WPH Architecture, Inc. v. Vegas VP, LP

360 P.3d 1145

131 Nev. Adv. Op. 88

WPH ARCHITECTURE, INC., a Nevada Corporation, Appellant,

v.VEGAS VP, LP, a Nevada Limited Partnership, Respondent.

No. 54389.

Supreme Court of Nevada.

Nov. 5, 2015.

Weil & Drage, APC, and Jean A. Weiland Trevor O. Resurreccion, Henderson, for Appellant.

Greenberg Traurig and Tami D. Cowdenand Mark E. Ferrario, Las Vegas, for Respondent.

OPINION

By the Court, SAITTA, J.:

In Nevada, it is well settled that a party who makes an unimproved upon offer of judgment in a district court action may recover attorney fees and costs incurred after the offer of judgment was made. This opinion addresses whether this is also true when the statutory offer of judgment takes place in an arbitration proceeding.

We hold that because the award of fees and costs by an arbitrator is discretionary, appellant WPH Architecture, Inc., has not demonstrated that the arbitrator manifestly disregarded Nevada law by refusing to award it fees and costs.

FACTUAL AND PROCEDURAL HISTORY

Respondent Vegas VP, LP, hired WPH to perform architectural services for a condominium project that Vegas VP was building in Las Vegas. Vegas VP brought an action against WPH for professional negligence relating to the services that WPH performed for Vegas VP. The contract provided that any disagreement between Vegas VP and WPH would be resolved by mediation and, if that were unsuccessful, binding arbitration before the American Arbitration Association (AAA).

After an unsuccessful attempt at mediation, Vegas VP filed a demand for arbitration. Prior to arbitration, WPH submitted what it claimed to be two statutory offers of judgment under NRCP 68and NRS 17.115to Vegas VP.¹Vegas VP did not accept either offer.

The case proceeded to arbitration, and an AAA panel of arbitrators ruled in favor of WPH. The arbitration order also stated that each party would bear its own fees and costs. WPH then filed a post-award motion for costs, fees, and interest, claiming that as the prevailing party it was entitled to fees and costs under Nevada law. The arbitration panel denied WPH's motion, stating that no caselaw existed which held that offers of judgment are available in arbitration proceedings in Nevada. Therefore, “[w]ithout express authority to grant fees and costs incidental to a declined offer of judgment, [the arbitration] Panel [was] disinclined to rule in favor of WPH.”

WPH subsequently filed a motion in the district court to confirm in part, modify, or correct the arbitration award to order Vegas VP to pay WPH's attorney fees, costs, and interest. The district court denied WPH's motion. This appeal follows.

DISCUSSION

WPH argues that because the arbitration panel manifestly disregarded Nevada law regarding the awarding of attorney fees and costs, the district court erred in denying WPHs motion to confirm in part, modify, or correct the arbitration award. Specifically, WPH argues that the arbitration panel disregarded NRCP 68and NRS 17.115, which provide for a party who makes an offer of judgment that its adversary does not improve upon to recover the reasonable attorney fees and costs it incurs, seeNRCP 68(f)(2); NRS 17.115(4)(c)–(d), and NRS 18.020, which requires costs to be awarded to the prevailing party in an action alleging more than $2,500 in damages, seeNRS 18.020(3).

“We review a district court's confirmation of an arbitration award de novo.” Sylver v. Regents Bank, N.A.,–––Nev. ––––, ––––, 300 P.3d 718, 721 (2013). An arbitration award “may be vacated based on statutory grounds and certain limited common-law grounds.” Bohlmann v. Printz,120 Nev. 543, 546, 96 P.3d 1155, 1157 (2004), overruled on other grounds by Bass–Davis v. Davis,122 Nev. 442, 452 n. 32, 134 P.3d 103, 109 n. 32 (2006). At common law, “an arbitration award may be vacated if it is ‘arbitrary, capricious, or unsupported by the agreement’ or when an arbitrator has ‘manifestly disregard [ed] the law.’ ” Id.(alteration in original) (quoting Wichinsky v. Mosa,109 Nev. 84, 89–90, 847 P.2d 727, 731 (1993)).

The arbitration was substantively governed by Nevada law

WPH argues that the contract between it and Vegas VP contained a choice-of-law agreement stating that any arbitration arising from the contract would be substantively governed by Nevada law. Vegas VP argues that the contract contained a choice-of-law agreement stating that the arbitration would be substantively governed by AAA rules. Contract interpretation is reviewed de novo. Bielar v. Washoe Health Sys., Inc.,–––Nev. ––––, ––––, 306 P.3d 360, 364 (2013).

