Canon School Dist. No. 50 v. W.E.S. Const. Co., Inc.

• Decision Date: 20 October 1994
• Docket Number: No. CV-93-0399-PR,CV-93-0399-PR
• Citation: 180 Ariz. 148,882 P.2d 1274
• Parties: , 95 Ed. Law Rep. 385 CANON SCHOOL DISTRICT NO. 50, a political subdivision of the State of Arizona, Plaintiff-Appellant, v. W.E.S. CONSTRUCTION COMPANY, INC., an Arizona corporation, Defendant-Appellee.
• Court: Arizona Supreme Court

Page 1274

882 P.2d 1274

180 Ariz. 148, 95 Ed. Law Rep. 385

CANON SCHOOL DISTRICT NO. 50, a political subdivision of the State of Arizona, Plaintiff-Appellant, v. W.E.S. CONSTRUCTION COMPANY, INC., an Arizona corporation, Defendant-Appellee.

No. CV-93-0399-PR.

Supreme Court of Arizona, In Banc.

Oct. 20, 1994.

[180 Ariz. 149] Horne, Kaplan & Bistrow, P.C. by Thomas C. Horne, Martha B. Kaplan, Phoenix, and Favour, Moore, Wilhelmsen, Payette & Schuyler, P.A. by David K. Wilhelmsen, Prescott, for plaintiff-appellant.

Dillingham, Keilp & Cross, P.C. by John L. Dillingham, Phoenix, for defendant-appellee.

OPINION

MOELLER, Vice Chief Justice.

FACTS AND PROCEDURAL HISTORY

This case has a tortured procedural history. W.E.S. Construction Company, Inc. (W.E.S.) contracted with Canon School District No. 50 (the District) to build a school building in Black Canyon City, Arizona. The contract contained an arbitration clause. When disputes arose, W.E.S. demanded arbitration. The District filed suit in superior court to stay arbitration, contending that certain statutes and rules of the Board of Education rendered the arbitration agreement unenforceable. The trial court rejected the District's contentions and ordered arbitration. On appeal by the District, the court of appeals held that some of W.E.S.'s claims were arbitrable and some were not. Canon Sch. Dist. v. W.E.S. Constr. Co., 174 Ariz. 269, 848 P.2d 848 (App.1992) (Canon I ). We granted review, vacated the court of appeals' opinion, and affirmed the trial court's order to arbitrate. Canon Sch. Dist. v. W.E.S. Constr. Co., 177 Ariz. 526, 869 P.2d 500 (1994) (Canon II ). The parties then prepared to arbitrate.

Shortly before the scheduled arbitration hearing, W.E.S. added a new issue, namely, whether the state fire marshal had given proper approval for the construction and, if so, when. The state fire marshal was a client of the Attorney General and had been represented on previous occasions by Charles Pierson, the Assistant Attorney General representing the District in the arbitration.

Based on a perceived conflict of interest, Mr. Pierson moved to withdraw as attorney for the District and to reset the arbitration hearing to a later date. Both motions were denied after oral argument on a Wednesday, and the arbitration hearing began the following Monday. Mr. Pierson associated outside counsel on the intervening Friday, and that attorney, Mr. Horne, handled the arbitration proceedings for the District.

The arbitrators ruled in favor of W.E.S., awarding it $107,651.68 plus certain prejudgment interest, costs, and expenses. The arbitration agreement did not include an attorney's fees provision, and no attorney's fees were awarded by the arbitrators. In confirmation proceedings in superior court, W.E.S. requested attorney's fees of $72,242.50, which included $54,521.50 for fees incurred in the arbitration and $17,721.00 for fees incurred in confirming the award. The superior court confirmed the arbitrators' award and also granted judgment for all the requested attorney's fees.

The District then filed a second appeal. The court of appeals held that the arbitrators had abused their discretion in denying the motion to continue the arbitration hearing, but because no prejudice to the District resulted, the trial court had properly confirmed the award. The court of appeals went on to affirm the trial court's award of attorney's fees in its entirety without distinguishing between those fees incurred in the arbitration and those incurred in the confirmation. Canon Sch. Dist. v. W.E.S. Constr. Co., 177 Ariz. 431, 868 P.2d 1014 (App.1993) (Canon III ). We granted review and have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and A.R.S. § 12-120.24. For reasons which follow, we conclude that the trial court properly confirmed the arbitrators' award and properly awarded attorney's fees for the confirmation proceedings, but erred by awarding attorney's fees for the arbitration itself.

