ECO Box Fabricators v. Zweigle

2020 UT App 133
THE UTAH COURT OF APPEALS
ECO BOX F ABRICATORS LLC, R ODNEY A. NEWMAN ,
S USAN M ARTINDALE, AND THE S USAN M ARTINDALE LIVING TRUST,
Appellees,
v.
TORY R. Z WEIGLE,
Appellant.
Opinion
No. 20190278-CA
Filed September 24, 2020
Third District Court, Salt Lake Department
The Honorable Todd M. Shaughnessy
No. 180901221
J. Morgan Philpot, Attorney for Appellant
Heather M. Sneddon and Jared D. Scott,
Attorneys for Appellees
JUDGE DIANA H AGEN authored this Opinion, in which
JUDGES M ICHELE M. C HRISTIANSEN F ORSTER and JILL M. POHLMAN
concurred.
HAGEN, Judge:
¶1 	Tory R. Zweigle appeals the district court’s denial of his
motion to vacate an arbitration award in favor of Eco Box
Fabricators LLC, Rodney A. Newman, Susan Martindale, and
the 	Susan 	Martindale 	Living 	Trust 	(collectively, 	Appellees).
Zweigle 	claims 	that 	the 	award 	should 	have 	been 	vacated
because the arbitrator exceeded his authority in several respects,
improperly applied Utah law to the parties’ claims, and awarded
unconstitutionally excessive punitive damages. He also claims
that the district court erroneously failed to hold a hearing on his
motion to vacate. We reject each of Zweigle’s arguments on
appeal and affirm the district court’s order. We also award

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attorney fees requested by Appellees for their defense of this
appeal and remand to the district court for calculation of fees
reasonably incurred.
BACKGROUND
¶2 	In 	2017, 	Zweigle 	and 	Newman 	formed 	Eco 	Box
Fabricators LLC to manufacture shipping container housing
units. 	Zweigle 	and 	Newman 	executed 	a 	limited 	liability
company 	agreement 	under 	which 	Newman 	would 	invest
$695,000 in cash and Zweigle would contribute non-monetary
assets, 	namely 	his 	purported 	expertise 	and 	experience 	in
manufacturing shipping container housing. Specifically, Zweigle
claimed 	to 	have 	spent 	several 	years 	designing 	shipping
container homes, paying architects to create drawings of his
designs, sending these drawings to a manufacturer in China, and
eventually selling the homes to Chinese customers.
¶3 	A few months after the formation of Eco Box, Susan
Martindale, a friend of Newman, purchased a 20% share in the
company. 	Zweigle, 	Newman, 	and 	Martindale 	executed 	an
amended 	limited 	liability 	company 	agreement 	(the 	LLC
Agreement), and Martindale deposited $300,000 into Eco Box’s
account. The LLC Agreement contained an arbitration provision
directing the parties to engage in binding arbitration to settle
“any 	controversy, 	dispute 	or 	claim 	arising 	out 	of 	or 	in
connection with or relating to” the LLC Agreement. It also
contained a dispute resolution provision, which provided that
before arbitration, managers must first engage a designated
business consultant and then initiate mediation.
¶4 	Newman and Martindale soon discovered that Zweigle
had 	misrepresented 	aspects 	of 	his 	prior 	experience 	and
fraudulently obtained funds from Eco Box for his personal use.
They initiated litigation and voted to remove Zweigle from Eco
Box. In response, Zweigle filed a motion to compel arbitration,

