Bradley Feldman, V, Darren Williams ( 2024 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
BRADLEY FELDMAN,
No. 85476-3-I
Appellant,
DIVISION ONE
v.
UNPUBLISHED OPINION
DARREN WILLIAMS,
Respondent.
BIRK, J. — Pursuant to the parties’ put/call agreement, Darren Williams
initiated arbitration to determine that Bradley Feldman must sell his shares in a
company to Williams and to determine the price. An arbitrator entered a final
award granting that relief, but Williams decided against purchasing Feldman’s
shares. Feldman filed a motion to confirm the arbitration award in superior court,
asking for an order requiring Williams to pay Feldman for his shares. The superior
court denied Feldman’s motion and granted Williams’s motion to confirm the award
as originally worded. We affirm and award attorney fees and costs to Williams,
because Feldman’s new claim that Williams must purchase his shares cannot be
resolved on a motion to confirm an arbitration award and the award is not
ambiguous.
I
Feldman and Williams were founders, shareholders, and employees of Riot
Insight, Inc. Feldman and Williams entered into a put/call agreement. It stated
No. 85476-3-I/2
that in the event of a termination resulting from the willful failure of Williams or
Feldman to perform their responsibilities or the voluntary termination of either party
prior to the third anniversary date of the agreement’s execution, the non-
terminating party will have a right to purchase all shares of stock held by the
terminating party. It stated further that if neither Williams nor Feldman has
experienced a termination in service of the corporation and any time after the 18
month anniversary date of the agreement are unable to reach an agreement with
respect to any major decision affecting the corporation, Williams may exercise his
call right and Feldman may exercise his put right. In that event, “Williams shall
have the right to elect to purchase Feldman’s Interest (the “Call”) at the Agreement
Price determined in accordance with Section 3.”
The put/call agreement contains the following arbitration clause:
Binding Arbitraion [sic]. Except as otherwise provided, any
controversy or claim arising out of or relating to this Agreement, or
the breach thereof shall be settled by final and binding arbitration in
accordance with the then prevailing rules of the American Arbitration
Association, and judgment upon the award rendered may be entered
in any court having jurisdiction thereof. The arbitration proceedings
shall be held in Seattle, WA, before a single arbitrator.
(Boldface omitted.) The parties agreed at least for purposes of the issues before
this court that the put/call agreement was executed in July 2018.
On August 24, 2021, Williams terminated Feldman’s employment with the
company, though the parties disagreed as to whether it was a wrongful termination.
On November 4, 2021, Williams sent an e-mail to Feldman stating he would like to
purchase Feldman’s interest in Riot. Williams stated, “Per the Put-Call Agreement,
you are eligible for 60% of your pro-rata share of the Agreement Price. Your
2
No. 85476-3-I/3
current percentage of stock in RIOT is 28.8% by my calculation. . . . [M]y offer is
$250,000 and we will remove you from the [Small Business Administration] loan
guarantee.”
In an amended demand for arbitration signed and dated on July 18, 2022,
Williams made claims for declaratory relief and breach of contract. Williams
requested an award declaring he has the right to purchase all of Feldman’s shares
and an award ordering Feldman specifically perform his obligations under the
put/call agreement by selling or transferring his shares of Riot to Williams.
On August 26, 2022, Feldman signed and dated his answer and affirmative
defenses to Williams’s demand. Feldman claimed among other things, “[a]ny right
to purchase Feldman’s shares, however, had expired by the passage of time and
because Williams (wrongfully) terminated Feldman from employment. As such,
Feldman is not obligated to sell his shares to Williams and the claims in the
Amended Demand should be dismissed.” However, Feldman asserted in the
alternative that if he were required to sell, then he was entitled to the fair value of
those shares, which he went on to claim was higher than Williams credited. At the
arbitration, Williams asserted Feldman was required to relinquish his shares for
$0, whereas Feldman asserted the appropriate value was from $616,000 to $1.8
million.
