Perry Golf Course Development, LLC v. Columbia Residential, LLC , 337 Ga. App. 525 ( 2016 )

FIRST DIVISION
DOYLE, C. J.,
ANDREWS, P. J., and RAY, J.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
June 9, 2016
In the Court of Appeals of Georgia
A16A0404. PERRY GOLF COURSE DEVELOPMENT, LLC v. DO-015
COLUMBIA RESIDENTIAL, LLC.
DOYLE, Chief Judge.
In a business dispute, plaintiff Perry Golf Course Development, LLC (“Perry
Golf”), appeals from the confirmation of an arbitration award in favor of defendant
Columbia Residential, LLC (“Columbia”). Perry Golf contends that the superior court
erred by compelling arbitration and confirming the award because (1) the arbitration
provision enforced by the trial court was part of an agreement already deemed
unenforceable as to another party, and (2) the parties had abandoned the agreement
that contained the arbitration provision. For the reasons that follow, we affirm.
“Because the question of whether a valid and enforceable arbitration agreement
exists represents a question of law, we review de novo a trial court’s order granting
or denying a motion to compel arbitration.”1
The relevant factual history is undisputed. In the mid 1990’s, the Atlanta
Housing Authority (“AHA”) sought to redevelop the Perry Homes public housing
development. Perry Golf, Columbia, and Brock Built, LLC, formed an entity, Perry
Homes Redevelopment, LLC (“PHR”), to bid on the redevelopment project, and PHR
ultimately was awarded the contract by the AHA. In 2001, PHR executed a
revitalization agreement with AHA that laid out a general plan for the redevelopment.
In 2002, the three members of PHR executed an operating agreement that
governed each party’s rights and obligations in furtherance of the redevelopment
plan. The agreement outlined three main areas of obligations: development of a golf
course by Perry Golf, development of multi-family housing by Columbia, and
development of single-family housing by Brock Built. The agreement also contained
1
(Puctuation omitted.) AAA Restoration Co. v. Peek, 333 Ga. App. 152 (775
SE2d 152) (2015).
2
a provision for dispute resolution allowing an aggrieved party to demand binding
arbitration. That provision provides as follows, in relevant part:
If any Dispute (as defined below) arises between the parties in relation
to this Agreement . . . any party . . . may demand binding arbitration
[after giving notice]. As used herein, “Dispute” shall include any
difference, disagreement[,] or failure to agree between the parties arising
out of or in connection with this Agreement or any of the Project
Documents including any question regarding the application, existence,
validity, performance, withdrawal from or non-performance, or
termination of this Agreement or any clause contained within this
Agreement or any Project Document or any matter in any way connected
with this Agreement or the rights, duties, or obligations of any party to
this Agreement or any Project Document. Each Member hereby agrees
that any unresolved Disputes shall be settled by means of arbitration . .
. . The Members also agree that any award resulting from such
Arbitration shall be final and binding upon them, with each Member
agreeing to waive its right to contest the arbitration award in a court of
law. . . .2
After a dispute arose between Perry Golf and Brock Built, in May 2005, Perry
Golf filed a demand for arbitration with Brock Built, which participated in the
arbitration over its objection. The ensuing arbitration (“First Arbitration”) ultimately
2
(Emphasis supplied.)
3
resulted in a ruling from the arbitrator that the “arbitration agreement is binding and
valid on the parties,” but the project-related obligations in the operating agreement
nevertheless were unenforceable as between Perry Golf and Brock Built based on the
agreement’s lack of mutuality between the two.
This result was not challenged by any of the parties. Going forward, the parties
agreed that their mutual authority with respect to PHR would be governed by the
Georgia Limited Liability Company Act,3 even as they continued to perform the roles
established by the original operating agreement to carry out the revitalization
agreement between PHR and the AHA.
As the housing portions of the project moved forward, progress on the golf
course languished, and in 2006, PHR and the AHA amended the revitalization
agreement to eliminate the golf course feature of the project.4 As a result, Perry Golf
believed it had been unfairly cut out of the project and filed the instant suit against
AHA, Brock Built, and Columbia. Enumerating various claims including breach of
contract and breach of fiduciary duty, Perry Golf alleged that the two other members
3
OCGA § 14-11-100 et seq.
