Opinion ID: 4422450
Heading Depth: 1
Heading Rank: 4

Heading: jurisdiction

Text: Having determined the UAA governs the purchase agreement in this case, we next address our jurisdiction to consider this interlocutory appeal. It is the duty of an appellate court to determine whether it has jurisdiction over the matter before it, even where no party has raised the issue.21 Section 25-2620 of the UAA provides: (a) An appeal may be taken from: (1) An order denying an application to compel arbitration made under section 25-2603; (2) An order granting an application to stay arbitration made under subsection (b) of section 25-2603; (3) An order confirming or denying confirmation of an award; (4) An order modifying or correcting an award; (5) An order vacating an award without directing a rehearing; or (6) A judgment or decree entered pursuant to the provisions of the [UAA]. (b) The appeal shall be taken in the manner and to the same extent as from orders or judgments in a civil action. This appeal was taken from an order that denied confirmation of an arbitration award and vacated an award without directing a rehearing. We therefore have appellate jurisdiction pursuant to § 25-2620(a)(3) and (5), and it is unnecessary to consider whether the orders appealed from are also final, appealable orders under Neb. Rev. Stat. § 25-1902 (Reissue 2016).22 Waiver of Challenge to A rbitrability The trial court’s order of March 8, 2018, and the parties’ briefs on appeal focus primarily on the enforceability of the 21 See McCullough v. McCullough, 299 Neb. 719, 910 N.W.2d 515 (2018). 22 See, generally, Kremer, supra note 1. - 533 - Nebraska Supreme Court A dvance Sheets 303 Nebraska R eports GARLOCK v. 3DS PROPERTIES Cite as 303 Neb. 521 arbitration provision in the purchase agreement and the arbitrability of the parties’ dispute. But given the procedural posture of this case and the parties’ agreement on the record before the arbitrator to proceed with arbitration of their dispute, we first address whether the Garlocks’ challenge to arbitrability has been waived in this case. After the litigation was stayed by the district court to permit mediation or arbitration—an order from which no party appealed23—all parties voluntarily submitted to and completed binding arbitration. And they did so despite a pending motion for rehearing before the district court that ordered the stay. The arbitrator found that “all Respondents agreed in writing to waive any challenge to the binding nature of the arbitration proceedings” and that “[t]he Parties also made the same representation on the record before the close of [the] Hearing.” Nebraska’s appellate courts have not yet addressed whether, or under what circumstances, a party’s participation in an arbitration proceeding without objection may result in a waiver of that party’s right to subsequently challenge arbitrability under state law. But many other states and several U.S. Circuit Courts of Appeal have considered the question.24 [4,5] As a general rule, these courts hold that voluntary participation in an arbitration proceeding on the merits of a dispute will result in a waiver or forfeiture of the right to later challenge arbitrability.25 In other words, a party may not voluntarily submit a dispute to arbitration and, after an unfavorable result, petition the courts to find the dispute was not 23 See id. 24 See Annot., Participation in Arbitration Proceedings as Waiver of Objections to Arbitrability Under State Law, 56 A.L.R.5th 757 (1998). 25 Id., §§ 2 and 3. See 21 Richard A. Lord, A Treatise on the Law of Contracts by Samuel Williston § 57:102 (4th ed. 2017) (“one who voluntarily and without objection participates in arbitration proceedings waives the right to object thereafter to the arbitrability of previously decided issues”). - 534 - Nebraska Supreme Court A dvance Sheets 303 Nebraska R eports GARLOCK v. 3DS PROPERTIES Cite as 303 Neb. 521 arbitrable.26 If, however, a party clearly and explicitly makes known to the arbitrator, prior to a hearing on the merits, that he or she objects to the arbitrability of an issue, that party’s participation in the arbitration will not preclude a later judicial challenge to arbitrability.27 The principle that a party may waive arbitrability by not timely objecting has been effectively codified under the UAA, which authorizes judicial vacatur of an arbitration award when “[t]here was no arbitration agreement and the issue was not adversely determined in proceedings under section 25-2603, and the party did not participate in the arbitration hearing without raising the objection[.]”28 In the instant case, the conduct of the Garlocks resulted in a waiver of the right to challenge arbitrability. After the district court stayed the lawsuit pending either mediation or arbitration, the Garlocks initiated arbitration proceedings. Six months later, the Garlocks asked the district court to reconsider its stay, but they did not seek a judicial stay of the ongoing arbitration proceedings under § 25-2603(b) despite the fact that the arbitration hearing was imminent. Instead, the Garlocks voluntarily proceeded with the arbitration hearing and never raised an objection to arbitrability before the arbitrator. To the contrary, they expressly agreed on the record to be bound by the decision of the arbitrator, and they asked the arbitrator to secure similar agreements on the record from all other parties, which he did. Thus, while it is possible for a party to participate in 26 See, e.g., Howard Univ. v. Metro. Campus Police Officer’s Un., 512 F.3d 716 (D.C. Cir. 2008); Fortune, Alsweet & Eldridge, Inc. v. Daniel, 724 F.2d 1355 (9th Cir. 1983); Bacon Const. Co. v. Dept. of Public Works, 294 Conn. 695, 987 A.2d 348 (2010); First Health Group Corp. v. Ruddick, 393 Ill. App. 3d 40, 911 N.E.2d 1201, 331 Ill. Dec. 971 (2009). 27 See, e.g., Opals on Ice Lingerie v. Body Lines Inc., 320 F.3d 362 (2d Cir. 2003); AGCO Corp. v. Anglin, 216 F.3d 589 (7th Cir. 2000); Azcon Const. Co. v. Golden Hills Resort, 498 N.W.2d 630 (S.D. 1993). 