Lamell Lumber Corp. v. Newstress Intern.

• Decision Date: 31 August 2007
• Docket Number: No. 05-567.,05-567.
• Parties: LAMELL LUMBER CORPORATION v. NEWSTRESS INTERNATIONAL, INC.
• Court: Vermont Supreme Court

938 A.2d 1215

2007 VT 83

LAMELL LUMBER CORPORATION v. NEWSTRESS INTERNATIONAL, INC.

No. 05-567.

Supreme Court of Vermont.

August 31, 2007.

Lisa B. Shelkrot and Clara F. Gimenez of Langrock Sperry & Wool, LLP, Burlington, for Plaintiff-Appellee.

Carrie J. Legus of Legus and Bisson, PLC, Montpelier, for Defendant-Appellant.

Present: REIBER, C.J., DOOLEY, JOHNSON and SKOGLUND, JJ., and DiMAURO, D.J., Specially Assigned.

¶ 1. SKOGLUND, J.

Plaintiff Lamell Lumber Corp., a lumber wholesaler and retailer based in Essex Junction, Vermont, entered into a contract with defendant Newstress International, Inc., a New Hampshire corporation, requiring defendant to fabricate a number of precast concrete panels and to "design, manufacture, truck, and erect these components" into a concrete kiln for plaintiff to use in the drying of lumber. After the kiln was completed, plaintiff detected an increasing number of cracks and holes in the concrete, which resulted in this lawsuit against defendant for breach of contract, breach of implied warranty, and negligence.¹ The jury returned a special verdict in favor of plaintiff, finding defendant to be liable on all three counts, and awarded damages of $100,000. On appeal, defendant contends the trial court erred in: (1) exercising subject matter jurisdiction despite the presence of an arbitration clause in the contract; (2) failing to dismiss the action as untimely under the four-year statute of limitations applicable to the sale of goods; (3) submitting the negligence claim to the jury; (4) instructing on damages; (5) excluding the testimony of defendant's expert witnesses; and (6) imposing sanctions against defendant. We affirm.

¶ 2. The basic facts may be briefly summarized. Additional material facts will be set forth in the discussion which follows. In November 1993, the parties entered into a contract calling for defendant to "design, manufacture, truck, and erect" a number of precast, prestressed concrete panels into a structure to be used by plaintiff as a kiln for drying lumber at its mill in Essex Junction. The kiln was completed in late 1993 or early 1994. Although the parties dispute the extent of defendant's participation in the design of the project, plaintiff adduced evidence at trial that defendant designed the concrete panels, the panel connections, the arrangement and location of the insulation materials inside the panels, and the building footings.

¶ 3. Plaintiff first noticed cracks in the kiln and reported them to defendant in the spring of 1998. Efforts over the next several years to repair the disintegrating concrete were unsuccessful, resulting in the filing of this lawsuit in April 2003. Following a series of pretrial motions, discussed more fully below, the case proceeded to trial in October and November 2005. Plaintiff's engineering expert, David Mitchell, testified that the building had not been properly designed to withstand the heat of the kiln, and that the deterioration of the concrete was caused by the improper arrangement of the insulation blocks inside the concrete panels and the improper connection of the panels to each other. As noted, the jury returned a special verdict in favor of plaintiff, awarding damages of $100,000. This appeal followed.

I.

¶ 4. Defendant first claims that the superior court lacked subject matter jurisdiction over this action. The basis of the claim is a clause in the parties' contract providing that all disputes arising out of the agreement shall be decided by arbitration. Although defendant raised the arbitration clause as an affirmative defense in its answer to the complaint, filed in June 2003, it proceeded to actively litigate the case over the next two years, responding to plaintiff's discovery requests and propounding requests of its own, attending depositions and other court proceedings, scheduling and canceling a mediation, and seeking several continuances of the jury draw. In early July 2005, however, about one month before trial was scheduled to commence, defendant filed a motion for summary judgment, arguing that the arbitration clause in the agreement deprived the court of subject matter jurisdiction and "estopped" plaintiff from pursuing its claims. Although plaintiff's counsel thereafter agreed to submit to arbitration, defendant rejected the offer on the ground that "any effort on the part of [plaintiff] to initiate arbitration at this time on its claims would be time-barred." Plaintiff thereupon filed an opposition to the motion, disputing defendant's claim that the court lacked subject matter jurisdiction and arguing that, by actively engaging in the litigation process for over two years, defendant had waived the arbitration agreement.²

¶ 5. The court issued a decision in October 2005, rejecting defendant's claim that it lacked subject matter jurisdiction and agreeing with plaintiff that defendant had waived the right to arbitration. Defendant contends the court erred, arguing that where, as here, a dispute is subject to an arbitration agreement, the Vermont Arbitration Act, 12 V.S.A. §§ 5651 to 5681 (VAA) confines the court's jurisdiction to certain statutorily defined proceedings and excludes civil actions based on the contract. As explained below, the claim is unpersuasive.

