Awards: Colorado Appeals Court Reinstates Employee's Arbitration Award (Web)

In H. Michael Sopko v. Clear Channel Satellite Servs. Inc., et al., No. 05CA1811, 2006 WL 3437654; (Nov. 30, 2006)(available at http://www.courts.state.co.us/coa/opinion/2006/2006q4/05CA1811.pdf), a Colorado state appeals court reversed a state district court’s order overturning an arbitrator’s interim award in an employment case, which also stayed additional proceedings.

The unanimous three-judge panel remanded the case to the district court, ordering it to reinstate the interim award, vacate the stay, and in turn remand the case to the arbitrator for additional proceedings to determine and award damages to the plaintiff.

The dispute arises out of an arbitration agreement executed in 2002 between the plaintiff, Michael Sopko, and his former employer, defendant Clear Channel Satellite Services Inc.

Both parties agreed to submit any claims between them to arbitration under American Arbitration Association rules.

In February 2004, Sopko filed a complaint against Clear Channel and two management employees, Donald Harms and Monty Dent, alleging unpaid wages, nonpayment on a check, and the value of a computer allegedly taken by the defendants.

The parties filed a joint motion pursuant to former § 13-22-204(1), Colo. Sess. Laws 1975, ch. 154 at 573-74, to stay further proceedings pending arbitration. The district court granted the motion to stay.

The six-day arbitration also examined the plaintiff's additional claims for relief, including federal law claims for age and religious discrimination.

On Dec. 28, 2004, the AAA notified the parties that the arbitration hearing was closed, and on Jan. 24, 2005, the arbitrator issued an interim award in the plaintiff’s favor for more than $27,700 on his Colorado Wage Act and on his age discrimination claim.

But the arbitrator also ordered an additional hearing to hear evidence on the plaintiff's damages on the age discrimination claim, and on the plaintiff’s attorneys fees claim.

The arbitrator ruled in defendants' favor on the remaining claims.

The defendants objected to further proceedings with the arbitrator, stating that the arbitrator’s jurisdiction expired 30 days after the arbitration’s formal closing.

The arbitrator denied the objection, finding that the parties had agreed to reserve the attorneys fees issue for post-hearing presentation and resolution, thus rendering the arbitration agreement’s 30-day limit “inapplicable by its own terms,” according to the opinion.

The defendant filed an emergency motion with the district court to stay the arbitration, arguing that the arbitrator lacked jurisdiction to schedule a hearing on damages and attorney fees beyond the arbitration agreement’s 30 days.

The lower court, relying on Cohen v. Quiat, 749 P.2d 453 (Colo.App.1987), and Ash Apartments v. Martinez, 656 P.2d 708 (Colo.App.1982), determined that the arbitrator's interim order was void, and that the arbitrator did not have authority to conduct an additional hearing on the damages, attorney fees, and costs. “In effect,” the appeals court opinion notes, “the district court’s order denied plaintiff any recovery on his claims.”

The unanimous appellate panel agreed with the plaintiff that there was no basis for disregarding the arbitrator’s interpretation and application of the arbitration agreements’ relevant provisions. The opinion, relying on Galbraith v. Clark, 122 P.3d 1061, 1064 (Colo.App.2005), states that “it is clear that the parties' dispute over the interpretation and application of the thirty-day provision is one that the parties contractually agreed to entrust to the arbitrator. We will enforce contractual provisions giving arbitrators such authority.”

The opinion addresses the defendant's contention that the district court was entitled to substitute its judgment for that of the arbitrator on the timeliness issue and that the arbitrator lost jurisdiction to conduct additional hearings 30 days after the AAA notified parties that the hearing had been closed. It states, simply, “We do not agree with either contention.”

The opinion examines Colo. Sess. Laws 1975, ch. 154, § 1322204(2) at 57374, dealing with courts’ power to grant arbitration stays. It states, “this provision gives the court authority to stay an arbitration proceeding only where there is no contract between the parties to arbitrate or it is apparent from the language of the contract that the claim sought to be arbitrated is clearly beyond the scope of the arbitration clause.”

The appellate panel found that such circumstances were not alleged in Sopko. It notes, the district court “erred in disregarding the arbitrator's decisions” and “in ruling that the thirty-day limit on issuing an award was jurisdictional, and that any award issued after that time would be void.”

The opinion further discusses the Ash Apartment case, where, under the common law, the plaintiffs waited to object to the award after they were notified by the AAA, so a Colorado appeals court held that the plaintiffs had waived their right to challenge the award’s timeliness.

The opinion points that Colorado law favors arbitration, and that a rigid rule that an arbitration award must be vacated if the arbitrator didn’t issue a final award within the period set forth in the arbitration agreement or the statute would frustrate such pro arbitration policy.

The appellate court concludes that “contractual and statutory time requirements for issuance of an award are directory, not mandatory or jurisdictional.” It explains, “In the absence of language in an arbitration agreement that time is of the essence or that any arbitration award issued after the expiration of the period specified in the agreement is void, the party seeking to preclude an award issued after the time prescribed by the agreement must show both that it made a timely objection to issuing an award after the time limitation in the agreement and that it has been prejudiced by the delay.”

The panel notes that the Sopko defendants didn’t suffer prejudice that would justify vacating the interim award and precluding an additional hearing on damages.

As a result, the appellate panel held that the district court erred in staying the arbitration proceedings and in determining that the initial arbitration award was void because a final award resolving all the claims had not been issued within the 30-day period

--Ongmu Tshering, CPR Intern