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arguing that the LLC Agreement required the parties to engage
in the specified dispute resolution process, including mediation
and binding arbitration. Appellees filed an arbitration demand
and 	responded 	to 	Zweigle’s 	motion 	to 	compel 	arbitration,
agreeing that the majority of the claims should be decided by
arbitration but arguing that at least some of them fell outside the
scope of the arbitration clause in the LLC Agreement. Zweigle
responded 	by 	seeking 	to 	withdraw 	his 	motion 	to 	compel
arbitration, stating he now expressly “reject[ed] arbitration.” He
then filed an answer, third-party complaint, and counterclaims.
¶5 	Eventually, the parties agreed to arbitrate their claims and
reached a stipulation regarding the scope of the arbitration (the
Stipulated Arbitration Agreement). Appellees’ counsel sent the
stipulation to Zweigle’s counsel via email, the relevant portion of
the stipulation reading as follows:
The parties have agreed that the AAA arbitration
will proceed with respect to all claims between Rod
Newman, 	Tory 	Zweigle, 	Susan 	Martindale, 	the
Susan 	Martindale 	Living 	Trust, 	and 	Eco 	Box
Fabricators, LLC. . . .
Mr. Zweigle hereby withdraws all objections to the
arbitration with respect to the foregoing parties
and the claims between them.
Zweigle’s 	counsel 	confirmed 	that 	the 	Stipulated 	Arbitration
Agreement was accurately represented by Appellees’ email.
¶6 	The 	parties 	began 	the 	arbitration 	process, 	which
culminated in a final arbitration hearing in September 2018. On
October 5, 2018, the arbitrator issued an interim award in favor
of Appellees. Specifically, the arbitrator concluded that Zweigle
fraudulently induced Appellees to enter into the LLC Agreement
by lying about his previous experience in the business. The
arbitrator noted that there was no evidence showing Zweigle

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had 	any 	previous 	experience 	designing 	and 	manufacturing
shipping container housing. The arbitrator also determined that
Zweigle 	had 	materially 	breached 	the 	LLC 	Agreement 	and
committed fraud by obtaining funds from the business that he
used for personal expenses. The arbitrator ultimately concluded
that a “pattern of willful misrepresentation and defiance of
important fiduciary duties was abundantly clear.” He awarded
Appellees $403,894.52 	in 	damages and 	$500,000 	in 	punitive
damages and ordered rescission of the LLC Agreement. He later
awarded attorney fees and costs.
¶7 	Appellees filed a motion with the district court to affirm
the arbitration award. Zweigle did not file an opposition to that
motion, but instead filed a motion to vacate the award. In his
motion, Zweigle requested a hearing pursuant to rule 7(h) of the
Utah Rules of Civil Procedure. Appellees opposed this motion.
Without holding a hearing, on March 1, 2019, the district court
denied 	Zweigle’s 	motion 	to 	vacate 	and 	granted 	Appellees’
motion 	to 	affirm 	the 	arbitration 	award. 	The 	court 	entered
judgment against Zweigle and awarded Appellees the attorney
fees they had incurred since the entry of the final arbitration
award. Zweigle now appeals.
ISSUES AND STANDARDS OF REVIEW
¶8 	On appeal, Zweigle first contends that the district court
erred by not holding a hearing under rule 7(h) of the Utah Rules
of Civil Procedure on his motion to vacate the arbitration award.
“We review the district court’s interpretation and application of
the rules of civil procedure for correctness and will reverse only
if 	the 	appellant 	shows 	error 	that 	was 	substantial 	and
prejudicial.” Conner v. Department of Com., 2019 UT App 91, ¶ 15,
443 P.3d 1250 (cleaned up).
¶9 	Next, Zweigle contends that the district court erred in
denying 	his 	motion 	to 	vacate 	the 	arbitration 	award. 	“In

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reviewing the order of a [district] court confirming, vacating, or
modifying an arbitration award, we grant no deference to the
district 	court’s 	conclusions 	of 	law 	but 	review 	them 	for
correctness, and we review the district court’s factual findings
under a clearly erroneous standard.” Evans v. Nielsen, 2015 UT
App 65, ¶ 7, 347 P.3d 32 (cleaned up).
ANALYSIS
I. Failure to Hold Hearing
¶10 	Zweigle first challenges the district court’s decision not to
hold a hearing on his motion to vacate. Zweigle contends that
the court’s refusal was improper under rule 7(h) of the Utah
Rules of Civil Procedure and violated his due process rights.
Rule 7(h) states that the court “must grant a request for a hearing
on . . . a motion that would dispose of the action or any claim or
defense in the action unless the court finds that the motion or
opposition to the motion is frivolous or the issue has been
authoritatively 	decided.” 	Utah 	R. 	Civ. 	P. 	7(h). 	Assuming,
without deciding, that rule 7(h) applies to a motion to vacate an
arbitration 	award, 	we 	conclude 	Zweigle 	has 	failed 	to
demonstrate that the failure to hold a hearing was a substantial
and prejudicial error.
¶11 	Zweigle “has the burden to show not only that the error
occurred but also that it was substantial and prejudicial.” See
Stevenett v. Wal-Mart Stores, Inc., 1999 UT App 80, ¶ 8, 977 P.2d
508. To show the error was substantial and prejudicial, Zweigle
must demonstrate that “there is at least a reasonable likelihood
that in the absence of the error the result would have been
different.” Ross v. Epic Eng’g PC, 2013 UT App 136, ¶ 12, 307 P.3d
576 (cleaned up). However, Zweigle has not pointed to any
evidence that he would have sought to admit had the court held
an evidentiary hearing or explained how oral argument would
have changed the outcome. Instead, Zweigle simply contends

