F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
DEC 3 2001
TENTH CIRCUIT
PATRICK FISHER
Clerk
CURTISS SIMMONS CAPITAL
RESOURCES, INC., a Colorado
corporation,
Plaintiff-Appellant/
Cross-Appellee, Nos. 00-1487
and 00-1511
v. (D. Colorado)
EDWARD KRAEMER & SONS, (D.C. No. 97-D-643)
INC.,
Defendant-Appellee/
Cross-Appellant,
NATIONAL UNION FIRE
INSURANCE COMPANY OF
PITTSBURGH,
Defendant.
ORDER AND JUDGMENT *
Before TACHA , Chief Circuit Judge , McKAY and ANDERSON , Circuit Judges.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Curtiss Simmons Capital Resources, Inc. appeals from the grant of a motion
for confirmation of, and the denial of its own motion to vacate, an arbitration
award in favor of Edward Kraemer & Sons, Inc. Kraemer cross-appeals the
denial of its motion for attorney’s fees incurred in seeking confirmation of the
award. We affirm.
BACKGROUND
The origin of this case is a subcontract between Kraemer and Consolidated
Landscaping, Inc., dated March 2, 1992, pursuant to which Consolidated agreed
to perform certain landscaping work for Kraemer, who was the general contractor
for the construction of the Twentieth Street Viaduct in Denver, Colorado, a
project supervised by the Regional Transportation District (“RTD”). The
subcontract contained a dispute resolution paragraph providing for arbitration to
resolve any disputes between Kraemer and Consolidated, and it contained an
attorney’s fees provision providing for attorney’s fees and costs for the prevailing
party in any legal action.
On November 2, 1994, pursuant to Colo. Rev. Stat. § 38-26-107(1),
Consolidated filed a statement of claim with the RTD, alleging that Kraemer was
liable to Consolidated for $281,058.09 for damages purportedly caused by delays
in the viaduct project. In accordance with § 38-26-107(2), the RTD withheld
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contract funds from Kraemer to cover that amount, pending resolution of the
claim. On March 1, 1995, Consolidated filed an amended claim in the amount of
$358,605.60 and the RTD withheld $366,637.40 to cover that amended amount.
In October 1995, Consolidated received a $500,000 loan from Curtiss
Simmons, payable on or before April 24, 1996. In connection therewith,
Consolidated executed a security agreement granting Curtiss Simmons a security
interest in the following:
All accounts and accounts receivable now owned, or hereafter
acquired, together with all increases to and replacement thereof,
insurance proceeds, contract rights and general intangibles now
owned or hereafter acquired.
The security interest extends to any and all proceeds of the property
described herein, including, but not limited to account, chattel paper,
documents, deposit accounts, and goods.
Appellant’s App. at 172. Curtiss Simmons loaned additional funds so that
Consolidated’s total indebtedness exceeded $700,000.
On April 17, 1996, Curtiss Simmons notified Kraemer of its loan to
Consolidated and its security interest, told Kraemer that Consolidated had
defaulted on the loan, and demanded that Kraemer pay Curtiss Simmons any
money owed Consolidated under the subcontract.
At about this same time, Consolidated also defaulted on its contractual
obligations to Kraemer. Kraemer then made a demand on Consolidated’s surety,
United Pacific Insurance Company, to perform Consolidated’s remaining
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obligations under the subcontract. In May 1996, United Pacific assumed
Consolidated’s subcontract obligations and hired a replacement to perform all of
Consolidated’s remaining work on the viaduct project.
A dispute then arose between Curtiss Simmons and Union Pacific over
priority to any balances left under the subcontract. They ultimately reached an
agreement whereby Curtiss Simmons disclaimed any interest in the subcontract
balance but retained the right to pursue Consolidated’s claim for delay damages
against Kraemer.
