Opinion ID: 2065752
Heading Depth: 2
Heading Rank: 2

Heading: Whether the City Waived Its Defense of Contract Illegality

Text: The city next claims that, because the arbitration panel lacked subject matter jurisdiction to decide whether a contract is void ab initio, that claim is not subject to waiver. In part I A of this opinion, we concluded that the city's claim that the CM agreement was void ab initio on the grounds of illegality is squarely within the jurisdiction of the panel, and not the court. Accordingly, we next consider whether the trial court properly concluded that the city, by its conduct during the arbitration proceedings, waived that contract defense. The record reveals the following additional facts and procedural history. As noted previously, on May 19, 2003, after twenty hearing days had already been held, the city moved to revise its amended answer and counterclaim to assert the defense of contract illegality. On May 21, 2003, after considering the jurisdictional implications of a finding of contract illegality, the panel denied the city's motion to amend the pleadings to reflect illegal procurement of the contract, noting that the indictment of Ganim containing the operative facts had been issued in October, 2001; see footnote 14 of this opinion; and that it was too late in the game to make that counterclaim [because] the facts that underlie that counterclaim were known, or should have been known, by the city . . . as of the date of the stated indictment against Ganim, and I guess his two, for lack of a better word, cohorts or henchmen. Indeed, in considering proffered evidence on similar claims several months later, on October 28, 2003, the panel reiterated that it was deciding this case as a construction claim and a construction counterclaim and to the extent any evidence can come out showing that the change orders were, let's say, unwarranted in initiation or unwarranted payment, that's one thing. But we are not going to try this issue as to illegal contracts which we consider, if permitted, would be void ab initio and therefore, we would have no jurisdiction if the entire contract with Klewin were to be found illegal. And furthermore, this claim has arisen much too late in the process as far as the illegality of the [CM agreement]. It should come as no surprise to anybody around here in [the city] that [Ganim] was indicted a particular count or countsโexcuse meโrelative to the letting of the arena contract. That information was available long before this panel ever began to sit. Subsequently, in November, 2003, the panel considered the city's motion to bifurcate the proceedings and to have the illegality issues, which it had declined to review, considered by the court. [25] The panel denied the city's motion, and again reiterated that the basis of its decision was the timing of the allegations, and that the city should have raised the issue at the outset of the arbitration proceedings or filed court proceedings to stop the arbitration. The panel also took the position that the issue of contract illegality could be considered, if necessary, during the judicial proceedings to follow the arbitration process. Shortly thereafter, the chairman of the panel raised the possibility of, with the consent of the parties, considering the illegality issue at that point, notwithstanding the panel's prior jurisdictional rulings to the contrary. The panel and counsel then engaged in off-the-record discussions, and subsequently went back on the record, with the chairman noting that the panel and the counsel for both parties [have] had an opportunity to discuss privately a proposition of the panel that, contrary to its previous ruling on the lack of jurisdiction of subject matter and the lateness of filing the amended complaint or the amended counterclaim regarding the illegality of the entire contract, the panel had suggested to the parties that if they could agree in writing in a form that we would all have had some input on, that theyโthe parties were giving the panel the subject matter jurisdiction over the illegality of the entire contract issue and would waive the lateness in filing for an amendment in the hopes that this would, let's say, do away with a possible legal issue down the road. The parties talked about that and with their counsel, and one of the parties does not want to do that for its own reasons. So, we will continue with the hearings. We will issue a ruling on the bifurcation issue. And we've told the parties in an interest to resolve the dispute that if there is a change of mind by the reluctant party that it wants to proceed as we had suggested, we will get something in writing and so proceed. Klewin then asked the panel to identify which party was willing to proceed, and which party was not. The city objected to this request as unfair, and the panel's chairman overruled the objection and denied the city's motion to strike Klewin's comment, despite the fact that, [t]he panel was very particular in not naming the party because it thought that it would be unfair. There are many reasons for not assenting to what the panel suggested. The panel did, however, leave the option available for the parties for the duration of the proceedings. When acting on the consolidated proceedings to vacate or to confirm the arbitration award, the trial court concluded that the city waived its right to claim that the dispute was not arbitrable because of its conduct in the proceedings. The trial court specifically credited the panel's emphasis on the fact that the city did not seek to amend its pleadings to raise its illegality claim until after twenty days of hearings had already been held, which was more than two and one-half years after the arbitration had commenced. The trial court noted that the panel had denied the city permission to amend its answer to assert an illegality defense because it deemed the amendment untimely, as the city had had notice of the alleged illegal conduct since October, 2001, when Ganim was indicted in federal court. Indeed, the trial court emphasized that the city had taken no action to contest the arbitrability of the dispute at that point by either filing an objection in the arbitration, filing an action for a declaratory judgment, or refusing to participate further in the arbitration, thus requiring Klewin to