Court Opinion

ID: 6318365
Source: CourtListenerOpinion
Date Created: 2022-03-01 15:16:03.852117+00
Date Added: 2024-06-11T09:01:35.757402
License: Public Domain

2022 WI 12

                  SUPREME COURT           OF   WISCONSIN
CASE NO.:               2019AP2205

COMPLETE TITLE:         Loren Imhoff Homebuilder, Inc.,
                                  Petitioner-Appellant,
                             v.
                        Lisa Taylor and Luis Cuevas,
                                  Respondents-Respondents-Petitioners.

                           REVIEW OF DECISION OF THE COURT OF APPEALS
                           Reported at 395 Wis. 2d 178,953 N.W.2d 353
                                      (2020 – unpublished)

OPINION FILED:          March 1, 2022
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:          October 4, 2021

SOURCE OF APPEAL:
   COURT:               Circuit
   COUNTY:              Dane
   JUDGE:               Frank D. Remington

JUSTICES:
ROGGENSACK, J., delivered the majority opinion for a unanimous
Court.
NOT PARTICIPATING:
KAROFSKY, J., did not participate.

ATTORNEYS:

      For    the       respondents-respondents-petitioners,   there   were
briefs filed by Deborah C. Meiners, Barret V. Van Sicklen, Jordan
Rohlfing, and DeWitt LLP, Madison. There was an oral argument by
Barret V. Van Sicklen.

      For the petitioner-appellant, there was a brief filed by Paul
W. Schwarzenbart, Jeffrey W. Younger, and Stafford Rosenbaum LLP,
Madison. There was an oral argument by Paul W. Schwarzenbart.
                                                             2022 WI 12
                                                             NOTICE
                                               This opinion is subject to further
                                               editing and modification.   The final
                                               version will appear in the bound
                                               volume of the official reports.
No.   2019AP2205
(L.C. No.      2016CV3177)

STATE OF WISCONSIN                         :              IN SUPREME COURT

Loren Imhoff Homebuilder, Inc.,

               Petitioner-Appellant,                               FILED
          v.                                                   MAR 1, 2022
Lisa Taylor and Luis Cuevas,                                      Sheila T. Reiff
                                                              Clerk of Supreme Court
               Respondents-Respondents-Petitioners.

ROGGENSACK, J., delivered the majority opinion for a unanimous
Court.

KAROFSKY, J., did not participate.

      REVIEW of a decision of the Court of Appeals.               Reversed and

cause remanded.

      ¶1       PATIENCE DRAKE ROGGENSACK, J.      We review the decision

of the court of appeals1 that applied the doctrine of forfeiture

as the basis for its reversal of the circuit court's2 vacatur of

      1Loren Imhoff Homebuilder, Inc. v. Taylor, 2020 WI App 80,
395 Wis. 2d 178, 953 N.W.2d 353.
      2The Honorable Frank D. Remington of Dane County Circuit
Court presided.
                                                                      No.   2019AP2205

Loren Imhoff Homebuilder, Inc.'s ("Imhoff") arbitral award under

Wis. Stat. § 788.10(1) (2019-2020).3                  On our review, Lisa Taylor

and Luis Cuevas ("the homeowners") urge us to reverse the court of

appeals, arguing that they did not forfeit their objections to the

arbitrator's conduct because they properly raised them before the

arbitral award was issued.            Furthermore, they assert that the

arbitrator's    sleeping    was     both       misbehavior     that    resulted    in

prejudice and indicative of a flawed process to the extent that

the   vacatur   of   the   arbitral        award      was   required    under    both

§§ 788.10(1)(c) and (1)(d).

      ¶2    We conclude that, because the homeowners objected to the

arbitrator's sleeping before he issued the arbitral award, they

did not forfeit their objection.               However, we are evenly divided

on whether the arbitration award should be vacated pursuant to

Wis. Stat. § 788.10.       Therefore, we reverse the decision of the

court of appeals and remand the matter to the court of appeals for

consideration of § 788.10 issues.

