United States District Court, D. Colorado
ORDER
PHILIP
A. BRIMMER, United States District Judge
This
matter comes before the Court on the Motion for Order
Confirming Arbitration Award and Directing Entry of Judgment
[Docket No. 18] filed by Slawson Exploration Company, Inc.
(“Slawson”). The Court has jurisdiction pursuant
to 28 U.S.C. § 1332.
Slawson
is a Kansas corporation involved in the acquisition and
development of oil and gas leases in McKenzie and Williams
Counties, North Dakota. Docket No. 1 at 3. On January 15,
2010, Slawson and respondent U.S. Energy Development
Corporation (“U.S. Energy”) entered into an
Exploration and Development Agreement With Area of Mutual
Interest, Project X, McKenzie and Williams Counties, North
Dakota (“Exploration Agreement”). Id. at
2, ¶ 5. Pursuant to that agreement, U.S. Energy agreed
to pay Slawson various fees and costs, including “a
cost-plus fee of 10% on its share of well drilling and
completion costs (the “Drilling Promotes”).
Id. at 3, ¶ 8. The agreement also provided that
“[a]ny dispute arising under this Agreement shall be
finally determined by binding arbitration in Denver,
Colorado, with a single arbitrator, and the arbitrator's
determination shall be final [and] binding upon the
Parties.” Id. at 2, ¶ 7; Docket No. 1-3
at 5, ¶ 14(c).
On
August 2, 2016, Slawson initiated arbitration proceedings
against U.S. Energy, claiming that U.S. Energy had breached
the Exploration Agreement by failing to pay Slawson for
Drilling Promotes on certain wells. Docket No. 1 at 3,
¶¶ 9-10. After an evidentiary hearing on March 8,
9, and 10, 2017, in which both parties participated,
Arbitrator Boyd N. Boland concluded that U.S. Energy
“breached the [Exploration] Agreement as amended by
failing to pay Drilling Promotes on all wells in which U.S.
Energy participates which are located on leases acquired by
U.S. Energy pursuant to the Agreement and on all wells
drilled on lands covered by pooling orders that include those
leaseholds.” Docket No. 1-2 at 28; see also
Docket No. 1 at 4, ¶ 11. On May 11, 2017, Arbitrator
Boland awarded Slawson $689, 338.78 in damages for unpaid
Drilling Promotes, plus prejudgment interest at a rate of 8%
per annum compounded annually, pursuant to Colo. Rev. Stat.
§ 5-12-102. Docket No. 1-2 at 28. On May 25, 2017,
Arbitrator Boland ordered the release of $184, 345.81 in
funds that were being held in trust to Slawson, in partial
payment of the arbitration award. Docket No. 18-1. On June
20, 2017, U.S. Energy filed a Motion to Correct or Modify
Award with Arbitrator Boland, seeking reconsideration of the
award of prejudgment interest. Docket No. 18 at 3, ¶ 7;
see also Docket No. 18-2 at 3-4 (identifying grounds
for motion to correct or modify). Arbitrator Boland denied
the motion on July 28, 2017, noting, among other things, that
“the FAA does not provide any mechanism for an
arbitrator to correct or modify an award.” Docket No.
18-2 at 10.
On May
23, 2017, Slawson filed a Petition to Confirm Arbitration
Award [Docket No. 1] in this Court. Slawson served U.S.
Energy through its registered agent on July 7, 2017 and filed
an affidavit of service on July 13, 2017. Docket No. 12. On
July 31, 2017, Slawson filed the instant motion for an order
confirming the arbitration award and directing entry of final
judgment. Docket No. 18. On May 25, 2018, the Court entered
an order requesting supplemental briefing on plaintiff's
request for post-award/prejudgment interest as well as an
updated proposed final judgment. Docket No. 26. Plaintiff
filed its supplemental brief on June 8, 2018. Docket No. 27.
U.S. Energy has not responded to Slawson's original
petition or its motion for confirmation of the arbitration
award.
Under
the Federal Arbitration Act (“FAA”), 9 U.S.C.
§ 9 et seq., confirmation of an arbitration
award is a summary procedure. “If the parties in their
agreement have agreed that a judgment of the court shall be
entered upon the award made pursuant to the arbitration,
” a court “must grant . . . an order [confirming
an arbitration award] unless the award is vacated, modified,
or corrected.” 9 U.S.C. § 9. Because the parties
have contracted to resolve their disputes by way of binding
arbitration, “maximum deference” is owed to the
arbitrator. Hosier v. Citigroup Global Markets,
Inc., 835 F.Supp.2d 1098, 1101 (D. Colo. 2011).
