Articles Posted in Arbitration & Mediation

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Defendant Extreme Contracting, LLC appealed a trial court’s order granting a default judgment to plaintiff Hermitage Inn Real Estate Holding Co., LLC in a contract dispute. The court held defendant responsible for enforcing a mandatory arbitration clause in the parties’ contract and ordered defendant to “initiate” arbitration by a certain date. When defendant failed to do so, the court considered this a failure to obey a “scheduling order” under Vermont Rule of Civil Procedure 16.2, and as a sanction, it granted a default judgment to plaintiff under Rule 37(b)(2)(C). Defendant argued, among other things, that a default judgment was inappropriate here. It contended that the court should have granted its motion to dismiss plaintiff’s suit given the mandatory arbitration provision, and that as the defendant, it should not have been required to “initiate” arbitration. It also argued that the court erred in denying its motion to vacate the default judgment. After review, the Vermont Supreme Court agreed the court erred, and based on that order ultimately granted a sanction unsupported by the facts and the law. The Court reversed the trial court’s decision and remanded for entry of an order requiring plaintiff to initiate arbitration or face dismissal of its suit. View "Hermitage Inn Real Estate Holding Co., LLC v. Extreme Contracting, LLC" on Justia Law

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The Burlington Administrators’ Association and Nicolas Molander (collectively the Association) appealed a trial court’s confirmation of an arbitration decision that Molander, in his capacity as an interim assistant principal, was not entitled to the contractual and statutory protections applicable to regular assistant principals who were not hired on an interim or acting basis. In particular, they challenged the trial court’s conclusion that it had no authority to review the merits of the arbitrator’s ruling for “manifest disregard of the law,” and argued that in this case, the arbitrator’s ruling evinced such a disregard. Because the Supreme Court concluded that the arbitrator’s award did not in any event reflect a manifest disregard of the law, it did not address the question whether the trial court had authority to review an arbitration award under such a standard. Accordingly, the Supreme Court affirmed. View "Burlington Administrators' Ass'n v. Burlington Bd. of School Comm'rs" on Justia Law

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In 1997, the Village of Derby Center and the City of Newport entered into a contract whereby the Village would supply 10,000 gallons of water per day to the City. The City claimed that the contract did not authorize the Village to adopt a new rate schedule in 2006 that included a ready-to-serve fee on top of actual water usage charges. The Village counterclaimed, alleging that the City connected customers who were not authorized under the contract, and that the City’s water use was chronically underreported due to equipment malfunction. After a trial, the superior court ruled for the City on its contract claim, holding that the ready-to-serve fee was not authorized by either contract or statute. As to the Village’s counterclaims, the court found that there was insufficient evidence to support the unauthorized-connection claim, and referred the water-usage-reconstruction claim to mediation. The Village appealed on all counts. The Supreme Court found: the plain language of the agreement authorized the use of a ready-to-serve fee to support the Village’s maintenance of its facilities. "The court erred in concluding otherwise." With respect to the Village's counterclaims, the Supreme Court found that the trial court indicated that it was clear, based on the billing periods showing a reading of zero usage by the City, that there were some erroneous readings, but it referred the Village’s claims to mediation without further resolution. After the City brought suit, the Village filed a motion to allow its counterclaim as to the underreported usage, which the trial court granted. The trial court’s decision to refer the Village’s counterclaim to mediation in its order, after it had already granted the Village’s motion to allow the counterclaim at trial, served only to create greater delay and expense to the parties, thus undermining the purpose of the alternative dispute resolution clause. "Even if the trial court would ordinarily have discretion over whether to send a counterclaim to mediation, under these circumstances the trial court could not properly rescind its decision, relied on by the parties, to allow the counterclaim after the trial had already taken place. Therefore, we remand the Village’s counterclaim for resolution by the trial court." View "City of Newport v. Village of Derby Center" on Justia Law

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This issue before the Supreme Court in this case arose from a dispute between a general partner and limited partners over the proceeds from the dissolution of their partnership. Appellant Alfred Lunde sought to reverse an arbitration award and a trial court order that assessed attorney’s fees and receivership fees and costs against his share of the partnership assets. The partnership agreement was for a thirty-year term that expired on December 31, 2009. At that time, the general partner was to liquidate the partnership’s assets “as promptly as is consistent with obtaining the fair value thereof.” The agreement called for fifty percent of the net proceeds to be distributed to the general partner and the remainder to be distributed to the limited partners. The partnership agreement included an arbitration clause that required arbitration of “[a]ny dispute or controversy arising in connection with this Agreement or in connection with the dissolution of the Partnership.” Lunde did not promptly liquidate the partnership’s assets after the agreement expired, and in February 2011 the limited partners filed suit in superior court seeking to have a receiver appointed to wind up the partnership, liquidate the assets, and distribute the proceeds. In March 2011 the trial court appointed a receiver who proceeded to wind down the business and sell the assets. A few months later the court removed Lunde as general partner after he failed to cooperate with the receiver, jeopardizing both the reauthorization of the apartment complex as Section 8 housing and the sale of the asset. Lunde filed a pro se demand for arbitration with the American Arbitration Association (AAA). Plaintiffs filed a motion to stay the arbitration. The court denied the motion, holding that the arbitration clause governed the parties’ dispute. The court’s order denying the motion to stay created two exceptions for issues that it reserved for its own decision: plaintiffs’ claim of fraudulent conveyance concerning the transfer of certain funds by Lunde, and plaintiffs’ claim for attorney’s fees “incurred in connection with all proceedings [in the trial court] with respect to the application to appoint a Receiver, through to conclusion of the Receiver’s duties pursuant to court order(s) . . . .” After its review of the matter, the Supreme Court affirmed on the legal issues, but remanded for a further hearing on a narrow issue regarding the amount of attorney’s fees assessed against Lunde. View "O'Rourke, et al. v. Lunde and The Housing Group Limited Partnership" on Justia Law

