Robert J. Herrera v. Santangelo Law Offices, P.C. ( 2022 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
August 11, 2022
2022COA93No. 20CA2105, Herrera v. Santangelo Law Offices, P.C. — ADR
— Arbitration — Colorado Uniform Arbitration Act — Vacating
Award — Sanctions
A division of the court of appeals examines whether an
arbitrator had authority to sanction an arbitrating party’s attorney
who was not himself a party to the arbitration agreement that
bound his client. The division first determines that, as a nonparty
to the arbitration agreement, the attorney was not bound to his
client’s arbitration obligation by ordinary principles of contract or
agency law under N.A. Rugby Union LLC v. U.S. of Am. Rugby
Football Union, 2019 CO 56. The division thus concludes that the
arbitrator did not possess any authority to sanction the attorney by
virtue of his client’s arbitration obligation.
The division then concludes that the arbitrator did not
otherwise possess authority to sanction the attorney, either
inherently as a quasi-judicial tribunal or statutorily under C.R.C.P.
11; section 13-17-102, C.R.S. 2021; or the provisions of the
Colorado Uniform Arbitration Act, sections 13-22-201 to -230,
C.R.S. 2021.
COLORADO COURT OF APPEALS 2022COA93Court of Appeals No. 20CA2105
Larimer County District Court No. 19CV30116
Honorable Daniel M. McDonald, Judge
Robert J. Herrera,
Plaintiff-Appellant,
v.
Santangelo Law Offices, P.C.,
Defendant-Appellee.
JUDGMENT REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division VII
Opinion by JUDGE KUHN
Navarro and Lipinsky, JJ., concur
Announced August 11, 2022
Gordon & Rees LLP, John M. Palmeri, John R. Mann, Denver, Colorado, for
Plaintiff-Appellant
Ringenberg & Beller, P.C., Richard D. Beller, Fort Collins, Colorado, for
Defendant-Appellee
¶1 In an arbitration between Santangelo Law Offices, P.C., and
Touchstone Home Health LLC, the arbitrator sanctioned
Touchstone’s arbitration counsel, Robert J. Herrera, after Herrera
fraudulently obtained Santangelo’s signature on a settlement
agreement and told the arbitrator a known falsehood — that the
parties had settled. Invoking C.R.C.P. 11 and section 13-17-102,
C.R.S. 2021, the arbitrator awarded Santangelo nearly $150,000
against Herrera personally for attorney fees Santangelo incurred in
responding to Herrera’s falsehood and in pursuing sanctions
against him. The district court confirmed this award.
¶2 On appeal, Herrera contends that the arbitrator lacked the
authority to sanction him personally. We agree and reverse
accordingly.
I. Background
¶3 Touchstone contracted for Santangelo’s legal services, entering
into an Agreement for Legal Services (the Touchstone-Santangelo
fee agreement) containing an arbitration clause:
The parties agree to submit any controversy or
claim in any way arising from this Agreement
or the parties’ relationship to confidential
binding arbitration . . . by a single attorney.
Such arbitration shall be conducted pursuant
1
to the Commercial Arbitration Rules (CARs) of
the American Arbitration Association (AAA)
. . . .1
Herrera did not sign the fee agreement in either a personal or
representative capacity, nor was he even counsel for Touchstone
when it was executed.
¶4 Years later, when Touchstone and Santangelo’s relationship
ended, Santangelo sought to collect its unpaid legal fees and
demanded arbitration pursuant to the Touchstone-Santangelo fee
agreement. Herrera entered his appearance in the arbitration as
Touchstone’s sole attorney. The parties participated in a
preliminary hearing. The arbitrator memorialized that hearing in a
report and scheduling order, which stated that “[t]he Colorado
Rules of Civil Procedure shall govern [the arbitration] and the laws
of the State of Colorado shall apply.”
¶5 Then, however, “something very strange happened.” In re
Touchstone Home Health LLC, 572 B.R. 255, 264 (Bankr. D. Colo.
2017). Soon after the parties rejected opposing settlement offers,
1The parties agreed to several modifications of the Commercial
Arbitration Rules not relevant here.
