Digital Landscape Inc. v. Media Kings LLC , 440 P.3d 1200 ( 2018 )

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
September 20, 2018
2018COA142
No. 17CA1111 Digital Landscape v. Media Kings — Courts and
Court Procedures — ADR — Arbitration — Uniform Arbitration
Act — Vacating Award
A division of the court of appeals holds that the meaning of the
phrase “arising under” in an arbitration clause is broad. The
opinion analyzes a debate among the federal circuits concerning the
breadth of the phrase “arising under,” and concludes that a broad
definition is most consistent with Colorado law. The division next
concludes that, based on the facts of this case, the arbitrator had
jurisdiction to treat a breach-of-the-implied-covenant-of-good-faith-
and-fair-dealing counterclaim as a breach-of-the-duty-of-loyalty
counterclaim. And, since there was no prevailing party, the
arbitrator was not required to award fees. The division therefore
affirms the trial court’s judgment confirming the arbitrator’s award.
COLORADO COURT OF APPEALS 2018COA142
Court of Appeals No. 17CA1111
City and County of Denver District Court No. 14CV33937
Honorable A. Bruce Jones, Judge
Digital Landscape Inc.,
Plaintiff-Appellant,
v.
Media Kings LLC,
Defendant-Appellee.
JUDGMENT AFFIRMED
Division I
Opinion by JUDGE BERNARD
Taubman and Welling, JJ., concur
Announced September 20, 2018
Sean Connelly, Connelly Law LLC, Denver, Colorado, for Plaintiff-Appellant
Sarah De Diego, De Diego Law, Santa Monica, California, for Defendant-
Appellee
¶1 Judge Learned Hand once wrote that “words are chameleons,
which reflect the color of their environment.” Comm’r v. Nat’l
Carbide Corp., 167 F.2d 304, 306 (2d Cir. 1948), aff’d, 336 U.S. 422(1949). In this appeal, the words are the phrase “arising under.”
Their environment is an arbitration clause, which reads: “Any
disputes arising under this [a]greement will be resolved by binding
arbitration . . . .” (Emphasis added.) We are tasked with figuring
out whether this phrase takes on a narrow or a broad hue from its
context in the arbitration clause.
¶2 The appellant in this case — plaintiff, Digital Landscape Inc.,
which we shall call Digital — asserts that “arising under” has a
narrow scope. For Digital, this means that the arbitrator lacked
jurisdiction to decide a claim that Digital submits did not “arise
under” the contract in this case. The appellee — defendant, Media
Kings LLC, which we shall call Media — submits that the scope of
“arising under” is broad, so the arbitrator had jurisdiction to
consider the claim. In this appeal, Digital asks us to review the
district court’s judgment confirming an arbitrator’s order and
denying Digital’s request to vacate it.
1
¶3 Modern arbitration clauses are products of a strong policy that
favors arbitration. For example, divisions of this court have
concluded that “arising under,” as it is used in an arbitration
clause, is broad because (1) Colorado courts favor arbitration to
resolve disputes; and (2) we should resolve any doubts that we have
about a clause’s scope in favor of arbitration.
¶4 But Digital points us to a debate among federal circuits
concerning the scope of “arising under” in an effort to convince us
to part company with these Colorado decisions. One side of the
debate thinks that the scope of “arising under” is narrow, while the
other side thinks that the phrase’s scope is broad. After
considering both sides of the debate, we are persuaded by the
reasoning of the circuits that conclude that “arising under” is
broad: these circuits are convinced that “arising under” is colored
by a fundamental attribute of its environment — the arbitration
clause — which reflects the strong federal policy that encourages
arbitration.
¶5 We therefore conclude that all the claims that the arbitrator
considered in this case were “dispute[s] arising under” the contract
between Digital and Media, which were to “be resolved by binding
2
arbitration.” The arbitrator therefore had jurisdiction to resolve
those claims.
¶6 We also disagree, for reasons that we explain below, with two
other contentions that Digital raises. As a result, we affirm the
district court’s judgment.
I. Background
¶7 Media entered into a contract to provide marketing services to
Transcendent Marketing, LLC, which we shall call Transcendent.
Transcendent was not a named party in this case.
¶8 Media then contracted with Digital to provide advertising
services to Transcendent. Under the contract, Media agreed to pay
Digital a portion of its earnings from Transcendent in exchange for
Digital’s work on the project.
¶9 But Media did not pay Digital. And someone from Digital told
someone from Transcendent that Media had not paid. Apparently
dissatisfied with Media’s work and with its lack of payment to
Digital, Transcendent proposed that Digital take over the project.
Digital’s principal officer agreed, but he had one of his other
companies assume the work. This proposal effectively cut Media
out of its agreement with Transcendent.
3
¶ 10 Digital sued Media for breach of contract, seeking unpaid
earnings that Digital contended Media owed it for work it had done
for Transcendent. Media filed counterclaims. The one that is the
focus of the appeal alleged that Digital had breached the implied
covenant of good faith and fair dealing by disclosing confidential
information to Transcendent, Media’s client; by soliciting
Transcendent’s business; by disparaging Media to Transcendent;
and by stealing Transcendent as a client.
¶ 11 Because the contract between Media and Digital included an
arbitration clause, the district court ordered them to arbitrate their
dispute. The court stayed the case until the arbitration proceeding
was finished.
¶ 12 During the arbitration proceeding, Digital argued that Media
had breached the contract because Media had not paid Digital the
amount that the contract required. The arbitrator agreed, and she
awarded Digital $68,197.41.
¶ 13 When discussing the counterclaim alleging that Digital had
breached the implied covenant of good faith and fair dealing, the
arbitrator also referred to it as addressing a breach of Digital’s duty
of loyalty to Media. She then decided that, although the agreement
4
described Digital as an independent contractor, Digital still owed a
duty of loyalty to Media, which Digital had breached. So the
arbitrator awarded Media $24,400 in damages.
¶ 14 In her final order, the arbitrator concluded that neither Media
nor Digital had prevailed. She therefore declined to award either of
them attorney fees.
