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04/16/91 W. EDWARD THOMPSON v. SANDY V. LEE

April 16, 1991

W. EDWARD THOMPSON, APPELLANT
v.
SANDY V. LEE, ET AL., APPELLEES



Appeal from the Superior Court of the District of Columbia; Hon. Joseph M. Hannon, Trial Judge

Rogers, Chief Judge, and Terry and Farrell, Associate Judges.

The opinion of the court was delivered by: Farrell

In this appeal we reverse the denial of a motion to confirm an arbitration award. We remand for a determination by the trial court, upon an adequate evidentiary foundation, of whether there was fraud in the inducement of the Settlement Agreement which gave rise to the arbitration and the ensuing arbitration award, and hence whether confirmation of the award could properly be denied.

I.

On January 18, 1988, former law partners W. E. Thompson, on the one hand, and Sandy V. Lee and Edwin H. Harvey (Lee & Harvey), on the other, executed a "Settlement Agreement" which resolved their disputes over the distribution of certain contingent fees received by their dissolved law partnership. *fn1 Paragraph 3 of the Settlement Agreement provided for the division of fees collected in the cases of certain clients listed by Lee & Harvey (Exhibit A to the Settlement Agreement) and by Thompson (Exhibit B to the Settlement Agreement). Paragraph 3 (d) provided an exception to the Agreement's general scheme of distribution:

The $150,000.00 attorney's fee received by Thompson from the case of Julio Gonzales shall not be taken into account in the income or expense of the Partnership and shall not be divided according to the terms of this Agreement, except as set forth in this subparagraph (d) of paragraph 3, as follows: at the time of the execution of this Agreement, Thompson shall pay Harvey $30,000; and Thompson shall be entitled to retain all of the remaining amount.

Paragraph 9 of the Settlement Agreement provided in relevant part:

Any dispute arising under this Agreement shall be submitted to binding Arbitration before a single arbitrator according to the rules of the American Arbitration Association and shall be decided by the single arbitrator upon written submissions and a single summary oral argument to be presented by the parties or their representatives without an evidentary hearing, it being the parties' purpose to achieve an amicable final resolutation of their disputes without further delay or undue expense. . . .

On August 8, 1988, after disputes had arisen, Thompson demanded arbitration concerning payment of his share of the contingent fees. On September 27, 1988, during discovery in the arbitration proceeding, Lee & Harvey claim to have found evidence of a $220,000 payment to Thompson for fees in the Gonzales case. This amount conflicted with Thompson's statement in paragraph 3 (d) of the Settlement Agreement that there was a "$150,000.00 attorney's fee received by Thompson from the case of Julio Gonzales."

This and other purported discoveries led Lee & Harvey to file "counterclaims" before the arbitrator in which they asserted that they had been fraudulently induced into entering the Settlement Agreement by (1) Thompson's alleged misrepresentations about the Gonzales fee, and (2) Thompson's failure to list fully in Exhibit B of the Settlement Agreement the clients as to whom Lee & Harvey were entitled to payment. Although raising the issue of fraudulent inducement, Lee & Harvey informed the arbitrator that in their view he lacked authority under the arbitration clause to resolve this issue, which could only be decided by a court. The arbitrator ultimately agreed that the claims of fraud were not "within the scope of the Arbitration Clause" and dismissed those claims.

The arbitrator issued an award in Thompson's favor on April 24, 1989. The portions of the award at issue in this appeal are chiefly (1) two awards to Thompson -- $75,765.60 (for fees collected during the existence of the partnership) and $81,674.55 (for fees collected after dissolution) -- and (2) the denial of an award to Lee & Harvey for an additional portion of the Gonzales fee, the amount of which the arbitrator ruled "could not have been determined without an evidentiary hearing, which is prohibited by the Arbitration Clause." Lee & Harvey filed a "Motion to Vacate, Modify and Correct Arbitrator's Award" which the arbitrator denied on June 21, 1989.

On June 30, 1989, Thompson filed a "Motion for Order to Confirm Arbitration Award" in Superior Court. On July 12, 1989, Lee & Harvey filed an opposition which combined a jurisdictional argument for dismissal of the motion to confirm, a request to stay the Superior Court proceedings, and an argument against confirmation on the merits on grounds which included the claim of fraud in the inducement of the Settlement Agreement. *fn2 On July 31, 1989, Judge Hannon denied the motion to confirm and vacated the arbitrator's award, and subsequently denied Thompson's motion to reconsider. Thompson appeals from these rulings.

II.

D.C. Code ยง 16-4310 (1989) provides that, "Upon application of a party, the Court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award . . . ." Thompson first contends that Lee & Harvey ...


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