Digital Landscape Inc. v. Media Kings LLC

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.

SUMMARY
September 20, 2018

2018COA142

No. 17CA1111 Digital Landscape v. Media Kings — Courts and
Court Procedures — ADR — Arbitration — Uniform Arbitration
Act — Vacating Award

A division of the court of appeals holds that the meaning of the

phrase “arising under” in an arbitration clause is broad. The

opinion analyzes a debate among the federal circuits concerning the

breadth of the phrase “arising under,” and concludes that a broad

definition is most consistent with Colorado law. The division next

concludes that, based on the facts of this case, the arbitrator had

jurisdiction to treat a breach-of-the-implied-covenant-of-good-faith-

and-fair-dealing counterclaim as a breach-of-the-duty-of-loyalty

counterclaim. And, since there was no prevailing party, the

arbitrator was not required to award fees. The division therefore

affirms the trial court’s judgment confirming the arbitrator’s award.
COLORADO COURT OF APPEALS 2018COA142

Court of Appeals No. 17CA1111
City and County of Denver District Court No. 14CV33937
Honorable A. Bruce Jones, Judge

Digital Landscape Inc.,

Plaintiff-Appellant,

v.

Media Kings LLC,

Defendant-Appellee.

JUDGMENT AFFIRMED

Division I
Opinion by JUDGE BERNARD
Taubman and Welling, JJ., concur

Announced September 20, 2018

Sean Connelly, Connelly Law LLC, Denver, Colorado, for Plaintiff-Appellant

Sarah De Diego, De Diego Law, Santa Monica, California, for Defendant-
Appellee
¶1 Judge Learned Hand once wrote that “words are chameleons,

which reflect the color of their environment.” Comm’r v. Nat’l

Carbide Corp., 167 F.2d 304, 306 (2d Cir. 1948), aff’d, 336 U.S. 422

(1949). In this appeal, the words are the phrase “arising under.”

Their environment is an arbitration clause, which reads: “Any

disputes arising under this [a]greement will be resolved by binding

arbitration . . . .” (Emphasis added.) We are tasked with figuring

out whether this phrase takes on a narrow or a broad hue from its

context in the arbitration clause.

¶2 The appellant in this case — plaintiff, Digital Landscape Inc.,

which we shall call Digital — asserts that “arising under” has a

narrow scope. For Digital, this means that the arbitrator lacked

jurisdiction to decide a claim that Digital submits did not “arise

under” the contract in this case. The appellee — defendant, Media

Kings LLC, which we shall call Media — submits that the scope of

“arising under” is broad, so the arbitrator had jurisdiction to

consider the claim. In this appeal, Digital asks us to review the

district court’s judgment confirming an arbitrator’s order and

denying Digital’s request to vacate it.

1
¶3 Modern arbitration clauses are products of a strong policy that

favors arbitration. For example, divisions of this court have

concluded that “arising under,” as it is used in an arbitration

clause, is broad because (1) Colorado courts favor arbitration to

resolve disputes; and (2) we should resolve any doubts that we have

about a clause’s scope in favor of arbitration.

¶4 But Digital points us to a debate among federal circuits

concerning the scope of “arising under” in an effort to convince us

to part company with these Colorado decisions. One side of the

debate thinks that the scope of “arising under” is narrow, while the

other side thinks that the phrase’s scope is broad. After

considering both sides of the debate, we are persuaded by the

reasoning of the circuits that conclude that “arising under” is

broad: these circuits are convinced that “arising under” is colored

by a fundamental attribute of its environment — the arbitration

clause — which reflects the strong federal policy that encourages

arbitration.

¶5 We therefore conclude that all the claims that the arbitrator

considered in this case were “dispute[s] arising under” the contract

between Digital and Media, which were to “be resolved by binding

2
arbitration.” The arbitrator therefore had jurisdiction to resolve

those claims.

¶6 We also disagree, for reasons that we explain below, with two

other contentions that Digital raises. As a result, we affirm the

district court’s judgment.

I. Background

¶7 Media entered into a contract to provide marketing services to

Transcendent Marketing, LLC, which we shall call Transcendent.

Transcendent was not a named party in this case.

¶8 Media then contracted with Digital to provide advertising

services to Transcendent. Under the contract, Media agreed to pay

Digital a portion of its earnings from Transcendent in exchange for

Digital’s work on the project.

¶9 But Media did not pay Digital. And someone from Digital told

someone from Transcendent that Media had not paid. Apparently

dissatisfied with Media’s work and with its lack of payment to

Digital, Transcendent proposed that Digital take over the project.

Digital’s principal officer agreed, but he had one of his other

companies assume the work. This proposal effectively cut Media

out of its agreement with Transcendent.

3
¶ 10 Digital sued Media for breach of contract, seeking unpaid

earnings that Digital contended Media owed it for work it had done

for Transcendent. Media filed counterclaims. The one that is the

focus of the appeal alleged that Digital had breached the implied

covenant of good faith and fair dealing by disclosing confidential

information to Transcendent, Media’s client; by soliciting

Transcendent’s business; by disparaging Media to Transcendent;

and by stealing Transcendent as a client.

¶ 11 Because the contract between Media and Digital included an

arbitration clause, the district court ordered them to arbitrate their

dispute. The court stayed the case until the arbitration proceeding

was finished.

¶ 12 During the arbitration proceeding, Digital argued that Media

had breached the contract because Media had not paid Digital the

amount that the contract required. The arbitrator agreed, and she

awarded Digital $68,197.41.

¶ 13 When discussing the counterclaim alleging that Digital had

breached the implied covenant of good faith and fair dealing, the

arbitrator also referred to it as addressing a breach of Digital’s duty

of loyalty to Media. She then decided that, although the agreement

4
described Digital as an independent contractor, Digital still owed a

duty of loyalty to Media, which Digital had breached. So the

arbitrator awarded Media $24,400 in damages.

¶ 14 In her final order, the arbitrator concluded that neither Media

nor Digital had prevailed. She therefore declined to award either of

them attorney fees.

