The Expansive Breadth and Scope of Arizona’s New Revised Uniform Arbitration Act

by Snell & Wilmer
Contact

Recently, the Arizona Court of Appeals determined that under the 2010 Arizona Revised Uniform Arbitration Act, A.R.S. §12-3001, et seq. (the AZ-RUAA), a contractual agreement to arbitrate extends to: (i) arbitration of claims arising out of a related contract that lacks an arbitration provision, (ii) non-contract claims so long as resolution of the claim requires reference to the contract, and (iii) non-signatories in certain circumstances. In addition, the Court of Appeals confirmed that arbitrators have the power under AZ-RUAA to appoint receivers and dissolve limited partnerships. Sun Valley Ranch 308 LP v. Robson, 648 Ariz. Adv. Rep. 42 (App. 2012). These holdings expand the scope of who can enforce arbitration provisions and the claims that are subject to arbitration under Arizona law, while confirming the broad powers of arbitrators.

Relevant Facts of the Case

In Sun Valley, five entities signed a partnership agreement for a limited partnership entitled Sun Valley Ranch 308 LP (SVR) in 2000. The partnership agreement contained an arbitration provision. Four of the five partners were entities owned or controlled by Steven Robson (the Robson Entities), and the fifth was a corporation named Englewood Properties, Inc. (Englewood). SVR subsequently contracted with one of the Robson Entities to construct the Sun Valley Ranch Apartments (the Construction Contract). Once the project was complete, SVR contracted with another, non-partner entity controlled by Steven Robson (the Management Company) to manage the project.

In 2008, SVR sold the project for $32 million. Not satisfied with the distributions made by SVR to the partners, Englewood hired a forensic accountant who opined that SVR owed Englewood an additional $2,578,034. Accordingly, Englewood, on behalf of itself and SVR, filed suit against Steven Robson, the Management Company and the Robson Entities (collectively, the Defendants). 

Procedural History

The complaint alleged 10 causes of action against the Defendants, including breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, fraud and negligent misrepresentation, breach of fiduciary duty, dissolution and accounting, and piercing the corporate veil of the Robson Entities. 

In response to the complaint, the Defendants moved to compel arbitration of all the claims based on the arbitration clause in the partnership agreement. Englewood objected to the motion, arguing that the arbitration clause did not apply to all of the claims, did not apply to all of the Defendants (some of whom were not parties to the partnership agreement), and that an arbitrator lacked the authority to grant Englewood the relief it requested (i.e., dissolution of the partnership and the appointment of a receiver). The trial court agreed with Englewood and denied the motion. The Defendants appealed, and the Court of Appeals reversed.

The Court of Appeal’s Opinion

On appeal, the Court of Appeals first disposed of Englewood’s argument that the trial court could not compel arbitration of claims arising out of the Construction Contract because the Construction Contract lacked an arbitration provision. Although the Construction Contract lacked an arbitration provision, the Court of Appeals concluded that the arbitration provision in the partnership agreement applied. Analyzing the following four factors: (1) whether the agreements incorporate or reference each other; (2) whether the agreements are dependent on each other or relate to the same subject matter; (3) whether the arbitration clause specifically excludes certain claims; and (4) whether the agreements are executed closely in time and by the same parties, the Court of Appeals concluded that because the Construction Contract was sufficiently related to the partnership agreement and the arbitration provision in the partnership agreement was sufficiently broad, the arbitration clause in the partnership agreement controlled. Sun Valley, 648 Ariz. Adv. Rep. 42, *8 (quoting Consol. Brokers, Ins. Servs., Inc. v. Pan-Am Assurance Co., 427 F. Supp. 2d 1074, 1082 (D. Kan. 2006)). Thus, even though most of the claims asserted by Englewood arose out of the Construction Contract, those claims could be compelled to arbitration based on the arbitration clause in the partnership agreement.

Second, the Court of Appeals rejected Englewood’s argument that the trial court could not compel arbitration of the common law unjust enrichment claims. Englewood argued that because the unjust enrichment claims did not depend upon the contracts between the parties, the claims fell outside of the agreement to arbitrate. The Court of Appeals disagreed, however, because whether the claim depends upon the contract is not the relevant inquiry. Rather, whether claims are subject to an arbitration clause depends upon whether the claims “raise some issue of the resolution of which requires a reference to or construction of some portion of the contract.”  Id. at *12 (quoting Dusold v. Porta-John Corp., 167 Ariz. 358, 362, 807 P.2d 526, 530 (App. 1990)). Because the adjudication of Englewood’s unjust enrichment claims would necessarily require consideration of the contract containing the arbitration clause, the common law unjust enrichment claims were also subject to the arbitration clause.

Third, the Court of Appeals rejected Englewood’s argument that an arbitrator could not appoint a receiver or dissolve a partnership. Englewood contended that those remedies were statutorily assigned to the courts, not arbitrators. Rejecting the argument, the Court of Appeals noted that A.R.S. § 12-3008(B)(1) authorizes arbitrators to “issue such orders for interim remedies . . . to the same extent and under the same conditions as if the controversy were the subject of a civil action.” Thus, although receiverships and dissolution actions are assigned to the courts, the Court of Appeals concluded that arbitrators had the authority to grant the relief requested by Englewood.

Last, the Court of Appeals rejected Englewood’s argument that non-signatories SVR, Steven Robson and the Management Company could not invoke the arbitration provision in the partnership agreement because they did not sign the partnership agreement. SVR could be compelled to arbitrate because it was the partnership entity and was, therefore, subject to the partnership agreement. Steven Robson could also compel arbitration because (i) Englewood sued him under an alter ego theory, and (ii) the claims asserted against Steven Robson were intertwined with the claims asserted against the signing parties. The Management Company could also compel arbitration because the claims against it depended, at least in part, upon purported violations of the partnership agreement. Thus, the fact that SVR, Steven Robson and the Management Company were not signatories to the partnership agreement with the arbitration clause did not prevent arbitration of the claims brought by or against them.

Having disposed of all of Englewood’s arguments, the Court of Appeals reversed and ordered the trial court to compel the matter to arbitration.

Conclusion

Sun Valley illustrates the expansive breadth and scope of the AZ-RUAA. The holding expands the parties who can enforce arbitration provisions, expands the claims subject to arbitration under Arizona law and confirms the broad powers of arbitrators to grant relief.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Snell & Wilmer | Attorney Advertising

Written by:

Snell & Wilmer
Contact
more
less

Snell & Wilmer on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.