Comprehensive Orthopaedics & Musculoskeletal Care, LLC v. Axtmayer
Comprehensive Orthopaedics & Musculoskeletal Care, LLC v. Axtmayer
Opinion of the Court
Opinion
J. The sole issue on appeal is whether the arbitrator exceeded his authority in declining to award attorney’s fees pursuant to the parties’ arbitration agreement. The plaintiffs, Comprehensive Orthopaedics and Musculoskeletal Care, LLC (Comprehensive), and certain physician members of Comprehensive,
Axtmayer, a physician, was employed by the plaintiffs pursuant to an employment agreement (agreement). Section 11 of the agreement contains a restrictive covenant that prohibits Axtmayer from competing with Comprehensive or disrupting any of its business relationships for a period of three years subsequent to the termination of Axtmayer’s employment. The restrictive covenant’s terms apply to various towns in the state and, in addition, prohibit Axtmayer from maintaining a business relationship with various Connecticut hospitals outside of the restricted territories.
Subsequently, the parties entered into an arbitration agreement to submit various issues arising from the employment relationship, including the question of whether Axtmayer had violated the terms of the restric
On February 4, 2008, the plaintiffs filed an application with the Superior Court to vacate the award only with respect to the arbitrator’s decision not to award attorney’s fees. The plaintiffs claimed that the arbitrator
“Judicial review of arbitral decisions is narrowly confined. . . . When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties’ agreement. . . . When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission. . . . Because we favor arbitration as a means of settling private disputes,
“Where the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous. Courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrators’ decision of the legal questions involved. ... In other words, [u]nder an unrestricted submission, the arbitrators’ decision is considered final and binding; thus the courts will not review the evidence considered by the arbitrators nor will they review the award for errors of law or fact. . . .
“Even in the case of an unrestricted submission, we have . . . recognized three grounds for vacating an award: (1) the award rules on the constitutionality of a statute ... (2) the award violates clear public policy . . . [and] (3) the award contravenes one or more of the statutory proscriptions of § 52-418. . . . [Section] 52-418 (a) (4) provides that an arbitration award shall be vacated if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.
“In our construction of § 52-418 (a) (4), we have, as a general matter, looked to a comparison of the award with the submission to determine whether the arbitrators have exceeded their powers.” (Internal quotation marks omitted.) Harty v. Cantor Fitzgerald & Co., 275 Conn. 72, 80-81, 881 A.2d 139 (2005). The standard for reviewing a claim that the award does not conform to the submission requires what we have termed “ ‘in effect, de novo judicial review.’ ” Id., 84. “Although we
“In determining whether an arbitrator has exceeded the authority granted under the contract, a court cannot base the decision on whether the court would have ordered the same relief, or whether or not the arbitrator correctly interpreted the contract. The court must instead focus on whether the [arbitrator] had authority to reach a certain issue, not whether that issue was correctly decided. Consequently, as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of authority, the award must be enforced. The arbitrator’s decision cannot be overturned even if the court is convinced that the arbitrator committed serious error.”
In the present case, we conclude that the arbitrator’s decision not to award attorney’s fees conformed to the submission, and, accordingly, that the arbitrator did not exceed his authority. At the outset, it is helpful to distinguish this case from cases in which we have vacated an arbitration award on the ground that the arbitrator exceeded his authority. In the leading case of Harty v. Cantor Fitzgerald & Co., supra, 275 Conn. 99-100, we determined that the arbitrator’s award of double damages conformed to the submission, but that his award of attorney’s fees did not conform to the submission, and therefore, that he had exceeded his authority with respect to that award. We reached differing results on the basis of the scope of the submission. In Harty, the submission asserted that “ ‘it is understood and agreed that the arbitrators are not authorized or entitled to include as part of any award rendered by them, special, exemplary or punitive damages or amounts in the nature of special, exemplary or punitive damages regardless of the nature or form of the claim or grievance that has been submitted to arbitration . . . .’ ” Id., 76. With respect to double damages, we concluded that because “the submission’s limitation on an award of ‘punitive damages,’ or ‘damages in the nature of punitive damages,’ is ambiguous with respect to whether the contract provision was designed to
In contrast, with respect to the award of attorney’s fees, because “attorney’s fees and costs provide the same relief and serve the same function as would be afforded by common-law punitive damages,” that award did not conform to the submission’s express prohibition as to those types of damage awards. Harty v. Cantor Fitzgerald & Co., supra, 275 Conn. 99-100. Likewise, in other cases, our determination that an arbitrator has exceeded his authority has been premised on similar circumstances in which the arbitrator’s award included items that were not submitted to, or outside the scope of, the arbitration. See Office of Labor Relations v. New England Health Care Employees Union, District 1199, AFL-CIO, 288 Conn. 223, 232, 951 A.2d 1249 (2008) (award conferred remedy to nonparties); Board of Education v. AFSCME, 195 Conn. 266, 273, 487 A.2d 553 (1985) (award granted on basis of document outside scope of collective bargaining agreement; submission expressly prohibited such review); Waterbury Construction Co. v. Board of Education, 189 Conn. 560, 563, 457 A.2d 310 (1983) (award determined, in part, on basis of item parties had not submitted to arbitration); Local 63, Textile Workers Union v. Cheney Bros., 141 Conn. 606, 616, 109 A.2d 240 (1954) (award included reduction of base pay rates despite fact that issue of base pay rates not submitted to arbitration), cert. denied, 348 U.S. 959, 75 S. Ct. 449, 99 L. Ed. 748 (1955).
