Comprehensive Orthopaedics v. Axtmayer

980 A.2d 297

293 Conn. 748

COMPREHENSIVE ORTHOPAEDICS AND MUSCULOSKELETAL CARE, LLC, et al. v. Alfredo L. AXTMAYER et al.

No. 18304.

Supreme Court of Connecticut.

Argued April 28, 2009.

Decided October 20, 2009.

Dominic Fulco III, with whom were Robert J. Durbin, and, on the brief, Maurice T. FitzMaurice and Edward F. Spinella, Hartford, for the appellants (plaintiffs).

Michael F. O'Connor, with whom were Scott R. Ouellette and, on the brief, James G. Williams, North Haven, for the appellees (defendants).

ROGERS, C.J., and NORCOTT, KATZ, PALMER, ZARELLA, McLACHLAN and QUINN, Js.^*

McLACHLAN, J.

The sole issue on appeal is whether the arbitrator exceeded his authority in declining to award attorney's fees pursuant to the parties' arbitration agreement. The plaintiffs, Comprehensive Orthopaedics and Musculoskeletal Care, LLC (Comprehensive), and certain physician members of Comprehensive,¹ appeal² from the judgment of the trial court, which denied the plaintiffs' motion to vacate in part the arbitration award pursuant to General Statutes § 52-418(a)(4),³ because it concluded that the arbitrator did not exceed his authority by determining that Comprehensive did not "prevail" on its underlying restrictive covenant claim. On appeal, the plaintiffs claim that the arbitrator exceeded his authority by declining to award attorney's fees because Comprehensive "prevailed" under Connecticut law on its underlying claim, and, therefore, the arbitration agreement required the arbitrator to award attorney's fees. The defendants, Alfredo L. Axtmayer (Axtmayer) and Alfredo L. Axtmayer, M.D., P.C., claim that the award was proper because the arbitrator's determination that Comprehensive did not prevail is not reviewable. We agree with the defendants, and, accordingly, affirm the judgment.

Axtmayer, a physician, was employed by the plaintiffs pursuant to an employment agreement (agreement). Section 11 of the agreement contains a restrictive covenant that prohibits Axtmayer from competing with Comprehensive or disrupting any of its business relationships for a period of three years subsequent to the termination of Axtmayer's employment. The restrictive covenant's terms apply to various towns in the state and, in addition, prohibit Axtmayer from maintaining a business relationship with various Connecticut hospitals outside of the restricted territories.⁴ Section 11(e) of the agreement requires Axtmayer to pay a liquidated damages award of $150,000 if he violates the terms of the covenant. Section 11(d) of the agreement, however, provides that "[i]n the event the provisions of [§] 11 are deemed to exceed the time, geographic, or occupational limitations permitted by applicable law, then such provisions shall be automatically reformed to the maximum time, geographic or occupational limitations permitted by applicable law." At some point during the employment period, the plaintiffs terminated Axtmayer.

Subsequently, the parties entered into an arbitration agreement to submit various issues arising from the employment relationship, including the question of whether Axtmayer had violated the terms of the restrictive covenant.⁵ In that submission, the parties agreed that "[a]s to [§] 11 of the . . . [a]greement . . . the [a]rbitrator shall award attorney's fees and costs only to [Comprehensive] and only if [Comprehensive] prevails in its claims under [§] 11 of the . . . [a]greement." The parties further agreed that the arbitrator's award could only be vacated on the basis of the grounds set forth in § 52-418. After the presentation of testimony and evidence, the arbitrator found that Axtmayer had "established his solo, competitive practice within the restrictive territory almost immediately after his ouster." Moreover, the arbitrator found that Axtmayer had continued to have a business relationship with many of the medical institutions covered by the restrictive covenant. Although the arbitrator found that those facts weighed in favor of enforcing the covenant, the arbitrator concluded that the time, geographical and occupational limitations imposed by the covenant were excessive. Accordingly, pursuant to the automatic reformation provision in the agreement, the arbitrator reformed the covenant's restrictions⁶ and reduced the liquidated damages to $75,000 from $150,000. With respect to attorney's fees, the arbitrator concluded that "[i]n view of the reformation, no attorney's fees and costs are awarded to [Comprehensive]."

