Malted Mousse, Inc. v. Steinmetz

• Decision Date: 13 November 2003
• Docket Number: No. 73120-9.,73120-9.
• Citation: 150 Wash.2d 518,79 P.3d 1154
• Parties: MALTED MOUSSE, INC., a Washington corporation, Petitioner, v. Michael A. STEINMETZ, Respondent.
• Court: Washington Supreme Court

79 P.3d 1154

150 Wash.2d 518

MALTED MOUSSE, INC., a Washington corporation, Petitioner, v. Michael A. STEINMETZ, Respondent.

No. 73120-9.

Supreme Court of Washington, En Banc.

Argued September 9, 2003.

Decided November 13, 2003.

Martin Burns, Law Offices of McFerran & Helsdon, Tacoma, for Petitioner.

Michael A. Steinmetz, Mesa, AZ, for Respondent.

SANDERS, J.

This case requires us to address whether the trial de novo appeal process from mandatory arbitration under chapter 7.06 RCW sufficiently protects the rights of small claimants who are aggrieved by an arbitrator's erroneous act. We hold it does and that trial de novo is the sole method to seek judicial review from mandatory arbitration. Accordingly, we reverse the Court of Appeals.

FACTS AND PROCEDURAL HISTORY

These facts are essentially undisputed. Petitioner Malted Mousse, Inc. (Malted Mousse) agreed in March 1999 to sell espresso equipment to Respondent Michael Steinmetz and provide training for its use. Steinmetz made a $5,000 down payment by check, but later stopped payment. He asserted the stop-payment order was justified, claiming Malted Mousse had misrepresented the "condition, content and quality of the equipment" and had failed to provide training and assistance as called for by the contract. Clerk's Papers (CP) at 17. Malted Mousse then brought suit in Pierce County Superior Court, seeking damages under $10,000.¹ The trial court transferred the case to arbitration pursuant to Washington's mandatory arbitration statute, chapter 7.06 RCW. The arbitrator, Duane E. Erickson, heard the case on May 31, 2000, and after deciding the case in Steinmetz's favor, filed a judgment on June 8, 2000.

At this point, the events which lead to our review unfold. Steinmetz moved on June 12, 2000 for attorney fees under RCW 4.84.250,² which the arbitrator denied in an "Arbitration Award Amended" filed with the trial court on June 19, 2000. CP at 32. The arbitrator did not explain his reasons for denying the award in the Arbitration Award Amended. The arbitrator did, however, send a cover letter to the parties, explaining that although he agreed that Steinmetz had complied with RCW 4.84.250, he denied Steinmetz's request for fees "based upon [his] opinion that the so called small claims statute, [RCW] 4.84.250 et. seq., are [sic] unconstitutional in that they deny litigants equal protection under the law contrary to [sic] Washington constitution and the U.S. constitution."³ CP at 33.

On July 10, 2000, Steinmetz filed a "Request for Trial de Novo/Review of Award of Attorney Fees Only," along with proof of service thereof, seeking judicial review of only the arbitrator's denial of attorney fees. CP at 26-27. He specifically excluded the merits of the case from his request. However, Steinmetz never noted the case for trial, and the case remained stagnant for seven months.

In February 2001 Steinmetz filed a motion in superior court "for 1) an order confirming arbitration award in this matter dated June 6, 2000 pursuant to RCW 7.04.150; 2) an order vacating amended arbitration award dated June 19, 2000; [and] 3) an order awarding defendant his reasonable attorney fees and costs herein pursuant to RCW 7.04.160(4) and CR 60(b)(1), (5), and (11)." CP at 54. The trial court denied the motion on March 2, 2001.

Acting pro se,⁴ Steinmetz appealed, assigning error to the trial court for (1) failing to grant his motion to vacate the arbitration award; and (2) "failing to address the unconstitutional issue under which the arbitrator denied attorney fees regarding [RCW] 4.84.250." Br. of Pet'r at 1. The Court of Appeals, Division Two, reversed and held: (1) the arbitrator's sua sponte declaration that RCW 4.84.250 is unconstitutional was a manifest procedural error; and (2) the trial court should have treated Steinmetz's July 10, 2000 trial de novo request as an "extraordinary writ challenging the arbitrator's refusal to follow the law." Malted Mousse, Inc. v. Steinmetz, 113 Wash.App. 157, 165, 52 P.3d 555 (2002). We granted Malted Mousse's petition for review. 149 Wash.2d 1001, 67 P.3d 1096 (2003).

ISSUES

I. Whether the Court of Appeals erred in treating Steinmetz's "Request for a Partial Trial de Novo" (on attorney fees only) on a mandatory arbitration proceeding under chapter 7.06 RCW as a petition for an article IV, section 6 constitutional writ of certiorari challenging an arbitrator's sua sponte holding that RCW 4.84.250 is unconstitutional.

II. And if so, whether we should award Malted Mousse attorney fees pursuant to RAP 18.9(a) because of Steinmetz's alleged frivolous appeal.