The parties attended a three day arbitration hearing. On February 14, 2023,
the arbitrator entered a final award that states,
1. Mr. Williams has the right to purchase all of Mr. Feldman’s shares
of Riot Insights, Inc., stock for the Agreement Price of $300,000.
3
No. 85476-3-I/4
2. Mr. Feldman shall sell his shares of Riot Insights, Inc., stock to
Mr. Williams for the Agreement Price of $300,000.
This granted the declaratory relief and specific performance in the terms Williams
had requested. The award noted relief not awarded was denied.
In a letter to Williams dated May 12, 2023, Feldman stated that since receipt
of the arbitration award, he had unsuccessfully sought to sell his shares in return
for the sum fixed in the award. He asked Williams to consider the letter to be a
formal tender of his shares “in return for $293,381.25, plus any applicable interest,
in accordance with the award.” This amount was based on the arbitrated price of
$300,000 less outstanding arbitration costs.
On May 15, 2023, Feldman filed a motion to confirm the arbitration award
and enter judgment in superior court. Feldman argued that Washington law
required confirmation of the award, that the arbitrator followed the law, and that the
court should order Williams to pay for Feldman’s shares. Feldman sought entry of
a money judgment in his favor for the price determined by the arbitrator less
outstanding arbitration costs. Feldman requested alternative relief that the court
modify the award to set a deadline for Williams to complete the purchase of his
shares or request the arbitrator clarify the award.
The same day, Williams filed his own motion to confirm the arbitration
award. Williams requested that the superior court only “enter an order confirming
the Final Award.” Feldman claimed Williams’s proposed order “is an obvious
delaying tactic that resolves little, leaving for a later motion the enforcement of the
arbitration award.”
4
No. 85476-3-I/5
The superior court entered Williams’s proposed order confirming the
arbitration award. In relevant part, the order states,
1. The final arbitration award is unambiguous. The award must
be read in its entirety that demonstrates Mr. Williams has the right to
purchase all of Mr. Feldman’s shares at the designated [price] and
Mr. Feldman must sell his shares at the designated price. The award
does not compel that Mr. Williams shall or must buy Mr. Feldman’s
shares. . . . Notably, the relief requested here of a specific deadline
was not included in Plaintiff-Respondent’s pre-hearing memorandum
– only a request in the alternative that claimant be required to
purchase them for $1,800,000.00. . . . The award does not need
clarification to the extent it appears parties did not contemplate or
consider this issue in the arbitration.
2. The Plaintiff-Respondent has failed to demonstrate a factual
basis to warrant modification of the arbitration award. The request
to include a timeframe is not correcting the award as permitted by
statute but is an alteration of the award.
The superior court denied Feldman’s motion and ordered that “[a]ny further
disputes as to the parties’ rights under the ‘Put/Call Agreement’ at issue in the
preceding arbitration may be resolved by the parties in arbitration.” The court
ordered that “[p]ursuant to RCW 7.04A.250, the prevailing party may apply for an
award of fees.” The superior court subsequently granted Williams’s motion for an
award of attorney fees and costs in the amount of $11,075.00.
Feldman appeals.
II
Feldman claims the superior court erred when it denied his motion to
confirm the arbitration award and granted Williams’s cross motion. We disagree.
In Washington, arbitration is controlled by the uniform arbitration act (UAA),
chapter 7.04A RCW. AURC III, LLC v. Point Ruston Phase II, LLC, 3 Wn.3d 80,
5
No. 85476-3-I/6
85, 546 P.3d 385 (2024). After a party to the arbitration proceeding receives notice
of an award, the party may file a motion with the court for an order confirming the
award, at which time the court shall issue such an order unless the award is
modified, corrected, or vacated. RCW 7.04.220. Although a party may apply to
the court to confirm an arbitration award, that is not the same as bringing an original
action to obtain a monetary judgment. Price v. Farmers Ins. Co. of Wash., 133
Wn.2d 490, 497, 946 P.2d 388 (1997). If the court does not modify, vacate, or
correct the award, the court exercises a mere ministerial duty to reduce the award
to judgment. Id.; see RCW 7.04A.260(2) (“An agreement to arbitrate providing for
arbitration in this state confers exclusive jurisdiction on the court to enter judgment
on an award under this chapter.”).