“Courts [ ] do not sit to hear claims of factual or
legal error by an arbitrator as an appellate court does in
reviewing decisions of lower courts.” United
Paperworkers Int'l Union v. Misco, Inc., 484 U.S.
29, 38 (1987). Thus, arbitration awards “must be
confirmed even in the face of errors in an arbitration
panel's factual findings, or its interpretation and
application of the law.” Hosier, 835 F.Supp.2d
at 1101 (citing Denver & Rio Grande W. R.R. v. Union
Pac. R. R., 119 F.3d 847, 849 (10th Cir. 1997)).
An
arbitration award may be disturbed only under
“exceptional circumstances.” Burlington N.
& Santa Fe Ry. Co. v. Pub. Serv. Co. of Okla., 636
F.3d 562, 567 (10th Cir. 2010); see also Brown v. Coleman
Co., Inc., 220 F.3d 1180, 1182 (10th Cir. 2000) (stating
that “the standard of review of arbitral awards is
among the narrowest known to law.” (internal quotation
marks omitted)). Section 10 of the FAA enumerates four
situations in which a district court may vacate an
arbitration award: (1) the award was procured by corruption,
fraud, or undue means; (2) there was evidence that the
arbitrators were partial or corrupt; (3) the arbitrators were
guilty of misconduct; or (4) the arbitrators exceeded their
powers or imperfectly executed them. 9 U.S.C. §
10(a)(1)-(4). There is also a “handful of judicially
created reasons” for which vacatur is appropriate,
including violations of public policy, an arbitrator's
manifest disregard of the law, or the denial of a
fundamentally fair hearing. Sheldon v. Vermonty, 269
F.3d 1202, 1206 (10th Cir. 2001) (citation
omitted).[1]
Before
assessing whether there is any ground for vacating,
modifying, or correcting the arbitration award, the Court
must first determine whether it has jurisdiction to confirm
the award. The “jurisdictional inquiry [in arbitration
confirmation cases] is two-fold.” P & P Indus.,
Inc. v. Sutter Corp., 179 F.3d 861, 866 (10th Cir.
1999). First, a court must have an independent basis for
federal jurisdiction. Id. Second, the parties must
“have agreed, explicitly or implicitly, that any
eventual arbitration award shall be subject to judicial
confirmation.” Id.; see also 9 U.S.C.
§ 9 (“If the parties in their agreement have
agreed that a judgment of the court shall be entered upon the
award made pursuant to the arbitration, and shall specify the
court, then at any time within one year after the award is
made any party to the arbitration may apply to the court so
specified for an order confirming the award . . . .”).
In this case, federal jurisdiction exists under 28 U.S.C.
§1332 because the parties are completely diverse and the
amount in controversy exceeds $75, 000. See Docket
No. 1 at 1, ¶¶ 1-2. Additionally, the parties have
agreed that any arbitration award will be subject to judicial
confirmation. The Exploration Agreement provides that
“the arbitrator's determination shall be final and
binding upon the Parties” and that “either Party
may apply to a court of competent jurisdiction to enforce any
arbitration awarded, specific performance, or injunctive
relief granted by the arbitrator.” Docket No. 1-3 at 5,
¶ 14(c). Courts have found implicit consent to judicial
confirmation based on similar language. See Will v.
Parsons Evergreene, LLC, No. 08-cv-00898-DME-CBS, 2011
WL 2792398, at *1 (D. Colo. July 15, 2011) (finding that
parties had consented to court's authority to enter
judgment confirming arbitration award where agreement
provided that the arbitration award would be final and
binding and that parties had “consented that judgment
upon the arbitration award may be entered in any federal or
state court having jurisdiction”); Dish Network
L.L.C. v. JBS Dish, Inc., No. 10-cv-00212-CMA-CBS, 2010
WL 2004570, at *1-2 (D. Colo. May 19, 2010) (exercising
jurisdiction to confirm arbitration award where the
parties' agreement stated that “[t]he decision of
the Arbitrator(s) shall be final and binding” and
“any award of the Arbitrator(s) may be entered and
enforced as a final judgment in any state or federal court of
competent jurisdiction in the United States”); see
also Okla. City Assocs. v. Wal-Mart Stores, Inc., 923
F.2d 791, 795 (10th Cir. 1991) (stating that section 9
“requires some manifestation of the agreement
to have judgment entered in the contract
itself”).[2]
In
addition to having jurisdiction to confirm the arbitration
award in this case, the Court is unaware of any grounds on
which to vacate, modify, or correct the award. Because U.S.