On March 7, 1997, Curtiss Simmons filed this suit in Colorado state court
against Kraemer and its surety, National Union Fire Insurance Co., seeking
$364,678.40 in damages plus attorney’s fees and interest. Citing diversity
jurisdiction, Kraemer and National Union subsequently removed the case to
federal district court in Colorado. After some discovery, Curtiss Simmons sought
to invoke the arbitration clause in the subcontract and filed a stay in federal court
pending arbitration. The magistrate judge eventually granted the stay. On
November 21, 1997, Curtiss Simmons filed a demand for arbitration against
Kraemer in the amount of $768,310, representing Curtiss Simmons’ asserted
damages in connection with its delay claim.
Kraemer filed a counterclaim against Curtiss Simmons for damages
incurred by Kraemer because of Curtiss Simmons’ pursuit of the delay claim. The
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damages, styled “Lost Interest on Escrow Funds,” Appellant’s App. at 70,
represented the interest allegedly lost by Kraemer on the funds held in escrow by
the RTD pending resolution of the delay claim.
Kraemer and Curtiss Simmons agreed to a bifurcated proceeding in which
the merits of the claims between Kraemer and Curtiss Simmons would be
determined in the first phase and the determination of attorney’s fees to be
awarded the prevailing party, if any, would be determined in the second phase. 1
The claims between Kraemer and Curtiss Simmons were argued to a panel
of arbitrators August 2-6, 1999. On August 9, the panel entered a partial award
denying Curtiss Simmons’ claims against Kraemer and awarding Kraemer
$15,326.78 on its counterclaim against Curtiss Simmons. On October 21-22 the
panel heard argument on the attorney’s fees issue. Kraemer sought $302,000 in
attorney’s fees, costs and expenses. On November 19, 1999, the panel entered a
final award granting Kraemer $171,856.00 for attorney’s fees plus costs and
expenses in the amount of $58,464.70, for a total of $230,321.10. 2
Combined
1
Kraemer had joined Union Pacific, Consolidated’s surety, in the
arbitration. Accordingly, the parties actually initially agreed to a tri-partite
proceeding in which the claims between Kraemer and Curtiss Simmons would be
determined in the first phase, the claims between Kraemer and Union Pacific
would be determined in the second phase, and the attorney’s fees issue would be
resolved in the third phase. Kraemer and Union Pacific settled their claims
following the first phase.
2
We note there is a discrepancy of $0.40 between the amount appearing in
(continued...)
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with the damage award, the total award against Curtiss Simmons was $245,647.88
plus interest. 3
Kraemer subsequently filed a motion to confirm the arbitrators’ award.
Curtiss Simmons responded to the motion and filed its own motion to vacate the
award. At the conclusion of a hearing before the federal district court, Kraemer
made an oral motion that, if the court confirmed the award, it be permitted to seek
attorney’s fees incurred in pursuing confirmation of the award in federal court.
On November 1, 2000, the court issued a final judgment in favor of Kraemer,
confirming the arbitral award and denying Kraemer’s motion for additional
attorney’s fees incurred in pursuing confirmation. Curtiss Simmons appeals the
order confirming the arbitral award, as well as the denial of its motion to vacate
the award, and Kraemer cross-appeals the district court’s denial of attorney’s fees
Kraemer incurred in obtaining confirmation.
(...continued)
2
the arbitration award and the actual amount of fees and costs expended by
Kraemer. We rely on the figures found in the actual arbitration award.
Additionally, as part of the arbitration panel’s award, it determined that
3
Curtiss Simmons must pay Kraemer $1,389.22 to reimburse Kraemer for
administrative fees and expenses Kraemer had previously paid to the American
Arbitration Association, as well as $6,660.84 for its share of the compensation
and expenses due the arbitrators.
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DISCUSSION
“Our standard of review in cases confirming arbitration awards is the same
as for any other district court decision, ‘accepting findings of fact that are not
“clearly erroneous” but deciding questions of law de novo .’” Kelley v. Michaels ,
59 F.3d 1050, 1053 (10th Cir. 1995) (quoting First Options of Chicago, Inc. v.
Kaplan , 514 U.S. 938, 948 (1995)) (further quotation omitted). The district
court’s standard of review, in turn, which we apply as well in our own de novo
review of the district court’s application of the law, is extremely narrow and “has
been described as ‘among the narrowest known to the law.’” Bowen v. Amoco
Pipeline Co. , 254 F.3d 925, 932 (10th Cir. 2001) (quoting ARW Expl. Corp. v.
