Buzas Baseball, Inc. v. Salt Lake Trappers, Inc.

• Decision Date: 04 October 1996
• Docket Number: No. 950351,950351
• Citation: 925 P.2d 941
• Parties: BUZAS BASEBALL, INC., a Utah corporation; Buzas Baseball, Inc., an Oregon corporation; Joseph J. Buzas, an individual and stockholder; and Pacific Coast League of Professional Baseball Clubs, Inc., a Florida corporation not for profit, Plaintiffs and Appellees, v. SALT LAKE TRAPPERS, INC., a Utah corporation; Jack Donovan, an individual and stockholder; and Pioneer Baseball League, a Montana corporation, Defendants and Appellants.
• Court: Utah Supreme Court

Page 941

925 P.2d 941

BUZAS BASEBALL, INC., a Utah corporation; Buzas Baseball Inc., an Oregon corporation; Joseph J. Buzas, an individual and stockholder; and Pacific Coast League of Professional Baseball Clubs, Inc., a Florida corporation not for profit Plaintiffs and Appellees, v. SALT LAKE TRAPPERS, INC., a Utah corporation; Jack Donovan an individual and stockholder; and Pioneer Baseball League, a Montana corporation Defendants and Appellants.

No. 950351.

Supreme Court of Utah.

Oct. 4, 1996.

Kevin Egan Anderson, Robert S. Campbell, and Tracy H. Fowler, Salt Lake City, for plaintiffs.

Dale A. Kimball, Gregory D. Phillips, and Scott R. Ryther, Salt Lake City, for Salt Lake Trappers and Donovan.

John R. Faust and Mitchell E. Hornecker, Portland, Ore., for Pioneer Baseball League.

ZIMMERMAN, Chief Justice:

After the trial court's grant of summary judgment in favor of plaintiffs Buzas Baseball, Inc., Joseph J. Buzas, and the Pacific Coast League of Professional Baseball Clubs, Inc. (collectively, "Buzas Baseball"), defendants Salt Lake Trappers, Inc. ("Trappers"), and Pioneer Baseball League, Inc. ("Pioneer"), appealed to this court. ¹ Pursuant to section 78-2-2(3)(j) of the Utah Code, we have appellate jurisdiction to review the trial court's order vacating and modifying an arbitration award. We reverse the trial court's decision, confirm the arbitration award, and remand the case to the trial court for reconsideration of the issue of attorney fees in light of this opinion. We further award a reasonable attorney fee to the Trappers on this appeal and remand to the trial court to determine the amount of such fees.

The relevant facts are drawn from the formal opinion issued by George Nicolau, the chairman of the panel that arbitrated the dispute between Buzas Baseball and the Trappers. On August 31, 1993, Buzas Baseball and the Trappers signed a memorandum of agreement in which the parties agreed to arbitrate two issues which had arisen as the result of Buzas Baseball's drafting of the Trappers' Salt Lake City territory: (i) the amount of just and reasonable compensation owed by Buzas Baseball to the Trappers for the drafting of the Salt Lake territory, and (ii) the amount of predraft damages, if any, arising from Buzas Baseball's failure to seek and obtain the Trappers' approval for talks with Salt Lake City exploring the possibility of acquiring the Salt Lake territory.

At the time the dispute arose, the Trappers were a member club of the Pioneer League, a short-season, eight-team rookie classification league (the lowest level of professional baseball). Buzas Baseball, then operating as the Portland Beavers (now the Salt Lake Buzz), was a member club of the Triple A Pacific Coast League (the highest level of professional baseball below the major leagues). Under various agreements by which the parties were bound at the time the dispute arose, a higher classification team such as Buzas Baseball could "draft" the territory of a lower classification team such as the Trappers, provided it paid "just and reasonable compensation" to the lower classification team.

In the arbitration, the Trappers claimed that Buzas Baseball failed to follow the applicable procedures for drafting the Salt Lake territory in late 1992 and thus damaged the Trappers. Specifically, the Trappers claimed that Buzas Baseball failed to obtain the Trappers' permission to explore the possibility of acquiring the Salt Lake territory. Under section 10.08(e) of the National Association Agreement ("NAA"), by which the parties were bound, a higher classification team wishing to explore the possibility of acquiring a lower classification team's territory at some point in the future must seek and obtain permission for such exploratory talks from the lower classification team. This rule allows the lower classification team to mitigate the damage that might occur, such as reduced attendance, when the public learns of such exploratory talks.

A series of events during late 1992 led to an October 14th agreement between Buzas Baseball and Salt Lake City whereby Buzas Baseball would move the team then known as the Portland Beavers to Salt Lake City for the 1994 baseball season. Buzas Baseball neither sought nor obtained the Trappers' consent before engaging in the negotiations which led to the October 14th agreement.

