Grimmer and Associates v. NRLA ( 2024 )

2024 UT App 131THE UTAH COURT OF APPEALS
GRIMMER & ASSOCIATES, PC,
Appellee and Cross-appellant,
v.
THE NRLA, LLC,
Appellant and Cross-appellee.
Opinion
No. 20220978-CA
Filed September 12, 2024
Third District Court, Salt Lake Department
The Honorable Kent R. Holmberg
No. 220901118
Cameron M. Hancock, Rod N. Andreason, Justin W.
Starr, Adam D. Wahlquist, and Jacob A. Green,
Attorneys for Appellant and Cross-appellee
Richard D. Burbidge, Carolyn LeDuc, and Clancey S.
Henderson, Attorneys for Appellee
and Cross-appellant
JUDGE JOHN D. LUTHY authored this Opinion, in which JUDGES
GREGORY K. ORME and RYAN M. HARRIS concurred.
LUTHY, Judge:
¶1 The law firm Grimmer & Associates (Grimmer) agreed to
represent The NRLA, LLC (NRLA) in litigation for a reduced
hourly rate combined with a contingency fee. After NRLA
accepted an offer of stock shares to settle the litigation, Grimmer
asserted its right to a portion of those shares. NRLA did not
transfer the shares, and several years later the shares were
converted into stock in a different company, dramatically
increasing their value.
Grimmer & Associates v. NRLA
¶2 A fee dispute between Grimmer and NRLA ensued, and
the matter went to arbitration. The parties’ engagement
agreement provided that in any arbitration, the rights and
obligations of the parties would be “resolved in accordance with
the then-prevailing law of the State of Utah, including the Utah
Rules of Professional Conduct.” NRLA argued that the present
value of the shares constituted an unreasonable fee, in part
because the fee violated the Utah Rules of Professional Conduct.
Both parties provided expert testimony regarding the
reasonableness of the fee, including under the Utah Rules of
Professional Conduct. The arbitrator then issued an award in
Grimmer’s favor. She concluded that the Utah Rules of
Professional Conduct “do not provide the decisional criteria for
determining the reasonableness of attorney[] fees in civil
litigation” and “do not control in this litigation.” She also
concluded that the contested fee was reasonable because it was
reasonable when NRLA obtained the stock and “[o]nly NRLA’s
continuing breach [of the engagement agreement] prevented
Grimmer from receiving its fee then.”
¶3 Grimmer filed a petition in the district court for an order
confirming the arbitration award, and NRLA moved for an order
vacating the award. NRLA argued that the arbitrator had
exceeded her authority and had refused to consider material
evidence. The district court determined that the arbitrator had
done neither and confirmed the arbitration award. Grimmer then
sought an award of its fees and expenses incurred in the district
court proceedings, and the court denied that petition. NRLA now
appeals the court’s decision confirming the arbitration award, and
Grimmer cross-appeals the district court’s denial of its petition for
fees. We affirm in both respects.
BACKGROUND
¶4 In 2005, NRLA invested $2,000,000 in Paradigm Group, LC
(Paradigm), receiving in return a 7% interest in the company. In
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2012, after NRLA “became concerned that it would be unable to
recover its investment . . . due to ongoing financial instability in
Paradigm,” NRLA retained Grimmer to “attempt[] to recover the
two-million-dollar investment NRLA had made to Paradigm.”
NRLA met with Grimmer and developed “a strategy to recover
assets from Paradigm”—assets that potentially included stock in
a company called Galileo—“in order to make NRLA whole.”
The Engagement Agreement
¶5 Rob and Nedra McKell, a married couple, were members
and, in turns, the managers of NRLA. Nedra was the manager of
NRLA until 2020; Rob was the manager thereafter. In February
2014, the McKells (individually) and NRLA (as an entity) together
entered into an engagement agreement (the Engagement
Agreement) with Grimmer. The Engagement Agreement outlined
the terms of Grimmer’s representation of NRLA against
Paradigm. The Engagement Agreement also outlined the terms of
Grimmer’s representation of one or both of the McKells in two
separate matters, including one in which the McKells anticipated
filing a bar complaint and malpractice action against their former
attorney.
¶6 As set forth in the Engagement Agreement, Grimmer
agreed to represent NRLA under a hybrid fee arrangement
involving a reduced hourly rate and a contingency fee:
We have agreed that we will bill and collect a
reduced/deferred rate which include[s] a contingent
fee interest in the outcome of the case. . . . Our
reduced or deferred rate is coupled with a
contingent fee percentage owed upon the successful
recovery of funds from the opposing party . . . .
¶7 The Engagement Agreement contained the following
“Dispute Resolution” provision:
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Any dispute arising out of, in connection
with, or in relation to the interpretation,
performance or breach of this agreement—
including any claim of legal malpractice (or similar
claim) and any claim involving fees or expenses—
shall be resolved by final and binding arbitration
conducted in Utah County, Utah, administered by
and in accordance with the Utah Uniform
Arbitration Act, and any judgment upon any award
rendered by the arbitrator may be entered by any
state or federal court having jurisdiction to do so.
[NRLA] further acknowledges that, by so
agreeing, [NRLA] waives the right to a jury trial.
[NRLA] also acknowledges that arbitration
provides only limited discovery and that courts will
enforce an award in arbitration without reviewing it
for errors of fact or law.
¶8 The Engagement Agreement also contained the following
“Choice of Law” provision:
In any proceeding (whether in arbitration, in court,
or in any other tribunal), all questions concerning
the rights and obligations of [NRLA] and [Grimmer]
under this agreement that are determined to be
governed by the law of a state shall be resolved in
accordance with the then-prevailing law of the State
of Utah, including the Utah Rules of Professional
Conduct.