Aguirre , 45 F.3d 1455, 1462 (10th Cir. 1995)). A court may vacate an arbitration
award “only in the limited circumstances provided in § 10 of the [Federal
Arbitration Act], 9 U.S.C. § 10, or in accordance with a few judicially created
exceptions.” Id.
Curtiss Simmons argues that we should vacate the arbitration award in this
case under one of those judicially created exceptions which permits vacation of an
award which is in “‘manifest disregard’ of the law.” ARW Expl. Corp. , 45 F.3d
at 1463 (quoting Wilko v. Swan , 346 U.S. 427, 436-37 (1953)). Our court has
interpreted the manifest disregard standard to require “‘willful inattentiveness to
the governing law.’” Bowen , 245 F.3d at 932 (quoting ARW Exploration Corp. ,
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45 F.3d at 1463). “Requiring more than error or misunderstanding of the law, . . .
a finding of manifest disregard means the record will show the arbitrators knew
the law and explicitly disregarded it.” Id. (citation omitted). “‘[E]rrors in either
the arbitrator’s factual findings or his interpretation[s] of the law . . . do not
justify review or reversal. . . .’” Sheldon v. Vermonty , No. 00-3337, 2001 WL
1338399 at *2 (10th Cir. Oct. 31, 2001) (quoting Denver & Rio Grand W. R.R. v.
Union Pac. R.R. , 119 F.3d 847, 849 (10th Cir. 1997)).
Further, arbitrators need not explain their reasons for an award. See Wilko
v. Swan , 346 U.S. 427, 436 (1953), overruled on other grounds by Rodriguez de
Quijas v. Shearson/American Express, Inc. , 490 U.S. 477 (1989). Finally, an
arbitration award may be based only upon those theories or matters which may
“fairly be read” as included in the arbitration submissions. Kelley , 59 F.3d at
1054. Applying this exceedingly narrow standard of review, we turn first to
Curtiss Simmons’ appeal of the district court’s order confirming the award and
denying its motion to vacate. We then address Kraemer’s cross-appeal of the
denial of attorney’s fees incurred in pursuing confirmation of the arbitral award.
I. Curtiss Simmons’ Appeal
Curtiss Simmons argues that the arbitrators manifestly disregarded
Colorado law clearly establishing that Curtiss Simmons was merely a secured
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party assignee “attempt[ing] to collect on its debt by asserting claims that
belonged to the debtor [Consolidated],” Appellant’s Opening Br. at 16, and, as
such, protected by Article 9 of the Uniform Commercial Code, as implemented in
Colo. Rev. Stats. § 4-9-317 and 318, 4
from being affirmatively liable for damages
to Kraemer. Curtiss Simmons relies upon those statutory provisions, along with
the case of Farmers Accept. Corp. v. DeLozier , 496 P.2d 1016 (Colo. 1972):
“[t]he inquiry into whether Curtiss Simmons, as an assignee, could be held liable
on Kraemer’s counterclaim begins and ends with a review of C.R.S. § 4-9-317
and Delozier .” Appellant’s Opening Br. at 23. A review of those authorities,
however, convinces us that the arbitrators did not manifestly disregard applicable
law.
Colo. Rev. Stat. § 4-9-317 provided at the time that “[t]he existence of a
security interest . . . given to a debtor to dispose of or use collateral, without
more, does not subject a secured party to liability in contract or tort for the
debtor’s acts or omissions.” Colo. Rev. Stat. § 4-9-318 provided in part that “the
rights of an assignee are subject to: (a) [a]ll the terms of the contract between the
account debtor and the assignor and any defense or claim arising therefrom . . . .”
Those provisions were applied in DeLozier . 496 P.2d at 1018. Curtiss Simmons
Colorado has recently revised its UCC statutes. Section 4-9-317 is now
4
§ 4-9-402, and § 4-9-318 is now §§ 4-9-404, 405 and 406.
