[No. 78290-3. En Banc.]
February 15, 2007. Decided July 6, 2007.
[1] Interest - Prejudgment Interest - Liquidated Claim - Necessity. Prejudgment interest may not be awarded on a claim unless the amount of the claim is liquidated. The amount of a claim is liquidated if it can be determined by reference to a fixed standard, without reliance on opinion or discretion. Damages that cannot be calculated without the use of discretion are not liquidated. [2] Interest - Prejudgment Interest - Liquidated Claim - Breach of Contract - Determination of Damages - In General. Breach of contract damages do not necessarily become liquidated merely by virtue of being decided. [3] Contracts - Construction - Intent of Parties - Plain Language. The goal of contract interpretation is to carry out the intent of the parties as manifested, if possible, by the parties' own contract language. [4] Interest - Prejudgment Interest - Liquidated Claim - Arbitration Award. In general, an arbitration decision does not convert unliquidated damages into liquidated damages and does not entitle the winner to prejudgment interest between the date of the arbitration decision and the entry of judgment on the award. Absent an agreement by the parties to the contrary in the arbitration agreement, interest on an arbitration award does not begin to run until the award is reduced to judgment. SANDERS, J., dissents by separate opinion. Nature of Action: The prevailing party in a dispute submitted to binding arbitration sought entry of a judgment on the arbitration award and prejudgment interest from the date of the award. Superior Court: The Superior Court for King County, No. 01-2-30874-2, William L. Downing, J., on February 8, 2005, entered a judgment on the arbitration award and an order awarding prejudgment interest from the date of the award. Court of Appeals: At 130 Wn. App. 629 (2005), the court reversed the order awarding prejudgment interest and remanded the case for entry of a judgment in favor of the nonprevailing party on the issue of prejudgment interest, holding that the arbitration award did not constitute a liquidated sum entitling the prevailing party to prejudgment interest. Supreme Court: Holding that the arbitration award did not transform the defendants' unliquidated claim into a fully liquidated sum for purposes of awarding prejudgment interest, the court affirms the decision of the Court of Appeals. Richard M. Stanislaw- and Christopher Wright- (of Stanislaw Ashbaugh, L.L.P.), for petitioners. Robert M. McKenna-, Attorney General, Steve E. Dietrich-, Senior Counsel, and Douglas D. Shaftel-, Assistant, for respondent. En Banc ¶1 CHAMBERS, J. -- The parties before us agreed to resolve their underlying dispute in binding arbitration. Fluor Daniel, Inc. (Fluor) prevailed and moved to reduce the arbitration award to judgment. Concluding that the arbitration award liquidated previously nonliquidated damages, the trial court reduced that award to judgment and added prejudgment interest from the date the arbitrator rendered the award to the time it was entered into judgment. We conclude that an arbitration award does not transform an unliquidated claim into a fully liquidated sum entitling the prevailing party to prejudgment interest. Unliquidated damages accrue interest from the date of judgment, not the date of an arbitration award. We affirm the Court of Appeals and remand to the trial court for entry of judgment without prejudgment interest. FACTS ¶2 The Department of Corrections (Department) contracted with Fluor to build a prison. Clerk's Papers (CP) at 3. The parties tell us that "major disputes developed," leading to "extremely expensive" litigation. CP at 3. ¶3 Twenty one days later, Fluor reduced the award to judgment. Fluor asked, over the Department's objection, for prejudgment interest from the date of the arbitration until judgment. Fluor's request for prejudgment interest was based on the theory that the amount of damages became liquidated by virtue of the arbitration award. The trial judge agreed and awarded Fluor prejudgment interest of $43,380.22. The Department appealed only the award of prejudgment interest. ANALYSIS ¶4 Only questions of law are presented. Our review is de novo. Parents Involved in Cmty. Schs. v. Seattle Sch. Dist. No. 1, 149 Wn.2d 660, 670, 72 P.3d 151 (2003). ¶6 If damages are liquidated, interest accrues from the time they were incurred. Hansen, 107 Wn.2d at 473 ("plaintiff should be compensated for the 'use value' of the money representing his damages for the period of time from his loss to the date of judgment") (emphasis added). Nothing in our case law or the underlying jurisprudence supports the proposition that the character of damages changes from unliquidated to liquidated by virtue of being decided. See generally Weyerhaeuser Co., 142 Wn.2d at 686 (character of the claim determines whether damages are liquidated). ¶8 We turn now to Fluor's arguments. Fluor does not argue that its damages were liquidated before the arbitrator reached his