Can parties expand an arbitrator's jurisdiction through conduct? Pacific Development v. Orton Explained

The Utah Court of Appeals addressed a critical question about arbitration jurisdiction in Pacific Development v. Orton, ruling that parties can modify a written arbitration agreement through their conduct, even when such conduct contradicts the agreement’s express terms.

Background and Facts

Pacific Development and Orton Excavation entered a written arbitration agreement that explicitly limited the arbitrator’s jurisdiction to disputes involving “Plat C” of a subdivision project, acknowledging that “Plat B” issues had been resolved. However, during the arbitration proceedings, Pacific introduced evidence relating to Plat B issues, and Orton followed suit. The arbitrator ultimately issued an award addressing both Plat B and Plat C matters, prompting Pacific to challenge the award on grounds that the arbitrator exceeded his authority.

Key Legal Issues

The primary issue was whether an arbitrator exceeds his jurisdiction when addressing matters outside the written arbitration agreement’s scope, but which the parties actually submitted through their conduct. Pacific also argued the arbitrator manifestly disregarded the law regarding the implied duty of good faith and fair dealing.

Court’s Analysis and Holding

The court applied ordinary contract principles to arbitration agreements, concluding that parties can modify written agreements through mutual conduct. The arbitrator had found that “both parties proceeded to introduce evidence concerning Plat B” and “clearly submitted those issues to the Arbitrator for resolution.” The court emphasized that Pacific was estopped from objecting since it initially introduced the Plat B evidence. Regarding the manifest disregard claim, the court distinguished between “manifest disregard” and “manifest disagreement,” finding no legal error in the arbitrator’s analysis.

Practice Implications

This decision reinforces that arbitration jurisdiction is determined not only by written agreements but also by the parties’ actual submissions during proceedings. Practitioners should carefully consider the scope of evidence presented, as introducing materials outside the written agreement’s parameters may waive objections to the arbitrator’s expanded jurisdiction. The ruling also demonstrates Utah courts’ strong deference to arbitration awards under the Utah Arbitration Act.