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that the failure to hold a hearing “materially prejudiced” him
because 	the 	court 	“glossed 	over” 	both 	“disputed 	facts 	(i.e.
whether 	an 	email 	from 	Mr. 	Zweigle’s 	counsel 	waived 	or
modified the terms of the parties[’] arbitration agreement)” and
“disputed 	legal 	issues 	(i.e. 	the 	statutory 	authority 	of 	an
arbitrator, and the jurisdiction of the arbitrator in this matter).”
But 	these 	very 	arguments 	were 	made 	in 	Zweigle’s 	written
memorandum in support of his motion to vacate and were
rejected by the district court when it denied the motion. He has
not demonstrated that, had the court held a hearing, there is a
reasonable 	likelihood 	that 	the 	outcome 	would 	have 	been
different. Therefore, any error in not holding a hearing was
harmless.
II. Grounds for Vacating Award
¶12 	Next, Zweigle argues that the district 	court erred in
failing to vacate the arbitration award on various grounds. The
arbitration process in Utah is governed by the Utah Uniform
Arbitration Act (the Act). The Act “reflects long-standing public
policy favoring speedy and inexpensive methods of adjudicating
disputes.” Allred v. Educators Mutual Ins. Ass’n of Utah, 909 P.2d
1263, 1265 (Utah 1996). Thus, when a district court reviews an
arbitration 	award, 	its 	standard 	of 	review 	“is 	an 	extremely
narrow 	one 	giving 	considerable 	leeway 	to 	the 	arbitrator.”
Softsolutions, Inc. v. Brigham Young Univ., 2000 UT 46, ¶ 10, 1 P.3d
1095. “The trial court may not substitute its judgment for that of
the arbitrator, nor may it modify or vacate an award because it
disagrees with the arbitrator’s assessment.” Id. (cleaned up).
¶13 	“Given 	the 	public 	policy 	and 	law 	in 	support 	of
arbitration, judicial review of arbitration awards . . . is limited to
those grounds and procedures provided for under the Act.”
Allred, 909 P.2d at 1265. The grounds for vacating an arbitration
award are limited to the following circumstances: (a) “the award
was procured by corruption, fraud, or other undue means”;

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(b) the arbitrator showed partiality or corruption or was guilty of
prejudicial misconduct; (c) the arbitrator refused to postpone a
hearing, hear material evidence, or otherwise conduct a hearing
pursuant to the Act, to the substantial prejudice of the rights of a
party; (d) the arbitrator exceeded his or her authority; (e) “there
was 	no 	agreement 	to 	arbitrate”; 	or 	(f) “the 	arbitration 	was
conducted without proper notice . . . so as to substantially
prejudice the rights of a party.” Utah Code Ann. § 78B-11-124(1)
(LexisNexis 2018). A party seeking to vacate an arbitration
award has the burden to point the court to which statutory
ground justifies setting aside the award. See Allred, 909 P.2d at
1267 (affirming the district court’s order denying a motion to
vacate because the moving party “failed to challenge the validity
of the arbitration of his claim in the manner prescribed by the
Act or under any of the statutorily recognized grounds for
vacating the arbitration award”); see also Youngs v. American
Nutrition, Inc., 537 F.3d 1135, 1141 (10th Cir. 2008) (“The burden
is on the party seeking to vacate an arbitration award . . . to show
that one of the limited statutory grounds exists for setting aside
the arbitration result.”).
¶14 	Zweigle argues that the district court erred in denying his
motion to vacate the arbitration award on six grounds. He
characterizes the first four grounds as instances of the arbitrator
exceeding his authority under section 78B-11-124(1)(d). First, he
asserts that there was no agreement to arbitrate issues that had
not been subject to the dispute resolution process outlined in the
LLC Agreement. Second, he argues that because Eco Box was not
a party to the LLC Agreement, the arbitrator exceeded his
authority by resolving claims brought by Eco Box. Third, he
claims that equitable rescission of the LLC Agreement was an
improper remedy imposed by the arbitrator. Fourth, he argues
that the arbitrator failed to consider his claims for breach of
contract and declaratory relief. The district court rejected each of
these arguments, concluding that Zweigle had “agreed to the
scope of the arbitration proceeding.” We agree with the district

