J Hamblen Et Ux v. Hon. hatch/winslow Memorial

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
JEFFREY HAMBLEN AND BARBARA YOUNGS,
HUSBAND AND WIFE,
Petitioners,
v.
HON. RALPH HATCH, JUDGE OF THE SUPERIOR COURT
OF THE STATE OF ARIZONA, IN AND FOR THE COUNTY OF NAVAJO,
Respondent Judge,
WINSLOW MEMORIAL HOSPITAL, INC.,
D/B/A LITTLE COLORADO MEDICAL CENTER,
Real Party in Interest.
No. CV-16-0260-PR
Filed July 21, 2017
Appeal from the Superior Court in Navajo County
The Honorable Ralph E. Hatch, Judge
No. CV-2014-00311
REVERSED AND REMANDED WITH DIRECTIONS
Special Action Order of the Court of Appeals, Division One
No. 1 CA-SA 16-0201
COUNSEL:
Scott W. Rodgers (argued), Thomas L. Hudson, Joshua D. Bendor, Osborn
Maledon, P.A., Phoenix, Attorneys for Jeffrey Hamblen and Barbara
Youngs
HAMBLEN V. HON. HATCH/WINSLOW MEMORIAL
Opinion of the Court
Randall Yavitz, Isabel M. Humphrey (argued), Hunter, Humphrey &
Yavitz, PLC, Phoenix; and James E. Ledbetter, Jared R. Owens, The
Ledbetter Law Firm, P.L.C., Cottonwood, Attorneys for Winslow Memorial
Hospital Inc.
VICE CHIEF JUSTICE PELANDER authored the opinion of the Court, in
which CHIEF JUSTICE BALES, JUSTICES BRUTINEL, TIMMER, BOLICK,
and LOPEZ, and JUDGE GURTLER * joined.
VICE CHIEF JUSTICE PELANDER, opinion of the Court:
¶1 In this employment dispute, the parties submitted their
respective claims to mandatory arbitration under their employment
contract’s broad arbitration provision, which neither side challenged. The
arbitrator ruled in favor of the employer, concluding that it properly
rescinded the contract based on the employee’s underlying
misrepresentations and omissions. The final arbitration award, which the
superior court later confirmed at the employer’s request, fully settled all
claims and counterclaims submitted to arbitration and denied all claims not
expressly granted in the award. Applying the “separability” doctrine, we
hold that the employer, having not specifically challenged the contract’s
arbitration provision, may not litigate in this action claims against the
employee that, at the least, were permissive counterclaims in the
arbitration.
I.
¶2 Winslow Memorial Hospital, Inc., doing business as Little
Colorado Medical Center (“LCMC”), is a nonprofit corporation that
operates a hospital in Winslow. In 2003, LCMC hired Jeffrey Hamblen as
its president and CEO. Before he was hired, Hamblen misrepresented two
aspects of his prior employment with another entity with which LCMC had
a management services agreement. First, Hamblen falsely told LCMC that
* Justice Andrew W. Gould has recused himself from this case. Pursuant
to article 6, section 3 of the Arizona Constitution, the Honorable Charles W.
Gurtler, Jr., Presiding Judge of the Mohave County Superior Court, was
designated to sit in this matter.
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he would not receive any severance payments from the other entity. And
second, Hamblen failed to disclose an amendment to the management
services agreement that required LCMC to reimburse the other entity for
the severance payments it made to Hamblen.
¶3 The 2013 Hamblen/LCMC employment contract included
this arbitration provision:
Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration
Association in accordance with its Commercial Arbitration
Rules . . . and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction
thereof.
....
All counterclaims that would be compulsory or permissive
under Federal Rule of Civil Procedure 13(a) and (b) if the
claim were filed in court shall be asserted in the arbitration
and not otherwise.
