Pearce v. Mutual of Omaha Ins. Co. , 293 Neb. 277 ( 2016 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
04/08/2016 09:05 AM CDT
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Nebraska A dvance Sheets
293 Nebraska R eports
PEARCE v. MUTUAL OF OMAHA INS. CO.
Cite as 293 Neb. 277
K evin P. Pearce, appellant, v. Mutual of Omaha
Insurance Company and Continuum Worldwide
Corporation, appellees.
___ N.W.2d ___
Filed April 8, 2016. No. S-14-947.
1. Jurisdiction: Appeal and Error. Before reaching the issues presented
on appeal, an appellate court must determine whether it has jurisdiction,
even where no party has raised the issue.
2. Jurisdiction: Final Orders: Appeal and Error. An appellate court
lacks jurisdiction to entertain appeals from nonfinal orders.
3. Judgments: Jurisdiction. A jurisdictional issue that does not involve a
factual dispute presents a question of law.
4. Judgments: Appeal and Error. When reviewing questions of law,
an appellate court resolves the questions independently of the lower
court’s conclusions.
5. Final Orders: Appeal and Error. Under Neb. Rev. Stat. § 25-1902
(Reissue 2008), an order is final for purposes of appeal if it affects a
substantial right and (1) determines the action and prevents a judgment,
(2) is made during a special proceeding, or (3) is made on summary
application in an action after judgment is rendered.
6. ____: ____. Numerous factors determine when an order affects a sub-
stantial right for purposes of an interlocutory appeal. Broadly, these
factors relate to the importance of the right and the importance of the
effect on the right by the order at issue. It is not enough that the right
itself be substantial; the effect of the order on that right must also
be substantial.
7. Final Orders: Words and Phrases. A substantial right is an essential
legal right, not merely a technical right.
8. Final Orders: Appeal and Error. An order affects a substantial right if
it affects the subject matter of the litigation, such as diminishing a claim
or defense that was available to the appellant prior to the order from
which he or she is appealing.
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PEARCE v. MUTUAL OF OMAHA INS. CO.
Cite as 293 Neb. 277
9. Final Orders: Arbitration and Award. To affect a substantial right,
an order denying arbitration must affect an essential legal right that was
available prior to the order, such as depriving the moving party of the
contractual benefits of an arbitration agreement.
Appeal from the District Court for Douglas County: Thomas
A. Otepka, Judge. Appeal dismissed.
Rodney K. Vincent, of Vincent Law Offices, for appellant.
James M. Bausch, Richard P. Jeffries, and Adam W. Barney,
of Cline, Williams, Wright, Johnson & Oldfather, L.L.P., for
appellees.
Heavican, C.J., Connolly, Miller-Lerman, Cassel, and
Stacy, JJ.
Stacy, J.
I. NATURE OF CASE
Kevin P. Pearce filed this replevin action seeking the return
of computers and files he alleges were wrongfully retained
by his former principal after Pearce’s agency relationship was
terminated. The issues on appeal do not involve the replevin
action directly, but instead involve the district court’s denial of
Pearce’s motion to compel arbitration. Because we conclude
there is no final, appealable order for us to review, we dismiss
the appeal.
II. BACKGROUND
Pearce worked as an agent of Mutual of Omaha Insurance
Company (Mutual) and was a registered representative of
Mutual of Omaha Investor Services, Inc. (MOIS). Pearce used
his own personal computers to conduct work for Mutual and
MOIS and stored both personal and client information on
the computers.
In January 2014, Pearce’s agency relationship was ter-
minated by both Mutual and MOIS for reasons which do
not appear in our record. Mutual retained Pearce’s personal
computers and files, allegedly to protect confidential client
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PEARCE v. MUTUAL OF OMAHA INS. CO.
Cite as 293 Neb. 277
information stored therein. Pearce refused to give Mutual and
MOIS the passwords to his computers, and Mutual refused
to return the computers to Pearce until the confidential infor-
mation was removed. Pending resolution of the dispute,
Mutual turned Pearce’s computers and files over to a secu-
rity firm, Continuum Worldwide Corporation (Continuum),
for safekeeping.
1. A rbitration Between
Pearce and MOIS
On March 27, 2014, MOIS initiated an arbitration pro-
ceeding against Pearce before a dispute resolution tribunal of
the Financial Industry Regulatory Authority (FINRA). FINRA
rules require any broker-dealer such as MOIS to arbitrate dis-
putes with any “associated person” such as Pearce. The arbi-
tration initiated by MOIS involved the dispute over the confi-
dential information stored on Pearce’s computers and sought
to compel Pearce to provide passwords to the computers so
that MOIS could recover confidential information and return
the computers to Pearce. Pearce filed a counterclaim against
MOIS in the arbitration, asking that MOIS be compelled to
return Pearce’s computers. The record indicates Pearce and
MOIS have been actively participating in the arbitration pro-
ceeding, and during oral argument, this court was advised an
arbitration hearing had been set for February 2016.
