Opinion
No. CV 04-0831432
July 15, 2004
MEMORANDUM OF DECISION
On January 21, 2004, the plaintiff, Greater Faith Deliverance Church, Inc. (Church, Inc.), filed an application to vacate an arbitration award favoring the defendant, Designtec, Inc. (Designtec), pursuant to General Statutes § 52-418 and Practice Book § 23-1. The application listed five grounds in support of the request: (a) lack of subject matter jurisdiction because there was no agreement to arbitrate between Church, Inc. and Designtec; (b) lack of authority to arbitrate because the arbitration was incorrectly initiated; (c) nonconformity of the award to the arbitration submission; (d) lack of jurisdiction due to the fact that the underlying contract was the product of fraud in the inducement; and (e) deprivation of Church, Inc.'s right to due process. On January 22, 2004, Designtec filed an application to confirm the arbitration award. At a March 22, 2004 hearing, the court ordered Church, Inc. and Designtec to submit memoranda of law on April 22, 2004 and May 7, 2004, respectively. The parties met the schedule and a hearing was held on May 18, 2004.
The January 22, 2004 application to confirm the arbitration award, docket number CV 04 0525326, was filed in the judicial district of New Britain. The matter was transferred to this judicial district on February 23, 2004 and was redesignated as docket number CV 04 0832583. The application to confirm is now pending before this court, along with the application to vacate which is designated docket number CV 04 0831432.
The documents submitted with Designtec's application to confirm the arbitration award, as well as the memoranda of law submitted by both parties, reveal the following undisputed facts: On June 7, 2002, the parties entered into a standard form contract published by the American Institute of Architects and identified as the Part 1 agreement. This contract dealt with the design phase of renovations to church property. Designtec's proposal at the signing of the Part 1 agreement was $199,433. By September 2002, the proposed costs had risen to $283,820. The Part 2 agreement, which reflected this higher estimate, was signed by the parties on September 9, 2002. Designtec sent invoices under the Part 2 agreement and, after failing to receive payment, stopped work.
The Part 1 and Part 2 agreements are between Designtec and Greater Faith Word Changing Ministries (Ministries), signed by the president of Designtec and by a Reverend Pettaway. Church, Inc.'s memorandum of law explains that Church, Inc. is sometimes referred to as the Greater Faith Word Changing Ministries. Church, Inc. further asserts, however, that Ministries is a separate unincorporated religious association. Both Church, Inc. and Ministries are directed by Pettaway. Under the facts of this case, whether Pettaway claims to have been representing Church, Inc. or Ministries when he signed various documents is a distinction without a difference. The issue was considered by the arbitrator who found that Ministries and Church, Inc. are "one and the same." As discussed below, the arbitrator had subject matter jurisdiction. See Two Sisters, Inc. v. Gosch Co., 171 Conn. 493, 370 A.2d 1020 (1976).
Article 10 of the Part 2 agreement provides: "Claims, disputes or other matters in question between the parties to this Part 2 Agreement arising out of or relating to this Part 2 Agreement or breach thereof shall be subject to and decided by mediation or arbitration." In an August 20, 2003 letter addressed to Designtec's attorney, Church, Inc. agreed to waive mediation and proceed to arbitration. In an October 1, 2003 letter, Church, Inc. requested that the American Dispute Resolution Center commence arbitration and sought the release of a mechanic's lien placed on its property by Designtec, release of all other claims, and $16,087.12 in damages. Designtec filed an answer and counterclaim seeking damages in the amount of $92,930. Designtec also denied at that point that it had an agreement to arbitrate with Church, Inc.
Following a one day arbitration hearing, the arbitrator entered an award, dated December 18, 2003. The arbitration award denied Church, Inc.'s claims and granted Designtec's claim for damages for breach of contract in the amount of $64,235.75. The arbitrator further found that "[c]laimant, Greater Faith Deliverance Church, Inc., and the contracting party, Greater Faith Word Changing Ministries, are one and the same. Therefore, this award, in favor of Respondent, Designtec, Inc., shall be enforceable against Claimant, Greater Faith Deliverance Church, Inc." The parties were notified of the award on or about December 23, 2003, and the parties' applications concerning the award have been timely filed.
"Our statutes do not require any particular words or form to create an arbitration agreement." Jacob v. Seaboard, Inc., 28 Conn. App. 270, 273, 610 A.2d 189, cert. denied, 223 Conn. 923, 614 A.2d 822 (1992). General Statutes § 52-408 provides that written arbitration agreements "shall be valid, irrevocable and enforceable, except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally."
"[T]he law in this state takes a strongly affirmative view of consensual arbitration . . . Arbitration is a favored method to prevent litigation, promote tranquility and expedite the equitable settlement of disputes . . . As a consequence of our approval of arbitral proceedings, our courts generally have deferred to the award that the arbitrator found to be appropriate." (Internal quotation marks omitted.) International Brotherhood of Police Officers, Local 361 v. New Milford, 81 Conn. App. 726, 729, 841 A.2d 706 (2004). "Judicial review of arbitral decisions is narrowly confined . . . When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of [the courts'] judicial review of the award is delineated by the scope of the parties' agreement . . . When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission . . . Because [the courts] favor arbitration as a means of settling private disputes . . . judicial review of arbitration awards [is undertaken] in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution." (Citation omitted; internal quotation marks omitted.) State v. New England Health Care Employees Union, District 1199, AFL-CIO, 265 Conn. 771, 777, 830 A.2d 729 (2003).
