City
and County of Denver District Court No. 14CV33937 Honorable
A. Bruce Jones, Judge
Sean
Connelly, Connelly Law LLC, Denver, Colorado, for
Plaintiff-Appellant
Sarah
De Diego, De Diego Law, Santa Monica, California, for
Defendant-Appellee
OPINION
BERNARD JUDGE
¶
1 Judge Learned Hand once wrote that "words are
chameleons, which reflect the color of their
environment." Comm'r v. Nat'l Carbide
Corp., 167 F.2d 304, 306 (2d Cir. 1948),
aff'd, 336 U.S. 422 (1949). In this appeal, the
words are the phrase "arising under." Their
environment is an arbitration clause, which reads: "Any
disputes arising under this [a]greement will be
resolved by binding arbitration . . . ." (Emphasis
added.) We are tasked with figuring out whether this phrase
takes on a narrow or a broad hue from its context in the
arbitration clause.
¶
2 The appellant in this case - plaintiff, Digital Landscape
Inc., which we shall call Digital - asserts that
"arising under" has a narrow scope. For Digital,
this means that the arbitrator lacked jurisdiction to decide
a claim that Digital submits did not "arise under"
the contract in this case. The appellee - defendant, Media
Kings LLC, which we shall call Media - submits that the scope
of "arising under" is broad, so the arbitrator had
jurisdiction to consider the claim. In this appeal, Digital
asks us to review the district court's judgment
confirming an arbitrator's order and denying
Digital's request to vacate it.
¶
3 Modern arbitration clauses are products of a strong policy
that favors arbitration. For example, divisions of this court
have concluded that "arising under," as it is used
in an arbitration clause, is broad because (1) Colorado
courts favor arbitration to resolve disputes; and (2) we
should resolve any doubts that we have about a clause's
scope in favor of arbitration.
¶
4 But Digital points us to a debate among federal circuits
concerning the scope of "arising under" in an
effort to convince us to part company with these Colorado
decisions. One side of the debate thinks that the scope of
"arising under" is narrow, while the other side
thinks that the phrase's scope is broad. After
considering both sides of the debate, we are persuaded by the
reasoning of the circuits that conclude that "arising
under" is broad: these circuits are convinced that
"arising under" is colored by a fundamental
attribute of its environment - the arbitration clause - which
reflects the strong federal policy that encourages
arbitration.
¶
5 We therefore conclude that all the claims that the
arbitrator considered in this case were "dispute[s]
arising under" the contract between Digital and Media,
which were to "be resolved by binding arbitration."
The arbitrator therefore had jurisdiction to resolve those
claims.
¶
6 We also disagree, for reasons that we explain below, with
two other contentions that Digital raises. As a result, we
affirm the district court's judgment.
I.
Background
¶
7 Media entered into a contract to provide marketing services
to Transcendent Marketing, LLC, which we shall call
Transcendent. Transcendent was not a named party in this
case.
¶
8 Media then contracted with Digital to provide advertising
services to Transcendent. Under the contract, Media agreed to
pay Digital a portion of its earnings from Transcendent in
exchange for Digital's work on the project.
¶
9 But Media did not pay Digital. And someone from Digital
told someone from Transcendent that Media had not paid.
Apparently dissatisfied with Media's work and with its
lack of payment to Digital, Transcendent proposed that
Digital take over the project. Digital's principal
officer agreed, but he had one of his other companies assume
the work. This proposal effectively cut Media out of its
agreement with Transcendent.
¶
10 Digital sued Media for breach of contract, seeking unpaid
earnings that Digital contended Media owed it for work it had
done for Transcendent. Media filed counterclaims. The one
that is the focus of the appeal alleged that Digital had
breached the implied covenant of good faith and fair dealing
by disclosing confidential information to Transcendent,
Media's client; by soliciting Transcendent's
business; by disparaging Media to Transcendent; and by
stealing Transcendent as a client.
¶
11 Because the contract between Media and Digital included an
arbitration clause, the district court ordered them to
arbitrate their dispute. The court stayed the case until the
arbitration proceeding was finished.
¶
12 During the arbitration proceeding, Digital argued that
Media had breached the contract because Media had not paid
Digital the amount that the contract required. The arbitrator
agreed, and she awarded Digital $68, 197.41.
¶
13 When discussing the counterclaim alleging that Digital had
breached the implied covenant of good faith and fair dealing,
the arbitrator also referred to it as addressing a breach of
Digital's duty of loyalty to Media. She then decided
that, although the agreement described Digital as an
independent contractor, Digital still owed a duty of loyalty
to Media, which Digital had breached. So the arbitrator
awarded Media $24, 400 in damages.
¶
14 In her final order, the arbitrator concluded that neither
Media nor Digital had prevailed. She therefore declined to
award either of them attorney fees.
¶
15 Digital filed a petition in the district court that asked
the court to confirm the part of the arbitration order that
awarded damages to Digital, vacate the part of the order that
awarded damages to Media because the arbitrator had exceeded
the scope of the arbitration clause, and award Digital its
attorney fees. The district court disagreed with
Digital's requests, so it confirmed the order in its
entirety.
II.
Digital's Contentions
¶
16 Digital raises three contentions.
¶
17 First, Digital contends that the arbitrator did not have
jurisdiction to consider whether Digital had breached a duty
of loyalty to Media because the duty of loyalty claim did not
"arise under" the arbitration clause.