decision. ¶9 The vast majority of courts considering this issue have rejected pleas to add prejudgment interest to arbitrator's awards. As the Supreme Court of Nevada ruled more than a decade ago, "[t]he weight of authority supports [the] position that the addition of prejudgment interest upon confirmation of an arbitration award constitutes an impermissible modification of the award." Mausbach v. Lemke, 110 Nev. 37, 40, 866 P.2d 1146 (1994) (citing Creative Builders, Inc. v. Ave. Devs. Inc., 148 Ariz. 452, 715 P.2d 308 (Ct. App. 1986); McDaniel v. Berhalter, 405 So. 2d 1027, 1030 (Fla. Dist. Ct. App. 1981); Leach v. O'Neill, 132 N.H. 665, 568 A.2d 1189 (1990)); Westmark Props., Inc. v. McGuire, 53 Wn. App. 400, 766 P.2d 1146 (1989); ¶10 Fluor contends that a binding arbitration award is more like an entered judgment than a jury's verdict, on the theory that a jury's verdict is subject to substantial revision; a binding arbitration award, Fluor argues, is not. Cf. Kiessling, 38 Wn.2d at 297 (noting that one reason interest does not begin to accrue on the verdict or the announcement of the trial court's decision is that it is subject to change). However, to treat an arbitrator's award like an entered judgment we would have to ignore the fact that the legislature has laid out the mechanisms required to reduce it into one. While a jury award is subject to significant changes via additur or remittitur, a binding arbitration award is also subject to modification prior to entry of judgment even outside of the appeal provisions. Compare RCW 4.76.030 (additur and remittitur) with former RCW 7.04.170 (1943) ¶11 Next, Fluor argues that one Washington court has already approved prejudgment interest upon an arbitration award, City of Moses Lake v. Int'l Ass'n of Firefighters, Local 2052, 68 Wn. App. 742, 847 P.2d 16 (1993). Firefighters arose out of a binding arbitration proceeding authorized in the State's collective bargaining statutes to resolve certain types of collective bargaining disputes. See ch. 41.56 RCW. Under that statutory scheme, if "uniformed personnel" and a government subdivision are unable to agree upon wages, they are authorized to refer the problem to a three-judge arbitration panel. RCW 41.56.450. This panel's decision is subject to review by the superior court "solely" to determine whether it was arbitrary and capricious. Id. Essentially, the superior court acts in an appellate capacity. ¶12 The primary issue in Firefighters was whether the arbitration panel's decision was arbitrary and capricious because it linked salary increases to the Seattle/Tacoma Consumer Price Index when only the "all cities" index had been submitted by the parties. The superior court found it was not arbitrary and capricious. The firefighters' union also sought prejudgment interest on the salary increase award. The entirety of the Court of Appeals' analysis on liquidated damages was: Prejudgment interest is allowable when the amount claimed is liquidated, i.e., "where the evidence furnishes data which, if believed, makes it possible to compute the amount with exactness, without reliance on opinion or discretion." The salary increase meets the definition of liquidated. As of May 31, 1991, the date of the award, the City was under a duty to raise the firefighters' salaries in the amount specified, subject only to review as provided in RCW 41.56.450. Contrary to the City's argument, the signing of a collective bargaining agreement in accordance with that award is not a prerequisite to the legal obligation to abide by the award. The judgment of the Superior Court is affirmed, except for that portion denying prejudgment interest. Prejudgment interest is allowed from May 31, 1991. Firefighters, 68 Wn. App. at 749 (emphasis added) (quoting Prier v. Refrigeration Eng'g Co., 74 Wn.2d 25, 32, 442 P.2d 621 (1968) and citing Hansen, 107 Wn.2d at 472)). The Court of Appeals decided that the salary increase that had been ordered by the arbitration panel was properly characterized as liquidated and that "prejudgment interest" was appropriate. Thus, the Firefighters court's holding was based upon its conclusion that under the statute in question, the salary increase could be calculated with certainty and was therefore liquidated. The Court of Appeals did not hold that the award became liquidated by virtue of the arbitration award. ¶13 Finally, Fluor relies upon the specific language of its agreement to enter binding arbitration with the Department (DOC). The arbitration agreement provides in relevant part: Once the Arbitrator issues a decision, either party may submit the decision to the King County Superior Court in the action now pending. The parties agree the judgment to be entered will be in full and complete compliance with the decision of the Arbitrator. Once said judgment is entered the judgment will be final and binding on Fluor and DOC. Fluor and DOC each waive any and all rights to appeal the Arbitration Award. CP at 6 (para. 8 of the Partial Settlement & Alternative