On a party’s motion, a superior court shall modify or correct an arbitrator’s
award if “[t]he award is imperfect in a matter of form not affecting the merits of the
decision on the claims submitted.” RCW 7.04A.240(1)(c). Superior courts may
submit the claim to the arbitrator to modify or correct an award. RCW
7.04A.200(4). Judicial review of an arbitration award is limited to the face of the
award, and the award will not be vacated or modified in the absence of an error of
law on the face of the award. Davidson v. Hensen, 135 Wn.2d 112, 118, 954 P.2d
1327 (1998). Accordingly, judicial review of an arbitration award does not include
a review of the merits of the case and the evidence before the arbitrator will
ordinarily not be considered by the court. Id. at 119. We review de novo a trial
court’s decision to confirm an arbitration award. Fid. Fed. Bank, FSB v. Durga Ma
Corp., 386 F.3d 1306, 1311 (9th Cir. 2004).
6
No. 85476-3-I/7
A
Feldman argues the arbitration award is imperfect as a matter of form not
affecting the merits of the decision and it requires Williams to complete the
purchase of his shares. We disagree.
The award states Williams is entitled to purchase Feldman’s shares for
$300,000 and Feldman must sell his shares to Williams for $300,000. Nowhere
does the award state that Williams must purchase Feldman’s shares. The use of
the word “shall” in the award imposes an obligation on Feldman to sell his shares
to Williams for $300,000. It does not address when Feldman must sell his shares.1
Feldman claims the arbitrator was not required to address Williams’s obligation to
purchase Feldman’s shares because Williams “had already asserted that he
properly exercised his call option, tendering performance, and therefore was
legally committed to purchase the shares.” Citing Washington and out of state
authorities, Feldman says Williams had an obligation to purchase that is “inherent”
in the award.
Relying on Rogers Walla Walla, Inc. v. Ballard, 16 Wn. App. 81, 553 P.2d
1372 (1976), Feldman argues Williams is now required to buy his shares because
Williams exercised his call option. In Ballard, a company employee entered into
an agreement to purchase 100 shares of the company’s treasury stock. Id. at 82.
1 The arbitration act limits the court’s role when confirming an arbitration
award. In general, a party seeking specific performance in court may be required
to show that they have performed or are ready and willing to perform. Bower v.
Bagley, 9 Wash. 642, 648-49, 38 P. 164 (1894). But, with exceptions not relevant
here, “[t]he fact that such a remedy could not or would not be granted by the court
is not a ground for refusing to confirm an award under RCW 7.04A.220 or for
vacating an award under RCW 7.04A.230.” RCW 7.04A.210(3).
7
No. 85476-3-I/8
The agreement provided that if the employee left the company or desired to sell
the shares, they must be sold only to the company, who agreed to purchase them
at $100 per share. Id. at 82-83. After the employee resigned at the company’s
request for mishandling a deal, the company sought the return of the stock
certificate and tendered the purchase price of $10,000, but the employee refused
to return the certificate. Id. at 84. The company filed an action for specific
performance, which the trial court granted following a bench trial. Id. The Ballard
court affirmed, noting specific performance was a proper remedy where the
corporate stock was of unknown and of not easily ascertainable value or is
unobtainable in the open market, as was the case with the company’s stock. Id.
at 89-90.
In Omicron Co. v. Hansen, a landowner leased her land to a corporation for
a term of 99 years with an option to buy. 16 Wn.2d 362, 363, 133 P.2d 505 (1943).
The option agreement provided that if the parties did not agree on price, the
reasonable value of the premises would be determined by a board of arbitration.
