Optimer Intern, Inc. v. Rp Bellevue, LLC

• Decision Date: 31 August 2009
• Docket Number: No. 63004-1-I.,63004-1-I.
• Citation: 151 Wn. App. 954,214 P.3d 954
• Parties: OPTIMER INTERNATIONAL, INC., Respondent, v. RP BELLEVUE, LLC, Appellant.
• Court: Washington Court of Appeals

214 P.3d 954

151 Wn. App. 954

OPTIMER INTERNATIONAL, INC., Respondent, v. RP BELLEVUE, LLC, Appellant.

No. 63004-1-I.

Court of Appeals of Washington, Division 1.

August 31, 2009.

Paul Edward Brain, Smith Alling Lane, Tacoma, WA, for Appellant.

Craig Steven Sternberg, Aaron Scott Okrent, Sternberg Thomson Okrent & Scher, PLLC, Seattle, WA, for Respondents.

DWYER, A.C.J.

¶ 1 RP Bellevue, LLC appeals from a superior court's order denying its motion to vacate or modify the arbitration award entered in a dispute with its tenant, Optimer International, Inc. The superior court denied RP Bellevue's motion because the parties' lease contained a clause in which each party agreed to waive the right to seek judicial review of any such award. However, Washington's Uniform Arbitration Act,¹ chapter 7.04A RCW, which by its terms applies retroactively to all arbitration agreements, prohibits parties to an arbitration agreement from waiving the right to seek judicial review of an arbitration award. Although the Arbitration Act was adopted after the formation of the parties' lease, it does not unconstitutionally impair the parties' preexisting contractual obligations to one another because the waiver clause in the lease was invalid even before the passage of the Act. Moreover, even if the nonwaiver provision of the Act did impair the parties' contractual obligations, it is still constitutional, as it is reasonably necessary to accomplish a legitimate public purpose. Thus, the superior court erred by concluding that the lease's waiver clause was enforceable. Accordingly, we reverse the judgment of the superior court and remand this cause for further proceedings.

I

¶ 2 In April 2008, Optimer made a demand for arbitration against its commercial landlord, RP Bellevue, pursuant to the parties' lease agreement. Optimer had entered into this agreement in 1997 with RP Bellevue's predecessor-in-interest. Paragraph 28.11 of the lease provides that, "[i]n the event of any dispute between the parties under this Lease, the dispute shall be resolved by single-arbitrator arbitration before the American Arbitration Association." The parties' arbitration agreement further provides that "[t]he decision of the Arbitrator shall be final and non-appealable and enforceable in any court of competent jurisdiction." Ultimately, an arbitration was held with the arbitrator ruling in Optimer's favor on some of its claims, including an award of attorney fees to Optimer as the prevailing party.

¶ 3 RP Bellevue subsequently filed a motion in superior court seeking to vacate or modify the arbitration award. In its motion, RP Bellevue claimed that the arbitrator exceeded his powers and that it was therefore entitled to relief pursuant to RCW 7.04A.230(1)(d), which provides that the reviewing court "shall vacate an [arbitration] award if ... [a]n arbitrator exceeded the arbitrator's powers." Optimer opposed the motion, arguing, in part, that the parties had contractually waived any right to seek judicial review of the arbitration award. Without addressing the merits of RP Bellevue's motion and relying on our decision in Harvey v. Univ. of Wash., 118 Wash.App. 315, 76 P.3d 276 (2003), the superior court denied the motion, ruling that the parties had contractually waived the right to seek judicial review of the arbitration award.² The superior court also confirmed the arbitration award. RP Bellevue then commenced this appeal.

¶ 4 Unfortunately, in neither their briefing before the superior court nor in their initial briefing to this court did the parties address the question of whether Washington's Arbitration Act, chapter 7.04A RCW, renders invalid the waiver clause in their arbitration agreement. In 2005, the state legislature adopted the Uniform Arbitration Act. Laws of 2005, ch. 433. Except for a few differences that are not pertinent here, the current Act follows verbatim the Uniform Arbitration Act adopted in 2000 by the National Conference of Commissioners on Uniform State Laws.³ The 2005 legislation repealed, in its entirety, the prior statutory framework governing arbitration, former chapter 7.04 RCW, which was the governing law when Harvey was decided. The current Act became effective on January 1, 2006. Moreover, the legislature specified that the current Act would apply retroactively to all arbitration agreements as of July 1, 2006. See RCW 7.04A.030(2).⁴ Furthermore, the current Act expressly provides that the parties to an arbitration agreement may not waive or vary the circumstances under which a court shall vacate an arbitration award. See RCW 7.04A.040(3) and.230.⁵ At oral argument, we questioned the parties about the effect of the current Act on their arbitration agreement and gave them the opportunity to submit supplemental briefing on the questions of whether the Act renders the waiver clause invalid, and, if so, whether it thus violates constitutional prohibitions against the legislative impairment of contracts. See U.S. CONST., ART. I, § 10; WASH. CONST. ART. I, § 23. Having considered the parties' supplemental briefing, we may now resolve the issues presented in this appeal.

