Signal 88, LLC v. Lyconic, L.L.C.
| Decision Date | 04 February 2022 |
| Docket Number | No. S-19-1069.,S-19-1069. |
| Citation | 310 Neb. 824,969 N.W.2d 651 |
| Parties | SIGNAL 88, LLC, appellant, v. LYCONIC, L.L.C., appellee. |
| Court | Nebraska Supreme Court |
Michael T. Eversden and Brian McKernan, of McGrath, North, Mullin & Kratz, P.C., L.L.O., Omaha, for appellant.
Michael S. Degan, Omaha, of Kutak Rock, L.L.P., for appellee.
Signal 88, LLC, filed a contract action against Lyconic, L.L.C., in the district court for Douglas County. The district court ordered the dispute to be submitted to arbitration. After the arbitrator rendered a decision, pursuant to Neb. Rev. Stat. § 25-2612 (Reissue 2016), Lyconic moved the district court to confirm the arbitrator's award. Eventually, the court entered judgment on the award.
On appeal, the Nebraska Court of Appeals found the award to be ambiguous, vacated the judgment, and remanded the matter to the district court with directions to remand the matter to the arbitrator for clarification.1 Lyconic petitioned for further review. For reasons we explain, we find merit to the petition for further review. The Court of Appeals’ decision is reversed, and the matter is remanded with directions.
Signal 88 is a franchisor that operates a security services franchise system in Nebraska. Lyconic develops software programs for use in the security services industry. In 2011, Lyconic contracted with Signal 88 to provide software and services to assist Signal 88 in operating its business. The initial contract was for a 3-year term, with Signal 88 reserving rights of renewal. Signal 88 would pay Lyconic $25,000 per month for the first 12 months and $30,000 per month for the remaining 24 months. In the event the contract was terminated, Lyconic would provide Signal 88 up to 180 days of posttermination services (termination assistance), in order to "achieve a smooth transition of all records[,] data[,] and services without disruption to [Signal 88's] [b]usiness." Signal 88 would pay for termination assistance at "Lyconic's then current hourly rate."
The parties executed two addendums. "Addendum #1" decreased the service fee from $30,000 to $25,000 per month. "Addendum #2" set a month-to-month term at the renewal rate of $25,000 per month, required 30 days’ notice prior to termination, and reduced Lyconic's termination assistance obligation to up to 30 days following termination. Addendum #2 granted Signal 88 the right to extend termination assistance longer than 30 days, provided Signal 88 gave an equivalent amount of notice before termination.
In February 2016, Signal 88 notified Lyconic of its intent to terminate the contract, setting the termination date for June 30. Lyconic then advised it would not renew the agreement beyond the current monthly term, expiring March 6, and would provide termination assistance until April 6. In a March 1 correspondence to Lyconic, Signal 88 disputed Lyconic's notice to terminate and stated it would terminate the agreement July 1, and it requested that termination assistance be extended for 122 days after the termination date.
Signal 88 filed its contract action against Lyconic seeking declaratory and injunctive relief. Pursuant to the terms of the contract, the district court ordered arbitration. On April 25, 2016, the arbitrator issued a written opinion finding Signal 88's March 1 letter effectively terminated the agreement as of July 1. Specifically, the arbitrator stated:
In providing this notice Signal 88 provided 122 days advance notice and therefore can request an equal amount of days of termination assistance. Accordingly, Lyconic's obligation to provide termination assistance extends 122 days from the termination date, expiring November 11, 2016. Signal 88 is obligated to pay for Lyconic's services at the renewal rate of $25,000 per month.
Thereafter, Signal 88 notified Lyconic that it would not require termination assistance after June 2, 2016.
