                                                                                   FILED
                                                                             Jan 12 2017, 8:21 am

                                                                                   CLERK
                                                                              Indiana Supreme Court
                                                                                 Court of Appeals
                                                                                   and Tax Court




      ATTORNEY FOR APPELLANT                                     ATTORNEY FOR APPELLEE
      Gordon A. Etzler                                           William J. Obermeyer
      Gordon A. Etzler & Associates, LLP                         Obermeyer Law
      Valparaiso, Indiana                                        Valparaiso, Indiana



                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Paul and Michelle Riley,                                   January 12, 2017
      Appellants-Defendants,                                     Court of Appeals Case No.
                                                                 45A04-1602-PL-454
              v.                                                 Appeal from the Lake Superior
                                                                 Court
      AAA Automotive, LLC,                                       The Honorable John R. Pera,
      d/b/a 3A Automotive,                                       Judge
      Appellee-Plaintiff.                                        Trial Court Cause No.
                                                                 45D10-1405-PL-55



      Bailey, Judge.



                                            Case Summary
[1]   Paul and Michelle Riley (“the Rileys”) appeal a judgment entered upon an

      arbitrator’s award in favor of AAA Automotive, LLC d/b/a 3A Automotive

      (“3A Automotive”). The Rileys present the sole, restated issue of whether the

      trial court erred in refusing to vacate the award, which consisted almost entirely

      Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017                      Page 1 of 12
      of attorney’s fees, apparently itemized in an ex parte document submitted to the

      arbitrator but not provided to the Rileys in accordance with Alternative Dispute

      Resolution Rule 3.4(B)1 or provided to the trial court. We reverse.



                               Facts and Procedural History
[2]   In the absence of an evidentiary hearing, we take the facts to be those

      undisputed by the parties. Some factual record was established in the

      deposition testimony of Willie Crosby Wright, Jr. (“Wright”), a shareholder

      together with Larry Brown of 3A Automotive, operating a car dealership in

      Highland, Indiana.


[3]   According to Wright’s deposition testimony, 3A Automotive purchased a 2006

      Dodge Durango from an auto auction in Indianapolis. 3A Automotive agreed

      to sell the Durango to the Rileys for $15,095.00 (including sales tax), subject to

      the procurement of financing. The Rileys tendered a $500.00 down payment

      and took possession of the Durango on December 12, 2013. However,

      financing was not readily forthcoming, and 3A Automotive soon contacted the

      Rileys to request that they make a larger down payment or trade in another




      1
        Alternative Dispute Resolution Rule 3.4(B) provides that documents to be considered by the arbitrator are
      to be exchanged among all attorneys 15 days prior to a hearing.

      Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017                       Page 2 of 12
      vehicle.2 The Rileys did not provide an additional down payment or trade-in

      and retained the Durango after 3A Automotive demanded its return.


[4]   On May 16, 2014, 3A Automotive filed a complaint for breach of contract and

      conversion. The complaint sought judgment in the sum of $14,000.00, or,

      alternatively, the return of the Durango with compensation for diminished

      value, interest at the rate of 19.95%, “damages in time and money properly

      expended in pursuit of said converted property,” attorney’s fees, and punitive

      damages. (App. at 13.) The final prayer for relief included a request for treble

      damages. The complaint did not include a demand for arbitration. Separately,

      3A Automotive filed its “Motion for Declaratory and Injunctive Relief and

      Replevin,” alleging that the Durango had a retail value of $14,000.00 and 3A

      Automotive was entitled to its possession. (App. at 16.) On June 17, 2014, 3A

      Automotive filed a motion for a temporary restraining order. On that same

      date, 3A Automotive filed an affidavit “for Preliminary Injunction and Order

      for Replevin.” (App. at 38.)


[5]   The trial court set a hearing to address the motion for a temporary restraining

      order. At the conclusion of that hearing on June 24, 2014, the trial court

      entered an order that 3A Automotive deposit the $500.00 down payment with




      2
        The Rileys alleged that 3A Automotive used their personal information during approximately twenty
      attempts to obtain financing. The Rileys further asserted that they did not authorize the large number of
      credit inquiries or credit applications. It is unclear whether 3A Automotive disputed the number of financing
      attempts or the purported lack of authorization for some attempts. However, 3A Automotive claims that it
      was eventually successful in securing financing for the Durango.

      Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017                       Page 3 of 12
      the Court Clerk and that the Rileys return the Durango by 5:00 p.m. on July 9,

      2014. Additionally, the Rileys were to answer the complaint by July 25, 2014.

      The Durango was returned on July 10, 2014 and 3A Automotive deposited the

      $500.00 as ordered.