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In July 2003, Michael Bandler and Michael Bandler & Company, Inc., (collectively “Bandler”) sued Charter One for various claims based primarily on Charter One’s alleged failure to honor advertising promises and other representations in connection with Bandler’s checking account at Charter One. Charter One moved to dismiss the case on the ground that Bandler had failed to exhaust his contractual remedy of arbitration before the American Arbitration Association (AAA) as required by Bandler’s depositor agreements with Charter One.  The trial court granted Charter One’s motion to dismiss and indicated that the parties should arbitrate Bandler’s claims as agreed by contract.  The trial court issued a final judgment in favor of Charter One in November 2003, and subsequently denied Bandler’s post-judgment motions for relief. In November 2004, Bandler made a demand to Charter One to arbitrate under the arbitration clauses in his depositor agreement with Charter One, thereby initiating an arbitration proceeding before the AAA.  Bandler’s initial arbitration demand did not include any class-based claims. The issue before the Supreme Court was whether the superior court had authority to review questions regarding arbitrability in the midst of an arbitration, and outside of the specific review provisions in the Vermont Arbitration Act (VAA). Upon review, the Supreme Court concluded that it did not, and reversed the superior court’s ruling concerning the arbitrability of class claims in this case. View "Bandler v. Charter One Bank " on Justia Law

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Plaintiff appealed the trial court's dismissal of his medical malpractice action for failing to satisfy the applicable statute of limitations. Plaintiff alleged that Defendant Allan Eisemann, M.D., practicing through a medical practice which bore his name, negligently failed to advise Plaintiff or his dentist of the known risks associated with a tooth extraction while Plaintiff was taking intervenous doses of a medication called "Zometa," prescribed for multiple myleoma. Defendant allegedly approved the procedure; Plaintiff's dentist pulled the tooth. Following the procedure, Plaintiff developed osteonecrosis of the jaw. All parties agreed that the statute of limitations period for Plaintiff's malpractice claims would expire October 9, 2009. By a letter dated in September, Plaintiff's counsel proposed to Dr. Eisemann's counsel and other potential defendants a "time out" agreement to toll the statute of limitations for ninety days so that the parties could pursue settlement. Although Dr. Eisemann signed off on the agreement, not all defendants did. As a result of Plaintiff's failure to reach an agreement with all defendants, Plaintiff filed suit on October 7, 2009. Counsel for Dr. Eisemann returned the acceptance of service to Plaintiff's counsel in January, 2010. Plaintiff did not filed the acceptance with the court at that time. The trial court dismissed the case on its own motion on April 15, 2011 based on Plaintiff's failure to prosecute his claim. Three days later, Plaintiff filed the signed acceptances of service. Dr. Eisemann moved to dismiss. On appeal, Plaintiff argued that the Eisemann defendants are equitably estopped from invoking the statute of limitations. Upon review, the Supreme Court concluded that Plaintiff could not rely on the doctrine of equitable estoppel because his own "omissions or inadvertences" contributed to the problem. Accordingly, the Court affirmed dismissal of his case. View "Beebe v. Eisemann" on Justia Law

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Defendant Junior's Pizza, Inc. appealed a superior court decision that confirmed an arbitration award and awarded attorney's fees to Plaintiff UniFirst Corporation. The Superior Court held that Junior's waived its right to object to arbitration by failing to challenge the award within thirty days of receiving notice. In June 2009, pursuant to the arbitration clause in the parties' contracts, UniFirst filed a demand for final and binding arbitration. Junior's declined to submit to arbitration, stating that it would reconsider if UniFirst produced a valid agreement. UniFirst subsequently provided copies of the contract provision to both Junior's and the arbitrator. In July 2009, the arbitrator notified the parties that UniFirst had met all filing requirements and arbitration would proceed absent a court order staying the matter. Junior's never sought a court order staying arbitration. UniFirst did not seek a court order compelling Junior's to participate. Notice of the arbitration hearing was provided to both parties, and the hearing took place. Junior's did not participate. UniFirst was awarded damages and attorney's fees, and Junior's was ordered to reimburse UniFirst in administrative fees associated with conducting the arbitration. The next day, the arbitrator notified Junior's of the award by email and certified mail. On appeal to the Supreme Court, Junior's argued (1) it did not waive its right to object to the arbitration award, (2) UniFirst was required to petition to compel arbitration prior to engaging in arbitration without Junior’s participation, and (3) the arbitration was not conducted in strict accordance with the terms of the contracts. Finding no error, the Supreme Court affirmed the arbitration award. View "UniFirst Corp. v. Junior's Pizza, Inc." on Justia Law

