Court Opinion

ID: 8202679
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:39:55.730115+00
Date Added: 2024-06-11T16:40:59.430343
License: Public Domain

MYSE, J.
(dissenting). I respectfully dissent from the majority opinion. I believe the majority has erred in two respects. First, it has approved court intervention in a dispute that should have been resolved by the arbitration panel. Second, it has approved the removal of an appointed arbitrator based on the parties' intent in adopting certain contract language without the benefit of an evidentiary hearing.
The scope of the arbitrator's power rests solely on the parties' agreement. Lundgren v. Freeman, 307 F.2d 104, 110 (9th Cir. 1962); City of Milwaukee v. Milwaukee Police Ass'n, 97 Wis. 2d 15, 25-26, 292 N.W.2d 841, 846-47 (1980). If the agreement contains a clause giving the arbitrator power to resolve disputes concerning the interpretation of the agreement, the meaning of the arbitration agreement should be determined by the arbitrator and not the courts. Local 205 v. General Elec. Co., 233 F.2d 85, 101 (1st Cir. 1956), aff'd 353 U.S. 547 (1957). The purpose of arbitration is to provide a forum for resolving disputes quickly and inexpensively, outside of the judicial system in accordance with the parties' agreement. Diversified Management Servs. v. Slotten, 119 Wis. 2d 441, 449, 351 N.W.2d 176, 180-81 (Ct. App. 1984). The role played by the courts in arbitration cases is limited and circumscribed by the nature of the agreement between the parties. The courts generally only review the arbitrator's decision to determine whether "there is a *770perverse misconstruction or if there is positive misconduct plainly established, or if there is a manifest disregard of the law, or if the award itself is illegal or violates strong public policy." Joint Sch. Dist. No. 10 v. Jefferson Educ. Ass'n, 78 Wis. 2d 94, 117—18, 253 N.W.2d 536, 547 (1977). Here, the arbitration agreement provides that "any dispute or difference of opinion with respect to the interpretation of this agreement or the rights with respect to any transaction involved" should be resolved by the arbitration panel, not the court. (Emphasis added.) Because the parties unambiguously granted the arbitration panel the power to resolve these disputes, the courts are not authorized to interfere.
The majority allows the court to intervene in a dispute as to the meaning and effect of the arbitration agreement in spite of the agreement's language reserving these issues for the arbitration panel. One side contends that the arbitration agreement permits the appointment of Hall as its arbitrator because time is not of the essence and because he "functioned as an executive officer, even though not so titled." The other side contends that Hall was disqualified because his appointment violated two requirements of the arbitration agreement: he was appointed after the thirty-day time period had lapsed and he is not an executive officer of an insurance company domiciled in the United States. Additionally, one side contends that the arbitration demand was served on the wrong person while the other side contends that it served the defacto agent.1 These disputes concerning the meaning of the arbitration agreement and Hall's qualifications to *771serve as an arbitrator are for the arbitration panel to resolve under the provisions of the agreement.
New York's highest court held in County of Rockland v. Primiano Constr. Co., 409 N.E.2d 951, 953-54 (N.Y. Ct. App. 1980), that questions concerning the conduct of the arbitration itself, for example, the time within which the demand for arbitration must be made, upon whom and in what manner the demand must be served, whether such procedural requirements have been complied with and the consequences of noncompliance, are questions for the arbitrator. Id. at 954. The court explained:
Whether the particular requirement falls within the jurisdiction of the courts or of the arbitrators depends upon its substance and the function it is properly perceived as playing — whether it is in essence a prerequisite to entry into the arbitration process or a procedural prescription for the management of that process.
Id.; see also Exber, Inc. v. Sletten Constr. Co., 558 P.2d 517, 523 (Nev. 1976). The question whether "time is of the essence" in nominating an arbitrator after the receipt of a demand for arbitration clearly falls within the jurisdiction of the arbitrators.
The majority asserts that its conclusion that the trial court properly exercised its discretion by confirming Fox and Mitchell as the arbitrators is based on an application of the agreement's terms to the facts, as the courts are required to do under sec. 788.04, Stats. This result is directly contrary to the decision in Texas Eastern Transmission Corp. v. Barnard, 285 F.2d 536 (6th Cir. 1960). In that case, the court determined that the language the majority relies on does not make time of the essence. The language providing for appointment of *772a second arbitrator by the party demanding the arbitration in the event the other party does not appoint an arbitrator within thirty days after receipt of the demand does not itself provide that time is of the essence. By determining that Lloyd's forfeited its right to appoint an arbitrator because it failed to do so within thirty days resolves the parties' dispute based not on the agreement's language, but on what the majority believes the parties intended.
