Meister v. Stout

2015 COA 60, 353 P.3d 916, 2015 Colo. App. LEXIS 691, 2015 WL 2203591
CourtColorado Court of Appeals
DecidedMay 7, 2015
DocketCourt of Appeals No. 14CA0161
StatusPublished
Cited by14 cases

This text of 2015 COA 60 (Meister v. Stout) is published on Counsel Stack Legal Research, covering Colorado Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Meister v. Stout, 2015 COA 60, 353 P.3d 916, 2015 Colo. App. LEXIS 691, 2015 WL 2203591 (Colo. Ct. App. 2015).

Opinion

Opinion by

JUDGE MILLER

T1 Appellant, Michael Meister, appeals from the district court's ruling compelling arbitration of his claims and from its judgment confirming the arbitration award. We affirm and remand the case for a determination of the appellees' reasonable attorney fees and costs incurred on appeal.

12 As a matter of first impression in the state courts of Colorado, we hold that a signatory to an agreement containing an arbitration clause may be equitably estopped from avoiding arbitration when he sues a nonsignatory on claims that (1) presume the existence of that agreement or (2) allege interconnected and concerted misconduct between the nonsignatory and one or more of the signatories related to that agreement.

I. Background

T3 Anthony DeLollis and S. Brian Stout founded an information technology company, Venti Solutions, LLC. A few years later, Meister invested in Venti and became a [919]*919member of the company by entering into a purchase agreement.

T4 The purchase agreement, signed by Venti, Stout, Del.ollis, and Meister, granted Meister a twenty percent interest in Venti in exchange for a capital contribution of $500,000. The agreement also incorporated by reference the Venti operating agreement, which was executed by Stout and DeLollis.1 The parties to the purchase agreement agreed to be bound by all of the terms and provisions of the operating agreement. The operating agreement includes a dispute reso-Tution article. This article provides that arbitration is the sole and exelusive mechanism for resolving all disputes, and it sets forth arbitration and related procedures.

15 In 2012, Meister filed suit against De-Lollis, Stout, and Venti. His amended complaint sought dissolution of Venti, recovery of his capital contribution and damages, a declaratory judgment establishing his rights and obligations under the operating agreement, and other relief, DeLollis and Venti moved the district court to compel arbitration under the operating agreement, and the court ordered all of the claims to arbitration. Venti then filed two counterclaims in the arbitration proceeding, one of which was dismissed before the hearing. Following the hearing, the arbitrator dismissed Meister's claims with prejudice and awarded $375,788.70 against him on Venti's breach of contract counterclaim based on his failure to pay the full amount of his capital contribution under the purchase agreement. The district court later confirmed the arbitration award over Meister's objection.

II. Meister's Claims Against Venti Are Subject to Arbitration

16 The district court reasoned that all parties to the purchase agreement (which included Venti) were obligated to arbitrate disputes as a result of that agreement's incorporation of the operating agreement,2 and it therefore ordered all claims to arbitration and stayed the litigation proceedings before the court. We affirm the district court's ruling, but for a different reason: we conclude that Meister was equitably estopped from avoiding arbitration of his claims against Venti.

A. © Standard of Review

17 We review de novo the district court's decision on a motion to compel arbitration. Lujan v. Life Care Ctrs. of Am., 222 P.3d 970, 972 (Colo.App.2009). When the record of the agreement to be construed or enforced consists of documentary evidence, we may base our legal conclusion upon that evidence and need not depend upon the district court's findings and conclusions. Lane v. Urgitus, 145 P.3d 672, 680 (Colo.2006); see Winslow Constr. Co. v. City & Cnty. of Denver, 960 P.2d 685, 692 n. 11 (Colo.1998).

18 If a district court reaches the correct result, its judgment may be affirmed on different grounds that are supported by the record. Rush Creek Solutions, Inc. v. Ute Mountain Ute Tribe, 107 P.3d 402, 406 (Colo.App.2004); see also Newflower Mkt., Inc. v. Cook, 229 P.3d 1058, 1061 (Colo.App.2010).

B. Venti May Enforce the Arbitration Provisions Against Meister

1 9 The operating agreement provides that "any dispute arising out of the agreement" that is not resolved through negotiations or mediation must proceed to arbitration under Colorado's version of the Uniform Arbitration Act (CUAA), sections 18-22-201 to -230, C.R.S.2014. Meister does not contest the arbitrability of his claims against DeLollis and Stout. Nor does he challenge on appeal the arbitrability of Venti's counterclaim against him. Thus, the only arbitrability issue before us is whether Meister's claims [920]*920against Venti, a nonsignatory to the operating agreement, were subject to arbitration.

1. Equitable Estoppel in Arbitration

$10 Arbitration is contractual by nature, and therefore "[in general, only parties to an agreement containing an arbitration provision can compel or be subject to arbitration." Everett v. Dickinson & Co., 929 P.2d 10, 12 (Colo.App.1996). Colorado has a strong policy favoring arbitration agreements. Lane, 145 P.3d at 678; City & Cnty. of Denver v. Dist. Court, 939 P.2d 1353, 1363-64 (Colo.1997). A broad or unrestricted arbitration clause, like the one in this case, gives even greater force to "the strong presumption favoring arbitration." City & Cnty. of Denver, 939 P.2d at 1364 (internal quotation marks omitted).

{11 Under Colorado law, both signatory and nonsignatory parties may be bound by an arbitration agreement if so dictated by ordinary principles of contract law. See Smith v. Multi-Financial Sec. Corp., 171 P.3d 1267, 1272 (Colo.App.2007) (citing 1 Martin Domke, The Law of Practice on Commercial Arbitration § 18:1 (rev. ed. Supp. 1993)); see also Lane, 145 P.3d at 683 (Eid, J., concurring) (When a third-party beneficiary compels arbitration, it is an "unremarkable application of the black-letter" law that a third-party beneficiary may enforce the terms of a contract.); Parker v. Ctr. for Creative Leadership, 15 P.3d 297, 2098-99 (Colo.App.2000) (holding that nonsignatory third-party beneficiary, who was suing signatory for relief based on signatory's obligations under a contract, was bound by arbitration clause in the contract).

Equitable estoppel may be used to bind parties to arbitration agreements in at least two scenarios. First, as previously held by another division of this court, a signatory to an arbitration agreement may compel arbitration of a claim brought against it by a nonsignatory plaintiff, so long as the claim arises from the agreement containing the arbitration provision. See Smith, 171 P.3d at 1271-74 (collecting cases). Estoppel is proper in this scenario because the nonsig-natory plaintiff cannot seek the benefit of the agreement containing the arbitration provision, while at the same time attempting to avoid the arbitration provision of that agreement. Id. at 1274.

{13 The second seenario occurs when a signatory asserts a claim arising from a contract against a nonsignatory to that contract.

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Cite This Page — Counsel Stack

Bluebook (online)
2015 COA 60, 353 P.3d 916, 2015 Colo. App. LEXIS 691, 2015 WL 2203591, Counsel Stack Legal Research, https://law.counselstack.com/opinion/meister-v-stout-coloctapp-2015.