Opinion
No. CV 09 4011645
January 14, 2011
COURT'S RULING ON APPLICATION TO CONFIRM ARBITRATION AWARD (#101)
The plaintiff, Criterion Flooring Systems, LLC, commenced the present action against the defendant, Oxford Ambulance Association, Inc., by an application to confirm an arbitration award pursuant to General Statutes § 52-417 on May 13, 2009.
General Statutes § 52-417 provides: "At any time within one year after an award has been rendered and the parties to the arbitration notified thereof, any party to the arbitration may make application to the superior court for the judicial district in which one of the parties resides or, in a controversy concerning land, for the judicial district in which the land is situated or, when the court is not in session, to any judge thereof, for an order confirming the award. The court or judge shall grant such an order confirming the award unless the award is vacated, modified or corrected as prescribed in Sections 52-418 and 52-419."
In its application to confirm, the plaintiff alleged that it "entered into a written agreement for arbitration" with the defendant, and that "[o]n May 14, 2008, the arbitrator, pursuant to the agreement, made a written award." In support of its application to confirm, the plaintiff submitted a proposal for construction services dated September 4, 2007, the written award of an American Arbitration Association arbitrator dated May 14, 2008, and a copy of a letter of May 14, 2008, from the American Arbitration Association notifying the plaintiff and defendant of the arbitration award.
The proposal that the plaintiff submitted consists of two pages and is dated June 15, 2007. The document provides, in relevant part: "Proposal Date: September 4, 2007 Firm proposals are good for six (6) months . . ." We hereby submit specifications and estimate for floor preparation and application of an epoxy/urethane floor coating system to approximately 1,902 square feet of floor area in your AMBULANCE BAYS facility, including: LAUNDRY AND TANK RMS. area(s)." The proposal goes on to lay out specific procedures to be performed by the plaintiff, and then states: "We hereby propose to furnish Labor and Materials Complete in accordance with the above specifications: For the Sum of: $10,461.00. A 1/3 Deposit of: $3,452.00 IS REQUIRED FOR MATERIALS AND TO HOLD A CONFIRMED STARTING DATE. Balance due of: $7,009.00 upon completion of the job and given to the foreman."
Page two of the plaintiff's proposal lists several "floor options" available to the defendant for an additional price, and then goes on to state certain "Terms and Conditions, which provide, in relevant part: "The signed proposal, deposit and moisture test(s) must be received 14 days prior to your scheduled floor installation date unless other arrangements have been made . . . Any proposed claims from arising disputes that cannot be resolved shall be submitted to the American Arbitration [Association] for determination in the State of Maryland in accordance with the commercial industry rules of the American Arbitration Association. The determination of the arbitrator shall be final and binding on all parties entitled to payment hereunder. The nonprevailing party shall be responsible for all cost and expenses of the arbitration (including, but not without limitation to, any and all reasonable attorneys fees and disbursements."
At the bottom of page two of the plaintiff's proposal is a signature line, which provides:
Proposal Total Cost: $10,461.00 SALES REPRESENTATIVE: Richard Wright Accepted By:________ Title:__________ Date:_______
Thus, the plaintiffs proposal is unsigned by the defendant.
The arbitrator's award of May 14, 2008 provides, in relevant part: "I, the undersigned arbitrator, having been designated in accordance with the arbitration agreement entered into by the parties and signed by Gary L. McEwen of Respondent Oxford Ambulance Company of June 15, 2007, and having been duly sworn and the oral hearings having been waived in accordance with the Rules, and having fully reviewed and considered the written documents submitted to me by the parties and Respondent Oxford Ambulance Company having failed to participate in a telephone Preliminary Hearing and Scheduling Order conference on October 15, 2007 and a second scheduled telephone conference on April 15, 2008, award, as follows:
"Oxford Ambulance Company shall pay Criterion Flooring Systems, LLC the sum of $9,086.66, and, as permitted under AAA Commercial Rule 43(d)(I), Maryland statutory interest running from the date of this award is paid in full." The award goes on to impose costs, fees and expenses of the arbitration on Oxford Ambulance Association, Inc.
