December Corporation v. Wild Meadows Home Owners Association

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
DECEMBER CORPORATION, :
:
Appellant, : K15A-04-001 JJC
: In and For Kent County
v. :
:
WILD MEADOWS HOME :
OWNERS ASSOCIATION, :
:
Appellee. :
:
ORDER
Submitted: February 24, 2017
Decided: March 7, 2017
On this 7th day of March 2017, having considered Appellant December
Corporation's (hereinafter December Corp.=s@) motion for relief from judgment
pursuant to Superior Court Civil Rule 60(b) and Appellee Wild Meadows
Homeowners Association’s (hereinafter AWild Meadows’@) response, it appears that:
1. December Corp. manages the Wild Meadows manufactured home
community in Dover.1 Primarily, the tenants at Wild Meadows own their homes but
rent the land from the community owner. 2 On November 10, 2014, pursuant to 25
Del. C. § 7043, December Corp. initiated the statutorily required meeting with Wild
Meadows= tenants in order to discuss a proposed rent increase in excess of the CPI-U.3
After a hearing on the issue of a rent increase, the original arbitrator issued a decision
1
December Corp. v. Wild Meadows Home Owners Ass=n, 2016 WL 3866272, at *1 (Del. Super. Ct.
July 12, 2016).
2
Id.
3
The statutory scheme requires the community owner to schedule a final meeting between the parties
to discuss the reasons for the rental increase. 25 Del. C. § 7043.
on March 30, 2015. 4 There, he decided that December Corp. was not entitled to a
rental increase for construction costs or for the 1.7% CPI-U increase.5 However, the
arbitrator awarded a $2.50 increase representing the Authority Fee. 6 December Corp.
filed an appeal of the arbitrator=s final decision. 7
2. On appeal from the arbitrator=s decision, the Court held that the proper
standard of review was that of substantial evidence, meaning that the Superior Court
will not overturn an arbitrator=s decision that is supported by substantial evidence and
free from legal error. 8 Furthermore, this Court remanded the case with instructions for
the arbitrator to make factual findings regarding the Rent Justification Act=s criteria for
a rental increase in excess of the CPI-U.9
3. Once the case was remanded for the arbitrator to make these factual findings,
December Corp. sought and obtained the original arbitrator=s recusal.10 Absent that
recusal, both parties agree that a new hearing would not be needed and this motion
would not be before the Court. In that case, the parties agree that the original
arbitrator would have appropriately decided the remaining factual issues on the current
record since he had already conducted a full hearing. However, a new arbitrator was
4
December Corp., 2016 WL 3866272, at *1.
5
Id. at 2.
6
Id.
7
Id. at 1.
8
Id. at 3. The Court=s opinion regarding the proper standard of review was based primarily on
discussion in a Delaware Supreme Court case analyzing the Rent Justification Act, and recognition
that substantial evidence review dominates Delaware=s administrative law landscape. Id. (discussing
Bon Ayre Land LLC v. Bon Ayre Comty. Ass=n, 133 A.3d 559, 2016 WL 747989, at *2 n.11 (Del.
2016) (Table)).
9
Id. at 4.
10
Wild Meadows Response at &8.
2
appointed and determined that a new hearing was necessary in order to make the
required factual findings. 11 December Corp. now seeks relief from the Court=s order
to foreclose this second hearing. In this claim, December Corp. seeks relief pursuant
to Superior Court Civil Rule 60(b) claiming that the July 2016 Opinion did not require
or suggest that a new evidentiary hearing was required. It argues that a new hearing
would be inequitable and a waste of time and resources.
4. In response, Wild Meadows argues that a Rule 60(b) motion is not the
appropriate method to seek relief. Wild Meadows argues that a Rule 60(b) motion is
inappropriate because December Corp. is not seeking relief due to A[m]istake;
12
inadvertence; excusable neglect; newly discovered evidence; fraud, etc.@
Furthermore, Wild Meadows argues that in providing deference to an arbitrator=s
decision, as required under a substantial evidence review, the Court must recognize the
need for the arbitrator to see, hear, and question witnesses. According to Wild
Meadows, if the new arbitrator is not permitted to hold a new hearing, a reviewing
court would not provide this deference on appeal.
5. In addition to the grounds argued by Wild Meadows, Rule 60(b) allows for
relief from judgment when Ait is no longer equitable that the judgment should have
prospective application.@13 Rule 60(b) also provides relief if there is Aany other reason
justifying relief from the operation of the judgment.@14 As such, the Court does not
hold at the outset that Rule 60(b) could not provide December Corp. relief.
