Opinion
No. 1 CA-CV 16-0214
12-21-2017
AMERICAN NATIONAL MEDICAL MANAGEMENT LLC, Plaintiff/Appellant, v. PAO LAW FIRM PLC, et al., Defendants/Appellees.
COUNSEL Schian Walker, PLC, Phoenix By Nathan Ted Mitchler, Tyler J. Grim Counsel for Plaintiff/Appellant Coppersmith Brockelman, PLC, Phoenix By L. Keith Beauchamp, Katherine DeStefano Co-Counsel for Defendants/Appellees The Wilkins Law Firm, PLLC, Phoenix By Amy M. Wilkins Co-Counsel for Defendants/Appellees
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2014-008572
The Honorable Arthur T. Anderson, Judge
AFFIRMED
COUNSEL Schian Walker, PLC, Phoenix
By Nathan Ted Mitchler, Tyler J. Grim
Counsel for Plaintiff/Appellant Coppersmith Brockelman, PLC, Phoenix
By L. Keith Beauchamp, Katherine DeStefano
Co-Counsel for Defendants/Appellees The Wilkins Law Firm, PLLC, Phoenix
By Amy M. Wilkins
Co-Counsel for Defendants/Appellees
MEMORANDUM DECISION
Judge Jon W. Thompson delivered the decision of the Court, in which Presiding Judge Kenton D. Jones and Judge John C. Gemmill joined. THOMPSON, Judge:
Pursuant to Article 6, Section 3 of the Arizona Constitution, the Arizona Supreme Court designated the Honorable John C. Gemmill, Retired Judge of the Court of Appeals, to sit in this matter.
¶1 Appellant, American National Medical Management, LLC (American), appeals from the superior court's order compelling arbitration, its judgment confirming an arbitrator's award in favor of Appellees, James Pao (James), Pao Law Firm, PLC, and Jane Doe Pao, and the court's subsequent award of attorneys' fees. For the following reasons, we affirm.
FACTUAL AND PROCEDURAL HISTORY
¶2 American is a medical billing company that retained James as legal counsel in May 2013. James formed the Pao Law Firm after interviews with American.
The parties disagree as to whether James was retained as in-house attorney or outside counsel.
¶3 In relation to his retention, James signed a Confidentiality, Non-Competition and Nonsolicitation Agreement (the Confidentiality Agreement), and he and American executed an "Agreement for Legal Services" (the Agreement). Pursuant to the Agreement, James was to assist American with its "medical billing adjudication." However, James's work involved drafting letters and appeals to insurance companies on his Pao Law Firm letterhead. The Agreement also provided that "roughly every two (2) weeks" American would pay James a retainer fee, and that the payments were "due without notice."
The Confidentiality Agreement included a provision regarding attorneys' fees and costs, providing:
[i]f any legal action or any other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which the prevailing party may be entitled.
James's drafted letters revised the forms American had been using to comply with changing law. American's internal employees who were part of its "Law Group" had access to the forms, but James maintained control of the form letters' content and the group's use of them.
¶4 An arbitration provision and a mandatory attorneys' fees and costs clause were also included in the Agreement. They stated:
9. ATTORNEYS' FEES AND COSTS. If any action at law or in equity, in court or in arbitration, is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements, in addition to any other relief to which it may be entitled.(Emphasis added.) Matthew Perez, American's then Vice-President of Operations, signed the Agreement on American's behalf.
10. ARBITRATION. Attorney and Client agree any dispute or claim arising out of or relating to this contract, the breach thereof, or Attorney/Client relationship shall be settled by arbitration in accordance with the Commercial Arbitration Rules of American Arbitration Association and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof . . . If Client claims that Attorney performed any legal services improperly, negligently or incompletely, then Client hereby agrees to submit the dispute to binding arbitration. By agreeing to this provision, Client understands that Client waives the right to bring an action against Attorney in a Court of law and further waives the right to a jury trial.