¶ 15 Digital filed a petition in the district court that asked the court
to confirm the part of the arbitration order that awarded damages to
Digital, vacate the part of the order that awarded damages to Media
because the arbitrator had exceeded the scope of the arbitration
clause, and award Digital its attorney fees. The district court
disagreed with Digital’s requests, so it confirmed the order in its
entirety.
II. Digital’s Contentions
¶ 16 Digital raises three contentions.
¶ 17 First, Digital contends that the arbitrator did not have
jurisdiction to consider whether Digital had breached a duty of
loyalty to Media because the duty of loyalty claim did not “arise
under” the arbitration clause.
5
¶ 18 Second, Media filed a counterclaim alleging that Digital had
breached the implied covenant of good faith and fair dealing.
Digital submits that the arbitrator improperly converted this
counterclaim to a different claim — breach of loyalty — that Media
had not raised. Digital continues that it did not have notice of the
different elements of this claim. Digital wraps up this contention by
asserting that the arbitrator’s ruling on this different claim was
unfair and that the arbitrator’s award to Media was therefore void.
¶ 19 Third, even if we disagree with the first two contentions,
Digital asserts that it was nonetheless entitled to attorney fees
because (1) its contract with Media stated that the prevailing party
in an arbitration proceeding concerning the terms of the contract
would be entitled to attorney fees; (2) it prevailed on its breach of
contract claim; (3) Media prevailed on a claim — the breach of
loyalty claim — that was not part of the contract; so (4) Media did
not prevail on a claim that was related to the contract.
III. Standard of Review and General Arbitration Principles
¶ 20 We review de novo
 whether a dispute falls within the scope of an arbitration
clause, Taubman Cherry Creek Shopping Ctr., LLC v.
6
Neiman-Marcus Grp., Inc., 251 P.3d 1091, 1093 (Colo.
App. 2010);
 “a district court’s legal conclusions on a motion to
confirm or vacate an arbitration award,” Rocha v. Fin.
Indem. Corp., 155 P.3d 602, 604 (Colo. App. 2006); and
 whether “the arbitrator’s refusal to award attorney fees to
plaintiff as the prevailing party was a determination
beyond the scope of the parties’ arbitration agreement,”
Magenis v. Bruner, 187 P.3d 1222, 1225 (Colo. App.
2008).
¶ 21 “To facilitate confidence in the finality of arbitration awards
and discourage piecemeal litigation, [Colorado’s arbitration statutes]
strictly limit[] the role of the courts in reviewing awards, and a party
challenging an award bears a heavy burden.” BFN-Greeley, LLC v.
Adair Grp., Inc., 141 P.3d 937, 940 (Colo. App. 2006). “An
arbitrator is the final judge of both fact and law,” id., and courts
may not review the merits of an arbitration award if there are not
statutory grounds to vacate, modify, or correct them, Levy v. Am.
Family Mut. Ins. Co., 293 P.3d 40, 49 (Colo. App. 2011).
7
¶ 22 Such statutory grounds are found in section 13-22-223(1)(d),
C.R.S. 2018, which provides, as is pertinent to this case, that a
court “shall vacate” an award “if the court finds that . . . [a]n
arbitrator exceeded [her] powers.” An arbitrator does not “exceed
[her] powers by rendering a decision that is contrary to the rules of
law that would have been applied by a court, so long as there is no
violation of an express term of the agreement to arbitrate.” Byerly
v. Kirkpatrick Pettis Smith Polian, Inc., 996 P.2d 771, 774 (Colo. App.
2000). In other words, “[i]t is not sufficient . . . to argue merely that
the arbitrator committed an error of law on the merits.” Giraldi v.
Morrell, 892 P.2d 422, 424 (Colo. App. 1994). “Rather, [a] plaintiff
must establish that the arbitrator exceeded the powers granted in
the agreement by refusing to apply or ignoring the legal standard
agreed upon by the parties for resolution of the dispute.” Id. And
an arbitrator has a great deal of flexibility in fashioning appropriate
remedies. BFN-Greeley, LLC, 141 P.3d at 941.
IV. Scope of “Arising Under”
A. Introduction
¶ 23 Arbitration is a “favored method of dispute resolution” in
Colorado. Lane v. Urgitus, 145 P.3d 672, 678 (Colo. 2006). “Our
8
constitution, our statutes, and our case law all support agreements
to arbitrate disputes.” Id. But, like the federal courts, we do not
force parties to arbitrate disputes when they have not clearly agreed
to submit them to arbitration. Id. at 679.
¶ 24 An arbitration clause is a contract. Allen v. Pacheco, 71 P.3d
375, 378 (Colo. 2003). We must therefore “interpret the [arbitration
clause] in a manner that best effectuates the intent of the parties.”
Id. We determine their intent by reading the language of the clause,
looking to “the plain and ordinary meaning of its terms.” Id. We
will enforce the clause as it is written unless it contains an
ambiguity. Id.¶ 25 “If ambiguities are found . . . we must afford the parties a
presumption in favor of arbitration and resolve doubts about the
scope of the arbitration clause in favor of arbitration.” Id. “More
specifically, we must compel arbitration unless we can say ‘with
positive assurance’ that the arbitration clause is not susceptible of
any interpretation that encompasses the subject matter of the
dispute.” Id. (quoting City & Cty. of Denver v. Dist. Court, 939 P.2d
1353, 1364 (Colo. 1997)). A “‘broad or unrestricted’ arbitration
clause makes the strong presumption favoring arbitration apply
9
with even greater force.” Id. (quoting City & Cty. of Denver, 939
P.2d at 1364).
¶ 26 Courts should “look beyond the legal cause of action and
consider the factual allegations upon which the claims are
premised.” Smith v. Multi-Fin. Sec. Corp., 171 P.3d 1267, 1270
(Colo. App. 2007) (citing City & Cty. of Denver, 939 P.2d at 1364).
The factual allegations which form the basis of
the claim asserted, rather than the legal cause
of action pled, should guide the district court
in making the determination as to whether a
particular dispute falls within the reach of the
[alternative dispute resolution] clause. Tort
claims and claims other than breach of
contract claims are not necessarily excluded
from [alternative dispute resolution].