¶ 15 Digital filed a petition in the district court that asked the court

to confirm the part of the arbitration order that awarded damages to

Digital, vacate the part of the order that awarded damages to Media

because the arbitrator had exceeded the scope of the arbitration

clause, and award Digital its attorney fees. The district court

disagreed with Digital’s requests, so it confirmed the order in its

entirety.

II. Digital’s Contentions

¶ 16 Digital raises three contentions.

¶ 17 First, Digital contends that the arbitrator did not have

jurisdiction to consider whether Digital had breached a duty of

loyalty to Media because the duty of loyalty claim did not “arise

under” the arbitration clause.

5
¶ 18 Second, Media filed a counterclaim alleging that Digital had

breached the implied covenant of good faith and fair dealing.

Digital submits that the arbitrator improperly converted this

counterclaim to a different claim — breach of loyalty — that Media

had not raised. Digital continues that it did not have notice of the

different elements of this claim. Digital wraps up this contention by

asserting that the arbitrator’s ruling on this different claim was

unfair and that the arbitrator’s award to Media was therefore void.

¶ 19 Third, even if we disagree with the first two contentions,

Digital asserts that it was nonetheless entitled to attorney fees

because (1) its contract with Media stated that the prevailing party

in an arbitration proceeding concerning the terms of the contract

would be entitled to attorney fees; (2) it prevailed on its breach of

contract claim; (3) Media prevailed on a claim — the breach of

loyalty claim — that was not part of the contract; so (4) Media did

not prevail on a claim that was related to the contract.

III. Standard of Review and General Arbitration Principles

¶ 20 We review de novo

 whether a dispute falls within the scope of an arbitration

clause, Taubman Cherry Creek Shopping Ctr., LLC v.

6
Neiman-Marcus Grp., Inc., 251 P.3d 1091, 1093 (Colo.

App. 2010);

 “a district court’s legal conclusions on a motion to

confirm or vacate an arbitration award,” Rocha v. Fin.

Indem. Corp., 155 P.3d 602, 604 (Colo. App. 2006); and

 whether “the arbitrator’s refusal to award attorney fees to

plaintiff as the prevailing party was a determination

beyond the scope of the parties’ arbitration agreement,”

Magenis v. Bruner, 187 P.3d 1222, 1225 (Colo. App.

2008).

¶ 21 “To facilitate confidence in the finality of arbitration awards

and discourage piecemeal litigation, [Colorado’s arbitration statutes]

strictly limit[] the role of the courts in reviewing awards, and a party

challenging an award bears a heavy burden.” BFN-Greeley, LLC v.

Adair Grp., Inc., 141 P.3d 937, 940 (Colo. App. 2006). “An

arbitrator is the final judge of both fact and law,” id., and courts

may not review the merits of an arbitration award if there are not

statutory grounds to vacate, modify, or correct them, Levy v. Am.

Family Mut. Ins. Co., 293 P.3d 40, 49 (Colo. App. 2011).

7
¶ 22 Such statutory grounds are found in section 13-22-223(1)(d),

C.R.S. 2018, which provides, as is pertinent to this case, that a

court “shall vacate” an award “if the court finds that . . . [a]n

arbitrator exceeded [her] powers.” An arbitrator does not “exceed

[her] powers by rendering a decision that is contrary to the rules of

law that would have been applied by a court, so long as there is no

violation of an express term of the agreement to arbitrate.” Byerly

v. Kirkpatrick Pettis Smith Polian, Inc., 996 P.2d 771, 774 (Colo. App.

2000). In other words, “[i]t is not sufficient . . . to argue merely that

the arbitrator committed an error of law on the merits.” Giraldi v.

Morrell, 892 P.2d 422, 424 (Colo. App. 1994). “Rather, [a] plaintiff

must establish that the arbitrator exceeded the powers granted in

the agreement by refusing to apply or ignoring the legal standard

agreed upon by the parties for resolution of the dispute.” Id. And

an arbitrator has a great deal of flexibility in fashioning appropriate

remedies. BFN-Greeley, LLC, 141 P.3d at 941.

IV. Scope of “Arising Under”

A. Introduction

¶ 23 Arbitration is a “favored method of dispute resolution” in

Colorado. Lane v. Urgitus, 145 P.3d 672, 678 (Colo. 2006). “Our

8
constitution, our statutes, and our case law all support agreements

to arbitrate disputes.” Id. But, like the federal courts, we do not

force parties to arbitrate disputes when they have not clearly agreed

to submit them to arbitration. Id. at 679.

¶ 24 An arbitration clause is a contract. Allen v. Pacheco, 71 P.3d

375, 378 (Colo. 2003). We must therefore “interpret the [arbitration

clause] in a manner that best effectuates the intent of the parties.”

Id. We determine their intent by reading the language of the clause,

looking to “the plain and ordinary meaning of its terms.” Id. We

will enforce the clause as it is written unless it contains an

ambiguity. Id.

¶ 25 “If ambiguities are found . . . we must afford the parties a

presumption in favor of arbitration and resolve doubts about the

scope of the arbitration clause in favor of arbitration.” Id. “More

specifically, we must compel arbitration unless we can say ‘with

positive assurance’ that the arbitration clause is not susceptible of

any interpretation that encompasses the subject matter of the

dispute.” Id. (quoting City & Cty. of Denver v. Dist. Court, 939 P.2d

1353, 1364 (Colo. 1997)). A “‘broad or unrestricted’ arbitration

clause makes the strong presumption favoring arbitration apply

9
with even greater force.” Id. (quoting City & Cty. of Denver, 939

P.2d at 1364).

¶ 26 Courts should “look beyond the legal cause of action and

consider the factual allegations upon which the claims are

premised.” Smith v. Multi-Fin. Sec. Corp., 171 P.3d 1267, 1270

(Colo. App. 2007) (citing City & Cty. of Denver, 939 P.2d at 1364).

The factual allegations which form the basis of
the claim asserted, rather than the legal cause
of action pled, should guide the district court
in making the determination as to whether a
particular dispute falls within the reach of the
[alternative dispute resolution] clause. Tort
claims and claims other than breach of
contract claims are not necessarily excluded
from [alternative dispute resolution].