2
Herrera asserted in an email to the arbitrator that the parties had
reached a settlement, but
[Santangelo] disputed this, asserting that
[Touchstone] had engaged in a fanciful scheme
to fabricate a settlement by using a fake FedEx
driver to obtain a signature from [Santangelo]
on a delivery slip [in exchange for a box
containing approximately 5,000 one-dollar
bills], which signature was then superimposed
or forged on a settlement agreement that
[Santangelo] had not even seen.
Id.¶6 In response, Santangelo moved for sanctions against
Touchstone and Herrera in his personal capacity. Herrera
responded by disclaiming any obligation to arbitrate his individual
liability for sanctions and filing a court action for declaratory relief
establishing that the arbitrator lacked the authority to enter
sanctions against him.
¶7 Following hearings on the purported settlement and
Santangelo’s motion, the arbitrator found that Herrera admitted he
knew that (1) Santangelo’s signature on the purported settlement
agreement was obtained and placed on the document through
deception; (2) this signature formed the basis for his assertion to
the arbitrator that the parties had settled; and (3) his email to the
3
arbitrator was therefore without merit and went uncorrected even
through the arbitrator’s initial hearing on the purported
settlement.2 The arbitrator also found that Herrera was aware that
the Colorado Rules of Civil Procedure and Colorado law generally
would apply to the arbitration because, at the preliminary hearing,
he had agreed on behalf of Touchstone that those authorities would
govern the arbitration.
¶8 The arbitrator then determined that the issue of sanctions
against Herrera was arbitrable, that Rule 11 and section 13-17-102
governed his consideration of sanctions, that Herrera’s conduct was
sanctionable under both, and that Santangelo reasonably incurred
$148,184.15 in fees and expenses in both responding to Herrera’s
false assertion and moving for sanctions against him. The
arbitrator awarded this amount to Santangelo and ordered Herrera
to pay it personally. Touchstone and Santangelo later settled their
2 Herrera later stipulated to many of these facts in his agreement
with Colorado’s Office of Attorney Regulation Counsel to a
three-year suspension of his license to practice law for this and
other misconduct. People v. Herrera, (Colo. O.P.D.J. No. 18PDJ026,
Nov. 29, 2018).
4
fee dispute but did not resolve the arbitrator’s award of sanctions
against Herrera individually.
¶9 In his district court suit, Herrera moved to vacate the
arbitrator’s award of sanctions against him pursuant to section
13-22-223(1), C.R.S. 2021. The court denied Herrera’s motion and
instead confirmed the award under section 13-22-223(4).
II. Analysis
¶ 10 Herrera contends the award of sanctions must be vacated
because (1) he did not agree to arbitrate any issues of attorney
sanctions, either individually in the arbitration hearing or as a
nonparty bound to the Touchstone-Santangelo fee agreement; and
(2) the arbitrator had no authority to sanction the attorney of an
arbitrating party absent an agreement granting the arbitrator such
authority. We agree with both contentions.
A. Standard of Review
¶ 11 “Colorado law favors the resolution of disputes through
arbitration.” J.A. Walker Co. v. Cambria Corp., 159 P.3d 126, 128
(Colo. 2007). This preference is embedded in both the Colorado
Constitution and the Colorado Uniform Arbitration Act (CUAA).
§§ 13-22-201 to -230, C.R.S. 2021; Johnson-Linzy v. Conifer Care
5
Communities A, LLC, 2020 COA 88, ¶ 16 (citing Colo. Const. art.
XVIII, § 3).
¶ 12 “To facilitate confidence in the finality of arbitration awards
and discourage piecemeal litigation, the [CUAA] strictly limits the
role of the courts in reviewing awards.” Magenis v. Bruner, 187
P.3d 1222, 1224 (Colo. App. 2008). Thus, “a court may decline to
confirm an arbitration award only in limited circumstances.”
Barrett v. Inv. Mgmt. Consultants, Ltd., 190 P.3d 800, 802 (Colo.
App. 2008); see also Treadwell v. Vill. Homes of Colo., Inc., 222 P.3d
398, 401 (Colo. App. 2009) (“These limited circumstances . . . do not
include the merits of the award. Rather, they involve ‘specific
instances of outrageous [arbitral] conduct’ and ‘egregious
departures from the parties’ agreed-upon arbitration.’” (quoting Hall
Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 586 (2008))).
