White v. Kampner

• Decision Date: 31 May 1994
• Docket Number: No. 14789,14789
• Citation: 229 Conn. 465,641 A.2d 1381
• Court: Connecticut Supreme Court
• Parties: Dennis E. WHITE v. Philip KAMPNER et al.

Page 1381

641 A.2d 1381

229 Conn. 465

Dennis E. WHITE v. Philip KAMPNER et al.

No. 14789.

Supreme Court of Connecticut.

Argued Feb. 18, 1994.

Decided May 31, 1994.

Stewart I. Edelstein, with whom was Monte E. Frank, Bridgeport, for appellants (defendants).

Joseph A. Mengacci, Waterbury, for appellee (plaintiff).

Before BORDEN, BERDON, NORCOTT, KATZ and PALMER, JJ. BERDON, Associate Justice.

This appeal raises two principal issues: (1) whether the agreements entered into by the parties empowered the arbitrator to determine the arbitrability of their contractual dispute; and (2) if not, whether, after seasonable objections to arbitrability, the voluntary submission of that issue to the arbitrator constituted a waiver. The trial court vacated an arbitration award in favor of the plaintiff, Dennis E. White, and against the defendants, Philip and Helen Kampner. The plaintiff appealed to the Appellate Court, and that court reversed, holding that, under the parties' contract, the determination of arbitrability was within the sole province of the arbitrator. White v. Kampner, 31 Conn.App. 73, 79, 623 A.2d 514 (1993). We granted the defendants' petition for certification, and we now reverse. ¹

The following facts are undisputed. In August, 1990, the plaintiff entered into a contract ² with the defendants. Under the contract, the plaintiff agreed to manage State Paint, Inc., a Connecticut corporation owned by the defendants, and was granted an option to purchase the corporation. There were two contractual clauses pertaining to the arbitrability of a dispute: a "mandatory negotiation" clause and an "arbitration" clause.

The clause entitled "mandatory negotiation" provides: "[The parties] agree that they will attempt to negotiate in good faith any dispute of any nature arising under this [agreement]. The parties shall negotiate in good faith at not less than two negotiation sessions prior to seeking any resolution of any dispute under the [arbitration provision] of this [agreement]. Each party shall have the right to legal representation at any such negotiation session."

The clause entitled "arbitration" provides: "Any dispute or question arising under the provisions of this [agreement] which has not been resolved under [the mandatory negotiation provision] shall be determined by arbitration before one (1) arbitrator appointed by the American Arbitration Association. Arbitration proceedings shall occur at a neutral location in Waterbury, Connecticut, and shall be conducted in accordance with the rules then applicable of the American Arbitration Association. The decision of the arbitrator shall be final and may be entered in any court having jurisdiction thereof. Each party shall pay one-half of all costs and expenses of such arbitration."

In December, 1990, the parties found themselves in a contract dispute. The defendants, alleging that the plaintiff had been dishonest in his management of the business, terminated the plaintiff's employment. Initially, both parties desired to negotiate, but after some delay not the sole fault of either party, the plaintiff filed a written demand for arbitration with the American Arbitration Association (arbitration association).

Prior to the arbitration hearing, the defendants repeatedly wrote to the arbitration association and to the plaintiff, stating that arbitration should not proceed because no negotiation sessions had occurred. ³ Nevertheless, the arbitrator scheduled the arbitration hearing for October 30, 1991. At the commencement of the evidentiary hearing, the defendants again objected to the arbitrator's authority to hear the dispute, claiming that it was not arbitrable due to the failure to hold the negotiation sessions. The arbitrator denied the objection. The trial court found that the parties, during the hearing before the arbitrator, had submitted the issue of arbitrability to the arbitrator, but only "in the context of an objection to the entire proceeding ... before the arbitration evidence began." ⁴

After the evidentiary hearing, the arbitrator made a written award in favor of the plaintiff, finding the defendants in breach of contract, and awarded damages to the plaintiff. ⁵ The plaintiff filed an application to confirm the arbitration award with the Superior Court pursuant to General Statutes § 52-417, ⁶ and the defendants filed an application to vacate the award pursuant to General Statutes § 52-418. ⁷ The trial court determined that the issue before it was "whether the matter could legally proceed to arbitration in the first place. This question arises from the fact that, while the contract calls for two negotiation sessions as a precondition to any request for arbitration, not even one negotiation session has ever occurred in this case." The trial court found that the defendants had preserved the issue of arbitrability by timely objection to the arbitrator before the commencement of arbitration proceedings. Because no negotiation sessions had occurred and because the defendants had preserved their right to have the court determine arbitrability, the trial court vacated the arbitration award.