City & Cty. of Denver, 939 P.2d at 1364.

¶ 27 Federal courts also have a “healthy regard for the . . . policy

favoring arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 24-25 (1983). Federal cases interpreting or

applying the Federal Arbitration Act help us to understand our

Colorado arbitration statutes because the two statutory schemes

“contain substantially similar language.” E-21 Eng’g, Inc. v. Steve

Stock & Assocs., Inc., 252 P.3d 36, 39 (Colo. App. 2010).

10
¶ 28 The Federal Arbitration Act “establishes that, as a matter of

federal law, any doubts concerning the scope of arbitrable issues

should be resolved in favor of arbitration,” including when “the

problem at hand is the construction of the contract language

itself . . . .” Moses H. Cone Mem’l Hosp., 460 U.S. at 24-25. Federal

courts will not deny a party’s request to arbitrate an issue “unless it

may be said with positive assurance that the arbitration clause is

not susceptible of an interpretation that covers the asserted

dispute.” United Steelworkers of Am. v. Warrior & Gulf Navigation

Co., 363 U.S. 574, 582-83 (1960).

¶ 29 Answering the question whether a party has agreed to

arbitrate an issue requires interpretation of the arbitration clause.

“[A] party cannot be required to submit to arbitration any dispute

which he has not agreed so to submit.” Id. at 582. Still, courts

should “construe ambiguities concerning the scope of arbitrability

in favor of arbitration.” Mastrobuono v. Shearson Lehman Hutton,

Inc., 514 U.S. 52, 66 (1995).

B. Analysis

¶ 30 To remind the reader, the arbitration clause in the contract in

this case states that “[a]ny disputes arising under this [a]greement

11
will be resolved by binding arbitration . . . .” (Emphasis added.)

Divisions of this court have considered this phrase before.

1. Colorado Cases

¶ 31 Discussing the general phrasing of arbitration clauses, a

division of this court held that, “[w]hen an arbitration clause uses

the phrase ‘arising out of’ or ‘relating to,’ it is broad in scope.”

Smith, 171 P.3d at 1270. Relatedly, our supreme court noted that

courts have interpreted the phrase “relating to” in arbitration

clauses “as being broad rather than restrictive.” City & Cty. of

Denver, 939 P.2d at 1366.

¶ 32 More apropos to the issue in this case, in R.P.T. of Aspen, Inc.

v. Innovative Communications, Inc., 917 P.2d 340, 341-42 (Colo.

App. 1996), the division characterized an arbitration clause reading

“[a]ny dispute which arises under this [a]greement” as employing

“broad language.” And BFN-Greeley, LLC, 141 P.3d at 940,

described the substantially similar phrase of “arising out of” as

“broad[].”

¶ 33 And, in Austin v. U S West, Inc., 926 P.2d 181, 183 (Colo. App.

1996), the division relied on the federal district court’s analysis in

Lee v. Grandcor Medical Systems, Inc., 702 F. Supp. 252, 256 (D.

12
Colo. 1988), to conclude that an “arising under” arbitration clause

was “sufficiently broad to include claims for fraud in the

inducement.” (In Lee, the district court decided that claims for

fraudulent inducement and tortious interference with business

relations “appear[ed]” to “arise under” the arbitration clause, adding

that “doubtful” questions about the applicability of arbitration

clauses should be resolved in favor of arbitration. Id. (quoting

Stateside Mach. Co. v. Alperin, 591 F.2d 234, 240 (3d Cir. 1979)).)

The division also recognized that “[o]ther courts have construed

similar clauses equally as broadly.” Austin, 926 P.2d at 183.

¶ 34 It turns out that the phrase “arising under” in arbitration

clauses has prompted a debate among federal circuit courts about

its scope. Considering this debate is helpful because “Colorado has

followed federal precedent to determine the scope of an arbitration

clause . . . .” City & Cty. of Denver, 939 P.2d at 1363-64. So the

next step of our analysis is to explain the parameters of the federal

debate.

2. Federal Cases

¶ 35 One side of the debate is represented primarily by cases from

the Second, Ninth, and Federal Circuits. A prominent decision

13
interpreting this phrase is Mediterranean Enterprises, Inc. v.

Ssangyong Corp., 708 F.2d 1458 (9th Cir. 1983). Mediterranean

Enterprises compared the meanings of two similar, but clearly

different, phrases.

¶ 36 The phrase “arising out of or relating to” a contract created a

“broad arbitration clause.” Id. at 1464 (quoting Michele Amoruso E

Figli v. Fisheries Dev. Corp., 499 F. Supp. 1074, 1080 (S.D.N.Y.

1980)). This is the standard language recommended by the

American Arbitration Association. Id.

¶ 37 Prefiguring Digital’s contention in this case, one of the parties

in Mediterranean Enterprises argued that “arising under” was

narrower than “arising out of or relating to.” Id. at 1463. The party

added that “arising under” meant that an arbitration proceeding

would apply only to disputes “arising under the contract itself” and

not to disputes that were “matters or claims independent of the

contract or collateral” to it. Id.

¶ 38 The Ninth Circuit agreed, concluding that “‘arising under’ has

been called ‘relatively narrow as arbitration clauses go.’” Id. at

1464 (quoting Sinva, Inc. v. Merrill, Lynch, Pierce, Fenner & Smith,

Inc., 253 F. Supp. 359, 364 (S.D.N.Y. 1966)). It is “narrower in

14
scope” than “arising out of or relating to.” Id.; see also Cape

Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914, 922-23 (9th Cir.

2011)(applying Mediterranean).

¶ 39 The court in Evans v. Building Materials Corp. of America, 858

F.3d 1377, 1381 (Fed. Cir. 2017), agreed with this interpretation of

“arising under.” It observed that “‘arising under’ . . . is narrower in

scope than language, such as ‘relating to,’ under which a claim may

be arbitrable if it has a ‘significant relationship’ to the contract,

regardless of whether it arises under the contract itself.” Id.