QUESTIONS PRESENTED

1. Whether the trial court erred by confirming the arbitration award.

2. Whether the trial court erred by awarding attorney's fees incurred in the arbitration proceeding.

3. Whether the trial court erred by awarding attorney's fees incurred in the confirmation proceeding.

DISCUSSION

1. Confirmation of the Arbitration Award

The court of appeals held that the arbitrators should have allowed Mr. Pierson to withdraw and should have continued the arbitration so that the District could associate new counsel. Canon III, 177 Ariz. at 440, 868 P.2d at 1023. The court held that the "arbitration panel abused its discretion when it denied the motion to continue." Id. Nevertheless, the court found this abuse of discretion harmless because it did not prejudice the District's substantial rights. Id. at 441, 868 P.2d at 1024. Thus, "the arbitrators' error did not warrant denial of confirmation of the award, and accordingly the superior court did not abuse its discretion by confirming the award." Id.

After reviewing the record, we agree with the court of appeals that the District was not prejudiced by the arbitrators' denial of the motions to withdraw and to continue. Because there was no prejudice, the arbitration panel did not abuse its discretion in denying the motions, nor did the trial court abuse its discretion in confirming the award.

2. The Trial Court's Award of Attorney's Fees Incurred in the Arbitration Proceeding

The trial court awarded attorney's fees incurred in the arbitration pursuant to A.R.S. § 12-341.01(A), which authorizes fees in contested contractual actions. ¹ Whether that statute applies to arbitrations under the Uniform Arbitration Act, which Arizona adopted in 1962, is an issue of first impression in Arizona. ² The court of appeals held that § 12-341.01(A) did apply to arbitration proceedings under the Uniform Arbitration Act. The appellate court reasoned that arbitration proceedings under the Act qualified as contested "actions" under § 12-341.01(A) and that no provision of the Uniform Arbitration Act precluded the trial court from awarding attorney's fees, although the court of appeals acknowledged that the arbitrators themselves were precluded from awarding such fees. Canon III, 177 Ariz. at 442, 868 P.2d at 1025. We need not decide whether arbitration is an "action" within the meaning of § 12-341.01(A), although we note that Semple v. Tri-City Drywall, Inc., 172 Ariz. 608, 838 P.2d 1369 (App.1992), relied upon by the court of appeals, suggests that it is not. Rather, we hold that the terms of the Uniform Arbitration Act itself, properly interpreted and applied, preclude trial courts from awarding attorney's fees for the arbitration proceeding when fees are not included in the agreement to arbitrate.

We start with A.R.S. § 12-1510, a section of the Uniform Act titled "Fees and expenses of arbitration," which states that "[u]nless otherwise provided in the agreement to arbitrate, the arbitrators' expenses and fees, together with other expenses, not including counsel fees, incurred in the conduct of the arbitration, shall be paid as provided in the award." W.E.S. advances two theories relative to this statute. First, it contends the statute only prohibits arbitrators from awarding attorney's fees the arbitrators themselves have incurred. This construction is supported by no authority and is so strained and implausible a construction that we necessarily reject it.

Second, W.E.S. urges that § 12-1510 only prohibits awards of attorney's fees by arbitrators, not by courts. W.E.S. urges us to adopt the reasoning found in the Florida cases, particularly Fewox v. McMerit Construction Co., 556 So.2d 419 (Fla.Dist.Ct.App.1989), which was adopted by the Florida Supreme Court in Insurance Co. of North America v. Acousti Engineering, 579 So.2d 77, 79-80 (Fla.1991). The Fewox court held that

[t]he legislature apparently eliminated attorney's fees from the subject matter jurisdiction of arbitration because arbitrators are generally businessmen chosen for their expertise in the particular subject matter of the suit and have no expertise in determining what is a reasonable attorney's fee.... Thus, the intent of the statute is merely to prohibit arbitrators from awarding attorney's fees. "The proper place to determine the entitlement to and amount of attorney's fees ... is in the circuit court upon application for confirmation of the ... award."

Fewox, 556 So.2d at 421-22 (citation omitted). Picking up on Fewox, W.E.S. argues that trial courts, being uniquely qualified to assess and award attorney's fees, should be allowed to do so in confirming arbitration awards.

We disagree with Fewox. We have been unable to find anything in the Uniform Arbitration Act or its history which supports the Fewox court's assertion concerning the alleged intent behind the statute. In addition to having no discernible support, we question the validity of the Fewox premise itself, as did another Florida court:

Even if only businessmen were to serve as arbitrators, it would be nearly impossible to find a businessman today who does not regularly incur attorney's fees as an ongoing business expense. There is no reason to suppose that they are not well-acquainted, as the payors of legal fees, with the rates and amounts charged generally in their community.

Pierce v. J.W. Charles-Bush Sec., 603 So.2d 625, 630 (Fla.Dist.Ct.App.1992).

We believe the proper interplay of the applicable statutes is correctly explained in Nucor Corp. v. General Bearing Corp., 333 N.C. 148, 423 S.E.2d 747, 749 (1992), a recent case directly on point. The facts in Nucor are identical to ours. Like Arizona, North Carolina has enacted the Uniform Arbitration Act as well as a general attorney's fees statute that permits fees to be awarded in certain contractual disputes. As in our case, the Nucor agreement to arbitrate did not include attorney's fees, and no fees were awarded by the arbitrators. On...