The Settlement and Subsequent Changes in Stock Value
¶9 NRLA ultimately settled its lawsuit against Paradigm for
250,000 shares of Galileo stock, which it received in May 2015.
According to Grimmer, it became entitled at that time to 37,500
shares of Galileo stock, representing 15% (the agreed-upon
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percentage under the contingency fee agreement) of the shares
NRLA received in the settlement. The value of the stock at that
time was less than two dollars per share.
¶10 The arbitrator who was later selected to resolve the fee
dispute (the Arbitrator) found that “Grimmer made several
attempts to collect its fee from NRLA,” including by meeting with
NRLA in June 2015, during which meeting Grimmer “discussed
the need to transfer shares to pay [its] contingency fee,” and by
further discussing the matter with NRLA in August and October
of that year. The Arbitrator further found that at some point in
2015, NRLA “requested additional time to make arrangements to
transfer the stock, due to other legal matters that consumed [its]
time and attention”; in June 2016, Grimmer “sent a letter . . .
seeking to collect the stock”; in November 2017, Grimmer “sent a
certified letter . . . seeking to effect a stock transfer”; in 2017 and
2018, Grimmer “contacted other attorneys who represented the
McKells[] to solicit their help in obtaining the stock”; and in
November 2020, Grimmer “sent a final letter.” “Notably,” the
Arbitrator found that “at no time [during these years] did . . .
NRLA contest Grimmer’s right to receive the shares.”
¶11 Between 2020 and 2021, Galileo was acquired by
another company, Social Finance Inc. (SoFi). As a result, in
exchange for its Galileo stock, NRLA received a combination of
cash and 1,263,922 SoFi shares. The value of the SoFi shares
was significantly higher than the previous value of the Galileo
stock.
Grimmer’s Arbitration Claim
¶12 In February 2021, Grimmer commenced arbitration against
NRLA, asserting a single claim for breach of contract. Grimmer
contended that it was entitled to “the consideration received by
NRLA when it converted [Grimmer’s] 37,500 contingency shares
[in Galileo] during the acquisition [of Galileo by SoFi], namely,
$600,208.48 and 188,426.4 [SoFi shares], plus interest.” NRLA
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responded by arguing, among other things, that Grimmer’s claim
was “barred, in whole or in part, as the requested fee is
unreasonable or otherwise violates rule 1.5 of the Utah Rules of
Profession[al] Conduct and related legal standards for the
reasonableness of attorney fees.”
¶13 The Arbitrator received briefing and evidence from the
parties. The evidence included expert testimony from both sides
regarding rules 1.5(a), 1.5(c), and 1.8 of the Utah Rules of
Professional Conduct. See generally Utah R. Prof’l Conduct 1.5(a)
(stating that “[a] lawyer shall not make an agreement for, charge,
or collect an unreasonable fee” and providing “factors to be
considered in determining the reasonableness of a fee”); id.R. 1.5(c) (stating that “[u]pon conclusion of a contingent fee
matter, the lawyer shall provide the client with a written
statement” showing, if there is a recovery, “the remittance to the
client and the method of its determination”); id. R. 1.8 (stating that
“[a] lawyer shall not enter into a business transaction with a client
or knowingly acquire an ownership, possessory, security or other
pecuniary interest adverse to a client” unless certain conditions
are met).
¶14 The parties’ experts also opined about the reasonableness
of the fee Grimmer alleged it was owed. In the words of the
Arbitrator, “neither expert took issue with the reasonableness of
the fee if it had been paid when the case concluded in May 2015.”
Grimmer’s expert “testified that [the] fee is reasonable today [as
well], regardless of value, because it was earned by [Grimmer] in
May 2015” and “[a]ny subsequent increase in [the] value of the
shares cannot alter, after the fact, [Grimmer’s] right to [the] fee.”
NRLA’s expert, on the other hand, “opined that the value of the
stock today makes the fee unreasonable, because the value and
amount of work done on the case by [Grimmer] would not
warrant a large fee.” NRLA’s expert “also relied on the Rules of
Professional Conduct to conclude that the fee is not reasonable at
this time.”
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The Arbitration Decision
¶15 On February 7, 2022, the Arbitrator issued a final
arbitration decision in favor of Grimmer. The Arbitrator
determined that Grimmer had been “entitled to receive 37,500
shares” of Galileo stock in May 2015 and that “NRLA breached
the [Engagement Agreement] by withholding the shares.”
¶16 The Arbitrator addressed NRLA’s argument that the fee
Grimmer sought “was not reasonable[] pursuant to the factors
required by [r]ule 1.5(a).” In so doing, the Arbitrator first cited
Long v. Ethics & Discipline Committee of the Utah Supreme Court,
2011 UT 32, 256 P.3d 206, noting that it was “clearly a case that
involved a finding by the Ethics and Discipline Committee that
[an attorney] had violated ethical rules” but that “[n]othing in the
Long case suggests that [r]ule 1.5 is applicable in civil litigation.”
She then observed that in Archuleta v. Hughes, 969 P.2d 409 (Utah
1998), “a case in which [a] plaintiff alleged that her attorney had
violated [r]ule 1.5 . . . by charging an excessive fee, the Utah
Supreme Court concluded that ‘the Utah Rules of Professional
Conduct are not designed to create a basis for civil liability.’”
(Quoting id. at 414.) Next, she cited Strohm v. ClearOne
Communications, Inc., 2013 UT 21, 308 P.3d 424, “a case also
involving an excessive attorney fee claim,” and noted that in
Strohm our supreme court had “cited . . . the Preamble [of the Utah
Rules of Professional Conduct] and pointed out that the Rules of
Professional Conduct ‘simply provide a framework for the ethical
practice of law and failure to comply . . . is a basis for invoking the
disciplinary process rather than a basis for contract tinkering.’”