City & Cty. of Denver, 939 P.2d at 1364.
¶ 27 Federal courts also have a “healthy regard for the . . . policy
favoring arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24-25 (1983). Federal cases interpreting or
applying the Federal Arbitration Act help us to understand our
Colorado arbitration statutes because the two statutory schemes
“contain substantially similar language.” E-21 Eng’g, Inc. v. Steve
Stock & Assocs., Inc., 252 P.3d 36, 39 (Colo. App. 2010).
10
¶ 28 The Federal Arbitration Act “establishes that, as a matter of
federal law, any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration,” including when “the
problem at hand is the construction of the contract language
itself . . . .” Moses H. Cone Mem’l Hosp., 460 U.S. at 24-25. Federal
courts will not deny a party’s request to arbitrate an issue “unless it
may be said with positive assurance that the arbitration clause is
not susceptible of an interpretation that covers the asserted
dispute.” United Steelworkers of Am. v. Warrior & Gulf Navigation
Co., 363 U.S. 574, 582-83 (1960).
¶ 29 Answering the question whether a party has agreed to
arbitrate an issue requires interpretation of the arbitration clause.
“[A] party cannot be required to submit to arbitration any dispute
which he has not agreed so to submit.” Id. at 582. Still, courts
should “construe ambiguities concerning the scope of arbitrability
in favor of arbitration.” Mastrobuono v. Shearson Lehman Hutton,
Inc., 514 U.S. 52, 66 (1995).
B. Analysis
¶ 30 To remind the reader, the arbitration clause in the contract in
this case states that “[a]ny disputes arising under this [a]greement
11
will be resolved by binding arbitration . . . .” (Emphasis added.)
Divisions of this court have considered this phrase before.
1. Colorado Cases
¶ 31 Discussing the general phrasing of arbitration clauses, a
division of this court held that, “[w]hen an arbitration clause uses
the phrase ‘arising out of’ or ‘relating to,’ it is broad in scope.”
Smith, 171 P.3d at 1270. Relatedly, our supreme court noted that
courts have interpreted the phrase “relating to” in arbitration
clauses “as being broad rather than restrictive.” City & Cty. of
Denver, 939 P.2d at 1366.
¶ 32 More apropos to the issue in this case, in R.P.T. of Aspen, Inc.
v. Innovative Communications, Inc., 917 P.2d 340, 341-42 (Colo.
App. 1996), the division characterized an arbitration clause reading
“[a]ny dispute which arises under this [a]greement” as employing
“broad language.” And BFN-Greeley, LLC, 141 P.3d at 940,
described the substantially similar phrase of “arising out of” as
“broad[].”
¶ 33 And, in Austin v. U S West, Inc., 926 P.2d 181, 183 (Colo. App.
1996), the division relied on the federal district court’s analysis in
Lee v. Grandcor Medical Systems, Inc., 702 F. Supp. 252, 256 (D.
12
Colo. 1988), to conclude that an “arising under” arbitration clause
was “sufficiently broad to include claims for fraud in the
inducement.” (In Lee, the district court decided that claims for
fraudulent inducement and tortious interference with business
relations “appear[ed]” to “arise under” the arbitration clause, adding
that “doubtful” questions about the applicability of arbitration
clauses should be resolved in favor of arbitration. Id. (quoting
Stateside Mach. Co. v. Alperin, 591 F.2d 234, 240 (3d Cir. 1979)).)
The division also recognized that “[o]ther courts have construed
similar clauses equally as broadly.” Austin, 926 P.2d at 183.
¶ 34 It turns out that the phrase “arising under” in arbitration
clauses has prompted a debate among federal circuit courts about
its scope. Considering this debate is helpful because “Colorado has
followed federal precedent to determine the scope of an arbitration
clause . . . .” City & Cty. of Denver, 939 P.2d at 1363-64. So the
next step of our analysis is to explain the parameters of the federal
debate.
2. Federal Cases
¶ 35 One side of the debate is represented primarily by cases from
the Second, Ninth, and Federal Circuits. A prominent decision
13
interpreting this phrase is Mediterranean Enterprises, Inc. v.
Ssangyong Corp., 708 F.2d 1458 (9th Cir. 1983). Mediterranean
Enterprises compared the meanings of two similar, but clearly
different, phrases.
¶ 36 The phrase “arising out of or relating to” a contract created a
“broad arbitration clause.” Id. at 1464 (quoting Michele Amoruso E
Figli v. Fisheries Dev. Corp., 499 F. Supp. 1074, 1080 (S.D.N.Y.
1980)). This is the standard language recommended by the
American Arbitration Association. Id.¶ 37 Prefiguring Digital’s contention in this case, one of the parties
in Mediterranean Enterprises argued that “arising under” was
narrower than “arising out of or relating to.” Id. at 1463. The party
added that “arising under” meant that an arbitration proceeding
would apply only to disputes “arising under the contract itself” and
not to disputes that were “matters or claims independent of the
contract or collateral” to it. Id.
¶ 38 The Ninth Circuit agreed, concluding that “‘arising under’ has
been called ‘relatively narrow as arbitration clauses go.’” Id. at
1464 (quoting Sinva, Inc. v. Merrill, Lynch, Pierce, Fenner & Smith,
Inc., 253 F. Supp. 359, 364 (S.D.N.Y. 1966)). It is “narrower in
14
scope” than “arising out of or relating to.” Id.; see also Cape
Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914, 922-23 (9th Cir.
2011)(applying Mediterranean).