¶ 13 This limited scope of judicial review springs from the general
principle that “[a]rbitration is ‘a matter of contract between the
parties; it is a way to resolve those disputes — but only those
disputes — that the parties have agreed to submit to arbitration.’”
See Johnson-Linzy, ¶ 11 (quoting First Options of Chi., Inc. v.
Kaplan, 514 U.S. 938, 943 (1995)). And because arbitration is a
6
matter of contract, “[t]he powers of an arbitrator derive from the
arbitration agreement between the parties and are strictly defined
by the terms of that agreement.” Magenis, 187 P.3d at 1224 (citing
Coors Brewing Co. v. Cabo, 114 P.3d 60, 64 (Colo. App. 2004)).
That being said, the CUAA provides that it “shall govern” arbitration
agreements, § 13-22-203, C.R.S. 2021, and “[p]arties may waive or
vary the effect of the CUAA ‘to the extent permitted by law,’”
Johnson-Linzy, ¶ 16 (quoting § 13-22-204(1), C.R.S. 2021).
¶ 14 As relevant here, the CUAA states that “the court shall vacate
an award made in the arbitration proceeding if it finds that . . . [a]n
arbitrator exceeded the arbitrator’s powers . . . [or] [t]here was no
agreement to arbitrate . . . .” § 13-22-223(1)(d), (e). It also provides
that “[t]he court shall decide whether an agreement to arbitrate
exists or a controversy is subject to an agreement to arbitrate.”
§ 13-22-206(2), C.R.S. 2021.
¶ 15 We thus review de novo both whether an enforceable
agreement to arbitrate exists and, if so, the scope of that agreement.
Moffett v. Life Care Ctrs. of Am., 219 P.3d 1068, 1072 (Colo. 2009);
N.A. Rugby Union LLC v. U.S. of Am. Rugby Football Union, 2019 CO
56, ¶ 19. We also review de novo whether an arbitrator exceeded
7
their powers.3 See Treadwell, 222 P.3d at 400 (“Courts
independently review whether an arbitrator had power to resolve a
dispute.”).
¶ 16 Lastly, the interpretation of the CUAA also presents a question
of law we review de novo. In re Marriage of Roth, 2017 COA 45,
¶ 15. “When interpreting the CUAA, ‘[w]e begin by analyzing the
text of the CUAA, giving its words their ordinary and commonly-
understood meanings.’” E-21 Eng’g, Inc. v. Steve Stock & Assocs.,
Inc., 252 P.3d 36, 39 (Colo. App. 2010) (quoting Ingold v.
AIMCO/Bluffs, L.L.C. Apartments, 159 P.3d 116, 120 (Colo. 2007)).
We “striv[e] to give effect to the General Assembly’s intent and
chosen legislative scheme.” Sooper Credit Union v. Sholar Grp.
Architects, P.C., 113 P.3d 768, 771 (Colo. 2005).
3 Santangelo argues that we review the arbitrator’s conclusion that
the issue of sanctions was arbitrable for a “manifest disregard of the
law.” We disagree. See Johnson-Linzy v. Conifer Care Communities
A, LLC, 2020 COA 88, ¶ 16 (“To deviate from [section 13-22-206(2),
C.R.S. 2021,] . . . ‘the law requires that parties must plainly and
unambiguously empower an arbiter to decide arbitrability and that
they must clearly and knowingly assent to terms incorporated by
reference.’” (quoting Taubman Cherry Creek Shopping Ctr., LLC v.
Neiman-Marcus Grp., Inc., 251 P.3d 1091, 1095 (Colo. App. 2010))).
8
B. Herrera Did Not Agree with
Santangelo to Arbitrate Sanctions
¶ 17 Santangelo argues that the arbitrator had the authority to
sanction Herrera because either (1) the arbitration language in the
Touchstone-Santangelo fee agreement bound Herrera; or (2) Herrera
personally agreed that the arbitrator possessed the authority to
sanction the parties’ counsel individually. We are not persuaded.