The contract between Vegas VP and WPH contains two choice-of-law clauses. The first clause (AAA rules clause), found under the contract's “Arbitration” section, states that the arbitration, “unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the [AAA].” The second clause (Nevada laws clause), found in the contract's “Miscellaneous Provisions” section, states that the contract itself would be “governed by the law of the principal place of business of the Architect, unless otherwise provided.” The principle place of business of WPH is Nevada.

The United States Supreme Court has ruled on this issue in a case with facts very similar to the current case. In Mastrobuono v. Shearson Lehman Hutton, Inc.,two parties disputed how a choice-of-law provision applied to their arbitration. 514 U.S. 52, 53, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995). The contract governing the parties' dispute had both a clause stating that “ ‘any controversy’ arising out of the transactions between the parties ‘shall be settled by arbitration’ in accordance with the rules of the National Association of Securities Dealers (NASD)” anda clause stating that “the entire agreement ‘shall be governed by the laws of the State of New York.’ ” Id.at 58–59, 115 S.Ct. 1212. The Court reasoned that reading the agreement as choosing New York law to apply for boththe procedural and substantive law governing the arbitration would violate a “cardinal principle of contract construction: that a document should be read to give effect to all its provisions and to render them consistent with each other.” Id.at 63, 115 S.Ct. 1212. Thus, the Court found that “the best way to harmonize the choice-of-law provision with the arbitration provision is to read the laws of the State of New York to encompass substantive principles” and the NASD rules to govern the procedural aspect of the arbitration. Id.at 63–64, 115 S.Ct. 1212(internal quotations omitted).

Similar to Mastrobuono,a finding here that the Nevada law clause supersedes the AAA rules clause would require this court to violate a well-established tenet of contract interpretation by rendering the AAA rules clause meaningless. SeeBielar,––– Nev. at ––––, 306 P.3d at 364(holding that this court interprets a contract so as to give effect to each of its words and to not render any terms meaningless). We also find that such a finding would not express the parties' intentions when they entered into the Agreement. SeeGalardi v. Naples Polaris, LLC,––– Nev. ––––, ––––, 301 P.3d 364, 367 (2013)(“Contract interpretation strives to discern and give effect to the parties' intended meaning.”). The parties' extensively blacked out portions of the contract, which was originally a boilerplate architecture agreement entitled “Abbreviated Standard Form of Agreement Between Owner and Architect.” By blacking out portions of the contract, the parties indicated that they did not intend for those portions to be part of the contract. Yet the AAA rules clause was not similarly repudiated, indicating that the parties intended for that clause to be included in the contract. Therefore, we hold that the arbitration was substantively governed by Nevada law and procedurally governed by the AAA rules.

NRCP 68, NRS 17.115, and NRS 18.020 are substantive laws

Vegas VP argues that this court previously held attorney fees to be procedural in Tipton v. Heeren,109 Nev. 920, 859 P.2d 465 (1993). In Tipton,the court stated in a footnote that it agreed with the parties' assessment that under a choice-of-law provision in a promissory note, Wyoming law would govern substantive issues and Nevada law would govern procedural issues. Id.at 922 n. 3, 859 P.2d at 466 n. 3. The court then, without making an express finding or performing any analysis on the issue of whether attorney fees is a procedural issue, applied Nevada law to the issue of attorney fees. Id.at 924, 859 P.2d at 467. Because the court in Tiptondid not analyze the issue of whether attorney fees statutes are substantive law, we hold that Tiptonis not controlling in this case. Thus, the issue of whether attorney fees laws are procedural or substantive is one of first impression.

Federal courts have found state laws awarding attorney fees to be substantive. For example, the Ninth Circuit Court of Appeals has stated that “[s]tate laws awarding attorney[ ] fees are generally considered to be substantive laws.” Northon v. Rule,637 F.3d 937, 938 (9th Cir.2011). Indeed, federal district courts in Nevada have found NRCP 68, NRS 17.115, and NRS 18.020to all be substantive laws. SeeWalsh v. Kelly,203 F.R.D. 597, 598–99 (D.Nev.2001)(holding that NRCP 68and NRS 17.115are substantive laws); see alsoIn re USA Commercial Mortg. Co.,802 F.Supp.2d 1147, 1178 (D.Nev.2011)(holding NRS 18.020to be a substantive law).

We see no reason to disagree with the federal courts on this issue. Therefore, we hold that NRCP 68, NRS 17.115, and NRS 18.020are substantive laws that apply to the arbitration proceedings in the current case.

The award of attorney fees and costs is discretionary by an arbitrator

It is well settled that NRCP 68and NRS 17.115provide that attorney fees and costs may be awarded when a party fails to improve upon a rejected statutory offer of judgment in an action before the district court. SeeRTTC Communications, LLC v. Saratoga Flier, Inc.,121 Nev. 34, 40–41, 110 P.3d 24, 28 (2005). We have similarly ruled...