                               I.    BACKGROUND
      ¶3    This case originates from a construction contract that

Imhoff entered into with the homeowners for a remodeling project

on their home.       Eight months into the contract, the homeowners

were dissatisfied with the work completed by Imhoff, alleging a

number     of   deficiencies        that       they     asserted      breached    the

construction    contract,    as     well       as   discrepancies      in   Imhoff's

      3All references to the Wisconsin Statutes are to the 2019-
2020 version unless otherwise indicated.

                                           2
                                                                 No.      2019AP2205

billing invoices.       Following an unsuccessful attempt at mediation,

Imhoff filed a petition to compel arbitration under the terms of

the contract, which was granted by the circuit court.

     ¶4     The arbitration commenced before a single arbitrator and

consisted    of    a   five-day    evidentiary     hearing.      Following      the

conclusion of the hearing, but prior to the conferment of the

arbitral    award,      the     homeowners      raised     objections      to   the

arbitration       proceedings     and   asked   the   arbitrator     to    recuse.

Specifically, the homeowners asserted that the arbitrator was

biased towards Imhoff, and that the arbitrator repeatedly fell

asleep and missed the presentation of evidence by their expert

witness.    The arbitrator denied the homeowners' motion and awarded

Imhoff over $320,000 in damages and fees.                The arbitrator did not

directly address the homeowners' allegation that he was sleeping

during the hearing.4           Imhoff subsequently brought a motion in

circuit court to confirm the arbitral award.                    The homeowners

opposed Imhoff's motion and moved to vacate the award based,

partly, on the arbitrator's sleeping.
     ¶5     The circuit court took testimony from the parties and

their    counsel    regarding     the   arbitrator's      sleeping     during   the

arbitration hearing.          The homeowners testified that his sleeping

happened repeatedly and that "[t]here was never a day . . . where

     4 The allegation that the arbitrator was sleeping was not
mentioned in his arbitral Decision and Order. It was mentioned in
note 2 of the Order Denying Recusal: "Ms. Taylor's suggestion
that my drowsiness somehow explains why I was unaware of recordings
having been made continuously over the course of a five-day
arbitration hearing is incredible on its face."

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                                                               No.   2019AP2205

he was not sleeping."       Specifically, the homeowners noted that the

arbitrator had "glazed eyes, haziness, drowsiness, and sometimes

[went into a state of outright] sleep."             The homeowners further

testified that the arbitrator's sleeping prejudiced their case

because it often coincided with their expert witness's testimony.

      ¶6      After hearing testimony from the parties and Imhoff's

attorney in regard to the allegation that the arbitrator was

sleeping, the circuit court said it found the homeowners' testimony

regarding the sleeping to be "credible."              Conversely, it found

Imhoff's counsel's testimony——that he did not see the arbitrator

sleeping——to be "more [of] an acknowledgment" and "certainly not

a denial" because he did not reject "the general proposition that

[the arbitrator] was sleeping."

      ¶7      Following the testimony, the circuit court concluded

that the homeowners had "satisfied [their] burden by clear and

convincing evidence that [the arbitrator] so imperfectly executed

his   power    that   an   award   upon    the   subject     was   not   made."

Accordingly, the circuit court denied Imhoff's motion to confirm
the award, granted the homeowners' motion to vacate, and remanded

the case for a new arbitration of the dispute with a different

arbitrator.      Imhoff appealed.

      ¶8      The court of appeals reversed, holding that by failing

to raise the arbitrator's sleeping during evidentiary testimony at

the   hearing,    failing    to    voice   an    objection    requesting    the

arbitrator to reconsider any missed evidence, and waiting to raise

the issue of sleeping until after the close of evidence, "the
homeowners forfeited drowsiness or sleeping by the arbitrator as
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                                                                  No.   2019AP2205

a basis to vacate the award."5             Loren Imhoff Homebuilder, Inc. v.

Taylor, 2020 WI App 80, ¶14, 395 Wis. 2d 178, 953 N.W.2d 353.

       ¶9        We granted the homeowners' petition for review.                We

determine:         (1) whether the doctrine of forfeiture may be applied

in an arbitration setting and, if so, (2) whether it should have

been applied here.

