David Fiala, Ltd. v. Harrison

• Decision Date: 20 March 2015
• Docket Number: No. S–14–178.,S–14–178.
• Citation: 860 N.W.2d 391
• Parties: David Fiala, Ltd., a Nebraska corporation, doing business as FuturesOne, appellee, v. Ian Harrison et al., appellees, and William Gross, appellant.
• Court: Nebraska Supreme Court

860 N.W.2d 391

David Fiala, Ltd., a Nebraska corporation, doing business as FuturesOne, appellee

v.Ian Harrison et al., appellees, and William Gross, appellant.

No. S–14–178.

Supreme Court of Nebraska.

Filed March 20, 2015.

Kevin R. McManaman and Charles E. Wilbrand, of Knudsen, Berkheimer, Richardson & Endacott, L.L.P., Lincoln, for appellant.

Robert B. Seybert, Lincoln, and Stephen J. Schutz, of Baylor, Evnen, Curtiss, Grimit & Witt, L.L.P., for appellee David Fiala, Ltd.

Heavican, C.J., Wright, Connolly, Stephan, McCormack, Miller–Lerman, and Cassel, JJ.

Syllabus by the Court

1. Arbitration and Award.Arbitrability presents a question of law.

2. Contracts.The meaning of a contract and whether a contract is ambiguous are questions of law.

3. Judgments: Appeal and Error.When reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion reached by the trial court.

4. Arbitration and Award: Federal Acts: Contracts.If a contract containing an arbitration clause involves interstate commerce, the Federal Arbitration Act governs the contract.

5. Contracts: States.Contracts involving interstate commerce include contracts for services between parties of different states.

6. Contracts.In interpreting a contract, a court must first determine, as a matter of law, whether the contract is ambiguous.

7. Contracts: Words and Phrases.A contract is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings.

8. Contracts.When a court has determined that ambiguity exists in a document, an interpretative meaning for the ambiguous word, phrase, or provision in the document is a question of fact for the fact finder.

9. Contracts: Evidence.If a contract is ambiguous, the meaning of the contract is a question of fact and a court may consider extrinsic evidence to determine the meaning of the contract.

Miller–Lerman, J.

NATURE OF CASE

William Gross appeals the order of the district court for Lancaster County which denied his motion to compel arbitration. The court concluded that the claims in this action were not subject to arbitration under the arbitration provision in the parties' employment agreement. We conclude that the district court erred as a matter of law when it failed to determine that the arbitration provision was ambiguous and to thereafter resolve the ambiguity with extrinsic evidence. We therefore reverse the order denying Gross' motion, and we remand the cause to the district court for further proceedings to resolve the ambiguity and determine the meaning and scope of the arbitration provision.

STATEMENT OF FACTS

In September 2006, Gross executed an “Associated Person/Individual Agreement/Procedures and Rules” (agreement) with David Fiala, Ltd., doing business as FuturesOne (FuturesOne), which set forth the terms of Gross' employment with FuturesOne. Section 6.B. of the agreement contained the following arbitration provision:

[Gross] and [FuturesOne] agree to arbitrate any dispute, claim, or controversy that may arise between themselves or a customer or any other person that is subject to arbitration under the rules, constitution or by-laws of the CFTC or NFA or any other self-regulatory organization with which [Gross] registers, from time to time.

In November 2012, FuturesOne filed a complaint in the district court for Lancaster County against Gross and three other individuals who had signed the same or a similar agreement with FuturesOne. FuturesOne alleged that each of the defendants had resigned from FuturesOne in late 2007 or early 2008; that in the year after resigning, two of the defendants had set up a firm to compete with FuturesOne; and that Gross and the fourth defendant were employed by the competing firm. FuturesOne also alleged that three of the defendants, including Gross, owed money to FuturesOne for amounts that had been paid but not earned at the time they resigned. FuturesOne alleged that Gross owed $7,000. FuturesOne asserted two causes of action for breach of contract. It alleged that Gross and others had breached the agreement (1) by failing to pay amounts owed to FuturesOne and (2) by competing with FuturesOne in violation of the agreement. FuturesOne sought damages against each of the defendants.

Gross filed a motion to dismiss or, in the alternative, to stay proceedings and compel arbitration. Gross asserted that the arbitration provision in his agreement with FuturesOne required that any and all disputes or claims that arose between the parties themselves be subject to arbitration. At a hearing on Gross' motion, the court received affidavits offered by Gross and by FuturesOne into evidence.

