Alessi v. Cornerstone Assocs., Inc.

• Decision Date: 13 November 2015
• Docket Number: No. A15A1115.,A15A1115.
• Citation: 780 S.E.2d 15,334 Ga.App. 490
• Parties: ALESSI v. CORNERSTONE ASSOCIATES, INC.
• Court: Georgia Court of Appeals

334 Ga.App. 490

780 S.E.2d 15

ALESSI

v.CORNERSTONE ASSOCIATES, INC.

No. A15A1115.

Court of Appeals of Georgia.

Nov. 13, 2015.

Patrick Deborde Jaugstetter, McDonough, for Appellant.

Jennifer C. Bellis, Atlanta, Stephen Taylor Snow, for Appellee.

BRANCH, Judge.

Gary and Melissa Alessi appeal from an order of the Superior Court of Spalding County granting the petition of Cornerstone Associates, Inc. for an award of costs and attorney fees under Georgia's offer of judgment statute, OCGA § 9–11–68. The Alessis contend that the trial court erred in granting the petition because in doing so it erroneously held that OCGA § 9–11–68 applies to claims that were decided during binding arbitration instead of civil litigation. For reasons explained more fully below, we agree with the Alessis and therefore reverse the order of the trial court.

"Because this appeal involves a question of law, we review both the record and the decision of the court below de novo." Johnson v. Allied Recycling, 323 Ga.App. 427, 746 S.E.2d 728 (2013) (citation and punctuation omitted).

The relevant facts are undisputed and the record shows that on December 22, 2006, the Alessis and Cornerstone entered into a "New Home Purchase and Sale Agreement." Under that agreement, Cornerstone agreed to construct and the Alessis agreed to purchase a home in the Heron Bay–Lakeview subdivision in Locust Grove. Paragraph 9 of that agreement, captioned "Mandatory Binding Arbitration," provided, in relevant part:

Seller and Buyer ... acknowledge that in the event of disputes which are not informally resolved, resolution of those disputes will best be achieved through arbitration rather than civil litigation because of the substantial savings of time and expense for all parties and because of the privacy and flexibility associated with arbitration procedures. If Seller provides a warranty to Buyer, then the terms and procedures of that warranty shall first apply to any claim or dispute, which is within the coverage of that warranty.... Any unresolved claim or dispute between Seller and Buyer arising out of or relating to such warranty, if any, and any other claim or dispute of any kind or nature between Seller and Buyer arising out of or relating in any manner to this Agreement or this transaction shall be decided by binding arbitration in accordance with the Federal Arbitration Act and with the rules and procedures of the arbitrator and such decision shall be final.

On August 29, 2011, the Alessis filed a demand for arbitration with Construction Arbitration Associates, the arbitrator designated in the parties' agreement. In their demand, the Alessis asserted claims against Cornerstone for breach of contract, breach of an oral agreement, negligent construction, breach of warranty, unjust enrichment, and attorney fees.

On June 12, 2012, Cornerstone sent the Alessis a written offer to settle all of their claims against Cornerstone for $3,000. The offer stated that it was made "pursuant to the provisions of OCGA § 9–11–68." The Alessis responded to this offer on July 6, 2012, rejecting the same.

The case proceeded to arbitration and on April 8, 2013, the arbitrator issued an written decision in which he awarded no money to either party. Specifically, the arbitrator's award stated:

With regard to the [Alessis's] claim[s], this Arbitrator awards $0.00 for the [Alessis] and $0.00 for [Cornertsone]. All other fees and expenses [,] including attorney[ ] fees incurred by the parties[,] shall be borne by the party producing such. THIS AWARD IS IN FULL SATISFACTION OF ALL CLAIMS AND COUNTERCLAIMS SUBMITTED TO ARBITRATION.

(Emphasis in original.)

On August 29, 2013, Cornerstone filed in the trial court an application for confirmation of the arbitration award and a request for attorney fees and expenses under OCGA § 9–11–68. Cornerstone asserted that after it made its written offer of settlement, it incurred $67,268.41 in attorney fees and expenses during the arbitration process. In support of its claim for fees and costs, Cornerstone submitted the affidavit of its attorney and other documentary evidence. The Alessis opposed the request for attorney fees and costs, arguing that OCGA § 9–11–68 did not apply to claims decided through binding arbitration. Following a hearing, the trial court entered an order confirming the arbitration award and awarding Cornerstone attorney fees and costs incurred between June 12, 2012 and April 8, 2013. The trial court subsequently entered a final judgment in favor of Cornerstone and against the Alessis in the amount of $67,268.41. The Alessis now appeal from that order of judgment.

