Opinion
C.A. No. 98C-05-227 RRC
Submitted: April 30, 2003
Decided: July 3, 2003
On Plaintiffs' "Motion to Enforce Arbitration Agreement." DENIED.
On Plaintiffs' "Motion to Strike the Defendant's Response . . . ." DENIED.
Battaglia, Esquire, Biggs and Battaglia, Attorney for Plaintiffs.
Deborah Martin Norcross, Esquire, Mason, Griffin Pierson, P.C., Attorney Pro Hac Vice for Defendant.
Jeffrey K. Martin, Esquire, Harvey, Pennington, Cabot, Griffith Renneisen, Ltd., Attorney for Defendant.
Dear Counsel:
Currently before the Court is a "Motion to Enforce Arbitration Agreement" and a "Motion to Strike the Defendant's Response . . ." filed by Plaintiffs and directed toward defendant St. Francis Hospital, Inc. The original main thrust of the motions, i.e., an effort to require payment to Plaintiffs of an arbitrator's award specified in a binding "high/low" arbitration agreement entered into by the parties, has already occurred, but two issues which the parties have been unable to resolve Page 2 remain for the Court's disposition: 1) whether Plaintiffs are entitled to interest on the amount of the "high" amount ultimately paid to them from the date of the arbitrator's decision to the date of eventual payment; and 2) whether Plaintiffs are entitled to an award of attorneys' fees from this Court as a result of what Plaintiffs allege to be delaying conduct by pro hac vice counsel for Defendant, asserted to have occurred during that same time period. For the reasons that follow, counsel for Plaintiffs is not entitled to relief on either of these claims, so Plaintiffs' "Motion to Enforce Arbitration Agreement" is DENIED. Relatedly, the Court having found that Plaintiffs are not entitled to the further relief they now seek, their "Motion to Strike the Defendant's Response . . ." is also DENIED.
FACTUAL AND PROCEDURAL HISTORY
This case began in May 1998 when Plaintiffs filed a complaint against defendant St. Francis Hospital, Inc. for breach of an employment contract. Plaintiffs also claimed fraud, prima facie tort, and intentional infliction of emotional distress, all stemming from Dr. Speidel's discharge from the Emergency Department at St. Francis, which discharge purportedly became effective December 31, 1997. After much pre-trial litigation, the parties ultimately decided to submit the matter to an arbitrator, while at the same time employing a binding "high/low" arbitration agreement.
For a more complete recitation of the facts, see this Court's July 11, 2002 letter opinion. Speidel v. St. Francis Hosp., Inc., C.A. No. 98C-05-227 RRC, 2002 WL 1477828 (Del.Super. July 11, 2002) (holding that this Court could not compel the performance of a binding "high/low" arbitration agreement).
See this Court's September 7, 2001 letter opinion, discussing the terms of Dr. Speidel's employment contract with St. Francis Hospital, and the September 1997 notice of termination that St. Francis provided Dr. Speidel. Speidel v. St. Francis Hosp., Inc., C.A. No. 98C-05-227, Cooch, J. (Sept. 7, 2001) (Letter Op.) (holding that, under the terms of his employment agreement, if a jury should determine that plaintiff Dr. Speidel was terminated under a certain provision of that agreement, Dr. Speidel would be entitled to compensation for the whole of the subsequent calendar year, less mitigation).
As detailed more fully in this Court's July 11, 2002 letter opinion, the arbitrator originally chosen by the parties did not serve in that role, because he properly disclosed, immediately prior to the beginning of the arbitration (when he first became aware of the potential conflict), his past adversarial relationship with a witness important to St. Francis Hospital. St. Francis Hospital then advised that it would not agree to the appointment of that arbitrator. Following the submission of competing motions (Plaintiffs had filed a "Motion to Enforce Settlement Agreement . . ." and Defendant had filed a "Motion for Judicial Intervention . . ."), this Court ruled that elementary fairness demanded that the arbitration proceedings be under the control of another arbitrator. Although the parties' agreement did not provide for substitution of the agreed-upon arbitrator, they eventually agreed upon a substitute arbitrator, with all other pertinent terms of the original agreement to remain in effect.
See Speidel, 2002 WL 1477828 (Del.Super. July 11, 2002).
For a more complete listing of the terms of the agreement, see Speidel, 2002 WL 1477828, at *2-*3.
