DA 09-0130

IN THE SUPREME COURT OF THE STATE OF MONTANA

2009 MT 354

WOLF’S INTERSTATE LEASING & 

SALES, L.L.C. doing business as 

Wolf’s Bozeman Suzuki, L.L.C.,

Plaintiff and Appellant,

v.

AARON BANKS and GLEN CROFT

doing business under the assumed and

unregistered names of BB&C, L.L.C. and

Bankroft Transportation Services, L.L.C.,

Defendants, Appellees and Cross-Appellants.

APPEAL FROM: District Court of the Eighteenth Judicial District,

In and For the County of Gallatin, Cause No. DV 08-831B

Honorable Mike Salvagni, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

R.J. “Jim” Sewell, Jr., Scott H. Clement; Smith Law Firm;

Helena, Montana

For Appellees:

Edward J. Guza; Guza, Williams, & Nesbit; Bozeman, Montana

Submitted on Briefs: September 16, 2009

Decided: October 27, 2009

Filed:

__________________________________________

Clerk

October 27 2009
2

Justice Jim Rice delivered the Opinion of the Court.

¶1 Wolf’s Interstate Leasing & Sales, L.L.C. (Wolf) appeals the order entered by the 

District Court for the Eighteenth Judicial District, Gallatin County, granting the motion 

by Aaron Banks and Glen Croft (Banks and Croft) to change the venue for the parties’ 

arbitration. Banks and Croft respond that Wolf’s appeal is without merit and request an 

award of attorney fees incurred on appeal. We consider:

¶2 Did the District Court err by granting the motion for change of arbitration venue?

PROCEDURAL AND FACTUAL BACKGROUND

¶3 On April 1, 2008, Wolf and Banks and Croft entered into an “Asset Purchase,

Management Agreement” (Contract) by which Banks and Croft would manage, and

incrementally acquire ownership of, Wolf’s automobile dealership in Bozeman. Shortly

thereafter, the relationship between the parties began to deteriorate, and on October 14,

2008, Wolf filed a complaint against Banks and Croft alleging contract and tort violations

and seeking punitive damages and injunctive relief. Wolf requested issuance of a

temporary restraining order restraining Banks and Croft from entering the dealership or

possessing dealership property. Banks and Croft filed a Motion to Dismiss/Summary

Judgment asking the court to enforce a settlement that had allegedly been reached

between the parties.

¶4 On November 5, 2008, Wolf initiated an arbitration proceeding in Colorado

through the American Arbitration Association pursuant to a provision in the Contract

which stated that “[a]ny controversy or claim arising out of this ‘management agreement’
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will be decided by arbitration before three (3) arbitrators, in the State of Colorado.” Wolf

followed by moving, on December 1, 2008, to dismiss the action it had filed in the

District Court and to compel arbitration. On December 11, 2008, Banks and Croft filed a

response opposing the motion to compel arbitration. Then, on January 27, 2009, Banks

and Croft filed a Motion to Change Arbitration Venue, arguing the arbitration could only

be properly conducted in Montana. The District Court granted Wolf’s motion to compel

arbitration, but also granted Banks and Croft’s motion to change the arbitration venue,

ordering that the arbitration be conducted in Bozeman, Montana. The District Court

declined to rule on the motion of Banks and Croft for dismissal or summary judgment.

Wolf appeals.

STANDARD OF REVIEW

¶5 The standard of review for a district court’s conclusions of law regarding

arbitration is whether they are legally correct. Iwen v. U.S. W. Direct, a Div. of U.S. W.

Mktg. Resource Group, 1999 MT 63, ¶ 17, 293 Mont. 512, 516, 977 P.2d 989, 993

(1999).

DISCUSSION

¶6 Did the District Court err by granting the motion for change of arbitration

venue?

¶7 Section 27-5-323, MCA (2007), provides, in relevant part:

No agreement concerning venue involving a resident of this state is valid

unless the agreement requires that arbitration occur within the State of

Montana. This requirement may only be waived upon the advice of

counsel as evidenced by counsel’s signature thereto.
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The parties concur that this provision controls the arbitration controversy at issue.

Further, it is uncontested that Banks and Croft are “resident[s] of this state” for this

purpose. The dispute here centers on the applicability of the last sentence of this

provision—whether Banks and Croft waived their statutory right to have the arbitration

conducted in Montana.

