Gordon & Rees Denver Team Wins Precedent-Setting Case Regarding Arbitration

April 2023

A Gordon Rees Scully Mansukhani Denver team, including Partner John Palmeri and Of Counsel Jack Mann, obtained a victory in the Colorado Court of Appeals on behalf of an attorney in a precedent-setting case.

The Colorado Court of Appeals held that a private arbitrator lacked authority under the Uniform Arbitration Act, the AAA Arbitration Rules, and the parties’ agreement to impose sanctions against an attorney for a party to the arbitration. The attorney was accused of making a false statement to the arbitrator that the matter had been settled. After the attorney retracted the statement about the settlement, the opposing party moved for sanctions and attorney fees under C.R.C.P. 11 and Colo. Rev. Stat. § 13-17-102, arguing that the arbitrator had the power to sanction the attorney for misconduct. The arbitrator agreed and imposed nearly $150,000 in sanctions against the attorney. The attorney challenged the award under the Uniform Arbitration Act based on the arbitrator’s lack of authority to impose sanctions. The Colorado Court of Appeals vacated the award.

The court of appeals held the arbitrator had no authority to impose sanctions on the attorney because he did not agree in writing to arbitrate sanctions. The court found the attorney did not personally agree to the arbitrator’s authority to impose sanctions merely by agreeing that state law applied to the arbitration. No statute or rule of civil procedure confers authority on arbitrators to sanction a party’s attorney. Finally, the court held the arbitrator had no authority to impose sanctions on the attorney because the Uniform Arbitration Act confers no authority on the arbitrator to sanction a party’s attorney and an arbitrator has no inherent authority to sanction a party’s attorney. The court of appeals reversed the judgment confirming the arbitration award and remanded with instructions to vacate the award.