Superpumper, Inc. v. Nerland Oil, Inc.

• Decision Date: 22 July 1998
• Docket Number: No. 970307,970307
• Parties: SUPERPUMPER, INC., Plaintiff and Appellant, v. NERLAND OIL, INC., Defendant and Appellee. Civil
• Court: North Dakota Supreme Court

Page 647

582 N.W.2d 647

1998 ND 144

SUPERPUMPER, INC., Plaintiff and Appellant, v. NERLAND OIL, INC., Defendant and Appellee.

Civil No. 970307.

Supreme Court of North Dakota.

July 22, 1998.

Thomas A. Wentz, Jr., Pringle & Herigstad, PC, Minot, for plaintiff and appellant. Appearance by Brent Olson, 3rd year law student. Michael A. Bosh, on brief.

Jay D. Carlson, Fargo, for defendant and appellee.

VANDE WALLE, Chief Justice.

¶1 Superpumper, Inc., appealed from an Order compelling arbitration issued by the Stutsman County District Court. We conclude this Order is not appealable under either the Uniform Arbitration Act or the Federal Arbitration Act. We, therefore, dismiss this appeal.

I

¶2 Superpumper purchased the Dakota Fuel Stop in Jamestown, North Dakota, from Nerland Oil in 1995. As part of the purchase, Superpumper executed a promissory note in favor of Nerland Oil. The note was secured by a mortgage against the Dakota Fuel Stop. The promissory note, mortgage, and purchase agreement did not contain any clause compelling arbitration.

¶3 The "OFFER TO PURCHASE," however, indicated it was "subject to a supply and freight agreement to be executed by [Superpumper] in a form acceptable to [Nerland Oil]." Superpumper entered into two supply and freight agreements with West Fargo Truck Stop, Inc. (WFTS). WFTS is affiliated with Nerland Oil. Both the supply and freight agreements contained similar clauses compelling binding arbitration:

"BINDING ARBITRATION

The parties hereto specifically agree that any disputes arising under this Agreement shall be submitted to arbitration pursuant to Chapter 32-29.2 of the North Dakota Century Code.

The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof."

¶4 The supply and freight agreements were part of the financing for the Dakota Fuel Stop sale. Superpumper was given a credit of $206,904.00 on the purchase price for the freight agreement and a credit of $372,428.00 for the exclusive supply agreement. The financing also included Superpumper's assumption of a mortgage in the amount of $650,000.00 at the Stutsman County Bank. In addition, Nerland took a second mortgage from Superpumper on the property in the amount of $350,000.00.

¶5 After Superpumper changed jobbers/suppliers for the Dakota Fuel Stop, a dispute arose between Superpumper and Nerland involving the processing of credit card receivables. Superpumper sued Nerland Oil seeking either to quiet title on the Dakota Fuel Stop property or to require specific performance to satisfy and release the promissory note and mortgage. Superpumper also sought certain credit card receipts that it claimed Nerland Oil failed to remit. In defense, Nerland Oil claimed, in part, that the entire dispute was subject to arbitration in accord with the supply and freight agreements. Nerland Oil also filed a "Counterclaim and Third Party Complaint" against Superpumper and certain third-party defendants, claiming fraudulent misrepresentation and breach of contract.

¶6 Superpumper and the third-party defendants moved to dismiss the Third-Party Complaint. Nerland Oil and WFTS resisted this motion and filed a cross-motion seeking joinder of WFTS as a defendant in the underlying proceeding. The district court granted the motion to dismiss the Third-Party Complaint, denied the motion to join WFTS, and stayed the underlying proceedings pending arbitration of disputes under the Supply and Freight Agreements.

¶7 Superpumper moved for reconsideration of the district court's order staying the underlying proceeding. Nerland Oil resisted Superpumper's motion and asked the district court to compel arbitration for the entire dispute. The court concluded the agreements between Superpumper, Nerland Oil and WFTS were "so intertwined that it only makes sense to place the entire dispute in arbitration." While the court acknowledged that the documents of sale for the Dakota Fuel Stop make no reference to arbitration, the court, nonetheless, recognized that the offer to purchase and the purchaser's settlement statement both make reference to the Supply and Freight Agreements. Noting the offer to purchase was explicitly subject to the Supply and Freight Agreements, the district court ordered Superpumper and Nerland Oil to settle the entire dispute by arbitration.

II

¶8 On appeal, Superpumper argues the district court erred in ordering the parties to submit the entire dispute to arbitration. Because we conclude the district court's order compelling arbitration is not appealable we do not reach that issue.

