IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
SIMEON J. OSBORN and MONICA No. 77871-4-1 OSBORN, and the marital community composed thereof, DIVISION ONE
Respondents,
V.
MICHAEL CALLAHAN and ROBIN CALLAHAN, individually, and the marital community composed thereof, UNPUBLISHED OPINION
Appellants,
OSBORN MACHLER, PLLC, a Washington professional limited liability company,
Third Party Defendant. FILED: March 18, 2019
SCHINDLER, J. — Michael Callahan and Robin Callahan appeal a superior court
order denying the motion to vacate the arbitrator's award, entry of judgment on the
award, and the award of attorney fees. We affirm.
FACTS
Simeon Osborn and Michael Callahan are attorneys and had been close friends
since 1976. No. 77871-4-1/2
On September 16, 2016, Osborn and his spouse Monica Osborn (collectively,
Osborn)filed a lawsuit against Callahan and his spouse Robin Callahan (collectively,
Callahan). The lawsuit alleged Callahan owed Osborn more than $700,000 in personal
loans Osborn made to Callahan between 2007 and 2009.
On March 20, 2017, Callahan filed an answer and counterclaims against Osborn
and the Osborn Machler PLLC law firm.1 Callahan claimed he was entitled to offsets
and asserted claims of breach of contract, breach of fiduciary duty, accounting, and
conversion. Callahan alleged that while acting as his lawyer, Osborn learned about
artwork Callahan held in a storage facility as collateral for a debt. Callahan alleged
Osborn or his law firm misappropriated three works of art valued at approximately $3
million. The amended answer and counterclaims did not allege misappropriation of
artwork.
In September 2017, the parties participated in a mediation and entered into a CR
2A settlement agreement. Callahan agreed to pay Osborn $315,000 "in full and final
settlement of the lawsuit pending between them." The parties stipulated to a schedule
of payments by Callahan, a significant reduction of the debt if Callahan paid early, and
acceleration of the debt if Callahan did not make certain scheduled payments.2 The
parties agreed to execute a "confession of judgment" to secure payment of the debt and
"[m]utual releases for all claims." The CR 2A agreement states the mediator, retired
King County Superior Court Judge Bruce Hilyer, "is appointed as arbitrator should any
I Three minutes after filing the answer and counterclaims on March 20, Callahan filed an amended answer and counterclaims. Callahan's attorney failed to serve the law firm as a third party defendant. At some point prior to the mediation, Callahan began representing himself pro se in this matter. 2 The debt accelerated because Callahan made only the first payment required under the CR 2A agreement.
2 No. 77871-4-1/3
issue or dispute arise regarding the performance, interpretation or enforcement of this
agreement."
With Callahan's consent, Osborn filed a notice of settlement, stating, "[A]ll claims
against all parties in this action have been resolved."
Osborn's attorney drafted and sent a confession of judgment to Callahan. The
confession of judgment addressed mutual releases as follows:
The Settlement Agreement contemplates mutual releases of all claims, asserted or unasserted, known or unknown, and the dismissal of the lawsuit with prejudice. Such dismissal shall not however affect Osborn's rights to enter this Confession of Judgment upon the occurrence of Callahan's default in faithfully performing the obligations set forth in the Settlement Agreement.
Callahan objected to signing a release of "all claims, asserted or unasserted, known Or
unknown."
Osborn requested arbitration to resolve the dispute. At the direction of the
arbitrator, Osborn and Callahan each provided a written submission and a proposed
confession of judgment.
Callahan argued the parties agreed to settle only claims asserted in the
pleadings and dismissal of the lawsuit. Callahan asserted that during discovery, he
asked Osborn about "all dealings with the art" and in response, Osborn produced
documentation related to four works of art. Callahan claimed that shortly after the
mediation, he learned that Osborn had taken possession of two additional works of art
that belonged to him with an "appraised value in the millions of dollars." Callahan
submitted a confession of judgment that provided for "mutual releases between the
parties of only the claims asserted in the pleadings and settled in the Settlement
3 No. 77871-4-1/4
Agreement, together with a dismissal of the lawsuit with prejudice of the subject
lawsuit."