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argues that, under those statutes, as interpreted in DeLozier , in pursuing the delay
claim initially filed by its assignor, Consolidated, Curtiss Simmons did “nothing
more than . . . act[] as a secured party to collect money owed to Consolidated.”
Appellant’s Reply Br. at 12. As a secured party assignee, Curtiss Simmons
argues, it could only be subject to defensive claims in the nature of an offset to its
claim against Kraemer, but it could not be liable for an independent claim for
damages like Kraemer’s counterclaim and an award of contractually-based
attorney’s fees. Kraemer responds that Curtiss Simmons, in actively pursuing the
delay claim and by seeking an award of attorney’s fees if it prevailed, was not
merely a secured party assignee collecting a debt, but, rather, by its conduct,
affirmatively assumed all the contractual liabilities of the Kraemer/Consolidated
subcontract and was, indeed, vulnerable to both the counterclaim and the award of
attorney’s fees.
Because DeLozier is the primary Colorado case cited to us by both parties,
we examine it in some detail. DeLozier involved an action by a general
contractor (DeLozier) against the assignee (Farmers Acceptance Corporation
“FAC”) of DeLozier’s subcontractor, who had failed to fulfill its contractual
obligations. DeLozier sought payments DeLozier had made to FAC, but which
FAC had not, in turn, paid to the company who supplied materials to the
subcontractor. The Colorado Supreme Court began by announcing:
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It is a general rule that an assignee of contract rights stands in the
shoes of the assignor and has no greater rights against the debtor than
did the assignor. The assignee is also subject to all the equities and
defenses which could have been raised by the debtor against the
assignor, with the exception of those claims and defenses which are
both unrelated to the underlying contract and arise after the debtor is
notified of the assignment.
DeLozier , 496 P.2d at 1018. The court noted that the word “claim” in section 318
“no doubt includes set-offs and counterclaims.” DeLozier , 496 P.2d at 1018.
Citing § 4-9-317, the court then observed that “an assignee of contract
rights is not subject to the contract or tort liabilities imposed by the contract on
the assignor, in the absence of an assumption of such liabilities.” Id. Applying
those general principles to the particular facts of the case, the court held:
In instances such as this, where the assignee obtains money which
the assignor could only retain upon performance of a contract, the
following rule applies: “(W)here the assignor fails to perform the
contract, the assignee cannot retain mistaken, or even negligent,
payments made to it by the (debtor) unless there has been a
subsequent change of position by the assignee.”
Id. at 1018-19 (quoting Gilmore, The Assignee of Contract Rights and His
Precarious Security , 74 Yale L.J. 217, 235 n.35 (1964-65)). After finding that
FAC had not relied to its detriment on the payment made to it by DeLozier, the
court held it could not retain the money so paid. Thus, in DeLozier , the court
allowed an affirmative claim against the assignee, and allowed the recovery of
payments made to the assignee, because the assignor had failed to fulfill its
contractual obligations. The court did not, however, hold FAC, as assignee, liable
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for any damages arising out of the subcontractor’s contractual default other than
the repayment of funds mistakenly paid to it.
As Curtiss Simmons acknowledges, DeLozier , and sections 9-318 and
9-317, have been subject to both narrow and more expansive interpretations.
“Some courts interpret [section 9-318] narrowly, permitting an account debtor to
assert a claim only as an affirmative defense and not as the basis for an
independent claim against an assignee.” Lydig Constr., Inc. v. Rainier Nat’l
Bank , 697 P.2d 1019, 1020 (Wash. App. 1985) (citing cases). Other courts
construe it more broadly to permit affirmative claims against assignees in certain
situations. Id. at 1021 (citing cases).
Similarly, DeLozier has been interpreted both narrowly and expansively.
Compare , e.g. , Massey-Ferguson Credit Corp. v. Brown , 567 P.2d 440, 443
(Mont. 1977) (discussing DeLozier and noting that “[u]nder certain circumstances
an assignee has been held to have impliedly assumed the contractual obligations
of the assignor,” and finding in the case before it that the “close relationship and
participation between the assignor and assignee” rendered the assignee vulnerable
to damages in counterclaim); and K Mart Corp. v. First Pa. Bank , 29 UCC Rep.
