Marriage of MacKenzie

20CA1246 Marriage of MacKenzie 10-21-2021

COLORADO COURT OF APPEALS

Court of Appeals No. 20CA1246

City and County of Denver District Court No. 19DR30646

Honorable Ericka F.H. Englert, Judge

In re the Marriage of

John Jason MacKenzie,

Appellee,

and

Kelie Gwen Plank-MacKenzie,

Appellant.

JUDGMENT AFFIRMED AND CASE

REMANDED WITH DIRECTIONS

Division II

Opinion by JUDGE BERGER

Román and Yun, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)

Announced October 21, 2021

Colorado Family Law Project, Maha Kamal, Denver, Colorado, for Appellee

Gill & Ledbetter, LLP, Anne Whalen Gill, Castle Rock, Colorado, for Appellant

1

¶ 1

In this dissolution of marriage case between Kelie Gwen Plank-

MacKenzie (wife) and John Jason MacKenzie (husband), wife

appeals the district court’s confirmation of an arbitration award

concerning the division of their marital estate, entered after the

court denied her motion to vacate, modify, or correct the award. We

affirm the judgment and remand the case for further proceedings on

appellate attorney fees.

I. Background

¶ 2

After approximately two years of marriage, husband initiated

the dissolution proceeding. The parties attended mediation, which

resulted in a partial property settlement agreement. As well, they

agreed to participate in another mediation session and to submit

any issues unresolved after the second mediation to binding

arbitration. The partial property settlement agreement provided

that the “[a]rbitrator shall follow the Colorado substantive law.”

The parties later executed a mediation and arbitration services

agreement, which reiterated that the arbitrator had the power to

make a summary decision on all issues unresolved through

mediation.

2

¶ 3

The second mediation session was unsuccessful, and the

matter proceeded to arbitration. The arbitrator (who also acted as

the mediator) issued three partial arbitration awards that,

collectively, resolved the division of property and debt. In the end,

the arbitrator divided the marital estate relatively equally, with each

party receiving approximately $60,000 in assets and $40,000 in

debts. As relevant, the arbitrator found the following:

 The arbitrator recognized that the parties received rental

properties in the partial property settlement agreement,

and he directed that each party was responsible for

returning the rental security deposit to their respective

tenants, even though both security deposits had been

placed into a bank account allocated to husband. The

arbitrator accounted for the respective security deposits

($2,000 for each property) as a marital debt.

 The arbitrator found that husband and wife paid for their

attorney fees on their marital credit cards —

approximately $6,600 for wife and approximately

$27,000 for husband. He divided the credit card debt

between the parties, declining to make any adjustment to

3

the property division for husband’s greater expenditure of

marital funds for attorney fees.

 The arbitrator found that husband would incur costs for

moving and storing his furnishings because he was

unable to move into the real property he received in the

partial property settlement agreement. The arbitrator

estimated these costs ($1,500 for a storage unit and

$2,000 to move) and included them as marital debts

allocated to husband.

 The arbitrator rejected wife’s argument that husband had

separate premarital credit card debt, finding that, while

the premarital credit card was in husband’s name, wife

also contributed to the debt incurred on that credit card.

 The arbitrator found that, before the marriage, wife

earned substantially more income than husband but,

during the marriage, she was voluntarily unemployed.

The arbitrator further found that wife had recently

obtained a job and her current earnings were expected to

surpass husband’s earnings.

4

 The arbitrator found that wife had separate property and

debt worth $622,606 and that husband had separate

property and debt worth $314,474, which he set aside

before dividing the marital estate.

¶ 4

Husband then asked the district court to confirm the collective

arbitration award. Wife objected and filed a motion to vacate,

modify, or correct the arbitration award. As relevant, she argued

that the court must vacate the award because the arbitrator

exceeded his powers and demonstrated evident partiality.

¶ 5

The district court denied wife’s motion and confirmed the

arbitration award. It rejected her arguments that the arbitrator

exceeded his powers, finding that her complaints were merely an

improper attempt to challenge the merits of the arbitrator’s award.

And it concluded that wife failed to demonstrate any evident

partiality by the arbitrator.

¶ 6

The court also determined that wife’s motion lacked

substantial justification, and it awarded husband the attorney fees

he incurred responding to the motion.