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Plaintiffs James and Heidi Glassford, who brought suit to obtain compensation for an allegedly negligent home inspection, appealed a superior court’s order granting summary judgment in favor of home inspector Defendants The BrickKicker and GDM Home Services, Inc. (a franchisee of BrickKicker) based on the terms of a binding arbitration agreement in the parties' contract. In this appeal, the issue before the Supreme Court was whether the superior court erred in rejecting Plaintiffs' contention that the terms of the home inspection contract were unconscionable under the common law and unfair and deceptive under Vermont’s Consumer Fraud Act (CFA). Upon review of the contract in question, as well as the superior court record, the Supreme Court found the contractual provisions limiting liability to the cost of the inspection and yet requiring arbitration that would necessarily cost more than the amount of the liability limit unconscionable. Accordingly, the Court reversed the superior court’s decision and remanded the matter for further proceedings. View "Glassford v. BrickKicker" on Justia Law

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Defendant AT&T Mobility, LLC appealed a trial court’s denial of its motion to compel arbitration. AT&T claimed the trial court erred by ruling that AT&T had not been assigned Plaintiff Pike Porter’s cell phone contract before sending him unsolicited text messages and erred in failing to hold an evidentiary hearing on this issue. AT&T also argued that even if Plaintiff's claims arose before AT&T purchased his contract, the trial court erred as a matter of law in holding that AT&T cannot enforce the binding arbitration agreement in Plaintiff's original cell phone contract. The court also noted that the arbitration agreement could not bind Plaintiff "with regard to events between him and AT&T that took place at a time when his only contract was with Unicel, not AT&T." AT&T highlighted four pieces of evidence it submitted along with its motion to amend and reconsider as "undisputed" proof that it purchased Plaintiff's contract in December 2008. Upon review of AT&T's evidence, the Supreme Court concluded the document did not establish that Plaintiff's contract was one of the 100,000 to 150,000 contracts sold, nor did it suggest that "certain Unicel assets" included all of the wireless contracts Unicel held in Vermont. Accordingly, the Court affirmed the trial court's decision in favor of Plaintiff. View "Porter v. AT&T Mobility, LLC" on Justia Law

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Defendant Applejack Art Partners, Inc., appealed a trial court enforcing an arbitration award and entered judgment in Plaintiff Albert Stephens, III's favor for $1,538,164.50 plus interest. Plaintiff began working with the company in September 2006 and subsequently invested $1,125,000 in the company in exchange for stock shares.  In April 2008, Applejack terminated plaintiff's employment.  Plaintiff filed suit against Defendants Applejack, Jack P. Appelman, Aaron S. Young, and William Colvin (collectively, Applejack) and Applejack counterclaimed.  Applejack also sought an order enforcing its right to repurchase Plaintiff's stock.  The parties engaged in binding arbitration and following four days of evidentiary hearings, the arbitrator issued his decision.  He found that in October 2006, plaintiff executed an employment contract, stock purchase agreement, and shareholders' agreement.  Pursuant to the stockholder's agreement, the executive stockholders had the right to buy out plaintiff's shares in the event that plaintiff's employment was terminated.  The agreement identified a specific formula for valuing the stock shares and allowed for Applejack to either pay for the stock in full or provide a 10% down payment and a promissory note for payment of the balance in three equal annual installments, plus interest. Plaintiff refused to sell his stock, in part because he misunderstood the terms of the stock purchase agreement.  An arbitrator concluded that Applejack had the right to buy the shares, and it ordered Plaintiff to transfer his stock into an escrow account, pending full performance of all payment obligations. Applejack did not meet its obligation on the first payment and Plaintiff brought an enforcement action.  Plaintiff sought both a judgment confirming the arbitration award as well as an immediate judgment for all amounts awarded by the arbitrator due to Applejack's default.  The court granted Plaintiff's request.  It found that Applejack's default went to the essence of the arbitrator's award and that Applejack could not now resort to the terms of the promissory note to delay its payments. Applejack argued on appeal that the court should have remanded this case to the arbitrator for clarification, although it was not clear what part of the award Applejack believed was ambiguous.  Applejack also suggested (apparently for the first time on appeal) that notwithstanding the arbitrator's decision Plaintiff should simply keep the stock shares because Applejack was unable to pay for them.  Finally, Applejack asserted that the court erred in ordering full payment of the award suggesting that by doing so, the court modified the arbitration award under Vermont Rule of Civil Procedure 60(b) without authority to do so.  It also argued that there was no clear basis for accelerating the payments due. Upon review of the arbitration record and the applicable legal authority, the Supreme Court found no abuse of discretion by the trial court nor from the arbitration proceedings and affirmed the decision against Applejack: [t]he court imposed an appropriate remedy for Applejack's default, and there was no error." View "Stephens III v. Applejack Art Partners, Inc." on Justia Law