[6]   On July 24, 2014, the Rileys filed their answer and counterclaim. The Rileys

      admitted that they had signed a document in acceptance of an offer by 3A

      Automotive, but alleged that the procurement of financing was part of the

      consideration to be provided by the seller. Accordingly, the Rileys denied the

      existence of a “legal contract pursuant to a Retail Installment Contract and

      Security Agreement” as alleged by 3A Automotive in paragraph 20 of its

      complaint. (App. at 12.) In addition to raising an affirmative defense that

      financing for the Durango was not properly secured, the Rileys raised an

      affirmative defense that 3A Automotive lacked marketable title:


              3A did not have the right, authority or power to sell the 2006
              Dodge Durango in question. 3A did not possess marketable title
              to the Durango as it had a lien on it held by Next Gear Capital.
              Also, 3A’s Exhibits in its Complaint further bolster [the] Rileys’
              defense that it did not possession [sic] marketable title as the
              information on the exhibited Title clearly reads “Non-
              Transferable.” Therefore 3A knew or should have known that
              the transaction as structured by 3A would be in violation of I.C.
              9-32-4-1(a)(1), (2) at time of the sale, thus breaching the contract
              immediately and causing it to be null and void. . . . After
              inspection of the Durango it was discovered that at one point it
              had suffered damage making it necessary to rebuild the Durango
              in order for it to be operational. 3A knew or should have known
              this. By not disclosing this to the Rileys as required per the law


      Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017   Page 4 of 12
               3A has committed an unfair sales practice which makes the
               contract to purchase the Durango null and void.


      (Tr. at 48.)


[7]   The Rileys filed a counterclaim alleging fraud in the transfer of a re-built vehicle

      without disclosure. Additionally, the Rileys contended that the repetitive credit

      inquiries damages their credit-worthiness. The Rileys sought treble damages

      and attorney’s fees. They attached as Exhibit D an appraisal indicating that the

      Durango had a trade-in value of $3,800 and a retail value of $7,500 to $8,500

      (reduced by “nearly half if title is deemed salvage value.” (App. at 56.) Exhibit

      H, a Carfax vehicle history report, indicates that the Durango had been

      declared a “total loss” on April 7, 2010 by an insurance company after

      “collision damage [was] reported.” (App. at 65.)3


[8]   On July 28, 2014, the trial court entered an order scheduling a case

      management conference. Among other things, the conference was to explore

      “the utilization of one or more methods of Alternative Dispute Resolution.”

      (App. at 69.) On September 29, 2014, the trial court entered an order providing

      in pertinent part: “This case is referred to mediation pursuant to ADR 2.2.

      Parties stipulate to Douglas McMillan as Mediator.” (App. at 78.) Apparently,

      efforts at mediation failed and, on March 17, 2015, the trial court entered an



      3
        The report also included the following language: “Not all total loss vehicles result in a DMV-reported
      branded title. This may occur when an insurance company’s definition of a total loss is different than the
      state DMV’s definition for a branded title or when the owner of the vehicle is a self-insured company, like a
      fleet or rental company.” (App. at 67.)

      Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017                        Page 5 of 12
       order as follows: “The Court further ORDERS the parties to complete

       arbitration with Douglas C. McMillan by June 19, 2015. The Arbitration

       Award shall be filed with the Court.” (Tr. at 80.)


[9]    An arbitration hearing was conducted on June 4, 2015. An award 4 was

       rendered in favor of 3A Automotive, consisting of the following:


                Interest on Seller’s Inventory Contract with NextGear $ 1,526.22


                Court and Filing Costs                                                             200.00


                Attorney Fees and Costs (as by Affidavit)                                     11,810.00


                Compensatory and Punitive Damages                                               1,000.00


       (App. at 173.) The award, consisting largely of attorney’s fees, was approved

       on July 2, 2015, by a senior judge of the Lake Superior Court, Civil Division.


[10]   On August 4, 2015, the Rileys filed a motion to correct error asking that the

       trial court vacate the judgment entered upon the arbitration award. The Rileys

       argued that the arbitrator had “applied a Federal standard to a State case and

       committed reversible error.” (App. at 177.) According to the Rileys, they had




       4
         The award language indicates that the arbitrator derived his authority from an agreement to binding
       arbitration under Section 9 of the Federal Arbitration Act (9 USC § 9) and by court order and by “mutual
       agreement” of the parties. (App. at 165.) The arbitration briefs and trial court orders indicate only that the
       matter was sent to a mediator as an alternative dispute resolution method and was later submitted to the
       named mediator in arbitration. The Rileys indicated in their motion to correct error that they did not object
       to this procedure. Their specific alternative dispute resolution agreement, if any, is not included in the record
       before us.

       Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017                          Page 6 of 12
       agreed to mediation and “subsequently agreed to arbitrate instead.” (Tr. at

       178.) They asserted that the scope of the arbitration was limited in that the

       contract for sale had been rescinded and, as for attorney’s fees:


               McMillan awarded Attorney Fees and Costs (as by affidavit) of
               eleven thousand eight hundred and ten dollars ($11,810) to
               Plaintiff. However, no showing of Attorney’s fees was ever made
               other than in Attorney Obermeyer’s Arbitration Brief stating his
               fees were eleven thousand eight hundred and ten dollars
               ($11,810). … Nowhere in his “Appendix of Supporting
               Documents” does it state that Statements of Billing were
               submitted. … [Neither] Rileys nor their Attorney have been
               presented any documentation to support such claim.


       (App. at 179.) (internal citations omitted.) 3A Automotive filed a response,

       claiming that arbitration had been conducted under the Federal Arbitration Act

       and contending that the state court lacked jurisdiction to hear the motion to

       correct error. Attached to the response was an affidavit from William

       Obermeyer, the attorney for 3A, attesting that “the Invoices for legal services

       presented to Arbitrator Doug McMillan are a true and correct representation of

       the cost of legal services for representing AAA Automotive, LLC in this

       matter.” (App. at 215.) No itemization was attached.


[11]   The trial court conducted a hearing on January 6, 2016. At that hearing, the

       attorney for 3A Automotive argued his position that he was not required to

       provide the Rileys with the basis of his attorney’s fees as it was “work product”

       and the award adequately rested upon “detailed invoices” provided to the

       arbitrator over the Rileys’ objection. (Tr. at 31.)

       Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017   Page 7 of 12
[12]   On January 19, 2016, the trial court entered its “Order Denying Motion to

       Correct Error and Entering Final Judgment.” (App. at 219.) On January 27,

       2016, pursuant to a “Final Order and Judgment,” the Rileys were ordered to

       pay 3A Automotive $14,036.22. This appeal ensued.



                                   Discussion and Decision
[13]   Indiana’s Uniform Arbitration Act, Indiana Code Section 34-57-2-1 et seq.,

       provides a mechanism for enforcing agreements to arbitrate and for securing

       judicial review and enforcement of arbitration awards. Sch. City of East Chicago,

       Ind. v. East Chicago Fed’n of Teachers, Local No. 511, A.F.T., 622 N.E.2d 166, 168

       (Ind. 1993). Judicial review of an arbitration award is extremely narrow in

       scope, and an award should be set aside only when one of the grounds specified

       by the Uniform Arbitration Act for vacation of the award is shown. Id. A party

       who seeks to vacate an arbitration award under the Act bears the burden of

       proving the grounds to set aside the award. Id.


[14]   Pursuant to Indiana Code Section 34-57-2-13(a), the trial court shall vacate an

       arbitration award where: (1) the award was procured by corruption or fraud;

       (2) there was evident partiality by the arbitrator; (3) the arbitrators exceeded

       their powers; (4) the arbitrators refused to postpone a hearing upon sufficient

       cause; or (5) there was no arbitration agreement and the party did not

       participate without objection. The parties to a contract are free to define for

       themselves what questions may be arbitrated, remedies the arbitrator may

       afford, and the extent to which a decision must conform to the general

       Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017   Page 8 of 12
       principles of law. Bopp v. Brames, 677 N.E.2d 629, 632 (Ind. Ct. App. 1997).

       An arbitrator is limited by the bounds of the agreement from which he or she

       draws authority, and an arbitrator is expected to be aware of those limits. Id.


[15]   Initially, we address the matter of whether arbitration was ordered pursuant to

       an arbitration clause of the sales contract. “[B]efore a court compels

       arbitration, it must first resolve any claims concerning the validity of the

       contract containing the arbitration clause.” Int’l Creative Mgmt. Inc. v. D & R

       Entm’t Co., Inc., 670 N.E.2d 1305, 1311 (Ind. Ct. App. 1996), trans. denied.