1. The Arbitration Language of the Touchstone-Santangelo
Fee Agreement Did Not Bind Herrera
¶ 18 Santangelo does not dispute that the arbitration language of
its fee agreement with Touchstone by its terms bound only the
“parties” — and that Herrera was not a “party.” The arbitrator
agreed, consistently finding that, throughout the arbitration,
Herrera was acting as counsel for Touchstone and not in his
individual capacity. Nonetheless, Santangelo contends that the
Touchstone-Santangelo fee agreement empowered the arbitrator to
sanction the parties’ attorneys, and that Herrera was bound to it
under principles of contract and agency law. We disagree with its
second contention and need not reach its first.
¶ 19 As a general rule, “when the requirement to arbitrate is
created by an agreement, it can be invoked only by a signatory of
9
the agreement, and only against another signatory.” Smith v.
Multi-Fin. Sec. Corp., 171 P.3d 1267, 1272 (Colo. App. 2007).
However, in Rugby Union, ¶¶ 20-22, the supreme court adopted
seven exceptions, born of ordinary principles of contract and agency
law, that may bind a nonparty to an arbitration agreement:
(1) incorporation of an arbitration provision by reference in another
agreement; (2) the nonsignatory’s assumption of the arbitration
obligation; (3) agency; (4) veil-piercing/alter ego; (5) equitable
estoppel; (6) successor-in-interest; and (7) third-party beneficiary.
¶ 20 Santangelo first argues that Herrera assumed Touchstone’s
obligation to arbitrate. See id. (citing Thomson-CSF, S.A. v. Am. Arb.
Ass’n, 64 F.3d 773, 777 (2d Cir. 1995)).4 According to Santangelo,
Herrera did so by (1) entering his appearance as counsel for
Touchstone and (2) agreeing — on Touchstone’s behalf in the
preliminary hearing before the issue of sanctions arose — that “[t]he
4 The parties have not cited — nor have we found — a Colorado case
applying this exception. For guidance, we look to federal cases
interpreting the Federal Arbitration Act. See E-21 Eng’g, Inc. v.
Steve Stock & Assocs., Inc., 252 P.3d 36, 39 (Colo. App. 2010) (citing
Ingold v. AIMCO/Bluffs, L.L.C. Apartments, 159 P.3d 116, 120 (Colo.
2007)).
10
Colorado Rules of Civil Procedure shall govern [the arbitration] and
the laws of the State of Colorado shall apply.”
¶ 21 We conclude that Herrera did not “manifest an intention to be
bound” by the Touchstone-Santangelo fee agreement through his
conduct. See Thomson-CSF, S.A., 64 F.3d at 777; In re Arb.
Between Promotora da Navegacion, S.A. & Sea Containers, Ltd., 131
F. Supp. 2d 412, 417 (S.D.N.Y. 2000) (“[T]he fundamental question
. . . is whether [the nonsignatory] evidenced — expressly or
implicitly — an unambiguous intent to arbitrate the submitted
dispute.”). Rather, Herrera “explicitly disavowed any obligations
arising out of it” from the moment Santangelo filed its motion for
sanctions against Herrera — even going as far as filing a court
action seeking a declaration that the arbitrator lacked the authority
to impose sanctions against him. See Thomson-CSF, 64 F.3d at
777; Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100, 1103-05
(2d Cir. 1991) (concluding that a nonsignatory “manifested a clear
intent” to arbitrate because, in part, nonsignatory did not, at any
point before or during the arbitration, object to the process, refuse
to arbitrate, or make any attempt to seek judicial relief); Henry v.
Imbruce, 177 A.3d 1168, 1184 (Conn. App. Ct. 2017) (“The
11
[nonsignatory’s] conduct belies his claim that he is not bound by
the arbitration. . . . [H]e repeatedly represented himself both at the
trial court and in the arbitration as involved in and bound by the
arbitration . . . [and he] did not argue that he was not a party until
after the arbitrator rendered her award.”); see also Invista S.À.R.L.
v. Rhodia, SA, 625 F.3d 75, 85 (3d Cir. 2010) (citing Thomson-CSF
in background for the proposition that “non-signatories may
assume the obligations contained in an arbitration clause where
there is a sufficiently close relationship to justify doing so, and the
circumstances warrant that result,” but ultimately ruling on other
grounds).