¶ 6. "Subject matter jurisdiction" refers to the power of a court to hear and determine a general class or category of cases. See In re B.C., 169 Vt. 1, 7, 726 A.2d 45, 49 (1999) (noting that family court "possessed subject matter jurisdiction over the general type of controversy before it"). In Vermont, the superior court is broadly vested with "original and exclusive jurisdiction of all civil actions," subject to certain specific exceptions not applicable here. 4 V.S.A. § 113. While the scope of authority of a court of limited jurisdiction — such as the Vermont family court — is "strictly construe[d]," Office of Child Support ex rel. Lewis v. Lewis, 2004 VT 127, ¶ 7, 178 Vt. 204, 882 A.2d 1128, the opposite is true of courts of general jurisdiction such as the superior court. For "courts of general jurisdiction ... the presumption is that they have subject matter jurisdiction ... unless a showing is made to the contrary." 13 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure § 3522, at 60 (2d ed. 1984). See also KBR Rural Pub. Power Dist. v. Kidder, 177 Neb. 228, 128 N.W.2d 687, 689 (1964) (observing that Nebraska district court "is a court of general jurisdiction and, as such, its powers are liberally construed in favor of vesting jurisdiction") (citation omitted); Thompson v. City of Atlantic City, 190 N.J. 359, 921 A.2d 427, 439 (2007) (noting the general principle that "subject matter jurisdiction is presumed for courts of general jurisdiction unless proved otherwise"); Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71, 75 (Tex.2000) (because it is a court of general jurisdiction "all claims are presumed to fall within the jurisdiction of the [Texas] district court unless the Legislature or Congress has provided that they must be heard elsewhere").

¶ 7. Notwithstanding its presumptively broad jurisdiction, defendant asserts that the superior court here lacked subject matter jurisdiction over plaintiff's contract and negligence claims as a result of the arbitration clause in the contract. Defendant relies on the VAA section authorizing the superior court to issue nine specific orders in relation to an agreement to arbitrate, including orders to compel arbitration, appoint arbitrators, confirm or vacate an arbitration award, and enter judgment on an award. 12 V.S.A. § 5671. Defendant claims that § 5671 effectively limits or "demarcates the parameters of the superior court's jurisdiction" and by implication divests the court of other authority. However, the superior court is presumed to retain jurisdiction over all civil actions unless the Legislature has clearly indicated to the contrary. Contrary to defendant's assertion, we find nothing in the language of § 5671 or the VAA as a whole that suggests a legislative intent — implied or otherwise — to "oust" the superior court of general jurisdiction over a civil suit arising from a contract containing an arbitration agreement.

¶ 8. Apart from the absence of any clear evidence of legislative intent, defendant's argument also lacks support in case law or other authority. Indeed, jurisdictional claims similar to defendant's have been uniformly rejected in other states. See, e.g., Multi-Service Contractors, Inc. v. Town of Vernon, 181 Conn. 445, 435 A.2d 983, 985 (1980) (reversing trial court's ruling that it lacked subject matter jurisdiction where agreement contained arbitration clause and holding that arbitration proceeding was not a "condition precedent" to court action); JKL Components Corp. v. Insul-Reps, Inc., 596 N.E.2d 945, 949 (Ind.Ct.App.1992) ("JKL cites no authority, and we can find none, to support its claim that a party's failure to arbitrate divests a trial court of jurisdiction over a breach of contract claim."); Hanslin Builders, Inc. v. Britt Dev. Corp., 15 Mass. App.Ct. 319, 445 N.E.2d 188, 190 (1983) ("It is well settled that a clause providing for the resolution by arbitration of disputes arising under an agreement is not jurisdictional ....") (citations omitted); Campbell v. St. John Hosp., 434 Mich. 608, 455 N.W.2d 695, 697 (1990) (holding that trial court was not deprived of subject matter jurisdiction over medical malpractice dispute subject to arbitration agreement); State ex rel. Barden & Robeson Corp. v. Hill, 208 W.Va. 163, 539 S.E.2d 106, 108 (2000) (observing that "an agreement to arbitrate a dispute does not divest a court of subject matter jurisdiction").

¶ 9. In further support of its claim that the arbitration agreement was jurisdictional — and therefore could not be voluntarily waived — defendant cites a section of the VAA providing that a written arbitration agreement "creates a duty to arbitrate, and is valid, enforceable and...