvert the purpose of A.R.S. § 12-1510, because the prevailing party in arbitration would merely shift the complication and expense of litigating a formal the confirmation. trial propriety to of the an confirmation award Id. (citation omitted). for stage fees by during Although this case is procedurally different, in that Appellees sought fees from the superior court before moving for confirmation of the arbitration award, the same rationale applies. ¶14 We need not separately address Appellees claim for fees under A.R.S. § 12-341.01. The foregoing analysis applies equally to the statutory fee claim. specifically submit the issue of Moreover, the failure to fees in the Arbitration Agreement precludes an award of fees incurred in the arbitration proceedings. Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., attack because one party believes the arbitrator erred with respect to factual determinations or legal interpretations. Hirt v. Hervey, 118 Ariz. 543, 545, 578 P.2d 624, 626 (App. 1978) (citations omitted). 9 Inc., 180 Ariz. 148, 152, 882 P.2d 1274, 1278 (1994) ( [A]ttorneys fees are not to be awarded for work performed in arbitration proceedings, unless the parties specifically agree to and provide for such fees in the arbitration agreement. ). 2. ¶15 Fees and Costs Incurred in Confirming the Award There is one category of fees and costs that Summit could properly seek to recover in the superior court. Under the Uniform [Arbitration] Act, the award of attorney s fees for the confirmation proceeding itself requires separate analysis from the award for fees incurred in the underlying arbitration. Canon Sch., 180 Ariz. at 153, 882 P.2d at 1279. Section 12-1514 (2003) states: Upon the granting of an order confirming, modifying or correcting an award, judgment or decree shall be entered in confirmity [sic] therewith and be enforced as any other judgment or decree. Costs of the application and of the proceedings subsequent thereto, and disbursements may be awarded by the court. (Emphasis added). This statute permits (but does not require) the superior court to award costs and attorneys fees incurred during the confirmation proceedings. Steer, 202 Ariz. at 528, ¶ 23, the 47 P.3d at 1166. On remand, superior court shall determine whether to award Summit such fees and costs. 3. ¶16 Raintree s Fees and Costs Raintree s claim for attorneys fees and costs differs 10 materially from Summit s. The court granted summary judgment to Raintree in September of 2007 -six months before the parties executed the Arbitration Agreement. Soon thereafter, Raintree requested $16,725 in fees pursuant to A.R.S. § 12-341.01(A). The superior court labeled Raintree s application premature and denied it without prejudice. Raintree, through Summit, re- urged its claim for fees after the arbitrator s ruling. In awarding fees, the superior court did not specifically mention Raintree and instead issued a lump sum award. Under these circumstances, the superior court was not divested of authority to rule on Raintree s fee request, and that aspect of the award is properly before us. ¶17 ReQuip s sole claim against Raintree was for unjust enrichment. According to ReQuip, Raintree cannot recover fees under A.R.S. § 12-341.01(A) because it did not prevail on an action arising out of contract. ¶18 We conclude otherwise. In Schwab Sales, Inc. v. GN Constr. Co., Inc., 196 Ariz. 33, 992 P.2d 1128 (App. 1998), a third-party plaintiff sued the general subcontractor construction. contractor failed to pay for unjust plaintiff enrichment for equipment when used its in The general contractor prevailed in defense of the unjust enrichment claim and sought fees under A.R.S. § 12341.01(A), which the superior court granted. at 37, ¶¶ 11-13, 992 P.2d at 1132. 11 Schwab, 196 Ariz. We held that a cause of action may arise out of a contract even if one of the litigants was not a party to the contract or the contract was rescinded. Id. at ¶ 12, 992 P.2d at 1132 (citations omitted). We affirmed the fee award because the unjust enrichment claim would not have existed but for a breach of a contract. at 1132 (citation omitted). The Id. at ¶ 11, 992 P.2d same logic applies here. Raintree was entitled to recover fees and costs under A.R.S. § 12-341.01(A). 4. ¶19 Attorneys Fees Incurred on Appeal Summit requests attorneys fees pursuant to A.R.S. §§ 12-341.01 and -1514. incurred on appeal ReQuip also seeks to recover fees under A.R.S. § 12-1514. ¶20 Summit and Raintree proceedings, as did ReQuip. partially prevailed in these In the exercise of our discretion, we decline to award appellate attorneys fees to any party. However, ReQuip, which prevailed on the majority of its claims, is entitled to recover its appellate costs. CONCLUSION ¶21 We vacate the award of attorneys fees and costs to Summit. We remand for the superior court to determine whether to award Summit its fees and costs incurred confirmation proceedings under A.R.S. § 12-1514. during the Additionally, on remand, Raintree is entitled to judgment for its reasonable attorneys fees and costs incurred in the superior court. 12 We award ReQuip its costs incurred on appeal upon compliance with Rule 21, Arizona Rules of Civil Appellate Procedure. /s/ MARGARET H. DOWNIE, Judge CONCURRING: /s/ MAURICE PORTLEY, Presiding Judge /s/ LAWRENCE F. WINTHROP, Judge 13

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