Sun Valley Ranch 308 Ltd. P'ship v. Robson

• Decision Date: 20 November 2012
• Docket Number: No. 1 CA–CV 11–0711.,1 CA–CV 11–0711.
• Citation: 648 Ariz. Adv. Rep. 42,294 P.3d 125
• Parties: SUN VALLEY RANCH 308 LIMITED PARTNERSHIP, an Arizona limited partnership, by and through its limited partner, Englewood Properties, Inc.; and ENGLEWOOD PROPERTIES, INC., an Arizona corporation, Plaintiffs/Appellees, v. Steven S. ROBSON and Kimberly M. Robson, husband and wife; Timberline Village Corporation, an Arizona corporation; Scott Homes Multifamily, Inc., an Arizona corporation; The Steven S. Robson Separate Property Trust Agreement of 1988 Dated October 30, 1984 and its unknown beneficiaries, heirs and devisees; Steven S. Robson, as Trustee of The Steven S. Robson Separate Property Trust Agreement of 1988 Dated October 30, 1984; Kimberly Management, Inc., an Arizona corporation; Scott Management Company, an Arizona corporation, Defendants/Appellants.
• Court: Arizona Court of Appeals

294 P.3d 125

648 Ariz. Adv. Rep. 42

SUN VALLEY RANCH 308 LIMITED PARTNERSHIP, an Arizona limited partnership, by and through its limited partner, Englewood Properties, Inc.; and ENGLEWOOD PROPERTIES, INC., an Arizona corporation, Plaintiffs/Appellees,

v.Steven S. ROBSON and Kimberly M. Robson, husband and wife; Timberline Village Corporation, an Arizona corporation; Scott Homes Multifamily, Inc., an Arizona corporation; The Steven S. Robson Separate Property Trust Agreement of 1988 Dated October 30, 1984 and its unknown beneficiaries, heirs and devisees; Steven S. Robson, as Trustee of The Steven S. Robson Separate Property Trust Agreement of 1988 Dated October 30, 1984; Kimberly Management, Inc., an Arizona corporation; Scott Management Company, an Arizona corporation, Defendants/Appellants.

No. 1 CA–CV 11–0711.

Court of Appeals of Arizona, Division 1, Department A.

Nov. 20, 2012.

Beus Gilbert P.L.L.C. by Leo R. Beus, Thomas A. Connelly, Sarah S. Letzkus, Scottsdale, Attorneys for Plaintiffs/Appellees.

Stinson Morrison Hecker L.L.P. by Michael Charles Manning, James E. Holland, Jr., Jennifer L. Allen, Phoenix, Attorneys for Defendants/Appellants.

OPINION

DOWNIE, Judge.

¶ 1 This case requires us to determine whether non-signatories may compel parties bound by an arbitration clause to arbitrate. We also consider an arbitrator's authority to appoint receivers, dissolve limited partnerships, and adjudicate claims for unjust enrichment. Because we conclude that all of the pending claims are subject to arbitration, we vacate the superior court's contrary order and remand with instructions to order arbitration.

FACTS AND PROCEDURAL HISTORY

¶ 2 In February 2000, the following entities signed an agreement establishing Sun Valley Ranch 308 Limited Partnership (“SVR 308”):

• General partner Timberline Village Corporation (“Timberline”) by Steven Robson,¹ president;

• Limited partner Englewood Properties, Inc. (“Englewood”) by its president;

• Limited partner The Steven S. Robson Separate Property Trust Agreement of 1988 Dated October 30, 1984 by Steven Robson;

• Limited partner Kimberly Management Inc. by Steven Robson, president;

• Special limited partner Scott Homes Multifamily, Inc. (“Scott Homes”) by Steven Robson, president.

¶ 3 On December 20, 2000, the parties signed an Amended and Restated Agreement of Limited Partnership of Sun Valley Ranch 308 Limited Partnership (“Partnership Agreement”). That same day, Scott Homes as “Contractor” and SVR 308 as “Owner” signed a U.S. Department of Housing and Urban Development (“HUD”) contract (“Construction Contract”) for the construction of Sun Valley Ranch Apartments (“the Project”).

¶ 4 After the Project was completed, Timberline and Scott Management Company (“SMC”), of which Robson is president and CEO, signed a HUD Management Certification, agreeing to enter into a written management agreement for SMC to manage apartment rental operations. SMC was reportedly paid for its management services beginning in 2001, although Timberline and SMC apparently did not sign a HUD management agreement until several years later.

¶ 5 Timberline began marketing the Project for sale in 2006. The Project sold in February 2008 for $32 million. After sales proceeds were distributed to the Robson Entities and Englewood, approximately $2.6 million remained in escrow. Timberline and the Robson Entities asserted claims to those funds. Englewood hired a forensic accountant, who opined that Timberline and the Robson Entities owed SVR 308 $5,156,067 and that Englewood was entitled to $2,578,034 based on its ownership interest in SVR 308.

¶ 6 Englewood filed a lawsuit on behalf of itself and SVR 308 (collectively, “plaintiffs”) against the Robson Entities, SMC, and Steven and Kimberly Robson (collectively, “defendants”). The complaint asserted ten counts: breach of contract; breach of the implied covenant of good faith and fair dealing; unjust enrichment as to Scott Homes, the Robson Entities, the SVR partners, and SMC; fraud/negligent misrepresentation; breach of fiduciary duty; dissolution and accounting; and piercing the corporate veil of the Robson Entities.