On appeal, the Appellate Court determined that the parties' contract had provided for an unconditional submission to arbitration of any dispute arising under the contract, including threshold issues of arbitrability. White v. Kampner, supra, 31 Conn.App. at 77, 623 A.2d 514. On the basis of this determination, the Appellate Court held that the arbitrator's decision that the dispute was arbitrable ⁸ was unreviewable for errors of law or fact by the trial court. Id., at 78, 623 A.2d 514. Accordingly, the Appellate Court did not reach the issue of waiver. The Appellate Court reversed the judgment of the trial court and ordered that court to grant the plaintiff's application to confirm the arbitration award and deny the defendants' application to vacate the award. Id., at 79, 623 A.2d 514.

I

Unless statutorily mandated; see, e.g., American Universal Ins. Co. v. DelGreco, 205 Conn. 178, 187, 530 A.2d 171 (1987); arbitration is a creature of contract. John A. Errichetti Associates v. Boutin, 183 Conn. 481, 488, 439 A.2d 416 (1981). "Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution." Garrity v. McCaskey, 223 Conn. 1, 4-5, 612 A.2d 742 (1992). Nevertheless, "a person can be compelled to arbitrate a dispute only if, to the extent that, and in the manner in which, he has agreed so to do." Marsala v. Valve Corp. of America, 157 Conn. 362, 365, 254 A.2d 469 (1969). This limitation on contractual arbitration includes the requirement of satisfying any conditions precedent to arbitration. Frager v. Pennsylvania General Ins. Co., 161 Conn. 472, 477, 289 A.2d 896 (1971).

The first issue presented by this appeal is whether, by contract language, the parties manifested an intent to have the question of arbitrability determined by the arbitrator. " 'Whether a particular dispute is arbitrable is a question for the court, unless, by appropriate language, the parties have agreed to arbitrate that question, also.' ... 'The intention to have arbitrability determined by an arbitrator can be manifested by an express provision or through the use of broad terms to describe the scope of arbitration, such as "all questions in dispute and all claims arising out of" the contract or "any dispute that cannot be adjudicated." ' " (Citation omitted.) Welch Group, Inc. v. Creative Drywall, Inc., 215 Conn. 464, 467, 576 A.2d 153 (1990).

The plaintiff argues, and the Appellate Court held, that the intent to have arbitrability determined by the arbitrator was manifested by the broad language of the parties' contract. White v. Kampner, supra, 31 Conn.App. at 77, 623 A.2d 514. The defendants argue that the trial court correctly determined that the plain language of the arbitration and negotiation clauses created a conditional submission to arbitration, rather than an unrestricted submission as determined by the Appellate Court. Under these circumstances, the defendants argue, it was for the court, not the arbitrator, ultimately to determine the issue of arbitrability. We agree with the defendants.

We initially note that, because we favor arbitration, we will defer to this alternative method of dispute resolution if the contractual arbitration provisions fall within the grey area of arbitrability, employing the "positive assurance" test as set out in United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960). Under this test, " 'judicial inquiry ... must be strictly confined to the question whether the reluctant party did agree to arbitrate the grievance.... An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.' " (Emphasis in original.) Board of Education v. Frey, 174 Conn. 578, 582, 392 A.2d 466 (1978), quoting United Steelworkers of America v. Warrior & Gulf Navigation Co., supra, 582-83, 80 S.Ct. at 1353. Nevertheless, the contractual language in this case does not fall within the grey area and, therefore, the positive assurance test is not applicable.

The trial court correctly interpreted the contractual language to require satisfaction of the provisions of the mandatory negotiation clause as a condition precedent to arbitration, and correctly determined that this arbitrability issue was one for the courts to determine, not the arbitrator. Although the arbitration clause begins with broad language that generally grants jurisdiction to the arbitrator to determine the issue of arbitrability; Welch Group, Inc. v....