¶4 In early 2014, after learning that Hamblen was receiving
severance payments for which it was obligated to reimburse the other
entity, LCMC placed Hamblen on administrative leave. Hamblen then
notified LCMC that he was terminating the employment contract, alleging
“good reason” under that agreement. LCMC in turn notified Hamblen that
it was rescinding the employment contract or, alternatively, terminating
him for cause. Hamblen then filed an arbitration demand with the
American Arbitration Association, claiming that LCMC owed him
severance pay under the contract on the ground that he had “good reason”
to terminate it. Shortly thereafter, LCMC filed this action in superior court,
alleging an unjust enrichment claim against Hamblen.
¶5 Hamblen moved to compel arbitration, arguing that LCMC’s
claim was subject to the employment contract’s arbitration provision.
LCMC opposed the motion on several grounds, including its contention
that it was entitled to rescind the employment contract because of
Hamblen’s fraudulent misrepresentations and omissions. Despite that
argument, the superior court granted the motion and stayed the case “until
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Opinion of the Court
mandatory arbitration under the contract is completed.”
¶6 The parties then engaged in extensive prehearing disclosures
and preparation for the arbitration. LCMC asserted various counterclaims,
including its claim for unjust enrichment. (Although LCMC continued to
pursue its unjust enrichment counterclaim at the arbitration hearing, it
purportedly withdrew that claim in a post-hearing memorandum to the
arbitrator.) LCMC also sought rescission of the employment contract based
on Hamblen’s fraudulent misrepresentations and omissions. LCMC did
not, however, challenge the arbitration clause itself (as opposed to the entire
employment contract). The parties then participated in a multi-day
arbitration hearing.
¶7 In October 2015, the arbitrator entered his award: (a) denying
Hamblen’s claim for severance pay because he terminated the agreement
without “good reason”; and (b) ruling that “LCMC had grounds to rescind,
and did rescind,” the employment contract based on Hamblen’s
misrepresentations and omissions, which “abrogates the agreement and
undoes it from the beginning.” The award also provided that “[t]his Final
Award is in full settlement of all claims and counterclaims submitted to this
Arbitration,” and that “[a]ll claims not expressly granted herein are hereby
denied.”
¶8 Following the arbitration process, LCMC moved in superior
court to confirm the final award. LCMC also asked the court to lift the stay
to allow LCMC to seek damages from Hamblen for various claims LCMC
asserted, or could have asserted, in the arbitration, including its unjust
enrichment claim that the court had previously ordered LCMC to arbitrate.
Hamblen did not oppose confirmation of the award, but did oppose the rest
of LCMC’s request and urged the court to enter a “simple judgment in
LCMC’s favor, with no monetary award for any party,” consistent with the
arbitration award’s language.
¶9 In February 2016, the superior court entered judgment
confirming the arbitration award but also lifting the stay and granting
LCMC leave to amend its complaint. The court acknowledged Hamblen’s
argument that, based on the arbitration proceedings and final award,
LCMC should be foreclosed from reasserting its counterclaims in this
action. But the court rejected that argument, noting that the arbitrator
found that LCMC had “grounds to and did rescind the LCMC/Hamblen
Employment Agreement,” which “abrogate[d] the agreement and undid it
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Opinion of the Court
from its very beginning.” Consequently, the court ruled, Hamblen’s
request “to deny [LCMC’s] right to a jury trial to prove damages” on its
claims “is unreasonable as the contract was rescinded and undid [sic] from
its very beginning.”
¶10 Hamblen later moved for a new trial or, alternatively, to alter
or amend the judgment under Arizona Rule of Civil Procedure 59. He
argued that the arbitration award disposed of all claims between the
parties—including LCMC’s counterclaims—and that the court overstepped
its authority under the Revised Uniform Arbitration Act (“RUAA”), A.R.S.
§ 12-3001 to -3029, by ruling that LCMC could reassert its counterclaims in
this court action. LCMC, in turn, moved to amend its complaint to assert
various claims against Hamblen.
