Opinion
No. CV03 0102646 S
December 24, 2003
MEMORANDUM OF DECISION RE MOTION TO DISMISS
Count one of the plaintiff's complaint alleges that it contracted with the defendant Sheppard, Mullin, Richter, Hampton, LLP ("Sheppard, Mullin") to provide legal services in connection with litigation then pending in the courts of California. The plaintiff alleges that it was inappropriately billed by the defendant for its services and seeks a declaratory judgment declaring that Sheppard, Mullin's fees are not reasonable and establishing an appropriate value for Sheppard, Mullin's legal services to Zymol. Sheppard, Mullin has now moved to dismiss the complaint against it, contending, first, that because Sheppard, Mullin has no contacts with the state of Connecticut and has not consented to this court's exercise of jurisdiction, the court lacks personal jurisdiction over it; second, that this court lacks subject matter jurisdiction because the contract between the parties contains a mandatory arbitration provision; and, third, that the plaintiff has not obtained proper service of process upon Sheppard, Mullin in that the summons and complaint were delivered to a staff employee, rather than a partner, officer or other duly authorized agent for service of process.
While the motion to dismiss was pending, the third of these problems was cured when the plaintiff made proper service of the complaint, and at oral argument, Sheppard, Mullin agreed that it would not pursue this issue as a basis for the present motion. Because this court agrees with the defendant that it lacks subject matter jurisdiction, it is not necessary to address the issue of personal jurisdiction.
The fee agreement letter between the parties contains the following pertinent language:
CT Page 14430 If any dispute between us cannot be resolved through our discussions with each other, then you and we agree that all such disputes shall be resolved through arbitration as hereafter provided. This agreement is intended to apply to all disputes between us, whether over our fees (a "fee dispute") or concerning any other matter relating to our services or conduct including any claim that our services were not necessary, were inappropriate or were negligently rendered (an "other dispute"). By signing this agreement, you and we agree that neither of us can file a lawsuit or resort to court process regarding our disputes with each other, except to the extent that California Law provides for judicial review of arbitration proceedings. (Emphasis added.)
The fee agreement goes on to specify the forms which the arbitration may take, and, indeed, Zymol did initially institute arbitration proceedings with the Los Angeles County Bar Association. A hearing was scheduled and then postponed at the request of plaintiff's counsel. One day before the rescheduled date for the arbitration hearing, plaintiff's counsel announced that Zymol was withdrawing from the arbitration and instead filed the instant lawsuit. Sheppard, Mullin contends that in light of the specific terms of the contract between the parties and Connecticut's policy favoring arbitration, it is entitled to have the case dismissed. Zymol's position is that the present matter should be stayed pursuant to General Statutes Section § 52-409 and not dismissed.
It is well settled that the scope of the parties' obligation to arbitrate is defined by the language of the parties' arbitration agreement, and a party can be compelled to arbitrate a dispute "only if, to the extent that, and in the manner which, he has agreed to do so." White v. Kampner, 229 Conn. 465, 471 (1994). No one is under a duty to submit any question to arbitration except to the extent that he has signified his willingness. (Citations and quotation marks omitted.) Success Centers v. Huntington Learning Centers, 223 Conn. 761, 772 (1992). However, if there is an agreement by the parties to arbitrate their disputes prior to seeking judicial relief, such an agreement is binding, and a court should not countenance the filing of a lawsuit if arbitration proceedings have not first been brought and exhausted. "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." Kantrowitz v. Perlman, 156 Conn. 224, 227-28, 240 A.2d 891 (1968).
"Whether an agreement makes arbitration a condition precedent to an action in court depends on the language of the arbitration clause." Multi-service Contractors, Inc. v. Vernon, 181 Conn. 445, 447 (1980). While a mere agreement to arbitrate, standing alone, will not give rise to a determination that arbitration is a condition precedent to litigation, Kantrowitz v. Perlman, supra, 156 Conn. 228-29, the parties may, through the express language of the arbitration agreement, so stipulate. In the present case, the arbitration clause of the contract between the parties expressly provides that arbitration is a condition precedent to any right of action under the contract, and even then, the scope of the right to litigate after arbitration is extremely limited.