file a motion to compel pursuant to General Statutes ง 52-410. Ultimately, the trial court concluded that the city's actions amounted to seeking two bites at the apple. We note briefly the proper standard of review. Ordinarily, [w]aiver is a question of fact subject to the clearly erroneous standard of review. AFSCME, Council 4, Local 704 v. Dept. of Public Health, 272 Conn. 617, 622, 866 A.2d 582 (2005); id., at 624-25, 866 A.2d 582 (applying clearly erroneous standard of review to case wherein evidence consisted of letter by plaintiff waiving deadline for arbitration decision). We agree with the city, however, that plenary review is appropriate in the present case because when a trial court makes a decision based on pleadings and other documents, rather than on the live testimony of witnesses, we review its conclusions as questions of law. State v. Lewis, 273 Conn. 509, 516-17, 871 A.2d 986 (2005). Waiver is the intentional relinquishment or abandonment of a known right or privilege. (Internal quotation marks omitted.) AFSCME, Council 4, Local 704 v. Dept. of Public Health, supra, 272 Conn. at 623, 866 A.2d 582. [V]arious statutory and contract rights may be waived. (Internal quotation marks omitted.) Id. Waiver is based upon a species of the principle of estoppel and where applicable it will be enforced as the estoppel would be enforced. . . . Estoppel has its roots in equity and stems from the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed. . . . Waiver does not have to be express, but may consist of acts or conduct from which waiver may be implied. . . . In other words, waiver may be inferred from the circumstances if it is reasonable to do so. (Citations omitted; internal quotation marks omitted.) Id. The waiver doctrine applies to arbitration because [w]e have made it clear that we will not permit parties to anticipate a favorable decision, reserving a right to impeach it or set it aside if it happens to be against them, for a cause which was well known to them before or during the trial. (Internal quotation marks omitted.) Diamond Fertiliser & Chemical Corp. v. Commodities Trading International Corp., 211 Conn. 541, 553, 560 A.2d 419 (1989), quoting Krattenstein v. G. Fox & Co., 155 Conn. 609, 616, 236 A.2d 466 (1967). In New Haven v. Local 884, Council 4, AFSCME, AFL-CIO, 237 Conn. 378, 380, 677 A.2d 1350 (1996), we concluded that a city that was party to a labor grievance arbitration proceeding had waived its right to vacate the award because of its affirmative conduct during the proceeding. The city sought to vacate the arbitration award on the ground that the state mediation and arbitration board had committed misconduct by refusing to grant the city's attorney a continuance when he became ill during the proceedings. Id., at 381, 677 A.2d 1350. We concluded that the trial court did not commit clear error when it determined that the city implicitly had waived its claim that the arbitrator committed misconduct because its attorney had continued to negotiate freely and voluntarily after the denial of the continuance. Id., at 389-90, 677 A.2d 1350. Similarly, in AFSCME, Council 4, Local 704 v. Dept. of Public Health, supra, 272 Conn. at 626, 866 A.2d 582, we concluded that the Appellate Court improperly concluded that the plaintiff's unilateral grant of the arbitrator's request for an extension was ineffective in the absence of the defendant's consent, and therefore could not amount to a waiver of the plaintiff's right to challenge the untimeliness of the award. See also White v. Kampner, 229 Conn. 465, 478, 641 A.2d 1381 (1994) (The defendant objected to the arbitrability of the dispute based on the parties' failure to satisfy the preconditional mandatory negotiation clause at issue, but [b]ecause the defendants preserved their objection to the arbitration, they had the option of committing the issue to the arbitrator without risking any waiver of their right to have the issue ultimately determined by the trial court. . . . Under these circumstances, we hold that the defendants did not waive consideration of the issue of arbitrability by the trial court. [Citation omitted.]); Diamond Fertiliser & Chemical Corp. v. Commodities Trading International Corp., supra, 211 Conn. at 552-53, 560 A.2d 419 (the plaintiff could not prevail in its attempt to vacate the award as untimely because it waived any right to object to the timeliness of the award by failing to object when it was notified of the date on which the award would be rendered); cf. Nagrampa v. Mailcoups, Inc., supra, 469 F.3d at 1278 (concluding that plaintiff did not waive her objection to arbitration via participation when her participation therein was limited to two preliminary telephone conferences and steps necessary to preserve her objections to arbitration and rights in proceeding, including filing of counterclaim and discovery requests, when she never participated in any proceedings which even touched the merits of the contractual claims that were to be the subject of arbitration). [26] It is apparent to us that the city acted aggressively, and, indeed, properly; see part I A of this opinion; in attempting to present its contract illegality claim to the panel. We agree with the trial court's determination, however, that the city's attempt was, in essence, too little, too late. Our conclusion that the city waived its contract illegality claim is based on the findings by the panel and the trial court that the city unduly delayed the presentation of the claim, notwithstanding the fact that it was aware of the bases for the claim since October, 2001, when the federal indictment against Ganim was issued. [27] Indeed, the city did nothing at that point to preserve its objection to or stay the arbitration proceedings pending developments with respect to facts alleged in the indictment. Moreover, the record indicates that, when the panel reconsidered its improper initial determination as to subject matter jurisdiction, as well as its timeliness ruling, and offered the city the chance to present its illegality claim, the city did not avail itself of that opportunity to go on the record to present or to preserve its right to make that claim. [28] Accordingly, we conclude that the trial court properly found that the city's actions before the panel constituted a waiver of this claim.