The court thereafter filed an order on January 29, 2014, denying Gross' motion. In its order, the court quoted a portion of section 6.B. and indicated that “CFTC” and “NFA” as used in that section referred to the “U.S. Commodity Futures Trade Commission” and the “National Futures Association,” respectively. The court stated in its order that in section 6.B., the parties had “agreed to ‘arbitrate any dispute, claim or controversy that may arise between themselves ... that is subject to arbitration under the rules, constitution or by-laws of the CFTC or NFA or any other self-regulatory organization with which [the defendant Gross] registers, from time to time.’ ” We note that the ellipsis and brackets are in the court's original order.

In its analysis of the scope of the arbitration provision, the court referred to the Web sites of both the CFTC and the NFA. The court quoted a statement from the CFTC's Web site to the effect that the CFTC's mission was “ ‘to protect market participants and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives—both futures and swaps—and to foster transparent, open, competitive and financially sound markets.’ ” The court quoted a statement from the NFA's Web site that the NFA was “ ‘formed in 1976 to become a futures industry's self-regulatory organization’ ” and that its regulatory activities included, inter alia, “ ‘providing an arbitration forum for futures and forex-related [sic] disputes.’ ”

After referring to these sources, the court stated that it did not believe that the parties intended that disputes between themselves regarding money owed by Gross to FuturesOne and regarding alleged violations of a covenant not to compete were to be subject to arbitration pursuant to section 6.B. The court apparently reasoned that these were not the types of disputes that were subject to arbitration under the rules, constitution, or bylaws of the CFTC and the NFA. The court therefore denied Gross' motion.

Gross appeals.

ASSIGNMENTS OF ERROR

Gross claims, restated, that the district court erred when it (1) denied his motion to compel arbitration, (2) referred to matters outside of the record in rendering its order, and (3) determined that the claims were not within the scope of the agreement.

STANDARDS OF REVIEW

Arbitrability presents a question of law. Kremer v. Rural Community Ins. Co., 280 Neb. 591, 788 N.W.2d 538 (2010). The meaning of a contract and whether a contract is ambiguous are questions of law. See Davenport Ltd. Partnership v. 75th & Dodge I, L.P., 279 Neb. 615, 780 N.W.2d 416 (2010). When reviewing questions of law, an appellate court has an obligation to resolve the questions

independently of the conclusion reached by the trial court. Village of Memphis v. Frahm, 287 Neb. 427, 843 N.W.2d 608 (2014).

ANALYSIS

The Agreement in This Case Is Governed by the Federal Arbitration Act, and Therefore, the Failure to Meet a Requirement of Nebraska's Uniform Arbitration Act Does Not Make the Arbitration Provision Unenforceable.

We note first that FuturesOne contends, as an alternative to the basis upon which the district court denied Gross' motion, that the court should have denied the motion on the basis that the parties' agreement did not meet one of the requirements of Nebraska's Uniform Arbitration Act (UAA), Neb.Rev.Stat. §§ 25–2601 to 25–2622 (Reissue 2008 & Cum.Supp.2014). FuturesOne does not contend or specify that either the arbitration provision or the agreement elsewhere delegates to the arbitrator the issue of the UAA's impact on the validity of the arbitration provision. Compare Rent–A–Center, West, Inc. v. Jackson, 561 U.S. 63, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010). If the UAA applied as urged by FuturesOne, its argument could determine this appeal, and we therefore consider this argument first. However, we conclude that the agreement is governed by the Federal Arbitration Act (FAA) rather than the UAA and that therefore, a purported failure to meet a requirement of the UAA does not render the arbitration provision unenforceable.

The UAA requires that any standardized agreement in which binding arbitration is the sole remedy for dispute resolution include a specific statement adjoining the signature block which states that the contract contains an arbitration provision. § 25–2602.02. The Nebraska statute provides the exact wording for this notice requirement and requires that this statement be capitalized and underlined. The agreement between FuturesOne and Gross does not contain the statement, and if the agreement were governed by the UAA, the failure to strictly comply with § 25–2602.02 would make the arbitration clause void and unenforceable. See

Kramer v. Eagle Eye Home Inspections, 14 Neb.App. 691, 716 N.W.2d 749 (2006), overruled on other grounds , Knights of Columbus Council 3152 v. KFS BD, Inc. , 280 Neb. 904, 791 N.W.2d 317 (2010). However, we have stated that if an agreement is governed by the FAA, then the FAA preempts the Nebraska notice requirement and the lack of the statutorily required statement does not render the arbitration agreement unenforceable. Aramark Uniform & Career Apparel v. Hunan, Inc. , 276 Neb. 700, 757 N.W.2d 205 (2008).

We noted in Aramark that the U.S. Supreme Court...