One of the key provisions for purposes of the present motions was that the binding "high/low" arbitration would be conducted in accordance with former Superior Court Rule 16.1(f) and (g), "as relates to procedure." Another pertinent provision provided that the arbitration fees would be determined by the arbitrator. The agreement also provided, at paragraph eight, that Plaintiffs agreed "to execute a General Release in favor of Defendant [St. Francis Hospital, Inc.] simultaneously with transmittal of the payment of the arbitrator's award." After viewing the "high/low" agreement in its entirety and with former Rule 16.1 as a backdrop for a mechanism of enforcement, this Court previously remarked that analyzing arbitration agreement enforcement issues arising from this particular arbitration agreement under Superior Court Civil Rules is "somewhat like forcing a square peg into a round hole[,]" since the Court of Chancery, and not the Superior Court, has been statutorily invested with authority to enforce arbitration agreements.
Former Superior Court Rule 16.1, in effect until July 1, 2002, provided for compulsory arbitration of all cases where the damages sought were less than $100,000, exclusive of costs and interest; 16.1(f) and 16.1(g) largely related to procedure to be employed during the arbitration hearing. Current Rule 16.1 maintains the $100,000 threshold, but has been extensively rewritten to cover additional forms of ADR.
Speidel, 2002 WL 1477828, at *3.
Id.
Id. at *5.
See DEL. CODE ANN. tit. 10, ¶ 5702(a) (1999).
Nevertheless, in January 2003 the parties proceeded before the newly agreed-upon arbitrator, and he rendered a decision on February 20, 2003.
Plaintiffs later provided a sealed copy of the arbitrator's decision to the Court, which the Court has read in an effort to more fully understand the facts of this case as they relate to the motion currently before it. Without disclosing all of the arbitrator's findings, the Court notes that the arbitrator found in Plaintiffs' favor in an amount in excess of the agreed-upon "high" figure of the parties' "high/low" agreement, and that the arbitrator thanked counsel "for their excellent work at the hearing in presenting their . . . positions forcefully but civilly. . . ."
On March 3, 2003 (11 days following the arbitrator's decision), Plaintiffs filed their "Motion to Enforce Arbitration Agreement" in this Court in which they moved the Court to compel St. Francis Hospital to make payment to them in the amount of the "high" side of their agreement, given that the arbitrator had ruled in their favor in an amount in excess of the prescribed limit. Although this issue has ultimately been resolved by virtue of St. Francis's payment of that amount sometime between April 21, 2003 and April 28, 2003 (some 60 days after the arbitrator's decision), there apparently was some contestation between the parties regarding payment, occurring between the date of the arbitrator's decision and the date of payment.
An April 21, 2003 letter of Victor F. Battaglia to the Court indicated that St. Francis, by agreement, was to produce a check for the sum certain; the Court has not been informed of the exact date of payment.
Although the "high/low" agreement stated that the arbitrator would determine the amount of arbitration fees, it did not address in more detail how those fees would be paid — much of the post-decision interaction between counsel concerned which party would be responsible for those fees, once they were determined. In the days following the arbitrator's decision, counsel for the parties apparently did not communicate except via e-mail, and even then it appears as if there were some delays in the sending and/or receiving of those communications. Plaintiffs' counsel has represented that "[o]n each business day from February 21, 2003 through February 27, 2003," he attempted to contact St. Francis's counsel by phone but was told "she was either in a meeting or otherwise unavailable." St. Francis's counsel responded by affidavit that because she was "involved in another matter making [her] unavailable by telephone," she requested that Plaintiffs' counsel communicate with her using e-mail.
Pls.' Mot. to Enforce Arb. Agreement ¶ 6.
Deborah Martin Norcross Aff. of 3/3/03 ¶ 5 (Ex. "A" to Def.'s Resp. to Pls.' Mot. to Enforce Arb. Agreement).
The parties' e-mail correspondence was apparently not enough to resolve what St. Francis contends was a chief reason for their not paying the "high" amount immediately following the arbitrator's award, namely the Plaintiffs' non-execution of a general release, as provided in paragraph eight of the "high/low" agreement. The parties could not agree to the terms of the release. Additionally, St. Francis averred in paragraph three of Ms. Norcross's affidavit that Plaintiffs' counsel "sent to the selected arbitrator a copy of the Confidential Arbitration Agreement [i.e., the "high/low" agreement]. . . ." This averment was later refuted by separate correspondence from each of the arbitrators; counsel for St. Francis later "apologized" by affidavit and offered the explanation that her belief that Plaintiffs' counsel had so acted "was based on a `fax' number reflected on the document" which, although she believed to be that of the original arbitrator, was in fact the fax number for Plaintiffs' counsel.
