A1 Team USA. Holdings LLC v. Llp

• Decision Date: 01 July 2010
• Docket Number: No. 09-CV-1205.,09-CV-1205.
• Citation: 998 A.2d 320
• Parties: A1 TEAM USA HOLDINGS, LLC, Appellant,v.BINGHAM McCUTCHEN LLP, Appellee.
• Court: D.C. Court of Appeals

998 A.2d 320

A1 TEAM USA HOLDINGS, LLC, Appellant,v.BINGHAM McCUTCHEN LLP, Appellee.

No. 09-CV-1205.

District of Columbia Court of Appeals.

Argued June 9, 2010.

Decided July 1, 2010.

COPYRIGHT MATERIAL OMITTED

George R.A. Doumar, Arlington, VA, for appellant.

Warren Anthony Fitch, Washington, DC, for appellee.

Before REID, GLICKMAN and OBERLY, Associate Judges.

REID, Associate Judge:

This is a case of first impression involving amendments to the District of Columbia Uniform Arbitration Act. Appellant, A1 Team USA Holdings, LLC (“A1”), claims that the amendments “provide[ ] a substantial new basis for vacating arbitral awards,” and that the trial court committed reversible error by failing to recognize the “substantial expansion of [the] court's authority to vacate arbitral awards compared to the repealed statute.” We conclude that D.C.Code § 16-4423(b),¹ one of the new statutory provisions under which “[t]he court may vacate an award made in the arbitration proceeding on other reasonable ground,” does not authorize de novo review of an arbitrator's award. Rather, this court's review of an arbitration award is still extremely limited. We affirm the judgment of the trial court.

FACTUAL SUMMARY

The record reveals that A1 entered into an attorney/client relationship with appellee, Bingham McCutchen LLP (“Bingham”) on January 9, 2008; A1 asked Bingham to assist in the resolution of certain franchise matters with A1 Holdings Limited. The engagement letter between the parties specified a billable hourly rate ranging from $335.00 to $750.00 an hour, with a nonbinding estimate of $75,000.00 for Phase I of the legal representation. A1 and Bingham agreed to resolve all disputes “by binding arbitration under the auspices and applicable rules of JAMS or the American Arbitration Association (AAA), whichever [A1] prefers, in Washington, D.C.”

Subsequently, A1 protested the amount of the fees charged by Bingham. The parties attempted to resolve their disagreement through settlement negotiations, but the parties dispute whether they ultimately reached an agreement. In any event, A1 paid only $75,000.00 of the $190,000.00 Bingham originally billed, and filed an arbitration claim on November 10, 2008, seeking the return of fees paid to Bingham. A1 contended that Bingham had a conflict of interest due to the law firm's prior representation of A1 Holdings Limited, beginning in 2006; and hence, Bingham should not have agreed to represent A1. A1 further argued that Bingham's computerized research billings were excessive.

The AAA arbitrator issued her award on April 16, 2009, finding that:

(1) there was not a conflict of interest that would have barred [Bingham] from representing [A1], and (2) the amount of $9,542.76 charged by [Bingham] for computerized legal research, which was calculated at a rate of over $1,100.00 per hour, is in excess of the actual charges by the service provider to [Bingham] and is beyond what a reasonable client would expect absent clear disclosure in advance of billing.

Following adjustments, the arbitrator determined that A1 owed Bingham $48,869.31.

On April 29, 2009, Bingham filed in the trial court a motion for confirmation of the arbitration award and entry of judgment. A1 filed an answer on May 27, and on July 13, lodged a motion to vacate the arbitration award on the ground that it “is unreasonable,” and also “on public policy grounds.” The trial judge concluded that the “other reasonable ground[s]” statutory language could not be interpreted “as a grant of de novo review to trial courts in vacating arbitral awards”; hence, the court declined to review the merits of the conflict of interest allegation and the reasonableness of the legal fees. In addition, the court rejected A1's public policy argument, and entered judgment in favor of Bingham in the amount of $48,869.31. A1 noted a timely appeal.

ANALYSIS

A1 argues that “the trial court improperly applied the revised Uniform Arbitration Act by conducting its evaluation of this matter under an ‘extremely limited’ standard of review, and not under the revised statute's reasonableness standard.” A1 maintains that “a court can now vacate an arbitral award on any ‘reasonable’ basis.” Furthermore, A1 claims that “[t]he available legislative history signals a public policy of protecting plaintiffs by providing for broader judicial review of arbitral awards,” and that “[t]he legislature viewed these new [statutory] provisions as counterweights to a seeming plaintiff and consumer-hostile arbitration process.”

