No. 02-733

IN THE SUPREME COURT OF THE STATE OF MONTANA

2004 MT 136

JACK PAULSON and DONNA PAULSON, 

Petitioners and Appellants, 

v.

FLATHEAD CONSERVATION DISTRICT and 

MONTANA DEPARTMENT OF FISH, 

WILDLIFE AND PARKS, 

Defendants and Respondents. 

APPEAL FROM: District Court of the Eleventh Judicial District, 

In and For the County of Flathead, Cause No. DV 2001-420B, 

Honorable Katherine R. Curtis, Presiding Judge

COUNSEL OF RECORD:

For Appellants: 

Wilmer E. Windham, Attorney at Law, Polson, Montana 

For Respondents:

Ed Corrigan, County Attorney; Dennis J. Hester, Deputy County

Attorney, Kalispell, Montana 

Rebecca J. Dockter, Special Assistant Attorney General, Helena, Montana 

Submitted on Briefs: May 13, 2003 

 Decided: May 25, 2004

Filed:

__________________________________________

Clerk
2

Justice Jim Rice delivered the Opinion of the Court. 

¶1 Appellants Jack Paulson and Donna Paulson (Paulsons) appeal the July 18, 2002,

order of the Eleventh Judicial District Court, Flathead County, granting a motion for

judgment on the pleadings by Respondents Flathead Conservation District (FCD) and

Montana Department of Fish, Wildlife and Parks (FWP). We affirm.

¶2 We restate the issues as follows:

¶3 1. Did the District Court err in concluding that the arbitration panel validly

determined factual and legal issues in accordance with the arbitration provisions of The

Natural Streambed and Land Preservation Act of 1975?

¶4 2. Did the District Court err in concluding Delano A. Hanzel was a neutral arbiter?

¶5 3. Was the arbitration process constitutional? 

FACTUAL AND PROCEDURAL BACKGROUND

¶6 This case involves a dispute between owners of property situated on Bigfork Bay in

Flathead County, Montana, and two administrative agencies, the Flathead Regional

Development Office (FRDO) and the FCD. The FRDO is the county agency charged with

administration of the Flathead County Lakeshore Protection Program (Lakeshore Program),

governed by § 75-7-201, et seq., MCA, which grants authority to local governments for

protection of the natural lakes of Montana. The FRDO exercises jurisdiction over projects

in Flathead Lake. The FCD is the agency charged with administration of The Natural

Streambed and Land Preservation Act of 1975 (Streambed Act), governed by § 75-7-101,

et seq., MCA, which grants authority to conservation districts for protection of Montana’s
3

natural rivers and streams. The Streambed Act is also called the “310 Law,” so named after

the permit required for construction projects in Montana’s streams (310 Permit). The FCD

exercises jurisdiction over projects in the Swan River. Section 75-7-112, MCA, of the

Streambed Act, calls for a “team” consisting of one representative of the applicant, the FCD,

and FWP to consider proposed projects in Montana’s rivers and streams.

¶7 On January 3, 2000, the Paulsons submitted a project proposal to the FRDO for

construction of a retaining wall and dock extension into what they considered Flathead Lake.

Upon receipt of their permit for the project from the FRDO, the Paulsons began work on

their waterfront improvements. In May 2000, however, the Paulsons were notified by the

FCD that they may be in violation of the Streambed Act because, according to the FCD, their

project was also located in the Swan River. Thus, on May 11, 2000, the Paulsons submitted

to the FCD a project application, entitled Joint Application for Proposed Work in Montana’s

Streams, Wetlands, Floodplains, and Other Water Bodies (Joint Application), requesting

after-the-fact approval for the installation of the retaining wall and dock extension into the

Swan River. 

¶8 On May 22, 2000, the FCD Board of Supervisors (Supervisors) denied the Paulsons’

request for a 310 Permit. The letter from the FCD notified the Paulsons that anyone

proposing work in a perennial stream must first obtain an approved permit from the local

conservation district, and, as the landowners, they were responsible for correcting their

illegal activity. The letter set forth several conditions for restoration of the stream and its

immediate banks, including removing the concrete retaining wall and the dock extension,
4

taking measures for reclamation and erosion control, and undergoing a site inspection by the

FCD when they had restored the river bank to its original condition. 