The dissent’s focus, like the plaintiffs’, on whether the arbitrator correctly determined that Comprehensive “prevailed” is misplaced. Such a query focuses not on whether the arbitrator exceeded his authority, but on whether the arbitrator was wrong on a legal or factual issue. In attempting to demonstrate the arbitrator’s error, the dissent engages in the expanded scope of judicial review that our law expressly prohibits, namely, review of the arbitrator’s factual and legal conclusions. See, e.g., Bridgeport v. Bridgeport Police Local 1159, supra, 183 Conn. 106 (“award cannot be reviewed for errors of law or fact”); see also Moore v. First Bank of San Luis Obispo, 22 Cal. 4th 782, 788, 996 P.2d 706, 94 Cal. Rptr. 2d 603 (2000) (arbitrator’s failure to designate prevailing party constituted error of law and “[e]ven if legally erroneous, such an arbitral decision as to who, if anyone, prevailed . . . [was] not . . . reviewable”). More importantly, expanded judicial review is contrary to our well settled and deferential policy favoring arbitration. See, e.g., Hottle v. BDO Seidman, LLP, 268 Conn. 694, 708, 846 A.2d 862 (2004) (Arbitration is “well recognized as an effective and expeditious means of resolving disputes between willing parties desirous of avoiding the expense and delay frequently attendant to the judicial process .... Thus, [i]t has long been the policy of the law to interfere as little as possible with the freedom of consenting parties to achieve that objective . . . .” [Internal quotation marks omitted.]); Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., supra, 258 Conn. 110 (goal of arbitration is efficient, economical and expeditious res
The simple but essential distinction between this case and Harty is as follows. In Harty, the arbitrator
The judgment is affirmed.
In this opinion NORCOTT, ZARELLA and QUINN, Js., concurred.
In addition to Comprehensive, the plaintiffs include Paul H. Zimmering, Jeffrey Pravda, Robert Dudek, Leonard Kolstad, Ronald Paret and Robert Biondino. We refer to the plaintiffs individually by name where necessary and collectively as the plaintiffs.
The plaintiffs appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1.
General Statutes § 52-418 (a) provides in relevant part: “Upon the application of any party to an arbitration, the superior court for the judicial district in which one of the parties resides . . . shall make an order vacating the award if it finds any of the following defects ... (4) if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.”
The covenant set forth a restricted territory comprised of Cheshire, Wallingford, Meriden, North Haven, Northford, Southington, Durham, Ham-den, Middlefield, Kensington and Berlin, and prohibited Axtmayer from maintaining a relationship with Veteran’s Memorial Medical Center, Hartford Hospital, University of Connecticut Health Center, Charlotte-Hungerford Hospital, Hospital of St. Raphael, Yale-New Haven Hospital and Bradley Memorial Hospital.
The arbitration agreement provides that the parties “have agreed to submit to binding arbitration any and all issues or claims that they have against each other in order to, among other reasons, reach an expedited resolution of their claims and reduce their expenses . . . .” The parties submitted claims that arose out of Axtmayer’s employment and subsequent termination including breach of contract, breach of fiduciary duty and bad faith, and claims that arose out of alease of premises between the two parties.
The arbitrator did not articulate the parameters of the new restrictions set forth on the basis of his reformation.