"These well established principles governing consensual arbitration are subject to certain exceptions. Even in the case of an unrestricted submission, [Connecticut courts] have, however, recognized three grounds for vacating an award: (1) the award rules on the constitutionality of a statute . . . (2) the award violates clear public policy . . . or (3) the award contravenes one or more of the statutory proscriptions of § 52-418." (Citations omitted; internal quotation marks omitted.) Stratford v. International Assn. of Firefighters, AFL-CIO, Local 998, 248 Conn. 108, 116, 728 A.2d 1063 (1999). General Statutes § 52-418 allows that an arbitration award may be vacated under subsection (a)(1) if the award has been procured by corruption, fraud or undue means and under subsection (a)(4) if the arbitrators have exceeded their powers. It is on these two subsections that Church, Inc.'s argument relies.
Designtec argues that Church, Inc. has misread General Statutes § 52-418(a)(1) in that the corruption, fraud or undue means which may result in vacating an arbitration award under the statute relate to conduct during the arbitration itself rather than the process by which the parties agreed to arbitrate. The court does not need to reach this issue because, as discussed below, Church, Inc. has not alleged corruption, fraud or undue means relating to the arbitration clause itself.
In its memorandum of law in support of the application to vacate, Church, Inc. states that, although it asserted numerous grounds in its application, it will now proceed on only one of its claims: the arbitrator lacked subject matter jurisdiction to hear the dispute since there was no valid contract or agreement to arbitrate between the parties. Church, Inc. argues that the Part 2 agreement was a product of "fraud or undue means" and that, under §§ 52-408 and 52-418(a)(4), the arbitration award is invalid because it was based upon an invalid agreement of submission. Alternatively, Church, Inc. argues that there was no meeting of the minds as to the Part 2 agreement and therefore the contract, and the arbitration clause within the contract, is void as a matter of law.
The Supreme Court of Connecticut addressed a motion to vacate an arbitration award based upon a claim that the contract containing the agreement to arbitrate was induced by fraud in Two Sisters, Inc. v. Gosch Co., 171 Conn. 493, 370 A.2d 1020 (1976). There, following notification of an arbitration hearing, the plaintiffs sought in the Superior Court to rescind the contract at issue based upon a claim of fraud. The arbitrator refused to delay the arbitration hearing and, after the plaintiffs failed to participate, an award was issued in favor of the defendant. The Superior Court refused to vacate the arbitration award and the plaintiffs appealed. The Supreme Court held that "[s]ince the plaintiffs failed to allege fraud which materially affected their decision to resolve any disputes under this contract through arbitration, there was no error in the court's conclusion that the plaintiffs' claim of fraudulent inducement was for the arbitrator." Id., 498. In support of its decision, the court cited Prima Paint Corp. v. Flood Conklin Mfg. Co., 388 U.S. 395, 402-04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), in which the Supreme Court of the United States also held that, under the United States Arbitration Act of 1925, 9 U.S.C. § 1-14, arbitration clauses are separable from the contracts in which they are embedded, except where the parties otherwise intend, and that where no claim is made that fraud was directed to the arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud. A number of state courts, dealing with arbitration statutes which are similar to or the same as Connecticut's statute, have also followed the rule in Prima Paint. See Ericksen, Arbuthnot, McCarthy, Kearney Walsh, Inc. v. 100 Oak Street, 35 Cal.3d 312, 673 P.2d 251, 197 Cal.Rptr. 581 (1983) (citing, inter alia, Two Sisters, Inc. v. Gosch Co., supra, 171 Conn. 493); Quirk v. Data Terminal Systems, Inc., 379 Mass. 762, 400 N.E.2d 858 (1980) (same); Weinrott v. Carp, 32 N.Y.2d 190, 298 N.E.2d 42, 344 N.Y.S.2d 848 (1973) (noting that judicial intervention in arbitration matters based upon a nonseparability contract theory prolongs litigation and defeats two of arbitration's primary virtues, speed and finality).
Like General Statutes section 408, section 2 of the United States Arbitration Act of 1925, 9 U.S.C. § 1-14, provided that an arbitration agreement "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
In Boylan v. Logan, 60 Conn. App. 714, 760 A.2d 1032 (2000), cert. denied, 255 Conn. 927 (2001), the Appellate Court of Connecticut applied the Two Sisters rule and concluded that the Superior Court properly denied a motion to vacate an arbitration award. The court stated that where "a contract contains a broadly worded arbitration clause, as does the contract in the present case, then the clause reflects the parties' general desire to settle any disputes relating to their contract speedily and finally through arbitration, including claims of fraudulent inducement." (Internal quotation marks omitted.) Id., 716. Similar to Article 10 in the Part 2 agreement, the arbitration clause in Boylan provided: "Any controversy or claim arising out of or related to this Agreement, or the breach thereof, shall be settled by arbitration . . ." (Internal quotation marks omitted.) Id., 715 n. 1.
In its memorandum of law in support of its application to vacate the arbitration award, Church, Inc. has not argued that the arbitration clause was an essential part of the alleged fraud. Therefore, the arbitration agreement under which the award was issued is valid and the arbitrator had subject matter jurisdiction.
Similarly, Church, Inc. does not argue that there was no meeting of the minds with respect to the arbitration clause. Under the Two Sisters reasoning which treats arbitration clauses as separable from the contracts in which they are embedded, the arbitration agreement under which the award was issued is valid and Church, Inc's argument regarding subject matter jurisdiction fails.
Based upon the foregoing, Church, Inc's application to vacate the arbitration award (Docket No. CV 04 0831432) is hereby denied and Designtec's application to confirm the award (Docket No. CV 04 0832583) is hereby granted.
BY THE COURT
Kevin E. Booth, J.