¶9 The Joint Application form provided a means of responding in the event an applicant

disagreed with the supervisors’ decision. On July 7, 2000, the Paulsons returned the form

with a check in the box stating, “I disagree with the supervisors’ decision and hereby

formally request arbitration.” 

¶10 Over the course of the next twelve months, the Paulsons took a number of steps to

determine which agency, the FRDO or the FCD, had jurisdiction over their waterfront

improvement project. First, the Paulsons requested and received written verification from

the FRDO that the retaining wall complied with the requirements of their valid Lakeshore

Program permit. Then, the Paulsons requested and received a letter from the Flathead

County Commissioners to the FCD stating that, in their opinion, since their project was not

situated in a streambed, the FCD should cooperate in issuing a 310 Permit. The FCD

responded to the Commissioners’ letter that the process was presently under arbitration as

established by the Streambed Act, and an arbitration panel would make a final decision in

the matter. At that point, the Flathead County Attorney’s Office initiated legal

representation of the FCD. The Paulsons proceeded pro se.

¶11 Pursuant to the statutory arbitration process as set forth in § 75-7-114, MCA, of the

Streambed Act, the Paulsons, the FCD, and FWP each chose three proposed arbitrators and

submitted the names to senior Flathead County Judge Ted O. Lympus. Judge Lympus chose

one representative from each of the parties’ list of three submissions to serve on a three-
5

member arbitration panel. One member of the panel, to whom the Paulsons object on

appeal, was Delano A. Hanzel, a FWP retiree. 

¶12 A fourteen-hour arbitration hearing was held on May 3, 2001. However, the hearing

transcript is not part of the record on appeal. The parties allege that the major issue before

the arbitration panel was whether the Supervisors correctly determined that the situs of the

Paulsons’ construction project was on a “natural, perennial-flowing stream or river” and

therefore subject to the FCD’s jurisdiction. On May 11, 2001, the arbitration panel rendered

its decision that the FCD, did, in fact, have jurisdiction pursuant to the Streambed Act over

this matter.

¶13 The Paulsons subsequently secured legal counsel who, on August 3, 2001, filed a

motion to vacate the arbitration award in District Court. The Paulsons contended at the time

of arbitration, as they do on appeal, that the instant dispute involved a jurisdictional issue

between administrative agencies which was a question of law to be determined by the

District Court, not a question of fact for the arbitration panel. The Paulsons’ motion

requested: (1) that the District Court hold a hearing to determine which, if either, of the

involved local governmental agencies had jurisdiction under these circumstances; (2)

permission to serve the Flathead County Commission; (3) a determination of the

appropriateness of legal representation of the FCD by the Flathead County Attorney’s

Office; (4) an order vacating the arbitration award in favor of the FCD; and (5) if the court

determined jurisdiction was proper under the conservation district, appointment of a new
6

panel which did not include a retiree from an involved party (FWP). Paulsons’ motion did

not raise constitutional issues.

¶14 On August 31, 2001, the Flathead County Attorney, on behalf of the FCD, joined by

FWP, filed a response to the Paulsons’ motion to vacate. These pleadings asserted the

Paulsons’ motion failed to state a claim upon which relief could be granted and requested

an order confirming the arbitration award and dismissing the motion. 

¶15 On October 5, 2001, the Flathead County Attorney, on behalf of the FCD, filed a

motion for judgment on the pleadings pursuant to Rule 12(c), M.R.Civ.P., in which the FWP

concurred. The Paulsons filed a brief in opposition, followed by replies by both the Flathead

County Attorney and FWP. The issues raised by the motion were: (1) whether the

arbitration panel had the power to determine both the factual and legal issues before it; (2)

whether a conflict of interest arose from the legal representation of the FCD by the Flathead

County Attorney’s Office in light of the FRDO’s involvement in the jurisdictional dispute,

since both entities are Flathead County administrative agencies; and (3) whether arbiter

Delano A. Hanzel was partial because of his employment status as a retiree of FWP.

¶16 On July 18, 2002, the District Court issued an order granting the FCD’s and FWP’s

motion for judgment on the pleadings, and, after the Paulsons moved to reconsider,

reaffirmed that judgment on September 26, 2002. The Paulsons appeal.