After eleven days of hearings before a panel of five arbitrators in February and April of 1994, the chairman, George Nicolau, issued a 54-page opinion and award in October of 1994. Of the panel of five arbitrators, two concurred in Chairman Nicolau's award and two dissented from it. Chairman Nicolau's opinion specifically found that Buzas Baseball had violated the terms of the NAA in failing to seek and obtain the Trappers' consent for the exploratory talks in 1992. The arbitration panel awarded the Trappers $552,152 on their claim for predraft damages arising from Buzas Baseball's violation of the NAA. Of this amount, $400,000 represented the value of the Trappers' lost franchise and $152,152 represented the lost net profits for the 1993 season, which the Trappers were unable to play because the agreement between Buzas Baseball and Salt Lake City led to the razing of Derk's Field to make room for a new stadium for the start of the 1994 season. The panel also awarded the Trappers $1.2 million as the amount of just and reasonable compensation due them as a result of the drafting of their territory. Chairman Nicolau's opinion based this valuation of the Salt Lake territory on evidence from a number of experts on both sides. The panel awarded $1.2 million after duly considering the expert evidence, noting that the disagreement between the experts was "of major proportions."

The panel relied in part upon the comparable sales testimony of the Trappers' expert, Dr. Cone. ² Dr. Cone put the value of the Salt Lake territory at somewhere between $2.6 and $3.1 million. He arrived at that value by looking at the sale price of other baseball teams, but the comparison was not perfect, as noted in Chairman Nicolau's opinion. Specifically, the "comparable" sales Dr. Cone used were not of other Pioneer League teams, but rather were of teams in higher classification leagues. Dr. Cone reasoned, and the arbitration panel agreed, that the Salt Lake territory was not comparable to any other Pioneer League territory, being far superior to the other territories in the league. As recounted in Chairman Nicolau's opinion, Dr. Cone testified that "by the measurements of attendance, population and revenue, the Salt Lake territory was at least comparable in value to the median of Class AA clubs." The arbitration panel rejected the direct comparability of Salt Lake City with Class AA territories and, after considering Dr. Cone's testimony and that of other experts for both sides, determined that the value of the Salt Lake territory to the Trappers was $1.2 million.

After receiving a copy of the award, Buzas Baseball filed a verified complaint against the Trappers in state district court on November 29, 1994. Buzas Baseball sought an order vacating or, in the alternative, modifying the arbitration award. It claimed that because the arbitration panel had based the $1.2 million territory award on evidence of comparable sales all of which included the territory and the franchise, having already awarded $400,000 for the value of the franchise, the arbitration panel had given the Trappers an unwarranted "double recovery." After protracted litigation, the trial court entered a judgment and order vacating and modifying the arbitration awards on August 8, 1995. The order, which included findings of fact and conclusions of law, was entered after a July 12, 1995, hearing on Buzas Baseball's motion to vacate or amend and for summary judgment as to the arbitration awards. Despite finding it necessary to enter findings of fact, the trial court granted summary judgment to Buzas Baseball. The order modified the panel's territory award to the Trappers, reducing the award by $400,000. The modification was made on the stated grounds of manifest disregard of the law, exceeding authority, evident material miscalculation, and violation of public policy.

On appeal, the Trappers argue that the trial court erred in reconsidering the merits of the arbitration award and in subsequently modifying that award. ³ We begin by noting that the Utah Arbitration Act "reflects long-standing public policy favoring speedy and inexpensive methods of adjudicating disputes." Allred v. Educators Mut. Ins. Ass'n, 909 P.2d 1263, 1265 (Utah 1996). Accordingly, the standard for reviewing an arbitration award is highly deferential to the arbitrator. [J]udicial review of arbitration awards should not be pervasive in scope or encourage repetitive adjudications but should be limited to the statutory grounds and procedures for review. As a general rule, an arbitration award will not be disturbed ... because the court does not agree with the award as long as the proceeding was fair and honest and the substantial rights of the parties were respected.

DeVore v. IHC Hosps., Inc., 884 P.2d 1246, 1251 (Utah 1994) (citing Utility Trailer Sales of Salt Lake, Inc. v. Fake, 740 P.2d 1327, 1329 (Utah 1987); Bivans v. Utah Lake Land, Water & Power Co., 53 Utah 601, 174 P. 1126, 1130 (1918)).

The Trappers first argue that the trial court erred in granting summary judgment to Buzas Baseball because the trial court simply substituted its judgment for that of the arbitrator. ⁴ We agree. We consider first the applicable standards of review before considering the statutory grounds for modification or vacatur of an arbitration award.

There are two standards of review at issue here: (i) the appropriate standard of review for a trial court to use in reviewing an arbitration award under the statutes, and (ii) the appropriate standard of review for this court to use in reviewing the trial court's proceedings. ⁵ As to...