Preview:

Supreme Court
No. 2010-343-Appeal.
(KM 10-847)
AVCORR Management, LLC                                                :
v.                                                                    :
Central Falls Detention Facility Corporation.                         :
NOTICE:    This  opinion  is  subject  to  formal  revision  before
publication in the Rhode Island Reporter. Readers are requested to
notify the Opinion Analyst, Supreme Court of Rhode Island, 250
Benefit Street, Providence, Rhode Island 02903, at Telephone 222-
3258 of any typographical or other formal errors in order that
corrections may be made before the opinion is published.




Supreme Court
No. 2010-343-Appeal.
(KM 10-847)
AVCORR Management, LLC                                                                                 :
v.                                                                                                     :
Central Falls Detention Facility Corporation.                                                          :
Present: Suttell, C.J., Goldberg, Robinson, and Indeglia, JJ.
O P I N I O N
Chief Justice Suttell, for the Court.   In this appeal, we are asked to decide whether the
terms of an agreement between the plaintiff, AVCORR Management, LLC (AVCORR), and the
defendant, Central Falls  Detention Facility Corporation                                               (Detention Facility or the facility),
require the facility to arbitrate certain disputed fees.   AVCORR petitioned the Superior Court to
appoint a binding arbitrator to settle the parties’ dispute concerning several types of fees that
AVCORR claimed were owed to it by Detention Facility.   The facility filed a limited opposition
to AVCORR’s petition, arguing that only some, but not all, of the fees were subject to binding
arbitration pursuant to the agreement.   The hearing justice granted AVCORR’s petition and
Detention Facility appealed.   This case came before the Supreme Court pursuant to an order
directing the parties to appear and show cause why the issues raised in this appeal should not
summarily be decided.  After considering the parties’ written and oral submissions and reviewing
the record, we conclude that cause has not been shown and that this case may be decided without
further briefing or argument.   For the reasons set forth in this opinion, we vacate and reverse, in
part, the order of the Superior Court.
- 1 -




I
Facts and Procedural History
The essential  facts  of this  case are not  in dispute.    Detention  Facility is  a public
corporation, distinct from the municipality of Central Falls, which was created to fill the need for
a detention facility in Rhode Island. See G.L. 1956 § 45-54-1(a) and § 45-54-2(a).   It currently
operates the Donald W. Wyatt Detention Facility (Wyatt) in the City of Central Falls.1   On
January  1,                                                                                            2008,  Detention  Facility entered  into  a  consulting agreement   (agreement)  with
AVCORR, in which AVCORR agreed to act as a “consultant” to the facility and “to provide
administrative oversight services and executive director services” with respect to the “day to day
operation” of Wyatt.   The agreement called for an initial five-year term, subject to either party’s
right to terminate the agreement.
The parties amended the agreement on May 22, 2008, altering, inter alia, the provisions
concerning the manner of compensation.    Section E of the amended agreement stated that
Detention Facility would compensate AVCORR for services rendered “at the rates and in the
manner set forth in Amended Exhibit B.”2   Amended Exhibit B, entitled “Annual Management
Fee,”  was  attached  to  the  amendment  and  incorporated  therein.    It  defined  the  Annual
Management Fee as the sum of the “Annual Fixed Fee” and the “Annual Man Day Fee.”  Section
(a) of Amended Exhibit B set forth the payment procedure for the Annual Fixed Fee, which was
payable in twelve equal installments, and called for AVCORR to submit monthly invoices to
1 According to Detention Facility, “Wyatt primarily serves as a temporary housing facility for
inmates in federal custody awaiting criminal trial, sentencing or resolution of an immigration
detainer.”    The  facility  also  informs  us  that                                                   “[t]he  main  source  of  Wyatt’s  inmates  has
historically come from contracts secured by [the facility] with the United States Marshal[s]
Office or United States Immigration and Customs Enforcement [(ICE)].”
2 Section E also specified that Detention Facility would reimburse AVCORR “for out-of-pocket
[business] expenses.”
- 2 -