¶ 40 According to this side of the debate, the phrase “relating to”

works to expand the scope of arbitration clauses. Prima Paint Corp.

v. Flood & Conklin Manufacturing Co., 388 U.S. 395 (1967),

illustrates the expansive properties of “relating to.” The United

States Supreme Court pointed out that the phrase “arising out

of” — which has been treated similarly narrowly to the phrase

“arising under” when it appears by itself, see Tracer Research Corp.

v. Nat’l Envtl. Servs. Co., 42 F.3d 1292, 1295 (9th Cir. 1994) — has

been viewed broadly when combined with “relating to,” see Prima

Paint Corp., 388 U.S. at 398. Indeed, for this side of the debate,

15
adding the phrase “relating to” to “arising under” turns a narrow

arbitration clause into a broad one.

¶ 41 We note that the Second Circuit was originally firmly on this

side of the debate, issuing the first circuit court opinion to decide

that “arising under” was a narrow phrase. In re Kinoshita & Co.,

287 F.2d 951, 953 (2d Cir. 1961). (Mediterranean Enterprises relied

heavily on Kinoshita. Mediterranean Enters., 708 F.2d at 1464.)

¶ 42 But the Second Circuit’s position has changed quite a bit

because the United States Supreme Court subsequently

emphasized the strong federal policy that favors arbitration. As a

result, the Second Circuit recognized that Kinoshita was

“inconsisten[t] with federal policy favoring arbitration.” S.A.

Mineracao Da Trindade-Samitri v. Utah Int’l, Inc., 745 F.2d 190, 194

(2d Cir. 1984). So the circuit court limited Kinoshita to its facts.

See Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading, Inc.,

252 F.3d 218, 225 (2d Cir. 2001).

¶ 43 The law in the Second Circuit today is that, “to ensure that an

arbitration clause is narrowly interpreted[,] contracting parties

must use [‘arising under’] or its equivalent, although the better

course, obviously, would be to specify exactly which claims are and

16
are not arbitrable.” S.A. Mineracao Da Trindade-Samitri, 745 F.2d

at 194. The Second Circuit has not overruled Kinoshita because of

its concern that “contracting parties may have (in theory at least)

relied on that case in their formulation of an arbitration provision.”

Id.

¶ 44 The other side of the debate is represented by decisions from

the First, Third, Fifth, Sixth, Seventh, Eighth, and Eleventh

circuits.

¶ 45 The First Circuit agreed “with the majority of the federal

circuits,” and it concluded that “the analysis in Kinoshita is not

consistent with the strong federal pro-arbitration policy set forth by”

the federal arbitration statute. Dialysis Access Ctr., LLC v. RMS

Lifeline, Inc., 638 F.3d 367, 381 (1st Cir. 2011)(addressing an

arbitration clause using the phrase “arising under”).

¶ 46 The Third Circuit observed that Kinoshita and its progeny have

been “discredited both in the Second Circuit and in other

jurisdictions.” Battaglia v. McKendry, 233 F.3d 720, 725 (3d Cir.

2000). The court then concluded that the phrases “arising under”

and “arising out of” “are normally given broad construction,” when

they appear in arbitration clauses. Id. at 727.

17
¶ 47 The Fifth Circuit decided that, “[b]ecause the arbitration

clause in [this] case differs from that in Kinoshita and recognizing

that Kinoshita is inconsistent with federal policy favoring

arbitration,” the district court had erred when it relied on Kinoshita

to grant a request to stay arbitration. Mar-Len of La., Inc. v.

Parsons-Gilbane, 773 F.2d 633, 637 (5th Cir. 1985).

¶ 48 The Sixth Circuit said that the Second Circuit “has recognized

that the authority of Kinoshita . . . is highly questionable even in”

that circuit. Highlands Wellmont Health Network, Inc. v. John Deere

Health Plan, Inc., 350 F.3d 568, 577 (6th Cir. 2003). The court

added that “[o]ther circuits have declined to follow Kinoshita

because of the strong federal policy in favor of arbitration.” Id. It

then concluded that the phrase “arises out of” in an arbitration

clause was “extremely broad.” Id. (quoting Cincinnati Gas & Elec.

Co. v. Benjamin F. Shaw Co., 706 F.2d 155, 160 (6th Cir. 1983)).

¶ 49 The Seventh Circuit distinguished Kinoshita, concluding that

the phrase “arising out of” “reache[d] all disputes having their origin

or genesis in the contract, whether or not they implicate

interpretation or performance of the contract per se.” Sweet

Dreams Unlimited, Inc. v. Dial-A-Mattress Int’l, Ltd., 1 F.3d 639, 642

18
(7th Cir. 1993). In reaching this result, the court saw “no need to

disagree with the Second and Ninth Circuits that ‘arising under’

may denote a dispute somehow limited to the interpretation and

performance of the contract itself.” Id.

¶ 50 The court then suggested a better approach than relying on

what are arguably unclear distinctions among various phrases:

[The] contracting parties control their own fate
when it comes to deciding which disputes to
consign to arbitration. On the one hand, they
may delineate precisely those claims that are
subject to arbitration or, on the other, they
may employ general — even vague — language
in their arbitration provisions. They may also
combine these techniques by using general
language to authorize arbitration together with
specific language to identify the types of
disputes that are not subject to arbitration,
thereby limiting the reach of phrases such as
“arising out of,” “arising under” or “arising out
of or relating to.”

Id. at 643. Because the parties had not “taken any steps to narrow

the reach” of the contract’s arbitration clause, and, “in the light of

the heavy presumption in favor of arbitration,” the Seventh Circuit

concluded that a claim in the complaint was arbitrable. Id.; accord

Cty. of Hawaii v. UNIDEV, LLC, 301 P.3d 588, 606 (Haw. 2013)(“Had

the parties intended to restrict arbitration . . . it would have been a

19
simple matter to draft unambiguous language to effectuate that

intent . . . . The failure of the parties to unambiguously limit the

arbitrability of disputes suggests that they intended a longer reach

for the arbitration clauses [using ‘arising under’].”).