STANDARD OF REVIEW

¶17 A movant for judgment on the pleadings pursuant to Rule 12(c), M.R.Civ.P., must

establish that no material issue of fact remains and that the movant is entitled to judgment
7

as a matter of law. Hedges v. Woodhouse, 2000 MT 220, ¶ 8, 301 Mont. 180, ¶ 8, 8 P.3d

109, ¶ 8 (citing Clayton v. Atlantic Richfield Co. (1986), 221 Mont. 166, 169-70, 717 P.2d

558, 560). The pleadings are to be construed in the light most favorable to the nonmoving

party, whose allegations are taken as true. Hedges, ¶ 8. Because a motion for judgment on

the pleadings is decided as a matter of law, we apply our standard of review for conclusions

of law: whether they are correct. Hedges, ¶ 8 (citing Steer, Inc. v. Dept. of Revenue (1990),

245 Mont. 470, 474-75, 803 P.2d 601, 603).

¶18 Judicial review of arbitration awards is limited by statute. Terra West Townhomes,

L.L.C. v. Stu Henkel Realty, 2000 MT 43, ¶ 22, 298 Mont. 344, ¶ 22, 996 P.2d 866, ¶ 22

(citing Nelson v. Livingston Rebuild Ctr., Inc., 1999 MT 116, ¶ 11, 294 Mont. 408, ¶ 11, 981

P.2d 1185, ¶ 11). When a matter has been submitted to binding arbitration, courts are not

permitted to review the merits of the controversy, but may only confirm, vacate, modify, or

correct an arbitration award pursuant to §§ 27-5-311, -312, and -313, MCA. See §§ 27-5-

311 to -313, MCA (2003); Nelson, ¶ 11. The standard of review for a court’s refusal to

modify or vacate an arbitration award is whether the court abused its discretion. See

Stockade Enters. v. Ahl (1995), 273 Mont. 520, 522, 905 P.2d 156, 157. 

DISCUSSION

Issue 1

¶19 Did the District Court err in concluding that the arbitration panel validly

determined factual and legal issues in accordance with the arbitration provisions of The

Natural Streambed and Land Preservation Act of 1975?
8

¶20 On appeal, the Paulsons challenge the arbitration panel’s authority to determine

jurisdiction. Specifically, the Paulsons argue that the question of whether the Streambed Act

as applied by the FCD or the Lakeshore Program as applied by the FRDO is a jurisdictional

question of law for the District Court, rather than the arbitration panel, to decide.

Conversely, the FCD contends that a conservation district can make the initial legal

determination of the status of a body of water and, accordingly, an arbitration panel can

review that determination because, under the arbitration process, it has authority to hear and

resolve all issues, both factual and legal, arising from the conservation district’s decision.

¶21 The Paulsons specifically contend that the arbitration panel was without authority to

decide the “basic jurisdictional question” presented in § 75-7-103, MCA, and § 75-7-202,

MCA, as to whether the situs of their project was a lake or a stream. The Streambed Act,

§ 75-7-103, MCA, defines “stream” as “any natural, perennial-flowing stream or river, its

bed, and its immediate banks except a stream or river that has been designated by district

rule as not having significant aquatic and riparian attributes in need of protection or

preservation under 75-7-102.” The Lakeshore Program, § 75-7-202, MCA, defines “lake”

as:

[A] body of standing water and the area within its lakeshore occurring

naturally rather than by virtue of constructed impoundments (although a

natural lake whose level is raised and whose area is increased by the

construction of impoundments includes the additional level and area), having

a water surface of at least 160 acres for at least 6 months in a year of average

precipitation as such averages are determined by the United States geological

survey, not used exclusively for agricultural purposes, and navigable by

canoes and small boats.
9

The Paulsons contend that the interpretation of these two statutes as applied to the question

of whether their construction project was located on Flathead Lake or the Swan River, was

properly a jurisdictional determination for the District Court, not the arbitration panel. 

¶22 Generally, Montana gives arbitrators broad authority and powers to determine all

issues. This Court stated in Terra West that the power of arbitrators as applied to bodies of

law is broader even than the power of courts: “Indeed, the power of arbitrators concerning

every body of law is broader than the power of courts concerning those same bodies of law.”

