Opinion
No. CV05 4004278-S
March 15, 2006
MEMORANDUM OF DECISION RE MOTION TO STAY JUDICIAL PROCEEDINGS AND PROCEED TO ARBITRATION, # 102
I. Background
The defendant seeks to stay these proceedings under General Statutes § 52-409, pursuant to an arbitration clause contained in a home improvement contract. The defendant's motion was granted on the papers by the court (Taylor, J.) on December 6, 2005. The plaintiffs filed a motion to reargue, which was granted, and the court held a hearing in this matter on March 6, 2006.
The plaintiffs object to the defendant's motion on several grounds, which the court will summarize as follows: First, they claim that the language of the arbitration clause is insufficient as a condition precedent to bringing this action in court. Second, the purported arbitration agreement is within a contract of adhesion and is therefore unenforceable. And third, the plaintiffs claim that it is unclear whether their CUTPA claim would be properly addressed by arbitration.
II. Discussion A. Sufficiency of Arbitration Clause
The court will first address the sufficiency of the language of the arbitration clause in this case, which provides as follows: "In the unlikely event that the customer has a dispute with FinalCoat, LLC, customer hereby agrees that the dispute shall be settled by arbitration." Similar language was reviewed by our Supreme Court in Multi-Service Contractors, Inc. v. Vernon, 181 Conn. 445, 446, 435 A.2d 983 (1980), and was found to be insufficient to require arbitration as a condition precedent to litigation. The specific language of the arbitration clause reviewed by the court was as follows: "all claims, disputes and other matters in question between the contractor and owner arising out of, or relating to, the Contract Documents or the breach thereof shall be decided by arbitration . . ." Id., 446.
"Where a contract contains a stipulation that the decision of arbitrators on certain questions shall be a condition precedent to the right of action on the contract itself, such a stipulation will be enforced and, until arbitration has been pursued or some sufficient reason given for not pursuing it, no action can be brought on the contract . . . Whether an agreement makes arbitration a condition precedent to an action in court depends on the language of the arbitration clause. While it is true that in the absence of express language a provision for arbitration may be construed, by implication, to be a condition precedent to suit that implication must be so plain that a contrary intention cannot be supposed. It must be a necessary implication. The mere agreement to arbitrate, standing alone, does not give rise to the necessary implication that arbitration is a condition precedent to an action in court. For arbitration to be a condition precedent, the agreement to arbitrate must expressly so stipulate, or it must necessarily be implied from the language used." (Internal citations omitted.) Id., 447-48.
In Multi-Service Contractors, the court considered a motion to dismiss. The trial court's dismissal of the case for lack of subject matter jurisdiction was set aside by the Supreme Court and remanded for further proceedings before the trial court, notwithstanding the arbitration clause. The rule in Multi-Service Contractors, however, does not clearly apply in this case where, instead of seeking a dismissal, one party simply seeks to stay the trial court proceedings pursuant to General Statutes § 52-409 and to enforce the arbitration agreement under General Statutes § 52-410.
In Multi-Service Contractors, there was no motion before the trial court to stay the proceedings; instead, the defendant sought a dismissal of the action because it claimed that the arbitration clause was a condition precedent to the court action. The court in Multi-Service Contractors also appears to have distinguished cases where "no application was filed to set the arbitration procedure in motion . . . and no relief was sought under § 52-410 to compel arbitration . . ." Multi-Service Contractors, Inc. v. Vernon, supra, 447-48. Under this reasoning, the specific arbitration agreement language presented here is sufficient to be enforceable.
In Mayron's Bake Shops, Inc. v. Arrow Stores, Inc., 149 Conn. 149, 152, 176 A.2d 574 (1961), the arbitration clause similarly read as follows: "In the event that any dispute shall arise hereunder or in relation to matters of payment or any matter or thing contained in this Agreement or in the rights or obligations of the parties hereto, such dispute shall be referred to arbitration . . ." Yet the court ignored the arbitration clause in that case.
B. Contract Of Adhesion
The court has taken no evidence in this case, and has made no determination as to whether the contract between the parties is one of adhesion. The contract in this case is a form contract for home improvements. The court, however, has no factual basis to determine at this time whether the form home improvement contract in this case is one of adhesion. Although an arbitrator could find and determine that there was no agreement to submit the dispute to arbitration, this argument is somewhat circular in nature.