¶ 51 The Eighth Circuit decided that the phrase “arising under” did

not bar arbitration of certain claims because the arbitration law did

not include any “limiting language” and it was “generally broad in

scope.” PRM Energy Sys., Inc. v. Primenergy, L.L.C., 592 F.3d 830,

837 (8th Cir. 2010); accord Simitar Entm’t, Inc. v. Silva Entm’t, Inc.,

44 F. Supp. 2d 986, 996 (D. Minn. 1999)(“[W]e believe than an

interpretation of ‘arising under,’ or ‘arising out of,’ should be as

broad as that applied to ‘arising out of or relating to,’ and we

respectfully reject . . . Kinoshita . . . .”).

¶ 52 The Eleventh Circuit rejected Kinoshita as “not being in accord

with present day notions of arbitration as a viable alternative

dispute resolution procedure.” Gregory v. Electro-Mech. Corp., 83

F.3d 382, 385 (11th Cir. 1996). The phrase “arising hereunder,”

which is a cheek-by-jowl relative of “arising under,” was therefore

broadly construed. Id. at 383.

20
¶ 53 The Tenth Circuit has not decided where it stands in this

debate. At least one United States magistrate judge, however,

believes that “the Tenth Circuit would follow the majority of the

federal circuits and give the phrase ‘arising under’ a broad

construction based on the strong federal policy in favor of

arbitration.” Cook v. PenSa, Civ. A. No. 13-cv-03282-RM-KMT,

2014 WL 3809409, at *14 (D. Colo. Aug. 1, 2014).

3. Granite Rock

¶ 54 Digital suggests that the United States Supreme Court

signaled its position in this debate in Granite Rock Co. v.

International Brotherhood of Teamsters, 561 U.S. 287 (2010).

Granite Rock involved an arbitration clause that included the

phrase “arising under.” Id. at 304.

¶ 55 As is pertinent to our analysis, the issue in Granite Rock was

“whether a collective-bargaining agreement . . . containing a

no-strike provision was validly formed during the strike period.” Id.

at 292. “For purposes of determining arbitrability, when a contract

is formed can be as critical as whether it was formed.” Id. at

303-04. That distinction was key in Granite Rock because the date

when the agreement “was formed . . . determines whether the

21
agreement’s provisions were enforceable during the period relevant

to the . . . dispute.” Id. at 304; see also Buckeye Check Cashing,

Inc. v. Cardegna, 546 U.S. 440, 444 n.1 (2006)(recognizing the

difference between questions concerning “the contract’s validity”

and questions concerning “whether any agreement . . . was ever

concluded”).

¶ 56 Turning to the “arising under” language, the Supreme Court

held that the collective-bargaining agreement’s arbitration provision

was not “fairly read to include a dispute about when the

[agreement] came into existence.” Granite Rock, 561 U.S. at 308.

The Court also characterized “arising under” as having a “relatively

narrow . . . scope.” Id. at 307. But the basis of comparison was

language in an arbitration clause found in Drake Bakeries, Inc. v.

Local 50, American Bakery & Confectionery Workers International,

370 U.S. 254 (1962). This clause read that the parties would

“promptly attempt to adjust all complaints, disputes or

grievances . . . involving questions of interpretation or application of

any clause or matter covered by this contract or any act or conduct

or relation between the parties . . . directly or indirectly.” Id. at

256-57.

22
¶ 57 We conclude, for the following reasons, that Granite Rock does

not send the signal that Digital claims it sends.

¶ 58 First, Granite Rock’s statement that the phrase “arising under”

was “relatively narrow,” 561 U.S. at 307, was based on a

comparison with the arbitration clause in Drake Bakeries that went

well beyond the terms of the contract. The clause in Drake Bakeries

included “any act or conduct or relation between the

parties . . . directly or indirectly.” 370 U.S. at 257. We must

therefore consider the Supreme Court’s observation about the

relative narrowness of “arising under” in the context of what was a

very broad arbitration clause in Drake Bakeries. And the

arbitration clause in this case is not as broad as the one in Drake

Bakeries because it does not refer to Digital’s or Media’s acts,

conduct, or relations.

¶ 59 Second, Granite Rock did not discuss the debate at the core of

this case, even though the debate had been vigorously joined well

before Granite Rock was decided. It does not analyze, or even refer

to, Kinoshita, Mediterranean Enterprises, Tracer, or to any of the

cases that we have cited above from the other side of the debate.

23
And, critically, it does not conclude that “arising under” is narrow

when compared to phrases such as “relating to.”

¶ 60 Third, Granite Rock is distinguishable because the issue in

that case concerned whether the arbitration clause was enforceable

at a particular time. Digital did not raise that issue in this case.

See Dialysis Access Ctr., LLC, 638 F.3d at 382 (Granite Rock’s

holding, “that a question concerning the very existence of the

[collective-bargaining agreement] cannot fairly be said to ‘arise

under’ the [collective-bargaining agreement,] does not counsel a

result different from the one at which we here arrive.”).

4. Conclusion

¶ 61 We conclude, for the following reasons, that the phrase

“arising under” was sufficiently broad to include the duty-of-loyalty

counterclaim.

¶ 62 First, one side of the debate has a clear majority of adherents.

Only three circuits hold that the phrase “arising under” is narrow,

although one of them — the Second Circuit — has retreated

significantly from that holding. Seven circuits interpret the phrase

broadly, and five of those circuits reject the foundation for the

minority view — Kinoshita — as inconsistent with the federal policy

24
favoring arbitration. Sheer numbers are not necessarily

determinative, of course, but the majority position is also of more

recent vintage. We also think that it is more persuasive because it

keeps faith with the Colorado and the federal policies favoring

arbitration.

