Herrera v. Santangelo Law Offices, P.C.
| Decision Date | 11 August 2022 |
| Docket Number | Court of Appeals No. 20CA2105 |
| Citation | 520 P.3d 698,2022 COA 93 |
| Parties | Robert J. HERRERA, Plaintiff-Appellant, v. SANTANGELO LAW OFFICES, P.C., Defendant-Appellee. |
| Court | Colorado Court of Appeals |
Gordon & Rees LLP, John M. Palmeri, John R. Mann, Denver, Colorado, for Plaintiff-Appellant
Ringenberg & Beller, P.C., Richard D. Beller, Fort Collins, Colorado, for Defendant-Appellee
Opinion by JUDGE KUHN
¶ 1 In an arbitration between Santangelo Law Offices, P.C., and Touchstone Home Health LLC, the arbitrator sanctioned Touchstone's arbitration counsel, Robert J. Herrera, after Herrera fraudulently obtained Santangelo's signature on a settlement agreement and told the arbitrator a known falsehood—that the parties had settled. Invoking C.R.C.P. 11 and section 13-17-102, C.R.S. 2021, the arbitrator awarded Santangelo nearly $150,000 against Herrera personally for attorney fees Santangelo incurred in responding to Herrera's falsehood and in pursuing sanctions against him. The district court confirmed this award.
¶ 2 On appeal, Herrera contends that the arbitrator lacked the authority to sanction him personally. We agree and reverse accordingly.
¶ 3 Touchstone contracted for Santangelo's legal services, entering into an Agreement for Legal Services (the Touchstone-Santangelo fee agreement) containing an arbitration clause:
The parties agree to submit any controversy or claim in any way arising from this Agreement or the parties' relationship to confidential binding arbitration ... by a single attorney. Such arbitration shall be conducted pursuant to the Commercial Arbitration Rules (CARs) of the American Arbitration Association (AAA)....1
Herrera did not sign the fee agreement in either a personal or representative capacity, nor was he even counsel for Touchstone when it was executed.
¶ 4 Years later, when Touchstone and Santangelo's relationship ended, Santangelo sought to collect its unpaid legal fees and demanded arbitration pursuant to the Touchstone-Santangelo fee agreement. Herrera entered his appearance in the arbitration as Touchstone's sole attorney. The parties participated in a preliminary hearing. The arbitrator memorialized that hearing in a report and scheduling order, which stated that "[t]he Colorado Rules of Civil Procedure shall govern [the arbitration] and the laws of the State of Colorado shall apply."
¶ 6 In response, Santangelo moved for sanctions against Touchstone and Herrera in his personal capacity. Herrera responded by disclaiming any obligation to arbitrate his individual liability for sanctions and filing a court action for declaratory relief establishing that the arbitrator lacked the authority to enter sanctions against him.
¶ 7 Following hearings on the purported settlement and Santangelo's motion, the arbitrator found that Herrera admitted he knew that (1) Santangelo's signature on the purported settlement agreement was obtained and placed on the document through deception; (2) this signature formed the basis for his assertion to the arbitrator that the parties had settled; and (3) his email to the arbitrator was therefore without merit and went uncorrected even through the arbitrator's initial hearing on the purported settlement.2 The arbitrator also found that Herrera was aware that the Colorado Rules of Civil Procedure and Colorado law generally would apply to the arbitration because, at the preliminary hearing, he had agreed on behalf of Touchstone that those authorities would govern the arbitration.
¶ 8 The arbitrator then determined that the issue of sanctions against Herrera was arbitrable, that Rule 11 and section 13-17-102 governed his consideration of sanctions, that Herrera's conduct was sanctionable under both, and that Santangelo reasonably incurred $148,184.15 in fees and expenses in both responding to Herrera's false assertion and moving for sanctions against him. The arbitrator awarded this amount to Santangelo and ordered Herrera to pay it personally. Touchstone and Santangelo later settled their fee dispute but did not resolve the arbitrator's award of sanctions against Herrera individually.
¶ 9 In his district court suit, Herrera moved to vacate the arbitrator's award of sanctions against him pursuant to section 13-22-223(1), C.R.S. 2021. The court denied Herrera's motion and instead confirmed the award under section 13-22-223(4).
¶ 10 Herrera contends the award of sanctions must be vacated because (1) he did not agree to arbitrate any issues of attorney sanctions, either individually in the arbitration hearing or as a nonparty bound to the Touchstone-Santangelo fee agreement; and (2) the arbitrator had no authority to sanction the attorney of an arbitrating party absent an agreement granting the arbitrator such authority. We agree with both contentions.