The plaintiff also filed two additional documents with the court: 1) a pre-hearing brief on September 29, 2010, requesting that the court take judicial notice of the American Arbitration Association's Commercial Arbitration Rules; and 2) a supplemental brief regarding the plaintiff's corporate status with "documentation from the Secretary of State's online C.O.N.C.O.R.D. database, indicating that the plaintiff is, in fact, registered to conduct business in the state."
The defendant filed an objection to the plaintiff's application on September 3, 2010 and a memorandum of law in support thereof on September 15, 2010. The plaintiff filed a memorandum in reply to the defendant's objection on September 10, 2010. As provided for by General Statutes § 52-420(a), the court heard oral argument on the plaintiff's application at short calendar on September 13, 2010. On September 30, 2010, the court held an evidentiary hearing to receive evidence on the limited issue of the existence of the agreement to arbitrate in the defendant's written submissions to the arbitrator.
General Statutes § 52-420(a) provides: "Any application under Section 52-417, 52-418 or 52-419 shall be heard in the manner provided by law for hearing written motions at a short calendar session, or otherwise as the court or judge may direct, in order to dispose of the case with the least possible delay."
At the evidentiary hearing on September 30, 2010, Jerry Schwab, the president and executive director of the defendant, testified that upon receipt of the plaintiff's notice of arbitration, he contacted the arbitrator and made clear his belief that there was no binding contract that would compel the defendant to arbitrate the plaintiff's dispute. The plaintiff, however, did participate in the arbitration proceedings, which the arbitrator conducted on the papers with reference only to the evidence submitted by the plaintiff. The proposal of June 15, 2007 was of primary significance in the plaintiff's submission. That document laid out the rights and responsibilities of both the plaintiff and the defendant, and provided for arbitration as the sole means of dispute resolution.
At the evidentiary hearing on September 30, 2010, the plaintiff entered its full submission to the arbitrator as an exhibit. The court, however, does not rely on this exhibit in reaching its decision.
Specifically, a paragraph entitled "Terms and Conditions" appears above the signature lines on the second page of the proposal. That section provides, in relevant part: "Any proposed claims from arising disputes that cannot be resolved shall be submitted to the American Arbitration [Association] for determination in the State of Maryland in accordance with the commercial industry rules of the American Arbitration Association. The determination of the arbitrator shall be final and binding on all parties entitled to payment hereunder. The nonprevailing party shall be responsible for all cost and expenses of the arbitration (including, but not without limitation to, any and all reasonable attorneys fees and disbursements)." The proposal is signed by Richard Wright, the plaintiff's sales representative, but the signature line that follows the words "accepted by" is blank.
"An agreement in any written contract, or in a separate writing executed by the parties to any written contract, to settle by arbitration any controversy thereafter arising out of such contract . . . shall be valid, irrevocable and enforceable, except when there exists cause at law or in equity for the avoidance of written contracts generally." General Statutes § 52-408. Accordingly, the scope of judicial review of an arbitral award upon an application to confirm is extremely narrow.
"The process which governs the confirmation of arbitral awards is well settled by our cases. If the parties have agreed in the underlying contract that their disputes shall be resolved by arbitration, the arbitration clause in the contract is a written submission to arbitration." Vail v. American Way Homes, Inc., 181 Conn. 449, 451, 435 A.2d 993 (1980), citing Gores v. Rosenthal, 150 Conn. 554, 557, 192 A.2d 210 (1963). Upon application to the Superior Court for the judicial district in which one party to the arbitration resides, the "court or judge shall grant such an order confirming the award unless the award is vacated, modified or corrected as prescribed in Sections 52-418 and 52-419." General Statutes § 52-417.