¶11 In April 2016, the superior court denied Hamblen’s motions,
ruling that (1) both parties jointly requested the court to confirm the
arbitration award, and that “the Court did in fact confirm the final
arbitration award by written order”; and (2) because LCMC rescinded the
employment contract, which “‘undoes it from the beginning,’” LCMC was
“entitled to a jury trial on its claims.” By separate order, the court also
granted LCMC’s motion to amend its complaint.
¶12 The court of appeals declined jurisdiction of Hamblen’s
ensuing special action. We granted review because the case presents an
issue of statewide importance and first impression before this Court—
whether the separability doctrine applies to post-arbitration confirmation
proceedings and precludes court litigation of arbitrable claims when the
agreement’s arbitration provision was not specifically challenged, even
though the arbitrator finds grounds for rescinding the entire agreement.
We have jurisdiction under article 6, section 5(3) of the Arizona
Constitution and A.R.S. § 12-120.24.
II.
¶13 Fifty years ago, the United States Supreme Court adopted
what became known as the “separability” doctrine in the arbitration
context. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).
The issue there was whether the federal court or an arbitrator should
resolve a claim of fraud in the inducement of a contract providing for
arbitration. Id. at 397-98, 402. Applying the applicable Federal Arbitration
Act (FAA), 9 U.S.C. §§ 1-16, the Court held that “if the claim is fraud in the
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inducement of the arbitration clause itself—an issue which goes to the
‘making’ of the agreement to arbitrate—the federal court may proceed to
adjudicate it. But the statutory language does not permit the federal court
to consider claims of fraud in the inducement of the contract generally.” Id.
at 403-04.
¶14 More recently, the Supreme Court affirmed and applied the
Prima Paint rule when the parties’ contract contained an arbitration clause,
but a party opposed arbitration and sought to litigate in federal court her
claim of unconscionability under state law. Rent-A-Center, West, Inc. v.
Jackson, 561 U.S. 63, 65-66 (2010). Rejecting that position, the Court ruled
that one may prevent arbitration of claims within the arbitration
agreement’s scope only if he or she “challenges specifically the validity of
the agreement to arbitrate,” rather than “challeng[ing] the contract as a
whole,” for example, based on its having been “fraudulently induced.” Id.
at 70 (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444
(2006)). Accordingly, the Court held that “a party’s challenge to another
provision of the contract, or to the contract as a whole, does not prevent a
court from enforcing a specific agreement to arbitrate.” Id.
¶15 Although this Court has not previously addressed the
separability doctrine, our court of appeals has. Relying on Prima Paint and
applicable statutes in Arizona’s Uniform Arbitration Act, A.R.S. §§ 12-1501,
-1502, the court of appeals embraced the doctrine over thirty years ago,
ruling that “the arbitration clause is considered to be an agreement
independent and separate from the principal contract.” U.S. Insulation, Inc.
v. Hilro Constr. Co., Inc., 146 Ariz. 250, 253 (App. 1985). As that court
observed,
except where the parties otherwise intend—arbitration clauses as
a matter of federal law are “separable” from the contracts in
which they are embedded, and . . . where no claim is made
that fraud was directed to the arbitration clause itself, a broad
arbitration clause will be held to encompass arbitration of the
claim that the contract itself was induced by fraud.
Id. (quoting Prima Paint, 388 U.S. at 402) (second emphasis added in U.S.
Insulation); see also WB, The Building Co., LLC v. El Destino, LP (“WB”), 227
Ariz. 302, 306-07 ¶ 11 (App. 2011) (noting as “well-established that
arbitration agreements are severable from the rest of the contract, and
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therefore, a court may only stay arbitration if there is a challenge to the
arbitration clause itself”); Stevens/Leinweber/Sullens, Inc. v. Holm Dev. &
Mgmt., Inc. (“SLS”), 165 Ariz. 25, 29 (App. 1990) (concluding that “the
doctrine of separability is inherent in the language of A.R.S. § 12-1501”).