Terra West, ¶ 31. Under the Streambed Act, an arbitration panel is charged with the

responsibility of reviewing all decisions of an agency through its supervisors. See § 75-7-

121, MCA (“any review of final action by the supervisors . . . may be by arbitration”). We

have stated that an arbitrator may decide the matters which are submitted to him, and the

decision will be upheld upon review if it was rationally derived from the agreement to

arbitrate:

An arbitrator’s authority is limited by the bounds of the [arbitration]

agreement, and courts may vacate [arbitration] awards that extend beyond the

contractual scope of arbitration. An arbitrator exceeds his powers when he

decides matters which were not submitted to him. . . . Moreover, we have

stated that “[i]f the remedy fashioned by the arbitrator has been rationally

derived from the [arbitration] agreement it will be upheld on review.” 

Terra West, ¶ 27 (citing Nelson, ¶ 15). 

¶23 Significantly, arbitrators have the power to review issues of both fact and law.

Section 75-7-114, MCA, empowers an arbitration panel “to settle the dispute before it,”

regardless of whether the issues involve fact or law. See also Kloss v. Edward D. Jones &

Co., 2002 MT 129, ¶ 30, 310 Mont. 123,¶ 30, 54 P.3d 1, ¶ 30 (factors listed by this Court
1

Section 75-7-121(1), MCA (2001), was revised by the 2003 Legislature to state: 

“Any review of final action by the supervisors under 75-7-112 or 75-7-113 may be by

arbitration or by the district court of the county where the project is located.” The 2003

revision is not applicable in this matter. 

10

for determining unconscionability in arbitration provision in contract of adhesion include,

inter alia, to what extent arbitrators are bound by the facts and to what extent arbitrators are

bound by the law).

¶24 The Paulsons’ appeal was brought before the District Court for the purpose of judicial

review that is provided in § 75-7-121, MCA (2001),1

 a part of the Streambed Act. Section

75-7-121, MCA, provides that a party who disagrees with a decision of the supervisors of

a conservation district must appeal that decision to a panel of arbitrators. Following the

arbitrators’ decision, it can be reviewed by the district court. However, judicial review of

the arbitration award is strictly limited by § 27-5-312, MCA, of the Uniform Arbitration Act.

See § 75-7-121, MCA (“[j]udicial review of an arbitration action is under the provisions of

Title 27, chapter 5, part 3”). In Geissler v. Sanem (1997), 285 Mont. 411, 415-16, 949 P.2d

234, 237, this Court delineated the scope of those limitations:

We stated in both Duchscher v. Vaile (1994), 269 Mont. 1, 4, 887 P.2d 181,

183, and May v. First Nat’l Pawn Brokers, Ltd. (1994), 269 Mont. 19, 22, 887

P.2d 185, 187, that judicial review of an arbitration award is strictly limited

by statute. See also Stockade Enters. v. Ahl (1995), 273 Mont. 520, 522-23,

905 P.2d 156, 157. Section 27-5-312(1), MCA, states in relevant part that

“the district court shall vacate an award if . . . there was evident partiality by

an arbitrator appointed as a neutral or corruption in any of the arbitrators or

misconduct prejudicing the rights of any party; [or] . . . the arbitrators

exceeded their powers.” . . . As we stated in Duchscher, 269 Mont. at 5, 887

P.2d at 184, “[t]he Montana Uniform Arbitration Act clearly does not

authorize judicial review of arbitration awards on the merits of the

controversy.”
11

Geissler, 285 Mont. at 415-16, 949 P.2d at 237. Additionally, in Geissler, we adopted the

“manifest disregard of the law” standard of review for vacating arbitration decisions. For

reversal under this standard, an arbitrator must have been aware of a clearly governing

principle of Montana law, but “blatantly refuse[d] to follow it.” Geissler, 285 Mont. at 416,

949 P.2d at 238.

¶25 This Court has previously addressed the same issue which the Paulsons now raise on

appeal: whether a conservation district had the authority to determine its own jurisdiction

in a dispute involving classification of a body of water as a “stream.” In Bitterroot River