Energy has not responded to Slawson's original petition
or its motion for an order confirming the arbitration award,
the Court has been presented with no grounds on which to deny
Slawson's request for judicial confirmation. See
Youngs v. Am. Nutrition, Inc., 537 F.3d 1135, 1141 (10th
Cir. 2008) (“The burden is on the party seeking to
vacate an arbitration award . . . to show that one of the
limited statutory grounds exists for setting aside the
arbitration result.”); Dingo, Inc. v. Who Ya Gonna
Call Bark Busters Pty, Ltd., No. 12-cv-02583-PAB-KMT,
2013 WL 3357662, at *2 (D. Colo. July 3, 2013) (confirming
arbitration award where plaintiff had not presented any valid
grounds to vacate, modify, or correct the award).
Accordingly, the Court will confirm the arbitration award of
Arbitrator Boyd N. Boland that was entered on May 11, 2017.
Finally,
Slawson requests both post-award, prejudgment interest and
postjudgment interest. “State law applies when
determining the issue of prejudgment interest.”
Hicks v. Cadle Co., 355 Fed.Appx. 186');">355 Fed.Appx. 186, 199 (10th
Cir. 2009) (unpublished); see also Strickland Tower
Maintenance, Inc. v. AT&T Commc'ns, Inc., 128
F.3d 1422, 1429 (10th Cir. 1997) (“A federal court
sitting in diversity applies state law, not federal law,
regarding the issue of prejudgment
interest.”).[3] Under Colo. Rev. Stat. § 5-12-102(1),
a prevailing party is entitled to prejudgment interest at the
rate of 8% per annum, compounded annually, when “money
or property has been wrongfully
withheld.”[4] This statute applies in contract and
property damage cases where a party has been awarded
compensatory damages. See Thompson v. United Secs.
Alliance, Inc., 2016 WL 4699113, at *5 (Colo.App. Sept.
8, 2016). During the arbitration proceedings in this case,
Slawson requested - and the arbitrator awarded - prejudgment
interest pursuant to § 5-12-102. See Docket No.
1-2 at 28. In an order releasing funds held in trust, the
arbitrator further indicated that prejudgment interest would
continue to accrue. See Docket No. 18-1 at 3 (noting
that Slawson was awarded “interest exceeding $232,
657.88, ” the amount that had accrued as of March 7,
2017). Slawson's request for post-award, prejudgment
interest is therefore consistent with the arbitration award
and does not represent an impermissible modification of that
award. See Duncan v. Nat'l Home Ins. Co., 36
P.3d 191, 193 (Colo.App. 2001) (reversing award of
prejudgment interest where prevailing party did not request
prejudgment interest during the arbitration proceedings and
thus “trial court's addition of prejudgment
interest upon confirmation of the arbitration award [ ]
constituted an impermissible modification of the award);
see also Barrett v. Investment Mgmt. Consultants,
Ltd., 190 P.3d 800, 802, 805 (Colo.App. 2008) (affirming
trial court's award of post-award, prejudgment interest
at rate of 8% per annum where arbitration panel had ordered
payment of prejudgment interest at same rate).
The
Court will also grant Slawson's request for post-judgment
interest. In contrast to prejudgment interest, the issue of
post-judgment interest is governed by federal law. Hosier
v. Citigroup Global Markets, 858 F.Supp.2d 1206, 1209
(D. Colo. 2012) (citing Fid. Fed. Bank, FSB v. Durga Ma
Corp., 387 F.3d 1021, 1024 (9th Cir. 2004)).
Accordingly, once an arbitration award is confirmed in
federal court, post-judgment interest is mandatory and
“the rate specified in [28 U.S.C.] § 1961
applies.” Id. While prejudgment interest under
Colorado law may only be awarded on compensatory damages,
see Seaward Constr. Co., Inc. v. Bradley, 817 P.2d
971, 977-78 (Colo. 1991), post-judgment interest
“applies to the entire Award.” Hosier,
858 F.Supp.2d at 1211 (internal quotation marks omitted)
(citing F.D.I.C. v. United Pac. Ins. Co., 152 F.3d
1266, 1277 n.8 (10th Cir. 1998)).
For the
foregoing reasons, it is
ORDERED
that petitioner's Motion for Order Confirming Arbitration
Award and Directing Entry of Judgment [Docket No. 18] is
GRANTED. It is further
ORDERED
that the award of Arbitrator Boyd N. Boland, executed on May
11, 2017 and attached hereto as Exhibit A (the
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