¶5 In March 2014, Perez and Chris Duffy, who served as American's national sales manager, each terminated their employment and partnership interests in American and its affiliates and formed AllianceMed, LLC. American contends Perez and Duffy formed AllianceMed to "deliberately and unfairly compete with [American]." James, by letter, terminated his representation of American on April 14, 2014, and began representing AllianceMed a few days later.
¶6 American filed a lawsuit against James, Pao Law Firm, PLC, and Jane Doe Pao—James's spouse (hereinafter, collectively Pao). In the lawsuit, American alleged Pao breached its fiduciary duty and requested an accounting of the $83,000 in legal fees paid to Pao. American cited the Agreement throughout its complaint and attached it as Exhibit 1.
Jane Doe Pao was named solely to bind community property.
¶7 In June 2014, American filed a motion for preliminary injunction. The motion requested that the trial court order Pao to return American's documents and property, to refrain from disclosing any information Pao learned about American to American's disadvantage, and to cease representing AllianceMed. The following month, Pao filed a motion to compel arbitration. American filed an opposing motion. The court ultimately granted Pao's motion to compel arbitration, and stayed the action before it.
¶8 The claims American brought before the assigned Arbitrator went beyond those asserted in the trial court. American alleged Pao: (1) breached the duty of loyalty and fiduciary duty owed to American; (2) were professionally negligent during and/or after their representation of American; (3) interfered with American's contractual relationships and business expectancies; and (4) aided and abetted tortious conduct. Both parties requested an award of attorneys' fees and costs. American also subsequently filed a motion for preliminary injunction seeking to bar Pao from disclosing its proprietary information, and the arbitrator denied that motion.
¶9 Following discovery and five days of arbitration, the arbitrator found in favor of Pao on all claims. The arbitrator also awarded Pao attorneys' fees. Pao moved to confirm the award in the trial court. American opposed Pao's motion and renewed its request for injunctive relief. The trial court confirmed the arbitration award, entered judgment in Pao's favor, and granted Pao an award of attorneys' fees incurred during the confirmation proceedings.
¶10 American filed a notice of appeal to this court. We have jurisdiction pursuant to Article 6, Section 9, of the Arizona Constitution and Arizona Revised Statutes (A.R.S.) sections 12-120.21(A)(1) (2016) and -2101(A) (2016).
DISCUSSION
¶11 American alleges various claims on appeal. Finding no basis for reversal, we affirm the superior court's order compelling the parties to arbitrate, its judgment confirming the arbitrator's award, and its award of attorneys' fees incurred in confirming the arbitrator's award.
I. Whether the Superior Court Erred in Granting Pao's Motion to Compel Arbitration
¶12 On appeal, American argues that the superior court erred in granting Pao's motion to compel arbitration for two reasons. First, American argues that granting the motion was in error because the Agreement, which includes the subject arbitration provision, was executed by Perez, who American claims lacked authority to bind American. Second, American asserts that, even if the Agreement was enforceable against it, the arbitration provision was inapplicable to the claims American raised in its complaint. American did not raise the latter contention in the superior court, and has therefore waived it on appeal. See Banales v. Smith, 200 Ariz. 419, 420, ¶ 8 (App. 2001) (finding that a failure to raise an issue below waives the issue on appeal). As to the remaining argument, we affirm the superior court's related findings, which are amply supported by the evidence in the record.
American argues that a provision in its operating agreement precluded Perez's ability to bind American.
In addition to the first argument, in opposition to Pao's motion to compel, American averred that enforcing the arbitration provision would intrude on the Arizona Supreme Court's disciplinary authority. Regarding this argument, the court noted that American was seeking non-disciplinary legal remedies against Pao, and thus arbitration would not infringe our Supreme Court's authority to discipline Pao in formal disciplinary proceedings.
