Avcorr Mgmt., LLC v. Cent. Falls Det. Facility Corp.

• Decision Date: 17 April 2012
• Docket Number: No. 2010–343–Appeal.,2010–343–Appeal.
• Citation: 41 A.3d 1007
• Parties: AVCORR MANAGEMENT, LLC v. CENTRAL FALLS DETENTION FACILITY CORPORATION.
• Court: Rhode Island Supreme Court

41 A.3d 1007

AVCORR MANAGEMENT, LLC

v.CENTRAL FALLS DETENTION FACILITY CORPORATION.

No. 2010–343–Appeal.

Supreme Court of Rhode Island.

April 17, 2012.

Joseph J. McGair, Esq., Warwick, for Plaintiff.

Michael J. Lepizzera, Jr., Esq., Warwick, for Defendant.

Present: SUTTELL, C.J., GOLDBERG, ROBINSON, and INDEGLIA, JJ.

OPINION

Chief Justice SUTTELL, for the Court.

In this appeal, we are asked to decide whether the terms of an agreement between the plaintiff, AVCORR Management, LLC (AVCORR), and the defendant, Central Falls Detention Facility Corporation (Detention Facility or the facility), require the facility to arbitrate certain disputed fees. AVCORR petitioned the Superior Court to appoint a binding arbitrator to settle the parties' dispute concerning several types of fees that AVCORR claimed were owed to it by Detention Facility. The facility filed a limited opposition to AVCORR's petition, arguing that only some, but not all, of the fees were subject to binding arbitration pursuant to the agreement. The hearing justice granted AVCORR's petition and Detention Facility appealed. This case came before the Supreme Court pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not summarily be decided. After considering the parties' written and oral submissions and reviewing the record, we conclude that cause has not been shown and that this case may be decided without further briefing or argument. For the reasons set forth in this opinion, we vacate and reverse, in part, the order of the Superior Court.

IFacts and Procedural History

The essential facts of this case are not in dispute. Detention Facility is a public corporation, distinct from the municipality of Central Falls, which was created to fill the need for a detention facility in Rhode Island. See G.L.1956 § 45–54–1(a) and § 45–54–2(a). It currently operates the Donald W. Wyatt Detention Facility (Wyatt) in the City of Central Falls.¹ On January 1, 2008, Detention Facility entered into a consulting agreement (agreement) with AVCORR, in which AVCORR agreed to act as a “consultant” to the facility and “to provide administrative oversight services and executive director services” with respect to the “day to day operation” of Wyatt. The agreement called for an initial five-year term, subject to either party's right to terminate the agreement.

The parties amended the agreement on May 22, 2008, altering, inter alia, the provisions concerning the manner of compensation. Section E of the amended agreement stated that Detention Facility would compensate AVCORR for services rendered “at the rates and in the manner set forth in Amended Exhibit B.” ² Amended Exhibit B, entitled “Annual Management Fee,” was attached to the amendment and incorporated therein. It defined the Annual Management Fee as the sum of the “Annual Fixed Fee” and the “Annual Man Day Fee.” Section (a) of Amended Exhibit B set forth the payment procedure for the Annual Fixed Fee, which was payable in twelve equal installments, and called for AVCORR to submit monthly invoices to Detention Facility itemizing each month's portion of the Annual Fixed Fee and “its reasonable costs and business expenses.” Section (a) also stated as follows:

“If [Detention Facility] disputes [AVCORR's] invoice, or any portion thereof, it shall notify [AVCORR] of the basis of any dispute within seven (7) days of [the facility's] receipt of the invoice. The parties shall attempt to resolve any dispute over [AVCORR's] invoice through negotiation; however, either party may demand binding arbitration to resolve said disputes.”

Section (b) of Amended Exhibit B discussed the Annual Man Day Fee, which was payable to AVCORR “for the correlating number of Man Days accrued at [Wyatt] during each Annual Period.” ³ It was to be paid “within [t]hirty (30) [d]ays of the end of each Annual Period during which the fee was earned.” Notably, section (b) of Amended Exhibit B did not contain the “binding arbitration” language found in section (a).

The body of the May 22, 2008 amendment to the parties' agreement additionally stated that the parties intended those terms of the original agreement that were “not amended, modified or otherwise supplanted” by the amendment to “remain in full force and effect.” Of relevance to the issue before us are Article V, section 5.04 of the original agreement, which stated that in the event of a breach, “the non-defaulting party shall have the right to pursue any right or remedy it may have available to it at law or in equity, including, but not limited to * * * [t]ermination of the [a]greement”; and Article VII, section 7.03, wherein the parties consented to the jurisdiction of the Rhode Island courts “relative to any dispute arising out of this [a]greement.”

