Opinion ID: 2558115
Heading Depth: 3
Heading Rank: 3

Heading: Severability of the Judicial Review Provision

Text: [¶ 32] Forsley argues that the provision reserving the right to appeal questions of law cannot be severed from the provision requiring arbitration because they are interdependent contractual exchanges of consideration. The severability or entirety of a contract depends upon the intent of the contracting parties, and that intent is a question of fact that we review for clear error. Carvel Co. v. Spencer Press, Inc., 1998 ME 74, ¶ 10, 708 A.2d 1033, 1035 (alteration omitted) (quotation marks omitted). [¶ 33] Federal courts of appeals have reviewed as a matter of law whether an invalid provision of an arbitration agreement is severable, focusing on whether the invalid provision is central or collateral to the purpose of the agreement. For example, the Court of Appeals for the Ninth Circuit severed a provision for expanded judicial review of an arbitration award because no contract reformation was required, it [did] not permeate any other portion of the arbitration clause, and the review provisions [were] not interdependent with any other. Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 1001-02 (9th Cir.2003); see also Kristian v. Comcast Corp., 446 F.3d 25, 62-63 (1st Cir.2006) (concluding that a clause barring class arbitration that comprised a full paragraph in the agreement was a major provision, but severing it because the clause had a specific savings clause). In Kyocera, the court specifically rejected a party's argument against severance of a clause that provided for judicial review of an arbitration award based on the party's assertion that it would never have agreed to arbitrate at all if expansive review were precluded. See 341 F.3d at 1000. [¶ 34] In its order confirming the arbitration award, the court found, with respect to the parties' intent, that [they] agreed to this severability clause, which is no way an unusual contractual term, and it perceive[d] no reason, based on the record before it, to invalidate the entire arbitration agreement. [¶ 35] Reviewing the relevant portions of the OGG Operating Agreement, we note that the sections on arbitration (section 11.01) and severability (section 11.11) are both contained in Article XI of the agreement. Additionally, the section on severability applies to any provision of this Operating Agreement, not any section or any article. (Emphasis added.) Furthermore, the bulk of section 11.01 concerns the procedures for selecting arbitrators and for conducting the arbitration hearing; the provision regarding judicial review is a parenthetical within that section. For these reasons, the judicial review provision is not central to the purpose of the arbitration agreement, and it can be severed without reforming the contract. Compare Kyocera, 341 F.3d at 1001-02, with City of Beaumont v. Int'l Ass'n of Firefighters, Local Union No. 399, 241 S.W.3d 208, 215-16 (Tx.App.2007) (concluding that a provision in an arbitration clause that specified criteria to be applied in arbitration proceedings was not severable because the provision was central to the essential purpose of the agreement). [¶ 36] The court did not err in its factual determination that the parties agreed to the severability clause or in its legal conclusion that the judicial review provision of the arbitration clause was severable.