(Quoting id. ¶ 71.) The Arbitrator then quoted this portion of the
Preamble to the Utah Rules of Professional Conduct: “The fact
that a rule is a just basis for a lawyer’s self-assessment, or for
sanctioning a lawyer under the administration of a disciplinary
authority, does not imply that an antagonist in a collateral
proceeding or transaction has standing to seek enforcement of the
rule.” The Arbitrator concluded:
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Based upon the Preamble to the Rules of
Professional Conduct, and relevant case authority, I
find that the Rules of Professional Conduct do not
provide the decisional criteria for determining the
reasonableness of attorney[] fees in civil litigation.
While they are important for self-reflection and in
disciplinary proceedings, they do not control in this
litigation.
¶17 The Arbitrator then considered NRLA’s assertion “that the
fees sought by [Grimmer] are unreasonable, separate from the
Rules of Professional Conduct.” After noting the evidence
indicating that Grimmer had attempted to collect the fee
numerous times between the time it was earned and the time the
Galileo shares were converted into SoFi stock, she concluded:
NRLA kept the shares to which Grimmer was
entitled. I agree with [Grimmer’s expert] that the fee
is reasonable today, because it was earned in 2015.
Only NRLA’s continuing breach prevented
Grimmer from receiving its fee then. . . . [The SoFi
purchase] provided a substantial benefit to both
parties. Based upon [NRLA’s] breach, [Grimmer] is
entitled to the benefit of its fee, which now resides
in the SoFi shares and associated cash.
Accordingly, the Arbitrator awarded Grimmer “189,588 shares of
SoFi public stock, plus $657,570 in cash, plus interest from the date
of trial, . . . representing the value of the 37,500 shares of Galileo
stock that Grimmer earned.”
NRLA’s OPC Complaint and Motions to Stay
¶18 On February 17, 2022, after the Arbitrator issued her
decision, Grimmer filed a petition in the district court for an order
confirming the arbitration award. Within a week, NRLA
responded by filing both (1) a motion with the Arbitrator asking
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her to stay further proceedings and (2) a request and objection in
the district court asking it to also stay further proceedings and
deny Grimmer’s petition for an order confirming the arbitration
award. NRLA explained that “[a]t the Arbitrator’s implied
suggestion,” it had filed a complaint against Grimmer in the Utah
State Bar’s Office of Professional Conduct (the OPC) based on
alleged violations of rules 1.4, 1.5(a), 1.5(c), and 1.8(a) of the Utah
Rules of Professional Conduct, and it requested that proceedings
be stayed until resolution of that complaint. NRLA further
contended that by “noting that [the Utah Rules of Professional
Conduct] could only be applied in a disciplinary proceeding
against [an] attorney,” the Arbitrator had “‘refused to consider
evidence material to the controversy.’” (Quoting Utah Code
§ 78B-11-124(1)(c).)
¶19 The Arbitrator denied NRLA’s motion for her to stay the
proceedings, concluding that the issuance of a stay following the
entry of an arbitration award was “beyond the scope of [her] role
as an arbitrator under the Utah Uniform Arbitration Act.” The
Arbitrator also stated:
I considered and addressed all claims submitted by
either party. I considered and ruled on the import of
the Utah Rules of Professional Conduct, and I found
that they did not control the fees in this civil matter.
I also found the fees were reasonable using criteria
that I identified.
The Proceedings in the District Court
¶20 In March 2022, before the district court was able to rule on
NRLA’s request that it stay the proceedings and deny Grimmer’s
petition, NRLA filed a separate motion in the district court to
vacate the arbitration award. NRLA argued that the court should
vacate the award under Utah Code section 78B-11-124(1)(c),
which requires vacation of an arbitration award if an arbitrator
“refuse[s] to consider evidence material to the controversy . . . so
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as to substantially prejudice the rights of a party to the arbitration
proceeding,” and under Utah Code section 78B-11-124(1)(d),
which requires vacation of an award if an “arbitrator exceed[s] the
arbitrator’s authority.” NRLA asserted:
Because the [Engagement Agreement] required
application and resolution of malpractice and
similar claims under the Utah Rules of Professional
[C]onduct (which the Arbitrator flatly ignored),
NRLA’s arguments and evidence related to the
[rules] are necessarily ‘material’ evidence.
Accordingly, the Arbitrator’s refusal to consider this
evidence mandates the [arbitration award] be
vacated.
Additionally, NRLA contended that the Arbitrator’s refusal to
apply the Utah Rules of Professional Conduct constituted a
“manifest disregard” of the law and of the Engagement
Agreement because the parties had agreed to the scope of
arbitration and the Arbitrator “unilaterally excluded an issue that
the parties submitted to her . . .—i.e., application of the Utah Rules
of Professional [C]onduct.”
¶21 On August 4, 2022, the district court issued its ruling and
order denying the motion to vacate, emphasizing that “[a] court’s
review of arbitration is tightly constrained.” 1 The court
1. Also on August 4, 2022, the OPC responded to NRLA’s bar
complaint against Grimmer. The OPC stated that it had
“determined that the evidence [was] insufficient to provide by a
preponderance that [Grimmer] engaged in conduct that violates
the ethical rules.” It also stated that such “matters are (and in most
cases already were) more appropriately addressed by the court”
and that “the OPC ordinarily declines to prosecute matters that
are more appropriately addressed elsewhere,” including “matters
(continued…)
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determined that the Arbitrator had “clearly considered but
ultimately rejected as a legal matter NRLA’s claim that the Rules
of Professional Conduct could be applied to assess the
reasonable[ness] of fees.” The court explained that “NRLA’s claim
that the Arbitrator refused material evidence [was, therefore,]
actually an argument challenging the Arbitrator’s legal
determination” that “the Rules of Professional Conduct ‘do not
provide decisional criteria . . . in civil litigation.’”