¶13 The superior court found American "ratified the Agreement by its conduct and is bound by its terms." The court specifically noted that American's claim that it was not bound by the Agreement (including the arbitration provision) was "inconsistent" with American's "acceptance of and payment for legal services pursuant to the Agreement for over a year." We agree. See, e.g., All-Way Leasing Inc. v. Kelly, 182 Ariz. 213, 216 (App. 1994) (stating that a party "may ratify the contract and thus become bound by its terms, by affirming the contract through words or deeds . . . We will infer an intent to ratify if a non-party to the contract voluntarily accepts benefits conferred by the contract") (citations omitted). Accordingly, we affirm the court's order granting Pao's motion to compel arbitration.
II. Whether the Superior Court Abused Its Discretion in Confirming the Arbitration Award, Which Included an Award of Attorneys' Fees
¶14 In Arizona, judicial review of an arbitrator's award is substantially limited because arbitration is favored as a more affordable and quicker means of resolving disputes. City of Cottonwood v. James L. Fann Contracting, Inc., 179 Ariz. 185, 189 (App. 1994). An Arizona statute provides that an arbitrator's award shall be confirmed unless the award falls within one of the enumerated exceptions under A.R.S. § 12-1512(A) (2016). "[T]he decisions of the arbitrators on questions of fact and of law are final and conclusive, except when they conflict with express guidelines or standards set forth or adopted in the arbitration agreement." Pawlicki v. Farmers Ins. Co., 127 Ariz. 170, 173 (App. 1980) (quoting Hirt v. Hervey, 118 Ariz. 543, 545 (App. 1978)). Accordingly, we review the superior court's decision not to set-aside an arbitration award for an abuse of discretion and in the light most favorable to upholding the decision. RS Industries, Inc. v. Candrian, 240 Ariz. 132, 135, ¶ 7 (App. 2016) (citation omitted).
Section 12-1512(A) states:
A. Upon filing of a pleading in opposition to an award, and upon an adequate showing in support thereof, the court shall decline to confirm and [sic] award and enter judgment thereon where:
1. The award was procured by corruption, fraud or other undue means;
2. There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party;
3. The arbitrators exceeded their powers;
4. The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of § 12-1505, as to prejudice substantially the rights of a party; or
5. There was no arbitration agreement and the issue was not adversely determined in proceedings under § 12-1505 and the adverse party did not participate in the arbitration hearing without raising the objection; but the fact that the relief was such that it could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award.
"To find an abuse of discretion, there must either be no evidence to support the superior court's conclusions or the reasons given by the court must be clearly untenable, legally incorrect, or amount to a denial of justice." Charles I. Friedman, P.C. v. Microsoft Corp., 213 Ariz. 344, 350, ¶ 17 (App. 2006) (internal quotation and citations omitted).
¶15 In the superior court, American contested the arbitrator's award in favor of Pao under two exceptions enumerated in A.R.S. § 12-1512(A). First, American argued the court should not confirm the arbitration award because it was procured through undue means, id. at § 12-1512(A)(1), and, second, that the arbitrator exceeded his authority when he awarded attorneys' fees, id. at § 12-1512(A)(3). On appeal, American asserts only the second argument; our review is confined accordingly. Specifically, American argues that an award of attorneys' fees was not authorized because the Agreement's attorneys' fees clause permitted fees only in an action "to enforce or interpret the terms of the Agreement." See supra ¶ 4. American contends that neither its claims nor the arbitrator's conclusions in the final award were related to the terms of the Agreement. We find the arbitrator did not exceed his power by awarding attorneys' fees.
¶16 American's opposition to the arbitrator's attorneys' fees award is undermined by the arbitration provision contained within the Agreement to which both parties agreed. The arbitration provision states that disputes between the parties were to be resolved "in accordance with the Commercial Arbitration Rules of [the] American Arbitration Association [(AAA)]." Supra ¶ 4. Those rules were thus incorporated into the Agreement, and became as much a part of the Agreement as the other expressed terms.