¶ 39 The court in Evans v. Building Materials Corp. of America, 858
F.3d 1377, 1381 (Fed. Cir. 2017), agreed with this interpretation of
“arising under.” It observed that “‘arising under’ . . . is narrower in
scope than language, such as ‘relating to,’ under which a claim may
be arbitrable if it has a ‘significant relationship’ to the contract,
regardless of whether it arises under the contract itself.” Id.¶ 40 According to this side of the debate, the phrase “relating to”
works to expand the scope of arbitration clauses. Prima Paint Corp.
v. Flood & Conklin Manufacturing Co., 388 U.S. 395 (1967),
illustrates the expansive properties of “relating to.” The United
States Supreme Court pointed out that the phrase “arising out
of” — which has been treated similarly narrowly to the phrase
“arising under” when it appears by itself, see Tracer Research Corp.
v. Nat’l Envtl. Servs. Co., 42 F.3d 1292, 1295 (9th Cir. 1994) — has
been viewed broadly when combined with “relating to,” see Prima
Paint Corp., 388 U.S. at 398. Indeed, for this side of the debate,
15
adding the phrase “relating to” to “arising under” turns a narrow
arbitration clause into a broad one.
¶ 41 We note that the Second Circuit was originally firmly on this
side of the debate, issuing the first circuit court opinion to decide
that “arising under” was a narrow phrase. In re Kinoshita & Co.,
287 F.2d 951, 953 (2d Cir. 1961). (Mediterranean Enterprises relied
heavily on Kinoshita. Mediterranean Enters., 708 F.2d at 1464.)
¶ 42 But the Second Circuit’s position has changed quite a bit
because the United States Supreme Court subsequently
emphasized the strong federal policy that favors arbitration. As a
result, the Second Circuit recognized that Kinoshita was
“inconsisten[t] with federal policy favoring arbitration.” S.A.
Mineracao Da Trindade-Samitri v. Utah Int’l, Inc., 745 F.2d 190, 194
(2d Cir. 1984). So the circuit court limited Kinoshita to its facts.
See Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading, Inc.,
252 F.3d 218, 225 (2d Cir. 2001).
¶ 43 The law in the Second Circuit today is that, “to ensure that an
arbitration clause is narrowly interpreted[,] contracting parties
must use [‘arising under’] or its equivalent, although the better
course, obviously, would be to specify exactly which claims are and
16
are not arbitrable.” S.A. Mineracao Da Trindade-Samitri, 745 F.2d
at 194. The Second Circuit has not overruled Kinoshita because of
its concern that “contracting parties may have (in theory at least)
relied on that case in their formulation of an arbitration provision.”
Id.¶ 44 The other side of the debate is represented by decisions from
the First, Third, Fifth, Sixth, Seventh, Eighth, and Eleventh
circuits.
¶ 45 The First Circuit agreed “with the majority of the federal
circuits,” and it concluded that “the analysis in Kinoshita is not
consistent with the strong federal pro-arbitration policy set forth by”
the federal arbitration statute. Dialysis Access Ctr., LLC v. RMS
Lifeline, Inc., 638 F.3d 367, 381 (1st Cir. 2011)(addressing an
arbitration clause using the phrase “arising under”).
¶ 46 The Third Circuit observed that Kinoshita and its progeny have
been “discredited both in the Second Circuit and in other
jurisdictions.” Battaglia v. McKendry, 233 F.3d 720, 725 (3d Cir.
2000). The court then concluded that the phrases “arising under”
and “arising out of” “are normally given broad construction,” when
they appear in arbitration clauses. Id. at 727.
17
¶ 47 The Fifth Circuit decided that, “[b]ecause the arbitration
clause in [this] case differs from that in Kinoshita and recognizing
that Kinoshita is inconsistent with federal policy favoring
arbitration,” the district court had erred when it relied on Kinoshita
to grant a request to stay arbitration. Mar-Len of La., Inc. v.
Parsons-Gilbane, 773 F.2d 633, 637 (5th Cir. 1985).
¶ 48 The Sixth Circuit said that the Second Circuit “has recognized
that the authority of Kinoshita . . . is highly questionable even in”
that circuit. Highlands Wellmont Health Network, Inc. v. John Deere
Health Plan, Inc., 350 F.3d 568, 577 (6th Cir. 2003). The court
added that “[o]ther circuits have declined to follow Kinoshita
because of the strong federal policy in favor of arbitration.” Id. It
then concluded that the phrase “arises out of” in an arbitration
clause was “extremely broad.” Id. (quoting Cincinnati Gas & Elec.
Co. v. Benjamin F. Shaw Co., 706 F.2d 155, 160 (6th Cir. 1983)).
¶ 49 The Seventh Circuit distinguished Kinoshita, concluding that
the phrase “arising out of” “reache[d] all disputes having their origin
or genesis in the contract, whether or not they implicate
interpretation or performance of the contract per se.” Sweet
Dreams Unlimited, Inc. v. Dial-A-Mattress Int’l, Ltd., 1 F.3d 639, 642
18
(7th Cir. 1993). In reaching this result, the court saw “no need to
disagree with the Second and Ninth Circuits that ‘arising under’
may denote a dispute somehow limited to the interpretation and
performance of the contract itself.” Id.¶ 50 The court then suggested a better approach than relying on
what are arguably unclear distinctions among various phrases:
[The] contracting parties control their own fate
when it comes to deciding which disputes to
consign to arbitration. On the one hand, they
may delineate precisely those claims that are
subject to arbitration or, on the other, they
may employ general — even vague — language
in their arbitration provisions. They may also
combine these techniques by using general
language to authorize arbitration together with
specific language to identify the types of
disputes that are not subject to arbitration,
thereby limiting the reach of phrases such as
“arising out of,” “arising under” or “arising out
of or relating to.”
Id. at 643. Because the parties had not “taken any steps to narrow
the reach” of the contract’s arbitration clause, and, “in the light of
the heavy presumption in favor of arbitration,” the Seventh Circuit
concluded that a claim in the complaint was arbitrable. Id.; accord
Cty. of Hawaii v. UNIDEV, LLC, 301 P.3d 588, 606 (Haw. 2013)(“Had
the parties intended to restrict arbitration . . . it would have been a
19
simple matter to draft unambiguous language to effectuate that
intent . . . . The failure of the parties to unambiguously limit the
arbitrability of disputes suggests that they intended a longer reach
for the arbitration clauses [using ‘arising under’].”).