¶ 22 We also reject Santangelo’s contention that Herrera is
equitably estopped from asserting that he is not bound by
Touchstone’s arbitration obligation. He has not “knowingly
exploited” the Touchstone-Santangelo fee agreement by claiming
direct benefits from, enjoying rights under, or seeking to enforce
other provisions of it for his own benefit. See Rugby Union, ¶ 38.
Any benefits Herrera received because of his representation of
Touchstone in the arbitration are simply too indirect to estop him
12
from disclaiming the arbitrator’s authority to impose sanctions
against him under Touchstone’s arbitration obligation.
¶ 23 Santangelo advances no other theory for binding Herrera to
the Touchstone-Santangelo fee agreement, and we see no other
Rugby Union exception as applicable under the facts of this case.
See Rugby Union, ¶ 31 (“[T]he signatory must establish one of the
recognized legal or equitable bases to compel the nonsignatory to
arbitrate.”); compare Bak v. MCL Fin. Grp., Inc., 88 Cal. Rptr. 3d
800, 806 (Ct. App. 2009) (upholding arbitrator’s sanctions award
against party’s attorney because, in part, the attorney was the
party’s agent), and Bigge Crane & Rigging Co. v. Docutel Corp., 371
F. Supp. 240, 246 (E.D.N.Y. 1973) (upholding arbitrator’s sanctions
award against nonparty principal of agent-signatory to an
arbitration agreement), with Rugby Union, ¶ 36 (“The agency
exception to the general principle that a party cannot be required to
arbitrate any dispute that it has not agreed to arbitrate is premised
on traditional principles of agency law. Under those principles, an
agent may bind a principal to a contract. A principal, however,
cannot bind an agent.”). Other cases Santangelo cites for binding
13
Herrera are inapposite.5 See First Pres. Cap. v. Smith Barney, Harris
Upham & Co., 939 F. Supp. 1559, 1567 (S.D. Fla. 1996) (motion for
sanctions directed against party to arbitration agreement); Pisciotta
v. Shearson Lehman Bros., 629 A.2d 520, 524 (D.C. 1993) (same).
¶ 24 We therefore conclude that the Touchstone-Santangelo fee
agreement did not bind Herrera to the arbitrator’s authority
because Herrera was a nonparty to that agreement and did not fall
within any of the Rugby Union exceptions. See MCR of Am., Inc. v.
Greene, 811 A.2d 331, 343-44 (Md. Ct. Spec. App. 2002) (vacating
sanctions award against a party’s attorney because attorney was
not bound by the parties’ arbitration agreement).
5 To the extent out-of-state cases have concluded that the terms of
the parties’ arbitration agreement can authorize an arbitrator to
sanction a party’s attorney without some basis existing in contract
or agency law to bind the attorney to that agreement, we disagree
with their conclusions. See Polin v. Kellwood Co., 103 F. Supp. 2d
238, 264-67 (S.D.N.Y. 2000) (Polin I) (reasoning, in part, that
arbitration panel had authority to sanction nonparty attorney
because the parties’ agreement “g[ave] the panel broad remedial
power, and provid[ed] that the panel ‘may grant any remedy or relief
that the arbitrator deems just and equitable, including any remedy
or relief that would have been available to the parties had the
matter been heard in court’”), aff’d, 34 F. App’x 406 (2d Cir. 2002).
14
2. Herrera Did Not Personally Agree to
the Arbitrator’s Authority to Impose Sanctions
¶ 25 We also reject Santangelo’s argument that Herrera personally
agreed to arbitrate attorney-sanctions disputes.
¶ 26 On this issue, the district court concluded that Herrera
“voluntarily agreed to the arbitrator’s authority under Colorado law
twice” when he (1) entered his appearance as counsel in the
arbitration and (2) expressly agreed at the preliminary hearing that
Colorado law and the Rules of Civil Procedure would apply to the
arbitration proceedings. In so agreeing, the court ruled that
Herrera “bound not only his client but also himself to the rule of the
arbitrator,” and, “[t]herefore, he (like his client) could be sanctioned”
under Rule 11 or section 13-17-102.