For a discussion of whether void contracts may be the subject of arbitration, see Nussbaum v. Kimberly Timbers, Ltd., 271 Conn. 65, 856 A.2d 364 (2004). "We conclude that the plaintiffs' claim that the contract is unenforceable because of the defendant's alleged failure to comply with § 20-417d clearly is a claim arising out of or relating to" the contract. The claim is, therefore, arbitrable. Furthermore, the arbitration clause is in writing, as required under § 52-408, and the plaintiffs do not allege that the agreement to arbitrate is void for reasons that involve the formation of that agreement, such as duress, misrepresentation, fraud or undue influence. e.g., Dewart v. Northeastern Gas Transmission Co., 140 Conn. 446, 449, 101 A.2d 299 (1953) ("an arbitration agreement, like any other, can be declared void for fraud, misrepresentation, duress or undue influence"). Finally, the plaintiffs do not make a claim of any improprieties in the formation of the underlying contract that would render the arbitration agreement void. See International Brotherhood of Teamsters v. Shapiro, 138 Conn. 57, 60-65, 82 A.2d 345 (1951) (duress in formation of contract can serve as basis to render arbitration agreement void). Accordingly, we conclude that the plaintiffs' claim that the contract is unenforceable is within the scope of the arbitration clause and must be decided initially by the arbitrator."
The Appellate Court has recently addressed this issue in Salomon Smith Barney, Inc. v. Cotrone, 81 Conn.App. 755, 841 A.2d 1199 (2004), which is generally instructive in this case. "We begin by observing that § 52-408 evinces a public policy favoring arbitration as a vehicle for dispute resolution. It provides in relevant part that `[a]n 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, or out of the failure or refusal to perform the whole or any part thereof . . . to arbitrate any controversy which may arise between them in the future . . . shall be valid, irrevocable and enforceable, except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally.'
"General Statutes § 52-410(a) provides for the enforcement of such agreements. It provides in relevant part that `[a] party to a written agreement for arbitration claiming the neglect or refusal of another to proceed with an arbitration thereunder may make application to the superior court . . . for an order directing the parties to proceed with the arbitration in compliance with their agreement . . .' When confronted with such an application, the task of the court is to determine whether the parties did, in fact, enter into an agreement and whether the agreement provides for arbitration . . . Additionally, the issue of whether the parties to a contract have agreed to arbitration implicates their intention, an issue of fact for the court's determination . . . Consequently, a court's finding on the factual question of whether the parties to a contract have agreed to arbitration is subject to review under the clearly erroneous standard." (Citations omitted.) Id., 758-59. Notwithstanding this recitation of the law, the Appellate Court "agree[d] with the reasoning of those cases that have held that the question of whether the entire agreement containing an arbitration provision is a contract of adhesion is one for an arbitrator's determination and not, at this juncture, one for judicial review." Id., 761. The Appellate Court therefore affirmed the lower court's order to enforce the arbitration agreement, even though the plaintiff claimed that the contract was one of adhesion.
C. Arbitration Of Claims Under CUTPA
CUTPA claims are to be brought "in the judicial district in which the plaintiff or defendant resides . . . to recover actual damages . . . The court may, in its discretion, award punitive damages and may provide such equitable relief as it deems necessary or proper." General Statutes § 42-110g(a). The court may also award costs and a reasonable attorneys fee, based upon the work performed by the attorney. See General Statutes § 42-110g(d).
General Statutes § 42-110g(a) provides that: "Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action in the judicial district in which the plaintiff or defendant resides or has his principal place of business or is doing business, to recover actual damages. Proof of public interest or public injury shall not be required in any action brought under this section. The court may, in its discretion, award punitive damages and may provide such equitable relief as it deems necessary or proper."
Although the award of punitive damages, costs and attorneys fees are matters within discretion of the court, the arbitration statute allows parties "to settle by arbitration any controversy thereafter arising out of such contract . . ." General Statutes § 52-408. Although CUTPA claims are not contract actions, per se, CUTPA claims may arise out of the transactions between contracting parties and may be taken into consideration in an arbitration award. See MedValUSA Health Programs, Inc. v. MemberWorks, Inc., 273 Conn. 634, 662, 872 A.2d 423, (2005), (affirming an arbitration award of punitive damages under CUTPA).
General Statutes § 52-408 provides that: "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, or out of the failure or refusal to perform the whole or any part thereof, or a written provision in the articles of association or bylaws of an association or corporation of which both parties are members to arbitrate any controversy which may arise between them in the future, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable and enforceable, except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally."
III. Conclusion
The language of the arbitration clause is sufficient for this court to order the parties to proceed to arbitration, including the claim that this is a contract of adhesion as well as claims made under CUTPA.
The defendant has presented to the court a form home improvement contact, which includes the arbitration agreement language, and the plaintiff claims that it is a contract of adhesion, Pursuant to General Statutes § 52-408, written arbitration agreements are valid and enforceable "except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally."