Opinion
No. 36196-5-II.
March 18, 2008.
Appeal from a judgment of the Superior Court for Pierce County, No. 06-2-04821-6, Rosanne Buckner, J., entered March 16, 2007.
Affirmed by unpublished opinion per Van Deren, A.C.J., concurred in by Bridgewater and Penoyar, JJ.
Walter Foto appeals the trial court's denial of his motion to modify an American Arbitration Association (AAA) award in favor of TTMI Construction, Inc. He argues that the trial court erred in denying his motion and confirming the award because the arbitrator miscalculated the award and ruled on claims not submitted to arbitration. Because the Uniform Arbitration Act, chapter 7.04A RCW, limits our review of arbitration awards, we affirm.
FACTS
TTMI entered into a construction contract with Powell Bonney Lake, LLC, the property owner, and Walter Foto, the tenant, for construction of a dental center. The contract provided that the parties would arbitrate any contractual disputes under the AAA Construction Industry
Arbitration Rules. The parties disputed final payment and full performance of the construction work. As a result, TTMI filed a contractor's lien and sued for breach of contract and foreclosure of the lien. Foto counterclaimed that TTMI breached its contract with him by failing to complete and improperly completing the construction work.
The record on appeal does not contain a copy of the construction contract. The parties cite portions of the contract in their pleadings and we reference those citations as evidence of the contract. The parties do not dispute that the contract provided for AAA arbitration.
TTMI subsequently settled with Powell Bonney Lake, LLC.
The trial court stayed the action and transferred it to arbitration as required by the contract. Before arbitration, Foto asked their assigned AAA case manager whether he was required to pay an administrative fee for the counterclaim he filed in the trial court. Foto explained that his counterclaim was "essentially more of an offset against the amount asked for by [TTMI] than anything else. However, under AAA rules, [he was] not certain if this qualifie[d] as a counterclaim." Clerk's Papers (CP) at 104. A different AAA case manager responded to Foto's inquiry by email only to Foto's counsel, informing him that "no filing fee [was] required." CP at 51. When their assigned case manager returned from vacation, she wrote to both parties, stating that she would transmit Foto's inquiry to the arbitrator for his consideration.
At oral argument, Foto's counsel asserted that he never saw the letter. TTMI's counsel stated that he received the letter and that it was his first notice of an inquiry about the arbitration fee.
On January 12, 2007, William Bass, the AAA arbitrator, awarded damages to both TTMI and Foto, stating:
[T]he Contract balance owing to TTMI prior to counterclaim is $1,429.90. Added to that amount will be interest, computed as follows:
Contract Balance (excluding interest) = $1,429.90 Interest on $22,782.93 @ 18% 10/17/05-01/09/06 (85 days) = $ 955.00 Interest on $1,429.90 @ 18% 03/23/06-01/12/07 (324 days) = $ 230.00 Total Amount Owing TTMI before counterclaim = $ 2, 614.90 CP at 48-49. Bass also determined that Foto was entitled to recover $825.00 on his counterclaim.
We, like Bass, recognize that the cost of arbitration and subsequent litigation has exceeded the amount in controversy.
Because Bass determined that both TTMI and Foto prevailed on their claims, he awarded them attorney fees and costs based on the percentage of their claims on which they prevailed. Bass found that TTMI prevailed on 75 percent of its claims and Foto on 27 percent of his claims. Bass awarded TTMI: (1) $2,614.90 for its contract claim; (2) 75 percent of its $8,032.50 claimed attorney fees ($6,024.38); and (3) 75 percent of its $1,057.52 claimed costs ($793.14). He offset this award by Foto's award of: (1) $825.00 for his counterclaim; (2) 27 percent of his $4,730.50 claimed attorney fees ($1,277.24); and (3) 27 percent of his $1,605.76 claimed costs ($433.56). Thus, Bass awarded a net recovery to TTMI of $6,896.62. In addition, Bass concluded that "Foto shall pay its required counterclaim AAA fees in the amount of $750.00 within 5 business days of this Award and shall not be entitled to its counterclaim or to obtain the associated recovery of attorney fees unless said fees are paid." CP at 49.
Bass determined the percentages by dividing the award granted by the total amount requested. Thus, he determined TTMI prevailed on 75 percent of its claim because $2,614.90 divided by $3,509.30 equates to 0.745, or approximately 75 percent. And, Foto prevailed on 27 percent of its claim because $825.00 divided by $3,043.73 equates to 0.271, or approximately 27 percent.
Foto failed to pay the counterclaim fees within five business days and, on January 25, 2007, TTMI requested that Bass modify his award to strike Foto's counterclaim. On February 1, 2007, Foto requested that Bass modify his award, contending that he miscalculated interest because he should have calculated it on TTMI's contract balance set off by Foto's award. Correspondingly, Foto argued that Bass's calculation of TTMI's attorney fees and costs was also too high.
The counterclaim fee was due by Friday, January 19, 2007, five business days from Friday, January 12, 2007. Foto paid the fee on Wednesday, January 31, 2007, eight business days past the deadline and after TTMI requested that Bass modify the award.
On February 21, 2007, Bass modified his award and denied Foto's counterclaim because he did not pay the fee within the allotted time. He excluded Foto's counterclaim entirely and awarded TTMI all of its requested relief: (1) $2,614.90 on its contract claim; (2) $8,032.50 in attorney fees; and (3) $1,057.52 in costs, for a total award of $11,704.92.
TTMI moved for judgment on the amended arbitration award. But Foto asked the trial court to modify or correct the award. He argued that Bass erred in the original interest calculation and that he increased the award based on "an administrative ruling that [was] not before him," i.e. payment of the $750.00 counterclaim fee. CP at 46. Thus, Foto sought "modification of both the original arbitration award dated January 12, 2007, and the subsequent award dated February 21, 2007." CP at 47.
The trial court confirmed the arbitration award and awarded TTMI $500.00 additional attorney fees. But the trial court also concluded "that it was improper for the AAA to require an additional filing fee and condition [Foto's] off set on the payment of that fee, but [it] further conclude[d] it [did] not have jurisdiction to overturn the arbitrator's decision and the decision is confirmed." CP at 67. Foto appeals.
ANALYSIS
Foto argues that the trial court erred when it concluded that it did not have jurisdiction to vacate or modify Bass's award. He also contends that the trial court should have modified the award because Bass miscalculated it and made an award on a claim no one submitted to arbitration.
I. Standard of Review
"Arbitration is a preferred means of settling disputes without litigation, in which an arbitrator is the judge of both the law and the facts. A trial court's limited authority to confirm, vacate, modify, or correct an arbitration award arises from statute." Hanson v. Shim, 87 Wn. App. 538, 545, 943 P.2d 322 (1997) (footnote omitted); see also Davidson v. Hensen, 135 Wn.2d 112, 118, 954 P.2d 1327 (1998) (the rights of the parties in arbitration are controlled by the statutes and their contract).
Under the Uniform Arbitration Act, if a party moves to modify or correct an arbitration award or a modified arbitration award, the trial court must modify or correct the arbitration award if:
(a) There was an evident mathematical miscalculation or an evident mistake in the description of a person, thing, or property referred to in the award;
(b) The arbitrator has made an award on a claim not submitted to the arbitrator and the award may be corrected without affecting the merits of the decision upon the claims submitted.
RCW 7.04A.240(1)(a)-(b).
"[J]udicial review of an arbitration award is limited to the face of the award. In the absence of an error of law on the face of the award, the arbitrator's award will not be vacated or modified." Davidson, 135 Wn.2d at 118 (citation omitted). And we will not review "the evidence before the arbitrator nor the merits of the case." Beroth v. Appollo Coll., Inc., 135 Wn. App. 551, 559, 145 P.3d 386 (2006); see also Davidson, 135 Wn.2d at 119. Our inquiry "is limited to that of the court which confirmed, vacated, modified or corrected that award." Barnett v. Hicks, 119 Wn.2d 151, 157, 829 P.2d 1087 (1992).
II. Evident Mathematical Miscalculation
Foto argues that Bass should not have calculated the interest award on the contract balance, but rather on the contract award set off by Foto's counterclaim award. He argues that the award should have been as follows:
Contract Balance ($1,429.90-$825) (excluding interest) = $604.90 Interest on ($22,782.93-$825) @ 18% 10/17/05 — 01/09/06 (85 days) = $920.55 Interest on ($1,429.90-$825) @ 18% 03/23/06-01/12/07 (324 days) = $ 97.20 Total Amount Owing TTMI = $1,622.65
Thus, Foto also argues that Bass should have calculated TTMI's attorney fees and costs based on a prevailing percentage of only 46 percent.
