HERCULES & CO. v. SHAMA RESTAURANT

• Decision Date: 21 August 1992
• Docket Number: No. 90-CV-593,90-CV-593
• Citation: 613 A.2d 916
• Parties: HERCULES & CO., LTD., Appellant, v. SHAMA RESTAURANT CORP., et al., Appellees.
• Court: D.C. Court of Appeals

613 A.2d 916

HERCULES & CO., LTD., Appellant, v. SHAMA RESTAURANT CORP., et al.,Appellees.

No. 90-CV-593.

District of Columbia Court of Appeals.

Argued March 16, 1992.

Decided August 21, 1992.

Appeal from the Superior Court, Shellie F. Bowers, J.

Martin F. McMahon, Washington, D.C., with whom Susan Amstadter, Takoma Park, Md., was on the brief, for appellant.

Donna S. McCaffrey, with whom John B. Tieder, Jr., McLean, Va., was on the brief, for appellee Shama Restaurant Corp.

Before FERREN, SCHWELB and FARRELL, Associate Judges.

SCHWELB, Associate Judge:

Hercules & Co. (Hercules), appeals from the confirmation of an arbitration award issued in favor of Shama Restaurant Corp., et al. (Shama).¹ Hercules contends that its dispute with Shama was not arbitrable (and therefore that the award was not properly confirmed) because both its contract with Shama and the arbitration clause contained therein had been fraudulently induced. It further argues that Judge Shellie F. Bowers erred on September 4, 1987, when he referred much of the dispute to arbitration and when he failed to conduct a trial on the merits before dismissing with prejudice Hercules' claim that the arbitration clause had been fraudulently induced. We affirm.

I THE FACTS

This is the second time that Hercules has asked this court to resolve a dispute arising out of an ill-fated renovation project in Old Town, Alexandria, Virginia, which began in the summer of 1986. The circumstances underlying the dispute were set forth in detail in our first disposition of this case, Hercules & Co. v. Shama Restaurant Corp., 566 A.2d 31, 33-34 (D.C. 1989) (Hercules I), and will only be reiterated here to the extent necessary to dispose of the issues on appeal.

Briefly, Hercules alleged in its complaint that it had contracted with Shama in 1986 to renovate Shama's restaurant in Old Town. The contract contained both a general arbitration clause, stating that the parties agreed to have all disputes arising out of the project resolved by independent arbitrators, and a general integration clause, stating that the contract "constitute[s] the entire agreement between" the parties. Throughout this litigation, Hercules has maintained that during the contract negotiations Shama and its architect, Darrell Downing Rippeteau (Rippeteau), made a number of material misrepresentations on which Hercules claims to have relied in deciding to execute the contract and in specifically agreeing to the arbitration clause; the most important of these alleged misrepresentations was that Shama had the financial wherewithal to satisfy fully its obligations under the contract. Neither this nor any of Shama's other alleged parolrepresentations, however, was included in the terms of the written contract, which was prepared on a standard form prescribed by the American Institute of Architects (AIA). When it later appeared to Hercules that some or all of these representations may not have been true, and when a number of other problems arose in the precarious relationship that had evolved among Hercules, Shama, and Rippeteau, Hercules walked off the construction site, leaving the project far from complete.

Hercules then filed a suit against Shama and Rippeteau in our Superior Court, seeking a variety of remedies including damages and rescission of the contract on the grounds, inter alia, of fraud and breach of contract. Shama responded with a motion to stay all judicial proceedings pending arbitration of the dispute pursuant to the terms of the contract. Hercules countered by claiming that the dispute was not properly arbitrable in that both the contract as a whole and its arbitration clause in particular had been fraudulently induced by intentional misrepresentations on the parts of Shama and Rippeteau. On September 4, 1987, the trial court, per Judge Bowers, dismissed with prejudice Hercules' claim that the arbitration clause itself had been fraudulently induced, on the grounds that Hercules' allegations as to that claim were insufficient as a matter of law to entitle it to relief or to a hearing. The court referred many of Hercules' remaining claims, including the question whether the contract as a whole had been fraudulently induced, to arbitration. Hercules filed an appeal from Judge Bowers' order, but this court, in Hercules I, ruled that an order staying litigation pending arbitration was not immediately appealable. 566 A.2d at 38-39. We therefore dismissed Hercules' appeal without ruling on the merits of its fraudulent inducement claims.²