¶22 The court observed that the Arbitrator’s determination that
the Utah Rules of Professional Conduct do not provide decisional
criteria in civil disputes “was based on governing Utah law and
the [r]ules themselves.” The court also explained that the
Arbitrator’s ruling “inherently defers issues of ethical or [r]ule
violations (and any attendant implication to fees that are owed by
a former client) to the disciplinary authority.” Indeed, the court
opined, “while the Engagement Agreement references the Rules
of Professional Conduct, it would have been legally
impermissible for the Arbitrator to adjudicate ethical violations or
to actually apply the [r]ules in the adjudication of a contract
enforcement claim” because “the parties have no standing to
enforce the [r]ules.” In the court’s view, enforcement of the rules
is “within the exclusive province” of the OPC, which “cannot be
deprived of its authority in this regard by a contract between these
two parties.”
¶23 Based on the foregoing reasoning, the court concluded that
the Arbitrator had “‘applied the contract in an arguably
reasonable manner’” (quoting Evans v. Nielsen, 2015 UT App 65,
¶ 21, 347 P.3d 32) and, accordingly, that there was “no cause to
vacate the Arbitration Award under the theory that the Arbitrator
[had] refused material evidence or . . . exceeded her authority.”
such as fee disputes and allegations regarding the quality of legal
services which are more appropriately addressed by a court.”
20220978-CA 11 2024 UT App 131Grimmer & Associates v. NRLA
Thus, the district court denied NRLA’s motion to vacate and
confirmed the arbitration award.
Grimmer’s Application for Attorney Fees and Costs
¶24 After the district court issued its order confirming the
arbitration award, Grimmer filed an application for attorney fees
and costs. Grimmer relied on Utah Code section 78B-11-126,
under which a court “may allow reasonable costs of [a] motion [to
confirm an arbitration award] and subsequent judicial
proceedings” and “add reasonable attorney fees and other
reasonable expenses of litigation incurred in a judicial proceeding
after the [arbitration] award is made.” Utah Code § 78B-11-126(2)–
(3). Grimmer argued that an award of costs and fees under this
statute was merited here because “NRLA’s challenge to the
arbitration award . . . was not a close call.” The district court
disagreed, concluding that “whether the [A]rbitrator refused to
consider material evidence or exceeded her authority was a close
call.” Thus, the court denied Grimmer’s application for costs and
fees.
ISSUES AND STANDARDS OF REVIEW
¶25 NRLA appeals the district court’s decision confirming the
arbitration award. In reviewing such a decision, “we grant no
deference to the court’s conclusions of law, reviewing them for
correctness.” Softsolutions, Inc. v. Brigham Young Univ., 2000 UT 46,
¶ 12, 1 P.3d 1095. “We review the district court’s findings of fact
under the clearly erroneous standard. More specifically, our scope
of review is limited to the legal issue of whether the [district] court
correctly exercised its authority in confirming . . . [the] arbitration
award.” Id. (cleaned up).
¶26 Grimmer cross-appeals the district court’s decision
denying Grimmer’s application for attorney fees and costs under
Utah Code section 78B-11-126. “[R]ecognizing the broad
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discretion given to trial courts” in the matter of awards of attorney
fees incurred in judicial proceedings following arbitration,
appellate courts “review a trial court’s decision to grant or not to
grant attorney fees under the Utah [Uniform] Arbitration Act for
an abuse of discretion.” Paul deGroot Bldg. Services, LLC v.
Gallacher, 2005 UT 20, ¶ 18, 112 P.3d 490. 2
ANALYSIS
I. NRLA’s Appeal
¶27 NRLA argues that the district court’s confirmation of the
arbitration award violated Utah Code section 78B-11-124, which
directs courts to vacate arbitration awards under certain limited
circumstances. NRLA asserts that under section 78B-11-124, the
district court was required to vacate the arbitration award because
the Arbitrator “exceeded [her] authority.”3 See Utah Code § 78B-
11-124(1)(d). We disagree.
2. The attorney fees and costs provision now found in Utah Code
section 78B-11-126 as part of the Utah Uniform Arbitration Act
was previously found in section 78-31a-126 as part of the Utah
Arbitration Act. See Paul deGroot Bldg. Services, LLC v. Gallacher,
2005 UT 20, ¶ 19, 112 P.3d 490. When this provision was
renumbered, it was not materially altered. Compare id. ¶ 19 n.4
(quoting Utah Code § 78-31a-126 (2003)), with Utah Code § 78B-
11-126. Accordingly, the standard of review articulated in Paul
deGroot under the prior Utah Arbitration Act is fully applicable to
the same issue under the current Utah Uniform Arbitration Act.
3. As it did below, NRLA also asserts that the Arbitrator “refused
to consider evidence material to the controversy,” which is listed
in the statute as a separate ground for vacating an arbitration
award, see Utah Code § 78B-11-124(1)(c). However, in NRLA’s
(continued…)
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¶28 As already noted, appellate review of a trial court’s
decision regarding an arbitration award “is limited to the legal
issue of whether the trial court correctly exercised its authority in
confirming, vacating, or modifying an arbitration award.”
Softsolutions, Inc. v. Brigham Young Univ., 2000 UT 46, ¶ 12, 1 P.3d
1095 (cleaned up). And in turn, a trial court’s review of an
arbitration award “is an extremely narrow one giving
considerable leeway to the arbitrator and setting aside the
arbitrator’s decision only in certain narrow circumstances.” Id.