Prot. Ass’n, Inc., v. Bitterroot Conservation Dist., 2002 MT 66, 309 Mont. 207, 45 P.3d 24,

the issue before the Court was whether the Bitterroot Conservation District (BCD) had the

authority to make the initial determination of whether the Mitchell Slough was a “natural,

perennial-flowing stream” as part of the routine permit process. We noted in Bitterroot that

although the code fails to assign to any specific entity the necessary task of identifying the

legislature’s articulated requirement of “natural, perennial-flowing stream,” numerous cases

supported the rule that “a court should allow an agency to determine initially whether it has

jurisdiction.” Bitterroot, ¶¶ 14-15 (citing Wilson v. Dept. of Pub. Serv. Regulation (1993),

260 Mont. 167, 171, 858 P.2d 368, 370; General Atomics v. United States Nuclear

Regulatory Comm’n (9th Cir.1996), 75 F.3d 536, 541; Lone Star Cement Corp. v. Federal

Trade Comm’n (9th Cir.1964), 339 F.2d 505, 509-10; Marshall v. Burlington Northern, Inc.

(9th Cir.1979), 595 F.2d 511, 513; Marshall v. Able Contractors, Inc. (9th Cir.1978), 573
12

F.2d 1055, 1057; California ex rel. Christiensen v. Federal Trade Comm’n (9th Cir.1977),

549 F.2d 1321, 1323).

¶26 In Bitterroot, we applied the following three-part test from Marshall v. Burlington

Northern for determining whether a court may “interfere” with an agency’s initial

determination of its jurisdiction:

(1) the agency’s jurisdiction is plainly lacking;

(2) clear evidence exists that requiring a party to exhaust its remedies will

result in irreparable injury;

(3) the agency’s special expertise will be of no help on the question of its

jurisdiction.

Bitterroot, ¶ 15 (citing Burlington Northern, 595 F.2d at 513). We noted, however, that in

practice, “courts have rarely found instances where a party overcomes these three hurdles,”

and, indeed, concluded that the appellant in Bitterroot did not overcome them. Bitterroot,

¶ 15. We concluded in Bitterroot: (1) that the BCD’s jurisdiction was not plainly lacking:

“The most logical interpretation . . . [was] to allow the BCD to make the initial

determination of a stream’s status. Otherwise, until some entity classifie[d] the Mitchell

Slough as a stream, the BCD presumably could not regulate projects or grant permits as the

Streambed Preservation Act authorize[d] it to do . . .”; (2) that allowing the BCD to

determine whether it had jurisdiction to classify the Mitchell Slough as a “natural, perennialflowing stream” would not cause irreparable injury because applicants who disagreed with

an adverse decision could seek judicial review under § 2-3-113, MCA, or through a writ of

review pursuant to § 27-25-102(2), MCA; and, (3) that the BCD’s expertise was not clearly

without value in making the determination regarding Mitchell Slough because of its
13

unquestioned ability to determine what bodies of water lie outside of its jurisdiction.

Bitterroot, ¶¶ 16-19.

¶27 Since the Paulsons have not alleged the arbitration panel misapplied the law, thus

invoking the “manifest disregard of the law” standard, but have challenged its assertion of

jurisdiction, we review the District Court’s decision for an abuse of discretion. Stockade

Enters., 273 Mont. at 522, 905 P.2d at 157. 

¶28 Bitterroot is dispositive of this issue. First, like the BCD in Bitterroot, the FCD’s

jurisdiction was not plainly lacking. Although the Streambed Act does not explicitly state

that the FCD may answer the initial jurisdictional question as to which streams are “natural,

perennial-flowing,” we conclude, as we did in Bitterroot, that the most logical interpretation

of the Streambed Act is to allow the FCD to determine what bodies of water are streams

pursuant to § 75-7-103(6), MCA. Otherwise, until some other entity classifies the area in

question in Bigfork Bay as a “stream,” the FCD presumably could not regulate projects or

grant permits as the Streambed Act authorizes it to do. As we stated in Bitterroot, “[h]aving

the same entity decide what is a stream and conversely decide what is not a stream is more

logical than having a district court or other entity decide the former and the BCD decide the

latter.” Bitterroot, ¶ 17. We believe the same holds true here. Second, allowing the FCD

to determine whether it has jurisdiction to classify the project situs as the Swan River will

not cause irreparable injury because of the aforementioned remedies available in § 2-3-113,