2. R eplevin Action Between Pearce,
Mutual, and Continuum
In April 2014, after arbitration proceedings were under-
way, Pearce filed this replevin action against Mutual and
Continuum in district court. MOIS is not a party to the
replevin action. The replevin action seeks return of the same
computers and personal property at issue in the pending
arbitration with MOIS. Before filing an answer, Mutual and
Continuum filed a joint motion to stay and compel arbitra-
tion, asking the district court to stay the replevin action and
order Pearce to participate in the already-filed arbitration with
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PEARCE v. MUTUAL OF OMAHA INS. CO.
Cite as 293 Neb. 277
MOIS. Pearce resisted the motion, explaining his opposition
in a written response filed with the court:
It is unique in that Mutual and Continuum are not
claimants in the arbitration action brought against
Plaintiff Pearce by MOIS. In fact, pursuant to FINRA
Arbitration Rules, Mutual is exempt from FINRA arbitra-
tion . . . .
....
. . . There is no contract, written or otherwise, between
the Plaintiff Pearce and the Defendant Mutual that requires
disputes between Pearce and Mutual be arbitrated. . . .
. . . There is no contract between Plaintiff Pearce and
Defendant Continuum, therefore no contract between the
parties to arbitrate exists.
On August 19, 2014, the district court granted the motion
to stay the replevin action, finding it involved the same opera-
tive facts and issues as those in the pending FINRA arbitration
and reasoning that “[o]nce right of ownership is determined
in the Pending Arbitration, this Stay would be lifted and
Pearce could proceed with this replevin lawsuit, if the panel
has not already ordered return of the personal property.” The
district court did not explicitly rule on the separate request
that Pearce be compelled to arbitrate with MOIS, essentially
finding the request moot and reasoning that arbitration was a
“fait accompli” because Pearce already was participating in
arbitration with MOIS.
On September 10, 2014, Pearce filed a motion to reconsider
the August 19 order staying the replevin action. The district
court denied the motion to reconsider, and Pearce did not
appeal from that order.
Also on September 10, 2014, Pearce filed his own motion
to compel arbitration in the replevin action. In his motion,
Pearce sought an order requiring Mutual and Continuum
to participate in the pending arbitration already underway
between Pearce and MOIS. Pearce did not allege the exis-
tence of an arbitration agreement requiring either Mutual or
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PEARCE v. MUTUAL OF OMAHA INS. CO.
Cite as 293 Neb. 277
Continuum to arbitrate the dispute with Pearce, nor did Pearce
allege the Uniform Arbitration Act (UAA)1 was applicable.
Instead, Pearce based his motion to compel arbitration on the
claim that “the Court’s reasoning and decision [in its order
staying the replevin action] goes both ways.” And Pearce
expressed concern that Mutual and Continuum “should not
be allowed to hide behind the stay granted in this action
allowing their strawman, MOIS [to arbitrate] the matter, and,
if MOIS is unsuccessful argue they were not parties to the
Arbitration action.”
In an order entered on September 29, 2014, the district court
denied Pearce’s motion to compel arbitration, explaining:
The Court’s power to compel arbitration is defined by
Neb. Rev. Stat. § 25-2603(a), which requires the moving
party to make a “showing of an agreement” to arbitrate.
Here, [Pearce] has unequivocally denied the existence
of such an agreement. Accordingly, he cannot make the
showing required by the statute, and his motion to compel
arbitration against [Mutual and Continuum] must be and
is hereby denied.
Pearce timely appealed from the order denying his motion
to compel arbitration. We moved the case to our docket pursu-
ant to our statutory authority to regulate the caseloads of the
appellate courts of this state.2
III. ASSIGNMENTS OF ERROR
Pearce assigns, restated, that the district court erred in (1)
denying his motion to compel Mutual and Continuum to arbi-
trate the issues in this matter and (2) failing to follow the law
of the case established when the court granted the motion to
stay filed by Mutual and Continuum.
1
Neb. Rev. Stat. §§ 25-2601 to 25-2622 (Reissue 2008 & Cum. Supp.
2014).
2
Neb. Rev. Stat. § 24-1106(3) (Reissue 2008).
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PEARCE v. MUTUAL OF OMAHA INS. CO.