¶ 10 (cleaned up). “The trial court may not substitute its judgment
for that of the arbitrator, nor may it modify or vacate an award
because it disagrees with the arbitrator’s assessment.” Id. (cleaned
up). While a trial court must vacate an arbitration award if it
determines that an arbitrator has exceeded the arbitrator’s
authority, see Utah Code § 78B-11-124(1)(d), “the remedy of
vacating an arbitration award . . . should be reserved for
circumstances of an arbitrator’s extraordinary lack of fidelity to
established legal principles,” Shipp v. Peterson, 2021 UT App 25,
¶ 14, 486 P.3d 70 (cleaned up), cert. denied, 502 P.3d 271 (Utah
2021). “And in deciding whether the arbitrator exceeded its
authority, we resolve all doubts in favor of arbitration.” Id.(cleaned up).
¶29 NRLA’s argument that the Arbitrator exceeded her
authority is founded on its assertion that “[t]he Arbitrator’s ruling
is contrary to the plain language of the Engagement Agreement”
and “renders [the Engagement Agreement’s] reference to the
briefing it becomes clear that this argument is inextricable from
NRLA’s assertion that the Arbitrator exceeded her authority.
NRLA traces the Arbitrator’s refusal to consider the testimony of
NRLA’s expert related to the Utah Rules of Professional Conduct
solely to the Arbitrator’s determination that she could not apply
those rules to NRLA’s claims. Thus, NRLA does not have a
standalone claim that the Arbitrator refused to consider material
evidence. Accordingly, we do not address this issue further.
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Utah Rules of Professional Conduct empty and useless.” Stated
another way, NRLA contends that it “did not receive [the
arbitration it] bargained for.”
¶30 NRLA is correct that “arbitration is a matter of contract
law” and that “precisely because arbitration is a bargained-for
remedy, an arbitrator cannot (manifestly) disregard the
boundaries the parties have set for her.” Ahhmigo, LLC v. Synergy
Co. of Utah, 2022 UT 4, ¶ 42, 506 P.3d 536 (cleaned up). “To the
contrary, arbitration contracts are to be enforced according to
their terms, and in the manner to which the parties have agreed.”
Id. (cleaned up). For example, “if the parties’ contract calls for
Utah law, but the arbitrator prefers Colorado law and applies that
instead,” then “the arbitrator [has] deprived the parties of their
bargained-for arbitration by disregarding the law that the parties
agreed would apply” and the resulting arbitration award should
be vacated. Id. ¶ 44. However, not all choice of law provisions are
similarly unambiguous in their meaning and application.
¶31 Whether an arbitration agreement’s choice of law
provision is unambiguous is a legal question of contract
interpretation. See WebBank v. American Gen. Annuity Service Corp.,
2002 UT 88, ¶ 22, 54 P.3d 1139 (“Whether an ambiguity exists in a
contract is a question of law.” (cleaned up)). And when faced with
issues of contract interpretation, “as long as the arbitrator
construe[s] and applie[s] the contract in an arguably reasonable
manner,” courts are not to “hear claims of . . . legal error by an
arbitrator as an appellate court does in reviewing decisions of
lower courts.” Intermountain Power Agency v. Union Pac. R.R. Co.,
961 P.2d 320, 323 (Utah 1998) (cleaned up).
¶32 From the foregoing, we glean the following principles: If
an arbitration agreement’s choice of law provision is inarguably
unambiguous and the arbitrator refuses to follow it, the district
court is required under section 78B-11-124(1)(d) to vacate the
arbitration award on the basis that the arbitrator exceeded the
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arbitrator’s authority. On the other hand, if the arbitration
agreement’s choice of law provision is at least arguably
ambiguous and the arbitrator applies an arguably reasonable
construction of the provision, then the district court is not to
disturb the resulting award on the basis that the arbitrator refused
to follow the choice of law provision and thereby exceeded the
arbitrator’s authority.
¶33 Here, the Engagement Agreement’s choice of law
provision provides, in relevant part, that “whether in arbitration,
in court, or in any other tribunal[], all questions concerning the
rights and obligations of [NRLA] and [Grimmer] under [the
Engagement Agreement] . . . shall be resolved in accordance with
the then-prevailing law of the State of Utah, including the Utah
Rules of Professional Conduct.” The Engagement Agreement also
expressly charges the Arbitrator with resolving “[a]ny dispute
arising out of . . . the interpretation” of the Engagement
Agreement. NRLA contends that “[t]he parties obviously
included the Rules of Professional Conduct in the choice of law
provision . . . so they could be enforced” and, therefore, that the
choice of law provision has a single, unambiguous meaning—
namely, that in a civil dispute over whether Grimmer’s claimed
fee is reasonable, the Utah Rules of Professional Conduct are to
serve as a source of criteria for determining the reasonableness of
the claimed fee. We agree that this is an arguably reasonable
reading of the Engagement Agreement’s choice of law provision.
However, it is not the only arguably reasonable reading of that
provision.
