Vulcan Power Co. v. Munson

• Decision Date: 03 February 2011
• Docket Number: No. 10CA0348.,10CA0348.
• Citation: 252 P.3d 511,31 IER Cases 1504
• Parties: VULCAN POWER COMPANY, a Colorado corporation, Plaintiff,v.Stephen M. MUNSON, Defendant,andSteve Munson; Bill Fraser; Soo Min Fay; Doug Frosch; George Marshall; Cal Mitchell; Jim Rubino; Tim Shea; John Sullivan; and Sandy Lonsdale, Counterclaimants–Appellees,v.Vulcan Power Company, a Colorado corporation; Scott Mackin; and Todd Bright, Counterclaim Defendants–Appellants.
• Court: Colorado Court of Appeals

252 P.3d 511

31 IER Cases 1504

VULCAN POWER COMPANY, a Colorado corporation, Plaintiff,

v.Stephen M. MUNSON, Defendant,andSteve Munson; Bill Fraser; Soo Min Fay; Doug Frosch; George Marshall; Cal Mitchell; Jim Rubino; Tim Shea; John Sullivan; and Sandy Lonsdale, Counterclaimants–Appellees,

v.Vulcan Power Company, a Colorado corporation; Scott Mackin; and Todd Bright, Counterclaim Defendants–Appellants.

No. 10CA0348.

Colorado Court of Appeals, Div. I.

Feb. 3, 2011.

No Appearance for Counterclaimants–Appellees.Greenberg Traurig LLP, David G. Palmer, Tyler D. Coombe, Denver, CO, for Counterclaim Defendant–Appellant Vulcan Power Company.Bieging Shapiro & Burrus LLP, I. Thomas Bieging, Denver, CO; Dickstein Shapiro LLP, Barry Wm. Levine, Howard N. Feldman, Washington, D.C., for Counterclaim Defendants–Appellants Scott Mackin and Todd Bright.Opinion by Judge GABRIEL.

Counterclaim defendants, Vulcan Power Company, Scott Mackin, and Todd Bright (collectively, defendants), appeal the district court's order refusing (1) to give preclusive effect to an Oregon court's order granting a motion to compel arbitration and (2) to compel arbitration based on the employment contract of counterclaimant Stephen M. Munson, Vulcan's former president and chief executive officer (CEO). We dismiss defendants' issue preclusion argument for lack of appellate jurisdiction but affirm the portion of the district court's order refusing to compel arbitration based on Munson's employment contract.

I. Background

After institutional investors obtained control of Vulcan's board of directors, the board terminated Munson for cause as president and CEO. In response, Munson and certain Vulcan shareholders, acting in their individual capacities, sued Vulcan and the institutional investor directors in Oregon circuit court. That court ultimately entered an order dismissing various claims for failure to state a claim. In the same order, however, the court granted a motion to compel arbitration of the very claims that it had dismissed. We are unclear as to why the court so ruled, rather than finding the motion to compel moot. Nonetheless, the court appears to have based its ruling on the arbitration clause in Munson's employment contract, which provided, “[I]f Executive [Munson] contests any termination hereunder, such contest shall be resolved by binding arbitration....”

While the Oregon action was pending, Vulcan filed the current Colorado action under section 7–108–109, C.R.S.2010. In this action, Vulcan sought to remove Munson as a member of the board of directors, a position he retained despite his termination as president and CEO of the company. Munson and certain other common stock shareholders then asserted a counterclaim under the same statutory provision, seeking to remove the institutional investor directors, including Mackin and Bright. As pertinent here, that counterclaim asserted various reasons why the directors should be removed, including that they wrongfully terminated Munson as president and CEO.

Thereafter, defendants moved to dismiss or stay the counterclaim on issue preclusion grounds, contending that the Oregon court's order granting the motion to compel arbitration was entitled to preclusive effect. Alternatively, they argued that, pursuant to Munson's employment contract, the Colorado court should compel arbitration of those allegations of the counterclaim relating to Munson's termination and then either dismiss or stay the counterclaim as appropriate.

The district court rejected these arguments. As pertinent here, the court held that it was not “persuaded that the elements of issue preclusion (including identity of issues and parties and the opportunity for ‘full and fair’ litigation of the issues) have been established.” The court also rejected defendants' assertion that Munson's employment contract required arbitration of the counterclaim, opining, among other things, that “issues pertinent to the agreement [were] sufficiently distinct from the issue of removal of corporate directors as to render arbitration on the counterclaim improper.”

Defendants now bring this interlocutory appeal pursuant to section 13–22–228(1)(a), C.R.S.2010, of the Uniform Arbitration Act (UAA).