       Here, the trial court ordered that each party restore the consideration in its

       control (the vehicle and the down-payment) but made no findings as to contract

       rescission or validity. Indeed, the order for arbitration makes no reference to an

       arbitration clause. It does not appear that arbitration was ordered based upon

       the failed sales contract; rather, it appears to have arisen in alternative dispute

       resolution.5


[16]   Apparently, by claimed “agreement” of the parties, after the replevin order was

       entered, the arbitrator was tasked with determining the proper amount of

       damages, if any, to 3A Automotive from the Rileys’ seven month retention of

       the Durango. He was also apparently asked to determine the proper amount of




       5
         However, the Chronological Case Summary does not reflect that the parties filed an Agreement to Arbitrate
       pursuant to Indiana Rule for Alternative Dispute Resolution 3.1. That rule provides that the parties may file
       with the court an agreement to arbitrate wherein they stipulate whether arbitration is to be binding or non-
       binding, whether the agreement extends to all or a portion of the case, and the procedural rules to be
       followed. The rule further provides: “Upon approval, the agreement to arbitrate shall be noted on the
       Chronological Case Summary of the Case and placed in the Record of Judgments and Orders for the court.”

       Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017                       Page 9 of 12
       damages, if any, to the Rileys from 3A’s alleged fraudulent misrepresentations

       and repetitive credit inquiries. The arbitrator determined that the damages to

       3A Automotive – apart from attorney’s fees – were relatively minimal. As for

       the would-be purchasers who retained a vehicle that had been “totaled,” the

       arbitrator awarded them no damages. The award upon which the trial court

       entered judgment primarily consisted of attorney’s fees. However, the award of

       attorney’s fees was made without a predicate finding by the trial court that the

       contract – including its provision for attorney’s fees – was valid and

       enforceable.


[17]   On appeal, the Rileys concede that they did not oppose arbitration after

       mediation could not be timely scheduled or was unsuccessful. However,

       neither party provided this Court with an agreement defining the scope of

       arbitration. The Chronological Case Summary does not reflect the filing of an

       agreement to arbitrate. Even assuming a proper arbitration order, without an

       agreement, we cannot definitively discern whether the arbitrator exceeded his

       authority as to substantive provisions. However, the lack of impartial and fair

       proceedings is evident. The arbitrator accepted an ex parte document upon

       which he apparently rested the award. The Rileys’ lack of notice and

       opportunity to respond is readily apparent from the argument and admissions

       made by the attorney for 3A Automotive at the motion to correct error hearing:

               I did not give those [attorney fee’s invoices] to the Defendant
               because I feel like they’re Work Product and protected by
               Attorney/Client Privilege because they actually have my
               strategies inside of them. No objection was made that those

       Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017   Page 10 of 12
                details weren’t there. But the affidavit, which is attached – I can
                – yeah, I don’t have a copy of the affidavit. But in arbitration, an
                affidavit where I swore that all my attorney fees were correct and
                accurate was presented to the arbitrator and to the Defendant.
                And I also presented the arbitrator with my detailed invoices
                with a claim that they were Attorney/Client Privilege and I
                wasn’t going to turn [them] over to the Defendant. And there
                were objections during the arbitration made that I didn’t turn
                those over to anyone. And the arbitrator looked at my invoices
                and the hours that I spent on it. My rate is very reasonable. It’s
                too reasonable in some cases.


       (Tr. at 31.) Attorney Obermeyer went on to claim that his fee was “fair” but

       also concede that the fees “still got out of hand.” (Tr. at 31-32.) Subsequent

       commentary indicated that he claimed entitlement to fees to obtain a copy of

       the Carfax report, something relevant to his own client’s defense of the

       counterclaim for fraud.


[18]   There is no evidence of an arbitration agreement in the record and, hence, no

       evidence that there was a meeting of the minds concerning the scope and terms

       of the arbitration. Thus, the arbitration proceedings were for naught, and the

       judgment on the arbitration award must be vacated.6




       6
         As a cautionary note, alternative dispute resolution has reached full bloom since it was first recognized by
       our Indiana Supreme Court. Nevertheless, absent a contract, our courts are to remain open – pursuant to
       Article 1, Section 12 of the Indiana Constitution – and participation in alternative dispute resolution is still
       voluntary. While we encourage voluntary settlement and resolution, we do so only after full disclosure of the
       nature of the alternative dispute method selected and its consequences to the litigants. It is incumbent upon
       the mediator or arbitrator to document the agreement to mediate or arbitrate in the Chronological Case
       Summary. See A.D.R. 1.8. And, moreover, where an individual has been selected first as a mediator, we
       question the propriety of that individual continuing to participate as an arbitrator, when he or she has first
       participated with the same litigants in a failed mediation.

       Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017                        Page 11 of 12
                                                 Conclusion
[19]   The trial court erred in entering judgment upon the purported arbitration

       award.


[20]   Reversed.


       Najam, J., and May, J., concur.




       Court of Appeals of Indiana | Opinion 45A04-1602-PL-454 | January 12, 2017   Page 12 of 12