5

¶ 7

The court later entered a decree that dissolved the marriage

and adopted the arbitration award as its permanent orders.1

II. Arbitration Award

¶ 8

Wife contends that the district court erred by confirming the

arbitration award. She argues that the partial property settlement

agreement required the arbitrator to follow “Colorado substantive

law,” and the arbitrator exceeded his powers by not applying that

law when dividing the marital estate. We discern no error.

A. Applicable Law

¶ 9

A district court may vacate an arbitration award only under

limited statutory circumstances. See § 13-22-223(1), C.R.S. 2020;

Treadwell v. Vill. Homes of Colo., Inc., 222 P.3d 398, 401 (Colo. App.

2009). Absent a valid statutory ground, the court must confirm the

arbitration award. § 13-22-222(1), C.R.S. 2020; see also § 13-22-

223(4).

1 After wife filed this appeal, the arbitrator issued an award to

clarify the prior arbitration award and to resolve the parties’ dispute

over wife’s obligation under the property settlement agreement —

an issue unrelated to the contentions presented on appeal. The

district court vacated this later arbitration award. This later

entered order has no bearing on the resolution of the issues on

appeal.

6

¶ 10

The court will vacate an arbitration award if it finds that the

arbitrator exceeded his or her powers. § 13-22-223(1)(d). An

arbitrator’s powers are strictly defined by the terms of the parties’

arbitration agreement, and the arbitrator exceeds his or her powers

when the agreement’s terms are not followed. See Coors Brewing

Co. v. Cabo, 114 P.3d 60, 64 (Colo. App. 2004); see also In re

Marriage of Dorsey, 2014 COA 19, ¶ 11 (“An arbitrator lacks

jurisdiction to decide an issue outside the scope of an arbitration

agreement . . . .”).

¶ 11

An arbitrator therefore may not ignore or refuse to apply the

legal standard agreed to by the parties. Giraldi v. Morrell, 892 P.2d

422, 424 (Colo. App. 1994). However, the arbitrator does not

exceed his or her powers “merely” because “the arbitrator

committed an error of law.” Id.; see also State Farm Mut. Auto. Ins.

Co. v. Broadnax, 827 P.2d 531, 545 (Colo. 1992) (“[I]n the absence

of specific contractual directions [the reviewing court] may not

vacate an arbitration award even if the arbitrator misapplied

applicable rules of law.”). This is so because “[t]he arbitrator is the

final judge of questions of law and fact, and the award is not

subject to review merely because of a claimed mistake on the

7

merits.” In re Marriage of Gavend, 781 P.2d 161, 162 (Colo. App.

1989); see also Coors Brewing, 114 P.3d at 64.

¶ 12

Our ability to review an arbitration award therefore is narrowly

defined. See Barnett v. Elite Props. of Am., Inc., 252 P.3d 14, 18

(Colo. App. 2010) (recognizing that “the standard of review of

arbitral awards is among the narrowest known to law”). We may

not review the arbitrator’s decisions but, instead, limit our review to

the district court’s order concerning the arbitration award. See S.

Washington Assocs. v. Flanagan, 859 P.2d 217, 220 (Colo. App.

1992) (“[T]his court may not review the substance or the procedure

underlying the arbitration panel’s award, except insofar as the same

was reviewed by the trial court.”). We review the district court’s

factual findings for clear error and its legal conclusions de novo.

1745 Wazee LLC v. Castle Builders Inc., 89 P.3d 422, 425 (Colo.

App. 2003).

B. Nonmarital Property

¶ 13

Wife first contends that the arbitrator exceeded his powers

because he did not apply Colorado substantive law when he

included nonmarital assets and debts in the division of the marital

estate. Specifically, she argues that the arbitrator improperly

8

included (1) the security deposits for her and husband’s rental

properties, which were the property of their tenants; and (2)

husband’s separate, premarital credit card debt, which collectively

distorted the arbitrator’s near-equal division of the marital estate.

¶ 14

Under Colorado law, the division of the marital estate requires

the determination of whether an asset or debt is marital and subject

to division or nonmarital and shielded from division. In re Marriage

of Williamson, 205 P.3d 538, 540 (Colo. App. 2009); see § 14-10-

113(1), C.R.S. 2020. The classification of property as marital or

nonmarital is a legal determination based on the resolution of

factual disputes. Williamson, 205 P.3d at 540.

¶ 15

Nothing in the record shows that the arbitrator refused to

apply or ignored Colorado law concerning the parties’ nonmarital

property. To the contrary, the arbitrator specifically found that

certain assets, including real estate and retirement accounts, and

certain debts, including premarital and family loans, were the

parties’ separate property and excluded them from the division of

the marital estate.