Deborah Martin Norcross Aff. of 3/13/03 ¶ 2 (Ex. "A" to Def.'s Supp. Resp. to Pls.' Mot. to Enforce Arb. Agreement).
Plaintiffs maintained that St. Francis's demand for a "general release" was "disingenuous," chiefly because former Rule 16.1(g) applied "and therefore Plaintiffs [we]re entitled to the entry of judgment for the amount of the arbitration award." St. Francis, on the other hand, countered that the "high/low" agreement set forth no time period certain within which payment needed to be made, and that by the terms of the agreement itself, "the arbitration agreement . . . require[d] Plaintiff to execute [the]. . .release in exchange for . . . payment. . ."; Rule 16.1, St. Francis argued, applied only to the conduct of the arbitration hearing, i.e., to the procedure to be followed for an ultimate determination of liability.
Pls.' Mot. to Strike ¶ 6.
Def.'s Supp. Resp. to Pls.' Mot. to Enforce Arb. Agreement at 2.
CONTENTIONS OF THE PARTIES
As a result of all of this, Plaintiffs now contend that they are entitled to interest on the amount of the "high" payment made to them by St. Francis, from the time of the arbitrator's decision until the time of payment (which the Court understands to be sometime between April 21, 2003 and April 28, 2003), and that they should also be awarded attorneys' fees as costs associated with the related post-decision litigation. With regard to interest, Plaintiffs contend that they are entitled to interest "as a matter of right" because "Delaware law could not be clearer that a claim for a liquidated amount bears interest . . . [in order to make a plaintiff whole]. . ."; Plaintiffs cite Moskowitz v. Mayor and Council of Wilmington to support their proposition. With regard to the requested fee-shifting, Plaintiffs' counsel has stated that counsel for St. Francis's delaying conduct requires as much, and that St. Francis's counsel has demonstrated "a pattern and practice of the use of false, misleading and disingenuous assertions. . . ." Furthermore, Plaintiffs' counsel argues, delays caused by St. Francis's counsel "have caused injury to Plaintiffs, both financially and emotionally[,]" such delays justifying St. Francis being held responsible "for the legal fees which were expended by th[e] [Plaintiffs'] application [to enforce the arbitration agreement]." Plaintiffs cite no caselaw or other authority in support of their position that they are entitled to an award of attorneys' fees. Plaintiffs also do not set forth the particulars of Defendant's alleged "pattern and practice" of inappropriate assertions.
Letter from Victor F. Battaglia to the Court of 4/8/03, at 1.
391 A.2d 209, 210 (Del. 1978) (holding in a tax assessment case that "interest is awarded in Delaware as a matter of right . . ." because "full compensation requires an allowance for the detention of the compensation awarded. . .").
Pls.' Mot. to Strike at 1.
Letter from Victor F. Battaglia to the Court of 3/14/03, at 2.
Letter from Victor F. Battaglia to the Court of 4/8/03, at 1. The Court notes that Plaintiffs' counsel first requested fee-shifting in paragraph eight of their Motion to Enforce Arbitration Agreement because of defense counsel's "failure to communicate with Plaintiffs. . . ."
In response, St. Francis chiefly contends that interest should not be awarded because the "high/low" agreement "provide[d] an absolute `cap' on Plaintiffs' . . . recovery . . ." and that St. Francis "specifically relied on the cap in entering into the ["high/low"] agreement." With regard to attorneys' fees being shifted to it as taxable costs, St. Francis implicitly contends that this shifting is not warranted because of Plaintiffs' refusal to execute the general release provided for in the arbitration agreement, particularly since St. Francis offered to transfer funds to counsel for Plaintiffs "as soon as the release [wa]s signed. . . ." Defendant also cites no caselaw or other authority in support of either its opposition to an award of interest or to an award of attorneys' fees.
Def.'s Supp. Resp. to Pls.' Mot. to Enforce Arb. Agreement at 1.
Id.
Def.'s Supp. Resp. to Pls.' Mot. to Enforce Arb. Agreement at 2.