28 § 25-2613(a)(5) (emphasis supplied). - 535 - Nebraska Supreme Court A dvance Sheets 303 Nebraska R eports GARLOCK v. 3DS PROPERTIES Cite as 303 Neb. 521 an arbitration and still preserve an objection to arbitrability, the Garlocks did not do so here. We find, on this record, that all parties voluntarily submitted their dispute to arbitration without objecting to arbitrability, and thereby waived the right to seek a judicial determination that the dispute was not arbitrable. Court Erred in Ruling on Motion for R ehearing In their second assignment, 3DS, Donner, and Basye argue the district court erred when it found the arbitration provision in the purchase agreement was unenforceable. Given the context and timing of the court’s finding in that regard, we agree the court erred. The court’s finding on arbitrability was not made until after the parties had agreed to be bound by the arbitrator’s decision, had participated in the arbitration hearing, and had received the arbitrator’s award. Fully aware that the parties’ dispute had already been arbitrated, and with the complete record of the arbitration proceeding offered into evidence on the competing motions to vacate and confirm the arbitration award, the court nevertheless granted an earlier motion for rehearing and then concluded, after the fact, that the entire arbitration was a nullity because the arbitration provision in the purchase agreement was unenforceable under the UAA. But by the time the court ruled on the motion for rehearing, the parties had already consented to, and completed, arbitration. Once the arbitration award was entered, challenges to that award—including claims that there was no enforceable arbitration agreement—were properly taken up in the context of the Garlocks’ motion to vacate the award. Thus, instead of ruling on a motion for rehearing that could no longer provide the relief sought, the district court should have proceeded directly to consideration of the Garlocks’ application to vacate the arbitration award and the competing motion to confirm the award brought by 3DS and Donner. - 536 - Nebraska Supreme Court A dvance Sheets 303 Nebraska R eports GARLOCK v. 3DS PROPERTIES Cite as 303 Neb. 521 Error to Vacate Award Under § 25-2613 Section 25-2613 provides in relevant part: (a) Upon application of a party, the court shall vacate an award when: (1) The award was procured by corruption, fraud, or other undue means; (2) 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; (3) The arbitrators exceeded their powers; (4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor, refused to hear evidence material to the controversy, or otherwise so conducted the hearing, contrary to the provisions of section 25-2606, as to prejudice substantially the rights of a party; (5) There was no arbitration agreement and the issue was not adversely determined in proceedings under section 25-2603, and the party did not participate in the arbitration hearing without raising the objection; or (6) An arbitrator was subject to disqualification pursuant to section 25-2604.01 and failed, upon receipt of timely demand, to disqualify himself or herself as required by such section. The fact that the relief was such that it could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award. The Garlocks sought to vacate the award on three grounds: (1) The arbitrator was “partial to the Defendants,” (2) the award was “contrary to the public policy” of Nebraska, and (3) the arbitrator “refused to postpone” the arbitration hearing. The Garlocks’ first and third grounds for vacatur are recognized in § 25-2613, and their second ground (that the award was contrary to public policy) was recognized by this court in - 537 - Nebraska Supreme Court A dvance Sheets 303 Nebraska R eports GARLOCK v. 3DS PROPERTIES Cite as 303 Neb. 521 State v. Henderson 29 as a reason to refuse to enforce an arbitration award. But at the hearing on the motion to vacate, the Garlocks did not offer evidence to support any of these three grounds. Instead, they offered only the record of the proceedings before the arbitrator and argued the question of arbitrability, claiming the “arbitration clause [in the purchase agreement] is void.” [6] As stated, § 25-2613(a)(5) authorizes vacating an arbitration award when “[t]here was no arbitration agreement and the issue was not adversely determined in proceedings under section 25-2603, and the party did not participate in the arbitration hearing without raising the objection[.]” Because the Garlocks voluntarily participated in the arbitration hearing without raising any objection to arbitrability, they may not now rely on § 25-2613(a)(5) to support judicial vacatur. Without evidence to support any of the three grounds raised in the Garlocks’ application, and because the Garlocks cannot rely on § 25-2613(a)(5) to support their request for judicial vacatur, it was error for the district court to vacate the arbitration award. Error Not to Confirm Award Under § 25-2612 Section 25-2612 provides: Within sixty days of the application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in sections 25-2613 [vacating an award] and 25-2614 [modifying or correcting an award]. [7,8] When a party seeks to confirm an arbitration award pursuant to the UAA, a court must confirm that award unless 29 Henderson, supra note 5 (holding court may refuse to enforce arbitration award contrary to public policy that is explicit, well defined, and dominant). - 538 - Nebraska Supreme Court A dvance Sheets 303 Nebraska R eports GARLOCK v. 3DS PROPERTIES Cite as 303 Neb. 521 a party has sought to vacate, modify, or correct the award and grounds for such vacation, modification, or correction exist.30 We have stated that “§ 25-2612 does not allow for the exercise of discretion by the court when a request of confirmation is made where there has been no application for vacation or modification.”31 Here, no party sought to modify the award, and the Garlocks’ application to vacate the award was meritless. As such, it was error to overrule the application to confirm the award. Instead, the district court should have confirmed the arbitration award pursuant to § 25-2612 and then entered judgment in conformity therewith pursuant to § 25-2615. For the sake of completeness, we also note that absent a timely application to modify under § 25-2614, it was plain error for the district court to modify the arbitration award by reallocating the arbitration expenses.32