¶ 51 The Eighth Circuit decided that the phrase “arising under” did
not bar arbitration of certain claims because the arbitration law did
not include any “limiting language” and it was “generally broad in
scope.” PRM Energy Sys., Inc. v. Primenergy, L.L.C., 592 F.3d 830,
837 (8th Cir. 2010); accord Simitar Entm’t, Inc. v. Silva Entm’t, Inc.,
44 F. Supp. 2d 986, 996 (D. Minn. 1999)(“[W]e believe than an
interpretation of ‘arising under,’ or ‘arising out of,’ should be as
broad as that applied to ‘arising out of or relating to,’ and we
respectfully reject . . . Kinoshita . . . .”).
¶ 52 The Eleventh Circuit rejected Kinoshita as “not being in accord
with present day notions of arbitration as a viable alternative
dispute resolution procedure.” Gregory v. Electro-Mech. Corp., 83
F.3d 382, 385 (11th Cir. 1996). The phrase “arising hereunder,”
which is a cheek-by-jowl relative of “arising under,” was therefore
broadly construed. Id. at 383.
20
¶ 53 The Tenth Circuit has not decided where it stands in this
debate. At least one United States magistrate judge, however,
believes that “the Tenth Circuit would follow the majority of the
federal circuits and give the phrase ‘arising under’ a broad
construction based on the strong federal policy in favor of
arbitration.” Cook v. PenSa, Civ. A. No. 13-cv-03282-RM-KMT,
2014 WL 3809409, at *14 (D. Colo. Aug. 1, 2014).
3. Granite Rock
¶ 54 Digital suggests that the United States Supreme Court
signaled its position in this debate in Granite Rock Co. v.
International Brotherhood of Teamsters, 561 U.S. 287 (2010).
Granite Rock involved an arbitration clause that included the
phrase “arising under.” Id. at 304.
¶ 55 As is pertinent to our analysis, the issue in Granite Rock was
“whether a collective-bargaining agreement . . . containing a
no-strike provision was validly formed during the strike period.” Id.
at 292. “For purposes of determining arbitrability, when a contract
is formed can be as critical as whether it was formed.” Id. at
303-04. That distinction was key in Granite Rock because the date
when the agreement “was formed . . . determines whether the
21
agreement’s provisions were enforceable during the period relevant
to the . . . dispute.” Id. at 304; see also Buckeye Check Cashing,
Inc. v. Cardegna, 546 U.S. 440, 444 n.1 (2006)(recognizing the
difference between questions concerning “the contract’s validity”
and questions concerning “whether any agreement . . . was ever
concluded”).
¶ 56 Turning to the “arising under” language, the Supreme Court
held that the collective-bargaining agreement’s arbitration provision
was not “fairly read to include a dispute about when the
[agreement] came into existence.” Granite Rock, 561 U.S. at 308.
The Court also characterized “arising under” as having a “relatively
narrow . . . scope.” Id. at 307. But the basis of comparison was
language in an arbitration clause found in Drake Bakeries, Inc. v.
Local 50, American Bakery & Confectionery Workers International,
370 U.S. 254 (1962). This clause read that the parties would
“promptly attempt to adjust all complaints, disputes or
grievances . . . involving questions of interpretation or application of
any clause or matter covered by this contract or any act or conduct
or relation between the parties . . . directly or indirectly.” Id. at
256-57.
22
¶ 57 We conclude, for the following reasons, that Granite Rock does
not send the signal that Digital claims it sends.
¶ 58 First, Granite Rock’s statement that the phrase “arising under”
was “relatively narrow,” 561 U.S. at 307, was based on a
comparison with the arbitration clause in Drake Bakeries that went
well beyond the terms of the contract. The clause in Drake Bakeries
included “any act or conduct or relation between the
parties . . . directly or indirectly.” 370 U.S. at 257. We must
therefore consider the Supreme Court’s observation about the
relative narrowness of “arising under” in the context of what was a
very broad arbitration clause in Drake Bakeries. And the
arbitration clause in this case is not as broad as the one in Drake
Bakeries because it does not refer to Digital’s or Media’s acts,
conduct, or relations.
¶ 59 Second, Granite Rock did not discuss the debate at the core of
this case, even though the debate had been vigorously joined well
before Granite Rock was decided. It does not analyze, or even refer
to, Kinoshita, Mediterranean Enterprises, Tracer, or to any of the
cases that we have cited above from the other side of the debate.
23
And, critically, it does not conclude that “arising under” is narrow
when compared to phrases such as “relating to.”
¶ 60 Third, Granite Rock is distinguishable because the issue in
that case concerned whether the arbitration clause was enforceable
at a particular time. Digital did not raise that issue in this case.
See Dialysis Access Ctr., LLC, 638 F.3d at 382 (Granite Rock’s
holding, “that a question concerning the very existence of the
[collective-bargaining agreement] cannot fairly be said to ‘arise
under’ the [collective-bargaining agreement,] does not counsel a
result different from the one at which we here arrive.”).
4. Conclusion
¶ 61 We conclude, for the following reasons, that the phrase
“arising under” was sufficiently broad to include the duty-of-loyalty
counterclaim.
¶ 62 First, one side of the debate has a clear majority of adherents.
Only three circuits hold that the phrase “arising under” is narrow,
although one of them — the Second Circuit — has retreated
significantly from that holding. Seven circuits interpret the phrase
broadly, and five of those circuits reject the foundation for the
minority view — Kinoshita — as inconsistent with the federal policy
24
favoring arbitration. Sheer numbers are not necessarily
determinative, of course, but the majority position is also of more
recent vintage. We also think that it is more persuasive because it
keeps faith with the Colorado and the federal policies favoring
arbitration.