¶ 27 As an initial matter, Santangelo appears to contend that the
trial court found that Herrera agreed that Colorado law applied to
him individually — as well as in a representative capacity. To the
extent the court did so, we find no record support for this finding.
See Albright v. McDermond, 14 P.3d 318, 322 (Colo. 2000) (“In
reviewing a breach of contract case, we defer to the trial court’s
findings of fact if the record supports them, and we review its
15
conclusions of law de novo.”). Rather, the arbitrator’s report merely
memorialized that Colorado law applied to the proceedings; the
arbitrator later found that Herrera only agreed to the application of
Colorado law on Touchstone’s behalf; and, in determining the
proper parties for the sanctions motion, the arbitrator specifically
stated that sanctions apply to Herrera “by virtue of his role as
counsel for Touchstone and not in his individual capacity.”
¶ 28 Having rejected Santangelo’s contention, we do not see
Herrera’s appearance as counsel for Touchstone, his agreement on
behalf of Touchstone that Colorado law would apply to the
arbitration, or both, as forming an enforceable agreement to
arbitrate. See City & Cnty. of Denver v. Dist. Ct., 939 P.2d 1353,
1361 (Colo. 1997) (“As a general rule, courts should follow state law
principles governing contract formation to determine whether the
parties agreed to submit an issue to alternative dispute
resolution.”); § 13-22-206(1) (“An agreement contained in a record
to submit to arbitration any existing or subsequent controversy
arising between the parties to the agreement is valid, enforceable,
and irrevocable . . . .”); see also E-21 Eng’g, 252 P.3d at 39(“Although the CUAA requires that an arbitration agreement be
16
‘contained in a record,’ it does not specifically require that the
written instrument be signed by either or both parties.”). Neither of
these actions satisfies the elements of a contract formed between
Herrera and Santangelo to arbitrate the issue of sanctions. See
Lane v. Urgitus, 145 P.3d 672, 677 (Colo. 2006) (“In determining
whether the parties have agreed to submit the issue in question to
arbitration, we follow state law principles governing contract
formation.”).
¶ 29 In summary, we conclude that no agreement bound Herrera to
arbitrate the issue of sanctions against him in an individual
capacity.
¶ 30 Nonetheless, this is not the end of our inquiry. While “[t]he
powers of an arbitrator derive from the arbitration agreement,”
Magenis, 187 P.3d at 1224, federal cases have entertained the
possibility — which Santangelo urges us to adopt — that,
notwithstanding the lack of an agreement binding nonparty
attorneys, arbitrators possess “inherent authority” to sanction
attorneys appearing before them as a part of their “obligation to
protect the forum.” InterChem Asia 2000 Pte. Ltd. v. Oceana
Petrochemicals AG, 373 F. Supp. 2d 340, 358 (S.D.N.Y. 2005)
17
(quoting Polin v. Kellwood Co., 132 F. Supp. 2d 126, 134 (S.D.N.Y.
2000) (Polin II)).
¶ 31 We thus turn to examine whether the arbitrator has authority
to sanction an arbitrating party’s attorney, regardless of whether
the attorney is personally subject to an agreement to arbitrate the
issue of sanctions.
C. Arbitrators Have No Inherent Authority
to Sanction a Party’s Attorney
¶ 32 Santangelo argues, as it did before the arbitrator, that the
arbitrator has the authority to craft appropriate sanctions for an
attorney’s misconduct due to the tribunal’s inherent power to
regulate the proceeding before it. We disagree.
¶ 33 Santangelo is correct regarding the well-settled principle that
“[c]ourts have inherent authority to issue orders that are necessary
for the performance of judicial functions.” People v. McGlotten, 134
P.3d 487, 489 (Colo. App. 2005); see Halaby, McCrea & Cross v.
Hoffman, 831 P.2d 902, 907 (Colo. 1992) (“The inherent powers
which courts possess consist of all powers reasonably required to
enable a court to efficiently perform its judicial functions, to protect
18
its dignity, independence, and integrity, and to make its lawful
actions effective.”).