PLAINTIFFS ARE NOT ENTITLED TO INTEREST OR ATTORNEYS' FEES AS COSTS
The Court of Chancery has addressed the issue of post-award, pre-judgment interest when concerned with the arbitration of disputes, first in Church Home Foundation, Inc. v. Victorine and Samuel Homsey, Inc. and later in Duffy v. Cook. In both instances, the court disallowed such interest because the arbitrator's award itself did not so provide. In Church Home Foundation, the court, "in view of . . . [its] limited scope of review on confirmation," specifically stated that "the proper stage for . . . [such a] request . . . [i]s [at] the proceeding before the arbitrator." And in Duffy v. Cook, the court declined "to establish as a general rule that arbitration awards should bear interest . . . from the time [that] they are entered, at least where the award does not provide otherwise." The court therefore held that where the losing party paid the full amount of the arbitrator's award in under 45 days from the date rendered, and the arbitrator made no specific determination regarding post-award interest, the winning party could not obtain interest for that time. In so holding, the court did recognize that a rule contrary to its holding "would help to secure the prompt satisfaction of awards and would prevent a losing party from benefiting from delay[,]" but that "the issues . . . should either be addressed by the parties in structuring the terms of their arbitration agreement . . . or . . . by rule of . . . court [if the arbitration itself is `part of a court-sponsored alternative dispute resolution mechanism']."
C.A. No. 6513 JJL, 1983 WL 3093 (Del.Ch. Aug. 29, 1983).
C.A. No. 16307 SPL, 1998 WL 914267 (Del.Ch. Dec. 22, 1998).
Church Home Foundation, 1983 WL 3093, at *1.
Duffy v. Cook, 1998 WL 914267, at *2.
Id.
Id. at *3.
Here, the "high/low" arbitration agreement made no provision for post-award interest, and as indicated by the above-cited caselaw, the issue at a minimum should have been presented to the arbitrator via the arbitration agreement and not now for the first time to this Court. Defendant's position that the "high/low" agreement should place an absolute "cap" on Defendant's liability is persuasive under these facts, given also that that amount was ultimately paid within approximately 60 days of the rendering of the arbitrator's decision. And as was recently stated by the Delaware Supreme Court, "[a]lthough prejudgment interest is awarded as a matter of right, and not by judicial discretion, a party must [still] affirmatively request this award [either in the pleadings or in the issues raised at trial]."
A provision regarding interest on an award can be part of an arbitration agreement. See 2A AM. JUR. PLEAD. PRAC. FORMS ANN. Arbitration and Award ¶ 101 (2000).
Chrysler Corp. (Delaware) v. Chaplake Holdings, Ltd., 822 A.2d 1024, 1037 (Del. 2003) (citing Collins v. Throckmorton, 425 A.2d 146, 152 (Del. 1980)).
Additionally, the Moskowitz case is distinguishable, insofar as the instant case involves a privately-litigated resolution that potentially would not now be before this Court were it not for the fact that the "high/low" agreement provided that arbitration would be conducted in accordance with former Superior Court Rule 16.1(f) and (g), "as relates to procedure." Moskowitz, however, involved a more typical cause of action to come before this Court, namely an appeal from an administrative agency decision, as opposed to (as occurred here) a binding arbitration. When all is said and done, any action this Court takes with regard to the decision of the arbitrator in this matter is necessarily limited, and the Court therefore finds cases such as Church Home Foundation and Duffy v. Cook to be sufficiently on point. Accordingly, Plaintiffs' request for interest from the date of the arbitrator's decision to the date of payment is DENIED.
See Speidel, 2002 WL 1477828, at *3.
With regard to the shifting of attorneys' fees to Defendant for what Plaintiffs allege are Defendant's delaying litigation tactics, there are at least two sources from which this Court could potentially derive authority to make such an award, neither of which the Court has determined should be utilized in the context of this case. Because Plaintiffs did not specify under which potential source they seek relief, the Court will explain its conclusion under each.
The first of these sources is the Court's "inherent power" to sanction parties to litigation, which power, although real, "must be exercised with great restraint." At least one treatise has noted, with regard to federal courts, that commentators have argued "that we should always looks askance upon any assertion of an inherent power by any branch of . . . government, including the judiciary."
Gilmour v. PEP Modular Computers, Inc., C.A. No. 92C-01-150 SCD, 1995 WL 791001, at *3 n. 4 (Del.Super. Dec. 14, 1995) (citing Roadway Express, Inc. v. Piper, 447 U.S. 752, 764 (1980). The Court of Chancery has similarly held that, in the context of awarding attorneys' fees under that court's inherent powers because of "bad faith" litigation conduct, "a higher or more stringent standard of proof, i.e., `clear evidence' [is required]." Arbitrium (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 232 (Del.Ch. 1997) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991) ("inherent powers must be exercised with restrain and discretion")), aff'd per curiam, 720 A.2d 542 (Del. 1998).
