B.A.P. v. Pearman

• Decision Date: 25 January 2011
• Docket Number: No. 107,747.,107,747.
• Parties: B.A.P., L.L.P., an Oklahoma Limited Liability Partnership, Plaintiff/Appellee,v.Michael H. PEARMAN, M.D. and Anesthesiologists of Bartlesville, P.C., an Oklahoma Professional Corporation, Defendants/Appellants.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

250 P.3d 332

2011 OK CIV APP 30

B.A.P., L.L.P., an Oklahoma Limited Liability Partnership, Plaintiff/Appellee,

v.Michael H. PEARMAN, M.D. and Anesthesiologists of Bartlesville, P.C., an Oklahoma Professional Corporation, Defendants/Appellants.

No. 107,747.

Court of Civil Appeals of Oklahoma, Division No. 2.

Jan. 25, 2011.

Released for Publication by Order of the Court

of Civil Appeals of Oklahoma, Division No. 2.

Appeal from the District Court of Washington County, Oklahoma; Honorable Russell C. Vaclaw, Trial Judge.REVERSED AND REMANDED WITH DIRECTIONS.Bruce W. Robinett, Rick D. Tucker, Brewer, Worten, Robinett, Bartlesville, OK, for Plaintiff/Appellee.John R. Woodard, III, Paula J. Quillin, Feldman, Franden, Woodard & Farris, Tulsa, OK, for Defendants/Appellants.JOHN F. FISCHER, Presiding Judge.

¶ 1 Plaintiff, B.A.P., L.L.P. (BAP), filed this suit against Defendants Anesthesiologists of Bartlesville, P.C. (AOB), and Michael H. Pearman, M.D. Defendants responded with a motion to compel arbitration, seeking to enforce an arbitration clause contained in the BAP Partnership Agreement. Defendants appeal the district court's order denying their motion. We reverse and remand this case with directions to conduct an evidentiary hearing on defendants' motion.

BACKGROUND

¶ 2 BAP is a limited liability partnership composed of five partners, including Michael H. Pearman, M.D., P.L.C., a professional entity owned by Dr. Pearman. Dr. Pearman is also the president and sole stockholder of AOB. AOB is a signatory to the BAP Partnership Agreement, and is designated as the manager of BAP in that Agreement. Dr. Pearman signed the Partnership Agreement on behalf of AOB and is designated as the agent and representative of BAP.

¶ 3 BAP sued AOB and Dr. Pearman in his individual capacity, seeking monetary damages, exemplary damages, injunctive and declaratory relief, reformation of contract, an accounting, a constructive or resulting trust, unjust enrichment, and disgorgement. The complaints center on allegations of fraud and abuse of confidence by Dr. Pearman and AOB to acquire funds owned by BAP. This appeal concerns BAP's obligation to arbitrate these claims.

STANDARD OF REVIEW

¶ 4 In “proceedings governing applications to compel arbitration, the existence of an agreement to arbitrate is a question of law. Questions of law are reviewed de novo.” Rogers v. Dell Computer Corp., 2005 OK 51, ¶ 18, 138 P.3d 826, 831 (citing Hill v. Blevins, 2005 OK 11, ¶ 3, 109 P.3d 332, 334; Cummings v. FedEx Ground Package Sys., Inc., 404 F.3d 1258, 1261 (10th Cir.2005)). “We review an order granting or denying a motion to compel arbitration de novo, the same standard of review employed by the trial court.” Thompson v. Bar–S Foods Co., 2007 OK 75, ¶ 9, 174 P.3d 567, 572 (citing Fleming Cos., Inc. v. Tru Discount Foods, 1999 OK CIV APP 18, ¶ 11, 977 P.2d 367, 370; Towe, Hester & Erwin, Inc. v. Kansas City Fire & Marine Ins. Co., 1997 OK CIV APP 58, ¶ 4, 947 P.2d 594, 596). “Arbitration should be compelled unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Id. See Fleming Cos., Inc., ¶ 16, 977 P.2d at 370–371.

ANALYSIS

¶ 5 The arbitration clause in the Partnership Agreement provides that any dispute among the parties to the Agreement that is not resolved by mediation “shall be submitted to binding arbitration....” BAP argues that neither AOB nor Dr. Pearman can enforce the arbitration clause because that clause was only intended to apply to disputes among the partners to the BAP Partnership Agreement. As BAP construes the Agreement, the “partners” in the Agreement are the five professional entities that constitute BAP. Therefore, BAP concludes that AOB is not a “partner” in the Agreement but a signatory to the Agreement only in its capacity as designated manager, and the arbitration clause was not intended to apply to disputes between partners and a manager. Likewise, BAP contends that Dr. Pearman cannot enforce the arbitration clause because he is not a party to the Agreement in his individual capacity.¹ The initial issue in this appeal, therefore, requires construction of the arbitration clause to determine whether AOB and/or Dr. Pearman may compel arbitration of this dispute.