In response to A1's arguments, Bingham contends that:

In the absence of any legislative history ..., there is no ground for concluding that [D.C.Code § 16-4423(b) ] was added to radically alter the arbitration process without any legislative consideration or analysis or to eviscerate the arbitration process by requiring essentially de novo adjudication by the courts of the countless arbitrations conducted in the District of Columbia every year.

Bingham further takes issue with A1's public policy argument, insisting that “A1 has not established any violation of public policy.” ²

Consistent with Bingham's position, we conclude that neither the National Conference of Commissioners on Uniform State Laws (“NCCUSL”),³ nor the Council of the District of Columbia, intended that the revised provisions of the Uniform Arbitration Act (“UAA”), including those relating to vacating an arbitration award, would convert limited judicial review of the award to a de novo judicial merits review of claims made in arbitration proceedings. Because the UAA had been promulgated in 1955 by the NCCUSL, it no longer provided answers to many modern-day issues in the arbitration process. Hence, the major impetus for revisions to the UAA centered on developing guidance on a variety of issues such as (1) “who decides the arbitrability of a dispute and by what criteria,” and (2) “the use of electronic information and other modern means of technology in the arbitration process.” ⁴ None of the fourteen issues identified by the NCCUSL concerned the judicial standard for reviewing an arbitration award.

The Council adopted the NCCUSL's 2000 revision of Section 23(a) almost verbatim.⁵ But, while the Council's bill, as introduced, contained the NCCUSL's subsection (b),⁶ the Council's engrossed and enrolled original bills contained a completely different subsection (b), specifying that “The court may vacate an award made in the arbitration proceeding on other reasonable ground.” When and why subsection (b) was changed to reflect the current language is a mystery; there is no legislative history explaining the substitution of the existing subsection (b) for the NCCUSL's subsection (b).

Nothing in the NCCUSL's comments relating to Section 23 even remotely suggests an intent to fundamentally change the nature of judicial review of arbitration awards. To the contrary, the NCCUSL considered but decided, after reviewing federal case law involving the Federal Arbitration Act (“FAA”), not to add provisions to Section 23 which would have allowed vacatur of an arbitration award on the grounds of “manifest disregard of the law” and “public policy.” ⁷ In part, the rationale for omitting these grounds was a desire for uniformity between the federal vacatur provision and that adopted by the states. The federal vacatur provision, 9 U.S.C. § 10, contains only four narrow grounds on which an arbitration award may be vacated. ⁸ Significantly, during its four years of deliberations, the Drafting Committee for the revised Uniform Arbitration Act had debated whether or not to add to Section 23 “a provision that the parties could ‘opt in’ to judicial review of arbitration awards for errors of law or fact or any other grounds not prohibited by applicable law.”

The Council also was cognizant of the need for uniformity with the federal act. As the Committee Report on the proposed Council amendments stated:

Bill 17-50, the “Arbitration Amendments Act of 2007” reflects changes made by the RUAA. The RUAA has been drafted against the preemptive presence of the Federal Arbitration Act (FAA).... The FAA encourages arbitration as an alternative to litigation. Therefore, any state law that limits the availability of arbitration risks failure as a result of federal preemption. Although there is not complete agreement about the relationship between federal and state law on certain specific issues, the RUAA is drafted to avoid preemption.

Council of the District of Columbia, Committee on Public Safety and the Judiciary, Report on Bill 17-50, the “Arbitration Amendments Act of 2007,” June 4, 2007, at 2. The Committee Report identifies areas in which the Council added provisions not reflected in the NCCUSL draft. These related to “the view of many ... that the arbitration process has been slanted in the favor of business over consumers.” Id. They included amendments regulating “arbitration service providers”; and “a requirement for the disclosure of arbitration costs.” Id. Another provision concerned insurance contracts. Id. None of the Council additions identified in the Committee Report focused on the judicial standard for review of arbitration awards. Moreover, we have been unable to find any supplemental legislative history that addresses § 16-4423(b).

The Committee on Public Safety and the Judiciary held hearings on the proposed Arbitration Amendments Act of 2007 on March 23, 2007. Those testifying included representatives of the NCCUSL, the insurance industry, and attorneys representing client or consumer interests. The hearing testimony was devoted mainly to amendments concerning attorney's fees, punitive or exemplary damages, arbitration clauses in insurance contracts, regulation of arbitration providers, and the impact of mandatory binding arbitration on consumers. Subsequently, the full Council considered the proposed Arbitration Amendments Act of 2007 at legislative sessions on June 5, October 2, and December 11, 2007....