61A AM. JUR. 2D Pleading ¶ 659 (1999) (citation omitted).
The second of these sources is Superior Court Civil Rule 11(c), which rule provides for the awarding of attorneys' fees under specified circumstances, payable into Court or to a party; an award under the rule is discretionary. There are significant procedural requirements associated with the rule, however, including the fact that a motion made under the rule "shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate . . . [the rule]"; failure to comply with these requirements has been held to be grounds for denying such motion. Furthermore, the rule contemplates a "safe harbor" provision in that after such motion has been served on another party, it may be thereafter be presented to this Court "unless, within 21 days after [such] service . . . the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected." And finally, a party seeking an award of attorneys' fees under the rule "must provide documentation supporting the request[,]" such documentation consisting of "[a]t a minimum . . . an affidavit specifying the hours spent on the case, the hourly rate charged, and any other costs or expenses incurred."
SUPER.CT.CIV.R. 11(c)(2).
Id.
SUPER.CT.CIV.R. 11(c)(1)(A). Under Rule 11(c)(1)(B), this Court may sua sponte sanction a party by "entering an order describing the specific conduct that appears to violate . . . [the rule]." The Court declines to do so in this case.
61A AM. JUR. 2D Pleading ¶ 637 (1999) (citations omitted).
SUPER.CT.CIV.R. 11(c)(1)(A).
61A AM. JUR. 2D Pleading ¶ 642 (1999) (citations omitted).
Here, there had been delay in payment of the "high" amount of the parties' binding arbitration agreement, but that delay has been sufficiently explained (but not necessarily justified) by the various affidavits submitted by Ms. Norcross. While counsel for Plaintiffs understandably felt some ire in being erroneously accused of disclosing confidential information to the arbitrators involved with this case, Defendant's counsel's averments tend to negate a finding of the factual circumstances that this Court believes would be required to award Plaintiffs attorneys' fees. The decision of the arbitrator itself demonstrates that, during the arbitration proceeding, counsel for both parties proceeded "forcefully but civilly . . ."; as has been stated by one treatise on the subject, "a party should not be penalized [merely] for maintaining an aggressive litigation posture[.]"
32 AM. JUR. 2D Federal Courts ¶ 274 (1995).
Defendant should not be liable for some amount of Plaintiffs' attorneys fees by contesting provisions in the "high/low" agreement that did not adequately address issues that later arose. The agreement was silent as to interest. No application was made to the arbitrator for an award of interest. The agreement sets forth no time period within which payment was to be made. And by the terms of the agreement itself, execution by Plaintiffs of a "General Release" (without further definition thereof) in Defendant's favor was a condition precedent to disbursement of any funds.
The Court therefore declines to exercise any "inherent power" it may have to sanction Defendant's counsel in this matter.
With regard to availability of sanctions under Rule 11, Plaintiffs' counsel has failed to comply with the procedural requirement of the rule, and in light of the above, this Court declines to sua sponte sanction Defendant's counsel. Plaintiffs' counsel did not make such request by separate motion served upon the other side, and did not adequately document the behavior which allegedly justifies such an award. Accordingly, Plaintiffs' request to recover those fees associated with Plaintiffs' Motion to Enforce Arbitration Agreement is DENIED.
Even if the strict procedural requirements of Rule 11(c) had been followed, this Court cannot say that it would have ordered payment of some amount of attorneys' fees. See Wilson v. B R Transporters, Inc., C.A. No. 93C-05-019 THG, 1994 WL 381001, at *2 (Del.Super. June 10, 1994) (noting that Delaware trial courts "rarely have imposed Rule 11 sanctions").
That said, this Court does reproach Defendant's pro hac vice counsel for the inaccuracies in Defendant's Response to Plaintiffs' motion and in Ms. Norcross's accompanying affidavit. Such criticism does not, however, warrant the striking of the Response or accompanying affidavit. Therefore, Plaintiffs' "Motion to Strike the Defendant's Response . . ." is also DENIED.
CONCLUSION
For all of the above reasons, both Plaintiffs' "Motion to Enforce Arbitration Agreement," as it relates to interest and attorneys' fees, and Plaintiffs' "Motion to Strike the Defendant's Response . . ." are DENIED.
IT IS SO ORDERED.