Cite as 293 Neb. 277
IV. JURISDICTION
[1,2] Before reaching the issues presented on appeal, an
appellate court must determine whether it has jurisdiction.3
That is so even where, as here, no party has raised the
issue.4 Because an appellate court lacks jurisdiction to enter-
tain appeals from nonfinal orders,5 we first consider whether
the order denying Pearce’s motion to compel arbitration was a
final, appealable order.6
1. Standard of R eview
[3,4] A jurisdictional issue that does not involve a factual
dispute presents a question of law.7 When reviewing questions
of law, we resolve the questions independently of the lower
court’s conclusions.8
2. A nalysis of Jurisdiction
To determine whether the district court order denying
Pearce’s motion to compel arbitration is appealable, we first
consider whether it is an appealable order under the UAA and
next whether it is a final order under the provisions of Neb.
Rev. Stat. § 25-1902 (Reissue 2008).
(a) Final, Appealable Orders
Under UAA
The UAA authorizes a party to a judicial proceeding to
apply for an order compelling arbitration of the dispute,9 and
3
See Webb v. American Employers Group, 268 Neb. 473, 684 N.W.2d 33
(2004).
4
Wilczewski v. Charter West Nat. Bank, 290 Neb. 721, 861 N.W.2d 700
(2015).
5
Connelly v. City of Omaha, 278 Neb. 311, 769 N.W.2d 394 (2009).
6
See Wilczewski, supra note 4.
7
Id.
8
Id.
9
§ 25-2603.
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further provides that an appeal may be taken from an order
denying such an application.10 Specifically, “[a]n appeal may
be taken from . . . [a]n order denying an application to com-
pel arbitration made under section 25-2603.”11 An application
under § 25-2603 is one “showing an agreement described in
section 25-2602.01.”12 Section 25-2602.01 describes a variety
of arbitration agreements. Pearce’s motion did not reference
the UAA, nor did Pearce allege the existence of an arbitra-
tion agreement, as § 25-2603 requires. And although Pearce’s
brief on appeal raises the possibility of a contractual obligation
to arbitrate, we decline to consider that possibility, because
Pearce did not raise it before the district court. Quite to the
contrary, Pearce instead affirmatively represented to the district
court that no arbitration agreement, “written or otherwise,”
existed between Pearce and Mutual or Continuum. An appel-
late court will not consider an issue on appeal that the trial
court has not decided.13
Because Pearce made no showing of an arbitration agree-
ment as described in the UAA, his motion to compel arbitra-
tion was not made pursuant to § 25-2603. As a result, the
order denying Pearce’s motion to compel arbitration is not
appealable under § 25-2620 of the UAA.
(b) Final Orders Under § 25-1902
[5] We next consider whether the order denying Pearce’s
motion to compel arbitration is a final order under § 25-1902.
Under § 25-1902, an order is final for purposes of appeal if
it affects a substantial right and (1) determines the action and
prevents a judgment, (2) is made during a special proceeding,
10
§ 25-2620(a)(1).
11
Id.
12
§ 25-2603(a).
13
Speece v. Allied Professionals Ins. Co., 289 Neb. 75, 853 N.W.2d 169
(2014).
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or (3) is made on summary application in an action after judg-
ment is rendered.14
We have held that motions to compel arbitration invoke a
specific statutory remedy that is neither an action nor a step
in an action, and as such, the statutory remedy is properly
characterized as a “special proceeding.”15 Here, no statutory
remedy was invoked by Pearce, but assuming without decid-
ing that Pearce’s motion to compel arbitration was made in
a special proceeding, we nevertheless conclude that the order
denying arbitration did not affect a substantial right as defined
in our jurisprudence.
[6] Numerous factors determine when an order affects
a substantial right for purposes of an interlocutory appeal.
Broadly, these factors relate to the importance of the right and
the importance of the effect on the right by the order at issue.16
It is not enough that the right itself be substantial; the effect of
the order on that right must also be substantial.17
[7,8] Regarding the importance of the right affected, we
often state that a substantial right is an essential legal right,
not merely a technical right.18 It is a right of “‘substance.’”19
We have elaborated further that an order affects a substan-
tial right if it “‘affects the subject matter of the litigation,
such as diminishing a claim or defense that was available
to the appellant prior to the order from which he or she is
appealing.’”20
14
Wilczewski, supra note 4.
15
Kremer v. Rural Community Ins. Co., 280 Neb. 591, 788 N.W.2d 538
(2010).
16
State v. Jackson, 291 Neb. 908, 870 N.W.2d 133 (2015).
17
Id.
18
Id.
19
Id. at 913, 870 N.W.2d at 138.