¶ 63 Second, the Second Circuit’s obvious reluctance to embrace
Kinoshita enthusiastically is telling. Kinoshita was the birth of the
minority view. But the court that birthed it has had second
thoughts about its offspring. The Second Circuit has now
 decided that Kinoshita was “inconsisten[t] with federal
policy favoring arbitration,” S.A. Mineracao Da
Trindade-Samitri, 745 F.2d at 194;
 limited Kinoshita to its facts, Louis Dreyfus Negoce S.A.,
252 F.3d at 225;
 counseled contracting parties that, instead of relying on
the phrase “[arising under] or its equivalent, . . . the
better course, obviously, would be to specify exactly
which claims are and are not arbitrable,” S.A. Mineracao
Da Trindade-Samitri, 745 F.2d at 194; accord Sweet
25
Dreams Unlimited, Inc., 1 F.3d at 643; Cty. of Hawaii, 301
P.3d at 606; and
 has not overruled Kinoshita only because of an apparent
concern that “contracting parties may have (in theory at
least) relied on that case in their formulation of an
arbitration provision,” S.A. Mineracao Da
Trindade-Samitri, 745 F.2d at 194. (We note that the
Ninth Circuit expressed a similar concern. See Cape
Flattery Ltd., 647 F.3d at 923.)
¶ 64 Third, Colorado is not in the Second or the Ninth Circuit. As a
result, we do not share the concern of those circuits that
contracting parties in this state would have relied on the circuits’
view of the phrase “arising under” when drafting arbitration
clauses. See Cape Flattery Ltd., 647 F.3d at 923; S.A. Mineracao Da
Trindade-Samitri, 745 F.2d at 194. Rather, we think that the
clearly preferable course to relying on the phrase “arising under”
would be to specify which claims are arbitrable and which claims
are not. See S.A. Mineracao Da Trindade-Samitri, 745 F.2d at 194;
accord Sweet Dreams Unlimited, Inc., 1 F.3d at 643; Cty. of Hawaii,
301 P.3d at 606.
26
¶ 65 Fourth, Colorado law lines up with the majority federal view.
Colorado applies a presumption in favor of arbitration unless a
court is “positive[ly] assur[ed]” that an arbitration clause does not
“encompass[] the subject matter of the dispute.” City & Cty. of
Denver, 939 P.2d at 1363-64 (quoting Jefferson Cty. Sch. Dist. No.
R-1 v. Shorey, 826 P.2d 830, 840 (Colo. 1992)). We must resolve
any doubts about the scope of an arbitration clause in favor of
arbitration. Id. at 364. And a “‘broad or unrestricted’ arbitration
clause makes the strong presumption favoring arbitration apply
with even greater force.” Allen, 71 P.3d at 378.
¶ 66 Austin is the only Colorado decision that we could find that
comments on the debate. In that case, the division used a “but see”
citation to refer to Mediterranean Enterprises, which indicated that
Mediterranean conflicted with or contradicted the division’s view
that “arising under” was broad in scope. 926 P.3d at 183; see
Black’s Law Dictionary 1563 (10th ed. 2014)(defining “sed vide,” or
“but see” as “direct[ing] the reader’s attention to an authority or a
statement that conflicts with or contradicts the statement or
principle just given”).
27
¶ 67 We have not unearthed another Colorado case, and the parties
did not cite any, that referred to any of the other principal cases in
the debate, including Kinoshita, for the proposition that the phrase
“arising under” in an arbitration clause is either narrow or broad.
But we know that, without commenting on the debate, R.P.T. of
Aspen, Inc., stated that an arbitration clause including the phrase
“arises under” contained “broad language,” 917 P.2d at 342, and
BFN-Greeley, LLC, described the substantially similar phrase of
“arising out of” as broad, 141 P.3d at 940.
¶ 68 Although we are not bound by Austin, R.P.T. of Aspen, Inc.,
and BFN-Greeley, LLC, see People v. Thomas, 195 P.3d 1162, 1164
(Colo. App. 2008)(one division of the court of appeals is not bound
by the decision of another division), we are persuaded by them in
light of the preceding analysis. This means to us that the majority
position is most consistent with Colorado’s law.
¶ 69 We further conclude that the arbitration clause in this case
was unrestricted: it was not accompanied by any qualifying
language, and it did not include any language expressly excluding
particular types of claims from its scope. As a result, (1) we
recognize that the “strong presumption favoring arbitration appl[ies]
28
with even greater force” in this case, Allen, 71 P.3d at 378; (2) we
cannot be “positive[ly] assur[ed]” that the clause did not
“encompass[] the subject matter of the dispute,” City & Cty. of
Denver, 939 P.2d at 1363-64 (quoting Jefferson Cty. Sch. Dist. No.
R-1, 826 P.2d at 840); and (3) we must therefore resolve any doubts
about whether the arbitrator’s ruling on Media’s counterclaim was
within the scope of the arbitration clause in favor of arbitration, id.
¶ 70 Having now clarified the scope of the arbitration clause, we
next consider the arbitrator’s analysis of Media’s counterclaim.
V. Duty of Loyalty
¶ 71 Relying on the conclusions that we have reached up to this
point and the ones that we make below, we reject Digital’s assertion
that the arbitrator’s ruling was void because she lacked jurisdiction
to decide a claim that the parties had not presented to her. See
State Farm Mut. Auto. Ins. Co. v. Stein, 886 P.2d 326, 328 (Colo.
App. 1994)(“If an arbitrator makes an award which is outside the
scope of the issues submitted, that portion of the award which goes
beyond the matters submitted to it for resolution is void for lack of
jurisdiction.”).
29
¶ 72 As an initial matter, Media suggests that the arbitrator
actually ruled on the counterclaim that Digital had breached the
implied covenant of good faith and fair dealing. It is clear from the
arbitration order that she did not intend to do so. She wrote
instead that
[t]he assertion that Digital . . . is liable to
Media . . . for disparaging Media . . . to
Transcendent and effectively stealing
Transcendent as a client is not truly a claim
for a breach of the implied covenant of good
faith and fair dealing because it is not
grounded in contract terms.
¶ 73 But even though we recognize that the arbitrator ruled on a
facially different counterclaim — breach of the duty of loyalty — we
nonetheless conclude, for the following reasons, that the different
claim was within the issues that Digital and Media had agreed to
submit and, indeed, submitted to the arbitrator. See id.¶ 74 We must “look beyond the legal cause of action” in this case —
the breach-of-the-implied-warranty-of-good-faith-and-fair-dealing
counterclaim — and consider the facts on which it was based.