Foto calculated this prevailing percentage by dividing the total amount owed to TTMI by the total amount that TTMI requested ($1,622.65 / $3,509.30 = 0.462, or approximately 46 percent). He contends that TTMI should have been awarded only $3,694.95 in attorney fees (46 percent of the $8,032.50 TTMI requested) and $486.46 in costs (46 percent of the $1,057.52 TTMI requested). And thus, TTMI's award, before Foto's counterclaim offset, should have been only $5,804.06.
Foto recognizes that we have limited authority to review an arbitration award, but he contends that Bass simply miscalculated the award and the trial court should have corrected the mathematical error under RCW 7.04A.240(1)(a). TTMI argues that Bass did not make a mathematical miscalculation and that Foto is asking us to impermissibly look beyond the face of the arbitration award. We agree with TTMI. An evident mathematical error occurs when an arbitrator obviously commits a mathematical error in applying an intended principle or standard. See, e.g., Hough v. Merrill Lynch, Pierce, Fenner Smith, Inc., 757 F. Supp. 283, 288 (S.D.N.Y. 1991), aff'd, 946 F.2d 883 (2d Cir. 1991) (An arbitration award can be modified because of a mathematical error "only if there is a mathematical miscalculation of figures used in determining an award, and not where the basis of the award is challenged."); Dadak v. Commerce Ins. Co., 53 Mass. App. Ct. 302, 304-06, 758 N.E.2d 1083 (2001); Jones v. Summit Ltd. Partnership Five, 262 Neb. 793, 798, 635 N.W.2d 267 (2001) (An "evident miscalculation of figures" occurs when there is "a mathematical error in the arbitration award that is both obvious and unambiguous."); Mike's Painting, Inc. v. Carter Welsh, Inc., 95 Wn. App. 64, 69-70, 975 P.2d 532 (1999). Here, the face of the arbitration award does not contain an evident mathematical error.
And under AAA Construction Industry Arbitration Rule 44(d), "[t]he award of the arbitrator may include interest at such rate and from such date as the arbitrator may deem appropriate." American Arbitration Association, Commercial Rules, available at http://www.adr.org/commercial_arbitration (follow "Construction" hyperlink; then follow "Construction Industry Arbitration Rules and Mediation Procedures" hyperlink) (last visited Feb. 19, 2008) (" AAA Constr. Rules"). Thus, Foto is asking us to review the substantive merits of the arbitration award, which we will not do. See Davidson, 135 Wn.2d at 119. Foto provides no authority to support his argument that we can review Bass's damages calculation. Accordingly, we will not look beyond the face of the award to determine if TTMI is entitled to a lesser sum as damages. See Davidson, 135 Wn.2d at 118; Kenneth W. Brooks Trust A. v. Pacific Media, L.L.C., 111 Wn. App. 393, 397, 44 P.3d 938 (2002). The trial court did not err when it concluded that it did not have jurisdiction to modify the arbitration award as Foto requested.
III. Counterclaim Fee
Citing Luvaas Family Farms v. Ferrell Family Farms, 106 Wn. App. 399, 23 P.3d 1111 (2001), Foto also argues that Bass erred by conditioning his arbitration award on payment of the counterclaim fee because the issue was not submitted to arbitration. He also argues that even if Bass could have conditioned the award, he could not bar all recovery for Foto's failure to timely pay the fee.
The trial court must correct the award if "[t]he arbitrator has made an award on a claim not submitted to the arbitrator and the award may be corrected without affecting the merits of the decision upon the claims submitted." RCW 7.04A.240(1)(b); see also Luvaas Family Farms, 106 Wn. App. at 404. "To determine whether an issue was presented to the arbitrators, the reviewing court examines the face of the award in light of the arbitration agreement, the demand for arbitration, and any documents reflecting that demand." Luvaas Family Farms, 106 Wn. App. at 404.
Under the former arbitration act, on which Luvaas Family Farms relies, the reviewing court had similar power to correct an award "[w]here the arbitrators have awarded upon a matter not submitted to them." Former RCW 7.04.170(2) (1943), repealed by Laws of 2005, ch. 433, § 50.
