ARBITRATORS NOT REQUIRED TO EXPLAIN AWARDS

The Colorado Court of Appeals has ruled "as a matter of Colorado law that arbitrators are not required to explain their reasons for issuing awards authorized by an agreement." Treadwell v. Village Homes of Colorado, Inc., 08CA0304 (Nov. 25, 2009). "Absent an affirmative showing of invalidity, arbitration awards may not be set aside for want of explanation (or ... remand for explanation)." Id.(internal quotations omitted). "'A mere ambiguity in the opinion accompanying an award, which permits the inference that the arbitrator may have exceeded his authority, is not a reason for refusing to enforce the award.'" Id. (quoting United Steel Workers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598 (S. Ct. 1960).

In the Treadwell case, the defendant, Village Homes, appealed the district court's confirmation of the arbitrator's award of attorneys' fees, costs, and post- and pre-judgment interest in favor of the plaintiffs. The arbitration provision contained in the sales contract provided for award of attorneys' fees and expenses to the prevailing party "upon a showing of egregious conduct." Id. The arbitrator awarded the plaintiffs $525,000 in damages and close to $300,000 in attorneys' fees, costs, and pre-judgment interest, but made no written findings. On appeal, Village Homes argued that the arbitrator exceeded its powers with respect to the award of attorneys' fees, costs and interest. The Court of Appeals disagreed.

The Court of Appeals ruled that the award of attorneys fees and costs in this case involved the merits of the dispute, because the arbitration clause provide for attorneys' fees and costs for egregious conduct, and not whether the arbitrator was empowered to make such award. Further, the merits of dispute are not subject to judicial review, and an arbitrator's award cannot be overturned simply because the arbitrator did not explain the reasoning for the award.

The Court of Appeals noted that parties can require the arbitrator to issue written "findings," and in that instance, the arbitrator's failure to issue findings would exceed the arbitrator's powers. However, the merits of the case shown in the findings would not be subject to judicial review. Only whether the award was within the powers of the arbitrator would be reviewable.

Posted By: Brent W. Houston, Esq.