¶ 63 Second, the Second Circuit’s obvious reluctance to embrace

Kinoshita enthusiastically is telling. Kinoshita was the birth of the

minority view. But the court that birthed it has had second

thoughts about its offspring. The Second Circuit has now

 decided that Kinoshita was “inconsisten[t] with federal

policy favoring arbitration,” S.A. Mineracao Da

Trindade-Samitri, 745 F.2d at 194;

 limited Kinoshita to its facts, Louis Dreyfus Negoce S.A.,

252 F.3d at 225;

 counseled contracting parties that, instead of relying on

the phrase “[arising under] or its equivalent, . . . the

better course, obviously, would be to specify exactly

which claims are and are not arbitrable,” S.A. Mineracao

Da Trindade-Samitri, 745 F.2d at 194; accord Sweet

25
Dreams Unlimited, Inc., 1 F.3d at 643; Cty. of Hawaii, 301

P.3d at 606; and

 has not overruled Kinoshita only because of an apparent

concern that “contracting parties may have (in theory at

least) relied on that case in their formulation of an

arbitration provision,” S.A. Mineracao Da

Trindade-Samitri, 745 F.2d at 194. (We note that the

Ninth Circuit expressed a similar concern. See Cape

Flattery Ltd., 647 F.3d at 923.)

¶ 64 Third, Colorado is not in the Second or the Ninth Circuit. As a

result, we do not share the concern of those circuits that

contracting parties in this state would have relied on the circuits’

view of the phrase “arising under” when drafting arbitration

clauses. See Cape Flattery Ltd., 647 F.3d at 923; S.A. Mineracao Da

Trindade-Samitri, 745 F.2d at 194. Rather, we think that the

clearly preferable course to relying on the phrase “arising under”

would be to specify which claims are arbitrable and which claims

are not. See S.A. Mineracao Da Trindade-Samitri, 745 F.2d at 194;

accord Sweet Dreams Unlimited, Inc., 1 F.3d at 643; Cty. of Hawaii,

301 P.3d at 606.

26
¶ 65 Fourth, Colorado law lines up with the majority federal view.

Colorado applies a presumption in favor of arbitration unless a

court is “positive[ly] assur[ed]” that an arbitration clause does not

“encompass[] the subject matter of the dispute.” City & Cty. of

Denver, 939 P.2d at 1363-64 (quoting Jefferson Cty. Sch. Dist. No.

R-1 v. Shorey, 826 P.2d 830, 840 (Colo. 1992)). We must resolve

any doubts about the scope of an arbitration clause in favor of

arbitration. Id. at 364. And a “‘broad or unrestricted’ arbitration

clause makes the strong presumption favoring arbitration apply

with even greater force.” Allen, 71 P.3d at 378.

¶ 66 Austin is the only Colorado decision that we could find that

comments on the debate. In that case, the division used a “but see”

citation to refer to Mediterranean Enterprises, which indicated that

Mediterranean conflicted with or contradicted the division’s view

that “arising under” was broad in scope. 926 P.3d at 183; see

Black’s Law Dictionary 1563 (10th ed. 2014)(defining “sed vide,” or

“but see” as “direct[ing] the reader’s attention to an authority or a

statement that conflicts with or contradicts the statement or

principle just given”).

27
¶ 67 We have not unearthed another Colorado case, and the parties

did not cite any, that referred to any of the other principal cases in

the debate, including Kinoshita, for the proposition that the phrase

“arising under” in an arbitration clause is either narrow or broad.

But we know that, without commenting on the debate, R.P.T. of

Aspen, Inc., stated that an arbitration clause including the phrase

“arises under” contained “broad language,” 917 P.2d at 342, and

BFN-Greeley, LLC, described the substantially similar phrase of

“arising out of” as broad, 141 P.3d at 940.

¶ 68 Although we are not bound by Austin, R.P.T. of Aspen, Inc.,

and BFN-Greeley, LLC, see People v. Thomas, 195 P.3d 1162, 1164

(Colo. App. 2008)(one division of the court of appeals is not bound

by the decision of another division), we are persuaded by them in

light of the preceding analysis. This means to us that the majority

position is most consistent with Colorado’s law.

¶ 69 We further conclude that the arbitration clause in this case

was unrestricted: it was not accompanied by any qualifying

language, and it did not include any language expressly excluding

particular types of claims from its scope. As a result, (1) we

recognize that the “strong presumption favoring arbitration appl[ies]

28
with even greater force” in this case, Allen, 71 P.3d at 378; (2) we

cannot be “positive[ly] assur[ed]” that the clause did not

“encompass[] the subject matter of the dispute,” City & Cty. of

Denver, 939 P.2d at 1363-64 (quoting Jefferson Cty. Sch. Dist. No.

R-1, 826 P.2d at 840); and (3) we must therefore resolve any doubts

about whether the arbitrator’s ruling on Media’s counterclaim was

within the scope of the arbitration clause in favor of arbitration, id.

¶ 70 Having now clarified the scope of the arbitration clause, we

next consider the arbitrator’s analysis of Media’s counterclaim.

V. Duty of Loyalty

¶ 71 Relying on the conclusions that we have reached up to this

point and the ones that we make below, we reject Digital’s assertion

that the arbitrator’s ruling was void because she lacked jurisdiction

to decide a claim that the parties had not presented to her. See

State Farm Mut. Auto. Ins. Co. v. Stein, 886 P.2d 326, 328 (Colo.

App. 1994)(“If an arbitrator makes an award which is outside the

scope of the issues submitted, that portion of the award which goes

beyond the matters submitted to it for resolution is void for lack of

jurisdiction.”).

29
¶ 72 As an initial matter, Media suggests that the arbitrator

actually ruled on the counterclaim that Digital had breached the

implied covenant of good faith and fair dealing. It is clear from the

arbitration order that she did not intend to do so. She wrote

instead that

[t]he assertion that Digital . . . is liable to
Media . . . for disparaging Media . . . to
Transcendent and effectively stealing
Transcendent as a client is not truly a claim
for a breach of the implied covenant of good
faith and fair dealing because it is not
grounded in contract terms.

¶ 73 But even though we recognize that the arbitrator ruled on a

facially different counterclaim — breach of the duty of loyalty — we

nonetheless conclude, for the following reasons, that the different

claim was within the issues that Digital and Media had agreed to

submit and, indeed, submitted to the arbitrator. See id.