¶8 Wolf maintains that the District Court erred in granting Banks and Croft’s Motion

to Change Arbitration Venue because the motion was untimely filed, and the venue issue

was thus waived. Wolf asserts that because Croft and Banks did not request a change of

venue within their initial response, filed December 11, 2008, to Wolf’s arbitration

motion, and first raised the issue over 45 days later, they waived their right to request a

change in venue. In support of this position, Wolf cites M. R. Civ. P. 12(b)(ii), which

provides “the defendant must at the time of defendant’s first appearance request by

motion that the trial be had in the proper county.” Wolf argues that we should directly

apply M. R. Civ. P. 12(b)(ii) to the request for change of arbitration venue filed herein or

that the rule “should be extended as a matter of public policy reflecting the policy of the

Rules that objections to venue should be raised as soon as possible or be waived.”

¶9 Banks and Croft argue that application of M. R. Civ. P. 12(b)(ii) to this case by

analogy is inappropriate. They assert that the rule does not apply by its plain terms,

which address the moving of a lawsuit filed in the trial court from one county to another.

They argue that § 27-5-323, MCA, requires arbitration proceedings involving a resident

to be conducted in Montana and expressly limits the instances in which that requirement
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may be waived—only “upon the advice of counsel as evidenced by counsel’s signature

thereto” on the agreement. They maintain that there is no statutory requirement that a

request to change arbitration venue be made in the first responsive pleading.

¶10 We agree with Banks and Croft that application of M. R. Civ. P. 12(b)(ii), here is

inappropriate. M. R. Civ. P. 12(b)(ii) is a procedural rule governing the timing of a

request for a change of venue from one county to another within civil proceedings filed in

the district courts. Section 27-5-323, MCA, is an expression of the public policy of the

state that arbitration involving residents must be conducted within the State of Montana,

unless that right is waived in the manner provided under the statute. This statutory public

policy would be contradicted by application of M. R. Civ. P. 12(b)(ii) or an equivalent

rule which would require waiver of the venue right upon failure to request a change

within a party’s initial pleading concerning the arbitration.

¶11 In Keystone, Inc. v. Triad Sys. Corp., 1998 MT 326, 292 Mont. 229, 971 P.2d

1240, we invalidated a contract provision designating California as the arbitration venue

for a Montana resident. Keystone, ¶ 22. We noted that there was “no indication from the

face of the contract at issue that the right to have disputes arbitrated in Montana was

waived based on the advice of counsel,” Keystone, ¶ 21, and explained that a provision

“which requires that a Montana resident arbitrate disputes related to a contract to be

performed in Montana at a location outside Montana is void because it violates Montana

law.” Keystone, ¶ 22. Similarly here, as the District Court noted, “the Contract does not

indicate that Defendants, on advice of counsel, waived their right to have this dispute
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arbitrated in Montana.” We thus reach the same result here as we did in Keystone, and

conclude there was not a waiver of the statutory right of Banks and Croft to arbitrate the

dispute in Montana.

¶12 Banks and Croft request that they be awarded attorney fees incurred in this appeal

on the ground that Wolf’s appeal is without merit. They argue that Wolf’s argument

offers a “clearly inapplicable analogy” and an absence of legal authority in an effort to

delay and create a “war of attrition.” Wolf counters that its appeal is meritorious and

that, although the issue it raised was apparently one of first impression, the arguments

were made in good faith and the appeal was not “entirely unfounded.”

¶13 M. R. App. P. 19(5), provides that this Court may “award sanctions to the

prevailing party in an appeal . . . determined to be frivolous, vexations, filed for the

purposes of harassment or delay, or taken without substantial or reasonable grounds.” In

determining whether an appeal is frivolous and unreasonable for this purpose, we

generally assess whether the arguments were made in good faith. Sorenson v. MasseyFerguson, Inc., 279 Mont. 527, 531, 927 P.2d 1030, 1033 (1996). Here, while we have

rejected the arguments advanced by Wolf, his contentions were arguable and we cannot

conclude they were made in the absence of good faith. We thus hold that an award of

attorney fees under M. R. App. P. 19(5), is not appropriate.

¶14 Affirmed.

/S/ JIM RICE
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We concur:

/S/ MIKE McGRATH

/S/ W. WILLIAM LEAPHART

/S/ PATRICIA O. COTTER

/S/ BRIAN MORRIS