STANDARD OF REVIEW

Even if the precise question we must answer is not perfectly articulated by the parties, we have a "duty to determine the extent of appellate review." Barnett v. Hicks, 119 Wash.2d 151, 154, 829 P.2d 1087 (1992). We interpret the mandatory arbitration rules as though they were drafted by the legislature, and we construe these rules consistent with their purpose. Wiley v. Rehak, 143 Wash.2d 339, 343, 20 P.3d 404 (2001). Our review of the application of a court rule or law to the facts is de novo. Id.

ANALYSIS

I. Constitutional Writs of Certiorari Are Not Available for Parties Aggrieved in Mandatory Arbitration.

As this case comes to us on appeal from a denial of a motion to confirm part and vacate part of an arbitration award from mandatory arbitration, we must determine whether such action was appropriate in the first place. The decision below and other decisions from Division Two of the Court of Appeals have intertwined the standards by which a superior court (and ultimately an appellate court) reviews an arbitrator's decision under Washington's arbitration act, chapter 7.04 RCW, and under the mandatory arbitration statute, chapter 7.06 RCW.⁵ A proper analysis of how each procedure occurs is necessary to illustrate where Division Two's analysis went awry.

A. Mandatory arbitration differs from private arbitration, and the appellate procedures should not be confused.

Chapter 7.06 RCW provides the statutory authorization for superior courts to require arbitration for small claims. Claims in Pierce County which involve an amount in controversy $35,000 or less are subject to mandatory arbitration. RCW 7.06.020(1); Pierce County Local Mandatory Rule 1.2. The superior court mandatory arbitration rules (MAR) governing arbitration proceedings under chapter 7.06 RCW are inapplicable to private arbitration unless the parties stipulate otherwise. MAR 1.1. We have noted that the "primary goal of the statutes providing for mandatory arbitration (RCW 7.06) and the MANDATORY ARBITRATION RULES that are designed to implement that chapter is to `reduce congestion in the courts and delays in hearing civil cases.'" Nevers v. Fireside, Inc., 133 Wash.2d 804, 815, 947 P.2d 721 (1997) (quoting Perkins Coie v. Williams, 84 Wash.App. 733, 737, 929 P.2d 1215, review denied, 132 Wash.2d 1013, 940 P.2d 654 (1997)).

Conversely, private arbitration is governed by Washington's arbitration act, chapter 7.04 RCW. That statute makes agreements to arbitrate existing or future disputes "valid, enforceable and irrevocable save upon such grounds as exist in law or equity for the revocation of any agreement." RCW 7.04.010. The arbitration act "provides a means by which disputants may dispose of controversies other than by an action in court." Thorgaard Plumbing & Heating Co. v. King County, 71 Wash.2d 126, 131, 426 P.2d 828 (1967). This form of arbitration depends on contractual agreement rather than the amount in controversy. Id. at 132, 426 P.2d 828; see also Balfour, Guthrie & Co. v. Commercial Metals Co., 93 Wash.2d 199, 202, 607 P.2d 856 (1980)

("arbitration stems from a contractual, consensual relationship").

While both acts deal with a form of alternative dispute resolution, they differ with respect to how a party appeals when dissatisfied with the arbitral decision.

1. Appealing an adverse decision under private arbitration.

Parties in private arbitration generally waive their right to a jury. See Godfrey v. Hartford Cas. Ins. Co., 142 Wash.2d 885, 898, 16 P.3d 617 (2001)

. A party dissatisfied with the arbitrator's decision may move the superior court to vacate, modify, or correct the award. RCW 7.04.150, .160, .170. A vacation, modification, or correction of an award requires a motion to the court by a party to the arbitration proceeding who can demonstrate one of the statutorily defined circumstances warranting the vacation, modification, or correction. When reviewing an arbitrator's decision, the court's review is limited to the grounds provided for in RCW 7.04.160-.170. See Barnett, 119 Wash.2d at 156,

829 P.2d 1087. In Boyd v. Davis, 127 Wash.2d 256, 897 P.2d 1239 (1995), we recognized that every case addressing a court's ability to reverse an arbitrator's error in law was based on a statute repealed by the current arbitration act, and that a reviewing court is limited to the statutory grounds. Boyd, 127 Wash.2d at 267-68,

897 P.2d 1239. This case, however, deals with mandatory arbitration with an appellate process discussed next.

2. Appealing an adverse decision under mandatory arbitration.

A party aggrieved by an arbitrator's decision in mandatory arbitration "may file with the clerk a written notice of appeal and request for a trial de novo in the superior court on all issues of law and fact." RCW 7.06.050 (emphasis added).⁶ A party who fails to improve his or her position at the trial de novo must pay the other side's costs and reasonable attorney fees. MAR 7.3.⁷

Once a party requests a trial de novo, though, the clerk must seal the arbitration award. MAR 7.1(a). The trial de novo is then "conducted as though no arbitration proceeding had occurred." MAR 7.2(b)(1) (emphasis added). No pleading, brief, statement (written or oral) during the trial de novo may refer to the arbitration proceeding. Id. The right to a jury trial is maintained, RCW 7.06.070 (contrary to private...