Anderson v. Constance Banks

• Decision Date: 24 January 2012
• Docket Number: 2012 ME 6
• Parties: CARRIE B. ANDERSON et al. v. CONSTANCE BANKS et al.
• Court: Maine Supreme Court

CARRIE B. ANDERSON et al.

v.CONSTANCE BANKS et al.

2012 ME 6

MAINE SUPREME JUDICIAL COURT

Argued: November 9, 2011

Decided: January 24, 2012

Reporter of Decisions

Docket: Han-11-134

Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, GORMAN, and JABAR, JJ.

JABAR, J.

[¶1] This appeal primarily concerns whether a Settlement Agreement,¹ which contains an arbitration clause, gave the arbitrator the authority to determine whether the Agreement was valid and enforceable. We conclude that it did and affirm the judgment of the Superior Court.

[¶2] Carrie B. Anderson, Deborah Collins, Liela Johnson, and Rebecca York (collectively, the sisters) appeal, and Constance Banks, William Banks, Jr., and Mary Banks (collectively, the Bankses) cross-appeal, from a judgment of the Superior Court (Hancock County, Cuddy, J.) confirming an arbitration award, denying a motion to vacate the award, denying a motion for judgment on the pleadings, and granting a motion to dismiss a complaint for declaratory judgment. The sisters argue that the arbitration is a nullity because they did not voluntarilyparticipate in the arbitration and because the arbitrator did not have authority to determine the validity of the Agreement. The sisters further contend that (1) the arbitrator exceeded his powers; (2) the arbitrator exhibited "evident partiality"; (3) the Agreement violates the statute of frauds; and (4) the Agreement is illusory and void. The Bankses argue that the Superior Court did not commit an error of law in confirming the arbitration award, but on cross-appeal argue that the court erred in stating that the orders of the Probate Court implementing the arbitration agreement are a nullity.

I. BACKGROUND

[¶3] This appeal involves six siblings and their mother. The parties challenging the arbitration award are sisters Carrie Anderson, Deborah Collins, Liela Johnson, and Rebecca York. The other two siblings, Constance Banks and William Banks, Jr., and Mary Banks, the mother of the six siblings, are defending the award in this appeal. A dispute arose among the siblings regarding the care of their mother, and the sisters petitioned for conservatorship of Mary Banks in Probate Court. While the petition was pending, the parties participated in mediation with the mutually agreed-upon mediator, Jerrol Crouter. The mediation resulted in the Agreement, signed by Constance Banks; William Banks; Peter Roy, Esq., on behalf of Mary Banks; Liela Johnson; Rebecca York; and Charles Budd,Esq., on behalf of Carrie Anderson and Deborah Collins. Mary Banks is the only party who did not attend the mediation.

[¶4] The Agreement contains nineteen paragraphs primarily addressing visitation with Mary Banks, dismissal of the pending petition for conservatorship of Mary Banks, division of personal property, division and deeding of real property, payments toward the grandchildren's education, dissolution of the family corporation, and release of and indemnification from any future claims. The most contested provision of the Agreement is the arbitration clause, which states:

ARBITRATION. The parties agree that any dispute regarding the interpretation, enforcement, or implementation or execution of this agreement or the documents necessary to effectuate it will be decided by binding arbitration by Jerrol Crouter. He shall award attorney fees and costs for any such arbitration against the unsuccessful party.

[¶5] After disputes arose over the Agreement, the Hancock County Probate Court (Patterson, J.) ordered arbitration. The Probate Court specifically determined that the arbitration clause is severable from the rest of the Agreement, that the sisters were challenging the validity of the Agreement and not the arbitration clause itself, that arbitration should be ordered if the validity of the entire Agreement is in question, and that the sisters agreed to arbitrate disputes. As a result of the Probate Court's order, Crouter conducted the arbitration on March 30, 2010. After evaluating the sisters' claims, the arbitrator decided that he did have the authority to determine the validity of the Agreement. The arbitrator thenconcluded that the Agreement was enforceable and ordered the transfer of land necessary to effectuate it.

[¶6] The sisters and the Bankses then filed a series of pleadings and motions in Superior Court. First, the sisters filed a complaint for declaratory judgment pursuant to 14 M.R.S. §§ 5951-5963 (2011) and M.R. Civ. P. 57, requesting that the Agreement be found invalid for violating the statute of frauds, for being illusory, and for a lack of a meeting of the minds. The request for declaratory judgment also asked that the Probate Court's order be found invalid for lack of subject matter jurisdiction. Along with the complaint, the sisters filed a motion to vacate the arbitration award pursuant to the Uniform Arbitration Act (UAA), contending that the award was procured by corruption, fraud, or undue means; that the arbitrator exhibited evident partiality; that the arbitrator exceeded his powers; and that there was no arbitration agreement. 14 M.R.S. §§ 5938(1)(A),² (B), (C), (E),³ 5942 (2011).