                                   II.   DISCUSSION

                            A.     Standard of Review

       ¶10       Whether a party has forfeited its right to raise an issue

on appeal is a question of law that we review independently.                  City

of Eau Claire v. Booth, 2016 WI 65, ¶6, 370 Wis. 2d 595, 882 N.W.2d

738.       See also State v. Coffee, 2020 WI 1, ¶17, 389 Wis. 2d 627,

937 N.W.2d 579          ("Whether a       claim is forfeited or adequately

preserved for appeal is a question of law this court reviews de

novo.").           Additionally,      whether    a   violation   of   Wis.   Stat.

§ 788.10(1) occurred, thereby requiring vacatur of an arbitral

award, is a question of law that we review independently.                    Racine

Cnty. v. Int'l Ass'n of Machinists & Aerospace Workers Dist. 10,
AFL-CIO, 2008 WI 70, ¶11, 310 Wis. 2d 508, 751 N.W.2d 312.                     And

finally, we affirm the "circuit court's findings of fact unless

they       are    unsupported    by      the    record   and   are . . . clearly

       Because the court of appeals resolved the appeal based on
       5

the forfeiture issue, it did not consider the issue of vacatur of
the arbitral award.    Id., ¶15 ("Because we resolve this appeal
based on the homeowners' forfeiture, we need not reach the
statutory and common law standards that guide courts in addressing
a request to vacate an arbitration award.").

                                           5
                                                                   No.    2019AP2205

erroneous."       Royster-Clark, Inc. v. Olsen's Mill, Inc., 2006 WI

46, ¶11, 290 Wis. 2d 264, 714 N.W.2d 530.

                        B    Arbitration Generally

     ¶11    Arbitration      is,   first     and   foremost,       a     matter    of

contract.     Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67,

(2010).    It is "a method of dispute resolution in which the parties

submit a dispute to an impartial person who has been selected by

the parties for a final and binding decision."               7 Jay E. Grenig &

Nathan A. Fishbach,         Wisconsin Practice Series:             Arbitration     §

86:40 (5th ed. 2021).          Arbitration can provide a "prompt and

efficient    method   for    resolving     disputes      without   the     expense,

delays, or complications that are inherent in litigation."                        Id.

Because arbitration occurs outside of the court system, it does

not carry with it the same formality inherent in the judicial

process.    Id.

     ¶12    Arbitration     proceedings      are   not     required      to   follow

procedures that are applicable to a court.             Arbitration procedures

are established by contract and are "enforceable except upon such
grounds as exist at law or in equity for the revocation of any

contract."    Wis. Stat. § 788.01.         The arbitrators are not required

to have any legal education or background and are, instead, chosen

based on "their integrity and impartiality as well as for their

professional      competence   and   knowledge        of   business       affairs."

Grenig & Fishbach, supra, § 86:44; see also Newark Stereotypers'

Union No. 18 v. Newark Morning Ledger Co., 397 F.2d 594, 599 (3d

Cir. 1968) (describing that most arbitrators are laymen).                     Unless
limited by statute, rule, or arbitration agreement, "arbitrators
                                      6
                                                           No.   2019AP2205

have considerable discretion as to the mode of conduct[ing] the

proceeding."      See Grenig & Fishbach, supra, § 86:45.    In addition,

representation by counsel is not required in all arbitrations.

Id.

                      C.   Forfeiture in Arbitration

      ¶13   We "often [have] referred to the issue preservation rule

as the 'waiver rule' in the past."       State v. Huebner, 2000 WI 59,

¶11 n.2, 235 Wis. 2d 486, 611 N.W.2d 727.              Although opinions

sometimes use "'forfeiture' and 'waiver' interchangeably, the two

words embody very different legal concepts.       'Whereas forfeiture

is the failure to make the timely assertion of a right, waiver is

the intentional relinquishment or abandonment of a known right.'"

State v. Ndina, 2009 WI 21, ¶29, 315 Wis. 2d 653, 761 N.W.2d 612

(quoting United States v. Olano, 507 U.S. 725, 733 (1993)).