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court that the terms of the Stipulated Arbitration Agreement
resolve each of these four claims.
¶15 	Zweigle 	initially 	takes 	issue 	with 	the 	arbitrator’s
resolution of claims that were not first subject to the formal
dispute resolution process outlined in the LLC Agreement. He
argues that the LLC Agreement expressly states that “arbitration
is not agreed to or authorized on any claim until the ‘dispute
resolution’ provisions . . . are followed.” Zweigle correctly notes
that he initially objected to arbitration on the basis that the
prerequisite dispute resolution steps in the LLC Agreement had
not been satisfied. But when he later stipulated to arbitrate all
claims 	between 	the 	parties, 	he 	expressly 	withdrew 	any
objections to arbitration, which necessarily included his claim
that the arbitration was not authorized by the terms of the LLC
Agreement. Based on the Stipulated Arbitration Agreement, the
arbitrator had authority to resolve all claims, notwithstanding
any limitations in the LLC Agreement.
¶16 	Second, Zweigle claims that the arbitrator “exceeded his
authority by resolving claims by [Eco Box] because [Eco Box] is
not a party to the arbitration agreement.” He claims that because
there was “no agreement, in writing or otherwise, that defines
the terms or scope of arbitration available to Eco Box,” the
“arbitrator was prohibited from considering Eco Box claims.”
Again, 	Zweigle’s 	argument 	fails 	because 	the 	scope 	of 	the
arbitrator’s authority was based on the Stipulated Arbitration
Agreement 	and 	was 	not 	limited 	by 	the 	terms 	of 	the 	LLC
Agreement. The Stipulated Arbitration Agreement clearly stated
that the parties agreed to arbitrate “all claims” between the
parties, including “Eco Box Fabricators, LLC.”
¶17 	Third, Zweigle argues that the arbitrator exceeded his
authority 	by 	imposing 	equitable 	rescission 	of 	the 	LLC
Agreement as a remedy, because equitable rescission “was not
part of any claim submitted by [Appellees],” and therefore was

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outside 	the 	scope 	of 	the 	Stipulated 	Arbitration 	Agreement.
Arbitrators have wide latitude to fashion remedies pursuant to
the Act. Under Utah Code section 78B-11-122, an arbitrator has
the authority to “order any remedies as the arbitrator considers
just and appropriate under the circumstances of the arbitration
proceeding,” and the “fact that a remedy could not or would not
be 	granted 	by 	the 	court 	is 	not 	a 	ground 	for 	refusing 	to
confirm . . . or for vacating an award.” Utah Code Ann. § 78B-11-
122(3) (LexisNexis 2018). Here, the arbitrator ordered rescission
of 	the 	contract 	after finding 	that 	Zweigle 	had 	fraudulently
induced 	Newman 	and 	Martindale 	to 	enter 	into 	the 	LLC
Agreement. Even if Appellees had not specifically requested
rescission 	prior 	to 	the 	parties 	entering 	into 	the 	Stipulated
Arbitration 	Agreement, 	the 	arbitrator 	did 	not 	exceed 	his
authority in his choice of remedy.
¶18 	Fourth, 	Zweigle 	argues 	that 	the 	arbitrator 	failed 	to
consider all the claims between the parties. Specifically, Zweigle
claims that the arbitrator ignored his breach of contract and
declaratory relief claims, which were based on the argument
“that the dispute resolution process required by the parties’
written agreement had not been followed and therefore there
was 	no 	basis 	to 	move 	forward 	with 	arbitration.” 	Zweigle
contends 	that, 	in 	agreeing 	to 	the 	Stipulated 	Arbitration
Agreement, he “was expressly agreeing to arbitrate—so long as
all claims [were considered]—including his claim that none of
the Appellees’ claims were authorized for arbitration unless and
until 	they 	complied 	with 	the 	dispute 	resolution 	process”
outlined in the LLC Agreement. But the Stipulated Arbitration
Agreement 	contained 	no 	such 	caveat. 	Instead, 	Zweigle
“withdrew all objections to the arbitration with respect to the
foregoing parties and the claims between them,” effectively
waiving any breach of contract or declaratory relief claim based