The enumerated statutory grounds upon which a court may vacate an award are limited to situations where the award "has been procured by corruption, fraud or undue means . . . if there has been evident partiality or corruption on the part of any arbitrator . . . if the arbitrators have been guilty of misconduct in refusing to postpone the hearing . . . or in refusing to hear evidence pertinent and material to the controversy . . . [or] if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made." General Statutes § 52-419. A party also has the right to "assert common-law contract defenses to attack the validity of an agreement to arbitrate." M.B.N.A. Bank, N.A. v. Boata, 283 Conn. 381, 394, 926 A.2d 1035 (2007).
The defendant, in its objection to the plaintiff's application to confirm, argues that it "never signed a written agreement with the plaintiff that provided for arbitration as required by . . . General Statutes § 52-408." The defendant also argues that the "plaintiff never completed the work and has admitted the defect in the installation which repair is necessary to complete the work in the unsigned proposal" and that the "plaintiff was not without recourse as it could have instituted legal action against the defendant upon several theories of liability which would have [given] the defendant the opportunity to address the issues related to the defective workmanship admitted by the plaintiff." The plaintiff responds, in its reply memorandum to the defendant's objection that "[a]s a matter of law, the defendant is simply incorrect that [General] Statutes § 52-408 requires a signature on the arbitration agreement itself." Moreover, the plaintiff maintains that the "arbitrator's factual conclusion — that [the] defendant entered into the arbitration agreement on June 15, 2007 — is no longer subject to review." Lastly, the plaintiff contends that the defendant waived its right to object to the arbitral award when it did not file a timely motion to vacate, modify or correct an award under General Statutes § 52-420.
At the outset, it is important to note that the procedural avenue that the defendant selected to raise its challenge to the arbitral award, although not preferred, is proper. International Board of Teamsters v. Shapiro, 138 Conn. 57, 65, 82 A.2d 345 (1951). While "[t]he . . . challenge of the [arbitrator's] power to act . . . should ordinarily be resolved before a hearing on the merits of a submission is had"; Id., 66; "[u]ntil an adjudication is had, an award by arbitrators appointed under a contract . . . may be challenged whenever it is relied upon as a source of rights and duties. Id., 65; M.B.N.A. Bank, N.A. v. Boata, 283 Conn. 381, 392-93, 926 A.2d 1035 (2007).
The bedrock principle of commercial arbitration is that: "The duty to arbitrate may be created by contract. But a party cannot be compelled to arbitrate a dispute unless he has contracted to do so." Frager v. The Pennsylvania General Ins. Co., 155 Conn. 270, 274, 231 A.2d 531 (1967). General Statutes § 52-408 presupposes a valid "agreement . . . to settle by arbitration." "It is the province of the parties to set the limits of the authority of the arbitrators, and the parties will be bound by the limits they have fixed . . . The arbitration provision in an agreement is, in effect, a separate and distinct agreement. Courts of law can enforce only such agreements as the parties actually make . . . The parties may, if they choose, confide to arbitrators the decision of legal as well as factual disputes . . . When they do so, the arbitrators may have the authority to interpret the provisions of the agreement which are involved in, or applicable to, the facts of the dispute submitted." Conn. Union of Telephone Workers v. So. N.E. Telephone Co., 148 Conn. 192, 198 (1961). The arbitration agreement itself need not be signed, and may be severable from the contract itself. General Statutes § 52-408; see Schwartzschild v. Martin, 191 Conn. 316, 321, 464 A.2d 774 (1983).
In the present case, the plaintiff contends that the defendant was bound by the Commercial Arbitration Rules of the American Arbitration Association to lodge its objection as to the lack of an agreement to arbitrate and the lack of a binding contract with the arbitrator in writing and, thereafter, preserve the objection for review by the Superior Court. The plaintiff argues that the defendant's failure to participate in the arbitration proceedings precludes the defendant from raising that objection in response to the plaintiff's application to confirm. The plaintiff's argument implies that, in the present case, the authority to decide the issue of contract formation was vested in the arbitrator by the arbitration clause contained in the proposal.
