Wells v. Wells-Wilson

• Decision Date: 30 June 2021
• Docket Number: A21A0198, A21A0199, A21A0229
• Court: Georgia Court of Appeals
• Parties: WELLS v. WELLS-WILSON. Magwell, LLC v. Wells-Wilson. First Nolia Enterprises, Inc. v. Wells-Wilson.

360 Ga.App. 646

860 S.E.2d 185

WELLS

v.WELLS-WILSON.

Magwell, LLC

v.Wells-Wilson.

First Nolia Enterprises, Inc.

v.Wells-Wilson.

A21A0198, A21A0199, A21A0229

Court of Appeals of Georgia.

June 30, 2021

Reconsideration Denied July 14, 2021

Certiorari Denied February 1, 2022

Nelson Mullins Riley & Scarborough, Erika Clarke Birg, Steven Harris Campbell, Atlanta, for Appellant in A21A0198 and A21A0229.

Eversheds Sutherland (US), Lee Alexander Peifer, Rocco Eugene Testani, Arnall Golden & Gregory, Henry Chalmers, Atlanta, for Appellee in A21A0198 and A21A0229.

Khayat Law Firm, Robert C. Khayat Jr., Atlanta, for Appellant in A21A0199.

Lee Alexander Peifer, Rocco Eugene Testani, Erika Clarke Birg, Henry Chalmers, Steven Harris Campbell, Atlanta, for Appellee in A21A0199.

Brown, Judge.

In these related appeals, D. Richard Wells, Magwell, LLC, and First Nolia Enterprises, Inc., separately appeal from a trial court's order vacating an arbitration award and returning the case to the arbitrator for a limited rehearing.¹ Each appellant asserts altogether different enumerations of error, while also incorporating by reference each of the enumerations of the other two appellants. We will therefore combine the arguments and enumerations of error set forth in Case Nos. A21A0198, A21A0199, and A21A0229 and address them as a whole below. The Appellants collectively assert ten enumerations of error regarding the arbitrator overstepping his authority and manifestly disregarding the law in a variety of ways and alleged errors in the trial court's order for rehearing. For the reasons explained below, we affirm in part, vacate in part, and remand these cases with direction.

The function of the trial court in proceedings to confirm or vacate an arbitration award should be severely limited in order not to frustrate the purpose of avoiding litigation by resorting to arbitration. Consistent with this policy, OCGA § 9-9-13 (b) of the Georgia Arbitration Code sets forth five exclusive statutory grounds for vacating an arbitration award upon the application of a party subject to the award:

(1) Corruption, fraud, or misconduct in procuring the award; (2) Partiality of an arbitrator appointed as a neutral; (3) An overstepping by the arbitrators of their authority or such imperfect execution of it that a final and definite award upon the subject matter submitted was not made; (4) A failure to follow the procedure of [the Georgia Arbitration Code], unless the party applying to vacate the award continued with the arbitration with notice of this failure and without objection; or (5) The arbitrator's manifest disregard of the law.

The fact that the relief was such that it could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award.

The authority of courts to review an award, pursuant to a motion to vacate, is very limited; courts cannot inquire into the merits of an arbitrable controversy; arbitrators are free to award on the basis of broad principles of fairness and equity; and an arbitrator need not make findings or state the reasons in support of the award. [When] reviewing a motion to vacate, appellate courts cannot make determinations as to the sufficiency of the evidence, as such judicial intervention would only frustrate the purpose of arbitration. The prohibition against considering the sufficiency of the evidence as grounds for vacating an arbitration award is unconditional. Therefore, a reviewing court is prohibited from weighing the evidence submitted before the arbitrator, regardless of whether the court believes there to be sufficient evidence, or even any evidence, to support the award.

(Citations, punctuation, and footnote omitted.) A&M Hospitalities v. Alimchandani , 359 Ga. App. 271, 277–278 (3), 856 S.E.2d 704 (2021). "In reviewing a trial court's order confirming an arbitration award, this Court will affirm unless the trial court's ruling was clearly erroneous." (Citation and punctuation omitted.) First Option Mtg. v. S&S Financial Mtg. Corp. , 322 Ga. App. 14, 743 S.E.2d 574 (2013). Our research revealed no Georgia decision outlining a specific standard of appellate review of a trial court's order vacating an arbitrator's award and ordering a rehearing under OCGA § 9-9-13 (e). The Eleventh Circuit Court of Appeals has stated generally with regard to the standard of review: "On an appeal of a district court's decision to confirm or vacate an arbitration award, we review the district court's resolution of questions of law de novo and its findings of fact for clear error." (Citation and punctuation omitted.) EGI-VSR v. Mitjans , 963 F.3d 1112, 1121 (III) (11th Cir. 2020). As this Eleventh Circuit standard comports with numerous Georgia decisions that appear to apply a de novo standard of review on questions of law without so stating,² and clarifies the specific circumstance under which we will reverse the trial court on the ground that it has clearly erred,³ we will apply this standard of review in this case.