Eco Box Fabricators v. Zweigle
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on failure to follow the dispute resolution process outlined in the
LLC Agreement.1
¶19 	Zweigle makes two additional arguments on appeal that
do not appear to be based on the scope of the arbitrator’s
authority. First, he argues that the arbitrator erred by applying
Utah law when the LLC Agreement designated the application
of Delaware law. Second, he claims that the punitive damages
awarded by the arbitrator were unconstitutionally excessive. But
Zweigle has not explained how these arguments fit within the
limited statutory grounds for vacating an arbitration award.
¶20 	The 	moving 	party 	has 	the 	burden 	of 	establishing 	a
recognized statutory ground for vacating an arbitration award.
See Utah Code Ann. § 78B-11-124; see also Allred v. Educators
Mutual Ins. Ass’n of Utah, 909 P.2d 1263, 1267 (Utah 1996). The
district court rejected Zweigle’s remaining arguments because
Zweigle 	failed 	to 	invoke 	any 	applicable 	statutory 	ground.
Specifically, the district court ruled that “none of [his] other
arguments 	concerning 	the 	conduct 	of 	the 	arbitrator 	or 	the
proceeding are grounds for vacating the arbitrator’s decision.”
Yet, on appeal, Zweigle does not address the district court’s
reasoning, nor does he attempt to identify the statutory grounds
on which these arguments are based. See Bad Ass Coffee Co. of
Hawaii Inc. v. Royal Aloha Int’l LLC, 2020 UT App 122, ¶ 55
(rejecting 	the 	appellees’ 	argument 	because 	they 	failed 	to
“address the district court’s reasoning and explain why it was
1. To the extent that Zweigle claims that the arbitrator refused to
address any other claims, such a contention is not borne out by
the record. In the award, the arbitrator addressed “all other
claims,” stating that he did not “see any path for recovery by
[Zweigle] and . . . considered and rejected each theory of liability
and 	each 	counterclaim.” 	He 	stated 	that 	“[a]ll 	claims 	not
addressed herein are denied.”

Eco Box Fabricators v. Zweigle
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wrong in their opening brief”). Accordingly, Zweigle has not
established any grounds for reversing the district court’s order
denying his motion to vacate the arbitration award.
III. Attorney Fees
¶21 	Appellees request an award of the attorney fees incurred
in defending this appeal. “When a party who received attorney
fees below prevails on appeal, the party is also entitled to fees
reasonably incurred on appeal.” Telegraph Tower LLC v. Century
Mortgage LLC, 2016 UT App 102, ¶ 52, 376 P.3d 333 (cleaned up).
Because Appellees were awarded attorney fees by the district
court, they are entitled to fees as the prevailing party on appeal.2
CONCLUSION
¶22 	We conclude that the district court did not err in refusing
to vacate the arbitration award on the various grounds asserted
by Zweigle. Further, we conclude that any error in refusing to
hold a hearing pursuant to rule 7(h) of the Utah Rules of Civil
Procedure was harmless. We therefore affirm the court’s ruling
confirming 	the 	arbitration 	award. 	As 	the 	prevailing 	party,
Appellees are entitled to recover their attorney fees on appeal,
and we remand to the district court to calculate the amount of
attorney fees reasonably incurred.
2. Appellees also request an award of attorney fees against “both
Zweigle and his counsel, jointly and severally,” under rule 33 of
the Utah Rules of Appellate Procedure. However, “damage
awards under rule 33 are reserved only for egregious cases,”
Redden v. Redden, 2020 UT App 22, ¶ 42 n.5, 461 P.3d 314 (cleaned
up), and we do not consider this to be an egregious case.