In their arbitration clause, the parties specifically contracted that "[b]y signing this agreement, you and we agree that neither of us can file a lawsuit or resort to court process regarding our disputes with each other except to the extent that California law provides for judicial review of the arbitration proceedings." This language is about as clear as it can possibly be. It unambiguously provides that arbitration is a condition precedent to the bringing of any action, and it specifically mandates that the only legal action that may be brought is for judicial review of the arbitration proceedings under California law. The parties' agreement to proceed with arbitration prior to instituting any action must therefore be enforced. Kantrowitz v. Perlman, supra, 156 Conn. 227. See also Hartford Accident and Indemnity Company et al. v. Ace American Reinsurance Company et al., Docket No. X02-CV-03-0178122 S, Superior Court, Complex Litigation Docket at Waterbury (September 23, 2003) (Alander, J.); Mcintosh v. Oxford Health Plans, Superior Court, complex litigation docket at Waterbury, Docket No. X01CV010165663S (Nov. 30, 2001) (Hodgson, J.), and Gavalis v. Wheeler, Superior Court, judicial district of Hartford at Hartford, Docket No. CV98-0584866 (January 13, 1999) (Fineberg, J.).
The plaintiff nonetheless argues that despite the clear language of the contract, this court should only stay this action pursuant to General Statutes § 52-409, rather than dismiss it. Section 52-409 provides that:
If any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate, the court in which the action or proceeding is pending, upon being satisfied that any issue involved in the action or proceeding is referable to arbitration under the agreement, shall, on motion of any party to the arbitration agreement, stay the action or proceeding until an arbitration has been had in compliance with the agreement, provided the person making application for the stay shall be ready and willing to proceed with the arbitration.
The plaintiff contends that this language is mandatory, but the same argument was addressed, and rejected in Hartford Accident and Indemnity Company et al. v. Ace American Reinsurance Company et al., supra. Although § 52-409 does state that the court "shall" stay litigation pending arbitration, that language does not apply when the parties' agreement unequivocally makes arbitration a condition precedent to any litigation, as does the agreement in this case. Judge Alander's thoughtful analysis is worth quoting in its entirety as it applies with equal force to this case:
Although the word "shall" normally expresses a mandatory duty, it does not invariably do so. Doe v. Statewide Grievance Committee, 240 Conn. 671, 681 (1997). "The test to be applied in determining whether a statute is mandatory or directory is whether the prescribed mode of action is the essence of the thing to be accomplished, or in other words, whether it relates to a matter of substance or a matter of convenience . . . If it is a matter of substance, the statutory provision is mandatory. If, however, the legislative provision is designed to secure order, system and dispatch in the proceedings, it is generally held to be directory, especially where the requirement is stated in affirmative terms unaccompanied by negative words." (Citations omitted.) Santiago v. State, 261 Conn. 533, 540 (2002). Section 52-409 relates to a matter of procedure designed to secure the orderly adjudication of matters appropriately referable to arbitration. The requirement of issuing a stay is also stated in affirmative terms unaccompanied by negative words or negative consequences. Consequently, the statute's instruction to the court to issue a stay of court proceedings until an arbitration has been held is directory. Moreover, a dismissal of the court action so that the parties here can pursue the resolution of their dispute though arbitration as mandated by their arbitration agreement is consistent with the purpose underlying § 52-409. The statute seeks to insure that arbitrable issues are resolved by arbitration. The objective of a dismissal in this case would be to require the parties to adhere to their agreement to arbitrate their dispute prior to the initiation of any court action. A stay of a court action is appropriate in cases in which the parties have agreed to arbitrate disputes but have not agreed that arbitration shall be a condition precedent to instituting a lawsuit. Mcintosh v. Oxford Health Plans, Superior Court, complex litigation docket at Waterbury, Docket No. X01CV010165663S (Nov. 30, 2001) (Hodgson, J.). A stay is not appropriate where the parties have expressly agreed that, as a condition precedent to any right of action, including the filing of an action in court, arbitration must first be had. Otherwise, the very result expressly prohibited by the parties, the existence of a lawsuit prior to arbitration, will be allowed to stand.
For all of the above reasons, Sheppard, Mullin's motion to dismiss the complaint against it is granted.
JONATHAN E. SILBERT, JUDGE.