In April 2009, Detention Facility terminated its consulting agreement with AVCORR,⁴ and on May 1, 2009, AVCORR sent the facility an invoice, which included the April 2009 portion of the Annual Fixed Fee, business expenses for that month, and additionally, the 2008 Man Day Fee.⁵ Detention Facility disputed the amount owed and did not pay the invoice.

On May 27, 2010, AVCORR filed a petition in the Superior Court seeking the appointment of a binding arbitrator.⁶ In its petition, AVCORR stated that while the “consulting agreement provides for binding arbitration, * * * the method of selection of a binding arbitrator [is] not provided.” Therefore, AVCORR asserted, the Superior Court should “designate and appoint a single impartial arbitrator.” Detention Facility filed a limited opposition to AVCORR's petition, in which it submitted that before appointing an arbitrator, the Superior Court first should “determine the scope of the arbitration.” The facility claimed that pursuant to Amended Exhibit B, “[t]he Annual Fixed Fee is the only fee that is subject to the [c]onsulting [a]greement's arbitration provisions.” Therefore, the facility urged, the Superior Court should “only submit the dispute over the Annual Fixed Fee monies to arbitration” and should deny AVCORR's petition “to the extent [that] it seeks to arbitrate issues that are not subject to arbitration as provided in the parties' [a]greement.”

A hearing was held on June 25, 2010, at which the hearing justice ruled that all aspects of the parties' dispute should be submitted to arbitration. In so doing, the hearing justice stated as follows:

“I can't imagine the part[ies] intended that if there's a dispute over the invoice that * * * when they provided for arbitration to resolve that dispute they had in mind just resolving the dispute over the [Annual] Fixed Fee and not the [Annual] Man Day Fee. It just doesn't make a lot of sense to me. And to the extent that the agreement * * * has some ambiguity in it with respect to that issue, I think that we're better off, the policy being that to encourage the private resolution [of] disputes in arbitration, * * * we're better off having that ambiguity addressed by the arbitrator in the first instance at least.”

An order granting AVCORR's petition and appointing a binding arbitrator was entered on July 2, 2010. Detention Facility appealed on July 20, 2010, and on September 16, 2010, the hearing justice entered another order, wherein he denied the facility's motion to stay pending appeal.⁷ This Court, however, granted the facility's motion to stay on December 16, 2010.⁸

IIStandard of Review

“The issue of whether a dispute is arbitrable is a question of law that this Court reviews de novo.” State Department of Corrections v. Rhode Island Brotherhood of Correctional Officers, 866 A.2d 1241, 1247 (R.I.2005). When so reviewing, we bear in mind that “[a]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit.” Radiation Oncology Associates, Inc. v. Roger Williams Hospital, 899 A.2d 511, 514 (R.I.2006) (quoting School Committee of North Kingstown v. Crouch, 808 A.2d 1074, 1078 (R.I.2002)). Because it is a matter of contract, “[g]eneral rules of contract construction apply” and the determination of “whether the parties agreed to submit a particular dispute to arbitration turns upon the parties' intent when they entered into the contract from which the dispute ultimately arose.” Id.

IIIDiscussion

On appeal, Detention Facility argues that the hearing justice erred to the extent that he required it and AVCORR to arbitrate their dispute over the Annual Man Day Fee. It asserts that the agreement's arbitration clause “is limited in scope and only requires arbitration of disputes concerning the monthly fixed fees and business expenses.” The facility points out that the “limiting language” of the arbitration clause signifies that the parties did not intend “to exclusively rely upon the arbitration process to resolve all disputes arising under the [a]greement.” Detention Facility further emphasizes that in Article V, section 5.04 and Article VII, section 7.03 of the agreement, “the parties expressly reserved their respective rights to pursue their legal and equitable rights in a court of law, not before an arbitrator.”

AVCORR, for its part, argues that Amended Exhibit B “calls for binding arbitration of any dispute involving invoices for the payment of AVCORR's Annual Management Fee,” which, it contends, consists of the Annual Fixed Fee and the Annual Man Day Fee. AVCORR claims that to interpret Amended Exhibit B as Detention Facility suggests would lead to “an absurd result in that the parties could have a dispute over the Annual Fixed Fee proceed to arbitration simultaneously with a dispute over the Annual Man Day Fee proceeding through the [c]ourts.” ⁹ Finally, AVCORR asserts that Amended Exhibit B “trumps” Article VII, section 7.03 of the original agreement, “which provides that the parties consent to the jurisdiction of the [c]ourts of the State of Rhode Island relating to any disputes arising out of the agreement,”...