Felix Felicis, LLC v. Riva Ridge Owners Ass'n
| Docket Number | S-22-0152 |
| Decision Date | 22 February 2023 |
| Citation | 524 P.3d 760 |
| Parties | FELIX FELICIS, LLC, a Wyoming limited liability company, Appellant (Defendant), v. RIVA RIDGE OWNERS ASSOCIATION, Appellee (Claimant). |
| Court | Wyoming Supreme Court |
Representing Appellant: James K. Lubing, Nathan D. Rectanus of Lubing, Gregory & Rectanus, LLC, Jackson, Wyoming. Argument by Mr. Lubing.
Representing Appellee: Paula A. Fleck, Bryson C. Smith of Holland & Hart LLP, Jackson, Wyoming. Argument by Ms. Fleck.
Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.
[¶1] Felix Felicis, LLC (Felix) and Riva Ridge Owners Association (RROA) engaged in protracted litigation after RROA's Site Committee rejected Felix's plans to build a home on its tract in the Riva Ridge subdivision. RROA incurred attorney fees and other related costs during the litigation which it ratably levied upon all tract owners in the subdivision, including Felix, via annual assessments. Felix refused to pay a portion of the assessments because it claimed the subdivision's restrictive covenants did not allow RROA to assess attorney fees and litigation costs against the tract owners. The parties agreed to arbitrate their dispute over the unpaid assessments. The arbitrator ultimately found in favor of RROA and awarded it a total of $334,890.03. Felix filed an application to vacate the arbitration award with the district court, arguing the arbitrator exceeded his powers and made a manifest mistake of law by failing to consider its affirmative defenses. The district court denied the application. We affirm.
[¶2] Felix raises a single issue which we re-state as follows:
Did the arbitrator commit a manifest mistake of law by failing to address Felix's affirmative defenses?
[¶3] In December 2010, Felix purchased an undeveloped tract in Riva Ridge, a high-end seven-tract residential subdivision in Teton County, Wyoming. At that time, the subdivision was governed by restrictive covenants recorded in December 1996 (1996 restrictive covenants). Relevant here, the covenants created RROA, required tract owners to obtain the approval of RROA's Site Committee prior to building a home on their tracts, and allowed RROA to collect annual assessments from each tract owner to "be used exclusively [for] promot[ing] the recreation, health, safety and welfare of the residents," "for the improvement and maintenance" of the common roads and driveways, and for "[RROA] employees’ wages, mailing costs and other related expenses incurred on behalf of [RROA]." A tract owner's failure to timely pay an assessment became an automatic lien upon the owner's tract, and the unpaid amount was subject to interest "at the rate of fifteen percent (15%) per annum."
[¶4] Soon after purchasing its tract, Felix submitted building plans to RROA's Site Committee for its approval to build a home and a detached writer's studio on Felix's tract. The Site Committee rejected Felix's plans because it believed they violated the architectural design standards of the 1996 restrictive covenants. Felix sued RROA and its Site Committee challenging, among other things, the Site Committee's interpretation of the 1996 restrictive covenants. Thereafter, the parties engaged in a years-long legal battle which included summary judgment proceedings, a bench trial, and an appeal. See Felix Felicis, LLC v. Riva Ridge Owners Ass'n , 2016 WY 67, 375 P.3d 769 (Wyo. 2016). The parties ultimately stipulated to dismissal of the lawsuit with prejudice.
[¶5] RROA incurred attorney fees and other litigation-related costs defending Felix's lawsuit. It included those fees and costs in the annual assessments which it levied ratably upon all subdivision tract owners, including Felix. Beginning in 2013, Felix intentionally did not pay a portion of each assessment because it believed it was not obligated to pay for the attorney fees and costs RROA incurred in defending the lawsuit. RROA claimed Felix owed the unpaid assessments (totaling $118,360.00) plus interest.
[¶6] In April 2018, the subdivision's tract owners amended the 1996 restrictive covenant's architectural standards and the "purpose" of the annual assessments. The 2018 restrictive covenants allowed RROA to use the annual assessments for the purposes stated in the 1996 restrictive covenants and for "[RROA] employees’ wages, mailing costs, accounting expenses, legal expenses , and other expenses incurred on behalf of [RROA]." (Emphasis added). Felix filed suit against RROA and all tract owners challenging the legality of the 2018 restrictive covenants.
