Khalsa v. Puri

• Decision Date: 02 February 2021
• Docket Number: No. A-1-CA-36701,A-1-CA-36701
• Parties: SOPURKH KAUR KHALSA, SHAKTI PARWHA KAUR KHALSA, and EK ONG KAR KAUR KHALSA, Trustees of the Yogi Bhajan Administrative Trust, Plaintiffs-Appellees, v. INDERJIT KAUR PURI, Defendant-Appellant.
• Court: Court of Appeals of New Mexico

SOPURKH KAUR KHALSA, SHAKTI PARWHA KAUR KHALSA,and EK ONG KAR KAUR KHALSA, Trustees of the Yogi Bhajan Administrative Trust, Plaintiffs-Appellees, v. INDERJIT KAUR PURI, Defendant-Appellant.

No. A-1-CA-36701

COURT OF APPEALS OF THE STATE OF NEW MEXICO

February 2, 2021

This decision of the New Mexico Court of Appeals was not selected for publication in the New Mexico Appellate Reports. Refer to Rule 12-405 NMRA for restrictions on the citation of unpublished decisions. Electronic decisions may contain computer-generated errors or other deviations from the official version filed by the Court of Appeals.

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY

Sarah M. Singleton, District Judge

Sanders & Westbrook, PC

Maureen A. Sanders

Albuquerque, NM

Wray Law, PC

Katherine Wray

Albuquerque, NM

for Appellees

The Bowles Law Firm

Jason Bowles

Albuquerque, NM

The Soni Law Firm

Surjit P. Soni

Pasadena, CA

for Appellant

MEMORANDUM OPINION

IVES, Judge.

{1} In a dispute about the parties' competing claims to funds that Defendant was awarded in an arbitration with a third party, the district court determined that Plaintiffs' writ of garnishment had priority over defense counsel's claimed charging lien. Defendant argues that (1) the district court did not have authority to determine priority between Plaintiffs' garnishment and defense counsel's charging lien, and (2) the district court erred in concluding that the garnishment had priority. Unpersuaded, we affirm.

BACKGROUND

{2} This is Defendant's fourth appeal to this Court in this litigation, which is now more than thirteen years old. Plaintiffs, the trustees of the Yogi Bhajan Administrative Trust, sued Defendant, Yogi Bhajan's widow, seeking a declaratory judgment that Defendant is not entitled to any distributions from the trust. The district court dismissed Plaintiffs' complaint, but the case proceeded to trial on Defendant's counterclaims. Plaintiffs prevailed in defending against Defendant's counterclaims, and the district court ordered Defendant to pay attorney fees and costs. This Court affirmed. Khalsa v. Puri, 2015-NMCA-027, 344 P.3d 1036.¹ Plaintiffs have yet to recover any of their attorney-fees award. With interest, Defendant's debt under the judgment now exceeds $1 million.

{3} Plaintiffs and Defendant are each owners of a one-half interest in intellectual property that was licensed to a third party under an Exclusive Licensing Agreement (ELA). The ELA includes a provision requiring "dispute[s] with respect to [the ELA] . . . [to] be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules" (AAA Rules). After Plaintiffs and Defendant prevailed against the third party in an arbitration proceeding conducted in accordance with the ELA, the arbitrator entered an order directing the third party to pay its remaining funds into a law firm's trust account. By stipulation of the parties, this order provided that the arbitrator would "retain jurisdiction in order to resolve any remaining disputes and issues remaining in [the] arbitration between [Defendant] and [Plaintiffs], including but not limited to, distribution of [the third party's] remaining funds, and any claims for attorney . . . fees and costs."

{4} The third party paid $504,565.27 into the trust account pursuant to the arbitrator's order. Hoping to recover some of the attorney fees they have been awarded in this case, Plaintiffs sought to garnish Defendant's $252,282.63 share of the funds recovered. However, Defendant filed a notice of lien in the arbitration proceeding in which she claimed that her attorney has a charging lien on the arbitration award that takes priority over Plaintiffs' garnishment. The district court ruled that the garnishment has priority, and Defendant appealed.

