AURC III v. Point Ruston Phase II

3 Wn.3d 80

[No. 101872-0. En Banc.]

Argued January 23, 2024. Decided April 11, 2024.

AURC III, LLC, Respondent, v. Point Ruston Phase II, LLC, et al., Petitioners.

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Madsen, J., delivered the opinion for a unanimous court. Owens, J., did not participate in the disposition of this case.

Nature of Action: Action by a lender against a borrower for being delinquent on interest payments in breach of the parties’ loan agreement. The trial court ordered the parties to engage in arbitration pursuant to the loan agreement. After issuing an interim award, the arbitrator entered a final award requiring the borrower to pay the lender over $11.4 million. The lender then moved to confirm the award and for

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presentation of judgment. The borrower subsequently paid the award in full.

Superior Court: After denying the borrower’s motion to dismiss the case as moot, the Superior Court for Pierce County, No. 20-2-05913-2, Timothy L. Ashcraft, J., on October 8, 2021, entered an order confirming the arbitration award, with the interim and final awards attached as exhibits, as well as a judgment against the borrower. The lender then filed a full satisfaction of judgment.

Court of Appeals: In an unpublished opinion noted at 25 Wn. App. 2d 1056 (2023), the court affirmed the confirmation order.

Supreme Court: Holding that (1) the borrower’s full payment of the arbitration award did not moot the underlying case and require dismissal of the case and (2) the trial court’s attaching the award to the confirmation order did not constitute an improper judicial endorsement of the arbitrator’s reasoning, the court affirms the decision of the Court of Appeals.

Jack B. Krona Jr., for petitioners.

Russell A. Knight (of Smith Alling PS), for respondent.

¶1 Madsen, J. — Washington law on arbitration states that when a party receives "notice of an award, the party may file a motion with the court for an order confirming the award, at which time the court shall issue such an order unless the award is modified or corrected … or is vacated." RCW 7.04A.220 (emphasis added). Judicial scrutiny of an arbitration award is "strictly limited; courts will not review

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an arbitrator’s decision on the merits." Westmark Props., Inc. v. McGuire, 53 Wn. App. 400, 402, 766 P.2d 1146 (1989). At issue here is (1) whether the full payment of an arbitration award moots the underlying case, including a motion to confirm the award, and requires dismissal and (2) whether attaching an arbitrator’s award to a confirmation order constitutes a judicial endorsement of the arbitrator’s reasoning.

¶2 We hold that when a party seeks a confirmation order, RCW 7.04A.220 requires issuance of the order subject to narrow exceptions inapplicable here. Payment of an arbitration award does not render the underlying case moot. We also hold that attaching an arbitrator’s award merely identifies the basis for the confirmation order. Accordingly, we affirm the Court of Appeals.

BACKGROUND

¶3 Point Ruston is a 97-acre former copper smelter and environmental clean-up site located on the Puget Sound waterfront in Ruston and Tacoma, Washington. Point Ruston LLC¹ purchased the site for $169,000,000 and developed it in phases. In 2013, Point Ruston began the second phase of development. To help fund phase two, Point Ruston negotiated a $66 million loan from American United Development Group, which in turn created AURC III LLC to raise and manage funds from foreign investors seeking United States residency.

¶4 After disbursing the full amount of the loan, AURC filed an amended complaint against Point Ruston. AURC alleged, among other things, that Point Ruston was delinquent on interest payments in breach of its loan agreement. The superior court ordered Point Ruston and AURC to engage in arbitration for which the parties contracted in their loan agreement. The agreement specified that arbitration would follow the Federal Arbitration Act, 9 U.S.C.

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§§ 1-14, or, if not applicable, state law and set out special rules, such as requiring the arbitrator to "provide a concise written statement setting forth the reasons for the judgment and for the award, if any." Clerk’s Papers (CP) at 137.

¶5 The parties entered arbitration. The arbitrator issued an interim award only on the amount of current and default interest due and awarded $10,969,015 to AURC. The interim award included facts about the loan, the parties’ arguments, and the arbitrator’s reasoning. The arbitrator then issued a final award for the same amount, as well as awarding attorney fees and arbitration fees and expenses. In total, Point Ruston was required to pay over $11.4 million.

¶6 AURC moved to confirm the award and for presentation of judgment. AURC’s confirmation motion identified the total award amount but did not attach the interim or final awards. Initially, Point Ruston agreed AURC was "entitled to confirmation of the Award and entry of a Final Judgment" but opposed attaching the arbitrator’s awards to that judgment. Id. at 162-63.² Point Ruston argued that attaching the awards would essentially serve as an independent judicial review of the "correctness" of the arbitration. Verbatim Rep. of Proc. (Sept. 24, 2021) at 8-9. Point Ruston also argued the awards contained erroneous, unsupported, and prejudicial findings. The court agreed that approval or disapproval of an arbitrator’s award was not the court’s job, but it distinguished the act of attaching the rulings as clarifying the basis for the court’s order.

