Arbitration in Colorado: the Uniform Arbitration Act of 1975
| Jurisdiction | Colorado,United States |
| Citation | Vol. 04 No. 1976 Pg. 483 |
| Pages | 483 |
| Publication year | 1976 |
1976, April, Pg. 483. Arbitration in Colorado: The Uniform Arbitration Act of 1975
With the passage of the Uniform Arbitration Act, C.R.S. 1973, § 13-22-201 et seq., Colorado becomes one of some 20 states to enact the Act since 1955. Virtually every state has some statutory provision respecting arbitration, although the provision may be of limited applicability. It is the purpose of this article to review the Act as Colorado has passed it, offering suggestions as to its use by the practitioner faced with it. It is also the purpose of this article to put the Act in perspective with the law as it existed before 1975. It is assumed that the statute is valid in all respects, although it is acknowledged that the doctrine of federal pre-emption under the supremacy clause(fn1) of the United States Constitution may void the Act as applied to labor-management relations(fn2) and controversies arising out of transactions involving commerce.(fn3) Those and many other substantive issues are not discussed here in an effort to present the use of this Act.
Notwithstanding the passage of the Act, which in certain respects sets forth the rules surrounding arbitration, arbitration was created as a private institution of self-government to fulfill private needs.(fn4) Its object was a final disposition of a dispute which is faster, less expensive and less formal than a normal court proceeding.(fn5) In Bel Pre Medical Center, Inc. v. Frederick Contractors, Inc.(fn6) the court noted that:
The person chosen to hear and resolve the dispute the arbitratorArbitration is the process whereby parties voluntarily agree to substitute a private tribunal for the public tribunal otherwise available to them. The arbitration process provides a speedy, informal, relatively inexpensive and private procedure for resolving controversies arising out of commercial transactions, as well as a tribunal uniquely qualified to resolve such disputes.
is usually chosen because of the parties' confidence in his knowledge of the practices of the industry which enables him to employ considerations in fashioning his judgments which may be foreign to the expertise of the courts. The parties expect that the arbitrator's competence and skill, based upon his specialized knowledge and experience, will produce a judgment which is founded not only upon the literal meaning of the words appearing in the contract document itself, but also on the meaning in the context of the practices and customs associated with their use.(fn7)
Judge Learned Hand, in American Almond Prods. Co. v. Consolidated Pecan Sales Co.,(fn8) had before him the question of whether he should set aside an arbitrator's award because the arbitrator had used extra-record evidence. The arbitrated dispute therein involved a contract to purchase nuts and one party claimed damages for nondelivery. The only evidence of unit price of the nuts, which was necessary to determine damages, was the assertion of counsel in a post-hearing brief. Judge Hand upheld the award, which relied upon the assertion of unit price, saying,
In trade disputes one of the chief advantages is that arbitrators can be chosen who are familiar with the practices and customs of the calling, and with just such matters as what are current prices, what is merchantable quality, what are the terms of the sale and the like.(fn9)
In Colorado, several appellate decisions have noted possible benefits of arbitration. In one case, arbitration was referred to as a "convenient mode of adjusting disputes" and as "a method for the submission and settlement of controversies which, if followed, might be more effective and furnish a more conclusive and expeditious remedy."(fn10) Another case characterized arbitration as "a simple, summary and inexpensive remedy as a means of settling their differences."(fn11)
Hence, arbitration may be characterized as a private dispute resolution tribunal. It may be described by the watchwords of expertise (of the arbitrator), economy (of money expended) and efficiency (of time). These terms---expertise, economy and efficiency --- should serve as a policy guide to the practitioner in determining when to use arbitration and how to interpret the statute.
