Hurt v. Williams

1

ALLEN HURT, MD, individually; BRIARWOOD CLINIC, LLC; and AMERICAN MEDICAL GROUP, INC., Plaintiffs-Appellees, v. JUSTIN WILLIAMS, individually; PARAMOUNT FINANCIAL SERVICES, LLC; and EAGLE STAR RANCH, LLC, Defendants-Appellants.

No. A-1-CA-39617

Court of Appeals of New Mexico

July 6, 2023

Corrections to this opinion/decision not affecting the outcome, at the Court's discretion, can occur up to the time of publication with NM Compilation Commission. The Court will ensure that the electronic version of this opinion/decision is updated accordingly in Odyssey.

APPEAL FROM THE DISTRICT COURT OF LEA COUNTY Mark Sanchez, District Court Judge

Giddens & Gatton Law, P.C. George Dave Giddens Albuquerque, NM Nickay Manning Law Firm, LLC Nickay B Manning Corrales, NM for Appellees

Holland & Hart LLP Larry J. Montano Santa Fe, NM Frazier & Ramirez Law Sean S. Ramirez Albuquerque, NM for Appellants

MEMORANDUM OPINION

KRISTINA BOGARDUS, Judge

{¶1} Allen Hurt, MD., Briarwood Clinic, LLC, and American Medical Group, Inc. (collectively, Plaintiffs) sued Justin Williams and his company, Eagle Star Ranch, LLC (collectively, Defendants) based on false and misleading statements made by Defendants during the course of the parties' venture to provide medical laser treatment services at Briarwood Clinic.^[1] The dispute went to arbitration, where Plaintiffs prevailed, and the district court denied Defendants' motion to vacate or modify the arbitration award. Defendants appeal the district order's denying their motion to vacate or modify the arbitration award. Defendants argue (1) the arbitrator decided issues outside the scope of the arbitration agreement, (2) the arbitrator impermissibly issued sanctions preventing Defendants from presenting evidence or cross-examining witnesses at the arbitration hearing, (3) the arbitrator exhibited partiality, and (4) the award was based on an erroneous assessment of damages. We affirm.

{¶2} Because this is a memorandum opinion and the parties are familiar with the facts and procedural background, we reserve discussion of the pertinent facts within the context of Defendants' arguments.

DISCUSSION

I. Standard of Review

{¶3} Defendants argue the district court erred by refusing to vacate or modify the arbitration award. "We review the district court's decision to vacate or modify an arbitration award for substantial evidence." Castillo v. Allstate Prop. &Cas. Ins. Co., 2023-NMCA-009, ¶ 9, 523 P.3d 643. "Substantial evidence is that evidence which is relevant and which a reasonable mind could accept as adequate to support a conclusion." Id. (internal quotation marks and citation omitted). "We view the evidence in the light most favorable to the prevailing party." Eagle Laundry v. Fireman's Fund Ins. Co., 2002-NMCA-056, ¶ 14, 132 N.M. 276, 46 P.3d 1276. Moreover, "the district court does not have the authority to review arbitration awards for errors as to the law or the facts; if the award is fairly and honestly made and if it is within the scope of the submission, the award is a final and conclusive resolution of the parties' dispute." Fernandez v. Farmers Ins. Co. of Ariz., 1993-NMSC-035, ¶ 9, 115 N.M. 622, 857 P.2d 22.

{¶4} The narrow scope of review of arbitration awards reflects the purposes of the Uniform Arbitration Act (UAA), NMSA 1978, §§ 44-7A-1 to -32 (2001), which "depend on finality in arbitration awards." Shah v. Devasthali, 2016-NMCA-053, ¶ 9, 371 P.3d 1080; see Fernandez, 1993-NMSC-035, ¶ 11 ("[E]xtended judicial review of arbitrators' decisions would defeat the goal of reducing the caseload of the courts."). Consequently, "[o]nce an arbitration award is entered, the finality that courts should afford the arbitration process weighs heavily in favor of the award." State ex rel. Hooten Constr. Co. v. Borsberry Constr. Co., 1989-NMSC-007, ¶ 4, 108 N.M. 192, 769 P.2d 726; Thus, we "exercise extreme caution when considering whether to vacate an arbitration award." In re Arb. Between Town of Silver City &Silver City Police Officers Ass'n (Silver City), 1993-NMSC-037, ¶ 8, 115 N.M. 628, 857 P.2d 28.

{¶5} Nevertheless, to the extent Defendants' appeal requires us to interpret Sections 44-7A-24 and 44-7A-25, which establish the statutory grounds for vacating or modifying an arbitration award, our review is de novo. See Cates v. Mosher Enters., Inc., 2017-NMCA-063, ¶ 14, 403 P.3d 687 ("We review interpretation of statutory provisions de novo."); Ponder v. State Farm Mut. Auto. Ins. Co., 2000-NMSC-033, ¶ 7, 129 N.M. 698, 12 P.3d 960 ("We review de novo the [district] court's application of the law to the facts in arriving at its legal conclusions."). We likewise "review the [district] court's interpretation of an arbitration agreement de novo." Casias v. Dairyland Ins. Co., 1999-NMCA-046, ¶ 13, 126 N.M. 772, 975 P.2d 385.