¶16 We agree with the court of appeals that Arizona law codifies
the separability doctrine and thus applies to all contracts governed by
RUAA and/or the Uniform Act. “Read in conjunction, [A.R.S. §§ 12-1501
and 12-1502] embody the concept of separability endorsed” in Prima Paint.
U.S. Insulation, 146 Ariz. at 253; see also SLS, 165 Ariz. at 28 n.3 (observing
that § 12-1502(A) tracks the FAA, 9 U.S.C. § 4, on which Prima Paint relied
“to limit a court’s inquiry to a determination of whether an enforceable
arbitration clause exists”); § 12-1501 (stating that arbitration agreements are
“valid, enforceable and irrevocable, save upon such grounds as exist at law
or in equity for the revocation of any contract”); § 12-1502(A) (limiting
judicial inquiry to whether an arbitration agreement exists).
¶17 In addition, in 2010 Arizona adopted RUAA, which “governs
an agreement to arbitrate made on or after January 1, 2011,” including the
agreement here. A.R.S. § 12-3003(A)(1). 1 Section 6(c) of that uniform act
incorporates the separability doctrine, and Arizona adopted that language
verbatim in RUAA. A.R.S. § 12-3006(C) (“An arbitrator shall decide . . .
whether a contract containing a valid agreement to arbitrate is
enforceable.”). In addition, “[i]n applying and construing” RUAA, Arizona
courts are to consider “the need to promote uniformity of the law with
respect to its subject matter among states that enact it.” A.R.S. § 12-3028. In
short, RUAA further supports the separability doctrine.
III.
¶18 Before addressing the parties’ positions on the doctrine’s
application to this case, we make two points. First, RUAA specifically
provides that beginning in January 2011, “this chapter shall not apply to an
agreement to arbitrate any existing or subsequent controversy . . .
1 RUAA, however, did not displace, and in some areas overlaps with,
Arizona’s Uniform Arbitration Act, A.R.S. §§ 12-1501 to -1518. See Bruce E.
Meyerson, Arizona Adopts the Revised Uniform Arbitration Act, 43 Ariz. St. L.J.
481, 486 (2011) (Because “RUAA does not entirely replace Arizona’s
existing arbitration law,” “Arizona now has two [sets of] arbitration
statutes.”).
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[b]etween an employer and employee.” A.R.S. § 12-3003(B)(1). Arizona’s
Uniform Arbitration Act contains a parallel provision. See North Valley
Emergency Specialists, L.L.C. v. Santana, 208 Ariz. 301, 302 ¶ 1 (2004) (holding
that A.R.S. § 12-1517 exempts from the Uniform Arbitration Act “all
arbitration agreements between employers and employees,” not only such
agreements contained in collective bargaining contracts).
¶19 The parties did not waive those non-applicability provisions
by entering into an employment agreement with an arbitration clause. But
both parties acknowledge they voluntarily “opted in” to RUAA and the
Uniform Act, and we accept the parties’ agreement on this point. See A.R.S.
§§ 12-3004(A) (“Except as otherwise provided in subsections B and C of this
section, a party to an agreement to arbitrate or to an arbitration proceeding
may waive, or the parties may vary the effect of, the requirements of this
chapter to the extent permitted by law.”); 12-3004(B), (C) (omitting
agreements to arbitrate employment disputes from listing of conditionally
waivable and non-waivable matters under RUAA). Therefore, for purposes
of this case we deem RUAA and the Uniform Act applicable.
¶20 Second, even had the parties not waived the Arizona laws
that exempt employment agreements from RUAA and the Uniform Act,
“[t]he FAA preempts state law and governs all written arbitration
agreements involving interstate commerce, making such agreements
enforceable in both federal and state courts.” S. Cal. Edison Co. v. Peabody
W. Coal Co., 194 Ariz. 47, 51 ¶ 13 (1999). And the FAA applies to arbitration
agreements in employment contracts. See Circuit City Stores, Inc. v. Adams,
532 U.S. 105, 109 (2001); see also Rent-A-Center, 561 U.S. at 65-71 (applying
separability doctrine to employment contract). Nonetheless, consistent
with the parties’ arguments, we limit our analysis and conclusion to
Arizona law, without considering whether the agreement here falls within
Congress’s Commerce Clause powers and is thus covered by the FAA. See
generally Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995);
Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681 (1996).
