Opinion ID: 2616432
Heading Depth: 2
Heading Rank: 2

Heading: did the circuit court err in ordering the selection of an arbitrator?

Text: On its application for appointment of an arbitrator Leeward alleged that Bourne and Driggs failed to agree upon a mutually acceptable arbitrator after numerous discussions of possible names. The City contended that Bourne offered Hendry's name as an acceptable impartial arbitrator and Driggs accepted Hendry within the time specified in the arbitration agreement. Leeward maintains that the circuit court's order was correct because (1) the representatives failed to avail themselves of the method provided for selecting the arbitrator or (2) there was a lapse in the naming of the arbitrator. [2] The City's contention that Hendry's name was proposed by Bourne and accepted by Driggs factually contradict these conclusions. It maintains that this contradiction entitled it to try the issue before a jury. We agree. Leeward contends that even if Bourne did submit Hendry's name he did not do so firmly but only casually mentioned Hendry's name along with others for discussion purposes, and that Driggs' acceptance of a casually mentioned name does not amount to his appointment as arbitrator. [T]he proclaimed public policy of our legislature is to encourage arbitration as a means of settling differences and thereby avoid litigation. Gregg Kendall & Associates, Inc. v. Kauhi, 53 Haw. 88, 93, 488 P.2d 136, 140 (1971). The effectiveness of arbitration as a vehicle for the resolution of disputes depends in part upon the predictability of its efficiency. Of course, the express provisions of the agreement between the parties is always the first measure of the procedures to be followed. However, where, as in this case the parties basically provide the authority to make the selection and a time limit within which the selection must be made, predictability is not assured if the caprice of the parties controls the selection process. Thus, within this context the suggestive approach proffered by Leeward can only detract from predictability. Where the agreement to arbitrate does not specifically provide terms for the withdrawal of names during the selection process the legislative policy to encourage arbitration leads us to hold that a party submitting a name to the other cannot unilaterally withdraw the name within the time provided for the selection. This is true whether the submission was oral or in writing. Once a name is submitted, the party to whom the name is submitted must consent to the withdrawal of the name and may require a substitute name before allowing the withdrawal. In this manner the parties are assured that their reliance on each other's submissions will not be misplaced. In finding that the circuit court erred in its order to appoint an arbitrator we note that under HRS § 658-4 the court may order the appointment of an arbitrator where the parties have failed to do so, whether the failure is due to the absence of a method to select, or the neglect of a party to use a provided method or simply the failure of the parties to reach a decision under a prescribed method. However, the court's power to appoint an arbitrator under HRS § 658-4 must be read in conjunction with the first sentence of the section which states, If, in the agreement, provision is made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed. This implies that the court cannot appoint an arbitrator where it is shown the parties have already agreed upon a name. The City has continually maintained that an agreement was reached. The contention that Hendry was properly named under the agreement clearly raises the issue of whether the method of selection has been followed. In substance, the City maintains that Leeward is not complying with the agreement. The resolution of a factual dispute over a party's compliance with the agreement to arbitrate is provided for in HRS § 658-3. [3] The section provides for a jury trial, when timely demanded, where the failure to comply with the agreement is at issue. The fact that the court was acting on Leeward's application for appointment of an arbitrator is not a bar to granting the City a trial on the issue. It is clear that the City would be entitled to a trial on the issue had it filed an application for an order to compel arbitration prior to Leeward's application for appointment of an arbitrator. There appears to be no good reason to deny it the same benefit simply because Leeward decided to proceed under HRS § 658-4. In this situation we hold that HRS § 658-4 must be read with HRS § 658-3 and the City's demand for a jury trial entitled it to a resolution of this issue by a jury. For these reasons we reverse and remand for further proceedings consistent with this opinion.