¶ 74 We must “look beyond the legal cause of action” in this case —

the breach-of-the-implied-warranty-of-good-faith-and-fair-dealing

counterclaim — and consider the facts on which it was based.

Smith, 171 P.3d at 1270 (citing City & Cty. of Denver, 939 P.2d at

1364). The factual allegations that formed the basis of that

counterclaim, rather than the legal label that Media placed on it,

30
guides us in our analysis of the issue whether a substituted

breach-of-the-duty-of-loyalty counterclaim fell within the scope of

the arbitration clause. Id. And, based on that factual analysis,

claims beyond breach of contract, such as tort claims, “are not

necessarily excluded” from arbitration. Id.

¶ 75 The factual allegations in the breach-of-the-implied-duty-of-

good-faith-and-fair-dealing counterclaim were that Digital had

disparaged Media to Transcendent and that Digital had cooperated

with Transcendent to pry Media loose from its contract with

Transcendent. These allegations could, for the following reasons,

form the basis for a breach-of-the-duty-of-loyalty claim if Digital

was Media’s agent.

¶ 76 “An agent is one who acts for or in the place of another by

authority from him, or one who is entrusted with the business of

another.” Governor’s Ranch Prof’l Ctr., Ltd. v. Mercy of Colo., Inc.,

793 P.2d 648, 651 (Colo. App. 1990). A claim of breach of the duty

of loyalty may allege, among other things, that an agent breached “a

duty to his principal to act solely for the benefit of the principal in

all matters connected with his agency.” Restatement (Second) of

Agency § 387 (Am. Law Inst. 1958). “[A]n agent is subject to a duty

31
not to compete with the principal concerning the subject matter of

his agency.” Id. § 393. An agent may breach the duty of loyalty to

a principal by acting “in competition with the principal” and by

acquiring “interests adverse to” the principal. Id. § 387 cmt. a; see

also Jet Courier Serv., Inc. v. Mulei, 771 P.2d 486, 494-98 (Colo.

1989)(observing that an employee’s solicitation of coworkers to start

a new business that would compete with the employer was a breach

of the duty of loyalty to the employer).

¶ 77 “An agent who, without the acquiescence of his principal, acts

for his own benefit . . . in a transaction is not entitled to

compensation which otherwise would be due him because of the

transaction.” Restatement (Second) of Agency § 469 cmt. a (Am.

Law Inst. 1958). And “[a] serious violation of a duty of loyalty . . . is

a willful and deliberate breach of the contract of service by the

agent.” Id. at cmt. b (emphasis added).

¶ 78 But Digital contends that it did not owe Media a duty of loyalty

because it was an independent contractor, and independent

contractors, since they are not agents, do not owe a duty of loyalty.

An independent contractor “is one who engages to perform services

for another, according to his own methods and manner, free from

32
the direction and control of the employer in all matters relating to

the performance of the work, and accountable to him only for the

result to be accomplished.” Cont’l Bus Sys., Inc. v. NLRB, 325 F.2d

267, 271 (10th Cir. 1963).

¶ 79 An independent contractor “may or may not be an agent.”

Restatement (Second) of Agency § 2(3) (Am. Law Inst. 1958). An

independent contractor is not an agent if “he is not a fiduciary, has

no power to make the one employing him a party to a transaction,

and is subject to no control over his conduct.” Id. at cmt. b.

¶ 80 The arbitrator found that the evidence presented at the

arbitration hearing “established that, although Digital . . . exercised

substantial autonomy in the manner in which it performed its work

under the [c]ontract, Media . . . controlled and had the right to

control Digital . . . in its work and in its direct communications with

Transcendent.” The arbitrator decided that Digital “was acting as

Media[’s] . . . agent” “in its communications with Transcendent on

the project.” Digital therefore “owed a duty of loyalty to

Media . . . in the manner in which it conducted those

communications.”

33
¶ 81 The question whether Digital was an agent, an independent

contractor, or both was one of fact, see Varsity Tutors LLC v. Indus.

Claim Appeals Office, 2017 COA 104, ¶ 16, which fell within the

arbitrator’s authority as the fact finder in the arbitration hearing,

see BFN-Greeley, LLC, 141 P.3d at 940. The record, however, does

not contain a transcript of the arbitration hearing, so we do not

know what evidence the arbitrator considered when she decided

that Digital was Media’s agent. In the absence of that transcript,

we must presume that the evidence presented at the hearing would

support the arbitrator’s decision. See Hock v. N.Y. Life Ins. Co., 876

P.2d 1242, 1252 (Colo. 1994)(“An appellate court must presume

that the trial court’s findings and conclusions are supported by the

evidence when the appellant has failed to provide a complete

record.”); In re Marriage of McSoud, 131 P.3d 1208, 1223 (Colo. App.

2006)(“[A]n appellate court presumes that material portions omitted

from the record would support the judgment of the trial court.”).

¶ 82 We do not know whether the arbitrator made a legal mistake

when applying the law of agency in this case. But what if she did?

It would not affect the result that we reach. Giraldi, 892 P.2d at

424 (“It is not sufficient . . . to argue merely that the arbitrator

34
committed an error of law on the merits.”). Instead, our review, like

the district court’s, is limited to deciding whether Digital has

“establish[ed] that the arbitrator exceeded the powers granted in the

agreement by refusing to apply or ignoring the legal standard

agreed upon by the parties for resolution of the dispute.” Id.; see

also Container Tech. Corp. v. J. Gadsden Pty., Ltd., 781 P.2d 119,

121 (Colo. App. 1989)(“[A]n arbitration award is not open to review

on the merits,” and “the merits of the award include the arbitrators’

interpretation of the contract.”).

¶ 83 (We note that, at one point, “manifest disregard of the law” was

“a judicially created reason” for vacating arbitration awards under

the Federal Arbitration Act. Barnett v. Elite Prop. of Amer., Inc., 252

P.3d 14, 20 (Colo. App. 2010). But the “continuing viability” of that

nonstatutory reason is now unclear under federal law. Id. at 21.

