Westgate Resorts, Ltd. v. Adel

Citations: 378 P.3d 93; 2016 UT 24; 2016 Utah LEXIS 74; 2016 WL 3511985Docket: No. 20131086

Court: Utah Supreme Court; June 7, 2016; Utah; State Supreme Court

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Justice Durham's amended opinion addresses the second appeal in a lawsuit against Westgate Resorts under the Utah Pattern of Unlawful Activity Act. In the prior appeal, the court upheld an arbitration panel's damage award against Westgate. The current appeal challenges the panel's award of attorney fees to Mr. Adel and Consumer Protection Group (CPG). Westgate asserts two main errors: (1) the arbitration panel lacked authority to award attorney fees for court proceedings that confirmed the panel's decision, and (2) the panel disregarded the law by awarding fees exceeding what CPG was contractually obligated to pay their attorneys.

The court agrees with Westgate on the first point, stating that the Utah Uniform Arbitration Act does not permit an arbitration panel to award fees for confirming its own decisions, rendering that portion of the award void. However, the court disagrees with Westgate's second argument, affirming that the Utah Pattern of Unlawful Activity Act allows prevailing plaintiffs to recover reasonable attorney fees irrespective of their contractual obligations. Consequently, the court upholds the panel's award for fees incurred during arbitration and grants CPG's request for attorney fees related to this appeal.

The litigation has spanned over a decade, beginning in 2002 when Westgate sued CPG for torts and contract breaches. In 2005, CPG counterclaimed for fraud under the UPUAA, which allows for arbitration of such claims. An arbitration panel ruled in favor of CPG in 2010. Westgate later contested the arbitrator's impartiality due to familial ties with CPG's legal counsel, leading to a court decision that vacated the initial ruling. Upon returning to arbitration, CPG requested attorney fees for both arbitration and subsequent judicial proceedings. The panel awarded CPG $558,810.80 for arbitration work and $88,829.50 for post-arbitration proceedings. Westgate's motion to vacate these fee awards was denied by the district court, prompting the current appeal.

When reviewing an appeal from a district court's examination of an arbitration award, two distinct standards of review are applicable: one for the district court's decision and another for how district courts evaluate arbitrators' decisions. The first standard involves a correctness review of the district court's interpretation of the Utah Uniform Arbitration Act (UUAA) and the Utah Uniform Parentage Act (UPUAA), with no deference given to its legal conclusions. In contrast, a district court can only vacate an arbitrator's decision in limited circumstances, such as if the panel exceeded its authority or exhibited a manifest disregard for the law. 

The "manifest disregard" standard requires that the panel's error be clearly evident and that the panel recognized a governing legal principle but chose to ignore it. Conversely, there is no reason to defer to an arbitrator's interpretation of statutory authority, as it is the judiciary's role to interpret the law.

The panel's authority to award attorney fees stems from both the UUAA, which allows for reasonable fees if permitted by law, and the UPUAA, which entitles a prevailing party to recover costs, including attorney fees. The validity of the attorney fee award hinges on compliance with both statutes. Westgate acknowledges that circumstances warranted an attorney fee award due to CPG prevailing under the UPUAA but contends that the fees awarded for post-arbitration proceedings do not qualify as "expenses of arbitration" under the UUAA. Additionally, Westgate argues that the awarded attorney fees exceed what is permissible under the UPUAA, which limits fees to the amount the prevailing party owes its attorneys. The document proceeds to address these challenges.

The arbitration panel's award of attorney fees for post-arbitration proceedings was deemed beyond its authority under the Utah Uniform Arbitration Act (UUAA). The analysis focused on whether "reasonable attorney fees and other reasonable expenses of arbitration" encompasses fees incurred during judicial reviews of arbitration awards. It was concluded that such post-arbitration fees fall outside the scope of section 122 of the UUAA, which primarily addresses expenses related to presenting a case to the arbitration panel, as supported by the section's title: "Remedies - Fees and expenses of arbitration proceeding." Legislative history, dating back to 2002 and based on the 2000 Revised Uniform Arbitration Act, did not clarify the term "expenses of arbitration." Additionally, a review of decisions in other jurisdictions adopting the uniform act revealed no relevant interpretations. However, section 126 of the Utah statute allows district courts to award attorney fees in judicial proceedings related to arbitration, indicating that such authority rests with the courts rather than the arbitration panel.