¶ 16

Rather, as the district court found, wife’s contentions

improperly attempt to review the merits of the arbitrator’s ruling,

9

arguing that the arbitrator misapplied the law when he included the

security deposits and husband’s premarital credit card debt in the

division of the marital estate. But even if we were to agree that the

arbitrator’s legal rulings were incorrect (an issue we do not decide),

an arbitrator does not “exceed his power when he does not properly

apply the law.” Coors Brewing, 114 P.3d at 64; see also Giraldi, 892

P.2d at 424. We therefore may not review the merits and propriety

of the arbitrator’s legal rulings.

¶ 17

Still, wife contends that the parties’ “agreement to apply

substantive Colorado law did not leave room to allow mistakes of

law.” But the agreement merely provided the applicable legal

standard, and an agreement to apply a specific legal standard does

not, without more, permit a court to vacate an award based on the

misapplication of that standard. See Coors Brewing, 114 P.3d at 66

(holding that the merits of an arbitration award could not be

attacked where the parties’ agreement designated “Colorado law” as

the governing legal standard). The arbitrator applied Colorado law,

and the court properly declined to vacate the arbitration award

based on an alleged mistake in applying it.

10

¶ 18

In addition to the classification of property, wife argues that

the arbitrator exceeded his powers when he included husband’s

moving and storage expenses as marital debts and made findings

on her past and future earnings. But again, these arguments

merely challenge the merits of the arbitrator’s decisions and

findings, matters beyond the court’s review. See Gavend, 781 P.2d

at 162; see also Barnett, 252 P.3d at 18.

¶ 19

She also suggests that the arbitrator refused to consider

material evidence concerning husband’s premarital debt and her

nonfinancial contributions to the marriage. However, to vacate an

award based on an arbitrator’s refusal to consider evidence, the

party must demonstrate that he or she was substantially

prejudiced. See § 13-22-223(1)(c); Carson v. PaineWebber, Inc., 62

P.3d 996, 998 (Colo. App. 2002). Wife develops no argument in

support of the alleged exclusion of her evidence, nor does she

establish that she was substantially prejudiced by it. See Biel v.

Alcott, 876 P.2d 60, 64 (Colo. App. 1993) (“An appealing party bears

the burden to provide supporting authority for contentions of error

asserted on appeal, and a failure to do so will result in an

affirmation of the judgment.”).

11

¶ 20

We therefore discern no error by the district court in rejecting

these arguments.

C. Attorney Fees as Marital Debt

¶ 21

Wife next argues that the arbitrator exceeded his powers

because he “placed all attorney fees in the marital debt,” which was

contrary to Colorado law. She contends that attorney fees may only

be allocated under section 14-10-119, C.R.S. 2020, and that such a

determination must be based on the parties’ relative economic

circumstances.

¶ 22

True, litigation costs associated with a dissolution proceeding

may be allocated under section 14-10-119 to ensure that neither

party suffers undue economic hardship as a result of that

proceeding. In re Marriage of Aldrich, 945 P.2d 1370, 1377 (Colo.

1997); In re Marriage of Burford, 26 P.3d 550, 559 (Colo. App.

2001). But when those litigation costs “have already been paid,

they may be allocated in the property division.” Burford, 26 P.3d at

559.

¶ 23

The arbitrator found that the parties’ credit card debt included

payments of husband’s and wife’s attorney fees. The arbitrator

thus determined that both parties had used marital money to pay

12

their attorney fees and included the credit card debt in its allocation

of the marital debts. In doing so, the arbitrator applied Colorado

substantive law, and we discern no indication that the arbitrator

exceeded his powers. See id.

¶ 24

To be sure, wife disagrees with the arbitrator’s decision and

argues that the arbitrator failed to apply and follow section 14-10-

119. But again, a misapplication of the law does not amount to an

excess of the arbitrator’s power or warrant the vacation of an

arbitration award. See Coors Brewing, 114 P.3d at 64; see also

Giraldi, 892 P.2d at 424.

¶ 25

The district court therefore did not err by declining to vacate

the arbitration award.

III. Attorney Fees in the District Court

¶ 26

Wife contends that the district court abused its discretion by

awarding attorney fees to husband for having to respond to her

motion to vacate, modify, or correct the arbitration award, arguing

that she presented meritorious arguments in support of her

contentions in the motion. We disagree.