Id. at 363-64. The board would be composed of three members, one appointed
by each party and the third appointed by the two parties’ appointees. Id. The
lessee assigned its interest to Omicron, who filed a lawsuit against the landowner
because she did not designate an appraiser after Omicron sought an agreement
to purchase the property. Id. at 364. Omicron sought the determination of a
purchase price before it would be required to exercise the option to purchase. Id.
at 364-65. The superior court dismissed the lawsuit and the Omicron court
affirmed. Id. at 365, 367. The Omicron court interpreted the agreement to mean
8
No. 85476-3-I/9
that if the lessee desired to purchase the land, it must notify the lessor and then
the purchase price must be fixed either by agreement or appraisal. Id. at 365.
Otherwise, the lessee could repeatedly seek market valuations of the property
throughout the life of the lease without any obligation to purchase the property. Id.
at 366. Feldman argues that Williams’s asserted right to invoke his call option and
put the parties to the trouble of the price determination under the put/call
agreement, but then decline to complete the purchase, leads to the same folly that
Omicron eschewed.
There may be substantive merit in Feldman’s position, but Ballard and
Omicron are distinguishable from this proceeding to confirm the arbitration award.
The court’s role in reviewing the confirmation of an arbitration award is limited by
statute. The remaining cases Feldman cites to support his substantive arguments
on Williams’s alleged obligations are distinguishable in the same way because
those cases were not subject to arbitration proceedings.2 See Wash. Co-op. Chick
2 Feldman relies on Riot’s status as a Delaware corporation to argue that
Delaware law is “persuasive” regarding the analysis of the put/call agreement. The
put/call agreement does not contain a choice of law clause. Ordinarily,
Washington looks to the law of the state of incorporation to determine
controversies arising from the internal affairs of a corporation. FutureSelect
Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc., 175 Wn. App. 840, 864-65 &
n.56, 309 P.3d 555 (2013), affirmed, 180 Wn.2d 954, 331 P.3d 29 (2014). But a
party who intends to raise an issue concerning the law of another state must set
forth in the party’s pleading facts which show that the other state’s law may be
applicable or must state in the party’s pleading or serve other reasonable written
notice that the law of another United States jurisdiction may be relied upon. CR
9(k)(1). “The purpose of CR 9(k) is ‘to put one’s opponent and the court on notice
of the applicability of foreign law.’ ” Mulcahy v. Farmers Ins. Co. of Wash., 152
Wn.2d 92, 98, 95 P.3d 313 (2004) (quoting Rodriguez v. Travelers Ins. Co., 54
Wn. App. 725, 728, 775 P.2d 973 (1989)). And where the law of Washington and
a foreign state do not conflict, we apply Washington law. See Shanghai Com.
Bank Ltd. v. Kung Da Chang, 189 Wn.2d 474, 481, 404 P.3d 62 (2017). Feldman
9
No. 85476-3-I/10
Ass’n v. Jacobs, 42 Wn.2d 460, 461-62, 466, 256 P.2d 294 (1953) (affirming
dismissal on a motion for judgment on the pleadings for action arising out of a
conditional sale contract); Allis-Chalmers Mfg. Co. v. Hedlund Lumber & Mfg. Co.,
164 Wash. 296, 297-98, 2 P.2d 708 (1931) (action brought to recover machinery
after default in installment payments filed in court). While Feldman may have
articulated persuasive arguments why Williams is legally bound by his election to
purchase his shares after invoking the put/call option, the type of order under
review does not allow us to grant the relief Feldman requests. Feldman asserts
that after the arbitration award, Williams’s performance came due and Williams did
not render it. This is a new claim of breach, not resolved in the existing arbitration
award.
Feldman provides no basis to modify or correct the award consistent with
statute. Including a requirement that Williams must exercise his right to buy
Feldman’s shares, or that he do so “in a reasonable time,” would affect the merits
of the arbitrator’s decision. Such a change is prohibited by RCW 7.04A.240(1)(c).
B
Feldman argues in the alternative that the award was ambiguous. We
disagree.