On April 11, 2008, the plaintiffs filed a motion to reargue, but that filing was incomplete and was returned to the plaintiffs. The plaintiffs filed a proper motion on April 25, 2008, which was beyond the twenty day period in which to file a timely motion to reargue. On June 11, 2008, the trial court issued a memorandum of decision in which it granted the plaintiffs’ motion to reargue but denied the requested relief. In that memorandum, the court rejected the plaintiffs’ new contention that the submission was restricted and stated that even if the submission was restricted, the arbitrator was within Ids authority to “resolve ‘any and all claims [the parties] have against each other.’ ”
This directive is distinguishable from a “manifest disregard” analysis. In Harty v. Cantor Fitzgerald & Co., supra, 275 Conn. 85, we clarified that a claim that an arbitrator has exceeded his authority may be established by showing that an award failed to conform to the submission, or that the arbitrator manifestly disregarded the law. In Garrity v. McCaskey, 223 Conn. 1, 6, 612 A.2d 742 (1992), we had adopted a three part test to determine whether an arbitrator has manifestly disregarded the law. In the present case, the plaintiffs do not claim error under the manifest disregard standard, and, accordingly, we confine our review to whether the award conformed to the submission.
In support of its assertion that the court may review the arbitrator’s conclusions of fact and law with respect to the award of attorney’s fees, the dissent principally relies on cases from the intermediate Maryland Court of Appeals. See footnote 6 of the dissent. The rationale underpinning those cases was premised on the decision of Agnew v. Lacey Co-Ply, 33 Wash. App. 283, 654 P.2d 712 (1982), cert. denied, 99 Wash. 2d 1006 (1983), which the Washington Court of Appeals recently rejected outright in Morrell v. Wedbush Morgan Securities, Inc., 143 Wash. App. 473, 487, 178 P.3d 387 (2008) (“Agnew court thereby corrected what it perceived as an arbitrators’ legal mistake in a maimer that Washington law does not permit”). We,
On appeal, the plaintiffs argue that the arbitration agreement was to be governed by Connecticut law, and that under our law, Comprehensive was the prevailing party. Despite the fact that the arbitration agreement contained a choice of law provision, the plaintiffs cite no authority for the proposition that such a clause compels a particular result when the arbitrator has the authority to determine the factual and legal issues presented. Of course, if the arbitrator had determined an issue on the basis of New York law, for example, despite the clear choice of law provision, such an act likely would form the basis for a colorable “manifest disregard” claim. See Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., supra, 273 Conn. 95.
Dissenting Opinion
join, dissenting. The majority concludes that the arbitrator’s decision refusing to award attorney’s fees to the named plaintiff, Comprehensive Orthopaedics and Musculoskeletal Care, LLC,
The resolution of the issue in this appeal is informed by our analysis in Harty v. Cantor Fitzgerald & Co., 275 Conn. 72, 881 A.2d 139 (2005). The arbitration agreement in Harty expressly precluded the arbitrator from awarding “punitive damages or amounts in the nature of . . . punitive damages . . . .” (Internal quotation marks omitted.) Id., 76. The relevant issues in Harty, for puiposes of this appeal, were whether the arbitrator had exceeded his authority by awarding: (1) double damages under the wage collection statute, General Statutes § 31-72; and (2) attorney’s fees. Harty v. Cantor Fitzgerald & Co., supra, 88. In that case, as in the present case, there was no dispute that the submission was unrestricted, in the sense that it did not condi
“Even with an unrestricted submission, however, it is well settled that the award may be reviewed to determine if the arbitrators exceeded their authority, one of the statutory grounds under [General Statutes] § 52-418 for vacating an award. Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., [273 Conn. 86, 94, 868 A.2d 47 (2005)]. We have explained that, [i]n our construction of § 52-418 (a) (4), we have, as a general matter, looked to a comparison of the award with the submission to determine whether the arbitrators have exceeded their powers. ... Id. The standard for reviewing a claim that the award does not conform to the submission requires what we have termed in effect, de novo judicial review. State v. New England Health Care Employees Union, District 1199, AFL-CIO, 265 Conn. 771, 789, 830 A.2d 729 (2003). . . . Our inquiry generally is limited to a determination as to whether the parties have vested the arbitrators with the authority to decide the issue presented or to award the relief conferred. With respect to the latter, we have explained that, as long as the arbitrator’s remedies were consistent with the agreement they were within the scope of the submission. [Id., 790]; see also In re Matter
In Harty, in deciding whether the arbitrator had exceeded his authority, we applied the following analytical framework. We first compared the award to the submission and noted the absence of any express reference in the award to “punitive” damages. Id., 91. We
That examination yielded different results. With respect to the award of double damages under § 31-72, because the case law was ambiguous as to whether such damages are punitive, we concluded that the arbitrator was acting within the scope of his authority by interpreting the contract to permit an award of such damages. Id., 98. By contrast, the case law demonstrated that “attorney’s fees and costs provide the same relief and serve the same function as would be afforded by common-law punitive damages. See Berry v. Loiseau, [223 Conn. 786, 827, 614 A.2d 414 (1992)] (attorney’s fees are element of punitive damages); Tedesco v. Maryland Casualty Co., [127 Conn. 533, 538, 18 A.2d 357 (1941)] (same).” Harty v. Cantor Fitzgerald & Co., supra, 275 Conn. 99-100. Therefore, we concluded that the law clearly demonstrated that the fees were punitive in nature, and, accordingly, the arbitrator had exceeded his authority by including those in the award. Id., 100.
