Opinion ID: 2805465
Heading Depth: 2
Heading Rank: 1

Heading: The Existence of an Arbitration Agreement

Text: This court has addressed the formation of an agreement to arbitrate on a number of occasions. See, e.g., Siopes, 130 Hawai#i 437, 312 P.3d 869; Douglass, 110 Hawai#i 520, 135 P.3d 129; Brown, 82 Hawai#i 226, 921 P.2d 146; Luke v. Gentry Realty, Ltd., 105 Hawai#i 241, 96 P.3d 261 (2004). The following three elements are necessary to prove the existence of an enforceable agreement to arbitrate: “(1) it must be in writing; (2) it must 12  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  be unambiguous as to the intent to submit disputes or controversies to arbitration; and (3) there must be bilateral consideration.” Douglass, 110 Hawai#i at 531, 135 P.3d at 140 (emphasis added). In this case, the arbitration clause appears in writing and the Homeowners have not argued that it lacks bilateral consideration. Thus, we are only concerned with the second requirement. “With respect to the second requirement, ‘there must be a mutual assent or a meeting of the minds on all essential elements or terms to create a binding contract.’” Siopes, 130 Hawai#i at 447, 312 P.3d at 879 (emphasis omitted) (quoting Douglass, 110 Hawai#i at 531, 135 P.3d at 140). “The existence of mutual assent or intent to accept is determined by an objective standard.” Id. This court has identified at least two circumstances where the requisite unambiguous intent to arbitrate may be lacking. First, where a contract contains one or more dispute resolution clauses that conflict, we have resolved that ambiguity against the contract drafter and held that the parties lacked the unambiguous intent to arbitrate. For example, in Luke, we held that an arbitration clause was unenforceable where the ambiguity between it and a reservation of remedies clause meant that a reasonable buyer “would not know whether she or he maintained the right to judicial redress or whether she or he had agreed to 13  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  arbitrate any potential dispute.” 105 Hawai#i at 249, 96 P.3d at 269. Second, where a party has received insufficient notice of an arbitration clause in a document that is external to the contract that the party signed, we have held that the party lacked the unambiguous intent to arbitrate and that the purported agreement was unenforceable. For example, in Siopes, this court held that an arbitration clause was unenforceable where it was not contained in a document that was made available to the plaintiff at the time he executed his contract and where nothing in the surrounding circumstances suggested that the plaintiff was otherwise on notice of the arbitration provision. 130 Hawai#i at 452, 312 P.3d at 884. Likewise, in Douglass, we held that an arbitration clause contained in an employee handbook was unenforceable where the employment contract that the employee signed did not contain the arbitration provision or notify employee of the provision, the handbook stated that its policies were merely guidelines, the arbitration provision was not boxed off or otherwise set apart from the other provisions in the handbook, and there was no evidence that the employee was ever informed of the existence of the arbitration provision. 110 Hawai#i at 531-32, 135 P.3d at 140-41. By contrast, in Brown, this court held that an arbitration clause was enforceable where 14  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  it was conspicuously labeled and boxed off in the “Employee Rights” subsection of an employment application, and where the applicant’s signature line appeared right below the arbitration clause. 82 Hawai#i at 159-60, 921 P.2d at 239-40. In this case, the purported agreement to arbitrate is unenforceable because it is ambiguous when taken together with the terms of the purchase agreements and the public report. The purchase agreements contain a provision that states: “Venue for any cause of action brought by Purchaser hereunder shall be in the Second Circuit Court, State of Hawai#i.” This conflicts with the arbitration term stating that all claims “arising out of” the condominium declaration “shall be decided by arbitration,” and that the “arbitration shall be held in Honolulu, Hawaii.” Given that the purchase agreements reference the condominium declaration more than twenty times and that both documents contain dispute resolution provisions that use broad language to define their scope, a dispute may arise out of both the purchase agreement and the declaration. It is facially ambiguous whether those disputes would be consigned to arbitration in Honolulu pursuant to the condominium declaration or the “Second Circuit Court” pursuant to the purchase agreement. The public report creates further ambiguity. It states: “[T]he Declaration, Bylaws, and House Rules control the rights and obligations of the apartment owners . . . . The 15  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  provisions of these documents are intended to be, and in most cases are, enforceable in a court of law.” A reasonable buyer presented with these documents “would not know whether she or he maintained the right to judicial redress or whether she or he had agreed to arbitrate any potential dispute.” Luke, 105 Hawai#i at 249, 96 P.3d at 269. “Resolving this ambiguity in favor of the Plaintiffs, we cannot say that the Plaintiffs agreed to submit the claims made in this litigation to arbitration.” Id. In sum, we hold that the arbitration provision contained in the condominium declaration is unenforceable because the terms of the various condominium documents are ambiguous with respect to the Homeowners’ intent to arbitrate. Luke, 105 Hawai#i at 249, 96 P.3d at 269. The ICA gravely erred when it concluded that the parties had formed a valid and enforceable agreement to arbitrate.