Signature Leasing, LLC v. Buyer's Grp., LLC

• Decision Date: 09 June 2020
• Docket Number: No. 115,100,115,100
• Citation: 466 P.3d 544
• Parties: SIGNATURE LEASING, LLC, an Oklahoma limited liability company, Plaintiff/Appellant, v. BUYER'S GROUP, LLC, an Oklahoma limited liability company; Buyer's Group Operating Company, Inc., an Oklahoma corporation; and Williams and Williams Marketing Services, Inc., an Oklahoma corporation, Defendants/Appellees.
• Court: Oklahoma Supreme Court

466 P.3d 544

SIGNATURE LEASING, LLC, an Oklahoma limited liability company, Plaintiff/Appellant,

v.BUYER'S GROUP, LLC, an Oklahoma limited liability company; Buyer's Group Operating Company, Inc., an Oklahoma corporation; and Williams and Williams Marketing Services, Inc., an Oklahoma corporation, Defendants/Appellees.

No. 115,100

Supreme Court of Oklahoma.

FILED JUNE 9, 2020

OPINION

DARBY, V.C.J.,

¶1 The underlying question before us is whether the district court or the arbitrator determines challenges of fraudulent inducement to the entirety of a contract which contains an arbitration clause under the Oklahoma Uniform Arbitration Act (OUAA), 12 O.S.2011, §§ 1851 - 1881. We answer that the arbitrator makes that determination and affirm the judgment of the district court compelling the matter to arbitration.

I. STANDARD OF REVIEW

¶2 A determination of the existence of a valid enforceable agreement to arbitrate is a question of law to be reviewed by a de novo standard. Okla. Oncology & Hematology P.C. v. US Oncology, Inc. , 2007 OK 12, ¶ 19, 160 P.3d 936, 944 ; Rogers v. Dell Computer Corp. , 2005 OK 51, ¶ 18, 138 P.3d 826, 831. An application to compel arbitration may present mixed questions of law and fact regarding the existence of an arbitration agreement. Bruner v. Timberlane Manor Limited Partnership , 2006 OK 90, ¶ 8, 155 P.3d 16, 20. Signature Leasing, LLC (Purchaser), did not dispute the evidence, relative to the issue now before the Court, presented by Buyer's Group, LLC, Buyer's Group Operating Company, Inc., (together "Seller"), or Williams & Williams Marketing Services, Inc. (Broker), but rather disputed the conclusion to be drawn from such evidence, making de novo review proper. A legal question involving statutory interpretation is also reviewed de novo . Samman v. Multiple Injury Trust Fund , 2001 OK 71, ¶ 8, 33 P.3d 302, 305 ; Arrow Tool & Gauge v. Mead , 2000 OK 86, ¶ 6, 16 P.3d 1120, 1123. Further, when reviewing a district court's dismissal of an action, we examine the issues de novo . Rogers v. Quiktrip Corp. , 2010 OK 3, ¶ 4, 230 P.3d 853, 855-56.

II. BACKGROUND

¶3 On June 5, 2012, Broker conducted an auction of the Indian Springs Country Club (Indian Springs) on behalf of Seller. Purchaser was the high bidder on the property. Immediately after the auction, Purchaser's members were presented with the "Purchase and Sale Agreement" (Agreement) which contained a provision that any controversy or claim arising out of or relating to the Agreement would be settled by binding arbitration. Purchaser alleged that its members were coerced by Broker into signing the Agreement immediately, without the opportunity for requested legal review. Purchaser alleged that following the auction, it learned of significant problems with the golf course and extensive title issues regarding the real property. Purchaser alleged it then contacted a local title company who informed Purchaser that there were too many title problems to allow transfer of marketable title to the Indian Springs property.

¶4 On June 8, 2012, Purchaser sent a letter to Broker rescinding the Agreement. On June 12, 2012, Broker, by means of a letter to Purchaser and one of Purchaser's members, formally rejected Purchaser's rescission and claimed that neither the terms of the auction nor the Agreement itself allowed for rescission. Broker further alleged that Purchaser had ample time prior to the auction to review the Agreement, that Purchaser decided to forego due diligence at its own fault and peril, and that Purchaser had no bona fide basis for breaching the Agreement. Petition Ex. C, Signature Leasing, LLC v. Buyer's Group, LLC , No. CJ-2013-4183 (Tulsa Cty. Dist. Ct.). Broker also alleged that the member personally had registered for the auction and had agreed to be bound to the terms and conditions of both the auction and the Agreement in his individual capacity.