II. Jurisdiction

As an initial matter, we must satisfy ourselves that we have jurisdiction over this appeal. See J.P. Meyer Trucking & Constr., Inc. v. Colo. Sch. Dists. Self Ins. Pool, 18 P.3d 198, 201 & n. 3 (Colo.2001). Defendants assert that we have interlocutory appellate jurisdiction under section 13–22–228(1)(a) to address whether the district court erred in rejecting both (1) their issue preclusion argument and (2) their argument that Munson's employment contract required arbitration of the counterclaim's allegations relating to his termination. Although we clearly have jurisdiction to address defendants' second assertion, see § 13–22–228(1)(a), we sought and have obtained supplemental briefing from defendants on whether we have jurisdiction over their issue preclusion argument. We conclude that we do not.

Section 13–22–228(1)(a) provides, “An appeal may be taken from ... [a]n order denying a motion to compel arbitration.” In analyzing a prior version of this provision, our supreme court opined that appellate jurisdiction under the statute was limited to the denial of a motion to compel arbitration “based upon a written agreement to arbitrate or an arbitration provision in a contract.” J.P. Meyer, 18 P.3d at 202. This followed, the court said, from a plain language reading of the relevant statutory provisions in the UAA. Id. Accordingly, the court held that the appellate courts lacked jurisdiction over an interlocutory appeal from the denial of a motion seeking arbitration based on the former No–Fault Act, rather than on an agreement to arbitrate. Id.

Although the General Assembly has since adopted an amended version of the UAA, the J.P. Meyer court's reasoning applies equally to the current version of the UAA. Specifically, the applicable provisions of the UAA state that a court shall compel arbitration “[o]n the motion of a person showing an agreement to arbitrate and alleging another person's refusal to arbitrate pursuant to the agreement.” § 13–22–207(1), C.R.S.2010. Section 13–22–228(1)(a), in turn, allows a party to appeal from “[a]n order denying a motion to compel arbitration.” Reading these provisions together, see J.P. Meyer, 18 P.3d at 201, we conclude that an interlocutory appeal under section 13–22–228(1)(a) may only be taken from the denial of a motion that seeks to compel arbitration based on “an agreement to arbitrate.” See § 13–22–207(1).

Applying these principles here, we hold that we lack jurisdiction to hear that portion of defendants' appeal concerning the district court's rejection of their issue preclusion argument. Like the argument advanced by the plaintiffs in J.P. Meyer, who sought arbitration based on a statutory provision, defendants' issue preclusion argument effectively sought arbitration on noncontractual grounds. For the reasons set forth in J.P. Meyer, an appeal from an order rejecting such an argument does not fall within the ambit of section 13–22–228(1)(a).

We are not persuaded otherwise by Winter Park Real Estate & Investments, Inc. v. Anderson, 160 P.3d 399 (Colo.App.2007), on which defendants rely. In Winter Park, 160 P.3d at 402, the district court ordered arbitration pursuant to the National Association of Realtors Code of Ethics and effectively denied the plaintiffs' request to arbitrate pursuant to a contract between the parties. Citing section 13–22–228(1)(a), a division of this court held that it had jurisdiction over the appeal “because the trial court denied plaintiffs' request for arbitration ... pursuant to the terms of the parties' contract.” Id. Accordingly, Winter Park does not support defendants' assertion that we have interlocutory appellate jurisdiction over their issue preclusion argument. To the contrary, Winter Park is entirely consistent with the reasoning in J.P. Meyer and with our analysis here.

Nor are we persuaded by defendants' assertions that their issue preclusion argument was merely part and parcel of their motion to compel arbitration. Defendants made two separate arguments, namely, that the case should have been dismissed on issue preclusion grounds, and alternatively, that the district court should have compelled arbitration. Moreover, whatever defendants may have asserted as a basis for arbitration in the Oregon action does not alter the fact that their issue preclusion argument in this case did not seek to compel arbitration pursuant to Munson's contract.

III. Munson's Employment Contract

We turn then to the merits of defendants' alternative argument that the district court erred in refusing to compel arbitration based on Munson's employment contract. We review this issue de novo, employing the same legal standards that the district court employed, see Lujan v. Life Care Ctrs., 222 P.3d 970, 972 (Colo.App.2009), and we affirm.

Pursuant to the choice of law provision in Munson's employment contract, we apply Oregon law here. See DEX Media, Inc. v. Nat'l Mgmt. Servs., Inc., 210 Or.App. 376, 150 P.3d 1093, 1097 (2007) (honoring the parties' choice of law provision when interpreting the scope of an arbitration clause to the extent that application of the chosen state law did not undermine the policies of the Federal Arbitration Act). Under Oregon law, courts must consider “whether the parties intended their arbitration agreement to include the present controversy by examining the text and context of the provision.” Livingston v. Metro. Pediatrics, LLC, 234 Or.App. 137, 227 P.3d 796, 803 (2010). If the provision is unambiguous, courts must give effect to the parties' intentions. Id. Any doubts, however, as to whether the controversy falls within the arbitration provision should be resolved in favor of arbitration. Id. Thus, our inquiry is whether the arbitration...