As the relevant facts are complicated and the proceedings below convoluted,⁴ we will provide a brief, initial overview before providing more detailed facts in our analysis of each enumerated error. Richard Wells, Susan Wells-Wilson, and Linda Palmer are siblings; their parents, now deceased, formed Magnolia Advanced Materials, Inc. ("Magnolia") which manufactures epoxies. Until 2008, the majority of Magnolia's stock was owned by non-party Nolia Enterprises, L.L.L.P. ("Nolia Partnership"); its general partner was First Nolia Enterprises, Inc. ("First Nolia"). As Richard Wells owned 100 percent of First Nolia's stock, he "was able to control the manner in which the Magnolia stock held by [the] Nolia [Partnership] was voted."

In anticipation of a 2008 sale of Magnolia, the parties finalized an "Operating Agreement" creating a new entity, Magwell, LLC, ("Magwell") and naming First Nolia as the initial manager of Magwell. On the same day, Nolia Partnership's stock was transferred to Magwell. The Operating Agreement provided for arbitration pursuant to the "commercial arbitration rules then in effect of the American Arbitration Association" and stated that the Operating "Agreement and the application or interpretation hereof shall be governed exclusively by the laws of the State of Georgia, without regard to its conflicts of law principles." It was agreed to by the Nolia Partnership as the "Initial Member" through First Nolia, the General Partner of Nolia Partnership, and signed by Richard Wells, in his capacity as the chief executive officer of First Nolia. The plan was for Magwell to be completely dissolved after the sale and distribution of money. The sale never took place.

Following subsequent disputes between the siblings regarding voting rights, Susan Wells-Wilson commenced a commercial arbitration in 2018, naming Richard Wells, Linda Palmer, Magwell, and First Nolia as respondents. She asserted claims for declaratory judgment, breach of contract, breach of the implied covenant of good faith and fair dealing, and stubborn litigiousness under OCGA § 13-6-11. In her prayer for relief, she sought damages, interest, attorney fees, and declaratory and injunctive relief. She summarized her claim for arbitration as one

concern[ing] the rights of the members of Respondent Magwell ... to vote the corporate stock that Magwell holds in a family-owned corporation named Magnolia .... Two of the Respondents in particular, First Nolia ... and Ric[hard] Wells, have attempted to deprive ... Susan Wells-Wilson[ ] of her rights to vote her ownership interests with respect to that stock in accordance with her ownership interests under the Magwell Operating Agreement. They, along with Magwell, have also refused to recognize the new board of directors elected by the shareholders of Magnolia ... at the annual shareholders meeting held on October 15, 2018.

After the arbitrator issued a Final Award on February 12, 2020, Susan Wells-Wilson asked the Superior Court of Fulton County to confirm the arbitration award, and Richard Wells, Magwell, and First Nolia counterclaimed with requests to vacate the final award, as well as previous awards issued by the arbitrator.⁵ The Business Case Division of the Superior Court of Fulton County subsequently issued a ten-page order concluding that no statutory ground existed to vacate the arbitrator's decision regarding the contract issues presented by the parties. But, based upon its decision to vacate that portion of the award which "effectively enjoins Magwell from retaining and paying legal counsel to represent it in this matter," as well as the portion that "fails to identify the amount of fees and expenses incurred on behalf of each of the Respondents," the trial court vacated the entire arbitration award and ordered the arbitrator to rehear only specific issues related to attorney fees and expenses that will be discussed in more detail below. Richard Wells, First Nolia, and Magwell have appealed from this order; Susan Wells-Wilson and Linda Palmer have filed separate appellee briefs.

1. Alleged Untimeliness of Successive Awards. First Nolia contends that "[t]he trial court erred when it did not specifically vacate successive arbitration awards issued more than thirty days after the hearing closed." It asserts that both the Georgia Arbitration Code, OCGA § 9-9-1 et seq., and the American Arbitration Association ("AAA") Commercial Rules require an arbitrator to issue an award within 30 days after a hearing closes.

The Georgia Arbitration Code "was designed to preserve and ensure the efficacy and expediency of arbitration awards." ABCO Builders v. Progressive Plumbing , 282 Ga. 308, 309, 647 S.E.2d 574 (2007). Except for certain exceptions not applicable here, it applies to "all disputes in which the parties thereto have agreed in writing to arbitrate and shall provide the exclusive means by which agreements to arbitrate disputes can be enforced." OCGA § 9-9-2 (c)....