4
See Perry Golf Course Dev. v. Housing Auth., 294 Ga. App. 387 (670 SE2d
171) (2008).
4
of PHR wrongfully voted (by two to one majority vote) to remove the golf course
from the plan, and that AHA and PHR wrongfully amended the revitalization
agreement. AHA moved for a judgment on the pleadings, Columbia answered and
moved to compel arbitration, Brock Built counterclaimed and brought third party
claims, and the trial court dismissed all claims against all parties.5 That order was
appealed to this Court, which affirmed in part and reversed in part the dismissal,
allowing certain claims to proceed, including alleged breach of fiduciary duty by both
Brock Built and Perry Golf.6
On remittur, Columbia renewed its motion to compel arbitration of Perry Golf’s
claims, and the trial court ordered the parties to binding arbitration. In 2015, the
arbitrator entered an award favoring Columbia (“Second Arbitration”), and the trial
court confirmed the award, giving rise to this appeal.
1. Perry Golf contends that the trial court erred by compelling arbitration
because the operating agreement containing the arbitration clause was deemed to be
unenforceable in the First Arbitration. Based on the scope of that proceeding, which
did not include Columbia, we disagree.
5
See id.6
See id. at 393 (6) (c), 394-395 (7) (a).
5
“Arbitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit. Therefore, the question
of arbitrability, i.e., whether an agreement creates a duty for the parties to arbitrate
the particular grievance, is undeniably an issue for judicial determination.”7 “And the
validity of an arbitration agreement is generally governed by state law principles of
contract formation.”8
Here, the arbitration clause is found in the operating agreement, which was the
subject of the First Arbitration between Perry Golf and Brock Built. Perry Golf argues
that the operating agreement is unenforceable, relying on the fact that the First
Arbitration resulted in a finding that the operating agreement was unenforceable due
to the lack of mutuality between Perry Golf and Brock Built.
As a threshold matter, we note that the First Arbitration did not include
Columbia, the appellee in this case. Accordingly, to the extent that Perry Golf makes
a collateral estoppel argument, the First Arbitration’s ruling does not bind Columbia
7
(Punctuation omitted.) Pickle v. Rayonier Forest Resources, L.P., 282 Ga.
App. 295, 296 (638 SE2d 344) (2006).
8
(Punctuation omitted.) McKean v. GGNSC Atlanta, LLC, 329 Ga. App. 507,
509 (1) (765 SE2d 681) (2014).
6
here because it was not a party to the First Arbitration, and its obligations under the
operating agreement were not the same as Brock Built’s.9 Therefore, the First
Arbitration lacks the identity of issues and parties to be binding on Columbia now.10
Next, with respect to the award itself, the arbitrator explicitly ruled that the
arbitration clause encompassed the dispute at issue and was valid and binding, even
though the arbitrator held that the operating agreement’s larger project obligations
between Perry Golf and Brock built were unenforceable (not void) due to the lack of
mutuality. Therefore, the result of the First Arbitration was not that the arbitration
clause itself was unenforceable – it was actually the opposite – nor did the First
Arbitration hold that the operating agreement was entirely void. The First Arbitration
merely addressed the enforceability of the substantive provisions of the operating
agreement as between Perry Golf and Brock Built, and no ruling was made as to the
enforceability of obligations as to the parties to this appeal.
9
See Pike County v. Callaway-Ingram, 292 Ga. 828, 832 (2) (742 SE2d 471)
(2013) (“The theory of collateral estoppel cannot apply because it addresses the
re-litigation of an issue that has been adjudicated on the merits in another action
involving the same parties or their privies.”). We need not decide whether the
arbitration was an adjudication on the merits for purposes of collateral estoppel.
10
See id.7
Finally, pretermitting the enforceability of the substantive obligations between
Perry Golf and Columbia, we note that the operating agreement contained the
following severability clause: “If any term or provision of this Agreement is held
illegal, invalid or unenforceable, such illegality, invalidity, or unenforceability will
not affect the legality, validity or enforceability of the remainder of this Agreement.”
“[W]here the agreement is founded on a legal consideration containing a promise to
do several things or to refrain from doing several things, and only some of the
promises are illegal, the promises which are not illegal will be held to be valid.”11
Giving effect to the unambiguous severability clause, we conclude the mutual
promises among all parties to forego litigation in court (and avoid the associated
expense and delay) are not dependent on the enforceability of other alleged promises
in the operating agreement.12 Accordingly, the First Arbitration award does not
support Perry Golf’s argument that the arbitration clause is unenforceable here.
