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Butler v. Dunlap (1/24/97), 931 P 2d 1036
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NOTICE: This opinion is subject to formal correction before
publication in the Pacific Reporter. Readers are requested to bring
errors to the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501; (907) 264-0607.
THE SUPREME COURT OF THE STATE OF ALASKA
REX LAMONT BUTLER, )
) Supreme Court No. S-7330
Appellant, )
) Superior Court No.
v. ) 3AN-95-2314 CI
)
DONALD DUNLAP, ) O P I N I O N
)
Appellee. ) [No. 4465 - January 24, 1997]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Brian Shortell, Judge.
Appearances: Rex Lamont Butler and Linda
Thomas, Anchorage, for Appellant. Herbert A.
Viergutz, Anchorage, for Appellee.
Before: Compton, Chief Justice, Rabinowitz,
Matthews, Eastaugh, and Fabe, Justices.
PER CURIAM.
I. INTRODUCTION
Rex Butler challenges the standard of review applied by
the superior court in upholding a Bar Association Fee Arbitration
Panel's decision awarding a $4,417.50 attorney's fee refund. He
argues in part that the proper scope of review is not the highly
deferential standard called for by the Uniform Arbitration Act but,
rather, the arbitrary and capricious standard applied in cases of
mandatory arbitration.
II. FACTS AND PROCEEDINGS
On July 29, 1993, Donald Dunlap entered into a written
contract governing the provision of legal services by Rex Butler.
Under the terms of the contract, Butler agreed to represent Dunlap
in the pending appeal of Dunlap's claim against the Bavarian
Village Condominium Association (Association). The lawsuit related
to the towing of Dunlap's vehicle by the Association in 1991.
According to the written agreement governing the provision of legal
services, Butler agreed to represent Dunlap "as to all claims
arising out of"his suit against the Association and to "prosecute
[Dunlap]'s claim with all reasonable vigor and force." In
exchange, Dunlap agreed to pay Butler the sum of $150 per hour for
work in conjunction with his appeal.
Subsequently this court issued a Memorandum Judgment and
Opinion affirming the superior court's grant of summary judgment
for the Association. Dunlap, dissatisfied with Butler's
performance in the matter, requested through the Alaska Bar
Association a Fee Arbitration Proceeding in accordance with Alaska
Bar Rule 34. (EN1) Dunlap alleged that Butler had breached their
agreement by not briefing the issues specifically referenced in the
statement of points on appeal. Dunlap requested that he be
reimbursed $5000 in attorney's fees.
The Bar Association Fee Arbitration Panel issued a
decision awarding Dunlap $4,417.50 plus interest from February 4,
1994. The panel found by a preponderance of the evidence that
Butler had agreed to litigate five specific points on appeal, and
that although he filed a "Statement of Point [sic] on Appeal"
shortly after taking the case, Butler failed to fully brief the
five points in accordance with the minimal standards of Appellate
Rule 212(c)(1)(i). The panel additionally noted that Butler had
never informed Dunlap of any intention to deviate from the scope of
his agreement to litigate the five points, and that Dunlap never
acquiesced in any such deviation.
The panel rested its decision to reduce Butler's fee on
two alternative grounds. First, it determined that the total fee
charged by Butler for work on Dunlap's case was excessive. In
particular, the panel found that Dunlap's "most significant
argument on appeal"was briefed in a "cursory"fashion and that the
case was "relatively simple . . . in terms of the size of the
record and the complexity of the issues." Second, the panel found
relevant Butler's failure to advise Dunlap that the fees would
exceed his initial estimate and stated that "[w]hile this failing
alone would not necessarily mandate a significant reduction of the
fee, it is a further indication of the poor communication practices
utilized by Butler in this case."
After the panel rendered its decision, Butler applied to
the superior court for vacation or correction of the award pursuant
to Alaska Bar Rule 40 and AS 09.43.020. The superior court denied
the motion. In so doing, the superior court stated:
This court may not review the factual findings
of the Panel, and will only overturn the
Panel's construction of a contract if it is
not a "reasonably possible"interpretation.
Breeze v. Sims, 778 P.2d 215, 217 (Alaska
1989). I find that in light of the evidence
before it, the Panel's interpretation of the
contract between Dunlap and Butler is
reasonable enough to withstand review.
Additionally, the panel's determination that
the fee charged to Dunlap was unreasonable is
a factual determination that I have no power
to review. The application is DENIED. The
fee award is AFFIRMED.
Butler now brings this appeal.
III. STANDARD OF REVIEW
The fundamental issue on appeal is the proper standard of
review of an arbitrator's decision made in accordance with the
Alaska Bar Rules. This is a question of law. Accordingly, this
court will review the superior court's decision de novo, adopting
the rule of law that is most persuasive in light of precedent,
reason and policy. Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska
1979).
The usual rule applied by this court is to give great
deference to the arbitrator's findings of both fact and law. As a
matter of both policy and law, the court is generally "loathe to
vacate an award made by an arbitrator." Department of Pub. Safety
v. Public Safety Employees Ass'n, 732 P.2d 1090, 1093 (Alaska
1987).