IV.
¶21 Hamblen argues that the separability doctrine applies to not
only pre-arbitration challenges to motions to compel arbitration, but also
post-arbitration proceedings. Proper application of the doctrine here,
Hamblen asserts, leads to several conclusions. First, “an arbitrator’s
decision to rescind a contract containing an arbitration provision does not
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impact the validity of the arbitration provision itself.” Second, “once a trial
court properly compels arbitration, the parties may not later litigate claims
subject to the governing arbitration provision.” Thus, Hamblen contends,
the doctrine “precluded the superior court from permitting further
litigation between the parties,” particularly after the court confirmed the
arbitration award.
¶22 LCMC counters with two points, one procedural and the
other substantive. First, it argues that Hamblen’s current attempt to
preclude superior court litigation of its various claims is premature,
inasmuch as he never filed a motion for dismissal or summary judgment on
those claims based on res judicata, merger, or otherwise. The superior
court, therefore, had no “opportunity to consider or rule upon Hamblen’s
potential dispositive motion.” We disagree. Hamblen clearly argued below
that, as a matter of law, the confirmed arbitration award and separability
doctrine foreclose further litigation of LCMC’s claims, and the superior
court clearly understood and rejected that argument. Hamblen’s argument
here, therefore, is not premature or procedurally deficient.
¶23 Substantively, LCMC argues that the parties’ dispute “is
merely with respect to the scope of the effect of the [arbitration] award,
which the parties agree is final and enforceable.” Relying on Clarke v.
ASARCO, Inc., 123 Ariz. 587, 589 (1979), LCMC contends that “[t]he
arbitrator’s subject-matter jurisdiction is . . . ‘limited in scope to issues
raised by the arbitration agreement.’” We agree with that proposition, but
it does not aid LCMC.
¶24 In Clarke, this Court affirmed the superior court’s order
denying arbitration because the arbitration provision in the parties’ contract
was limited and governed only certain specified disputes, and the disputes
involved in the case went “far beyond the scope of issues which the parties
intended to submit to arbitration under the terms of the agreement to
arbitrate.” Id. As we observed, “[p]arties are only bound to arbitrate those
issues which by clear language they have agreed to arbitrate,” and in Clarke
the parties’ “contract could have required that all disputes arising out of the
contract as a whole be subject to arbitration,” but did not so state. Id.
¶25 Here, in contrast, the Hamblen/LCMC employment contract
broadly required arbitration of “[a]ny controversy or claim arising out of or
relating to” the employment contract. That language is not limited to
contract claims, but also encompasses any tort claims arising out of or
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related to the parties’ employment contract. LCMC does not dispute that
the various tort claims it seeks to litigate under its amended complaint in
superior court fall within that language. Nor does LCMC contest that its
pending tort claims constitute permissive counterclaims in the arbitration
and thus are covered by the agreement’s mandate that all “compulsory or
permissive” counterclaims “shall be asserted in the arbitration and not
otherwise.”
¶26 LCMC argues, however, that Hamblen’s position exhibits “a
fundamental misunderstanding of the separability doctrine.” According to
LCMC, under Hamblen’s view “neither the court nor the arbitrator had any
authority to decide LCMC’s claim that the entire contract, including the
arbitration clause, was invalid.” But Hamblen has never challenged the
arbitrator’s exclusive authority to rule on LCMC’s rescission claim, nor did
Hamblen contest the superior court’s confirmation of the arbitration award,
which found LCMC’s rescission supported and appropriate. Rather,
Hamblen’s argument is based on the fact that LCMC neither specifically
challenged the validity of the arbitration provision nor sought to limit the
scope of the arbitration proceeding or the arbitrable claims submitted there.