11
December Corp. Motion &5.
12
Wild Meadows Response at &1.
13
Superior Ct. R. 60(b)(5).
14
Superior Ct. R. 60(b)(6).
3
6. For relief under Rule 60(b)(5), December Corp. must show Athat, if
unchanged, the prior judgment will work manifest injustice on the moving party.@15
Furthermore, in order to obtain relief pursuant to Rule 60(b)(6), December Corp. Amust
demonstrate extraordinary circumstances.@16 Obtaining relief under Rule 60(b)(6) is
more exacting than the other provisions of Rule 60(b). 17
7. Here, December Corp.=s argument for relief centers on the fact that the
parties expended significant time and money creating a record before the original
arbitrator. December Corp. argues that repeating the hearing would work manifest
injustice by unduly wasting time and resources. December Corp. further argues that
these circumstances provide a basis for Rule 60(b) relief because the Court could not
have intended the July 2016 Opinion to have such consequences. While both parties
agree that holding a second hearing would cost both sides significant time and money
and would have been unnecessary had the original arbitrator remained assigned to the
case, this reality does not provide a basis for relief under Rule 60(b).
8. As noted above, the Court=s earlier opinion held the proper standard of
review of an arbitrator=s decision to be that of substantial evidence. 18 The substantial
evidence standard of review recognizes the considerable deference given an arbitrator.
This deference is appropriate because it is the arbitrator who sees, hears, and questions
witnesses and is better able to determine the credibility and weight of each of the
witnesses= testimony.19 It also follows that these decisions are not entitled to the same
15
Nakahara v. NS 1991 Am. Tr., 718 A.2d 518, 520 (Del. Ch. 1998). The Court of Chancery=s Rule
60(b)(5) has the same language as that found in Superior Court Civil Rule 60(b)(5).
16
Bachtle v. Bachtle, 494 A.2d 1253, 1256 (Del. 1985) (quoting Jewell v. Div. of Soc. Servs., 401
A.2d 88, 90 (Del. 1970).
17
MCA, Inc. v. Matsushita Elec. Indus. Co., 785 A.2d 625, 634 n.9 (Del. 2001).
18
December Corp., 2016 WL 3866272, at *3.
19
Landis v. Brandywine Med. Mgmt., 2004 WL 3030016, at *2 (Del. Super. Ct. Dec. 22, 2004);
4
deference when the arbitrator is not the one who sees, hears, and questions the
witnesses.20 Accordingly, the Court will not grant the requested relief by directing the
arbitrator to forgo her discretion in determining the appropriate scope of the record.
She is charged with making findings regarding the criteria set by the Rent Justification
Act and is best suited to control the hearing process.
9. As litigation has unfolded regarding the Rent Justification Act, both this
Court and the Delaware Supreme Court have remanded cases to the arbitrators. In
doing so, those cases recognized the arbitrator’s discretion regarding whether or not to
expand the record.21 Here, the July 2016 Opinion provided the arbitrator this same
discretion. Giving the arbitrator this appropriate discretion does not create manifest
injustice or extraordinary circumstances that would justify relief under Superior Court
Civil Rule 60(b).
10. December Corp. argues that the Court=s July 2016 Opinion does not provide
explicit authority for the new arbitrator to open the record, and accordingly, the
arbitrator has no discretion to require additional evidence. This argument, however, is
outside the scope of a motion for relief from judgment and is more akin to an
interlocutory appeal. In Wild Meadows response, it indicates that an interlocutory
appeal or an extraordinary writ would have been the appropriate means for December
Corp. to seek relief, rather than relying upon Rule 60(b). 22 However, neither an
Pierson v. Parkview Nursing Home, 1995 WL 108730, at *2 (Del. Super. Ct. Feb. 7, 1995).
20
Landis, 2004 WL 3030016, at *2; Pierson, 1995 WL 108730, at *2.
21
Bon Ayre Land LLC v. Bon Ayre Cmty. Ass=n, 2016 WL7036580, at *3 (Del. Super. Ct. Dec. 2,
2016) (recognizing that Athe arbitrator will be best suited to determine the ultimate scope of the record
. . .@); see also Bon Ayre Land LLC v. Bon Ayre Cmty. Ass=n, 133 A.3d 559, 2016 WL 747989, at *3
(Del. 2016) (Table) (remanding the case so the parties could re-argue the issues and present additional
evidence on the claim, if required in the arbitrator=s discretion).
22
Wild Meadows= Response &1 n.4.