¶ 27

The district court has broad discretion when determining

whether to award attorney fees, and absent a showing that the

13

court abused its discretion, we will not disturb its decision. In re

Marriage of Tognoni, 313 P.3d 655, 660-61 (Colo. App. 2011). A

court abuses its discretion when its decision is manifestly arbitrary,

unfair, or unreasonable, or a misapplication of the law. In re

Marriage of Herold, 2021 COA 16, ¶ 5. Under this standard, we

consider whether the decision fell within the range of reasonable

options, not whether we would have reached a different result. In re

Estate of Shimizu, 2016 COA 163, ¶ 30.

¶ 28

A court may award attorney fees against a party that has

brought a claim that lacked substantial justification. § 13-17-

102(4), C.R.S. 2020. A claim lacks substantial justification when,

as relevant here, it is substantially frivolous. Id. A party’s

contention is frivolous when the party presents no rational

argument based on the evidence or law to support it. W. United

Realty, Inc. v. Isaacs, 679 P.2d 1063, 1069 (Colo. 1984).

¶ 29

The district court found that each of wife’s alleged contentions

presented no grounds under which it could vacate, modify, or

correct the arbitration award. The court explained that many of

wife’s contentions were merely “a thinly-veiled request for a review

of the Arbitrator’s Awards on the merits.” And the court found that

14

for other contentions (not reasserted on appeal), wife did not

provide the court with supporting legal authority or sufficient

allegations to warrant relief.

¶ 30

The record supports the district court’s conclusion that wife

failed to present rational arguments in support of her motion. See

Nienke v. Naiman Grp., Ltd., 857 P.2d 446, 449 (Colo. App. 1992) (A

“court’s award of attorney fees is not to be disturbed on appeal if

there is support in the record for the conclusion that the claim or

defense advanced was frivolous . . . .”). We agree with the court

that wife’s contentions concerning the arbitrator’s powers were, in

fact, attempts to challenge the merits of the arbitration award, and

it has been well-established that the district court does not review

the propriety of the arbitrator’s legal ruling absent specific authority

to do so, which did not exist here. See Coors Brewing, 114 P.3d at

64; Giraldi, 892 P.2d at 424. The record further reveals that the

remaining allegations in wife’s motion lacked legal and factual

support, and wife presents no argument to the contrary on appeal.

¶ 31

Under these circumstances, we cannot conclude that the

district court abused its discretion by ordering wife to pay

husband’s attorney fees.

15

IV. Attorney Fees on Appeal

¶ 32

Wife and husband request an award of appellate attorney fees

under section 14-10-119, both arguing that the other party has

greater financial resources. See Aldrich, 945 P.2d at 1377. The

district court is better equipped to determine the factual issues

regarding the parties’ current financial resources. See In re

Marriage of Alvis, 2019 COA 97, ¶ 30. We therefore remand this

issue to the district court. See C.A.R. 39.1.

¶ 33

Husband also seeks appellate attorney fees under section 13-

17-102, arguing that wife’s appeal was substantially frivolous and

groundless, and as a sanction under the mediation and arbitration

services agreement for “not acting in good faith or taking an

unreasonable position.” We decline to award fees under either

basis.

¶ 34

First, an award of attorney fees on appeal under section 13-

17-102 “is appropriate only in clear and unequivocal cases” when

the appeal itself lacked substantial justification. Shimizu, ¶ 34; see

also Front Range Home Enhancements, Inc. v. Stowell, 172 P.3d 973,

977 (Colo. App. 2007). Although the district court awarded

attorney fees and we determined that it did not abuse its discretion

16

in doing so, we exercise our discretion to decline an award of such

fees on appeal. See Shimizu, ¶ 34.

¶ 35

Second, we do not agree that the mediation and arbitration

services agreement permits an award of appellate attorney fees.

The provision relied on by husband states, “The parties agree that

each party shall pay one-half of the [mediation/arbitration] fees,

subject to reallocation if [the] mediator/arbitrator finds that one of

the parties is not acting in good faith or taking an unreasonable

position.” This provision plainly applies to the mediation and

arbitration proceeding and the fees associated with it, not to any

proceeding before this or any other court.

V. Conclusion

¶ 36

The judgment is affirmed. We remand the case to the district

court to consider the parties’ requests for appellate attorney fees

under section 14-10-119.

JUDGE ROMÁN and JUDGE YUN concur.