Detention Facility itemizing each month’s portion of the Annual Fixed Fee and “its reasonable
costs and business expenses.”  Section (a) also stated as follows:
“If                                                                                                   [Detention  Facility]  disputes   [AVCORR’s]  invoice,  or  any
portion thereof, it shall notify  [AVCORR] of the basis of any
dispute within seven  (7) days of  [the facility’s] receipt of the
invoice.    The parties shall attempt to resolve any dispute over
[AVCORR’s] invoice through negotiation; however, either party
may demand binding arbitration to resolve said disputes.”
Section  (b) of Amended Exhibit B discussed the Annual Man Day Fee, which was
payable to AVCORR “for the correlating number of Man Days accrued at [Wyatt] during each
Annual Period.”3   It was to be paid “within [t]hirty (30) [d]ays of the end of each Annual Period
during which the fee was earned.”   Notably, section (b) of Amended Exhibit B did not contain
the “binding arbitration” language found in section (a).
The body of the May 22, 2008 amendment to the parties’ agreement additionally stated
that the parties intended those terms of the original agreement that were “not amended, modified
or otherwise supplanted” by the amendment to “remain in full force and effect.”  Of relevance to
the issue before us are Article V, section 5.04 of the original agreement, which stated that in the
event of a breach, “the non-defaulting party shall have the right to pursue any right or remedy it
may have available to it at law or in equity, including, but not limited to * * * [t]ermination of
the [a]greement”; and Article VII, section 7.03, wherein the parties consented to the jurisdiction
of the Rhode Island courts “relative to any dispute arising out of this [a]greement.”
3 Although “Man Day” is not explicitly defined in the parties’ agreement, we understand that
term to mean “[a]n industrial unit of production equal to the work one person can produce in a
day.” The American Heritage Dictionary of the English Language 1062 (4th ed. 2000).   As
Detention Facility explains on appeal, the Annual Man Day Fee in the agreement was “tied to
[AVCORR] meeting certain inmate population numbers.”
- 3 -




In April 2009, Detention Facility terminated its consulting agreement with AVCORR,4
and on May 1, 2009, AVCORR sent the facility an invoice, which included the April 2009
portion of the Annual Fixed Fee, business expenses for that month, and additionally, the 2008
Man Day Fee.5  Detention Facility disputed the amount owed and did not pay the invoice.
On  May  27,  2010,  AVCORR  filed  a  petition  in  the  Superior  Court  seeking  the
appointment of a binding arbitrator.6   In its petition, AVCORR stated that while the “consulting
agreement provides for binding arbitration, * * * the method of selection of a binding arbitrator
[is] not provided.”   Therefore, AVCORR asserted, the Superior Court should “designate and
appoint  a  single  impartial  arbitrator.”    Detention  Facility  filed  a  limited  opposition  to
AVCORR’s petition, in which it submitted that before appointing an arbitrator, the Superior
Court first should “determine the scope of the arbitration.”   The facility claimed that pursuant to
Amended Exhibit B, “[t]he Annual Fixed Fee is the only fee that is subject to the [c]onsulting
[a]greement’s arbitration provisions.”   Therefore, the facility urged, the Superior Court should
“only submit the dispute over the Annual Fixed Fee monies to arbitration” and should deny
AVCORR’s petition  “to the extent  [that] it seeks to arbitrate issues that are not subject to
arbitration as provided in the parties’ [a]greement.”
4 Apparently, Detention Facility’s termination of the agreement was a result of the “serious
financial blow” it suffered when ICE terminated its contract with the facility in December 2008.
ICE did so four months after an inmate at Wyatt died while in custody.   The death of the inmate,
who was a Chinese national and had been detained by ICE, prompted an investigation into
Wyatt’s internal operations.
5  According  to  AVCORR’s  invoice,  the  portion  of  the  Annual  Fixed  Fee,  referred  to  as
“Consulting Fees,” owed was $20,020.20.   The business expenses, described on the invoice as
“Invoice #0531-09” and “Invoice #0623-09,” totaled $292.27.   Finally, the invoice listed the
2008 Man Day Fee as being $162,521.
6 AVCORR asserts on appeal that prior to filing this petition, on May 11, 2010, it forwarded a
demand for binding arbitration to Detention Facility.   However, the record of this case does not
contain any evidence of such a demand.
- 4 -




