RS INDUSTRIES, INC. and SUN MECHANICAL CONTRACTING, INC., Plaintiffs/Appellants,
J. SCOTT and BEVERLY CANDRIAN, Defendants/Appellees.
from the Superior Court in Maricopa County No. CV2014-009512
The Honorable Katherine M. Cooper, Judge
Haralson, Miller, Pitt, Feldman & McAnally, PLC, Tucson
By Gerald Maltz Counsel for Plaintiffs/Appellants.
Rusing, Lopez & Lizardi, PLLC, Tucson By Michael J.
Rusing, P. Andrew Sterling Co-Counsel for Defendant/Appellee
A. Zlaket, PLLC, Tucson By Thomas A. Zlaket Co-Counsel for
Presiding Judge Diane M. Johnsen delivered the opinion of the
Court, in which Judge Patricia A. Orozco and Judge Kenton D.
After an arbitrator ruled on several claims and made a
significant award of attorney's fees and expenses, the
superior court confirmed the award and granted more fees and
expenses. On appeal, the parties dispute whether their
arbitration agreement and applicable law authorize the awards
of fees and expenses. We affirm.
AND PROCEDURAL BACKGROUND
Scott and Beverly Candrian founded Sun Mechanical
Contracting, Inc., a Tucson plumbing and HVAC contractor. In
2003, the Candrians entered into a series of agreements with
RS Industries, Inc., an Iowa company, by which the Candrians
exchanged their stock in Sun for a 25 percent interest in RS.
Mr. Candrian agreed to serve as president of Sun, now wholly
owned by RS, for ten years and, at the end of that period, RS
would buy back the Candrians' stock in RS. Mr. Candrian
was guaranteed a position on RS's board of directors so
long as he owned RS stock; meanwhile, the Candrians continued
to serve on the Sun board.
In late 2012, before time for the stock buy-back, RS accused
Mr. Candrian of breaching his employment agreement and
alleged that, as a result of his breach, the Candrians'
stock in RS had no value. In response, the Candrians filed
suit in federal district court, asking it to declare the
value of the stock; several months later, Sun sued the
Candrians in superior court, alleging $10.7 million in
damages for breach of the employment agreement and seeking
enforcement of newly passed corporate resolutions purporting
to oust the Candrians from the Sun board. A month later, the
district court dismissed the complaint in favor of
arbitration. The parties eventually negotiated an arbitration
agreement covering all their disputes, and the superior court
stayed the state action pending arbitration.
The parties selected a Phoenix lawyer as their arbitrator. In
the two court cases, they had made numerous filings and
litigated an application for a temporary injunction. They
continued to battle during the run-up to the four-day
arbitration. With several million dollars at stake, they
retained expert witnesses, took depositions, propounded and
responded to discovery requests, litigated discovery
disputes, and briefed a motion by the Candrians for summary
judgment. The arbitrator ultimately decided nearly all issues
in favor of the Candrians, concluding they were owed $5, 006,
245 for their RS stock and that Mr. Candrian was due $77, 000
in unpaid wages.
Having prevailed on the merits, the Candrians filed an
application seeking $1, 032, 411.50 in attorney's fees
and $211, 240.41 in "costs." Over RS's
objection, the arbitrator granted the Candrians nearly every
dollar they had sought, citing as authority the arbitration
agreement, RS bylaws, Iowa indemnity laws (one of the
contracts referenced Iowa law) and Arizona Revised Statutes
("A.R.S.") section 12-341.01(A)
(2016). RS then filed a motion in superior court
to vacate the arbitrator's award of attorney's fees
and costs; the Candrians moved to confirm the award. After
briefing and oral argument, the superior court denied the
motion to vacate and confirmed the arbitration award in its
entirety. The court then granted the Candrians attorney's
fees and expenses of $54, 781.33, along with taxable costs of
$243, incurred in the confirmation proceeding.
RS timely appealed. We have jurisdiction pursuant to Article
6, Section 9, of the Arizona Constitution and A.R.S.
§§ 12-2101(A)(1) (2016) and -2101.01(A)(6) (2016).
Arbitrator's Award of Attorney's Fees and
Arizona public policy favors arbitration as a speedy and
affordable means of resolving disputes, and judicial review
of an arbitrator's award is substantially limited by
statute. City of Cottonwood v. James L. Fann Contracting,
Inc., 179 Ariz. 185, 189 (App. 1994). An
arbitrator's decisions regarding questions of law and
fact are final, and will not be disturbed unless the
arbitrator has purported to decide a matter that is beyond
the scope of the issues submitted for arbitration.
Smitty's Super-Valu, Inc. v. Pasqualetti, 22
Ariz.App. 178, 180-81 (1974); see also Hirt v.
Hervey, 118 Ariz. 543, 545 (App. 1978) ("[A]n
arbitration award is not subject to attack merely because one
party believes that the arbitrators erred with respect to
factual determinations or legal interpretations.").
Indeed, under Arizona's version of the Revised Uniform
Arbitration Act, A.R.S. §§ 12-3001 et
seq., as relevant to this appeal, an aggrieved party may
petition the superior court to vacate an arbitration award
only if the "arbitrator exceeded the arbitrator's
powers." A.R.S. § 12-3023(A)(4) (2016). We review
the superior court's decision to confirm an arbitration
award in the light most favorable to upholding the decision
and will affirm unless the superior court abused its
discretion. See Atreus Communities Group of Ariz. v.
Stardust Dev., Inc., 229 Ariz. 503, 506, ¶ 13 (App.
RS does not contest the arbitrator's findings on
liability and damages, but argues the arbitrator exceeded his
authority when he awarded attorney's fees and expenses.
By statute, "[a]n arbitrator may award reasonable
attorney fees and other reasonable expenses of arbitration
only if that award is authorized by law in a civil action
involving the same claim or by the agreement of the parties
to the arbitration proceeding." A.R.S. § 12-3021(B)
(2016). In that regard, § 12-3021(B) grants an
arbitrator the same power the superior court has to award
fees in a civil action. See Sanders v. Boyer, 126