Under those circumstances, he asserts, “the separability doctrine requires
that once the superior court properly compelled arbitration” and later
confirmed the arbitration award, “LCMC could never litigate any claims
(permissive or compulsory) against Hamblen that existed at that time.”
And that is so, Hamblen contends, even when, as in this case, the arbitrator
finds valid grounds to rescind the contract in which the arbitration
agreement is found.
¶27 Without citing any authority, LCMC counters that “[o]nce the
arbitrator had determined that LCMC had properly rescinded the entire
contract,” “the arbitrator no longer had any power to decide any other
claims that were or could have been asserted by LCMC against Hamblen.”
But this argument is unsupported and inconsistent with the separability
doctrine, the arbitration provision, the arbitration award, the superior
court’s confirmation of that award, RUAA, and arbitration-related policy
considerations.
¶28 Unlike the party that opposed arbitration in WB, LCMC did
not “challenge the validity of the arbitration agreement separately and
distinctly from [its] challenge of the underlying contract.” 227 Ariz. at 307
¶ 13 & n.4; see also SLS, 165 Ariz. at 29 (affirming superior court’s order
denying motion to compel arbitration when party “challeng[ed] the validity
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of the arbitration provision, but not the validity of the principal contract”).
Had LCMC separately and specifically challenged, even on identical
grounds, “both [the] arbitration agreement and the underlying
[employment] contract,” WB, 227 Ariz. at 307 ¶ 13, the superior court
conceivably could have found the arbitration clause to be unenforceable,
denied Hamblen’s motion to compel arbitration, retained jurisdiction, and
ruled on the merits of all claims. Cf. Prima Paint, 388 U.S. at 404 (“[I]n
passing upon a[n] . . . application for a stay while the parties arbitrate, a
federal court may consider only issues relating to the making and
performance of the agreement to arbitrate.”). But that is not what happened
here.
¶29 Under the separability doctrine, therefore, the superior court
properly compelled arbitration of all claims relating to the parties’
employment agreement, including LCMC’s claim for rescission. Cf. Buckeye
Check Cashing, 546 U.S. at 445-46 (stating that “unless the challenge is to the
arbitration clause itself, the issue of the contract’s validity is considered by
the arbitrator in the first instance”); Saint Agnes Medical Center v. PacifiCare
of California, 82 P.3d 727, 735 (Cal. 2003) (“[T]he central rationale of Prima
Paint was that an arbitration clause is separable from other portions of a
contract, such that fraud in the inducement relating to other contractual
terms does not render an arbitration clause unenforceable, even when such
fraud might justify rescission of the contract as a whole.”). Under these
circumstances, we agree with Hamblen that the doctrine should apply here
in the post-arbitration context.
¶30 Once the parties’ dispute was correctly referred to arbitration,
LCMC was required under their agreement to present in that proceeding
all counterclaims, permissive or otherwise, that arose out of or related to
the Hamblin/LCMC employment agreement. Consistent with that
requirement, LCMC identified numerous claims against Hamblen in its
arbitration disclosure statement. That LCMC chose to not present certain
claims does not justify its later asserting them in its amended complaint in
superior court. And although the arbitrator found valid grounds for
LCMC’s rescission of the employment contract, that ruling did not vitiate
the unchallenged arbitration clause in the parties’ contract or preclude the
arbitrator from also deciding all of the parties’ employment related claims.
Cf. Verma v. Stuhr, 223 Ariz. 144, 158 ¶ 73 (App. 2009) (although “rescission
is meant to restore the parties to their pre-contract status,” “a contract may
be partially rescinded when the contract is divisible or severable”). Indeed,
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the arbitrator stated that the final award was “in full settlement of all claims
and counterclaims submitted” to arbitration and denied “[a]ll claims not
expressly granted” in the award.