The present case is the converse of Harty. Rather than precluding the arbitrator from including certain compensation in the award, the agreement mandates that the arbitrator include certain compensation in the award if a factual predicate is met, namely, that the
I begin by comparing the arbitration agreement and the submission to the award. See Administrative & Residual Employees Union v. State, 200 Conn. 345, 348, 510 A.2d 989 (1986) (“[t]he arbitration agreement and the submission constitute the charter of the entire arbitration proceedings . . . and define the powers of the arbitrator and the issues to be decided” [citation omitted; internal quotation marks omitted]). In the arbitration agreement, the parties agreed to submit to binding arbitration “any and all issues or claims that they have against each other” and that “[t]he [arbitrator shall apply the laws of the [s]tate of Connecticut wherever applicable and relevant.” In the section of the agreement titled “Expenses,” the parties agreed as follows: “As to [§] 11 of the [employment [agreement [titled ‘Restrictive Covenant’] . . . the [arbitrator shall award attorney’s fees and costs only to [the named plaintiff] and only if [the named plaintiff] prevails in its claims under [§] 11 of the [e]mployment [agreement.” (Emphasis added.) The parties submitted the following issues to be decided by the arbitrator. The plaintiffs asked the arbitrator to decide: “Did [the named defendant, Alfredo L. Axtmayer
A comparison between the award and the submission reflects that, as in Harty, the arbitrator did not use the precise term at issue. In other words, the arbitrator did not state expressly that the named plaintiff had “prevailed” or “not prevailed” on its claims under § 11 of the employment agreement. As in Harty, therefore, we turn to our case law to determine whether a party that is awarded damages on a claim, even in an amount less than requested, has “prevailed” on that claim.
The Appellate Court aptly has summarized the law on this question in the context of discretionary awards of attorney’s fees to prevailing parties: “Our Supreme Court and this court, in construing various statutory fee shifting provisions, repeatedly have cited favorably the following definition of a prevailing party: [A] party in whose favor a judgment is rendered, regardless of the amount of damages awarded . . . . Frillici v. Westport, 264 Conn. 266, 285, 823 A.2d 1172 (2003); Wallerstein v. Stew Leonard’s Dairy, [258 Conn. 299, 303, 780 A.2d 916 (2001)]; Right v. Breen, 88 Conn. App. 583, 591, 870 A.2d 1131 [(2005), rev’d on other grounds, 277 Conn. 364, 890 A.2d 1287 (2006)]; see also Wallerstein v. Stew Leonard’s Dairy, supra, 304 (prevailing party is a legal term of art . . . [referring to] one who has been awarded some relief by the court. . .). Generally, costs may be awarded to a successful party-plaintiff as the prevailing party where there is success on the merits of the case although not to the extent of the plaintiff’s original contention, or where the plaintiff is not awarded the entire claim. A party need not prevail on all issues to justify a full award of costs, and it has been held that if the prevailing party obtains judgment
The parties in this case undoubtedly vested the arbitrator with authority to decide whether the named defendant had violated the restrictive covenant and, if so, the amount of damages the plaintiffs were entitled to recover for that breach. Indeed, the defendants had asked the arbitrator to conclude that the plaintiffs were entitled to no payment. Accordingly, the arbitrator’s legal and interpretive functions, consistent with the parties’ submissions, were completed upon reaching those
Although the trial court concluded that the arbitrator could have viewed the term prevail as ambiguous because, by virtue of receiving only 50 percent of the liquidated damages sought, the plaintiffs’ proverbial glass was either “half full” or “half empty,” neither the defendants nor the trial court has cited a single source to support that interpretation. In light of the clearly contrary meaning of prevailing party, that interpretation is not merely an incorrect one; it is implausible that the parties intended such an interpretation. See Kashner Davidson Securities Corp. v. Mscisz, 531 F.3d 68, 78 (1st Cir. 2008) (“With respect to the authority to interpret, the [arbitration] [p]anel’s disregard of the unambiguous text of a [National Association of Securities Dealers] [c]ode provision cannot be deemed a mere interpretation. To find otherwise and expand the concept of ‘interpretation’ to include the [p]anel’s dismissal decision in this case would be tantamount to giving . . . arbitration panels a blank check to [act] in contravention of an explicit provision of the [c]ode. Our deference to the decisions of arbitrators does not extend that far.”). It is a well settled principle of arbitration law that, “[a]n arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice. He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining
As another jurisdiction has noted: “Here, the parties’ agreement mandates the arbitrator to award attorney fees and expenses to the prevailing party. It leaves no discretion to the arbitrator to deny attorney fees to the prevailing party. In ruling on [the plaintiffs] motion to modify, the arbitrator ignored the parties’ agreement and fashioned his own rule that no prevailing party attorney fees will be awarded if any fault is attributable to each of the parties. The arbitrator’s ruling is contrary to the parties agreement, it exceeds the arbitrator’s power, and the award may be properly vacated . . . .”
