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Harper Hofer & Associates, LLC v. Northwest Direct Marketing, Inc.

Court of Appeals of Colorado, Fifth Division

November 6, 2014

Harper Hofer & Associates, LLC, Plaintiff-Appellee,
v.
Northwest Direct Marketing, Inc.; Northwest Direct Marketing of Oregon, Inc.; and Northwest Direct Teleservices, Inc., Defendants-Appellants.

City and County of Denver District Court No. 13CV31634 Honorable J. Eric Elliff, Judge

Jones & Keller, PC, Kent C. Modesitt, Daniel A. Wartell, Denver, Colorado, for Plaintiff-Appellee

Gordon & McWhirter LLC, Stephen F. McWhirter, Denver, Colorado, for Defendants-Appellants

OPINION

GRAHAM JUDGE

¶ 1 As a matter of first impression in Colorado, we must determine whether participation in an arbitration waives a party's objection to the existence of a contract that contains an arbitration clause. We conclude that it does. Defendants, Northwest Direct Marketing, Inc., Northwest Direct Marketing of Oregon, Inc., and Northwest Direct Teleservices, Inc., appeal the trial court's judgment in favor of plaintiff, Harper Hofer & Associates, LLC, affirming an arbitration award in favor of plaintiff and assessing additional collection costs and attorney fees. We conclude that under the Colorado Uniform Arbitration Act (CUAA), sections 13-22-201 to -230, C.R.S. 2014, defendants waived their objection to the validity of the agreement containing the arbitration clause by actively participating in the arbitration proceeding and not timely seeking judicial review. Accordingly, we affirm and remand with directions.

I. Background

¶ 2 Defendants engaged plaintiff to provide expert reports and possible testimony in an unrelated legal matter. The parties exchanged various engagement letters which all contained the following arbitration clause:

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by binding arbitration, in Denver, Colorado, in accordance with the Commercial Arbitration Rules of the American Arbitration Association in place at the time of the filing of any demand (Arbitration Proceeding). Any such demand will be sent to the address (mail or email) used for billing, and the demand will be deemed to be served upon attempted delivery to that address. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction hereof. It is agreed that, in the event of arbitration, the parties will keep the proceedings and results confidential, except as required by law or reasonable business necessity.
In the event that either party institutes legal proceedings (not including Arbitration Proceeding) with respect to this Agreement, the prevailing party shall be entitled to recover, in addition to any other relief to which it is entitled, its costs and expenses incurred in connection with such legal proceedings, including reasonable attorney's fees.

While the arbitration clause was never objected to by either party, there were numerous revisions made between the parties regarding, among other things, the maximum cost of services and the retainer to be provided plaintiff. One engagement letter sent by plaintiff and dated August 3, 2011, was signed by defendants' representative on August 31, 2011.[1] This letter contains no clear alterations.

¶ 3 Another engagement letter sent by plaintiff and dated August 3, 2011, was signed by defendants' representative on September 29, 2011, and contained alterations to the August 3 letter. In an email dated October 4, 2011, plaintiff objected to defendants' revisions to the engagement letter. The record contains no further communications between the parties regarding the completion of the engagement.

¶ 4 In 2012, plaintiff initiated arbitration proceedings against defendants for the fees and costs associated with the work it performed in 2011. Defendants, via e-mail to the arbitrator, requested that a court determine whether the parties ever executed a valid contract (and, thereby, agreed to arbitration).[2] However, defendants also requested the arbitrator make a determination that no contract between the parties existed and, after receiving an unfavorable ruling on that issue, participated in the arbitration proceedings. Defendants never sought independent judicial relief pursuant to C.R.C.P. 57 on the question of whether the parties had a valid agreement to arbitrate. Ultimately, the arbitrator found in favor of plaintiff and against defendants, and ordered defendants to pay plaintiff $27, 982.24.

¶ 5 On April 5, 2013, plaintiff filed a petition to convert the arbitration award to a civil judgment in Denver County District Court. In its petition, plaintiff sought the original $27, 982.24 award plus costs of collection, fees, and interest for a total of $42, 830.03. Defendants responded and requested that the district court vacate the arbitration award.

ΒΆ 6 In seeking to vacate the arbitration award, defendants raised three arguments: (1) only the district court could determine the existence of a contract between the parties and, therefore, the arbitrator's determination that the parties executed a valid contract containing an arbitration clause was in error; (2) the arbitrator exceeded his powers by awarding plaintiff's attorney fees when the arbitration provision expressly excluded such fees; and (3) the arbitrator refused to consider evidence and counterclaims ...


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