RROA again levied the attorney fees and costs it incurred in the lawsuit upon the tract owners, including Felix, via the annual assessments, and again Felix refused to pay a portion of them based on its belief RROA was not authorized by the 1996 restrictive covenants to assess attorney fees and costs. In December 2020, Felix sold its tract in the subdivision, dismissed its lawsuit with prejudice, and agreed to submit its dispute with RROA over the unpaid assessments to binding arbitration before a single arbitrator jointly selected by the parties.
[¶7] After discovery, both parties moved the arbitrator for summary judgment. Relevant here, Felix argued the 1996 restrictive covenants, not the 2018 restrictive covenants, applied. The plain language of the 1996 restrictive covenants, according to Felix, did not allow for the collection of the attorney fees and costs RROA incurred in defending Felix's lawsuits as part of the annual assessments. However, even if the 1996 restrictive covenants allowed for the assessment of such attorney fees and costs, Felix argued RROA was not entitled to relief because RROA was the first to materially breach the 1996 restrictive covenants, there was a failure of consideration, and RROA's claim for the unpaid assessments was barred by laches, waiver, and estoppel (hereinafter collectively referred to as Felix's affirmative defenses).
[¶8] The arbitrator issued an "Interim Ruling on Cross-Motions for Summary Judgment" (Interim Ruling) in which he granted RROA's summary judgment motion and denied Felix's motion. The arbitrator decided the 1996 restrictive covenants were the applicable covenants, they "authorize[d] the[ ] assessments," and Felix "[was] required to pay them, as a matter of law" notwithstanding any disputes with RROA. He also found Felix had failed to cite any case law from any jurisdiction supporting its arguments. The arbitrator decided his "findings ma[d]e a full discussion of the other claims and defenses asserted by [Felix] unnecessary."
[¶9] Felix filed a motion for reconsideration or, in the alternative, for clarification of the arbitrator's Interim Ruling. It argued the arbitrator committed a manifest mistake of law by "refus[ing] to address" its affirmative defenses and by concluding a full discussion of them was "unnecessary" based on his determination the 1996 restrictive covenants authorized the assessments. With respect to the latter argument, Felix maintained its affirmative defenses were "not foreclosed or in any way rendered moot" by the arbitrator's determination that the assessments were authorized by the covenants; in fact, it was that determination which rendered an analysis of its affirmative defenses necessary. For instance, it claimed its argument that it was excused from paying the assessments because RROA was the first to materially breach the covenants applied even if it had a duty under the covenants to pay the assessments. According to Felix, the only ruling which would have made it "unnecessary" to analyze and resolve its affirmative defenses would have been that the 1996 restrictive covenants did not authorize the disputed assessments.
[¶10] The arbitrator denied Felix's motion for reconsideration, stating:
I have considered [Felix]’s arguments regarding its affirmative defenses, as well as its other assertions including without limitation whether or not the 1996 [restrictive covenants] allow RROA to assess the owners for the purposes at issue here, and which party, if either, was the first to materially breach the [c]ontract between the parties. I find no reason to arrive at a different result from that included within the Interim Ruling.
[¶11] With respect to Felix's motion for clarification, the arbitrator ruled:
[ ] The Interim Ruling is clear: See the Interim Ruling, page 1 (); page 4 (); and page 6, paragraph 6 ()[.] These provisions indicate that in fact I did fully consider [Felix]’s contentions in issuing the [I]nterim Ruling.
To the extent any further clarification was necessary, the arbitrator confirmed he had "carefully and fully ... consider[ed] all of [Felix]’s claims and defenses[,] ... rejected them [based on the facts and law asserted by both parties and Felix's failure to satisfy its burden of proof regarding them], and deemed a full discussion not needed for purposes of the Interim Ruling." In his final award, the arbitrator awarded RROA $334,890.03, which included the principal amount of the unpaid assessments, interest, the arbitrator's fees, and the attorney fees and costs RROA incurred in the arbitration proceeding.
[¶12] Felix filed an "Application to Vacate Final Arbitration Award" under Wyo. Stat. Ann. § 1-36-114 (LexisNexis 2021) with the district court. It claimed the arbitrator exceeded his powers and made a manifest mistake of law by failing to address or analyze its affirmative defenses and by determining Felix's affirmative defenses were rendered moot by the arbitrator's determination that the 1996 restrictive covenants authorized the disputed assessments. The district court denied the application to vacate, concluding Felix had failed to meet its burden of showing vacatur was warranted. It confirmed the arbitration award with...
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