Prior to our dismissal of Hercules' original appeal, the dispute between Hercules and Shama proceeded to arbitration. The arbitral panel, after rejecting Hercules' claim that the entire contract had been fraudulently induced, ruled in favor of Shama in the amount of $150,015. Shama subsequently filed a petition in the Superior Court for judicial confirmation of the arbitral award pursuant to D.C.Code § 16-4313 (1989). Hercules responded with a motion to dismiss Shama's petition on jurisdictional grounds.³ On October 5, 1989, Judge Robert Shuker denied Hercules' motion and entered an order confirming the arbitral award in favor of Shama. Hercules filed a motion for reconsideration,⁴ and on March 29, 1990, Judge Bowers denied that motion.⁵ We consider Hercules' instant appeal to be at once a reinstatement of its earlier appeal, which had been dismissed as premature in Hercules I, and a fresh challenge to the confirmation of the arbitral award.⁶

II THE WAIVER ISSUE

As a preliminary matter, we consider Shama's contention that, in order to preserve for review the question of arbitrability, Hercules was required to reassert its claim of fraudulent inducement in a timelypost-award motion to vacate,⁷ even though the claim had earlier been raised and dismissed with prejudice. As support for its position, Shama cites the District of Columbia Uniform Arbitration Act, D.C.Code § 16-4311(b) (1989), under which a party seeking to vacate an arbitration award must apply to the Superior Court "within ninety days after delivery of a copy of the award to the applicant." Shama also cites this court's decision in Walter A. Brown, Inc. v. Moylan, 509 A.2d 98, 100 (D.C. 1986), according to which a party who fails "to urge grounds for vacation of [an arbitration] award within the ninety-day statutory limit . . . waive[s] any right to challenge the award." In the present case, the decision of the arbitration panel was made final and delivered to the parties involved on December 6, 1988. Shama argues that because Hercules did not file a motion to vacate the award or otherwise raise any substantive defenses to its confirmation within ninety days of this date, Hercules waived any right it may have had to challenge the award. For three reasons, we find this contention to be without merit.

First, Shama's reliance on our holding in Moylan is misplaced. Moylan stands for the proposition that a party seeking to modify or set aside an arbitration award under §§ 16-4311 or 4312 is required to file an application urging grounds for such relief within ninety days of the award. The purpose of this rule is to ensure that a decision by an arbitrator becomes final without undue delay. It requires a party who challenges an arbitral award to put the opponent on notice as early as possible of the nature of the challenge. In the present case, however, Hercules raised the issue of fraudulent inducement in pre-award proceedings commenced under § 16-4302,⁸ which are not governed by the 90-day time limit, rather than under § 16-4311 or § 16-4312, and the reasoning of Moylan thus has no application.

After Shama moved to stay the lawsuit Hercules had originally brought against it, Hercules filed a memorandum in opposition in which it alleged that the arbitration clause had been fraudulently induced and was therefore unenforceable. Hercules repeated this allegation in Count XI of its amended complaint. This was sufficient to put Shama on timely notice of Hercules' objections to the arbitration clause and to preserve those objections for appeal.

Secondly, to adapt Gertrude Stein's famous line about a rose, a dismissal with prejudice is a dismissal with prejudice. In Glick v. Ballentine Produce, Inc., 397 F.2d 590, 593 (8th Cir. 1968), the court stated that

a dismissal of an action with prejudice is a complete adjudication of the issues presented by the pleadings and bars further action between the parties. Additionally, a dismissal for failure to state a cause of action is a final judgment on the merits sufficient to raise the defense of res judicata in a subsequent action between the parties.

When Judge Bowers concluded on September 4, 1987, that Hercules had failed sufficiently to allege in its complaint fraudulent inducement of the arbitration clause, and when he dismissed that claim with prejudice, he effectively barred Hercules from relitigating that issue after the arbitrators issued their award. Shama correctly argues that the losing party in an arbitration case is ordinarily permitted to raise a post-award fraudulent inducement claim, eitherby filing a motion to vacate the award on that ground or by raising that issue in an answer to the prevailing party's motion to confirm.⁹ For Hercules to have done so in this case, however, would have been futile in light of Judge Bowers' prior dismissal of that claim with prejudice; that decision was the law of the case. Hercules' failure to raise a timely post-award challenge therefore could not operate as a waiver of its right to oppose the award on the grounds of fraudulent inducement. Simply stated, "the law does not require the doing of a futile act." Ohio v. Roberts, 448 U.S. 56, 74, 100 S.Ct. 2531, 2543, 65 L.Ed.2d 597 (1980), quoted in Stack v. United States, 519 A.2d 147, 156 (D.C. 1986).

Finally, this appeal is before us for the second time. When Hercules initially sought to appeal from the order dismissing with prejudice Count XI...