Serv. 701 (Pa. Comm. Pl. 1980) (noting that DeLozier and another case “stand for
the proposition that, in the appropriate circumstances, an assignee can be
affirmatively required to return monies held by it as a result of mistaken or
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negligent payment, as long as it has not changed its position adversely in reliance
on the monies received,” and further observing that “[t]his rule particularly
applies when an assignee bears the greater responsibility for allowing improper
overpayments to be made”) with Michelin Tires (Canada) Ltd. v. First Nat’l Bank
of Boston , 666 F.2d 673, 679 (1st Cir. 1981) (reading DeLozier and section 9-318
narrowly and stating “to the extent that DeLozier can be read to permit an
affirmative suit against a lender who is completely unrelated to the underlying
contract, we decline to follow this departure from traditional common law
principles of restitution”).
Further, as all parties acknowledge, neither DeLozier nor any other cases
cited are factually similar to this case. And, while DeLozier recognizes the
possibility that an assignee can assume “liabilities imposed by the contract on the
assignor,” 496 P.2d at 1018, it fails to further develop the ways in which an
assignee could assume such liabilities, nor the scope of such liabilities, outside of
the specific factual context of that case. Nor, however, does it imply that an
assumption of such liabilities is only possible in the particular factual setting of
that case. Thus, it could very well be that the DeLozier court would have
concluded, were it presented to it, that Curtiss Simmons affirmatively assumed all
contractual obligations by pursuing the delay claim and seeking an award of
attorney’s fees if it prevailed. Additionally, as the Michelin court observed in
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analyzing section 9-318, “[t]he key statutory language is ambiguous.” Michelin ,
666 F.2d at 677. In short, we do not discern a clear expression of Colorado law
on the issue of whether and how an assignee like Curtiss Simmons, in the
circumstances of this case, can become liable for, or be absolutely immune from
liability for, damages and attorney’s fees arising out of a delay claim and a
counterclaim like those presented in this case.
In the absence of any such clear expression, we cannot conclude that the
arbitrators willfully disregarded applicable Colorado law. 5
Furthermore, as the
district court found, the arbitrators evidently made some crucial factual findings,
concluding that Kraemer’s counterclaim against Curtiss Simmons was based upon
Curtiss Simmons’ own conduct in the way it pursued the delay claim, not simply
upon its status as an assignee. Even if erroneous, that does not permit vacation of
the award. We therefore affirm the judgment of the district court enforcing the
arbitration award and denying Curtiss Simmons’ motion to vacate it.
5
Curtiss Simmons urges us to review various portions of the transcript of
the proceedings before the arbitrators which, it argues, show that the arbitrators
expressed a willingness to disregard the law as Curtiss Simmons’ articulated it
because of a perception that the result would be unfair. We have carefully read
the entire transcript contained in the record on appeal, and we cannot discern any
such willingness by the arbitrators. Rather, they carefully questioned each party
as to their arguments about what the law required, and expressed a desire to make
sure that they understood both the arguments of the parties and the law before
they made their decision.
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II. Kraemer’s Cross-Appeal
As indicated, at the conclusion of the hearing before the district court,
Kraemer sought attorney’s fees it incurred in seeking enforcement of the award.
The district court subsequently denied those fees. Kraemer appeals that denial.
Kraemer concedes that an award of fees incurred in obtaining enforcement
of an arbitration award is discretionary. See United Steelworkers of Am. v. Ideal
Cement Co. , 762 F.2d 837, 843 (10th Cir. 1985) (“In an action to enforce an
arbitration award, the allowance of attorney’s fees is discretionary.”); see also
Fabricut, Inc. v. Tulsa Gen. Drivers, Local 523 , 597 F.2d 227, 230 (10th Cir.
1979). We therefore review the court’s denial of such fees for an abuse of
discretion. We find no abuse of discretion in this case.
For the foregoing reasons, we AFFIRM the judgment of the district court.
ENTERED FOR THE COURT
Stephen H. Anderson
Circuit Judge
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