On February 4, 2008, the plaintiffs filed an application with the Superior Court to vacate the award only with respect to the arbitrator's decision not to award attorney's fees. The plaintiffs claimed that the arbitrator exceeded his authority because the arbitration agreement provided that "the [a]rbitrator shall award attorney's fees and costs . . . if [Comprehensive] prevails in its claims under [§] 11. . . ." On March 3, 2008, the defendants filed an application to confirm the arbitrator's decision and award. On March 26, 2008, the trial court denied the plaintiffs' application to vacate in part. The trial court concluded that the submission to arbitration was unrestricted and that the arbitrator had the authority to fashion any remedy that was rationally related to a plausible interpretation of the agreement. Accordingly, the trial court concluded that, in light of the arbitrator's reformation of the restrictive covenant, the arbitrator reasonably could have concluded that Comprehensive did not prevail on its claims and, therefore, was not entitled to attorney's fees. On April 14, 2008, the trial court granted the defendants' application to confirm the award.⁷ This appeal followed.

"Judicial review of arbitral decisions is narrowly confined. . . . When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties' agreement. . . . When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission. . . . Because we favor arbitration as a means of settling private disputes we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution. . . .

"Where the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous. Courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrators' decision of the legal questions involved. . . . In other words, [u]nder an unrestricted submission, the arbitrators' decision is considered final and binding; thus the courts will not review the evidence considered by the arbitrators nor will they review the award for errors of law or fact. . . .

"Even in the case of an unrestricted submission, we have . . . recognized three grounds for vacating an award: (1) the award rules on the constitutionality of a statute . . . (2) the award violates clear public policy . . . [and] (3) the award contravenes one or more of the statutory proscriptions of § 52-418. . . . [Section] 52-418(a)(4) provides that an arbitration award shall be vacated if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.

"In our construction of § 52-418(a)(4), we have, as a general matter, looked to a comparison of the award with the submission to determine whether the arbitrators have exceeded their powers." (Internal quotation marks omitted.) Harty v. Cantor Fitzgerald & Co., 275 Conn. 72, 80-81, 881 A.2d 139 (2005). The standard for reviewing a claim that the award does not conform to the submission requires what we have termed "`in effect, de novo judicial review.'" Id., at 84, 881 A.2d 139. "Although we have not explained precisely what `in effect, de novo judicial review' entails as applied to a claim that the award does not conform with the submission . . . [o]ur inquiry generally is limited to a determination as to whether the parties have vested the arbitrators with the authority to decide the issue presented or to award the relief conferred." Id., at 85, 881 A.2d 139.

"In determining whether an arbitrator has exceeded the authority granted under the contract, a court cannot base the decision on whether the court would have ordered the same relief, or whether or not the arbitrator correctly interpreted the contract. The court must instead focus on whether the [arbitrator] had authority to reach a certain issue, not whether that issue was correctly decided. Consequently, as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of authority, the award must be enforced. The arbitrator's decision cannot be overturned even if the court is convinced that the arbitrator committed serious error."⁸ (Internal quotation marks omitted.) Id., at 86 n. 7, 881 A.2d 139, quoting 1 M. Domke, Commercial Arbitration (3d Ed.2003) § 39:6, pp. 39-12 through 39-13. Moreover, "[e]very reasonable presumption and intendment will be made in favor of the award and of the arbitrator's acts and proceedings. Hence, the burden rests on the party challenging the award to produce evidence sufficient to show that it does not conform to the submission." Bic Pen Corp. v. Local No. 134, 183 Conn. 579, 585, 440 A.2d 774 (1981).

"Such a limited scope of judicial review is warranted given the fact that the parties voluntarily bargained for the decision of the arbitrator and, as such, the parties are presumed to have assumed the risks of and waived objections to that decision. . . . It is clear that a party cannot...