¶17 Rule R-47(d)(ii) of those incorporated AAA Rules provide that arbitrators may award attorneys' fees "if all parties have requested such an award." Commercial Arbitration Rules and Mediation Procedures, Am. Arb. Ass'n, Commercial Arb. Mediation Procedures, https://www.adr.org/sites/default/files/Commercial%20Rules.pdf (visited Sept. 14, 2017). Here, during the arbitration proceedings both parties sought attorneys' fees. Therefore, as to this issue, we need not discuss the attorneys' fees clause American construes as not having authorized the arbitrator's award. Nor do we need to address American seeking fees they believed they were entitled to arising from the same agreement and provisions they now argue do not allow fees to Pao. We affirm the superior court's decision confirming the award.
III. Whether the Superior Court Erred in Failing to Make Findings of Fact Regarding American's Motion for Injunctive Relief After the Issue was Decided at Arbitration
¶18 As noted, American's opposition to Pao's request to confirm the arbitrator's award included a renewed request for injunctive relief. In confirming the award and entering judgment, the court made no findings of fact and conclusions of law regarding American's request. American now argues the court abused its discretion by (1) not ruling on its request for injunctive relief at the time of the award confirmation, even though the issue was decided by the arbitrator, and (2) failing to make findings of fact and conclusions of law on the issue when the court was obligated to do so as it effectively denied American's request for preliminary injunctive relief by granting the motion compelling arbitration. However, parties having contractually chosen a different tribunal and method of resolving their controversy may not reinstate judicial tribunals to resolve that controversy. See Smitty's Super-Valu, Inc. v. Pasqualetti, 22 Ariz. App. 178, 182 (1974). We affirm the court's decision, which amounts to refusing to reassess matters already decided by the arbitrator.
IV. Whether the Superior Court Properly Awarded Pao's Attorneys' Fees Associated with Confirming the Arbitration Award in the Superior Court
¶19 Upon Pao's request, the superior court awarded Pao attorneys' fees incurred in connection with confirming the arbitrator's award. American maintains these fees were unauthorized under the Agreement's attorneys' fees clause because "[n]othing in the confirmation proceeding pertained to enforcing the Agreement nor any action by [American] requesting interpretation of the agreement." We disagree.
¶20 The superior court may award attorneys' fees incurred in connection with an action to confirm an arbitration award. See A.R.S. § 12-1514 (2016). We review the court's award of attorneys' fees incurred in confirming the award for an abuse of discretion, and we will affirm if there is a reasonable basis for the award. See RS Industries, Inc., 240 Ariz. at 138, ¶ 21 (citations omitted). Because the court's minute entry does not state its basis for awarding fees associated with confirming the arbitrator's award, this court may affirm for any reason supported by the record. See Associated Aviation Underwriters v. Wood, 209 Ariz. 137, 160 n.21, ¶ 71 (App. 2004) (citation omitted).
The minute entry stated only that "consistent with the prior ruling, fees are available here." --------
¶21 We find that the attorneys' fees clause which permits an award of fees for actions to enforce the Agreement would reasonably include proceedings to confirm an arbitration award brought pursuant to the arbitration provision within that Agreement. Moreover, the language of A.R.S. § 12-1514 permits the award of attorneys' fees incurred in confirmation proceedings even if fees were not expressly authorized. Canon School Dist. v. W.E.S. Constr. Co., 180 Ariz. 148, 153-54 (1994). Accordingly, we affirm the superior court's award.
V. Attorneys' Fees on Appeal
¶22 On appeal, both parties request an award of attorneys' fees and costs. American makes its requests pursuant to Arizona Rule of Civil Appellate Procedure (ARCAP) 21 and A.R.S. §§ 12-341.01 (2016) (attorneys' fees), and -341 (2016) (costs). As American is unsuccessful on appeal, we deny its requests. Pao makes its requests pursuant to the Agreement, the Confidentiality Agreement and ARCAP 21. We award Pao fees and taxable costs, in an amount to be determined, upon compliance with ARCAP 21.
CONCLUSION
¶23 For the foregoing reasons, we affirm.