IV. DISCUSSION
The proper standard of review of an arbitration award
depends on the basis of the arbitration. For arbitrations
conducted pursuant to the Alaska Uniform Arbitration Act (UAA), the
standard of review is highly deferential. In Breeze v. Sims, 778
P.2d 215 (Alaska 1989), this court reviewed a superior court
affirmance of an arbitration panel's decision ordering an attorney
to partially refund fees paid pursuant to an oral agreement. The
arbitration action was maintained pursuant to Alaska Bar Rule 34.
Id. at 216. The Breeze court held that the proper standard for
review of an arbitrator's decision is as follows:
[F]indings of fact are unreviewable and the
arbitrator's construction of the contract will
be reviewed to determine whether "it is a
reasonably possible one that can seriously be
made in the context in which the contract was
made."
Id. at 217 (citation omitted). (EN2)
In Ahtna, Inc. v. Ebasco Constructors, Inc., 894 P.2d 657
(Alaska 1995), we emphasized that even this narrow judicial review
of an arbitrator's construction of the contract is unavailable in
a UAA governed arbitration unless the dispute is limited to the
meaning of the arbitration clause itself. There we said:
Ebasco claims that the standard of review
with regard to an arbitrator's "conclusions of
law"is found in the following passage of
Breeze v. Sims: "the arbitrator's
construction of the contract will be reviewed
to determine whether it þis a reasonably
possible one that can be seriously made in the
context in which the contract was made.þ" 778
P.2d at 217 (quoting University of Alaska v.
Modern Constr. Inc., 522 P.2d 1132, 1137
(Alaska 1974)). Ebasco argues that the
arbitrator's interpretation of the JVA could
not be "seriously made,"and therefore urges
us to affirm the superior court's vacation of
the award.
Ebasco is wrong to contend that Alaska
law allows courts to routinely review the
merits of an arbitrator's legal conclusions.
An examination of Breeze and Modern
Construction reveals that the language Ebasco
proffers here represents the standard of
review for examining the arbitrator's
construction of the contract with regard to
arbitrability. As we have elsewhere held,
"[t]here are no statutory grounds for review
of an arbitrator's determination as to the
meaning of contract provisions which do not
pertain to the issue of arbitrability."
Alaska State Housing Auth. v. Riley Pleas,
Inc., 586 P.2d 1244, 1247 (Alaska 1978). "We
clearly indicated [in Riley Pleas] that
judicial review under AS 09.43.120 of an
arbitrator's decision is limited to issues of
arbitrability. . . . In accordance with Riley
Pleas, we cannot address [an] argument that
the arbitrator incorrectly interpreted the
collective bargaining agreement,"unless such
an argument is limited to a dispute over the
meaning of the arbitration clause. Masden v.
University of Alaska, 633 P.2d 1374, 1376-77
(Alaska 1981) (emphasis added, footnote
omitted).
Id. at 661.
A somewhat less deferential standard is used to review
arbitration awards governed by contracts that are expressly
excluded from the UAA by AS 09.43.010, such as labor-management
contracts. (EN3) For cases of this nature, the common law standard
of judicial review is gross error, either factual or legal. See
Nizinski v. Golden Valley Elec. Ass'n, Inc., 509 P.2d 280, 283
(Alaska 1973); City of Fairbanks v. Rice, 628 P.2d 565, 567 (Alaska
1981); City of Valdez v. 18.99 Acres, 686 P.2d 682, 687-88, n.9
(Alaska 1984). "Gross error"is defined as "only those mistakes
which are both obvious and significant." Rice, 628 P.2d at 567.
The most searching standard of review of arbitration
awards applies in cases of compulsory arbitration. Here the court
must overturn an arbitrator's finding if it concludes the
determination was "arbitrary and capricious." See Public Safety
Employees Ass'n, Local 92 v. State, 895 P.2d 980, 984 (Alaska
1995), aff'd on reh'g, 902 P.2d 1334 (Alaska 1995), and
Municipality of Anchorage v. Anchorage Police Dept. Employees
Ass'n, 839 P.2d 1080, 1088 (Alaska 1992). The arbitrary and
capricious standard of review has been impliedly equated with an
abuse of discretion standard. Id.