{5} Defendant argues that the district court lacked the authority to decide whether it could determine priority because the arbitrator had exclusive authority to do so. Our district courts have the authority to decide arbitrability—whether a particular dispute is subject to arbitration—"unless there is clear and unmistakable evidence that the parties decided otherwise under the terms of their arbitration agreement." Felts v. CLK Mgmt., Inc., 2011-NMCA-062, ¶ 17, 149 N.M. 681, 254 P.3d 124. Because it was unclear to us from the original briefing whether Defendant's argument was that the ELA was clear and unmistakable evidence that the parties to this appeal intended to delegate questions of arbitrability, we requested supplemental briefing on that issue and specifically asked the parties to address "doctrines under which a non-signatory may be bound by an agreement to arbitrate[.]" In her supplemental brief, Defendant concedes both that the priority dispute is not one within the scope of the ELA and that the ELA "[did] not impose an agreement among the [parties] to arbitrate any disputes they may have between them." Instead, Defendant argues, as we now understand she did in her brief in chief and reply, that the arbitrator had exclusive authority to resolve the priority dispute because the parties stipulated to the arbitrator's retention of jurisdiction "in order to resolve any . . . disputes and issues remaining in [the] arbitration." Because the parties are not signatories to the ELA, we agree that the arbitration provision within the ELA does not apply to the present dispute. See Edward Family Ltd. P'shlp v. Brown, 2006-NMCA-083, ¶ 10, 140 N.M. 104, 140 P.3d 525 ("As a general rule, an arbitration clause is only binding on the parties to the underlying agreement and not on third parties."); cf. In re: Auto. Parts Antitrust Litig., 951 F.3d 377, 384 (6th Cir. 2020) (holding that the defendants could not compel arbitration under a limited warranty associated with their goods because "the parties did not form an agreement to arbitrate" when the plaintiffs were "distributors" of those goods and "not 'original retail purchasers' [covered by] the terms of the arbitration provision" of the limited warranty). Therefore, our discussion of whether the district court could determine the arbitrability of the dispute is limited to whether the parties clearly and unmistakably delegated questions of arbitrability by stipulating to the arbitrator's retention of jurisdiction.

DISCUSSION

I. The District Court Had the Authority to Determine Priority Between Plaintiffs' Writ of Garnishment and Defense Counsel's Charging Lien

{6} Defendant argues that the district court lacked authority to determine priority because (1) the arbitrator had exclusive authority to do so under the parties' stipulation to the arbitration award, (2) the arbitrator had exclusive authority as the decisionmaker in the case that created Defendant's entitlement to the funds in issue, and (3) the district court needed to confirm the arbitration award before the award could be garnished. For the reasons that follow, we conclude that Defendant's first and second arguments are unpersuasive, and we conclude that Defendant failed to preserve the third. Defendant's preserved arguments present issues of subject matter jurisdiction and the applicability and construction of a contract requiring arbitration,² both of which we review de novo.

Best v. Marino, 2017-NMCA-073, ¶ 19, 404 P.3d 450 ("We review questions of subject matter jurisdiction de novo."); Felts, 2011-NMCA-062, ¶ 14 ("[W]hether the parties have agreed to arbitrate presents a question of law, and we review the applicability and construction of a contractual provision requiring arbitration de novo." (internal quotation marks and citation omitted)). We address each argument in turn.

A. The Parties' Stipulation to the Arbitration Award Did Not Grant the Arbitrator Exclusive Authority Over This Dispute

{7} "New Mexico district courts are courts of general jurisdiction[.]" State ex rel. Foy v. Austin Cap. Mgmt., Ltd., 2015-NMSC-025, ¶ 7, 355 P.3d 1 (internal quotation marks and citation omitted). They "ha[ve] jurisdiction over all matters not expressly consigned to other courts." Marchman v. NCNB Tex. Nat'l Bank, 1995-NMSC-041, ¶ 27, 120 N.M. 74, 898 P.2d 709. "[I]n the absence of proof to the contrary," we presume the jurisdiction of the district court. Id. "[A]rbitration agreements are contracts enforceable by the rules of contract law." Horne v. Los Alamos Nat'l Sec., L.L.C., 2013-NMSC-004, ¶ 16, 296 P.3d 478. "The terms of the agreement define the scope of . . . jurisdiction [and the] conditions, limitations[,] and restrictions on the matters to be arbitrated." Id. (alteration, internal quotation marks, and citation omitted). The district court has the authority to determine whether a particular dispute is subject to arbitration "unless there is clear and unmistakable evidence that the parties decided otherwise under the terms of their arbitration agreement." Felts, 2011-NMCA-062, ¶ 17. In construing an arbitration agreement, courts must apply its plain meaning, and an arbitration agreement "require[s] broad interpretation" when it is "drafted with broad strokes." Id. ¶ 22.

{8} The plain language of the arbitrator's retention of jurisdiction, even interpreted broadly, does not constitute clear and unmistakable evidence that the parties agreed to vest the arbitrator with the exclusive authority to determine the arbitrability of this dispute. In Felts, this Court concluded that the parties had divested the district court of its jurisdiction to determine the scope of an arbitration agreement because the "sweeping" plain language of the agreement stated that the parties agreed to arbitrate "any and all claims, disputes[,] or controversies . . . including disputes as to the matters subject to arbitration." 2011-NMCA-062, ¶ 23 (emphasis, internal quotation marks, and citation omitted). Here, by stipulating to the arbitration award, the parties agreed that the arbitrator would "retain jurisdiction [over] any . . . disputes and issues remaining in [the] arbitration between [Defendant] and...