      ¶14   Whether a right is forfeited or waived depends, in part,

on the state of mind of the non-objecting party.          Forfeiture has

been consistently understood as failing to claim a right at trial

or the simple failure to object.        Ndina, 315 Wis. 2d 653, ¶30.
Non-actions may result in forfeiture of the right on appellate

review.     Id.   There is no subjective component to the forfeiture

analysis; it occurs by operation of law.      See State v. Kelty, 2006

WI 101, ¶18 n.11, 294 Wis. 2d 62, 716 N.W.2d 886 (citing Peter

Westen, Away from Waiver:        A Rationale for the Forfeiture of

Constitutional Rights in Criminal Procedure, 75 Mich. L. Rev.

1214, 1214 (1975) (explaining that forfeiture "occurs by operation

of law without regard to the defendant's state of mind")).

                                    7
                                                                    No.    2019AP2205

     ¶15    Conversely,        because       waiver    is     the     intentional

relinquishment of a known right, see Ndina, 315 Wis. 2d 653, ¶29,

there is a subjective component to determine whether the failure

to assert the right was done knowingly.                 The determination of

whether there has been a knowing waiver depends, in each case,

"upon the particular facts and circumstances surrounding that

case, including the background, experience, and conduct of the

accused." Johnson v. Zerbst, 304 U.S. 458, 464 (1938). Therefore,

as the court of appeals correctly determined,6 because this case

involves the potential failure to object, it implicates issues of

forfeiture rather than waiver.

     ¶16    As   part     of    the      adversarial        system,       forfeiture

historically has been applied to aspects of the arbitration process

in Wisconsin.    For example, in 1876, we determined that a party's

argument regarding an arbitrator's possible bias had not been

preserved and that "by accepting him as an arbitrator, [the party

had] waived[7] any right to object to him for that reason."                     Kane

v. City of Fond du Lac, 40 Wis. 495, 501 (1876); see also Borst v.
Allstate Ins. Co., 2006 WI 70, ¶36, 291 Wis. 2d 361, 717 N.W.2d 42

("A failure to initially object to the selection of an arbitrator,

based on the information disclosed prior to the arbitration, may

act as a forfeiture of any subsequent post-arbitration challenge

     6   See id, ¶21 n.5.
     7 Because this case involved a litigant's failure to raise an
issue as the reason for its non-preservation, it should properly
be understood to constitute forfeiture rather than waiver. See
State v. Ndina, 2009 WI 21, ¶29, 315 Wis. 2d 653, 761 N.W.2d 612.

                                         8
                                                                           No.    2019AP2205

[based]      on   the   disclosed    information.").                Furthermore,         in    a

challenge to the scope of an arbitrator's authority, Wisconsin

courts have held that "a party cannot complain to the courts that

the arbitrator acted outside the scope of his or her authority if

the objection was not first raised before the arbitrator."                              De Pue

v. Mastermold, Inc., 161 Wis. 2d 697, 705, 468 N.W.2d 750 (Ct.

App. 1991).

       ¶17    Wisconsin's    usage        of       forfeiture      in   the    arbitration

context is consistent with the majority of other jurisdictions

around the country.          See, e.g., Howard Univ. v. Metro. Campus

Police Officer's Union, 512 F.3d 716, 720 (D.C. Cir. 2008) ("[A]

party that does not object to the arbitrator's jurisdiction during

the arbitration may not later do so in court."); Cummings v. Future

Nissan, 27 Cal. Rptr. 3d 10, 14-16 (Cal. Ct. App. 2005), as

modified (Apr. 8, 2005) ("[A] party who knowingly participates in

the arbitration process without disclosing a ground for declaring

it    invalid     is    properly     cast          into     the    outer      darkness        of

forfeiture.").
       ¶18    Specifically, in terms of "when" during an arbitration

an    objection     must   be     made     in       order    to    preserve       it,    many

jurisdictions, including Wisconsin, agree that a proper time to

raise an objection is before the arbitration award is issued.                             See

City of Manitowoc v. Manitowoc Police Dep't, 70 Wis. 2d 1006, 1021,

236    N.W.2d     231    (1975)     ("A    party          cannot    attack       procedural

irregularities after an award when he was aware of them earlier

but remained silent until an unfavorable outcome."); see also
Ahluwalia v. QFA Royalties, LLC, 226 P.3d 1093, 1098 (Colo. App.
                                               9
                                                             No.   2019AP2205

2009) ("If a party willingly allows an issue to be submitted to

arbitration, it cannot await the outcome and later argue that the

arbitrator lacked authority to decide the matter."); AAOT Foreign

Econ. Ass'n (VO) Technostroyexport v. Int'l Dev. & Trade Servs.,

Inc., 139 F.3d 980, 982 (2d Cir. 1998) ("The settled law of this

circuit precludes attacks on the qualifications of arbitrators on

grounds previously known but not raised until after an award has

been rendered.").