5
interlocutory appeal nor a writ of certiorari would be appropriate in this instance.23
December Corp. cannot use a Rule 60(b) motion to accomplish what it cannot through
an interlocutory appeal.
11. In advancing this argument, December Corp. incorrectly emphasizes
certain references in the Court=s July 2016 Opinion where the Court referenced a record
review.24 Rather than supporting a limit of the discretion of the arbitrator, the first
two references include this Court’s analysis regarding the appropriate standard of
review on appeal. The third instance December Corp. references merely discusses
this Court=s rejection of December Corp.=s argument that a de novo standard of review
is the appropriate standard on appeal. Based on direction from the Delaware
23
Before a court will issue a writ of certiorari, Athe judgment below must be final.@ Here, there is not
a final judgment by the arbitrator; she merely decided that a new record was required to satisfy the
Court=s July 2016 Opinion. As such, there is no final order for the Court to review pursuant to a writ
of certiorari. Furthermore, December Corp. could not bring this as an interlocutory appeal. When
reviewing a decision, A[a]ppellate courts ordinarily have jurisdiction to consider immediate appeals of
interlocutory orders only if a statute explicitly provides appellate jurisdiction.@ Moreover, given the
general disfavor of interlocutory appeals and Athe strong policy against piecemeal review, statutes
authorizing interlocutory appeals are to be strictly construed.@ 4 Am. Jur. 2d Appellate Review §
112. Here, the Rent Justification Act provides the Superior Court with jurisdiction to hear an appeal
of an arbitrator=s decision. However, this statute does not explicitly provide for the court to hear
interlocutory appeals. As the Rent Justification Act does not explicitly provide for an interlocutory
appeal, the Court does not have jurisdiction to hear an appeal regarding this interim matter. Sinha v.
Bd. of Trs. of Del. Tech. & Cmty. Coll., 585 A.2d 1310, 1313 (Del. Super. Ct. 1990) (noting that given
Athe legislative practice of providing appellate review from certain State agencies and commissions, it
is clear that the Superior Court has no jurisdiction to treat a matter as an appeal unless it has specific
statutory authority to do so@).
24
December Corp. first emphasizes page 6 of the Court=s July 2016 Opinion where the Court
recognized that another Superior Court decision held the Rent Justification Act required de novo
review on the record. December Corp. then looks to page 7 of the Court=s Opinion where the Court
quoted from the Delaware Supreme Court=s Bon Ayre decision saying that the arbitrator=s decision
should be given deference if based on substantial record evidence. Finally, December Corp. points
to page 8 where the Court analyzed December Corp.=s arguments for imposing a de novo standard of
review based on the Rent Justification Act=s language stating the Superior Court will address
arguments of the parties to determine whether the record created in the arbitration is sufficient
justification under the Code to increase the rent.
6
25 26
Supreme Court, this Court specifically rejected that standard of review.
Accordingly, the Court=s reference to the record was not a signal to the parties or the
arbitrator that, on remand, the arbitrator was required to make factual findings based on
the previously created record. That remains within the discretion of the arbitrator.
12. Admittedly, the Court=s Opinion did not specify whether or not the
arbitrator needed to expand or supplement the record and take new evidence. That
was left to the discretion of the arbitrator. Here, before recusal, the original arbitrator
had the discretion to decide a new hearing was not necessary. Likewise, the new
arbitrator must have the same level of discretion. Both parties must exhaust their
administrative remedies before appealing a final decision under the Act.27 Under the
circumstances of this case, Superior Court Civil Rule 60(b) does not provide for an
exception to December Corp.’s responsibility to first exhaust its administrative
remedies.
13. December Corp. has not demonstrated it is entitled to relief from judgment
pursuant to Rule 60(b), and no interlocutory appeal from an arbitrator=s decision is
available under the Rent Justification Act.
WHEREFORE, December Corp.=s Motion for Relief under Superior
Court Rule 60(b) is DENIED.
IT IS SO ORDERED.
/s/Jeffrey J Clark
Judge
25
Bon Ayre Land LLC, 133 A.3d 559, 2016 WL 747989, at *3.
26
December Corp. v. Wild Meadows Home Owners Ass=n, 2016 WL 3866272, at *3 (Del. Super. Ct.
July 12, 2016).
27
See Levinson v. DCRB, 616 A.2d 1182, 1187 (Del. 1992)(recognizing that Delaware has adopted
the doctrine of exhaustion of administrative remedies which requires that “where a remedy before an
administrative agency is provided, relief must be sought by exhausting this remedy before the courts
will either review any action by the agency or provide an independent remedy.”).
7