MCA, and § 27-25-102(2), MCA, for reviewing agency rulings. And, third, the FCD’s

expertise is not clearly without value here. The record indicates that, historically, since the
14

1970s when the Streambed Act was adopted, the FCD has asserted concurrent jurisdiction

with the FRDO over Bigfork Bay, the situs of the Paulsons’ project. Regardless of how the

Lakeshore Program is applied, the Streambed Act has its own regulatory scheme that

requires a person proposing a project on a “natural, perennial-flowing stream or river” to

obtain a permit from the local conservation district. Application of the Lakeshore Program

does not preclude application of the Streambed Act to a particular area, especially in

situations where, as here, a construction project may be located simultaneously in a lake and

where a river once flowed before lake waters were expanded as a result of construction of

a dam.

¶29 Therefore, we conclude that the District Court did not abuse its discretion in granting

judgment on the pleadings to the FCD and FWP because no material issue of fact existed

that could have established that the arbitration panel was without authority to determine

questions of fact and law in resolving the initial question of jurisdiction, and, as a matter of

law, jurisdiction was properly exercised by the panel. 

Issue 2

¶30 Did the District Court err in concluding Delano A. Hanzel was a neutral arbiter?

¶31 The Paulsons further assert that one of the arbiters, Delano A. Hanzel, was not

neutral by virtue of being a retiree from FWP, one of the agencies involved in the arbitration

process, and therefore should have been excluded from the panel because of his prior

employment status. Respondents FCD and FWP reply that no provision of law requires an

arbitrator’s exclusion from the panel on the basis of prior employment, and, because the
15

Paulsons’ motion to vacate contained no other allegations of partiality, the Paulsons have not

stated a cause of action on this claim.

¶32 Arbitrators must be selected according to § 75-7-114, MCA, and Rule 2 of the

Streambed Act Rules of Arbitration. Section 75-7-114, MCA, states:

75-7-114. Arbitration panel - selection. The arbitration panel shall consist

of three members chosen by the senior judge of the judicial district in which

the dispute takes place. The members must be residents of that judicial district

at the time of selection . . . .

Arbitration Rule 2 of the Streambed Act states: 

Rule 2. Selection of the Arbitration Panel. Within thirty (30) days of the

request for arbitration, each team member must submit the names and

qualifications of three consenting persons to the administering agency. The

senior district judge for the judicial district of the conservation district

involved will select three panel members, one from each team member’s

group of names . . . .

The above statute and rule governing the choice of members for the arbitration panel contain

only two requirements: (1) members must be residents of that judicial district at the time of

selection, and (2) the senior district judge for the judicial district of the conservation district

involved will select three panel members, one from each team member’s group of names.

¶33 The burden of proof in establishing a statutory basis for vacating an arbitration award

is on the party attacking the award, here the Paulsons. May, 269 Mont. at 25, 887 P.2d at 189.

Section 27-5-312(1)(b), MCA, provides:

27-5-312. Vacating an award. (1) Upon the application of a party, the district

court shall vacate an award if:

. . . 

(b) there was evident partiality by any arbitrator appointed as a neutral or

corruption in any of the arbitrators or misconduct prejudicing the rights of any

party;
16

(Emphasis added.) “The partiality which will suffice to vacate an arbitration award must be

certain, definite and capable of demonstration; alleged partiality which is remote, uncertain

or speculative is insufficient.” May, 269 Mont. at 25, 887 P.2d at 189. 

¶34 Arbiter Hanzel met the two criteria set forth in § 75-7-114, MCA, and Arbitration Rule

2: (1) he was a resident of the judicial district at the time of selection, and (2) Senior District

Judge Lympus selected him as one of three panel members from the group of names submitted

by the three team members. Additionally, this Court has previously held that employment

status is insufficient, of itself, to establish partiality. See e.g. State v. Radi (1978), 176 Mont.