The sole issue on this appeal is whether OCGA § 9–11–68 applies to claims decided through binding arbitration, rather than through traditional civil litigation. The offer of judgment statute provides, in relevant part:

(a) At any time more than 30 days after the service of a summons and complaint on a party but not less than 30 days (or 20 days if it is a counteroffer) before trial, either party may serve upon the other party, but shall not file with the court, a written offer, denominated as an offer under this Code section, to settle a tort claim^{[1 ]} for the money specified in the offer and to enter into an agreement dismissing the claim or to allow judgment to be entered accordingly....

(b) (1) If a defendant makes an offer of settlement which is rejected by the plaintiff, the defendant shall be entitled to recover reasonable attorney's fees and expenses of litigation incurred by the defendant or on the defendant's behalf from the date of the rejection of the offer of settlement through the entry of judgment if the final judgment is one of no liability or the final judgment obtained by the plaintiff is less than 75 percent of such offer of settlement.

OCGA § 9–11–68(a), (b)(1).

In determining whether this statute applies to cases that are subject to binding arbitration, we bear in mind that "[t]he cardinal rule" of statutory construction "is to ascertain the legislative intent and purpose in enacting the law, and then to give it that construction which will effectuate the legislative intent and purpose." RadioShack Corp. v. Cascade Crossing II, 282 Ga. 841, 843, 653 S.E.2d 680 (2007) (citation and punctuation omitted). With respect to the legislature's intent,

we must presume that the General Assembly meant what it said and said what it meant. To that end, we must afford the statutory text its plain and ordinary meaning, we must view the statutory text in the context in which it appears, and we must read the statutory text in its most natural and reasonable way, as an ordinary speaker of the English language would.... Applying these principles, if the statutory text is clear and unambiguous, we attribute to the statute its plain meaning, and our search for statutory meaning is at an end.

Deal v. Coleman, 294 Ga. 170, 172–173(1)(a), 751 S.E.2d 337 (2013) (citations and punctuation omitted). Moreover, because OCGA § 9–11–68 entitles one party to an award of attorney fees and costs, it "is in derogation of common law ... [and] it must be strictly construed against the award of such damages." Joyner v. Raymond James Financial Svcs., 268 Ga.App. 835, 838 –839(2), 602 S.E.2d 871 (2004) (citation and punctuation omitted). See also Heard v. Neighbor Newspapers, 259 Ga. 458, 459(5)(b), 383 S.E.2d 553 (1989).

Here, the plain language of OCGA § 9–11–68 reflects that the legislature contemplated that it would apply only in the context of traditional civil litigation and not in the context of alternative dispute resolution. Notably, the time frame in which a settlement offer must be made is "30 days after the service of a summons and complaint ... but not less than 30 days ... before trial. " (emphasis supplied). Service of a summons and complaint, of course, is the way in which a traditional civil lawsuit is initiated. Binding arbitration, however, is not initiated in this fashion. As the record in this case reflects, binding arbitration is initiated by the filing of a demand for arbitration. And there is no requirement that a claimant filing such a demand perfect service thereof in the same way that a civil litigant must perfect service of a summons and complaint.

Furthermore, an arbitration proceeding is not a trial. As the parties' agreement to arbitrate acknowledges, arbitration differs from a trial in that it is usually more economical and affords the parties more privacy and flexibility. There are also significant substantive and procedural differences between an arbitration proceeding and a trial. As the United States Supreme Court has explained, "arbitral factfinding is generally not equivalent to judicial factfinding.... [T]he record of the arbitration proceedings is not as complete; the usual rules of evidence do not apply; and rights and procedures common to civil trials, such as discovery, compulsory process, cross-examination, and testimony under oath, are often severely limited or unavailable." McDonald v. City of W. Branch, Mich., 466 U.S. 284, 291(II)(B), 104 S.Ct. 1799, 80 L.Ed.2d 302 (1984) (citations and punctuation omitted.) See also Greene v. Hundley, 266 Ga. 592, 595(2), 468 S.E.2d 350 (1996) ("arbitrating parties agree to waive certain such rights in favor of a quick resolution of their dispute by extralegal means. Indeed, ... by electing arbitration, the parties can agree to waive certain constitutional and procedural rights to which they would be entitled in a judicial forum, such as the right to trial by a jury") (footnote omitted). And unlike a judgment rendered in the trial...