Smith, 171 P.3d at 1270 (citing City & Cty. of Denver, 939 P.2d at
1364). The factual allegations that formed the basis of that
counterclaim, rather than the legal label that Media placed on it,
30
guides us in our analysis of the issue whether a substituted
breach-of-the-duty-of-loyalty counterclaim fell within the scope of
the arbitration clause. Id. And, based on that factual analysis,
claims beyond breach of contract, such as tort claims, “are not
necessarily excluded” from arbitration. Id.
¶ 75 The factual allegations in the breach-of-the-implied-duty-of-
good-faith-and-fair-dealing counterclaim were that Digital had
disparaged Media to Transcendent and that Digital had cooperated
with Transcendent to pry Media loose from its contract with
Transcendent. These allegations could, for the following reasons,
form the basis for a breach-of-the-duty-of-loyalty claim if Digital
was Media’s agent.
¶ 76 “An agent is one who acts for or in the place of another by
authority from him, or one who is entrusted with the business of
another.” Governor’s Ranch Prof’l Ctr., Ltd. v. Mercy of Colo., Inc.,
793 P.2d 648, 651 (Colo. App. 1990). A claim of breach of the duty
of loyalty may allege, among other things, that an agent breached “a
duty to his principal to act solely for the benefit of the principal in
all matters connected with his agency.” Restatement (Second) of
Agency § 387 (Am. Law Inst. 1958). “[A]n agent is subject to a duty
31
not to compete with the principal concerning the subject matter of
his agency.” Id. § 393. An agent may breach the duty of loyalty to
a principal by acting “in competition with the principal” and by
acquiring “interests adverse to” the principal. Id. § 387 cmt. a; see
also Jet Courier Serv., Inc. v. Mulei, 771 P.2d 486, 494-98 (Colo.
1989)(observing that an employee’s solicitation of coworkers to start
a new business that would compete with the employer was a breach
of the duty of loyalty to the employer).
¶ 77 “An agent who, without the acquiescence of his principal, acts
for his own benefit . . . in a transaction is not entitled to
compensation which otherwise would be due him because of the
transaction.” Restatement (Second) of Agency § 469 cmt. a (Am.
Law Inst. 1958). And “[a] serious violation of a duty of loyalty . . . is
a willful and deliberate breach of the contract of service by the
agent.” Id. at cmt. b (emphasis added).
¶ 78 But Digital contends that it did not owe Media a duty of loyalty
because it was an independent contractor, and independent
contractors, since they are not agents, do not owe a duty of loyalty.
An independent contractor “is one who engages to perform services
for another, according to his own methods and manner, free from
32
the direction and control of the employer in all matters relating to
the performance of the work, and accountable to him only for the
result to be accomplished.” Cont’l Bus Sys., Inc. v. NLRB, 325 F.2d
267, 271 (10th Cir. 1963).
¶ 79 An independent contractor “may or may not be an agent.”
Restatement (Second) of Agency § 2(3) (Am. Law Inst. 1958). An
independent contractor is not an agent if “he is not a fiduciary, has
no power to make the one employing him a party to a transaction,
and is subject to no control over his conduct.” Id. at cmt. b.
¶ 80 The arbitrator found that the evidence presented at the
arbitration hearing “established that, although Digital . . . exercised
substantial autonomy in the manner in which it performed its work
under the [c]ontract, Media . . . controlled and had the right to
control Digital . . . in its work and in its direct communications with
Transcendent.” The arbitrator decided that Digital “was acting as
Media[’s] . . . agent” “in its communications with Transcendent on
the project.” Digital therefore “owed a duty of loyalty to
Media . . . in the manner in which it conducted those
communications.”
33
¶ 81 The question whether Digital was an agent, an independent
contractor, or both was one of fact, see Varsity Tutors LLC v. Indus.
Claim Appeals Office, 2017 COA 104, ¶ 16, which fell within the
arbitrator’s authority as the fact finder in the arbitration hearing,
see BFN-Greeley, LLC, 141 P.3d at 940. The record, however, does
not contain a transcript of the arbitration hearing, so we do not
know what evidence the arbitrator considered when she decided
that Digital was Media’s agent. In the absence of that transcript,
we must presume that the evidence presented at the hearing would
support the arbitrator’s decision. See Hock v. N.Y. Life Ins. Co., 876
P.2d 1242, 1252 (Colo. 1994)(“An appellate court must presume
that the trial court’s findings and conclusions are supported by the
evidence when the appellant has failed to provide a complete
record.”); In re Marriage of McSoud, 131 P.3d 1208, 1223 (Colo. App.
2006)(“[A]n appellate court presumes that material portions omitted
from the record would support the judgment of the trial court.”).
¶ 82 We do not know whether the arbitrator made a legal mistake
when applying the law of agency in this case. But what if she did?
It would not affect the result that we reach. Giraldi, 892 P.2d at
424 (“It is not sufficient . . . to argue merely that the arbitrator
34
committed an error of law on the merits.”). Instead, our review, like
the district court’s, is limited to deciding whether Digital has
“establish[ed] that the arbitrator exceeded the powers granted in the
agreement by refusing to apply or ignoring the legal standard
agreed upon by the parties for resolution of the dispute.” Id.; see
also Container Tech. Corp. v. J. Gadsden Pty., Ltd., 781 P.2d 119,
121 (Colo. App. 1989)(“[A]n arbitration award is not open to review
on the merits,” and “the merits of the award include the arbitrators’
interpretation of the contract.”).
¶ 83 (We note that, at one point, “manifest disregard of the law” was
“a judicially created reason” for vacating arbitration awards under
the Federal Arbitration Act. Barnett v. Elite Prop. of Amer., Inc., 252
P.3d 14, 20 (Colo. App. 2010). But the “continuing viability” of that
nonstatutory reason is now unclear under federal law. Id. at 21.