I. The Arbitration Clause

¶ 6 The district court found in favor of BAP and denied defendants' motion to compel arbitration. On appeal, defendants raise five issues, three of which we find dispositive:

1. Whether it was error to deny defendants' motion to compel arbitration based on the conclusion that the parties intended the arbitration clause to apply only to disputes among partners, and not disputes between partners and managers, and therefore AOB lacked standing to compel arbitration.

2. Whether it was error to conclude that Dr. Pearman lacked standing to enforce the clause because he was not party to the Agreement in his individual capacity.

3. Whether it was error to deny defendants' motion based on the finding that compliance with the mediation procedures provided in the Agreement was a condition precedent to compelling arbitration, and therefore defendants waived any right to compel arbitration by engaging in mediation using a different procedure.

¶ 7 “Courts generally favor arbitration ... because [it] provide[s] substantial justice by an immediate and speedy resolution with a minimum of court interference.” Voss v. City of Oklahoma City, 1980 OK 148, ¶ 6, 618 P.2d 925, 928. The role of the court is to determine whether there is a valid binding arbitration clause, and if so, whether “the arbitration clause is broad enough to include the alleged dispute....” Id. If the court answers both these questions in the affirmative, “arbitration must be ordered.” Id. The question of whether parties have an agreement to submit a dispute to arbitration is a question of law to be decided applying state contract law. Rogers v. Dell Computer Corp., 2005 OK 51, ¶ 19, 138 P.3d 826, 831 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943–44, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)).²

A. AOB's Standing to Enforce the Arbitration Clause

¶ 8 It is undisputed that AOB is a signatory to the BAP Partnership Agreement and is designated as the manager in the Agreement. The Agreement confers rights and obligations on AOB, including responsibility for “[a]ll decisions with respect to any matter set forth [in the Agreement] affecting or arising from the conduct of the business of the Partnership....” Nonetheless, BAP claims that the dispute resolution procedure provided in the Agreement was not intended to apply to disputes between managers and partners. It bases this argument on the fact that the arbitration clause provides that the initial step in the dispute resolution process is to submit the dispute to the manager. BAP concludes that because it would not make sense to submit a dispute involving a manager to the manager, the dispute resolution procedures in the Agreement were not intended to apply to the manager. The district court found this argument dispositive of the parties' intent. Although this language invokes some ambiguity, we find that pursuant to Oklahoma contract law the dispute resolution process provided in the Agreement reflects that the parties intended it to apply to partners and managers, and that for that purpose, AOB is a “party” to the Agreement.

¶ 9 When there is a written agreement, “[t]he whole of the contract is to be taken together” and “the intention of the parties is to be ascertained from the writing alone, if possible....” Oklahoma Southern Life Ins. Co. v. Mantz, 1942 OK 392, ¶¶ 11–12, 131 P.2d 70, 72 (citing 15 O.S.2001 §§ 155, 157). “The courts will read the provisions of a contract in their entirety to give effect to the intention of the parties as ascertained from the four corners of the contract, and where the language is ambiguous, it will be interpreted in a fair and reasonable sense.” Oklahoma Oncology & Hematology, P.C. v. U.S. Oncology, Inc., 2007 OK 12, ¶ 27, 160 P.3d 936, 946. “The intention of the parties must be deduced from the entire agreement, and every provision must be construed so as to be consistent with each other and that construction adopted which, if possible, gives effect to every part of the contract.” Sullivan v. Gray, 1938 OK 183, ¶ 7, 78 P.2d 688, 690. See 15 O.S.2001 § 157. The contract language is to be read “in its plain and ordinary meaning” and the court will determine, “as a matter of law, whether a contract provision is ambiguous and interpret the contract provision as a matter of law, where the ambiguity can be cleared by reference to other provisions or where the ambiguity arises from the contract language and not from extrinsic facts.” Oklahoma Oncology & Hematology, P.C., ¶ 27, 160 P.3d at 946.

¶ 10 The dispute resolution procedure in the Agreement provides for resolution of disputes between “parties” to the Agreement. “Parties” is not a defined term in the Agreement. However, in other provisions of the Agreement “partners” and “manager” are specifically referenced. The term “parties” appears only in the dispute resolution section of the Agreement.

¶ 11 BAP's construction of the term “parties” would require us to substitute “partners” for “parties” where the latter term appears in the dispute resolution provision. The drafters of the Agreement were in a better position to do so than this Court. “The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” 15 O.S.2001 § 154. Elsewhere in the Agreement, except in the non-compete section, the Agreement consistently uses the terms “partners” and “manager.” Consequently, the most consistent interpretation of this language leads to the conclusion that “parties” in the dispute resolution section was intended to refer to both “partners” and the “manager.”

¶ 12 Further, this...