¶ 7 Defendants moved to compel arbitration based on an arbitration clause contained in the Partnership Agreement. Plaintiffs objected, arguing, inter alia, that the arbitration clause did not apply to all of their claims or to all parties named in the lawsuit. The superior court denied defendants' motion. Defendants timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes (“A.R.S.”) section 12–2101.01(A)(1).

DISCUSSION

¶ 8 In 2010, the Arizona legislature adopted the Revised Uniform Arbitration Act (“AZ–RUAA”). SeeA.R.S. §§ 12–3001 through –3029. The parties agree that AZ–RUAA applies to this proceeding. SeeA.R.S. § 12–3003(A)(3) (AZ–RUAA applies if the arbitration or legal proceeding is commenced after January 1, 2011); Bruce E. Meyerson, Arizona Adopts the Revised Uniform Arbitration Act, 43 Ariz. St. L.J. 481, 486 (2011) (same). Because AZ–RUAA substantially mirrors the Revised Uniform Arbitration Act (“RUAA”), we look to cases arising thereunder and to RUAA's commentary for guidance. See In re Estate of Dobert, 192 Ariz. 248, 252, ¶ 17, 963 P.2d 327, 331 (App.1998) (if an Arizona statute is based on a uniform act, courts assume the legislature “intended to adopt the construction placed on the act by its drafters,” and commentary to the uniform act is “highly persuasive unless erroneous or contrary to settled policy in this state”) (quoting State v. Sanchez, 174 Ariz. 44, 47, 846 P.2d 857, 860 (App.1993)).

¶ 9 A.R.S. § 12–3006(A) states:

An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable and irrevocable except on a ground that exists at law or in equity for the revocation of a contract.

The court decides “whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate.” A.R.S. § 12–3006(B). We review the denial of a motion to compel arbitration de novo. Nat'l Bank of Ariz. v. Schwartz, 230 Ariz. 310, 311, ¶ 4, 283 P.3d 41, 42 (App.2012) (citations omitted).

¶ 10 “Although it is commonly said that the law favors arbitration, it is more accurate to say that the law favors arbitration of disputes that the parties have agreed to arbitrate.” S. Cal. Edison Co. v. Peabody W. Coal Co., 194 Ariz. 47, 51, ¶ 11, 977 P.2d 769, 773 (1999). Section 13.14 of the Partnership Agreement (“the arbitration clause”) reads, in pertinent part:

Arbitration. In the event any controversy or dispute arises out of or relating to this Agreement or the breach hereof, each party shall name an arbitrator with in [sic] twenty (20) days after either party notifies the other in writing that there is such a dispute [o]r controversy existing....

I. Claims Arising Under the Construction Contract

¶ 11 Plaintiffs contend they are only required to arbitrate disputes relating to the Partnership Agreement, whereas “most” of their claims arise under the Construction Contract, which lacks an arbitration clause. Defendants counter that the Construction Contract was incorporated into the Partnership Agreement and that claims arising from or related to the Construction Contract are subject to arbitration.

¶ 12 Other courts have “rejected the notion that disputes arising out of an agreement that lacks an arbitration clause are ipso facto not subject to the arbitration clause of a related contract.” Consol. Brokers Ins. Servs., Inc. v. Pan–Am. Assurance Co., Inc., 427 F.Supp.2d 1074, 1081 (D.Kan.2006). In Consolidated Brokers, the plaintiffs signed two contracts with the defendants, only one of which included an arbitration clause. Id. at 1077–78. In subsequent litigation between the parties, defendants sought to compel arbitration of disputes arising under both contracts. Id. at 1078. The district court examined earlier caselaw mandating arbitration under such circumstances, stating:

[W]here there are two agreements at issue, one with an arbitration clause and one without, the courts first examined the breadth of the arbitration clause. If the court found the arbitration provision to be broad by purporting to cover all disputes “related to” the agreement, the court then evaluated whether the agreements were sufficiently related to justify compelling arbitration of all claims arising under the agreements. In determining whether to compel arbitration of a dispute arising under an agreement lacking an arbitration clause when a related contract contains a broad arbitration clause that encompasses all matters in dispute, courts have considered the following specific factors: (1) whether the agreements incorporate or reference each other; (2) whether the agreements are dependent on each other or relate to the same subject matter; (3) whether the arbitration clause specifically excludes certain claims; (4) whether the agreements are executed closely in time and by the same parties.

Id. at 1082.

¶ 13 The Consolidated Brokers analytic framework is consistent with Arizona law and with our tenet that doubts about the arbitrability of disputes should be resolved in favor of arbitration. Saguaro Highlands Cmty. Ass'n v. Biltis, 224 Ariz. 294, 295, ¶ 5, 229 P.3d 1036, 1037 (App.2010) (citations omitted). We therefore adopt the Consolidated Brokers factors.

¶ 14 The arbitration clause at issue here encompasses “any” controversies or disputes “aris[ing] out of or relating to” the Partnership Agreement. It is “the paradigm of a broad clause.” See Collins & Aikman Prods. Co. v. Bldg. Sys., Inc., 58 F.3d 16, 20 (2d Cir.1995) (describing a clause requiring arbitration of “[a]ny claim or controversy arising out of or relating to th[e] agreement” as “the paradigm of a broad clause”). The duty to arbitrate attaches not only to controversies arising under the Partnership Agreement, but also to disputes “relating to” that...