And a division of this court held that manifest disregard of the law

is not a ground for vacating an arbitration award under Colorado’s

arbitration statutes. Coors Brewing Co. v. Cabo, 114 P.3d 60, 63-66

(Colo. App. 2004).)

¶ 84 We therefore conclude that the arbitrator in this case did not

exceed her powers because the substituted breach-of-the-duty-of-

35
loyalty counterclaim “arose under” the contract between Digital and

Media. See Restatement (Second) of Agency § 469 cmt. b (Am. Law

Inst. 1958)(“A serious violation of a duty of loyalty . . . is a willful

and deliberate breach of the contract of service by the agent . . . .”).

¶ 85 Digital asserts that it did not have notice that the arbitrator

was going to recast the breach-of-the-duty-of-good-faith-and-fair-

dealing counterclaim as a breach-of-the-duty-of-loyalty

counterclaim. Digital adds that the breach-of-the-duty-of-loyalty

counterclaim was “never submitted or tried,” so Digital “had no

opportunity to offer evidence or provide legal argument for why it

did not owe or breach any such duty . . . .” As a result, Digital

finishes, it was prejudiced “in many ways.” We disagree.

¶ 86 First, the language of the breach-of-the-duty-of-good-faith-

and-fair-dealing counterclaim alleged that Digital had “disclos[ed]

confidential information,” “directly solicit[ed]” Media’s client, and

“disparage[d]” Media to its client. This language obviously

incorporated concepts of disloyalty.

¶ 87 Second, Media’s other counterclaims provided Digital with

notice that Media intended to prove that Digital had been disloyal.

A counterclaim based on breach of contract alleged that Digital had

36
disclosed confidential information in violation of a clause in the

contract and solicited business from Transcendent in violation of a

different contractual clause. A counterclaim based on intentional

interference with contractual relations alleged that Digital had

induced Transcendent to breach its contract with Media or had

made it virtually impossible for Transcendent to perform its

obligations under the contract. And a counterclaim based on

misappropriation of trade secrets alleged that Digital had

improperly taken Media’s intellectual property.

¶ 88 Last, contrary to Digital’s assertion, we do not know whether

Digital expressly or impliedly consented to the arbitrator recasting

the breach-of-the-duty-of-good-faith-and-fair-dealing counterclaim

as a duty-of-loyalty counterclaim because we do not have a

transcript of the arbitration hearing. See C.R.C.P. 15(b) (“When

issues not raised by the pleadings are tried by express or implied

consent of the parties, they shall be treated in all respects as if they

had been raised in the pleadings.”); CB Richard Ellis, Inc. v. CLGP,

LLC, 251 P.3d 523, 528-29 (Colo. App. 2010)(“Despite any defect in

the pleadings, an issue is deemed properly before the court where it

37
has been tried before the court without timely objection or

motion.”).

¶ 89 We know from the arbitrator’s award that the evidentiary part

of the hearing lasted two days, two witnesses testified, the

arbitrator admitted about fifty-five exhibits, and the parties gave

their closing arguments over the telephone. But we do not know

what anyone said during the hearing. As a result, we must, as we

have previously concluded, presume that the transcript would

support the arbitrator’s award. See Hock, 876 P.2d at 1252; In re

Marriage of McSoud, 131 P.3d at 1223.

VI. Attorney Fees

¶ 90 Digital submits that the arbitrator exceeded her authority

when she concluded that, because neither party had prevailed,

neither party was entitled to attorney fees. In support of this

assertion, Digital points to the holding in Magenis, 187 P.3d at

1225.

¶ 91 The division in Magenis concluded that the language of the

parties’ arbitration clause did not give the arbitrator discretion to

decide who was entitled to fees. The language in this case is

similar: “In any action brought to enforce any provision of this

38
Agreement, the losing party shall pay the prevailing party’s

reasonable attorney fees . . . .”

¶ 92 The arbitrator in Magenis, though, resolved all disputes in one

party’s favor. Id. at 1223. So, in that case, there was a clear

prevailing party. In this case, by contrast, there was no clear

prevailing party since Digital prevailed on its breach-of-contract

claim and Media prevailed on a counterclaim. The arbitration

clause’s mandatory language therefore did not apply in the same

way.

¶ 93 Digital contends that the arbitration clause in this case

required the arbitrator to award attorney fees to the prevailing party

in an action to enforce a contract provision. We agree. But Digital

also contends that it was the only party that prevailed in an action

to enforce a provision of the contract. We disagree with that

contention.

¶ 94 We have already “look[ed] beyond the legal cause of action” to

consider the facts on which the counterclaim was based. Smith,

171 P.3d at 1270 (citing City & Cty. of Denver, 939 P.2d at 1364).

Although, by doing so, we considered the concepts of a breach-of-

the-duty-of-loyalty counterclaim, they were nonetheless rooted in

39
the facts that were pled in the breach-of-the-duty-of-good-faith-and-

fair-dealing counterclaim, which, in turn, concerned a breach of

contract claim. The arbitrator’s award to Media on the breach-of-

the-duty-of-loyalty counterclaim therefore meant that Media had

prevailed in an action to enforce a provision of the contract. See

Restatement (Second) of Agency § 469 cmt. b (Am. Law Inst.

1958)(“A serious violation of a duty of loyalty . . . is a willful and

deliberate breach of the contract of service by the agent . . . .”).

¶ 95 So, because there was no clearly prevailing party, the

arbitrator was not required to award Digital its attorney fees.

Likewise, since the result of this appeal maintains the status quo

and there is still no prevailing party, we decline Digital’s request for

appellate attorney fees.

¶ 96 Based on our preceding conclusions, our penultimate

conclusion is that the arbitrator did not “exceed [her] powers.”

§ 13-22-223(1)(d). Our ultimate conclusion is that the district court

did not err when it confirmed the arbitrator’s award because there

were no statutory grounds to vacate, modify, or correct it. See

Levy, 293 P.3d at 49.

¶ 97 The district court’s judgment is therefore affirmed.

40
JUDGE TAUBMAN and JUDGE WELLING concur.

41