¶7 The superior court decided to attach the awards to the confirmation order. The court made an oral ruling and stated it would later enter a written order that would include language explaining the court was not endorsing the arbitrator’s reasoning. Before the court could enter the written confirmation order and judgment, Point Ruston paid the award and filed a motion to dismiss the case as moot because

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no live dispute remained. After AURC alerted the court that it received the award amount from Point Ruston, the court denied the motion to dismiss. The court entered the confirmation order with the interim and final awards attached as exhibits, as well as a judgment against Point Ruston. AURC filed a full satisfaction of judgment.

¶8 Point Ruston appealed on two grounds. It challenged (1) the superior court’s denial of the motion to dismiss and (2) the court’s decision to attach the arbitration awards to the confirmation order. Division Two of the Court of Appeals affirmed in an unpublished opinion. AURC III, LLC v. Point Ruston Phase II, LLC, No. 56658-3-II, slip op. at 2 (Wash. Ct. App. Mar. 7, 2023) (unpublished), https://www.courts.wa.gov/opinions/pdf/D2%2056658-3-II%20Unpublished%200pinion.pdf. Point Ruston sought review in this court, which was granted. AURC III v. Point Ruston Phase II, LLC, 1 Wn.3d 1018 (2023).

ANALYSIS

[1] ¶9 In Washington, arbitration is controlled by the uniform arbitration act (UAA). See ch. 7.04A RCW; Price v. Farmers Ins. Co. of Wash., 133 Wn.2d 490, 495, 946 P.2d 388 (1997). The UAA sets out the procedure and rules governing arbitration. Godfrey v. Hartford Cas. Ins. Co., 142 Wn.2d 885, 894, 16 P.3d 617 (2001) (arbitration proceedings are governed by statute); see, e.g., RCW 7.04A.190 (requiring the arbitrator to make a record of an award). While arbitration is intended to fully settle controversies outside the courtroom, trial courts do play a limited role. Relevant here, when a party is notified of an arbitration award,

the party may file a motion with the court for an order confirming the award, at which time the court shall issue such an order unless the award is modified or corrected under RCW 7.04A.200 or 7.04A.240 or is vacated under RCW 7.04A.230.

RCW 7.04A.220.

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¶10 RCW 7.04A.200, .240, and .230 provide narrow grounds for modifying, correcting, or vacating an arbitrator’s award. Upon granting an order confirming, vacating, or modifying an award, the court "shall enter a judgment in conformity" therewith, which "may be recorded, docketed, and enforced as any other judgment in a civil action." RCW 7.04A.250(1).

[2, 3] ¶11 Washington courts have accorded "substantial finality" to arbitration decisions that adhere to the parties’ contract and statutory requirements. Davidson v. Hensen, 135 Wn.2d 112, 118, 954 P.2d 1327 (1998). "The shorthand description for this policy of finality is that judicial review of an arbitration award is limited to the face of the award." Id. Phrased differently, judicial review of an award "in the context of a proceeding under RCW 7.04.150³ to confirm an arbitrator’s award is exceedingly limited." Id. at 119.

1. Motion To Dismiss

¶12 Point Ruston contends its payment of the arbitration award rendered the case moot. In Point Ruston’s view, "tendering payment of this amount ended the controversy. There was nothing left for the Superior Court to decide," and the court should have dismissed the case with prejudice instead of confirming the arbitration award. Suppl. Br. of Pet’rs at 15.

[4, 5] ¶13 A case is moot when it involves only abstract propositions or questions, the substantial issues in the trial court no longer exist, or a court can no longer provide effective relief. Orwick v. City of Seattle, 103 Wn.2d 249, 253, 692 P.2d 793 (1984). Mootness is reviewed de novo. Hilltop Terrace Homeowner’s Ass’n v. Island County, 126 Wn.2d 22; 29, 891 P.2d 29 (1995).

¶14 The meaning of RCW 7.04A.220 is a question of statutory interpretation that we review de novo. Dep’t of

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Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 9, 43 P.3d 4 (2002). The primary objective of statutory interpretation is to "ascertain and carry out the Legislature’s intent." Id. If the meaning of the statute is plain on its face, we give effect to that plain meaning as an expression of legislative intent. Id. at 9-10. We discern plain language from the ordinary meaning of the language in the context of related statutory...