Butler claims that the superior court was required, by
due process, to review the legal conclusions of the arbitration
panel under the arbitrary and capricious standard. Butler's
arguments based upon due process are foreclosed by our recent
decision in Miller v. Purvis, 921 P.2d 610 (Alaska 1996). There
attorney Miller argued that mandatory fee arbitration, pursuant to
Alaska Bar Rules 34 through 40, is constitutional only where there
is judicial review on the merits, that is, awards should be
reviewable for clearly erroneous findings of fact and arbitrary and
capricious applications of law. In Miller, we held that the
limited scope of judicial review provided by the Alaska Bar Rules
in connection with mandatory fee arbitrations does not constitute
a denial of due process. (EN4) In reaching this holding, we
employed the balancing approach expressed in Matthews v. Eldridge,
424 U.S. 319, 335 (1976), stating in part:
Both the attorney and the former client
have an interest in fair, expedient and
inexpensive adjudication. Appellate review of
an arbitration panel's decision in order to
determine either clear error of fact or law
would reduce the risk of an unjust decision by
an arbitration panel. On the other hand the
same concerns which underlie the limits on
appealability under the arbitration act apply
to those limits in the context of attorney fee
arbitration. They are that review on the
merits tends to cause delay, necessitates
greater judicial involvement, is more apt to
require the employment of counsel, and thus
cause greater expense . . . .
In addition to these generic
considerations there are factors which are
unique to attorney fee arbitration. These are
the need for public confidence in the
lawyer/client relationship, the difficulty
which clients of limited income may have in
procuring an attorney to represent them
against another attorney, and the
vulnerability of clients when litigating
against their former lawyers. Also to be
considered is the fact that Alaska has had
mandatory fee arbitration since 1974. The
system has apparently worked well . . . . In
view of these factors and circumstances we are
not convinced that, for purposes of the
Matthews v. Eldridge approach, the benefits to
be gained from appellate review on the merits
necessarily outweighs the detriments which
such review would entail.
Miller at 17-18.
Relying on prior precedent, Butler also urges this court
to adopt, under the common law, the arbitrary and capricious
standard for review of fee arbitration decisions. In State v.
Public Safety Employees Ass'n, 798 P.2d 1281, 1287-88 (Alaska
1990), in the context of compulsory "interest"arbitration, we
indicated in dictum that a heightened standard of judicial review
might be constitutionally required. (EN5) In addition to noting
that his participation in the arbitration was compelled by Bar
Rule, thus distinguishing it from voluntary arbitration under the
UAA, Butler suggests that the subject matter of the case at bar is
akin to "interest arbitration"as defined in Public Safety
Employees Ass'n.
We hold that Miller requires rejection of Butler's
arguments in favor of adopting an arbitrary and capricious standard
of review for fee arbitration awards based on Public Safety
Employees Ass'n. A similar contention was implicitly rejected in
Miller.
V. CONCLUSION
The superior court's denial of Butler's application for
vacation or correction of the December 19, 1994 award of the Bar
Association Fee Panel is AFFIRMED.
ENDNOTES:
1. Alaska Bar Rule 34(b) provides in relevant part:
Arbitration pursuant to these rules is
mandatory for an attorney when commenced by a
client. . . .
Alaska Bar Rule 34(c) provides:
All disputes concerning fees charged for
professional services or costs incurred by an
attorney are subject to arbitration under
these rules except for:
(1) disputes where the attorney is also
admitted to practice in another state or
jurisdiction and (s)he maintains no office in
the state of Alaska and no material portion of
the legal services were rendered in the state
of Alaska, unless (s)he appeared under Alaska
Civil Rule 81;
(2) disputes where the client seeks
affirmative relief against the attorney for
damages based upon alleged malpractice or
professional misconduct; or
(3) disputes where the fee to be paid by
the client or on his behalf has been
determined pursuant to state statute or by a
court rule, order or decision;
(4) disputes over fees which were charged
more than six years earlier, unless the
attorney or client could maintain a civil
action over the disputed amount.
2. This standard of review was explicitly adopted by the superior
court in the case at bar.
3. AS 09.43.010 states: "A written agreement to submit an
existing controversy to arbitration or a provision in a written
contract to submit to arbitration a subsequent controversy between
the parties is valid, enforceable, and irrevocable, except upon
grounds that exist at law or in equity for a revocation of a
contract." However, AS 09.43.010-.180 do not apply to a labor-
management contract unless they are incorporated into the contract
by reference or their application is provided for by statute.
4. In the context of fee arbitration disputes, the grounds for
vacating an award are
(1) [t]he award was procured by fraud or
other undue means;
(2) there was evident partiality by an
arbitrator appointed as a neutral or
corruption in any of the arbitrators or
misconduct prejudicing the rights of a party;
(3) the arbitrators exceeded their
powers; [or]
(4) the arbitrators refused to postpone
the hearing upon sufficient cause being shown
for postponement or refused to hear evidence
material to the controversy or otherwise so
conducted the hearing, contrary to the
provisions of AS 09.43.050, as to prejudice
substantially the rights of a party[.]
AS 09.43.120(a)(1)-(4).
AS 09.43.130 provides the following additional grounds
for judicial modification or correction of an arbitration award:
(1) there was an evident miscalculation
of figures or an evident mistake in the
description of a person, thing or property
referred to in the award;
. . .
(3) the award is imperfect in a matter of
form not affecting the merits of the
controversy.
5. "We believe it appropriate to apply the arbitrary and
capricious standard when reviewing awards in compulsory interest
arbitrations. Without deciding whether such a standard is
constitutionally required, . . . we will henceforth apply it as a
matter of common law."
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