The document asserts that the statute does not explicitly restrict the awarding of reasonable attorney fees solely to the court, suggesting that the legislature could grant this authority to both the district court and arbitration panels. However, the language implies that arbitrators are not intended to award fees for confirmation proceedings, as it assumes judicial confirmation follows arbitration completion. This aligns with longstanding Utah jurisprudence, which maintains that trial courts cannot award appellate attorney fees unless specifically directed by appellate courts. The reasoning is that appellate courts are better positioned to assess the value of appellate work than trial judges.

The conclusion drawn is that the arbitration panel exceeded its authority by awarding Westgate post-arbitration attorney fees. Conversely, Westgate does not dispute the panel's authority to award attorney fees for arbitration proceedings, as the law permits such awards for prevailing parties. Westgate challenges the method used to calculate the awarded fees, which totaled $558,810.30, arguing that Utah law mandates a cap at the amount CPG contracted to pay its attorneys. This challenge is framed as an error of law rather than an ultra vires act, meaning that the fee award can only be vacated under the "manifest disregard" standard, which requires demonstrating that the panel made an obvious error and was aware of the relevant law but chose to disregard it.

The arbitration panel's award of attorney fees to CPG is upheld, as the manifest disregard standard is not met; the panel did not err in interpreting the law. CPG's entitlement to attorney fees arises from the UPUAA, which does not expressly limit recovery to fees actually incurred during arbitration. Westgate's argument, citing two Utah cases that emphasize limiting fees to incurred expenses, is rejected because those cases involved different statutes and did not address the UPUAA's language. CPG distinguishes these cases by noting the UPUAA's purpose to encourage attorney involvement in such cases and its similarity to the federal RICO statute, which allows plaintiffs to recover the market value of their attorney’s services. Westgate counters that the UPUAA functions as a "loser pays" statute, providing reasonable fees to both prevailing plaintiffs and defendants, unlike RICO. Ultimately, the absence of a statutory limit on attorney fees under the UPUAA and the lack of relevant Utah case law lead to the conclusion that the arbitration panel's decision was not erroneous. The district court's confirmation of the $558,810.30 award is therefore affirmed.

CPG's request for attorney fees on appeal is granted based on the UPUAA, which allows a prevailing party to recover costs, including reasonable attorney fees. CPG has been recognized as the prevailing party under this statute, and Westgate has not contested this determination. The costs recoverable include those associated with the appeal, though adjustments may be needed to ensure CPG does not receive fees for issues on which it did not prevail, as established in Valcarce v. Fitzgerald. Westgate's argument that a party waives the right to attorney fees if not requested before final judgment is a misinterpretation of Meadowbrook, which pertains solely to trial fees and does not preclude requests for appellate fees. Additionally, Westgate's claim regarding Valcarce's stipulation that only parties awarded fees at the trial level are entitled to appellate fees is inaccurate; the case confirms that parties can recover fees incurred on appeal regardless of trial fee waivers. This court broadly interprets attorney fee statutes, allowing for the recovery of appellate fees when authorized by the statute, which applies in this instance.

The district court's confirmation of a panel's award of $558,810.80 is affirmed, while its confirmation of an award of $88,829.50 is reversed, with the case remanded for further proceedings. On remand, the district court is directed to calculate and award a reasonable attorney fee for the appeal in accordance with section 1605(2) of the UPUAA. The term "misstates" has been corrected to "misreads." CPG retains the right to raise a claim for post-arbitration attorney fees in the district court, though this issue has not been addressed on its merits due to lack of briefing. For underlying case facts, reference is made to Westgate Resorts, Ltd. v. Consumer Protection Group, LLC, 2012 UT 55. Concerns have been noted regarding the manifest disregard standard, with some suggesting it complicates the law, yet no decision is made on its application here since Westgate's challenge fails even under this standard. Additionally, potential constitutional issues regarding mandatory arbitration for non-consenting parties have not been raised or briefed, so no opinion is offered on that matter. The opinion clarifies that there are no known cases where arbitrators have awarded attorney fees for judicial proceedings affirming their own decisions, and section 122 of the UUAA does not contain nonwaivable provisions. Parties can enable arbitrators to award attorney fees for post-arbitration proceedings if desired.