Cohen v. Quiat
| Decision Date | 19 November 1987 |
| Docket Number | No. 86CA1061,86CA1061 |
| Parties | Jeffrey COHEN, Plaintiff-Appellant, v. Andrew L. QUIAT, Michael R. Dice, Quiat & Dice, a Colorado Partnership, Defendants-Appellees. . III |
| Court | Colorado Court of Appeals |
Ireland, Stapleton, Pryor & Pascoe, P.C., William G. Imig, Neal S. Cohen, Denver, for plaintiff-appellant.
Feder, Morris & Tamblyn, P.C., Harold A. Feder, Denver, for defendants-appellees.
Plaintiff's appeal of the district court judgment vacating an arbitration award raises the issue whether a panel of arbitrators "exceeded their powers" within the meaning of the Uniform Arbitration Act, § 13-22-214(1)(a)(III), C.R.S. (1986 Cum.Supp.). Contrary to the district court, we conclude that the panel did not exceed the powers granted to it, and therefore, we reverse the judgment and remand for the entry of a judgment confirming the award.
Plaintiff, Jeffrey Cohen, was a junior member of a law partnership, consisting of himself and defendants Andrew L. Quiat and Michael R. Dice, which was governed by a written partnership agreement. This agreement called for the creation of a "Policy Group," initially consisting of all three partners and the firm's business manager. To this group was delegated extensive authority, including the authority to determine the amount of capital of each partner and the accounting principles to be followed by the firm. The agreement also provided that, upon a partner's withdrawal, he was to be paid the amount standing to his credit in his capital account, as well as his share "in the net realizable value of accounts receivable and work in progress of the Partnership as determined by the Policy Group." Any decision made by the Policy Group was to be "final, binding and conclusive," provided it was "in accordance with the terms and provisions of the agreement."
The agreement also provided that an accounting of the firm's business was to be made at the end of each fiscal year. Such accounting, if not objected to in writing by some partner within two months after his receipt of a copy of the same, would be "deemed to be conclusive and final and to constitute an accord as to all its aspects."
Finally, the partnership agreement provided for binding arbitration of:
"Any controversy or dispute relating to ... the agreement or the Partnership and its affairs ... except that (1) any accounting provided for in this agreement to be conclusive shall not be subject to such procedure ...; and (2) express and complete recognition shall always be given by any Arbitration Panel ... to any final decision of the Firm [including a decision by the Policy Group]." (emphasis supplied)
In accordance with the terms of the agreement, Cohen gave prior notice of his withdrawal as a partner, effective March 31, 1985. A meeting of the partners, apparently as the Policy Group, was held on March 30. At that time, when Cohen refused to reach an agreement for his withdrawal on a basis other than that set forth in the agreement, Quiat and Dice proceeded to adopt a series of "decisions" that purported to "clarify" certain of the agreement's provisions. Among these decisions, all of which were prompted by Cohen's withdrawal, was one that interpreted the agreement's reference to the value of the partnership's accounts receivable and work in progress to refer only to each individual partner's "portfolio of accounts receivable," rather than to all of the partnership's accounts receivable. Another such decision resolved that an evaluation of such an individual partner's accounts receivable could result in a "debit balance" for such a partner. A third decision adopted a 75% collection rate as the rate to be used in evaluating the accounts receivable and directed that an accounting, utilizing the principles adopted, be prepared.
The accounting thus prepared reflected that the partnership had total accounts receivable of some $364,000, for which Cohen was responsible for some $203,000, or about 56%. However, it concluded that some $175,000 of Cohen's accounts were uncollectible, leaving a "net" value for these accounts of approximately $28,700.
Rather than treating these accounts as having a net value of this amount, however, this accounting subtracted from the $203,000 in total accounts receivable attributable to Cohen 25% thereof, representing the normal rate of uncollectibles, plus the $28,700 in good accounts; the remainder of approximately $124,000 was treated as being owed by Cohen to the firm. Upon receiving a copy of this accounting, Cohen objected to the same in writing and timely requested the convening of an arbitration panel.
Before the panel, and later before the district court, Quiat and Dice maintained that the decisions made by them and the accounting based thereon were binding upon Cohen and were not subject to arbitration under the agreement. The arbitration panel disagreed, ruling, in effect, that the method of evaluating the accounts receivable was not justified by a proper interpretation of the pertinent provisions of the agreement. The panel concluded that a proper evaluation required that all of the partnership's accounts receivable be considered as a whole; that application of a 75% collection rate was reasonable; that from the resulting figure the amount of the outstanding accounts payable of the partnership had to be deducted; and that Cohen was entitled to his share (22.5%) of the resulting balance, or $35,390.
Upon review of this award under the Uniform Arbitration Act, § 13-22-201, et seq., C.R.S. (1986 Cum.Supp.), the district court concluded that the arbitration panel ...
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