American Arbitration Association Commercial Arbitration Rules R-7 provides: (a) The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement. (b) The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part. Such an arbitration clause shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitrator that the contract is null and void shall not for that reason alone render invalid the arbitration clause. (c) A party must object to the jurisdiction of the arbitrator or to the arbitrability of a claim or counterclaim no later than the filing of the answering statement to the claim or counterclaim that gives rise to the objection. The arbitrator may rule on such objections as a preliminary matter or as part of the final award.
The defendant, in its objection to the plaintiff's application to confirm, argues that because the proposal was unsigned, the arbitrator was devoid of any authority to act. The defendant maintains that, absent a validly formed agreement to arbitrate, the issue is not one of arbitrability, but of contract formation. Therefore, the defendant argues that the plaintiff's reliance on White v. Kampner, 229 Conn. 465, 472, 641 A.2d 1381 (1994) and its progeny is misplaced insofar as those cases require a party objecting to the arbitrability of a dispute to preserve their objections in order to raise them as a shield upon an application to confirm.
Where a properly formed contract containing an arbitration clause does not exist, the arbitrator lacks the authority to decide both the issue of contract formation and the issue of arbitrability. See International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America, Local Union No. 677 v. Trudon and Platt Motor Lines, Inc., 146 Conn. 17, 23, 147 A.2d 484 (1958); 1 M. Domke, Domke on Commercial Arbitration (3d Ed. 2008) § 8:4, p. 8-6— 8-7 ("[W]hen the parties fail to agree on all the essential terms of a contract, there is no contract and an arbitration clause cannot be invoked"). For, "[a]lthough the courts of this state encourage arbitration as a means of alternative dispute resolution, there are limits to this policy. Arbitration is a creature of contract, and without a contractual agreement to arbitrate, there can be no arbitration . . . No one can be directed to arbitrate a dispute who has not previously agreed to do so . . ." (Citations omitted; internal quotation marks omitted.) Scinto v. Sosin, 51 Conn.App. 222, 721 A.2d 552 (1998).
"The decision of the arbitrators was, by the specific terms of the agreement, final and binding on both parties, but the arbitrators, in making the award, could not exceed their powers . . . If the dispute arose while the agreement was operative, the arbitrators had jurisdiction to decide it. Whether the agreement expired . . . or continued to be in effect when the . . . dispute arose . . . was a jurisdictional issue necessarily involved in the decision of the arbitrators." (Citation omitted; internal quotation marks omitted.) International Brotherhood of Teamsters, Chauffers, Warehousemen, and Helpers of America, Local Union No. 677 v. Trudon and Platt Motor Lines, Inc., supra, 146 Conn. 23 (interpreting a labor contract containing an arbitration clause).
"If the dispute is whether the contract which contains the clause has ever been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into the contract is thereby denying that he has ever joined the submission." Batter Building Materials Co. v. Kirschner, 142 Conn. 1, 9, 110 A.2d 464 (1954); citing Heyman v. Darwins, Ltd., [1942] A.C. 356, 366 (H.L.) (U.K.) and Woolf v. Collis Removal Service, [1948] 1 K.B. 11, 16 (H.L.) (U.K.); see Chastain v. Robinson-Humphrey Co., Inc., 957 F.2d 851, 854 (11th Cir. 1992) ("[W]hen it is undisputed that the party seeking to avoid arbitration has not signed any contract requiring arbitration . . . that party is challenging the very existence of any agreement, including the existence of an agreement to arbitrate . . . If a party has not signed an agreement containing arbitration language, such a party may not have agreed to submit grievances to arbitration at all. Therefore, before sending any such grievances to arbitration, the district court itself must first decide whether or not the non-signing party can nonetheless be bound by the contractual language"). "The issue of whether the parties to a contract have agreed to arbitration is controlled by their intention . . . The intention of the parties is, in turn, a question of fact." A. Dubreuil Sons, Inc. v. Lisbon, 215 Conn. 604, 608-09, 577 A.2d 709 (1990).