¶34 Another arguably reasonable reading of the Engagement
Agreement’s choice of law provision is that in a civil dispute over
whether Grimmer’s claimed fee is reasonable, “all questions”—
including the question of whether the Utah Rules of Professional
Conduct should be used as a source of decisional criteria—must
be resolved in accordance with what Utah law, including the rules
themselves, say about that issue. The Arbitrator plainly applied
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this reading of the provision. In her decision on NRLA’s motion
to stay, she explained that her conclusion that “the Rules of
Professional Conduct do not provide the decisional criteria for
determining the reasonableness of attorney[] fees in civil
litigation” was “[b]ased upon the Preamble to the Rules of
Professional Conduct[] and relevant case authority.” Our review
of the arbitration decision confirms that the Arbitrator did base
her decision on these sources. She analyzed various Utah cases—
including Long v. Ethics & Discipline Committee of the Utah Supreme
Court, 2011 UT 32, 256 P.3d 206, Archuleta v. Hughes, 969 P.2d 409(Utah 1998), and Strohm v. ClearOne Communications, Inc., 2013 UT
21, 308 P.3d 424—and the Preamble of the Utah Rules of
Professional Conduct. Then, based on these sources, she
determined that the Utah Rules of Professional Conduct did not
provide the criteria for determining the reasonableness of the
attorney fee Grimmer sought. The Arbitrator’s implicit
interpretation of the choice of law provision as requiring her to
look to Utah law—including the Utah Rules of Professional
Conduct themselves—to determine whether those rules may
provide criteria for determining the reasonableness of an attorney
fee is consistent with the language of that provision. The
Arbitrator’s interpretation of the choice of law provision is,
therefore, at least an arguably reasonable one. 4 Thus, the district
court was correct to “not substitute its judgment” on this legal
question for that of the Arbitrator. Softsolutions, Inc. v. Brigham
Young Univ., 2000 UT 46, ¶ 10, 1 P.3d 1095 (cleaned up).
4. The Arbitrator’s interpretation of Utah law, including the Utah
Rules of Professional Conduct, was also reasonable. As even
NRLA recognizes, our supreme court has determined that
“nothing in our rules requires or even suggests that we can use
[the Utah Rules of Professional Conduct] as a basis for
invalidating otherwise-enforceable contractual provisions.”
Strohm v. ClearOne Commc’ns, Inc., 2013 UT 21, ¶ 71, 308 P.3d 424.
20220978-CA 17 2024 UT App 131Grimmer & Associates v. NRLA
¶35 NRLA contends that the Arbitrator’s interpretation of the
choice of law provision “renders its reference to the Utah Rules of
Professional Conduct empty and useless.” We are not convinced.
The choice of law provision expressly contemplates the possibility
of proceedings in a “tribunal” other than “arbitration” or “court”
wherein “the rights and obligations” of the parties under the
Engagement Agreement might be determined. This
acknowledgment of potential proceedings in a tribunal other than
arbitration or court suggests that the reference to the Utah Rules
of Professional Conduct might be read as an agreement that any
bar complaint against Grimmer stemming from its representation
of NRLA in matters covered by the Engagement Agreement
would be filed with the Utah State Bar. This reading is all the more
reasonable in light of the fact that under the Engagement
Agreement, the McKells had also personally retained Grimmer to
“draft a bar complaint” against their prior attorney, implicitly
putting Grimmer on notice that the McKells (on behalf of NRLA)
likely would not hesitate to file a bar complaint against
Grimmer as well if they came to believe that Grimmer had
violated applicable rules of professional conduct. Moreover, as
the district court observed, notwithstanding that the
Engagement Agreement ostensibly required “[a]ny dispute
arising out of, in connection with, or in relation to” the
Engagement Agreement to be “resolved by final and binding
arbitration,” enforcement of the Utah Rules of Professional
Conduct for discipline purposes is within the providence of the
OPC, which “cannot be deprived of its authority in this regard by
a contract between these two parties.” Cf. Duke Cap. LLC v. Proctor,
2023 UT App 59, ¶ 25, 531 P.3d 745 (“Parties cannot avoid or
extinguish by contract a court’s subject-matter jurisdiction
established through constitutional or statutory pronouncement.”
(cleaned up)). For these reasons, we disagree that the Arbitrator’s
reading of the choice of law provision necessarily rendered its
reference to the Utah Rules of Professional Conduct meaningless.
Accordingly, the Arbitrator’s reading of the choice of law
provision remains arguably reasonable, and, again, the district
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court was correct to not substitute its judgment for that of the
Arbitrator.
II. Grimmer’s Cross-Appeal
A. Grimmer’s Fees and Costs Incurred Before the District
Court
¶36 In its cross-appeal, Grimmer asserts that the district court
abused its discretion by denying Grimmer’s application for
attorney fees and costs incurred in the proceedings before the
district court. Grimmer’s arguments in this regard are unavailing.
¶37 The Utah Uniform Arbitration Act directs that after
confirming an arbitration award, “[a] court may allow reasonable
costs of the motion and subsequent judicial proceedings” and that
“[o]n application of a prevailing party . . . , the court may add
reasonable attorney fees and other reasonable expenses of
litigation incurred in a judicial proceeding after the award is made
to a judgment confirming . . . an award.” Utah Code § 78B-11-
126(2)–(3). Our supreme court has observed that this “grant of
authority to award attorney fees is unlike most other grants of
such authority by statute in Utah” because it “provides no
guidance to the court in determining when to award attorney fees,
which most Utah statutes do.” Buzas Baseball, Inc. v. Salt Lake
Trappers, Inc., 925 P.2d 941, 953 (Utah 1996). 5 Our supreme court
has also explained that “by selecting the word ‘may’ to describe
5. The analysis in Buzas Baseball, Inc. v. Salt Lake Trappers, Inc., 925
P.2d 941 (Utah 1996), was conducted under a predecessor statute
to current section 78B-11-126. See id. at 952. That predecessor
version of the statute and the current version of the statute are
materially different in only one relevant respect; namely, the
predecessor version did not expressly limit the parties to whom
an award of fees might be made to only prevailing parties.
Compare id. (quoting Utah Code § 78-31a-16 (1996)), with Utah
Code § 78B-11-126.