¶ 11 "Colorado law favors the resolution of disputes through arbitration." J.A. Walker Co. v. Cambria Corp. , 159 P.3d 126, 128 (Colo. 2007). This preference is embedded in both the Colorado Constitution and the Colorado Uniform Arbitration Act (CUAA). §§ 13-22-201 to - 230, C.R.S. 2021; Johnson-Linzy v. Conifer Care Communities A, LLC , 2020 COA 88, ¶ 16, 469 P.3d 537 (citing Colo. Const. art. XVIII, § 3 ).
¶ 12 "To facilitate confidence in the finality of arbitration awards and discourage piecemeal litigation, the [CUAA] strictly limits the role of the courts in reviewing awards." Magenis v. Bruner , 187 P.3d 1222, 1224 (Colo. App. 2008). Thus, "a court may decline to confirm an arbitration award only in limited circumstances." Barrett v. Inv. Mgmt. Consultants, Ltd. , 190 P.3d 800, 802 (Colo. App. 2008) ; see also Treadwell v. Vill. Homes of Colo., Inc. , 222 P.3d 398, 401 (Colo. App. 2009) ( (quoting Hall Street Assocs., L.L.C. v. Mattel, Inc. , 552 U.S. 576, 586, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008) ).
¶ 13 This limited scope of judicial review springs from the general principle that "[a]rbitration is ‘a matter of contract between the parties; it is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.’ " See Johnson-Linzy , ¶ 11 (quoting First Options of Chi., Inc. v. Kaplan , 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ). And because arbitration is a matter of contract, "[t]he powers of an arbitrator derive from the arbitration agreement between the parties and are strictly defined by the terms of that agreement." Magenis , 187 P.3d at 1224 (citing Coors Brewing Co. v. Cabo , 114 P.3d 60, 64 (Colo. App. 2004) ). That being said, the CUAA provides that it "shall govern" arbitration agreements, § 13-22-203, C.R.S. 2021, and "[p]arties may waive or vary the effect of the CUAA ‘to the extent permitted by law,’ " Johnson-Linzy , ¶ 16 (quoting § 13-22-204(1), C.R.S. 2021 ).
¶ 14 As relevant here, the CUAA states that "the court shall vacate an award made in the arbitration proceeding if it finds that ... [a]n arbitrator exceeded the arbitrator's powers ... [or] [t]here was no agreement to arbitrate ...." § 13-22-223(1)(d), (e). It also provides that "[t]he court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate." § 13-22-206(2), C.R.S. 2021.
¶ 15 We thus review de novo both whether an enforceable agreement to arbitrate exists and, if so, the scope of that agreement. Moffett v. Life Care Ctrs. of Am. , 219 P.3d 1068, 1072 (Colo. 2009) ; N.A. Rugby Union LLC v. U.S. of Am. Rugby Football Union , 2019 CO 56, ¶ 19, 442 P.3d 859. We also review de novo whether an arbitrator exceeded their powers.3 See Treadwell , 222 P.3d at 400 ().
¶ 16 Lastly, the interpretation of the CUAA also presents a question of law we review de novo. In re Marriage of Roth , 2017 COA 45, ¶ 15, 395 P.3d 1226. "When interpreting the CUAA, ‘[w]e begin by analyzing the text of the CUAA, giving its words their ordinary and commonly-understood meanings.’ " E-21 Eng'g, Inc. v. Steve Stock & Assocs., Inc. , 252 P.3d 36, 39 (Colo. App. 2010) (quoting Ingold v. AIMCO/Bluffs, L.L.C. Apartments , 159 P.3d 116, 120 (Colo. 2007) ). We "striv[e] to give effect to the General Assembly's intent and chosen legislative scheme." Sooper Credit Union v. Sholar Grp. Architects, P.C. , 113 P.3d 768, 771 (Colo. 2005).
¶ 17 Santangelo argues that the arbitrator had the authority to sanction Herrera because either (1) the arbitration language in the Touchstone-Santangelo fee agreement bound Herrera; or (2) Herrera personally agreed that the arbitrator possessed the authority to sanction the parties' counsel individually. We are not persuaded.
¶ 18 Santangelo does not dispute that the arbitration language of its fee agreement with Touchstone by its terms bound only the "parties"—and that Herrera was not a "party." The arbitrator agreed, consistently finding that, throughout the...
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