11
(Punctuation omitted.) Harris v. SAL Financial Svcs., 270 Ga. App. 230, 232
(606 SE2d 293) (2004).
12
Cf. ISS Intl. Svc. System v. Widmer, 264 Ga. App. 55, 61 (3) (589 SE2d 820)
(2003) (“[W]here the agreement is founded on a legal consideration containing a
promise to do several things or to refrain from doing several things, and only some
of the promises are illegal, the promises which are not illegal will be held to be
valid.”).
8
2. Perry Golf next argues that the arbitration clause is unenforceable because
the parties abandoned the operating agreement when they agreed to conduct
themselves according to the Georgia Limited Liability Company Act. This argument
is belied by the subsequent conduct of the parties and the broad scope of the
arbitration clause.
It is undisputed that the parties to the agreement endeavored to continue their
roles to honor the overall development process contemplated by the revitalization
agreement between PHR and the AHA, which agreement was untouched by the First
Arbitration. The arbitration clause applies to disputes in “any matter in any way
connected with this Agreement or the rights, duties[,] or obligations of any party to
this Agreement or any Project Document.” The Project Documents include the
operating agreement, the revitalization agreement executed between AHA and PHR,
and “each other agreement and instrument contemplated [in the operating agreement]
or entered into by” PHR in furtherance of the development project. The basis of the
dispute was the amendment of the revitalization agreement between AHA and PHR
by removing the golf course from the planned project. Thus, is clear that the subject
matter of the dispute falls squarely within that contemplated by the arbitration clause.
9
Further, with respect to disputes arising after termination of the contract, the
arbitration clause contains no limitation on the time frame of disputes that are subject
to arbitration. Under OCGA § 9-9-3, “[a] written agreement to submit any existing
controversy to arbitration or a provision in a written contract to submit any
controversy thereafter arising to arbitration is enforceable . . . .”13 The arbitration
clause applies to disputes in “any matter in any way connected to” the project
documents, including the revitalization agreement. This reflects an intent by the
parties to arbitrate project issues broadly. “[I]n the absence of some contrary
indication, there are strong reasons to conclude that the parties did not intend their
arbitration duties to terminate automatically with the contract.”14 In interpreting
similarly broad language, this Court has held that disputes arising from conduct after
the termination of a contract can still be subject to an arbitration clause in the
terminated contract. This was based on the fact that because the alleged wrongful
conduct “touched” the contract, the contract’s broadly worded arbitration clause was
13
(Emphasis supplied.)
14
Nolde Bros. v. Bakery & Confectionery Workers Union, 430 U.S. 243, 253
(3) (97 SCt 1067, 51 LE2d 300) (1977). See also Pickle, 282 Ga. App. at 297 (2) (b).
10
given effect even after termination of the contract.15 Here, the underlying dispute
arose from the amendment of the revitalization plan (a “Project Document” subject
to the arbitration clause) and conduct that occurred both before and after the alleged
termination of the operating agreement. The application of the broadly-worded
arbitration clause to the subject matter of the operating agreement is consistent with
the parties’ continued pursuit of the project.16 Under these circumstances, the trial
court did not err by compelling arbitration and confirming the arbitrator’s award.
Judgment affirmed. Andrews, P. J. and Ray, J., concur.
15
See Davidson v. A. G. Edwards & Sons, Inc., 324 Ga. App. 172, 174 (1) (b)
(i) (748 SE2d 300) (2013), quoting Brown v. Coleman Co., 220 F3d 1180, 1184 (III)
(10th Cir. 2000). See also Penso Holdings, Inc. v. Cleveland, 324 Ga. App. 259, 263
(749 SE2d 821) (2013) (“A provision in a written contract to submit any controversy
thereafter arising to arbitration is enforceable without regard to the justiciable
character of the controversy and confers jurisdiction on the courts of the state to
enforce it and to enter judgment on an award. As with any other contract, the parties’
intentions control.”) (footnote and punctuation omitted) (physical precedent only).
16
Cf. Pickle, 282 Ga. App. at 297-298 (2) (b).
11