¶ 34 However, it does not follow that, because judicial tribunals
possess inherent authority to regulate the proceedings before them,
all quasi-judicial tribunals possess the same authority. After all, the
powers of an arbitrator arise primarily from contract, while those of
courts arise from the judiciary’s constitutional role, statutory
authority, and historical practice. See Chambers v. NASCO, Inc.,
501 U.S. 32, 47 (1991); InterChem Asia, 373 F. Supp. 2d at 358(concluding that arbitrators do not have inherent sanction authority
because “finding that the Arbitrator had inherent authority to
sanction [an arbitrating party’s attorney] would directly contradict
the principle that an arbitrator’s authority is circumscribed by the
agreement of the parties”); c.f. Munich Reinsurance Am., Inc. v. ACE
Prop. & Cas. Ins. Co., 500 F. Supp. 2d 272, 275-76 (S.D.N.Y. 2007)
(concluding that disqualification of an attorney for an alleged
conflict of interest was not within arbitrator’s authority to decide as
that function “has historically been a matter for judges and not
arbitrators because it requires an application of substantive state
19
law regarding the legal profession and results in an enforceable
judicial order”).
¶ 35 Moreover, we agree with Herrera that no Colorado statute or
rule of civil procedure confers on arbitrators the authority to
sanction a party’s attorney. See Seagate Tech., LLC v. W. Digit.
Corp., 854 N.W.2d 750, 761 (Minn. 2014) (noting that arbitrators
may have authority conferred by the legislature). As he argues,
Rule 11 and section 13-17-102 only empower “courts” to sanction
attorneys, so absent an arbitration agreement incorporating these
provisions to which Herrera was bound, they provide no
independent, standalone authority for an arbitrator to sanction a
party’s attorney. Compare Halaby, 831 P.2d at 907 (interpreting a
previous version of C.R.C.P. 107 that defined “contempt” to include
“[m]isbehavior of any person in the presence of . . . an arbitrator
while sitting on arbitration” and stating: “Thus, a judge, a master
and an arbitrator all have clear authority to impose sanctions for
conduct which interferes with the functions of the court”), with In re
Marriage of Leverett, 2012 COA 69, ¶ 11 (interpreting the current
Rule 107 and noting that, because “arbitrator” is not included in
20
the definition of “court,” violation of an arbitrator’s order is not
“contempt”).
¶ 36 Further, we agree with Herrera that no provision of the CUAA
explicitly confers on arbitrators the authority to sanction a party’s
attorney. The CUAA does grant arbitrators specific statutory
powers that can be exercised in arbitration proceedings. See
§ 13-22-215(1), C.R.S. 2021 (noting that the CUAA confers certain
authority upon the arbitrator). For example, arbitrators can issue
subpoenas, authorize depositions, and issue protective orders. See,
e.g., § 13-22-217, C.R.S. 2021. But the legislature has also
specifically limited the bounds of these powers. See, e.g.,
§ 13-22-217(1) (subpoenas must be enforced via court order);
§ 13-22-217(4) (arbitrators do not have the power of contempt);
§ 13-22-217(7) (granting courts the power to enforce subpoenas and
discovery-related orders issued by arbitrators). And while the CUAA
authorizes arbitrators to award “reasonable attorney fees . . . if such
an award is authorized by law in a civil action involving the same
claim or by the agreement of the parties to the arbitration
proceeding,” § 13-22-221(1), C.R.S. 2021, we do not see this
authorization as broad or express enough to apply to an arbitrating
21
party’s attorney. Most importantly, nowhere else in these
provisions has the General Assembly imbued arbitrators with
general powers, particularly against nonparties.6
¶ 37 Lastly, we acknowledge a looming concern Santangelo raises
in its briefing — that if arbitrators are not permitted to control and
protect the arbitration proceedings through the sanction power,
then attorneys may be more likely to commit misconduct in
arbitration. See Polin II, 132 F. Supp. 2d at 134 (“If an attorney
were free to disregard and flaunt the authority of the arbitral forum,
[the] benefits [of arbitration] would be lost; the interest of . . . courts
in following the . . . policy of promoting arbitration as a means of
resolving disputes would be frustrated.”); see also Positive Software
Sols., Inc. v. New Century Mortg. Corp., 619 F.3d 458, 460-63 (5th
Cir. 2010) (concluding that courts lack inherent authority to
sanction attorneys for their conduct during arbitration); Teamsters
6 To the contrary, in enacting the CUAA, the General Assembly
declined to enact language contained in the Uniform Arbitration Act
that would have authorized arbitrators to “order such remedies as
the arbitrator considers just and appropriate under the
circumstances of the arbitration proceeding.” Compare Unif. Arb.