20220978-CA 19 2024 UT App 131Grimmer & Associates v. NRLA
the authority of the trial court, the legislature [has] clearly
signaled an intention to yield discretion to courts over whether to
award attorney fees for matters covered by the statute.” Paul
deGroot Bldg. Services, LLC v. Gallacher, 2005 UT 20, ¶ 22, 112 P.3d
490. 6
¶38 In Buzas Baseball, Inc. v. Salt Lake Trappers, Inc., 925 P.2d 941(Utah 1996), the court offered guidance as to when an award of
fees incurred in post-arbitration judicial proceedings might
amount to an abuse of discretion, saying that “it is difficult to
conceive of an award of attorney fees to a prevailing party” that
would amount to an abuse of discretion. Id. at 953. The “only”
circumstance the court could “imagine” where an award of fees
in this context would be an abuse of discretion was “where a trial
court awarded attorney fees to a party who did not prevail in the
litigation or who challenged an [arbitration] award and prevailed
only as to some very minor point but lost as to all major points.”
Id. Subsequent to Buzas Baseball, however, the legislature
amended the statute to allow for an award of fees only to
prevailing parties, thus eliminating the one situation imagined by
our supreme court in which a court might abuse its discretion by
awarding fees under the statute. See supra note 5.
¶39 Although Buzas Baseball addressed the question of when an
award of fees under the statute would not be proper, it left
“unaddressed possible scenarios in which a trial court would
6. The analysis in Paul deGroot Building Services, LLC v. Gallacher,
2005 UT 20, 112 P.3d 490, was conducted under a version of the
statute subsequent to the one in effect in Buzas Baseball but prior
to the version now in effect. Compare Paul deGroot, 2005 UT 20, ¶ 19
n.4 (quoting Utah Code § 78-31a-126 (2003)), with Utah Code
§ 78-31a-16 (1996), and Utah Code § 78B-11-126. The version of the
statute in effect at the time of Paul deGroot is not materially
different from the current statute. Compare Utah Code § 78-31a-
126 (2003), with Utah Code § 78B-11-126.
20220978-CA 20 2024 UT App 131Grimmer & Associates v. NRLA
abuse its discretion by failing to award attorney fees.” Paul deGroot
Bldg. Services, LLC, 2005 UT 20, ¶ 22 (emphasis added). In Paul
deGroot, however, the court seized the opportunity to address the
subject of limits on a trial court’s discretion to deny an award of
fees under the statute. See id. ¶ 23. The Paul deGroot court first
observed that, other than the noted amendment allowing for fee
awards to prevailing parties only, “the modified statutory
language [still] offer[ed] no guidance as to when attorney fees
would or would not be appropriate.” Id. Then, on the basis of its
prior reasoning in Buzas Baseball and the continued lack of
guidance in the statute itself, the court endorsed the following
principle as the touchstone for analyzing whether a trial court has
abused its discretion by denying an award of fees: “a trial court
may properly exercise its discretion . . . by denying attorney fees
to a party who prevails against a challenge to the validity of an
arbitration award.” Id. In other words, given the opportunity to
articulate a limiting principle under which a trial court might be
deemed to have abused its discretion by failing to award fees to a
prevailing party, the court declined to do so. See id. We therefore
cannot but read the decision in Paul deGroot as an
acknowledgment that, as with the granting of a fee award, there
are very limited circumstances under which the failure to award
fees under the statute would be an abuse of discretion.
¶40 The landscape changed slightly two years later when the
supreme court issued its opinion in Duke v. Graham, 2007 UT 31,
158 P.3d 540. 7 In Duke, two parties who prevailed on appeal from
7. The appeal in Duke v. Graham, 2007 UT 31, 158 P.3d 540, was
decided under the same version of the statute that was in effect in
Paul deGroot. See Duke, 2007 UT 31, ¶ 29; Paul deGroot, 2005 UT 20,
¶ 19 n.4. And, as already noted, the version in effect at the time of
Paul deGroot and Duke is not materially different from the current
version. Compare Utah Code § 78-31a-126 (2003), with Utah Code
§ 78B-11-126. Therefore, Duke also remains applicable to the
current version of the statute.
20220978-CA 21 2024 UT App 131Grimmer & Associates v. NRLA
a district court’s order confirming an arbitration award asked the
supreme court to award them the attorney fees they had incurred
on appeal. See id. ¶¶ 4‒5, 30. The supreme court again observed
that “[t]he award of attorney fees and costs under this statute . . .
is left to the discretion of the court.” Id. ¶ 31. It then said that
“[b]ecause the statute itself gives no guidance as to how this
discretion should be exercised, [the court would] look to the
policies behind” the statute to help it decide, in the first instance,
whether to grant an award of fees to the prevailing parties on
appeal. Id. The court then explained:
The inclusion of an attorney fees provision within
the Arbitration Act suggests that our policies favor
the enforceability of arbitration awards and
discourage relitigation of valid awards. Against this
policy of finality, we must balance the need not to
unduly burden parties with the threat of fees when
they have legitimate concerns about the legal
validity of an award.
To balance these competing concerns, we
assess the merits of the party’s arguments. An
appeal that has little legal support would likely
merit an award of fees to discourage unnecessary
delays and costs in enforcing an award, while a
close case would not.
Id. ¶¶ 31‒32 (cleaned up). Ultimately, the court found that the
appellants’ position had “little legal support,” and it therefore
awarded the appellees their reasonable attorney fees associated
with the appeal. Id. ¶ 32.
