R.P.T. of Aspen, Inc. v. Innovative Communications, Inc.

Citations: 917 P.2d 340; 20 Brief Times Rptr. 494; 1996 Colo. App. LEXIS 101; 1996 WL 154485Docket: 94CA1582

Court: Colorado Court of Appeals; April 4, 1996; Colorado; State Appellate Court

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Innovative Communications, Inc. (Fones West) appeals a trial court judgment that confirmed an arbitrator's award in favor of R.P.T of Aspen, Inc. (RPT) in a contract dispute regarding a joint marketing agreement. The contract included a binding arbitration clause governed by Colorado law. Fones West attempted to terminate the contract in June 1993, leading RPT to demand arbitration. Following a five-day hearing, the arbitrator ordered Fones West to perform specific actions including depositing all receipts in a joint account and potentially paying RPT $400,000 in damages for non-compliance. Fones West's motion to vacate the arbitrator's award was denied by the trial court, which also awarded RPT attorney fees upon proper motion.

Fones West argued that the trial court erred in confirming the arbitrator's award because the termination of the contract voided the arbitration agreement. The court noted that arbitration clauses are generally considered severable from the contracts they are part of, meaning that termination does not invalidate the arbitration clause unless explicitly stated otherwise. Therefore, the court upheld the arbitrator's authority to resolve issues related to the contract's termination.

Additionally, Fones West claimed the contract was void due to violations of Colorado antitrust laws. The court agreed that this issue warranted a remand for further consideration.

The court's task is to ascertain the existence of a valid arbitration agreement between the parties, as established in Eychner v. Van Vleet. Under Colorado law, specifically C.R.S. 13-22-214(1)(a), a court can stay arbitration proceedings if no agreement to arbitrate is found. Although arbitration clauses are typically viewed as separate from the main contract regarding arbitrability, if a party claims that the entire contract is illegal, the court must first address that issue, as indicated in Moncharsh v. Heily, Blase. Contracts that violate statutory prohibitions are void, making related disputes non-arbitrable, as noted in M. Domke's work on Commercial Arbitration.

Fones West alleges that its contract with RPT violates the Colorado Antitrust Act, which deems certain contracts illegal and void. If the contract is found to be in violation, it would render any related arbitration issues non-arbitrable. In seeking to vacate the arbitration award, Fones West claimed the contract was illegal, while RPT incorrectly argued that the arbitrability of the contract was for the arbitrator to decide. Although antitrust issues can sometimes be arbitrated, the legality of a contract must be adjudicated by the court.

The trial court confirmed the arbitration award without determining whether the contract breached the antitrust laws, necessitating a remand for this specific issue to be addressed. If the contract is found legal upon remand, Fones West also contends that the arbitrator exceeded his authority by not applying Colorado law, particularly in ordering specific performance, which it argues is inappropriate. However, the court maintains that arbitrators are not strictly bound by legal rules unless stipulated in the arbitration agreement. The arbitrator was given the authority to decide the case under Colorado law, and any relief provided does not need to align with what a court might grant. Fones West has not sufficiently demonstrated that the arbitrator applied any law other than Colorado law. Since the arbitrator has the final say on fact and law, there are no grounds for reversal based on these arguments.

Fones West contends that the arbitrator exceeded his authority by awarding damages to RPT if Fones West fails to comply with the ruling. The arbitrator stated that if Fones West does not abide by the award, RPT would receive $400,000 for wrongful termination and conversion. Fones West argues this damages award constitutes a penalty for a future breach, violating due process. However, the arbitrator's award is interpreted as a conditional damages assessment, functioning as a backup remedy rather than a penalty. Unsupported assertions of error cannot justify vacating the arbitration award. 

Additionally, Fones West’s claim that the arbitrator did not apply Colorado law regarding attorney fees was not addressed since it was raised for the first time on appeal. RPT seeks a remand for the trial court to award specific attorney fees, which the court should determine as it retains jurisdiction to do so after an appeal, provided fees are considered costs. RPT also requests attorney fees for this appeal, which may be granted if the Contract is found legal, designating RPT as the "substantially prevailing party." The judgment is reversed, and the case is remanded for the trial court to assess the legality of the Contract under Colorado antitrust laws. If deemed legal, the arbitration award will be confirmed; if illegal, the award must be vacated, and the court may consider attorney fees accordingly.