This court cannot find, as a matter of law, that time was of the essence for two reasons. First, the agreement did not specify that time was of the essence. Several courts have held that time is not of the essence in arbitration agreements in the absence of a specific provision. In Barnard the court was faced with a similar factual situation as we are faced with here. The contract stated that if either party demands arbitration, the other party has thirty days to appoint an arbitrator on its behalf. Failure to appoint an arbitrator within the thirty-day time period gave the demanding party's arbitrator the right to make an ex parte determination. The court concluded that nothing in the agreement indicated that the parties intended that time should be of the essence regarding the period of time in which the arbitrator should be chosen. Id. at 539. The court further noted that relief under 9 U.S.C. § 4 of the United States Arbitration Act (USAA) grants relief in the form of equitable specific performance of the arbitration contract, and that equity does not consider time to be of the essence unless the contract specifically provides. Id. (Citation omitted.) See also New England Reinsurance Corp. v. Tennessee Ins. Co., 780 F.Supp. 73, 77-78 (D. Mass. 1991); Compania Portorafti Commerciale v. Kaiser Int'l Corp., 616 *773F.Supp. 236, 238 (S.D. N.Y. 1985) (and cases cited therein).
Even if the absence of a provision providing that time is of the essence creates a contractual ambiguity that the trial court has jurisdiction to consider, the trial court must be reversed. The trial court held no evidentiary hearing and made no factual findings regarding the parties' intent. The meaning of an unambiguous contract is a question of law. Schlosser v. Allis-Chalmers Corp., 86 Wis. 2d 226, 244, 271 N.W.2d 879, 887 (1978). But, if ambiguous the parties' intent is an issue of fact. Patti v. Western Machine Co., 72 Wis. 2d 348, 353, 241 N.W.2d 158, 161 (1976). The agreement requires that the second arbitrator be appointed within thirty days and provides a mechanism for appointing a second arbitrator when the thirty-day time period has expired without such appointment. Arguably, these provisions may be some evidence of the parties' intent that time be of the essence. However, without an evi-dentiary hearing, this court cannot sustain the trial court's conclusion that the parties intended time to be of the essence in the contract.
The trial court also based its judgment on its determination that Hall is not qualified to act as an arbitrator because he is not titled as an executive officer of an insurance company domiciled in the United States. The majority did not address this issue, electing to uphold the trial court's judgment on other grounds. However, the parties should not be allowed to challenge the qualifications other party's designated arbitrator in court before a final arbitration award because allowing such challenges "would tend to defeat the very purpose" of arbitration, which is to "expedite the disposition of commercial disputes without the restrictive conditions characteristic of judicial proceed*774ings." In re Dover S.S. Co., 143 F.Supp. 738, 740 (S.D. N.Y. 1956). Likewise, the second circuit in Florasynth, Inc. v. Pickholz, 750 F.2d 171, 174 (2d Cir. 1984), noted that "[t]he Arbitration Act does not provide for judicial scrutiny of an arbitrator's qualifications to serve, other than in a proceeding to confirm or vacate an award ... ."2 The challenge to Hall's qualification to serve as an arbitrator centers on the dispute over what the parties intended by "executive officer." As I noted previously, the determination of the meaning of this contractual term is expressly within the jurisdiction of the arbitration panel, according to the contract. Furthermore, because the circuit court held no evidentiary hearing it could not properly make determinations as to the meaning of this provision.
Finally, I have serious doubts that an impasse actually exists and therefore, whether sec. 788.04, Stats., and USAA § 5 are applicable. Even if an impasse exists, however, it does not empower the courts to resolve the parties' disputes. Section 788.04 and § 5 only empower the courts to designate arbitrators according to the arbitration agreement's terms. Here, by designating Fox and Mitchell as arbitrators, the trial court and the majority are resolving the parties' disputes concerning Hall's qualifications. Neither sec. 788.04 nor USAA § 5 empowers the courts to resolve the parties' disputes in the face of an arbitration agreement that expressly grants that power to the arbitration panel.
*775I believe that the proper methodology is for Hall, the arbitrator initially appointed by Lloyd's, to meet with Fox, Wausau's arbitrator, to select a third arbitrator. The three-person panel may determine whether the parties intended that time be of the essence in appointing a second arbitrator after receipt of an arbitration demand. The panel may further determine whether Lloyd's named its arbitrator within a reasonable time if it concludes that time was not of the essence. The panel may entertain challenges to the arbitrators' qualifications based on the requirements that the arbitrators be executive officers of insurance companies. Finally, if necessary to the complete resolution of the disputes, the panel may determine who may properly receive arbitration demands on Lloyd's behalf. The resolution of these questions by the arbitration panel is consistent with the parties' agreement and the general philosophy of arbitration.
The majority's decision has improperly interposed the judicial system in the midst of an arbitration proceeding to address issues that are properly reserved to resolution by the arbitrators. The mischief is compounded by sustaining the trial court's conclusions concerning the meaning of the arbitration agreement's terms, arrived at without an evidentiary hearing. This result cannot and should not be sustained on appeal.

 The majority concedes that the agency issue is properly one for the arbitration panel. Majority opinion at 768-69.

 Although the Florasynth court was confronted with what amounted to a request for an order forcing unwilling arbitrators, who had previously disqualified themselves, to serve, this view of the USAA is accurate and especially applicable to a challenge of a nominated arbitrator's qualifications to serve.