¶9 The Uniform Arbitration Act (UAA) was adopted by the 1987 North Dakota Legislature and is codified at Chapter 32-29.2, N.D.C.C. See 1987 N.D. Sess. Laws ch. 408 (adopting the Uniform Arbitration Act). The UAA was enacted in North Dakota to expand the use of arbitration in future disputes and improve arbitration procedures, generally. Hearing on S.B. 2100 Before Senate and House Judiciary Comms., 50th N.D. Legis. Sess. (Jan 7, 1987; Mar. 11, 1987) (written testimony submitted to both Senate and House Judiciary Committees by Jay E. Buringrud of the North Dakota Commission on Uniform State Laws). This Court, too, has generously encouraged broad arbitrability of disputes. See, e.g., Allstate Ins. Co. v. Nodak Mut. Ins. Co., 540 N.W.2d 614 (N.D.1995) (holding arbitrator, rather than district court, had jurisdiction to decide statute of limitations issue); State v. Stremick Const. Co., 370 N.W.2d 730 (N.D.1985) (concluding question of whether dispute was arbitrable is for arbitrator and not district court to determine).

¶10 Section 19 of the UAA delineates when an appeal may be taken. ¹ See N.D.C.C. § 32-29.2-19 (UAA § 19). Orders compelling arbitration are not listed as appealable under the Uniform Act. See id. With no statutory guidance in the UAA, adopting jurisdictions are divided as to whether an order compelling arbitration is appealable. ² See Unif. Arbitration Act, 7 U.L.A. § 19, note 24, pp. 448-449 (1997); and generally 6 A.L.R.4th 652 (1981).

¶11 Some UAA-adopting jurisdictions hold that an order compelling arbitration is appealable as a final order or an appealable interlocutory order. See, e.g., Dusold v. Porta-John Corp., 167 Ariz. 358, 807 P.2d 526, 528 (Ct.App.1990) (holding appellate court could consider whether arbitration clause was applicable despite assertion order compelling arbitration was interlocutory and not appealable); Atkins v. Rustic Woods Partners, 171 Ill.App.3d 373, 121 Ill.Dec. 493, 525 N.E.2d 551, 554-555 (2d 1988) (concluding order compelling arbitration is appealable under a rule permitting appeal of interlocutory order granting injunction); Evansville-Vanderburgh Sch. v. Teachers Ass'n, 494 N.E.2d 321, 322-323 (Ind.Ct.App.1986) (interpreting UAA as allowing appeal from an order compelling arbitration because order has fully decided issue before the court); Brennan v. General Acc. Fire and Life Assur., 307 Pa.Super. 288, 453 A.2d 356, 357 (1982) (noting order granting petition to enforce agreement to arbitrate under arbitration act is appealable).

¶12 Other jurisdictions hold that orders compelling arbitration are interlocutory and not appealable. See, e.g., Chem-Ash, Inc. v. Arkansas Power & Light Co., 296 Ark. 83, 751 S.W.2d 353, 354 (1988) (holding orders compelling arbitration are not appealable because the policy favoring arbitration would be frustrated); Bluffs, Inc. v. Wysocki, 68 N.C.App. 284, 314 S.E.2d 291, 293 (1984) (concluding there is no right of appeal from an order compelling arbitration because order was interlocutory and did not affect a substantial right or work an injury on the appellant); Clark County v. Empire Elec., Inc., 96 Nev. 18, 604 P.2d 352, 353 (1980) (concluding an order compelling arbitration is not appealable under the UAA).

¶13 In the present case, each party recognizes there is a split of authority on the question of whether the UAA allows an appeal from an order compelling arbitration. What the parties have failed to fully realize, and the cases cited above do not for the most part discuss, is the impact of federal law on arbitration clauses.

¶14 The Federal Arbitration Act (FAA) is codified as amended at 9 U.S.C. sections 1 to 16. The FAA preempts state law and governs all written arbitration agreements in contracts involving interstate commerce. Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 839, 130 L.Ed.2d 753 (1995) (holding the words "involving commerce" in the FAA signal Congress's intent to exercise its full commerce power). The FAA makes agreements to arbitrate valid, irrevocable, and enforceable in federal and state courts. Id., 115 S.Ct. at 838-839; 9 U.S.C. § 2. "Its purpose was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26 (1991). ³ As a result, generally applicable contract defenses may be applied to invalidate arbitration agreements, but states cannot invalidate arbitration agreements with laws applicable only to arbitration provisions. Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 116 S.Ct. 1652, 1656, 134 L.Ed.2d 902 (1996).

¶15 The Uniform Arbitration Act is a law that specifically applies to arbitration clauses. Thus, insofar as the state-enacted UAA impedes the accomplishment and execution of the full purposes and objectives of the FAA, the UAA is preempted by federal law. Smith Barney, Etc. v. Luckie, 85 N.Y.2d 193, 623 N.Y.S.2d 800, 647 N.E.2d 1308, 1314 (1995). See U.S. Const. Art. VI, cl. 2 (providing for the supremacy of federal law); Allied-Bruce Terminix Cos., Inc., 115 S.Ct. at 838 (stating FAA applies in state...