Here, the parties agreed to submit their disputes to AAA and, as part of that arbitration, the AAA case manager wrote a letter notifying both parties that the issue of Foto's payment of a counterclaim fee would be submitted to the arbitrator. Furthermore, the AAA Construction Rules provide that "[t]he administrative fees of the AAA are based on the amount of the claim or counterclaim [and] . . . administrative fees are subject to allocation by the arbitrator in the award" and they also note that "[a]n initial filing fee is payable in full by a filing party when a . . . counterclaim . . . is filed."
The rules state that if the amount of the claim is between $0 and $10,000, the fee is $750. AAA Constr. Rules.
In addition, Foto argues that the trial court should not have confirmed the modified award because "when an arbitrator fashions a remedy that would not be fashioned by a trial court, that decision can be modified," citing Kennewick Education Ass'n v. Kennewick School District No. 17, 35 Wn. App. 280, 666 P.2d 928 (1983). Br. of Appellant at 14. But Kennewick Education Ass'n is distinguishable.
In Kennewick Education Ass'n, the court held that an arbitrator could not award punitive damages because such an award was contrary to public policy when no statute allowed them. 35 Wn. App. at 282. Foto points to no authority or contract provision preventing an arbitrator from conditioning his award and then modifying it when the condition is not met. See Kamaya Co. v. Am. Prop. Consultants, Ltd., 91 Wn. App. 703, 714, 959 P.2d 1140 (1998); Mendez v. Palm Harbor Homes, Inc., 111 Wn. App. 446, 456, 45 P.3d 594 (2002) (disputes are presumed arbitrable).
Recently, we held that when an arbitrator awarded general attorney fees and the parties then failed to follow the necessary procedures to request a specific award of attorney fees, the arbitrator could modify the award to omit attorney fees entirely. See Marquez v. Cascade Residential Design, Inc., ___ Wn. App. ___, 174 P.3d 151 (2007). Here, as in Marquez, Foto failed to follow the condition the arbitrator placed on his award. It was reasonable for Bass to conclude that Foto's failure to comply with the condition resulted in his waiver of the counterclaim and the associated recovery of attorney fees and costs. Because of this, the award had to be recalculated because TTMI's award was no longer offset by Foto's counterclaims. In modifying the award, Bass did not redetermine the merits of a claim he had already decided, he only recalculated damages. See RCW 7.04A.200(1); Marquez, 174 P.3d at 155; AAA Constr., R-47. Thus, the trial court did not err and we affirm the trial court's confirmation of the arbitration award.
RCW 7.04A.200(1) provides:
On motion to an arbitrator by a party to the arbitration proceeding, the arbitrator may modify or correct an award:
(a) Upon the grounds stated in RCW 7.04A.240(1)(a) ["There was an evident mathematical miscalculation or an evident mistake in the description of a person, thing, or property referred to in the award."] or (c) ["The award is imperfect in a matter of form not affecting the merits of the decision upon the claims submitted."];
(b) Because the arbitrator has not made a final and definite award upon a claim submitted by the parties to the arbitration proceeding; or
(c) To clarify the award.
It would save resources and avoid the type of confusion that resulted in this appeal if the arbitrators required payment of the counterclaim fee before considering the merits of the dispute, rather than condition an award on payment of the fee.
IV. Attorney Fees
TTMI asks for attorney fees as the prevailing party on appeal. RAP 18.1 authorizes the award of attorney fees on appeal where "applicable law grants to a party the right to recover reasonable attorney fees or expenses on review." RAP 18.1(a). And a contract provision awarding attorney fees at trial also authorizes such fees on appeal. Boyd v. Davis, 127 Wn.2d 256, 264, 897 P.2d 1239 (1995). Here, the contract provided that the prevailing party was entitled to reasonable attorney fees in "a dispute in which either party seeks and receives legal counsel." CP at 3. Thus, we award TTMI reasonable attorney fees and costs in an amount to be determined according to RAP 14 and 18.1 upon TTMI's compliance with RAP 18.1.
RAP 14.1(b) provides: "Costs on review are determined and awarded by the appellate court which accepts review and makes the final determination of the case."
Foto asks us, if he prevails, to reverse the trial court's award of attorney fees to TTMI and to award him attorney fees. Because Foto does not prevail and we affirm the trial court, we do not award Foto attorney fees or reverse the trial court's award of attorney fees to TTMI.
We affirm the trial court's decision confirming the arbitration award and concluding that it did not have jurisdiction to modify the arbitrator's award to TTMI. We award reasonable attorney fees and costs to TTMI.
A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.
We concur:
Bridgewater, J.
Penoyar, J.