The arbitrator issued a two-page "Arbitrator's Award" that set forth findings and
conclusions. The arbitrator concluded the confession of judgment submitted by Osborn
conformed to the CR 2A agreement. The Arbitrator's Award sets forth the following
findings and conclusions:
FINDINGS 1. With regard to the lawsuit entitled Osborn v. Callahan, King County Superior Court Cause No. 16-2-22333-8 SEA, a "CR2A" settlement agreement dated September 8, 2017, was negotiated and signed by and on behalf of all the parties, in which the parties appointed the undersigned to act as arbitrator and authorized the arbitrator to resolve any issues regarding the performance, interpretation and enforcement of the settlement. 2. The underlying lawsuit included counterclaims against petitioners Osborn and a third party complaint against Osborn Machler, PLLC, including claims and affirmative defenses for offset, breach of contract, breach of fiduciary duty, claims related to ownership of artwork, and for an accounting. 2. [sic] An issue has arisen between the parties regarding the form and execution of a confession of judgment. Respondent Callahan also contends that certain of his claims against petitioner Osborn were left unresolved by the settlement agreement. While the CR2A does not explicitly mention Osborn Machler, PLLC, it was clearly intended to resolve all claims including claims against Osborn Machler, PLLC, and that was clearly explained by the undersigned to Mr. Callahan. 3. Respondent Callahan has failed and refused to sign the form of confession of judgment prepared by counsel for petition, and petitioner Osborn has refused to sign the form of confession of judgment prepared by Callahan. 4. Pursuant to my preliminary order, both forms of confession of judgment have been submitted to me to decide the form of confession of judgment best conforming to the CR2A settlement agreement. CONCLUSIONS AND AWARD 5. The form of confession of judgment submitted by petitioner Osborn, attached hereto as Exhibit "A" and incorporated herein by this reference, best conforms with the terms of the CR2A settlement, and I direct that respondents Michael Callahan and Robin Callahan,
4 No. 77871-4-1/5
husband and wife, forthwith execute that confession of judgment before a notary. 6. All claims by respondent Callahan against petitioner Osborn, including without limitation claims against the law firm of Osborn Machler PLLC and claims related to the ownership of artwork, were fully and finally settled and compromised by the CR2A settlement agreement.
The arbitrator attached the confession of judgment submitted by Osborn and directed
Callahan to "execute that confession of judgment before a notary."
Callahan did not execute the confession of judgment. On November 13, 2017,
Osborn obtained a superior court order confirming the Arbitrator's Award.
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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
SIMEON J. OSBORN and MONICA No. 77871-4-1 OSBORN, and the marital community composed thereof, DIVISION ONE
Respondents,
V.
MICHAEL CALLAHAN and ROBIN CALLAHAN, individually, and the marital community composed thereof, UNPUBLISHED OPINION
Appellants,
OSBORN MACHLER, PLLC, a Washington professional limited liability company,
Third Party Defendant. FILED: March 18, 2019
SCHINDLER, J. — Michael Callahan and Robin Callahan appeal a superior court
order denying the motion to vacate the arbitrator's award, entry of judgment on the
award, and the award of attorney fees. We affirm.
FACTS
Simeon Osborn and Michael Callahan are attorneys and had been close friends
since 1976. No. 77871-4-1/2
On September 16, 2016, Osborn and his spouse Monica Osborn (collectively,
Osborn)filed a lawsuit against Callahan and his spouse Robin Callahan (collectively,
Callahan). The lawsuit alleged Callahan owed Osborn more than $700,000 in personal
loans Osborn made to Callahan between 2007 and 2009.
On March 20, 2017, Callahan filed an answer and counterclaims against Osborn
and the Osborn Machler PLLC law firm.1 Callahan claimed he was entitled to offsets
and asserted claims of breach of contract, breach of fiduciary duty, accounting, and
conversion. Callahan alleged that while acting as his lawyer, Osborn learned about
artwork Callahan held in a storage facility as collateral for a debt. Callahan alleged
Osborn or his law firm misappropriated three works of art valued at approximately $3
million. The amended answer and counterclaims did not allege misappropriation of
artwork.