The arbitrator in the present case had complete discretion to decide whether, under the facts and the terms of the contract, the named defendant had violated the restrictive covenant. Once the arbitrator determined, however, that the named defendant had violated the covenant and thus the plaintiffs were entitled to recover damages for that breach, the right to attorney’s fees was not a matter of discretion or contract interpretation.
Accordingly, I respectfully dissent.
See footnote 1 of the majority opinion for the listing of the individual plaintiffs involved in this appeal. References herein to those individuals and Comprehensive Orthopaedics and Musculoskeletal Care, LLC, jointly, are to the plaintiffs.
We have used the term “unrestricted submission” in several ways, each of which has different legal implications. See Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., 273 Conn. 86, 89 n.3, 868 A.2d 47 (2005) (“[a] submission is unrestricted when, as in the present case, the parties’ arbitration agreement contains no language restricting the breadth of issues, reserving explicit rights, or conditioning the award on court review” [internal quotation marks omitted]).
Alfredo L. Axtmayer, M.D., P.C., also was named as a defendant in the present case. We refer to Axtmayer individually as the named defendant, and to him and his professional corporation jointly as the defendants.
It is wholly irrelevant that the arbitrator reformed the agreement to reduce the liquidated damages provision. The arbitrator did not strike either the restrictive covenant or the liquidated damages clause as unenforceable.
The agreement at issue in Sooner Builders & Investments, Inc. v. Nolan Hatcher Construction Services, LLC, supra, 164 P.3d 1068, provided: “Should either party employ an attorney to institute suit or demand arbitration to enforce any of the provisions hereof . . . the prevailing party shall be entitled to recover reasonable attorney’s fees, costs, charges and expenses expended or incurred therein.” (Internal quotation marks omitted.)
The agreement at issue in Bernard, v. Kuhn, supra, 65 Md. App. 560, provided: “The cost of said arbitration, including all reasonable attorney’s fees and other proper expenses incident thereto incurred by the winning party, will be borne by the losing party relative to said arbitration, and this fact will be reflected in the arbitrator’s decision.” (Internal quotation marks omitted.) In that case, the Maryland Court of Special Appeals relied on the reasoning of the Washington Court of Appeals decision in Agnew v. Lacey Co-Ply, 33 Wash. App. 283, 654 P.2d 712 (1982), cert. denied, 99 Wash. 2d 1006 (1983). See Bernard v. Kuhn, supra, 565. Although, the Washington Court of Appeals recently has questioned the reasoning in Agnew; see Morrell v. Wedbush Morgan Securities, Inc., 143 Wash. App. 473, 178 P.3d 387 (2008); the Maryland courts have reiterated their view that an arbitrator acts outside the scope of his authority by failing to comply with a mandatory provision for attorney’s fees to a prevailing party. See Marsh v. Loffler Housing Corp., 102 Md. App. 116, 132, 648 A.2d 1081 (1994) (stating that “[t]he issue of [attorney’s] fees . . . was not disputed, and therefore not arbitrable” and citing in support thereof Bernard and Agnew).
In re Matter of Application of Shapiro does not indicate the language of the attorney’s fees clause at issue.
Reference
- Full Case Name
- Comprehensive Orthopaedics and Musculoskeletal Care, LLC, Et Al. v. Alfredo L. Axtmayer Et Al.
- Cited By
- 16 cases
- Status
- Published