¶41 Notably, while the Duke decision articulates principles that
can serve as guides to other courts deciding whether to award fees
under the statute in the first instance, the decision does little to
illuminate the outer limits of those courts’ discretion for purposes
of appellate review. At most, we glean from Duke the principle
20220978-CA 22 2024 UT App 131Grimmer & Associates v. NRLA
that at some point a case may present a close enough call on the
issue of whether an arbitration award should have been
confirmed, modified, or vacated that an award of fees to the
prevailing party would be an abuse of discretion. See id.¶42 In sum, while Duke provides some general guiding
principles, we perceive in the legislature’s language and the
supreme court’s caselaw as a whole nearly no tether to a trial
court’s discretion when deciding whether to award attorney fees
to a prevailing party under section 78B-11-126.
¶43 Against this backdrop, Grimmer urges us to nevertheless
recognize two concrete limits to a trial court’s discretion to deny
to a prevailing party an award of fees under section 78B-11-126
and to then apply those limits here. We address each potential
limit in turn.
1. Adequate Findings
¶44 First, Grimmer observes that in Paul deGroot, after the
supreme court affirmed the broad discretion given to trial courts
under the statute but before it affirmed the trial court’s decision
not to award fees to the prevailing party in that case, the supreme
court stated that “[t]he trial court [had] adequately articulated its
reasons for declining to award [the prevailing party] his attorney
fees.” 2005 UT 20, ¶ 24. On the basis of this statement, Grimmer
asks us to hold that a trial court abuses its discretion if it fails to
adequately articulate its reasons for declining to award attorney
fees to the prevailing party in post-arbitration judicial
proceedings. Grimmer then asks us to conclude that the district
court here failed to adequately articulate its reasons for denying
an award of fees to Grimmer.
¶45 Even assuming for purposes of our discussion that
Grimmer actually preserved its challenge to the adequacy of the
district court’s findings, the district court did articulate its reason
for not granting Grimmer’s fee request. Specifically, the court
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based its denial of Grimmer’s fee request on its determination that
“whether the [A]rbitrator refused to consider material evidence
or exceeded her authority was a close call.” This finding provides
an adequate basis for the court’s decision not to award fees. See
Duke, 2007 UT 31, ¶¶ 31–32 (explaining that when an appeal from
a proceeding challenging an arbitration award presents “a close
case,” an award of fees likely is not merited).
2. Compatibility of the Court’s Decision on Fees and
Its Confirmation of the Arbitration Award
¶46 Grimmer next urges us to “recognize an abuse of discretion
. . . when the district court’s decision on an application for fees is
contrary to the court’s previous ruling regarding the
confirmation, vacatur, or modification of an arbitration award.”
Grimmer then contends that the district court’s determination
that NRLA’s motion to vacate the arbitration award presented “a
close call” is at odds with the court’s order denying NRLA’s
motion to vacate the arbitration award. We are not convinced.
¶47 The court’s order denying NRLA’s motion to vacate the
arbitration award contained a lengthy and nuanced analysis of the
issues NRLA raised in its motion. The court’s thorough discussion
of these issues—particularly of whether “the Arbitrator had to
reach a determination as to whether there was any violation of the
Utah Rules of Professional Conduct in adjudicating the contract
claim”—supports the court’s determination that NRLA’s motion
to vacate presented a close call.
¶48 Furthermore, the court’s determination that the motion to
vacate presented a close call was not “contrary to” its order
denying the motion to vacate, as Grimmer claims. The caselaw
discussed above clearly contemplates situations in which a party
may prevail in post-arbitration proceedings yet be unsuccessful in
receiving an award of costs and fees, see Paul deGroot Bldg. Services,
LLC v. Gallacher, 2005 UT 20, ¶ 23, 112 P.3d 490, so these rulings
are not inherently discordant. Nor does Grimmer’s observation
20220978-CA 24 2024 UT App 131Grimmer & Associates v. NRLA
that the district court did “not mince words” at various points in
its order denying NRLA’s motion to vacate convince us that the
court’s conclusions there are incompatible with its later
determination that the motion to vacate presented a close call.
Simply because a court is unequivocal in its final written
reasoning does not mean that it did not rightfully struggle to
reach its ultimate ruling precisely because the case presented a
close call.
¶49 For example, Grimmer points to the district court’s
statement that “there [was] no basis” for it to rule in NRLA’s favor
on the motion to vacate. But this does not demonstrate that the
case did not present a close call because the court ultimately had
to decide whether there was a basis to rule for NRLA no matter
how close of a call the case presented. Grimmer also points to the
court’s statement that “[b]ased on the caselaw and controlling
authority, the inverse of NRLA’s argument is true.” But again, the
court had to reach that conclusion in order to rule in Grimmer’s
favor, even if divining the appropriate outcome in light of the
controlling authorities presented a close call. In short, our reading
of the district court’s order denying NRLA’s motion to vacate—
including each of the statements therein that Grimmer points to
as examples of where the court did not mince its words—does not
convince us that the court’s findings and conclusions there were
incompatible with its later determination that the motion
presented a close call.
¶50 Ultimately, under the controlling statute and our supreme
court’s decisions interpreting it, trial courts enjoy nearly
untethered discretion when considering applications for fees and
costs in post-arbitration judicial proceedings, and the district
court did not abuse its discretion in declining to award Grimmer
the costs and fees it incurred in the district court proceedings here.
20220978-CA 25 2024 UT App 131Grimmer & Associates v. NRLA
B. Grimmer’s Fees and Costs on Appeal
¶51 Finally, Grimmer contends that if we “reverse[] the district
court’s order denying Grimmer’s application for attorney fees,
Grimmer is also entitled to recover its attorney fees, costs, and
expenses for this cross-appeal.” Because we do not reverse on this
point, we do not award appellate fees on this basis.
CONCLUSION
¶52 The district court did not err in confirming the arbitration
award because the Arbitrator did not exceed her authority in
making the award. And the district court did not abuse its
discretion in declining to award Grimmer its costs and fees. We
affirm.
20220978-CA 26 2024 UT App 131