In September 2017, the parties participated in a mediation and entered into a CR
2A settlement agreement. Callahan agreed to pay Osborn $315,000 "in full and final
settlement of the lawsuit pending between them." The parties stipulated to a schedule
of payments by Callahan, a significant reduction of the debt if Callahan paid early, and
acceleration of the debt if Callahan did not make certain scheduled payments.2 The
parties agreed to execute a "confession of judgment" to secure payment of the debt and
"[m]utual releases for all claims." The CR 2A agreement states the mediator, retired
King County Superior Court Judge Bruce Hilyer, "is appointed as arbitrator should any
I Three minutes after filing the answer and counterclaims on March 20, Callahan filed an amended answer and counterclaims. Callahan's attorney failed to serve the law firm as a third party defendant. At some point prior to the mediation, Callahan began representing himself pro se in this matter. 2 The debt accelerated because Callahan made only the first payment required under the CR 2A agreement.
2 No. 77871-4-1/3
issue or dispute arise regarding the performance, interpretation or enforcement of this
agreement."
With Callahan's consent, Osborn filed a notice of settlement, stating, "[A]ll claims
against all parties in this action have been resolved."
Osborn's attorney drafted and sent a confession of judgment to Callahan. The
confession of judgment addressed mutual releases as follows:
The Settlement Agreement contemplates mutual releases of all claims, asserted or unasserted, known or unknown, and the dismissal of the lawsuit with prejudice. Such dismissal shall not however affect Osborn's rights to enter this Confession of Judgment upon the occurrence of Callahan's default in faithfully performing the obligations set forth in the Settlement Agreement.
Callahan objected to signing a release of "all claims, asserted or unasserted, known Or
unknown."
Osborn requested arbitration to resolve the dispute. At the direction of the
arbitrator, Osborn and Callahan each provided a written submission and a proposed
confession of judgment.
Callahan argued the parties agreed to settle only claims asserted in the
pleadings and dismissal of the lawsuit. Callahan asserted that during discovery, he
asked Osborn about "all dealings with the art" and in response, Osborn produced
documentation related to four works of art. Callahan claimed that shortly after the
mediation, he learned that Osborn had taken possession of two additional works of art
that belonged to him with an "appraised value in the millions of dollars." Callahan
submitted a confession of judgment that provided for "mutual releases between the
parties of only the claims asserted in the pleadings and settled in the Settlement
3 No. 77871-4-1/4
Agreement, together with a dismissal of the lawsuit with prejudice of the subject
lawsuit."
The arbitrator issued a two-page "Arbitrator's Award" that set forth findings and
conclusions. The arbitrator concluded the confession of judgment submitted by Osborn
conformed to the CR 2A agreement. The Arbitrator's Award sets forth the following
findings and conclusions:
FINDINGS 1. With regard to the lawsuit entitled Osborn v. Callahan, King County Superior Court Cause No. 16-2-22333-8 SEA, a "CR2A" settlement agreement dated September 8, 2017, was negotiated and signed by and on behalf of all the parties, in which the parties appointed the undersigned to act as arbitrator and authorized the arbitrator to resolve any issues regarding the performance, interpretation and enforcement of the settlement. 2. The underlying lawsuit included counterclaims against petitioners Osborn and a third party complaint against Osborn Machler, PLLC, including claims and affirmative defenses for offset, breach of contract, breach of fiduciary duty, claims related to ownership of artwork, and for an accounting. 2. [sic] An issue has arisen between the parties regarding the form and execution of a confession of judgment. Respondent Callahan also contends that certain of his claims against petitioner Osborn were left unresolved by the settlement agreement. While the CR2A does not explicitly mention Osborn Machler, PLLC, it was clearly intended to resolve all claims including claims against Osborn Machler, PLLC, and that was clearly explained by the undersigned to Mr. Callahan. 3. Respondent Callahan has failed and refused to sign the form of confession of judgment prepared by counsel for petition, and petitioner Osborn has refused to sign the form of confession of judgment prepared by Callahan. 4. Pursuant to my preliminary order, both forms of confession of judgment have been submitted to me to decide the form of confession of judgment best conforming to the CR2A settlement agreement. CONCLUSIONS AND AWARD 5. The form of confession of judgment submitted by petitioner Osborn, attached hereto as Exhibit "A" and incorporated herein by this reference, best conforms with the terms of the CR2A settlement, and I direct that respondents Michael Callahan and Robin Callahan,
4 No. 77871-4-1/5
husband and wife, forthwith execute that confession of judgment before a notary. 6. All claims by respondent Callahan against petitioner Osborn, including without limitation claims against the law firm of Osborn Machler PLLC and claims related to the ownership of artwork, were fully and finally settled and compromised by the CR2A settlement agreement.