Dispute Resolution Agreement). Fluor reasons that because the Department waived any right to appeal the arbitration award, the binding nature of the arbitration liquidated the damages. CONCLUSION ALEXANDER, C.J., and C. JOHNSON, MADSEN, BRIDGE, OWENS, FAIRHURST, and J.M. JOHNSON, JJ., concur. ¶16 SANDERS, J. (dissenting) -- Fluor Daniel, Inc. (Fluor) and the Department of Corrections (DOC) agreed to resolve their legal dispute in binding arbitration. The arbitrator issued a decision in favor of Fluor, and Fluor moved the superior court to confirm the award and enter judgment. The court did so and awarded Fluor prejudgment interest dating back to the date of the arbitration decision. DOC appealed. The Court of Appeals directed entry of judgment but denied any award for prejudgment interest. Our majority now affirms. Because Fluor is entitled to prejudgment interest from the date of the arbitration decision, I dissent. ¶17 The Court of Appeals properly approved prejudgment interest on an arbitration award in City of Moses Lake v. International Association of Firefighters, Local 2052, 68 Wn. App. 742, 847 P.2d 16 (1993). There the city of Moses Lake entered into negotiations with the city's fire fighters for a new collective bargaining agreement governing the terms and conditions of the fire fighters' employment. After negotiations stalled on several issues, the issues were referred to an interest arbitration panel pursuant to RCW 41.56.450. The panel awarded the fire fighters a salary increase and the city appealed. The superior court affirmed the panel's decision but refused to grant prejudgment interest. The city again appealed and the Court of Appeals affirmed the arbitration decision but reversed the superior court's order denying prejudgment interest. The Court of Appeals determined the salary increase was "liquidated," and therefore, on the date of the award "the City was under a duty to raise the firefighters' salaries in the amount specified, subject only to review as provided in RCW 41.56.450." ¶18 Here, the majority holds Fluor's award was not liquidated at the time of the arbitrator's decision, and therefore Fluor was not entitled to prejudgment interest. To support its position the majority analogizes arbitration awards to jury verdicts, contending an arbitrator's award, like a jury verdict, "is also subject to modification prior to entry of judgment even outside of the appeal provisions." Majority at 8. Therefore, reasons the majority, because "the parties did not contract to remove the trial court's power to make modifications under former RCW 7.04.170, only to forgo their appeal rights," the arbitrator's award was "not completely fixed until entered into judgment." Id. (emphasis omitted). ¶19 The majority's analogy of arbitration awards to jury verdicts is problematic. Jury verdicts must be reduced to judgment by a court to become final. Cox v. Charles Wright Acad., Inc., 70 Wn.2d 173, 179, 422 P.2d 515 (1967). And there is always the prospect the verdict will never be reduced to judgment pursuant to a successful motion for judgment notwithstanding the verdict. CR 50(b). By contrast, "Washington courts have given substantial finality to arbitrator decisions rendered in accordance with the parties' contract and RCW 7.04," Davidson v. Hensen, 135 Wn.2d 112, 118, 954, P.2d 1327 (1998), and an arbitrator's ruling does not require court confirmation for it to be final, In re Point Allen Service Area, 128 Wn. App. 290, 303-04, 115 P.3d 373 (2005), review denied, 157 Wn.2d 1005 (2006). Furthermore, "judicial review of an arbitration award in the context of a proceeding under RCW 7.04.150 to confirm an arbitrator's award is exceedingly limited." Davidson, 135 Wn.2d at 119. Such review does not include a review of the merits of the case, and ordinarily a court will not consider the evidence before the arbitrator. ¶20 Furthermore, contrary to the majority's contention, Fluor and DOC did explicitly contract to remove the superior court's power to make modifications. Their arbitration agreement provides, Once the Arbitrator issues a decision, either party may submit the decision to the King County Superior Court in the action now pending. The parties agree the judgment to be entered will be in full and complete compliance with the decision of the Arbitrator. Once said judgment is entered the judgment will be final and binding on Fluor and DOC. Fluor and DOC each waive any and all rights to appeal the Arbitration Award. Clerk's Papers at 6 (emphasis added). The sentence, "The parties agree the judgment to be entered will be in full and complete compliance with the decision of the Arbitrator" indicates the parties' intention to remove the superior court's ability to modify the award in addition to waiving their appeal rights. ¶21 Because the majority's decision is at odds with the parties' language in their arbitration agreement and because I would uphold the trial court's grant of prejudgment interest from the date of the arbitration decision, I dissent.