Courts throughout the United States are enamored by arbitration. Judges routinely uphold arbitration clauses in contracts. it is one way to resolve a case that could otherwise consume several days of trial.
A question then arises: Can a party waive the right to contest an arbitration clause? The Colorado Court of Appeals' decision in
Harper Hofer & Associates v. Northwest Direct Marketing, Inc., et al., ___P.3d___, No. 13CA1844, 2014 WL 5840498 indicates how a waiver can occur. In
Harper Hofer Associates, plaintiff was retained to provide expert reports and testimony in an unrelated legal matter. Various engagement letters were exchanged. Each of the letters contained an arbitration clause. None of the engagement letters were signed by all of the parties.
Demand was made for arbitration by plaintiff, seeking payment of fees and costs incurred in the unrelated legal matter. The matter proceeded to hearing, and defendants did not prevail. The arbitrator found in favor of plaintiff and entered an award. Shortly thereafter, Plaintiff filed a motion in the Denver district court seeking to change the award to a civil judgment. Defendants filed a motion seeking to vacate the award. Defendants raised the issue of whether the arbitrator had erred in finding that a contract existed, whether the arbitrator exceeded his powers by awarding attorney fees, and whether the arbitrator inappropriately denied the questioning of two defense witnesses and striking counterclaims as not timely. The Denver district court entered judgment against defendants and refused to set aside the arbitration award.
The court of appeals noted that the defendants had participated in the arbitration proceedings and made no attempt to seek a determination of the breadth of the arbitration clause.
When a party does not seek judicial resolution of the question of whether a contract exists before participating in an arbitration regarding the existence of the contract and the contract's arbitration clause, he waives any arguments about the existence of the underlying contract on appeal.
The court of appeals pointed to C.R.S. §13-22-207(2) as providing a speedy remedy for the question of whether a party must proceed into arbitration. In this case, defendants did not make use of that process, choosing instead to participate in the arbitration process and then claim lack of jurisdiction after the award was entered against them.
The court of appeals was unimpressed by the argument of defendants that they could raise the issue of jurisdiction after the arbitration award was entered against them. A party does not get the right to arbitrate its case and then have the right to a trial
after losing before the arbitrator.
To credit this argument would be to give defendants, who fully participated in the arbitration proceeding and who had a simple procedure outlined by statute providing them with a remedy in the district court before expending any resources in the arbitration, a second bite at the apple.
Defendants are seeking certiorari from the Colorado Supreme Court.
Harper Hofer & Associates' decision makes sense. A party cannot utilize the benefits of an arbitration and not be bound by the results. That is true even though no contract exists that is signed by all the parties.