¶31 The superior court’s confirmation of that award was
unqualified and unchallenged. That confirmation was in keeping with
RUAA, which strictly limits the superior court’s options after the arbitration
process is complete. See A.R.S. § 12-3022 (requiring a court to confirm an
arbitration award “unless the award is modified or corrected . . . or is
vacated,” actions that were neither requested nor appropriate here). In
view of the confirmed arbitration award, neither RUAA nor any other
authority permitted further litigation, via LCMC’s amended complaint that
the superior court authorized, of arbitrable claims that could and should
have been pursued in the arbitration. As Hamblen points out, permitting a
party to later litigate arbitrable claims in court, after unlimited arbitration
proceedings have concluded and the arbitration award has been confirmed,
“would result in tremendous waste and discourage parties from entering
into arbitration agreements.”
¶32 Finally, our conclusion advances the policies underlying
arbitration and the separability doctrine. See Prima Paint, 388 U.S. at 404
(noting that the separability doctrine “not only honor[s] the plain meaning
of the [FAA] but also the unmistakably clear congressional purpose that the
arbitration procedure, when selected by the parties to a contract, be speedy
and not subject to delay and obstruction in the courts”). As discussed
above, when parties contractually agree to arbitrate any disputes and the
arbitration provision is not specifically and separately challenged, the
applicable United States Supreme Court and Arizona cases require that a
general challenge to the validity of the contract be submitted to arbitration.
Although those cases do not squarely address what happens “next” if the
arbitrator concludes that the contract as a whole—including its arbitration
clause—is unenforceable or rescinded, the underlying purpose and policy
of the separability doctrine support Hamblen’s position.
¶33 Because the separability doctrine presumes that the
arbitration clause is separable from the overall contract, where, as here, the
parties agree to a broad arbitration clause that is not specifically challenged,
that provision will apply even if the arbitrator finds that the overall contract
is void or voidable. And this is so unless (1) the parties have provided
otherwise in their contract; (2) the parties stipulate to a bifurcated
procedure in which they may later litigate claims in court if the arbitrator
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finds the entire contract void or voidable; or (3) the party opposing
arbitration establishes that the clause itself is unenforceable. Thus, the
separability doctrine operates as a presumption that the parties intend an
arbitration clause to be severable from the rest of the agreement, but—
consistent with the notion that the scope of contractual arbitration turns on
the parties’ agreement—the parties can themselves provide otherwise.
¶34 This construct also aligns with the general underlying goals
of arbitration. “The primary purpose of arbitration is to provide an
alternative to litigation so that the parties may ‘obtain an inexpensive and
speedy final disposition of the matter.’” Canon Sch. Dist. No. 50 v. W.E.S.
Constr. Co., Inc., 180 Ariz. 148, 152 (1994) (quoting Smitty’s Super-Valu, Inc.
v. Pasqualetti, 22 Ariz. App. 178, 182 (1974)). When parties have agreed to
submit their claims to arbitration, “the parties, having chosen a different
tribunal, may not reinstate judicial tribunals to resolve the controversy.”
Id.; see also S. Cal. Edison Co., 194 Ariz. at 52 ¶ 17 (recognizing purpose of
arbitration as affording “prompt, efficient, and inexpensive dispute
resolution”); SLS, 165 Ariz. at 29 (recognizing “the strong public policy
favoring arbitration as the preferred means of dispute resolution”).
Litigating anew LCMC’s various claims against Hamblen, as LCMC urges
and the superior court sanctioned, would undercut those fundamental
policies, result in considerable duplication of effort, and require additional
time and expense, all after costly, time-consuming arbitration proceedings
to which the parties agreed and the court ordered. Accordingly, we hold
that LCMC is barred from litigating its claims against Hamblen in superior
court.
V.
¶35 For the reasons stated, we reverse the superior court’s
judgments granting LCMC’s motion to amend its complaint and allowing
LCMC to litigate its various claims against Hamblen in this action. We
remand the case to the superior court with directions to dismiss the
amended complaint. In our discretion, we deny Hamblen’s request for an
award of attorney fees under A.R.S. § 12-341.01 and RUAA, A.R.S. § 12-
3025(C).
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