A hearing was held on June 25, 2010, at which the hearing justice ruled that all aspects of
the parties’ dispute should be submitted to arbitration.   In so doing, the hearing justice stated as
follows:
“I can’t imagine the part[ies] intended that if there’s a
dispute  over  the  invoice  that                                                                       * * *  when  they  provided  for
arbitration to resolve that dispute they had in mind just resolving
the dispute over the [Annual] Fixed Fee and not the [Annual] Man
Day Fee.   It just doesn’t make a lot of sense to me.   And to the
extent that the agreement  * * * has some ambiguity in it with
respect to that issue, I think that we’re better off, the policy being
that to encourage the private resolution [of] disputes in arbitration,
* * *  we’re better off  having that  ambiguity addressed  by the
arbitrator in the first instance at least.”
An order granting AVCORR’s petition and appointing a binding arbitrator was entered on July 2,
2010.   Detention Facility appealed on July 20, 2010, and on September 16, 2010, the hearing
justice entered another order, wherein he denied the facility’s motion to stay pending appeal.7
This Court, however, granted the facility’s motion to stay on December 16, 2010.8
II
Standard of Review
“The issue of whether a dispute is arbitrable is a question of law that this Court reviews
de  novo.”  State  Department  of  Corrections  v.  Rhode  Island  Brotherhood  of  Correctional
Officers,                                                                                               866  A.2d  1241,  1247  (R.I.  2005).    When  so  reviewing,  we  bear  in  mind  that
“[a]rbitration is a matter of contract and a party cannot be required to submit to arbitration any
dispute which [it] has not agreed so to submit.” Radiation Oncology Associates, Inc. v. Roger
Williams  Hospital,                                                                                     899  A.2d  511,  514  (R.I.                                                                          2006)   (quoting  School  Committee  of  North
                                                                                                        7 In the same order, the hearing justice granted Detention Facility’s motion to correct the record
for appeal,  incorporating the parties’ January                                                                                                                                                              1,      2008  agreement  and  their May  22,  2008
amendment into the record.
8 A separate appeal was docketed for the motion to stay, which appeal was closed after the
motion to stay was granted.
- 5 -




Kingstown v. Crouch, 808 A.2d 1074, 1078 (R.I. 2002)).   Because it is a matter of contract,
“[g]eneral rules of contract construction apply” and the determination of “whether the parties
agreed to submit a particular dispute to arbitration turns upon the parties’ intent when they
entered into the contract from which the dispute ultimately arose.” Id.
III
Discussion
On appeal, Detention Facility argues that the hearing justice erred to the extent that he
required it and AVCORR to arbitrate their dispute over the Annual Man Day Fee.   It asserts that
the agreement’s arbitration clause “is limited in scope and only requires arbitration of disputes
concerning the monthly fixed fees and business expenses.”   The facility points out that the
“limiting  language”  of  the  arbitration  clause  signifies  that  the  parties  did  not  intend   “to
exclusively  rely  upon  the  arbitration  process  to  resolve  all  disputes  arising  under  the
[a]greement.”   Detention Facility further emphasizes that in Article V, section 5.04 and Article
VII, section 7.03 of the agreement, “the parties expressly reserved their respective rights to
pursue their legal and equitable rights in a court of law, not before an arbitrator.”
AVCORR, for its part, argues that Amended Exhibit B “calls for binding arbitration of
any dispute involving invoices for the payment of AVCORR’s Annual Management Fee,”
which, it contends, consists of the Annual Fixed Fee and the Annual Man Day Fee.   AVCORR
claims that to interpret Amended Exhibit B as Detention Facility suggests would lead to “an
absurd result in that the parties could have a dispute over the Annual Fixed Fee proceed to
arbitration simultaneously with a dispute over the Annual Man Day Fee proceeding through the
- 6 -




[c]ourts.”9   Finally, AVCORR asserts that Amended Exhibit B “trumps” Article VII, section
7.03 of the original agreement, “which provides that the parties consent to the jurisdiction of the
[c]ourts of the State of Rhode Island relating to any disputes arising out of the agreement,” and it
also cites                                                                                               “the longstanding policy  [of] encourag[ing] the private resolution of disputes in
arbitration.”
In ascertaining the parties’ intent with respect to the arbitration of disputes arising out of
their agreement, we look to Amended Exhibit B, which contains the arbitration clause at issue.
Section (a) of Amended Exhibit B states that if Detention Facility and AVCORR cannot resolve
a dispute over AVCORR’s “invoice, or any portion thereof,” through negotiation, “either party
may demand binding arbitration to resolve said dispute[].”   Importantly, the same section of
Amended Exhibit B explicates that the monthly invoice “incorporates an equal 1/12th portion of
the total Annual Fixed Fee and an itemization of its reasonable costs and business expenses
reimbursable to [AVCORR] pursuant to the [a]greement.”   Section (a) does not mention the
Annual Man Day Fee at all, and section (b), which specifically concerns the Annual Man Day
Fee, does not call for that fee to be included in the monthly invoice.   Instead, section (b) reads as
follows: “[Detention Facility] shall verify the amount of the Annual Man Day Fee and make
payment to [AVCORR] within [t]hirty (30) [d]ays of the end of each Annual Period during
which the fee was earned.”   Also in contrast to section (a), section (b) does not contain any
“binding arbitration” language.
9 Detention Facility responds to AVCORR’s “absurdity” argument by explaining that agreeing to
arbitrate disputes over the monthly invoices and to litigate any other legal disputes arising under
the agreement “is not unusual” because the parties “ha[ve] every reason to resolve * * * regular
monthly billings in an expedited fashion,” whereas “a one-time bonus” in excess of $150,000 “is
undoubtedly a matter that rises to the level of something more significant than  $292.00 in
monthly copying, over-night delivery or conference call expenses.”
- 7 -




