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Herrera v. Santangelo Law Offices, P.C.

2022 COA 93. No. 20CA2105. Legal Services Agreement—Arbitration Provision—Colorado Uniform Arbitration Act—Arbitration Award—Sanctions.

August 11, 2022

Touchstone Home Health LLC (Touchstone) contracted for legal services from Santangelo Law Offices, P.C. (Santangelo). As part of their fee agreement, Touchstone and Santangelo (the parties) agreed to arbitrate controversies or claims arising from their relationship. Years later, the parties’ relationship ended, and Santangelo sought to collect its unpaid legal fees and demanded arbitration pursuant to the fee agreement. Herrera entered his appearance in the arbitration as Touchstone’s attorney. The parties rejected opposing settlement offers. Herrera then asserted in an email to the arbitrator that the parties had reached a settlement, but Santangelo disputed this assertion. Santangelo moved for sanctions against Touchstone and Herrera in his personal capacity. Herrera disclaimed an obligation to arbitrate his individual liability for sanctions and sought declaratory relief establishing that the arbitrator lacked authority to enter sanctions against him. Following hearings, the arbitrator determined that Herrera’s conduct was sanctionable and ordered him to personally pay Santangelo $148,184.15 in fees and expenses. The parties later settled their fee dispute but did not resolve the arbitrator’s sanctions award against Herrera individually. Herrera moved the district court to vacate the arbitrator’s sanctions award. The court denied the motion and confirmed the award.

On appeal, Herrera contended that the sanctions award must be vacated because he did not agree to arbitrate issues of attorney sanctions, either individually in the arbitration hearing or as a nonparty bound to the fee agreement. An agreement to arbitrate can only be invoked by a signatory to the agreement and only against another signatory, subject to narrow exceptions. Here, Herrera was a nonparty to the fee agreement and did not fall within any of the exceptions that may bind a nonparty to such agreement, so the fee agreement did not bind Herrera to the arbitrator’s authority. Further, Herrera did not personally agree to the arbitrator’s authority to impose sanctions.

Herrera also argued that the arbitrator had no authority to sanction him. An arbitrator can only act within an arbitration agreement’s scope, with authority granted by that agreement or by law. As stated above, Herrera was a nonparty to the fee agreement, and no Colorado statute or civil procedure rule gives arbitrators the authority to sanction a party’s attorney. Therefore, the arbitrator lacked authority to sanction Herrera personally. Accordingly, the district court erred in denying Herrera’s motion to vacate and instead confirming the award.

The judgment was reversed and the case was remanded with instructions to vacate the arbitration award against Herrera.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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