II

¶ 5 Optimer initially contends that we should not consider whether the current Arbitration Act renders invalid the lease agreement's waiver clause. We should decline to do so, Optimer avers, because RP Bellevue did not raise this specific issue before the superior court and thus failed to preserve it for appellate review. We disagree.

¶ 6 Optimer is correct that, generally, "issues cannot be raised for the first time on appeal." State v. Kennar, 135 Wash.App. 68, 71, 143 P.3d 326 (2006) (citing RAP 2.5(a)); accord State v. McFarland, 127 Wash.2d 322, 332-33, 899 P.2d 1251 (1995). However, in the superior court proceeding the parties and the court relied on judicial decisions based on former chapter 7.04 RCW, which was superseded long before the motion was filed in superior court. The superior court particularly based its ruling on Harvey, which was decided before the enactment of the current Arbitration Act and on which Optimer relied heavily in its briefing. The parties' and the court's reliance on caselaw developed under a superseded statutory regime presents an entirely different situation from that in which a party fails to raise an issue altogether.

¶ 7 As our Supreme Court recently emphasized, we may not "excuse an order based on an erroneous view of the law because the trial court considered and rejected an equally erroneous argument." State v. Quismundo, 164 Wash.2d 499, 505, 192 P.3d 342 (2008). "A trial court's obligation to follow the law remains the same regardless of the arguments raised by the parties before it." Quismundo, 164 Wash.2d at 505-06, 192 P.3d 342. Here, RP Bellevue contested the enforceability of the lease's waiver provision. Optimer urged its validity. The superior court ruled on the issue. We have an obligation to see that the law is correctly applied. Thus, we must consider the effect of the current Arbitration Act on the parties' arbitration agreement.⁶

III

¶ 8 Preliminarily, we must determine whether and to what extent the current Arbitration Act, which was enacted in 2005, applies to the parties' arbitration agreement, which was formed in 1997. To do so, we must construe the Arbitration Act.

¶ 9 The primary goal of statutory construction is to discern and carry out the legislature's intent. Cockle v. Dep't of Labor & Indus., 142 Wash.2d 801, 807, 16 P.3d 583 (2001) (citing Rozner v. City of Bellevue, 116 Wash.2d 342, 347, 804 P.2d 24 (1991)). "If a statute is plain and unambiguous, its meaning must be primarily derived from the language itself." Cockle, 142 Wash.2d at 807, 16 P.3d 583 (citing Dep't of Transp. v. State Employees' Ins. Bd., 97 Wash.2d 454, 458, 645 P.2d 1076 (1982)). If we cannot discern the legislature's intent from the plain text of the statute, we "resort to principles of statutory construction, legislative history, and relevant case law to assist us in discerning legislative intent." Cockle, 142 Wash.2d at 808, 16 P.3d 583 (citing Harmon v. Dep't of Soc. & Health Servs., 134 Wash.2d 523, 530, 951 P.2d 770 (1998); State v. Bash, 130 Wash.2d 594, 601-02, 925 P.2d 978 (1996)).

¶ 10 Pursuant to RCW 7.04A.030(2), as of July 1, 2006, the Arbitration Act "governs agreements to arbitrate even if the arbitration agreement was entered into before" the operative date. In adopting this provision, the state legislature expressly provided that the current Act applies retroactively to all arbitration agreements, thereby superseding the prior statutory regime set forth in former chapter 7.04 RCW.⁷ Thus, according to the plain meaning of its express terms, the current Act governs the parties' agreement, even though the lease agreement at issue was entered into in 1997.

¶ 11 The Arbitration Act further provides that the parties to an arbitration agreement may waive or vary the requirements of the Arbitration Act, except for certain specified provisions. See RCW 7.04A.040(1).⁸ In this regard, the Act declares that "[t]he parties to an agreement to arbitrate may not waive or vary the requirements of this section or" the requirement that a court, upon proper motion, shall vacate an arbitration award where "[a]n arbitrator exceeded the arbitrator's powers." RCW 7.04A.040(3), .230(d). The meaning of this statutory language is plain and unambiguous: parties to an arbitration agreement are prohibited from waiving the requirement that a court vacate an arbitration award upon finding that an arbitrator exceeded his or her powers.⁹ These statutory provisions clearly render invalid the waiver clause in the parties' arbitration agreement.

IV

¶ 12 Optimer next contends that, as so construed, the Arbitration Act unconstitutionally impairs RP Bellevue's obligations under the parties' lease agreement. We disagree.

¶ 13 The contracts clauses of both the federal and state constitutions prohibit the legislative authority from...