It is our opinion that  Amended Exhibit B makes clear that Detention Facility and
AVCORR intended to arbitrate only those disputes dealing with the  “invoice,” which was
payable on a monthly basis.   It is also clear that the term “invoice” was defined by the parties as
consisting of the monthly portion of the Annual Fixed Fee and the business expenses, but not the
Annual Man Day Fee.   The Annual Man Day Fee, described in a different section of Amended
Exhibit B, was to be paid separately from the monthly invoice—specifically, “within [t]hirty (30)
[d]ays of the end of each Annual Period during which the fee was earned.”
The parties’ intent not to submit the entire Annual Management Fee to arbitration is
further elucidated by Article V, section 5.04 and Article VII, section 7.03 of the agreement,
which sections were not altered by the May 22, 2008 amendment.10   Article V, section 5.04, in
the event of a breach, vests the nonbreaching party with “the right to pursue any right or remedy
it may have available to it at law or in equity.”   Article VII, section 7.03 specifies that the
agreement was to be “governed by and construed in accordance with the laws of * * * Rhode
Island,” and that the parties consented to the jurisdiction of Rhode Island courts “relative to any
dispute arising out of [the] [a]greement.”   It therefore is evident that the parties were free to
resolve all their disputes with respect to the agreement, save for any dispute about the Annual
Fixed Fee or the business expenses, in Rhode Island courts.
We find unavailing AVCORR’s contention that providing “for two separate and distinct
forms of dispute resolution regarding the payment of the AVCORR Annual Management Fee
leads to an absurd result.”   Because  “[a]rbitration is a creature of the contract between the
parties[,] * * * [a] duty to arbitrate a dispute arises only when a party agrees to arbitration in
10 The amendment specifically states that the parties intended for those terms of the agreement
that were “not amended, modified or otherwise supplanted by” the amendment to “remain in full
force and effect.”
- 8 -




clear and unequivocal language, and even then, the party is only obligated to arbitrate issues that
it explicitly agreed to arbitrate.” State Department of Corrections, 866 A.2d at 1247.11
In the case at hand, Detention Facility and AVCORR did not agree “with clear language”
to arbitrate their disputes regarding the Annual Man Day Fee; they therefore are not under any
“duty to arbitrate” such disputes. Crouch, 808 A.2d at 1078 (quoting Stanley-Bostitch, Inc. v.
Regenerative Environmental Equipment Co., 697 A.2d 323, 326 (R.I. 1997)).   Consequently, we
hold that Detention Facility and AVCORR agreed to submit to arbitration only those disputes
dealing with the Annual Fixed Fee and the business expenses, and not those disputes dealing
with the Annual Man Day Fee.
IV
Conclusion
For the reasons stated in this opinion, we vacate and reverse the order of the Superior
Court to the extent that the order grants AVCORR’s petition to appoint a binding arbitrator to
resolve the parties’ dispute regarding the Annual Man Day Fee.  The record shall be remanded to
the Superior Court for further proceedings consistent with this opinion.
Justice Flaherty did not participate.
11 It is true that “[w]hen uncertainty exists about whether a dispute is arbitrable, this Court, like
the United States Supreme Court, ‘has enunciated a policy in favor of resolving any doubt in
favor of arbitration.’” School Committee of North Kingstown v. Crouch, 808 A.2d 1074, 1078
(R.I.                                                                                                   2002)  (quoting Brown v. Amaral,  460 A.2d  7,  10  (R.I.  1983)).    Here, however, no
uncertainty exists because the plain language of the agreement sets forth the conditions for
arbitration.  Thus, a public policy analysis is unnecessary.
- 9 -




RHODE ISLAND SUPREME COURT CLERK’S OFFICE
Clerk’s Office Order/Opinion Cover Sheet
TITLE OF CASE:                                        AVCORR Management, LLC v. Central Falls Detention Facility
Corporation.
CASE NO:                                              No. 2010-343-Appeal.
                                                      (KM 10-0847)
COURT:                                                Supreme Court
DATE OPINION FILED:   April 17, 2012
JUSTICES:                                             Suttell, C.J., Goldberg, Robinson, and Indeglia JJ.
WRITTEN BY:                                           Chief Justice Paul A. Suttell
SOURCE OF APPEAL:    Kent County Superior Court
JUDGE FROM LOWER COURT:
Associate Justice Bennett R. Gallo
ATTORNEYS ON APPEAL:
For Plaintiff:                                        Joseph J. McGair, Esq.
For Defendant:      Michael J. Lepizzera, Jr., Esq.

Download 10-343.pdf

Rhode Island Law