And a division of this court held that manifest disregard of the law
is not a ground for vacating an arbitration award under Colorado’s
arbitration statutes. Coors Brewing Co. v. Cabo, 114 P.3d 60, 63-66
(Colo. App. 2004).)
¶ 84 We therefore conclude that the arbitrator in this case did not
exceed her powers because the substituted breach-of-the-duty-of-
35
loyalty counterclaim “arose under” the contract between Digital and
Media. See Restatement (Second) of Agency § 469 cmt. b (Am. Law
Inst. 1958)(“A serious violation of a duty of loyalty . . . is a willful
and deliberate breach of the contract of service by the agent . . . .”).
¶ 85 Digital asserts that it did not have notice that the arbitrator
was going to recast the breach-of-the-duty-of-good-faith-and-fair-
dealing counterclaim as a breach-of-the-duty-of-loyalty
counterclaim. Digital adds that the breach-of-the-duty-of-loyalty
counterclaim was “never submitted or tried,” so Digital “had no
opportunity to offer evidence or provide legal argument for why it
did not owe or breach any such duty . . . .” As a result, Digital
finishes, it was prejudiced “in many ways.” We disagree.
¶ 86 First, the language of the breach-of-the-duty-of-good-faith-
and-fair-dealing counterclaim alleged that Digital had “disclos[ed]
confidential information,” “directly solicit[ed]” Media’s client, and
“disparage[d]” Media to its client. This language obviously
incorporated concepts of disloyalty.
¶ 87 Second, Media’s other counterclaims provided Digital with
notice that Media intended to prove that Digital had been disloyal.
A counterclaim based on breach of contract alleged that Digital had
36
disclosed confidential information in violation of a clause in the
contract and solicited business from Transcendent in violation of a
different contractual clause. A counterclaim based on intentional
interference with contractual relations alleged that Digital had
induced Transcendent to breach its contract with Media or had
made it virtually impossible for Transcendent to perform its
obligations under the contract. And a counterclaim based on
misappropriation of trade secrets alleged that Digital had
improperly taken Media’s intellectual property.
¶ 88 Last, contrary to Digital’s assertion, we do not know whether
Digital expressly or impliedly consented to the arbitrator recasting
the breach-of-the-duty-of-good-faith-and-fair-dealing counterclaim
as a duty-of-loyalty counterclaim because we do not have a
transcript of the arbitration hearing. See C.R.C.P. 15(b) (“When
issues not raised by the pleadings are tried by express or implied
consent of the parties, they shall be treated in all respects as if they
had been raised in the pleadings.”); CB Richard Ellis, Inc. v. CLGP,
LLC, 251 P.3d 523, 528-29 (Colo. App. 2010)(“Despite any defect in
the pleadings, an issue is deemed properly before the court where it
37
has been tried before the court without timely objection or
motion.”).
¶ 89 We know from the arbitrator’s award that the evidentiary part
of the hearing lasted two days, two witnesses testified, the
arbitrator admitted about fifty-five exhibits, and the parties gave
their closing arguments over the telephone. But we do not know
what anyone said during the hearing. As a result, we must, as we
have previously concluded, presume that the transcript would
support the arbitrator’s award. See Hock, 876 P.2d at 1252; In re
Marriage of McSoud, 131 P.3d at 1223.
VI. Attorney Fees
¶ 90 Digital submits that the arbitrator exceeded her authority
when she concluded that, because neither party had prevailed,
neither party was entitled to attorney fees. In support of this
assertion, Digital points to the holding in Magenis, 187 P.3d at
1225.
¶ 91 The division in Magenis concluded that the language of the
parties’ arbitration clause did not give the arbitrator discretion to
decide who was entitled to fees. The language in this case is
similar: “In any action brought to enforce any provision of this
38
Agreement, the losing party shall pay the prevailing party’s
reasonable attorney fees . . . .”
¶ 92 The arbitrator in Magenis, though, resolved all disputes in one
party’s favor. Id. at 1223. So, in that case, there was a clear
prevailing party. In this case, by contrast, there was no clear
prevailing party since Digital prevailed on its breach-of-contract
claim and Media prevailed on a counterclaim. The arbitration
clause’s mandatory language therefore did not apply in the same
way.
¶ 93 Digital contends that the arbitration clause in this case
required the arbitrator to award attorney fees to the prevailing party
in an action to enforce a contract provision. We agree. But Digital
also contends that it was the only party that prevailed in an action
to enforce a provision of the contract. We disagree with that
contention.
¶ 94 We have already “look[ed] beyond the legal cause of action” to
consider the facts on which the counterclaim was based. Smith,
171 P.3d at 1270 (citing City & Cty. of Denver, 939 P.2d at 1364).
Although, by doing so, we considered the concepts of a breach-of-
the-duty-of-loyalty counterclaim, they were nonetheless rooted in
39
the facts that were pled in the breach-of-the-duty-of-good-faith-and-
fair-dealing counterclaim, which, in turn, concerned a breach of
contract claim. The arbitrator’s award to Media on the breach-of-
the-duty-of-loyalty counterclaim therefore meant that Media had
prevailed in an action to enforce a provision of the contract. See
Restatement (Second) of Agency § 469 cmt. b (Am. Law Inst.
1958)(“A serious violation of a duty of loyalty . . . is a willful and
deliberate breach of the contract of service by the agent . . . .”).
¶ 95 So, because there was no clearly prevailing party, the
arbitrator was not required to award Digital its attorney fees.
Likewise, since the result of this appeal maintains the status quo
and there is still no prevailing party, we decline Digital’s request for
appellate attorney fees.
¶ 96 Based on our preceding conclusions, our penultimate
conclusion is that the arbitrator did not “exceed [her] powers.”
§ 13-22-223(1)(d). Our ultimate conclusion is that the district court
did not err when it confirmed the arbitrator’s award because there
were no statutory grounds to vacate, modify, or correct it. See
Levy, 293 P.3d at 49.
¶ 97 The district court’s judgment is therefore affirmed.
40
JUDGE TAUBMAN and JUDGE WELLING concur.
41