Act § 21(c) (Unif. L. Comm’n 2000) (containing quoted language),
with § 13-22-221, C.R.S. 2021 (containing no such language).
22
Loc. Union No. 430 v. Cement Express, Inc., 841 F.2d 66, 70 (3d Cir.
1988) (concluding that federal courts lack authority under F.R.C.P.
11 to sanction attorneys for their submissions to arbitration).
¶ 38 But even if valid, other safeguards alleviate his concern. First,
going forward arbitrators could ask attorneys appearing before
them to explicitly and personally agree to the arbitrator’s authority
to sanction the lawyers. Second, as happened here, attorney
misconduct in arbitration is still subject to regulation by the
Colorado Office of Attorney Regulation Counsel. But more
importantly in our view, attorneys committing misconduct in
arbitration could open the door to the arbitrator sanctioning their
clients. See, e.g., Certain Underwriters at Lloyd’s London v.
Argonaut Ins. Co., 264 F. Supp. 2d 926, 944 (N.D. Cal. 2003)
(noting that parties may agree by arbitration contract to confer
sanction power on the arbitrator); Commercial Arbitration Rules
and Mediation Procedures R-58(a) (Am. Arb. Ass’n, amended and
effective Oct. 1, 2013) (“The arbitrator may, upon a party’s request,
order appropriate sanctions where a party fails to comply with its
obligations under these rules or with an order of the arbitrator.”);
see also § 13-22-221(1). Either way, we don’t see the absence of
23
arbitrator authority to sanction a party’s attorney as opening a
Pandora’s box of attorney misconduct in arbitration.
¶ 39 Importantly, too, there are significant concerns counseling
against concluding that arbitrators have authority to sanction
nonparty attorneys absent an agreement to that effect. Here,
Herrera claims it would be futile for him to challenge the merits of
the arbitrator’s sanctions award — his factual findings or
application of law — because, Herrera argues, the scope of judicial
review of that award is so narrow. See Cabo, 114 P.3d at 66(“[A]rbitration awards are not open to review on the merits.”). That
may be so in Herrera’s case, but even if not,
[w]e are . . . [still] not inclined to accept a
broadening of the powers of an arbitrator while
our authority to review the exercise of those
powers remains narrow. To hold otherwise
would grant arbitrators greater power to
sanction attorneys by awarding arbitration or
attorney’s fees than the courts presently enjoy,
because the power of arbitrators to do so is
less reviewable. That would be an unfortunate
result, given that arbitrators are not judges
and arbitrations are not trials. If arbitrators’
powers are to be so expanded, it should be
done expressly by rule or statute, not
inferentially by this Court.
Greene, 811 A.2d at 344.
24
¶ 40 Ultimately, arbitration in Colorado is largely a function of
statutory and contract law, and an arbitrator can only act within
the scope of an agreement between the parties, with authority
granted by that agreement or by law. We conclude that arbitrators
have no authority — either inherent to the arbitration tribunal or
conferred by Rule 11, section 13-17-102, or the CUAA — to
sanction a party’s attorney absent an agreement that provides
otherwise, and to which that attorney is bound.
III. Conclusion
¶ 41 We conclude that the arbitrator exceeded his authority in
sanctioning Herrera personally, as (1) Herrera was not bound to any
agreement to arbitrate the issue of sanctions against himself; and
(2) the arbitrator otherwise possessed no authority to do so. The
district court therefore erred in denying Herrera’s motion to vacate
and instead confirming the award. We reverse the district court’s
judgment accordingly and remand with instructions to vacate the
arbitration award against Herrera.
JUDGE NAVARRO and JUDGE LIPINSKY concur.
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