[¶7] The sisters next filed a motion for judgment on the pleadings pursuant to M.R. Civ. P. 12(c). The Bankses then filed a motion to dismiss the complaint for declaratory judgment pursuant to M.R. Civ. P. 12(b)(6). Lastly, the sisters filed a motion for exemption from the alternative dispute resolution (ADR) requirements of M.R. Civ. P. 16B(a), pursuant to M.R. Civ. P. 16B(b)(9).

[¶8] The Superior Court, after hearing argument on the motions, first ordered a stay of the ADR requirements pending resolution of the remaining motions. The court next addressed the validity of the arbitration in general. The court concluded that, although the Superior Court has exclusive jurisdiction to order arbitration pursuant to 14 M.R.S. § 5943 (2010),⁴ the sisters nevertheless voluntarily participated in the arbitration because they agreed to arbitrate disputes and they failed to seek relief or stay the proceedings pursuant to 14 M.R.S. § 5928(2010).⁵ The court also concluded that the Probate Court has jurisdiction over the validity of the Agreement as a whole, but "the implementation of the arbitration of that [A]greement is before the Superior Court."

[¶9] Next, the court addressed the standard of review governing challenges to the arbitration award and concluded that the scope of review is narrow. The court determined that even if the arbitrator makes a mistake of law or fact, the court could not vacate an award if the arbitrator kept within the scope of his authority when deciding the outcome of the arbitration. The court listed the six grounds upon which an award may be vacated pursuant to section 5938, and concluded that none of the grounds existed in this case.

[¶10] Specifically, the court, noting the trend to "interpret agreements broadly and in favor of arbitration authority," first determined that the arbitrator did not exceed his powers pursuant to section 5938(1)(C). The court determined that the Agreement contains the authority to allow the arbitrator to arbitrate the defenses to the enforcement of the Agreement.

[¶11] Second, the court determined that the arbitrator's decision was not procured through undue means or bias pursuant to 14 M.R.S. § 5938(1)(A), (B). Here, the court determined that the Agreement was the product of an "arm[']slength" negotiation and did not reflect bias or undue means on the part of the mediator.⁶ The court also determined that the arbitration proceedings, conducted by an arbitrator agreed to by all parties, did not show evidence of bias or undue means. Finally, the court concluded that, because the parties did not allege any facts in the record to support claims pursuant to 14 M.R.S. § 5938(1)(E) and (F), those provisions did not need to be addressed.

[¶12] Based on these findings and conclusions, the court granted the Bankses' motion to dismiss the complaint and denied the sisters' motions to vacate the arbitrator's award and for judgment on the pleadings. The sisters timely appealed and the Bankses timely cross-appealed pursuant to 14 M.R.S. § 5945(1)(C) (2011) and M.R. App. P. 2.

II. DISCUSSION

[¶13] The pivotal issue on appeal is the sisters' substantive arbitrability challenge pursuant to section 5938(1)(E)—that the parties to the Agreement did not intend to submit disputes concerning the underlying validity of the Agreement to arbitration.⁷ See Westbrook Sch. Comm. v. Westbrook Teachers Ass'n, 404 A.2d204, 207 (Me. 1979). There are two avenues available to a party who wants to challenge the substantive arbitrability of a particular dispute. First, a party can file an application to compel or stay arbitration pursuant to section 5928. See J.M. Huber Corp. v. Main-Erbauer, Inc., 493 A.2d 1048, 1050 (Me. 1985). Second, a party can file an application to vacate an arbitration award pursuant to section 5938(1)(E).⁸ See id. Although the Bankses urge otherwise, we have never required a party to file an application to stay in order to preserve a substantive arbitrability objection. See Westbrook Sch. Comm., 404 A.2d at 207; cf. J.M. Huber Corp., 493 A.2d at 1050 (identifying the two separate avenues for lodging a substantive arbitrability challenge without acknowledging a requirement that an application to stay must precede an application to vacate); Cape Elizabeth Sch. Bd. v. Cape Elizabeth Teachers Ass'n, 435 A.2d 1381, 1383 (Me. 1981) (identifying the two separate avenues for lodging a substantive arbitrability challenge, with the only distinction between the two avenues being that the UAA provides for appeals from denials of applications to vacate but not from denials of applications to stay).

[¶14] The application to stay and the application to vacate are the exclusive avenues for challenging the substantive arbitrability of a dispute. J.M. Huber Corp., 493 A.2d at 1050. Ultimately, the courts must decide the substantive...