An arbitration award is ambiguous on its face if it may be read in more than
one reasonable way. See Snoqualmie Police Ass’n v. City of Snoqualmie, 165
has neither pleaded that law other than Washington law governs this action, nor
that there is a conflict between such other law and Washington law. We therefore
apply Washington law. This does not foreclose review of Delaware case law as
persuasive authority.
10
No. 85476-3-I/11
Wn. App. 895, 897, 273 P.3d 983 (2012). “A provision is not ambiguous merely
because the parties suggest opposing meanings.” Stranberg v. Lasz, 115 Wn.
App. 396, 402, 63 P.3d 809 (2003). When an arbitration award is ambiguous, the
proper remedy is to remand the award to the arbitrator for clarification. Snoqualmie
Police Ass’n, 165 Wn. App. at 905. Findings of fact entered on an order confirming
an arbitration award are superfluous. See Thorgaard Plumbing & Heating Co. v.
King County, 71 Wn.2d 126, 136, 426 P.2d 828 (1967).
The arbitration award is not ambiguous, because it can be read in only one
reasonable way. As explained above, the award did not require Williams to
exercise his right to buy Feldman’s shares at any time. Feldman’s interpretation
essentially reads language into the award that does not exist and its inclusion
would amount to more than a mere correction.
This does not mean that Williams did not or does not have the obligation to
complete the purchase—he may well have for the reasons Feldman argues. But
this question simply has not been litigated, was not before the superior court, and
is not before us. In the superior court’s order confirming the arbitration award, the
court stated, “The award does not compel that Mr. Williams shall or must buy Mr.
Feldman’s shares.” But this refers only to the fact the arbitration award factually
does not do so, and is not a determination that Williams had no such obligation.
At oral argument, Feldman claimed that whether Williams could revoke an
assertion of the right to purchase Feldman’s shares was not before the arbitrator,
and Williams conceded that on a motion to confirm an arbitration award the
11
No. 85476-3-I/12
superior court could not reach the merits of whether he had an obligation to sell.3
We agree, and conclude that the question of Williams’s obligation to complete the
transaction must be litigated in a subsequent arbitration proceeding.
III
Feldman challenges the superior court’s order awarding attorney fees and
costs and requests an award for attorney fees and costs on appeal pursuant to
RAP 18.1. Williams also requests attorney fees on appeal.
“On application of a prevailing party to a contested judicial proceeding under
RCW 7.04A.220, 7.04A.230, or 7.04A.240, the court may add to a judgment
confirming, vacating without directing a rehearing, modifying, or correcting an
award, attorneys’ fees and other reasonable expenses of litigation incurred in a
judicial proceeding after the award is made.” RCW 7.04A.250(3). The superior
court awarded attorney fees and costs to Williams as the prevailing party pursuant
to this statute.
“We will award attorney fees to the prevailing party ‘only on the basis of a
private agreement, a statute, or a recognized ground of equity.’ ” Buck Mountain
Owner’s Ass’n v. Prestwich, 174 Wn. App. 702, 731, 308 P.3d 644 (2013) (quoting
Equitable Life Leasing Corp. v. Cedarbrook, Inc., 52 Wn. App. 497, 506, 761 P.2d
77 (1988)). RCW 7.04A.250(3) provides such a basis. Mainline Rock & Ballast,
Inc. v. Barnes, Inc., 8 Wn. App. 2d 594, 618, 439 P.3d 662 (2019).
3 Wash. Court of Appeals oral argument, Feldman v. Williams, No. 85476-
3-I (Jun. 5, 2024), at 09 min. 54 sec. to 11 min., 18 sec., & 20 min. 41 sec. to 20
min., 55 sec., https://tvw.org/video/division-1-court-of-appeals-2024061208/.
12
No. 85476-3-I/13
Williams is the substantially prevailing party on confirming the arbitration
award, so we affirm the superior court’s order granting attorney fees and costs and
award reasonable attorney fees and costs to Williams on appeal, subject to his
further compliance with RAP 18.1(d).
We need not reach any other issues.
Affirmed.
WE CONCUR:
13