The cases upon which the plaintiff relies for its contention that the arbitrator has the authority to decide the issue of contract formation rest on the principle under Connecticut that parties may confer authority on an arbitrator to determine the issue of arbitrability by the use of broad language. White v. Kampner, supra, 229 Conn. 472; Bodner v. United Services Automobile Assn., 222 Conn. 480, 610 A.2d 1212 (1992); Two Sisters, Inc. v. Gosch and Co., 171 Conn. 493, 497, 370 A.2d 1020 (1976). That principle requires that the parties have conferred some authority upon an arbitrator. See M.B.N.A. Bank, N.A. v. Boata, supra, 283 Conn. 383 (requiring defendant to preserve properly an objection to arbitrability where plaintiff argued that arbitration agreement arose when defendant did not opt out of amendment to preexisting credit card agreement); M.B.N.A. Bank, N.A. v. Bailey, 104 Conn.App. 457, 467, 934 A.2d 316 (2007) (plaintiff argued that arbitration agreement arose when defendant did not opt out of amendment to preexisting credit card agreement and defendant did not preserve properly an objection to arbitrability where defendant did not appear or participate in arbitration in any way). Parties to a dispute may also empower an arbitrator to determine arbitrability by manifest consent. Bacon Construction Co. v. Department of Public Works, CT Page 2614 294 Conn. 695, 711, 987 A.2d 348 (2010). The plaintiff's argument, however, presupposes that the arbitrator had the authority to bind the defendant in some way. The plaintiff's argument would be compelling were the present case factually analogous to M.B.N.A. Bank, N.A. v. Boata, supra, 283 Conn. 381 or M.B.N.A. Bank, N.A. v. Bailey, supra, 104 Conn.App. 457. In the present case, however, it is undisputed that the defendant never signed the proposal that contains the arbitration clause.
M.B.N.A. Bank, N.A. v. Boata, supra, 283 Conn. 381, arose on identical procedural grounds as the present case. Id., 382-83. The issue in that case was whether the Appellate Court had properly concluded "that the defendant had preserved his right to challenge the arbitrability of the plaintiffs claim." The court held that the defendant was entitled to challenge the arbitrator's determination of arbitrability, so long as he had not waived the issue by failing to participate in the arbitration or consenting to the arbitration of the issue-thereby mooting the question of the arbitrator's authority. Id., 395. Unlike the present case, in Boata, the parties did not contest the issue of whether they had entered into the underlying contract.
Schwab testified at the September 30, 2010 evidentiary hearing that he had never seen the unsigned proposal until shortly before the commencement of the arbitration proceedings. Schwab further testified that "when we received notice [of the arbitration] . . . I contacted the arbitrator and advised him that there was no agreement that [bound] us to this arbitration and that we weren't going to pay the fee, nor were we going to participate." The court finds that the defendant did not participate in the arbitration proceedings in any way after this communication. Instead of submitting evidence that would show the mutual intention of both parties to enter into the proposal as it existed with the arbitration clause, the plaintiff relies on the arbitrator's finding that there was an "arbitration agreement entered into by the parties and signed by Gary L. McEwen of Respondent Oxford Ambulance Company of June 15, 2007."
The court finds that the unsigned proposal proffered by the plaintiff did not form a binding contract between the parties because it does not reflect a mutual agreement as to its material terms, including the arbitration clause. While the arbitration agreement itself need not be signed and may be severable from the contract itself, some basis for arbitral authority must exist. Where the mutual intent to commit a dispute to arbitration is absent, the arbitrator is never empowered with the authority to act.
For the foregoing reasons, the plaintiff's application to confirm the arbitration award is denied.