20
Id. at 914, 870 N.W.2d at 138.
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PEARCE v. MUTUAL OF OMAHA INS. CO.
Cite as 293 Neb. 277
In Webb v. American Employers Group,21 we held that an
order denying a motion to compel arbitration was a final,
appealable order because it affected a substantial right and was
made during a special proceeding. In reaching that conclusion,
we reasoned that the order affected the moving party’s sub-
stantial rights by preventing it from enjoying the contractual
benefit of arbitrating the dispute between the parties as an
alternative to litigation.22
In Speece v. Allied Professionals Ins. Co.,23 we cited Webb
for the general proposition that “denial of a motion to com-
pel arbitration is a final, appealable order because it affects a
substantial right and is made in a special proceeding.” But in
Speece, as in Webb, it was clear from the record that the parties
had a contractual agreement to arbitrate the dispute, and it was
clear that the order denying arbitration deprived the moving
party of the benefits of that arbitration agreement.
[9] We take this opportunity to clarify that our holdings in
Webb and Speece do not stand for the broad proposition that
every order denying arbitration will necessarily affect a sub-
stantial right. Rather, Webb and Speece illustrate that to affect
a substantial right, an order denying arbitration must affect an
essential legal right that was available prior to the order, such
as depriving the moving party of the contractual benefits of an
arbitration agreement.
Our recent opinion in Wilczewski v. Charter West Nat.
Bank24 further illustrates this point. In Wilczewski, we held
that an order denying a motion to compel arbitration with-
out prejudice was not a final, appealable order, because the
order we were asked to review made no final determination
one way or the other as to whether the arbitration clause
21
Webb, supra note 3.
22
Id.
23
Speece, supra note 13, 289 Neb. at 80, 853 N.W.2d at 174.
24
Wilczewski, supra note 4.
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was enforceable under the Federal Arbitration Act.25 As such,
we concluded the order did not affect a substantial right of
the appellant and was not a final, appealable order under
§ 25-1902.26
In the present case, it is key to our “substantial right” analy-
sis that the district court denied Pearce’s motion to compel
arbitration only after concluding Pearce had failed to show
the existence of any arbitration agreement or legal authority
upon which to premise a right to arbitrate the dispute with
Mutual and Continuum. Unlike the orders we considered in
Webb and Speece, the order here cannot fairly be character-
ized as depriving Pearce of any contractual right to arbitrate
that existed prior to the order from which he appeals, because
Pearce relied on none. And like the order we considered in
Wilczewski, the order here made no determination, one way or
another, regarding the enforceability of an arbitration agree-
ment, because the court was not presented with evidence from
which it could make such a determination. In fact, when the
district court asked Pearce for legal authority supporting his
request to compel Mutual and Continuum to participate in the
ongoing arbitration between Pearce and MOIS, Pearce admit-
ted he had none. Provided with no arbitration agreement and
cited to no legal authority, the district court denied Pearce’s
motion to compel arbitration. That is the order from which
Pearce appeals.
On this record, we cannot find that the district court’s
order affected an essential legal right, or indeed any right of
substance, nor can we find that the order affected the subject
matter of the litigation by diminishing a claim or defense
that was available to Pearce prior to the order from which
he appeals.27 On these facts, we conclude the order denying
25
9 U.S.C. § 1 et seq. (2012).
26
Wilczewski, supra note 4.
27
See Jackson, supra note 16.
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a­ rbitration did not affect a substantial right and, as such, is
not a final order under § 25-1902 from which Pearce can
appeal at this time.
For the sake of completeness, we note Pearce points out
on appeal that other jurisdictions have applied equitable prin-
ciples of estoppel to compel nonsignatories to participate in
an arbitration. But Pearce did not present this argument to
the district court. Consequently, the order denying arbitration
neither analyzed nor made any final determination one way
or the other regarding the applicability of equitable principles
of estoppel to Pearce’s motion to compel arbitration. Because
the issue was not raised in the district court, and because the
court’s order did not consider or finally resolve any such claim,
Pearce’s attempt to argue principles of estoppel on appeal does
not change our conclusion that the district court’s order deny-
ing arbitration did not affect a substantial right. Like the order
we considered in Wilczewski, the order here did not purport to
make a final determination of the legal issue on which appel-
late review is sought, and as such, there is no final order on
that issue for appellate review.
V. CONCLUSION
The order denying Pearce’s motion to compel arbitration
is not an appealable order under the UAA and is not a
final, appealable order under § 25-1902. In the absence of a
final order, we lack jurisdiction and dismiss this interlocu-
tory appeal.
A ppeal dismissed.
Wright and McCormack, JJ., not participating.