On May 5, 2016, Lyconic applied "for an [o]rder confirming the arbitration award and entry of judgment thereon." In its application, Lyconic alleged that the arbitrator determined that "Signal 88 is obligated to pay Lyconic $25,000 per month through November 11, 2016." While that application was pending, Lyconic also filed an answer to the original lawsuit, acknowledging the arbitration award, but including a counterclaim, which it alleged was not resolved by arbitration. Lyconic subsequently amended its counterclaim to add additional allegations that following the arbitrator's decision, but prior to the termination date, Signal 88 hacked into Lyconic's computers, downloaded information, and wrongfully disclosed confidential information.
On May 31, 2016, the court informed the parties in an email that it would grant Lyconic's application to confirm the arbitration award and directed Lyconic to prepare and submit a proposed order. However, no such order was entered.
On August 23, 2019, both parties filed motions labeled as a motion for partial summary judgment. Lyconic's motion asserted that "[t]he arbitrator further determined that Signal 88 was obligated to pay Lyconic for 122 days of Termination Assistance at the rate of $25,000 per month." (Emphasis supplied.) Signal 88's motion sought judgment regarding Lyconic's amended counterclaims.
At the conclusion of the hearing, the district court announced it would grant Lyconic's motion to confirm the award, but would also move forward with a bench trial over Lyconic's counterclaims. Following trial, the court issued an "Order Granting Application for Confirmation of Arbitration Award & Entry of Judgment." The court's order stated: "Lyconic moved for confirmation of the arbitrator's award within the applicable time frame and given that the record does not show that a party moved for vacation, modification or correction of the arbitrator's award, this Court must confirm the award." The court quoted the text of § 25-2612 in full: "Within sixty days of the application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in sections 25-2613 and 25-2614." In confirming the arbitrator's decision, the court's order stated, "[T]he Arbitrator found that Signal 88 is obligated to pay Lyconic for 122 days of Termination Assistance at the renewal rate of $25,000 per month." (Emphasis supplied.) The court then proceeded to enter judgment in favor of Lyconic and against Signal 88 in the amount of $109,166.67 with interest accruing at the rate of 1.5 percent per month as of November 26, 2016.
Signal 88 moved for a new trial or to alter or amend the judgment, arguing the court should have simply "confirm[ed] the arbitration decision." At the hearing on the motion, Signal 88 argued the court should grant a "new trial and then remand the issue of termination assistance to the arbitrator to clarify." Signal 88 argued the court "has the power to remand under [ Neb. Rev. Stat. § 25-2610 (Reissue 2016) ]." The court issued an order denying the motion. Signal 88 appealed.
On appeal, Signal 88 assigned and argued that the "trial court erred in modifying rather than simply confirming the arbitration award." Signal 88 argued that by entering a $109,166.67 judgment against it, the trial court had "dramatically exceeded its authority in modifying the arbitration award, and its decision should therefore be reversed."2 Signal 88 argued that because there was no motion to vacate, modify, or correct the award, "the trial court had no discretion and was required to confirm the award."3
Signal 88 also assigned and argued that if Lyconic's position prevailed, then the "trial court erred in not remanding the question of termination assistance to the arbitrator."4 Signal 88 argued that if the court found the award to be ambiguous, a remand to the arbitrator would still be appropriate.
The Court of Appeals recognized that the district court adopted Lyconic's interpretation of the arbitration decision and that the language in the district court's order did not track with the language used by the arbitrator. The court cited our decision in Cinatl v. Prososki ,5 in which we held that without a pending application to modify, vacate, or correct an arbitration award, a district court shall confirm the award. The appellate court acknowledged there was no application to modify, vacate, or correct the award, but found the proper issue for resolution in this case was "clarification,"6 alluding to Neb. Rev. Stat. § 25-2610 (Reissue 2016).
The court determined that the arbitrator's award was ambiguous and, based upon Domino Group v. Charlie Parker Mem. Foundation ,7 concluded that the best course was to vacate the judgment and have the district court remand the matter to the arbitrator for clarification.
Lyconic petitions for further review. Lyconic assigns, summarized, that the Court of Appeals erred in...
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