The arbitrator attached the confession of judgment submitted by Osborn and directed
Callahan to "execute that confession of judgment before a notary."
Callahan did not execute the confession of judgment. On November 13, 2017,
Osborn obtained a superior court order confirming the Arbitrator's Award.
Callahan filed a motion in superior court to modify or vacate the Arbitrator's
Award. As he previously argued to the arbitrator, Callahan claimed (1) he entered into
the settlement based on deceptive information Osborn provided in discovery and (2) the
settlement agreement contemplated a release of only the claims expressly asserted in
the pleadings.
Osborn filed a motion to enforce the arbitration award. The superior court denied
Callahan's motion to modify or vacate the arbitration award and granted the motion to
enforce the Arbitrator's Award.
Callahan did not comply with the court order enforcing the Arbitrator's Award.
The court entered judgment on the award and an order awarding attorney fees and
costs.
ANALYSIS
Callahan contends the court erred by enforcing the Arbitrator's Award, entering
the confession of judgment, and awarding attorney fees.
Washington courts accord substantial finality to the decision of an arbitrator
rendered in accordance with the parties' agreement and Washington's uniform
5 No. 77871-4-1/6
arbitration act, chapter 7.04A RCW. Davidson v. Hensen, 135 Wn.2d 112, 118, 954
P.2d 1327 (1998). Judicial review of arbitration awards is controlled by statute and
permits vacation of an arbitration award only upon specific grounds enumerated in RCW
7.04A.230.3 Such review is extremely limited and does not encompass a review of the
merits of the case. Boyd v. Davis, 127 Wn.2d 256, 267-68, 897 P.2d 1239 (1995)
(Utter, J., concurring). Absent an error of law on the face of the award, the trial court
will not modify or vacate it. Boyd, 127 Wn.2d at 263. "[C]ourts may not search the
arbitral proceedings for any legal error; courts do not look to the merits of the case, and
they do not reexamine evidence." Broom v. Morgan Stanley DW, Inc., 169 Wn.2d 231,
239, 236 P.3d 182(2010).4 Accordingly, "[r]arely is it possible to have an arbitration
award vacated for [obvious] error of law on the face of the award." Cummings v. Budget
Tank Removal & Envtl. Servs., LLC, 163 Wn. App. 379, 382, 260 P.3d 220 (2011).
3 RCW 7.04A.230(1) provides: Upon motion of a party to the arbitration proceeding, the court shall vacate an award if: (a) The award was procured by corruption, fraud, or other undue means; (b) There was: (i) Evident partiality by an arbitrator appointed as a neutral; (ii) Corruption by an arbitrator; or (iii) Misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding; (c) An arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to RCW 7.04A.150, so as to prejudice substantially the rights of a party to the arbitration proceeding; (d) An arbitrator exceeded the arbitrator's powers; (e) There was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection under RCW 7.04A.150(3) not later than the commencement of the arbitration hearing; or (f) The arbitration was conducted without proper notice of the initiation of an arbitration as required in RCW 7.04A.090 so as to prejudice substantially the rights of a party to the arbitration proceeding. 4 Emphasis in original.
6 No. 77871-4-1/7
Likewise, "in the case of an appeal from an arbitrator's award, an appellate court
is strictly proscribed from the traditional full review." Barnett v. Hicks, 119 Wn.2d 151,
157, 829 P.2d 1087(1992). Our review of an arbitrator's award is confined to a review
of the decision by the court that confirmed, vacated, modified, or corrected that award.
Expert Drywall, Inc. v. Ellis-Don Constr., Inc., 86 Wn. App. 884, 888, 939 P.2d 1258
(1997).
