Opinion ID: 2635821
Heading Depth: 2
Heading Rank: 1

Heading: the parties agreed on a method for selecting arbitrators which must be followed

Text: ¶ 8 When the parties to a dispute have contracted to settle their dispute in arbitration, the role of the courts is extremely limited. Section 78B-11-112 of the Utah Arbitration Act specifies the narrow circumstances under which a court is authorized to interfere in the appointment of arbitrators. That section provides: If the parties to an agreement to arbitrate agree on a method for appointing an arbitrator, that method must be followed, unless the method fails. If the parties have not agreed on a method, the agreed method fails, or an arbitrator appointed fails or is unable to act and a successor has not been appointed, the court, on motion of a party to the arbitration proceeding, shall appoint the arbitrator. Utah Code Ann. § 78B-11-112(1) (2008). ¶ 9 In construing this statute, we look first and foremost to the statute's plain language. Dale T. Smith & Sons v. Utah Labor Comm'n, 2009 UT 19, ¶ 7, 208 P.3d 533. We consult other sources only if the plain language of the statute is ambiguous. Otter Creek Reservoir Co. v. New Escalante Irrigation Co., 2009 UT 16, ¶ 14, 203 P.3d 1015. ¶ 10 IHC argues that by referencing the American Arbitration Association (AAA) rules in the arbitration clause of the contract IHC and Peterson agreed on a method for the selection of arbitrators which Peterson was required to follow and which the district court was required to enforce. Peterson disagrees. There is no evidence in the district court's decision that the court made a determination of whether the parties had agreed on a selection method. Rather, the record of the February 21, 2008 hearing indicates that the court deliberately avoided deciding whether the AAA rules applied. Such avoidance is not permissible under the statute. ¶ 11 The plain language of the statute states that if the parties have agreed to a method for selecting arbitrators, that method must be followed. Utah Code Ann. § 78B-11-112(1). On the other hand, if no method has been agreed upon, the court may assume the responsibility for selection. Thus, the statute clearly contemplates that a court must first evaluate the contract to determine whether the parties have agreed to a selection method. If the court finds that they have, the court has no alternative but to enforce it. The statute provides for only one exception to this rule; the agreed upon method need not be applied if the method fails. Id. ¶ 12 This determination has not yet taken place in this case. Rather, the district court found justification for its ruling under Utah Code section 78B-11-109, which grants a court the authority, prior to the appointment of an arbitrator, to enter an order for provisional remedies to protect the effectiveness of the arbitration proceeding to the same extent and under the same conditions as if the controversy were the subject of a civil action. Id. § 78B-11-109(1). This was error. The authority granted in section 78B-11-109 is not reached until after a determination has been made under section 78B-11-112 that the parties have not agreed to any method for the appointment of arbitrators. ¶ 13 Therefore, while we consider the relevance of the pertinent sections of the Utah Arbitration Act, the underlying issue is one of straightforward contract interpretation. Arbitration is a contractual remedy for the settlement of disputes .... Lindon City v. Engineers Constr. Co., 636 P.2d 1070, 1073 (Utah 1981) (internal quotation marks omitted). The parties are free to structure their agreement in any manner they desire. We respect the parties' freedom to contract by enforcing arbitration agreements according to their terms and [ensuring that] arbitration proceedings [are] conducted in the manner to which the parties have agreed. Buckner v. Kennard, 2004 UT 78, ¶ 18, 99 P.3d 842. As with any contract, we determine what the parties have agreed upon by looking first to the plain language within the four corners of the document. Cent. Fla. Invs., Inc. v. Parkwest Assocs., 2002 UT 3, ¶ 12, 40 P.3d 599. When interpreting the plain language, we look for a reading that harmonizes the provisions and avoids rendering any provision meaningless. Encon Utah, LLC v. Fluor Ames Kraemer, LLC, 2009 UT 7, ¶ 28, 210 P.3d 263. If we find the language unambiguous, we interpret the contract as a matter of law. Cent Fla. Invs., Inc., 2002 UT 3, ¶ 12, 40 P.3d 599. We find ambiguity only where the language of the contract is reasonably capable of being understood in more than one sense. Id. (internal quotation marks omitted). ¶ 14 Here, the plain language of the contract clearly indicates that the parties agreed on a method of selecting arbitrators. The arbitration clause states, In the event of any dispute arising under this agreement that cannot be settled by informal means, the parties agree to submit the dispute to binding arbitration according to the Utah Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association. A plain reading of the clause unequivocally indicates that the parties have agreed that if a dispute should arise between them, they would first attempt to settle that dispute by informal means. Should informal means fail, the parties agreed that they would arbitrate their dispute in accordance with the rules set forth by the Utah Arbitration Act and the AAA. ¶ 15 By specifically naming the Utah Arbitration Act and the Commercial Arbitration Rules of the AAA, the parties have agreed to adopt these rules as part of the contract. It is immaterial that the contract does not use the exact words of adoption suggested by the AAA. Incorporation by reference requires that the reference ... be clear and unequivocal, and alert the non-drafting party that terms from another document are being incorporated. Hous. Auth. v. Snyder, 2002 UT 28, ¶ 19, 44 P.3d 724 (internal quotation marks omitted). Additionally, the party must consent thereto, and the terms of the incorporated document must be known or easily available to the contracting parties. Consol. Realty Group v. Sizzling Platter, Inc., 930 P.2d 268, 273 (Utah Ct.App.1996)(internal quotation marks omitted). These requirements are satisfied here. Therefore, arbitration must be conducted according to the Utah Arbitration Act and AAA rules. Any other reading would render the plain language of the contract meaningless. ¶ 16 Additionally, we find no ambiguity in the arbitration clause. Peterson has not advanced any rational alternative interpretation of the contract language and we find none. Ambiguity might have arisen in the event that the provisions of the Utah Arbitration Act conflicted with the provisions of the AAA, but such is not the case here. The Utah Arbitration Act includes no method for the selection of arbitrators beyond its provision that a court may appoint arbitrators if the parties have not agreed on a method of selection or if that method fails. Utah Code Ann. § 78B-11-112(1). The AAA Commercial Arbitration Rules, on the other hand, contain a detailed, step by step procedure for selecting arbitrators. In brief, under AAA rules, the claimant must first file two copies of a demand for arbitration along with two copies of the contract at any office of the AAA. AAA Commercial Arb. R. 4(a)(ii) (2007). Immediately following this filing, [t]he AAA shall send simultaneously to each party to the dispute an identical list of 10 ... names of persons chosen from the National Roster. The parties are encouraged to agree to an arbitrator from the submitted list and to advise the AAA of their agreement. ... If the parties are unable to agree upon an arbitrator, each party to the dispute shall have 15 days from the transmittal date in which to strike names objected to, number the remaining names in order of preference, and return the list to the AAA. Id. R. 11(a)-(b). The AAA then selects arbitrators from these lists. Id. Thus, no conflict exists between the Utah Arbitration Act and the AAA rules, and the contract is unambiguous. ¶ 17 Because the plain language of the arbitration clause clearly incorporates the AAA rules, and because the arbitration clause is unambiguous, we find that the parties have agreed on a method of selecting arbitrators as a matter of law. That method is the method outlined in the AAA rules. We further find that the agreed upon method has not failed for the purposes of section 78B-11-112(1) of the Utah Arbitration Act. The method has had no opportunity to fail as it has not as yet been attempted. As a misunderstanding of a contract is a mistake of law, we reverse and vacate the provisional order mandating a procedure for the selection of arbitrators. We remand and instruct the parties to proceed according to AAA rules.