¶
18 Second, Media filed a counterclaim alleging that Digital
had breached the implied covenant of good faith and fair
dealing. Digital submits that the arbitrator improperly
converted this counterclaim to a different claim - breach of
loyalty - that Media had not raised. Digital continues that
it did not have notice of the different elements of this
claim. Digital wraps up this contention by asserting that the
arbitrator's ruling on this different claim was unfair
and that the arbitrator's award to Media was therefore
void.
¶
19 Third, even if we disagree with the first two contentions,
Digital asserts that it was nonetheless entitled to attorney
fees because (1) its contract with Media stated that the
prevailing party in an arbitration proceeding concerning the
terms of the contract would be entitled to attorney fees; (2)
it prevailed on its breach of contract claim; (3) Media
prevailed on a claim - the breach of loyalty claim - that was
not part of the contract; so (4) Media did not prevail on a
claim that was related to the contract.
III.
Standard of Review and General Arbitration Principles
¶
20 We review de novo
⢠whether a dispute falls within the scope
of an arbitration clause, Taubman Cherry Creek Shopping
Ctr., LLC v. Neiman-Marcus Grp., Inc., 251 P.3d 1091,
1093 (Colo.App. 2010);
⢠"a district court's legal
conclusions on a motion to confirm or vacate an arbitration
award," Rocha v. Fin. Indem. Corp., 155 P.3d
602, 604 (Colo.App. 2006); and
⢠whether "the arbitrator's refusal
to award attorney fees to plaintiff as the prevailing party
was a determination beyond the scope of the parties'
arbitration agreement," Magenis v. Bruner, 187
P.3d 1222, 1225 (Colo.App. 2008).
¶
21 "To facilitate confidence in the finality of
arbitration awards and discourage piecemeal litigation,
[Colorado's arbitration statutes] strictly limit[] the
role of the courts in reviewing awards, and a party
challenging an award bears a heavy burden."
BFN-Greeley, LLC v. Adair Grp., Inc., 141 P.3d 937,
940 (Colo.App. 2006). "An arbitrator is the final judge
of both fact and law," id., and courts may not
review the merits of an arbitration award if there are not
statutory grounds to vacate, modify, or correct them,
Levy v. Am. Family Mut. Ins. Co., 293 P.3d 40, 49
(Colo.App. 2011).
¶
22 Such statutory grounds are found in section
13-22-223(1)(d), C.R.S. 2018, which provides, as is pertinent
to this case, that a court "shall vacate" an award
"if the court finds that . . . [a]n arbitrator exceeded
[her] powers." An arbitrator does not "exceed [her]
powers by rendering a decision that is contrary to the rules
of law that would have been applied by a court, so long as
there is no violation of an express term of the agreement to
arbitrate." Byerly v. Kirkpatrick Pettis Smith
Polian, Inc., 996 P.2d 771, 774 (Colo.App. 2000). In
other words, "[i]t is not sufficient . . . to argue
merely that the arbitrator committed an error of law on the
merits." Giraldi v. Morrell, 892 P.2d 422, 424
(Colo.App. 1994). "Rather, [a] plaintiff must establish
that the arbitrator exceeded the powers granted in the
agreement by refusing to apply or ignoring the legal standard
agreed upon by the parties for resolution of the
dispute." Id. And an arbitrator has a great
deal of flexibility in fashioning appropriate remedies.
BFN-Greeley, LLC, 141 P.3d at 941.
IV.
Scope of "Arising Under"
A.
Introduction
¶
23 Arbitration is a "favored method of dispute
resolution" in Colorado. Lane v. Urgitus, 145
P.3d 672, 678 (Colo. 2006). "Our constitution, our
statutes, and our case law all support agreements to
arbitrate disputes." Id. But, like the federal
courts, we do not force parties to arbitrate disputes when
they have not clearly agreed to submit them to arbitration.
Id. at 679.
¶
24 An arbitration clause is a contract. Allen v.
Pacheco, 71 P.3d 375, 378 (Colo. 2003). We must
therefore "interpret the [arbitration clause] in a
manner that best effectuates the intent of the parties."
Id. We determine their intent by reading the
language of the clause, looking to "the plain and
ordinary meaning of its terms." Id. We will
enforce the clause as it is written unless it contains an
ambiguity. Id.
¶
25 "If ambiguities are found . . . we must afford the
parties a presumption in favor of arbitration and resolve
doubts about the scope of the arbitration clause in favor of
arbitration." Id. "More specifically, we
must compel arbitration unless we can say 'with positive
assurance' that the arbitration clause is not susceptible
of any interpretation that encompasses the subject matter of
the dispute." Id. (quoting City & Cty.
of Denver v. Dist. Court, 939 P.2d 1353, 1364 (Colo.
1997)). A "'broad or unrestricted' arbitration
clause makes the strong presumption favoring arbitration
apply with even greater force." Id. (quoting
City & Cty. of Denver, 939 P.2d at 1364).
¶
26 Courts should "look beyond the legal cause of action
and consider the factual allegations upon which the claims
are premised." Smith v. Multi-Fin. Sec. Corp.,
171 P.3d 1267, 1270 (Colo.App. 2007) ...