III. PROCEDURAL HISTORY

¶5 On September 6, 2013, Purchaser filed a petition in Tulsa County District Court against Seller and Broker (together "Defendants"). Purchaser requested a declaratory judgment that Purchaser properly rescinded the contract, the contract is unenforceable, and that Purchaser's members do not bear personal liability regarding the Agreement. Purchaser alleged that Defendants obtained their signature on the Agreement through duress, menace, fraud, or undue influence. Further, Purchaser claimed fraudulent and negligent misrepresentation by the Defendants, and violation of title 76, section 2 of the Oklahoma statutes.¹

¶6 On February 13, 2014, Seller filed a motion to compel arbitration, pursuant to title 12, sections 1856 and 1858, and a motion to dismiss, pursuant to title 12, section 2012(b)(6) for failure to state a claim.² Seller argued that the parties entered into a valid and enforceable contract and Seller has a substantive and mandatory right to arbitrate claims. Broker filed a motion to dismiss pursuant to section 2012(b)(6) on February 18, 2014 and a motion to compel arbitration on February 19, 2014. Broker adopted and incorporated Seller's motion to compel arbitration. Purchaser responded that arbitration cannot be compelled when the underlying contract is the subject of a claim of fraudulent misrepresentation.³

¶7 On June 6, 2016, the district court granted Defendants' motions to dismiss and motions to compel arbitration. The district court found:

1. Extant Oklahoma law on resolving challenges to arbitration agreements conflicts with the Federal Arbitration Act (hereinafter "FAA").

2. Federal law adheres to the "separability doctrine" under the FAA. See Nitro-Lift Technologies, LLC v. Howard , , 133 S.Ct. 500, 503, 184 L.Ed.2d 328 (2012) ("... and when the parties commit to arbitrate contractual disputes, it is a mainstay of the Act's substantive law that attacks on the validity of the contract, as distinct from attacks on the validity of the arbitration clause itself, are to be resolved by the arbitrator in the first instance, not by a state or federal court.")(Quotations and citations omitted).

3. Plaintiff's allegations of fraud are to the contract as a whole, not to the arbitration clause itself. The FAA displaces Oklahoma law in this case, and mandates that the validity of the contract must be determined by the arbitrator.

4. The arbitration clause in this contract is valid on its face.

5. The matter is compelled to arbitration as (1) the FAA applies, and (2) the FAA displaces Oklahoma's rejection of the separability doctrine.

Ord. on Defs.' Mots. to Dismiss and Mots. to Compel Arb. 1-2, Signature Leasing, LLC v. Buyer's Group, LLC , No. CJ-2013-4183 (Tulsa Cty. Dist. Ct. June 6, 2016).

¶8 On June 20, 2016, Purchaser filed a petition in error. Purchaser argued that Defendants had waived applicability of the FAA because they did not timely raise it, the choice of law provision should control, the transaction did not involve interstate commerce and the district court erred when it determined that the FAA applied regardless of whether the transaction involved interstate commerce, and finally the district court erred when it found that the OUAA conflicts with the FAA. Purchaser noted the lack of explicit language in the district court's order regarding interstate commerce and claimed the court therefore failed to make a finding regarding that issue.

¶9 On appeal, Defendants argued that the choice of law and waiver arguments were settled by COCA in the prior appeal and thus are settled under the law of the case doctrine.

Defendants further argued that they had not waived their right to compel arbitration under the FAA, that the Oklahoma choice of law provision is not controlling, and the district court properly determined that the FAA applied, therefore properly compelling arbitration. Finally, Defendants noted the distinct conflict between the FAA and Oklahoma case law as it applies to the arbitration provision in this case.

¶10 On April 9, 2019, the Court of Civil Appeals (COCA) reversed the district court's decision and remanded for an evidentiary hearing on Purchaser's contract revocation claim. COCA found that because the transaction did not involve interstate commerce and the parties agreed to be governed by Oklahoma law, Oklahoma law controls. COCA noted that the parties did not invoke the FAA in the Agreement or in the motions to compel arbitration. Finally, COCA held that the ruling from Shaffer v. Jeffery , 1996 OK 47, ¶ 26, 915 P.2d 910, 917, regarding determination of allegations of fraud in the inducement, does not inherently conflict with the FAA. Judge Fischer dissented, noting that due to repeal of the original Oklahoma arbitration act, Shaffer may no longer be good law and the OUAA mandates arbitration. Defendants filed a petition for rehearing which COCA denied.

¶11 On June 21, 2019, Defendants timely filed a petition for certiorari. Defendants argue that COCA erred in their analysis and application of United States Supreme Court precedent regarding interstate commerce and that arbitration is mandated under the FAA. Further, Defendants argue that legislative amendments to the OUAA have overturned Shaffer and therefore arbitration is also mandated under Oklahoma law.

¶12 On certiorari, Purchaser argues that COCA correctly determined the transaction did not involve interstate commerce. Additionally, Purchaser argues that Defendants recognized Shaffer as valid earlier and have waived and forfeited any right to contend otherwise for the first time now. In reply, Defendants argue that the issue of whether Shaffer is good law has been properly preserved and raised in the petition for certiorari. We previously granted certiorari.

IV. ANALYSIS

¶13 The underlying question before us is whether the district court or an arbitrator should determine the challenge of fraudulent inducement to the entirety of a contract which contains an arbitration clause. In 1996, we answered this question in Shaffer , 1996 OK 47, ¶ 26, 915 P.2d at 917. Due to subsequent ...