Treadwell v. Village Homes and the Lessons Learned Regarding Deference to an Arbiter’s Decision

For at least a couple of decades, business parties have often preferred to seek resolution of disputes through arbitration proceedings rather than court proceedings. While this kind of alternative dispute resolution has some significant benefits, some downside factors do exist, and are occasionally highlighted in later court published appellate cases where an arbitration award is either challenged or enforced.

In the recent appellate case of Treadwell v. Village Homes of Colorado, Inc., 222 P.3d 398 (Colo. App. 2009), a homeowner arbitrated issues asserted against the builder/vendor of a residence. The use of arbitration was based on a the terms of the sales contract at the time of purchase of the home.

The contract provided that in any dispute, the parties would pay their own attorney’s fees, unless there was “a showing of egregious conduct,” which would then allow the arbiter to award attorneys’ fees to the prevailing party. The arbiter, The Honorable Robbie Barr of the Judicial Arbiter Group (JAG), awarded $525,000 in damages against the builder for negligent misrepresentations and violations of the Colorado Consumer Protection Act (CCPA). She also awarded almost $300,000 in attorneys’ fees, costs, and interest. Village Homes challenged the award in a later enforcement action in court, arguing that the arbiter had exceeded her powers, and that the arbiter had not provided any stated basis for the award of attorneys’ fees.

The trial court, and later the appellate court, enforced the awards in all respects, saying that arbiters’ decisions are given extreme deference, and will generally not be second-guessed, even when they are not fully explained. In particular, an arbiter’s interpretation of the contract between the parties will not be re-examined by the courts in a later action to challenge or enforce the award. The result was driven by the fact that Village Homes’ challenge to the arbitration award was based on what the arbiter did, and not her power to do it. If there is a lesson to be learned from this case it is that an arbiter’s powers are in many ways greater than a judge’s powers, because the appellate process exists as a potential check on the decisions of the trial judge in a court. As a practical and legal matter, most decisions by arbiters are not subject to that same judicial or appellate scrutiny.

For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.