Since the original enactment of this Act, state appellate court decisions are replete with statements that the Act was meant to discourage litigation and encourage arbitration.(fn12) Such a policy statement would seem to have special force, beyond uniformity among the states,(fn13) by virtue of Article XVIII, § 3 of the Colorado Constitution:
It shall be the duty of the general assembly to pass such laws as may be necessary and proper to decide differences by arbitrators, to be appointed by mutual agreement of the parties to any controversy who may choose that mode of adjustment. The powers and
This provision has apparently been before the Colorado Supreme Court on only one occasion, and the court held that § 3 does not allow the legislature to pass legislation providing for compulsory arbitration.(fn14) The court further held, curiously, that voluntary arbitration does not violate the proscription against unreasonable searches and seizures.(fn15)duties of such arbitrators shall be prescribed by law.
The language of our constitution may suggest that the draftsmen clearly felt that arbitration was a desirable dispute resolution mechanism. Therefore, the rule that statutes in derogation of the common law be strictly construed would be inapplicable and should not be followed. However, some inconsistent language may be found in Colorado cases under common law arbitration or Rule 109 of the Colorado Rules of Civil Procedure. In Koscove v. Peacock,(fn16) an award had been made on a dispute between a lessor and a lessee. The prevailing party docketed the award as a judgment under Rule 109. The court set aside the judgment because there had been no written submission as the rule requires. The Supreme Court noted: "It is generally held that when submission of arbitration matters is made under the statute, it must conform to the statute in every respect and a deviation therefrom negates the procedure. Exactitude in this instance required that the real arbitration be in writing...."
Thus, in Koscove the court gave a very strict interpretation to its own rule. In a second case(fn17) an action was brought to terminate a lease. The lease contained a typical clause stating that "any dispute or difference. . . as to terms or construction of this lease" shall be arbitrated. The Supreme Court upheld a trial court's denial of a stay of litigation and order to proceed to arbitration on the theory that if the lease was set aside there was nothing to arbitrate. The court stated that not only must the right to arbitration be "inevitable" but also that "the contract must not only provide for an arbitration but either expressly or by clear implication make such arbitration a condition precedent to the right of action...."(fn18)
Whatever the validity of these holdings under the common law and Rule 109, they represent a policy other than fostering arbitration and discouraging litigation. In a more recent case, Sisters of Mercy v. Mead & Mount Const. Co.,(fn19) there may be found dicta far more consistent with a policy encouraging arbitration and discouraging litigation. Sisters of Mercy, like Koscove, involved a suit on an award rendered. The Supreme Court noted: "There may be merit to the contractor's various technical contentions. However, in the situation here, and
in the spirit of the arbitration concept it is deemed advisable to reach across technicalities and eschew needless verbiage."(fn20) The court added, "Strict adherence to legal punctilio is not required in arbitration proceedings as in court procedures."(fn21) Sisters of Mercy embodies a policy of encouraging arbitration, quite in contrast to Koscove and Roy and the theory of interpretation they represent. It is believed, accordingly, that the statute will be interpreted to encourage arbitration---broadly when by doing so arbitration can be utilized and narrowly when to do so will protect the process. Anything less will "tend to render the proceedings neither one nor the other, but transfer them into a hybrid, part judicial and part arbitrational."(fn22)
If it is true that the legal process more and more engulfs individual citizens and large institutions, it would seem that the policy enunciated by the general assembly of providing for private dispute resolutions should be enforced by interpreting the Act to protect and enhance this process.
Section 203 defines the scope of the Act. It provides that an agreement to arbitrate is binding if it is in writing. The Act allows for the enforcement of such written agreements whether they involve an existing controversy or an agreement to arbitrate future disputes. No particular form of agreement is required. The agreement to arbitrate is of a contractual nature and the draftsmen should have contract concepts in mind while preparing an instrument.
A distinction must be made between an agreement to arbitrate and a submission agreement. Each may be a separate document or they may be contained within the same document. An agreement to arbitrate, that which the statute speaks of in § 203, is a promise or set of promises acknowledging that the parties are bound to resolve problems involving a particular subject matter or course of dealing through arbitration. Such an agreement to arbitrate would normally be one article in a broader instrument defining primary rights and obligations. The larger document might be, for example, a collective...
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