Callahan claims the arbitrator exceeded his authority by adding terms to the CR
2A agreement. Callahan contends (1)there was no evidence the parties contemplated,
much less agreed to, a mutual release of all claims, including those unknown to the
parties and unasserted in the pleadings and (2) the arbitrator ignored his claim that he
was induced to settle because Osborn provided false or misleading information in
discovery.
An arbitrator exceeds his or her powers within the meaning of RCW
7.04A.230(1)(d) when the arbitration award exhibits a facial legal error. Broom, 169
Wn.2d at 240. The error, if any, must be recognizable from the language of the award.
Federated Servs. Ins. Co. v. Pers. Representative of Estate of Norberq, 101 Wn. App.
119, 124,4 P.3d 844 (2000). Where, as here, the Arbitrator's Award sets forth the
arbitrator's factual findings and conclusions, we consider any issues of law evident in
those findings and conclusions as part of the "face of the award." Cumminqs, 163 Wn.
App. at 389.
Callahan fails to identify any facial legal error in the Arbitrator's Award. The
arbitrator resolved a dispute "regarding the form and execution of a confession of
judgment." The arbitrator considered and rejected Callahan's claim that certain claims
7 No. 77871-4-1/8
were "left unresolved by the settlement agreement." The arbitrator concluded the
confession of judgment drafted by Osborn conformed to the CR 2A agreement that
resolved 101 claims," including and "without limitation" the claims "related to the
ownership of artwork." We conclude the face of the Arbitrator's Award exhibits no
erroneous or mistaken application of law.
Callahan also contends the arbitrator erred by resolving the dispute based on
written submissions without a full evidentiary hearing, depriving him of his right to due
process. The statute Callahan cites, RCW 7.04A.150, does not require an evidentiary
hearing.
RCW 7.04A.150(1) states the arbitrator "may conduct the arbitration in such
manner as the arbitrator considers appropriate so as to aid in the fair and expeditious
disposition of the proceeding." The record does not show that Callahan requested an
arbitration hearing, objected to the procedure, or that the arbitrator denied any request
to consider evidence. Callahan fails to establish a violation of his constitutional right to
due process.
Callahan also claims the court erred by refusing to modify the arbitration award to
exclude his spouse because she did not sign and was not a party to the CR 2A
agreement. But the CR 2A settlement agreement states the agreement is "between Mr.
and Mrs. Michael Callahan (`Callahan) and Mr. and Mrs. Osborn ('Osborn')." Both
Callahan and Osborne signed and entered into the CR 2A agreement on behalf of the
marital community.
8 No. 77871-4-1/9
Callahan argues the superior court erred in awarding attorney fees to Osborn
because the parties did not incur fees as a result of a "contested arbitration" and the CR
2A agreement did not include a fee provision.
RCW 7.04A.250(3) allows the trial court to award the "prevailing party to a
contested judicial proceeding" reasonable fees. Because there were contested judicial
proceedings following entry of the arbitration award and Osborn prevailed in those
proceedings, he was entitled to reasonable attorney fees.
Callahan also challenges the amount of the attorney fee award. We review the
reasonableness of an award of attorney fees for an abuse of discretion. Rettkowski v.
Dep't of Ecology, 128 Wn.2d 508, 519, 910 P.2d 462(1996). Osborn's attorney
submitted a detailed fee request that set forth the time spent by two attorneys on
various tasks related to responding to the motion to vacate, enforcing the arbitration
award, and securing the judgment. Osborn requested $15,240 in attorney fees and the
court awarded a total of $10,000 in fees and costs. Callahan's conclusory assertion that
the amount of fees was unwarranted fails to demonstrate an abuse of discretion.
Osborn seeks an award of attorney fees on appeal. Osborn is the prevailing
party on appeal. Subject to compliance with RAP 18.1(d), we grant the request under
RCW 7.04A.250(3).5
5 Although Callahan suggests the arbitrator was biased, he points to nothing beyond his disagreement with the arbitrator's ruling to support the claim. In evaluating partiality, we do not look to the merits of the arbitrator's decision or the evidence. See Broom, 169 Wn.2d at 239.
9 No. 77871-4-1/10
We affirm the superior court order denying the motion to vacate the Arbitrator's
Award, entry of the judgment on the award, and the award of attorney fees.
WE CONCUR: k(,1v-EQQQ_