     ¶19   Here, the court of appeals determined that, because the

homeowners     did   not   raise     their     objections   regarding    the

arbitrator's    sleeping    during    the     evidentiary   hearing,    they

forfeited any objection to his sleeping. Loren Imhoff Homebuilder,

Inc., 395 Wis. 2d 178, ¶35. However, unlike a judicial evidentiary

hearing, where case law directs a general rule that failure to

contemporaneously object to an issue may result in forfeiture of

the argument on appeal, this arbitration hearing had no such rule.

An arbitration hearing is subject to the conditions or rules of

arbitration chosen by the parties.           Arbitration often is selected
in order to escape the formalities inherent in a judicial process.

Arbitration's chief concern is that the arbitration contract be

followed, unless "such grounds as exist at law or in equity for

the revocation of any contract" are present.          Wis. Stat. § 788.01;

Grenig & Fishbach, supra, § 86:45.

     ¶20   In discerning whether the objection took place during

the hearing or after the hearing, the court of appeals failed to

consider the following:      neither party had prior notice of the
issue now in dispute, i.e., the arbitrator's sleeping, and an
                                     10
                                                                         No.   2019AP2205

arbitration is not concluded until the arbitral award is issued.

City of Manitowoc, 70 Wis. 2d at 1021.

     ¶21      The arbitral award is the arbitrator's decision on the

merits   of    the    disputes     that    were        subjected    to    arbitration.

Therefore, as long as an objection to a new issue is raised before

the merits are decided, the policy goals underlying forfeiture are

protected and the fairness of the proceeding is preserved.                          Before

the award is issued, the arbitrator can reopen testimony to hear

or rehear testimony and to correct any perceived errors without

resorting to the appeals process. Furthermore, by raising an issue

to the arbitrator, the danger of "sandbagging" the process and

claiming      the    unraised    issues     as    a     grounds    for    reversal     is

mitigated.

     ¶22      Here,   the    homeowners     raised       their     objection    to     the

arbitrator's sleeping to him before he issued the arbitral award.

Even though it was after the evidentiary hearing was completed,

there    remained      the   opportunity         for    the   arbitrator       to    make

corrections     for    his   sleeping      during       the   evidentiary      hearing.
However, he failed to do so.               Therefore, because the homeowners

raised their objection before the issuance of the arbitral award,

we conclude that the issue was not forfeited and was preserved for

review by the circuit court.

     ¶23      The    homeowners     also    sought       review     of    whether     the

arbitrator's sleeping merited vacatur of the arbitral award under

Wis. Stat. § 788.10.            However, we are evenly divided on whether

the award should be vacated pursuant to § 788.10.                         Accordingly,
because the court of appeals did not reach this question in its
                                           11
                                                     No.   2019AP2205

previous opinion,8 we remand this matter to the court of appeals

for consideration of § 788.10 issues.

                         III.   CONCLUSION

    ¶24    We conclude that, because the homeowners objected to the

arbitrator's sleeping before he issued the arbitral award, they

did not forfeit their objection.     However, we are evenly divided

on whether the arbitral award should be vacated pursuant to Wis.

Stat. § 788.10.   Therefore, we reverse the decision of the court

of appeals and remand the matter to the court of appeals for

consideration of § 788.10 issues.

    By the Court.—The decision of the court of appeals is reversed

and the cause is remanded to the court of appeals for further

consideration.

    ¶25    JILL J. KAROFSKY, J., did not participate.

    8   Loren Imhoff Homebuilder, Inc., 395 Wis. 2d 178, ¶15.

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    No.   2019AP2205

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