451, 460, 578 P.2d 1169, 1175 (court found no statute permitted automatic challenge for cause

solely on the basis prospective juror was also a county officer); State v. Thomson (1976), 169

Mont. 158, 163, 545 P.2d 1070, 1073 (followed in State v. Deschon, 2004 MT 32, ¶ 41, 320

Mont. 1, ¶ 41, 85 P.3d 756, ¶ 41) (court found prospective juror’s connection with law

enforcement did not, without more, necessitate finding of partiality). Thus, the Paulsons’

argument amounts to a speculative and conclusory allegation of partiality rather than the direct

and demonstrable evidence of partiality required to vacate an award. We conclude that the

Paulsons’ partiality allegations relating to Delano A. Hanzel do not establish “evident

partiality” under § 27-5-312(1)(b), MCA. We conclude, therefore, that the District Court did

not abuse its discretion in refusing to vacate the award on that basis.

Issue 3

¶35 Was the arbitration process constitutional?
17

¶36 On appeal, the Paulsons assert that the arbitration process to which they were required

to submit under the Streambed Act is unconstitutional. They contend the fact the Streambed

Act provides for arbitration as its sole appellate remedy, whereas the Lakeshore Program

provides judicial review as an appellate remedy, constitutes an equal protection violation.

Further, the Paulsons contend the process of promulgating the Streambed Act was

unconstitutional because the public had no voice in developing the process.

¶37 However, the Paulsons raise this as an issue for the first time on appeal. It is well

established that this Court will not review an issue that was not raised in the district court. “[I]t

is fundamentally unfair to fault the trial court for failing to rule correctly on an issue it was

never given the opportunity to consider.” Day v. Payne (1996), 280 Mont. 273, 276, 929 P.2d

864, 866. Accordingly, we summarily decline to address the merits of the Paulsons’ equal

protection argument on appeal. 

¶38 The Paulsons also raise the argument that the arbitration provision in the Streambed Act

exceeded the reasonable expectations of the parties and was compulsory, oppressive, and

unconscionable. In support of this argument, the Paulsons rely on our decision in Kloss which

determined that a contract of adhesion will not be enforced against a weaker party when it is:

“(1) not within the reasonable expectations of said party, or (2) within the reasonable

expectations of the party, but, when considered in its context, is unduly oppressive,

unconscionable or against public policy.” Kloss, ¶ 23. 

¶39 However, like their equal protection challenge, the Paulsons did not properly preserve

this issue. Even if we were to concede that they raised a similar argument in their brief in
18

opposition to the Respondents’ motion, this argument was not raised in the pleadings, fully

briefed by the parties, nor addressed by the District Court. Thus, it is both untimely and not

properly preserved for appeal. Moreover, Paulsons neither presented nor litigated this issue

prior to the arbitration process itself. This Court has specifically held that waiver may result

from acts or conduct which induce the belief that a party’s intention and purpose is to waive:

[A] right may be waived by implication as well as by agreement. Although

waiver is mainly a question of intention and must be manifested in some

unequivocal manner, a waiver may be founded upon express written statements,

oral express statements or acts or conduct which induce the belief that the

intention and purpose is to waive. 

Thiel v. Johnson, 219 Mont. 271, 275, 711 P.2d 829, 832 (citing Northwestern Fire & Marine

Ins. Co. v. Pollard (1925), 74 Mont. 142, 148, 238 P. 594, 596). We conclude that the

Paulsons’ act of requesting the very process to which they now object, and in which they

completely participated without objection, waived their right to challenge its constitutionality

on appeal. 

¶40 The Paulsons finally request that this Court conduct a plain error review of the

constitutionality of the arbitration process. We have held that we may discretionarily review

a claimed error not previously raised in the district court which affects fundamental

constitutional rights where failing to review it may result in a manifest miscarriage of justice,

leave unsettled the question of the fundamental fairness of the proceedings, or compromise the

integrity of the judicial process. State v. Finley (1996), 276 Mont. 126, 137, 915 P.2d 208,

215, overruled in part on other grounds; § 46-20-701(2), MCA. However, we further held

in Finley that we will use our inherent power of plain error review sparingly and only in
19

exceptional cases meeting one of the above criteria. Finley, 276 Mont. at 138, 915 P.2d at

215. Based on our review of the record, which reveals that the Paulsons affirmatively

requested to participate in the arbitration process, we conclude that this is not one of those

exceptional cases warranting plain error review.

¶41 We affirm the District Court on all issues.

/S/ JIM RICE

We concur:

/S/ JIM REGNIER

/S/ W. WILLIAM LEAPHART

/S/ PATRICIA O. COTTER