{¶6} Defendants contend the arbitration award should be vacated pursuant to Section 44-7A-24, or, alternatively, modified pursuant to Section 44-7A-25. We review these arguments in turn.

II. The District Court Did Not Err in Denying Defendants' Motion to Vacate the Award Pursuant to Section 44-7A-24

{¶7} Defendants first argue that the district court erred in denying their motion to vacate the arbitration award pursuant to Section 44-7A-24(a)(2)-(5). Section 44-7A-24(a)(2)-(5) provides:

(a) Upon motion to the court by a party to an arbitration proceeding, the court shall vacate an award made in the arbitration proceeding if[]

....

(2) there was:

(A) evident partiality by an arbitrator appointed as a neutral arbitrator; or

(B) corruption by an arbitrator;

....

(3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy or otherwise conducted the hearing contrary to Section [44-7A-16], so as to prejudice substantially the rights of a party to the arbitration proceeding;

(4) an arbitrator exceeded the arbitrator's powers; [or]

(5) there was no agreement to arbitrate.

We review Defendants' arguments under each of these statutory bases.

A. The District Court Did Not Err in Denying Defendants' Motion to Vacate the Arbitration Award Pursuant to Section 44-7A-24(a)(4), (5)

{¶8} As a threshold matter, Defendants argue that the arbitration award should be vacated because the arbitrator decided issues that had not been agreed to, thereby violating Section 44-7A-24(a)(4), (5). We first address Defendants' arguments addressing Section 44-7A-24(a)(4), then turn to Section 44-7A-24(a)(5).

{¶9} As discussed, Section 44-7A-24(a)(4) provides, "[T]he court shall vacate an award made in the arbitration proceeding if . . . an arbitrator exceeded the arbitrator's powers." "Generally, the parties' agreement defines the scope of the arbitrator's powers." K.R. Swerdfeger Constr. v. UNMBd. of Regents, 2006-NMCA-117, ¶ 15, 140 N.M. 374, 142 P.3d 962. Accordingly, "[a]rbitrators exceed their powers when they attempt to resolve an issue that is not arbitrable because it is outside the scope of the arbitration agreement." Silver City, 1993-NMSC-037, ¶ 10 (internal quotation marks and citation omitted).

{¶10} The arbitration provisions at issue are contained in the Joint Venture Agreement (JVA) signed by Allen Hurt, M.D. (Hurt) and Justin Williams (Williams). The JVA delineated the parties' respective responsibilities in financing and providing laser treatment services, and described how they were to share the profits from this venture. The arbitration provision provides, in relevant part: "The Joint Venturers agree that any dispute, claim, or controversy concerning th[e JVA] or the termination of th[e JVA], or any dispute, claim or controversy arising out of or relating to any interpretation, construction, performance or breach of th[e JVA], shall be settled by arbitration."

{¶11} Defendants contend the arbitrator decided claims outside the scope of this arbitration provision. We conclude that each claim decided by the arbitrator "concern[ed]" the JVA or "relat[ed] to . . . performance . . . of th[e JVA]," and therefore fell within the scope of the provision.

{¶12} The arbitrator's award addressed five claims, determining: (1) Defendants violated the Unfair Trade Practices Act (UPA) by "engag[ing] in a series of misleading statements;" (2) "Williams breached the express warranties he gave to Hurt in failing to provide high quality and functional equipment as he promised;" (3) "Williams made fraudulent misrepresentations to Hurt;" (4) "Williams breached his contract with Hurt in failing to perform any of his obligations under the [JVA];" and (5) "Williams breached the implied covenant of good faith and fair dealing in his breaching the [JVA]."

{¶13} Defendants argue that "any claim based on the sale of laser equipment to . . . Hurt . . . would not arise out of the [JVA]." Although Defendants do not specify which claims they contend are "based on the sale of laser equipment," we understand Defendants to concede that the last two claims, which clearly "concern" and "relat[e] to . . . performance or breach of th[e JVA]," fell within the scope of the arbitration provision. We thus turn to the remaining claims decided by the arbitrator.

{¶14} In so deciding we may look to the conduct underlying these claims and compare this conduct to the subject matter of the JVA. See Clay v. N.M. Title Loans, Inc. 2012-NMCA-102, ¶¶ 15, 25, 28, 288 P.3d 888 (examining the conduct underlying the claims in determining whether claims were arbitrable); K. L. House Constr. Co. v. City of Albuquerque, 1978-NMSC-025, ¶ 7, 91 N.M. 492, 576 P.2d 752 ("Once it appears that there is, or is not a reasonable relationship between the subject matter of the dispute and the general subject matter of the...