In a decision that is very skinny on the facts, a unanimous Nevada Supreme Court recently un-vacated a significant arbitration award in a dispute over dental franchises. In Half Dental Franchise, LLC v. Houchin, 2017 WL 3326425 (Nev. Aug. 3, 2017), the court found the arbitrators did not exceed their power in exercising authority over non-signatories.

The dispute began when Half Dental Franchise filed an arbitration demand against Precision Dental Professionals and Robert Houchin (among others). They asserted breaches of contract and tort claims (including tortious interference with contract and usurping corporate opportunities). A three-arbitrator panel found that both those respondents were proper parties, and granted Half Dental about $6.7M in damage. Houchin filed a motion to vacate the arbitration award The district court granted the motion, finding that the arbitrators exceeded their power in finding authority over Houchin, and vacated the award.

On appeal, the Nevada Supreme Court found that the district court improperly conducted a de novo review of the arbitrator’s decision finding Houchin bound to the arbitration agreement by estoppel. (Precision Dental was also a non-signatory to the franchise agreement that the arbitrator found was bound to arbitrate based on estoppel.) The court noted that under Nevada’s state arbitration statutes, the district court should have asked simply whether there was “colorable justification for the outcome.” Finding that the arbitrator’s citation to contemporaneous documents provided at least colorable justification for estoppel, the appellate court found no basis for vacatur. The “colorable justification” standard was especially appropriate because the parties’ arbitration agreement contained a delegation clause, authorizing the arbitrator to “decide any questions relating in any way to the parties’ agreement or claimed agreement to arbitrate.” (Otherwise, the question of whether non-signatories are bound is presumptively for a court to determine.) For those reasons, the supreme court reversed the district court’s decision.

What’s the lesson here? It might be that dentistry is a very competitive field, but it is also that if an award is vacated at the trial court, it’s usually worth bringing an appeal.