Hardman v. Hardman ( 2024 )

2024 UT App 115THE UTAH COURT OF APPEALS
PAUL HARDMAN AND JON HARDMAN,
Appellants,
v.
DAWNA LYN CAMPBELL, MARCIA JACOBS, HEBER HARDMAN, AND
SHIRLEY HARDMAN,
Appellees.
Opinion
No. 20220609-CA
Filed August 8, 2024
First District Court, Logan Department
The Honorable Spencer D. Walsh
No. 210100259
Benjamin K. Lusty, Cami Schiel, Erin E. Byington,
and Samuel A. Goble, Attorneys for Appellants
Jonathan E. Jenkins and Dalton J. Smuin, Attorneys
for Appellees Marcia Jacobs
and Dawna Lyn Campbell
Gary N. Anderson, R. Christian Hansen, and S. Drew
Parkinson, Attorneys for Appellees Heber Hardman
and Shirley Hardman
JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion,
in which JUDGES DAVID N. MORTENSEN and JOHN D. LUTHY
concurred.
CHRISTIANSEN FORSTER, Judge:
¶1 Each party to this case owns a share of a family-owned
company, Hardman Properties, LLC (the LLC), which owns
several parcels of real property in northern Utah. The LLC was
allegedly dissolved in August 2021, after which brothers Paul and
Jon Hardman (collectively, Brothers) sued their sisters Dawna
Hardman v. Hardman
Lyn Campbell and Marcia Jacobs (collectively, Sisters) and their
parents Heber and Shirley Hardman (collectively, Parents) 1 to
prevent the LLC’s dissolution and the distribution of the LLC’s
properties. Ninety-three days after their complaint had been filed
and their request for a temporary restraining order (TRO) had
been litigated, Brothers filed a motion to compel arbitration as
required by the LLC’s operating agreement. The district court
denied the motion, ruling that by filing the complaint and TRO,
filing mandatory initial disclosures, and litigating the TRO,
Brothers had substantially participated in litigation to the
prejudice of Sisters and Parents, thereby waiving their right to
arbitrate. Brothers argue on appeal that seeking to prevent the
distribution of the LLC’s properties before arbitrating the
dissolution dispute did not demonstrate an intent to litigate to a
point inconsistent with an intent to arbitrate nor did it prejudice
Sisters and Parents and so the district court erred in its
determination. We conclude that by filing a complaint and TRO
to keep the status quo pending arbitration, all the while
repeatedly asserting the right to arbitrate and seeking to compel
arbitration within three months of filing the complaint, Brothers
did not substantially participate in litigation and waive the right
to arbitrate. We therefore reverse the district court’s decision.
BACKGROUND
¶2 The LLC owns thirty-two parcels of land in Cache County,
Utah. The LLC’s membership consists of Brothers (Jon owning
23%, Paul owning 23%), Sisters (Dawna owning 23%, Marcia
owning 23%), and Parents (Heber and Shirley owning 8% jointly).
1. Heber passed away during these proceedings. For simplicity,
we will continue to refer to Heber and Shirley collectively as
Parents. Moreover, because several of the parties share a last
name, we refer to the parties by their first names and intend no
disrespect by the apparent informality.
20220609-CA 2 2024 UT App 115Hardman v. Hardman
The LLC was created in 1996 by Parents “for their own benefit and
the benefit of their children.” The LLC operating agreement,
signed in March 1996, identified LLC management and members
and set out in detail the relative relationships and ownership
interests in the LLC among the members.
¶3 The overarching purpose behind the LLC was to create a
family business wherein Parents, for tax and estate reasons, could
effectuate a series of property and asset transfers to their children
in lieu of them receiving a direct inheritance from Parents upon
their passing. The operating agreement contains an arbitration
clause, which provides in pertinent part:
Arbitration. No civil action concerning any dispute
arising under this Agreement shall be instituted
before any court. Instead, all such disputes—and all
voting deadlocks—shall be submitted to final and
binding arbitration at Logan, Utah. Such arbitration
shall be conducted in accordance with the rules of
the American Arbitration Association before a
single arbitrator.
¶4 In early 2021, the family members discussed dissolving the
LLC in an effort to “maintain a good relationship between [the]
children, which had . . . begun to unravel due to the children’s
involvement in the [LLC].” Parents moved forward with the
dissolution, and it was allegedly completed in August 2021. But
Brothers disagreed with the purported dissolution and final
distribution of properties and filed suit in the district court on
September 7, 2021, asserting breach of the LLC’s operating
agreement, promissory estoppel, breach of fiduciary duties, and
unjust enrichment. In their complaint, Brothers did not
affirmatively request arbitration or even mention the topic of
alternative dispute resolution at all. At the same time, however,
Brothers moved for an ex parte TRO to stop the sale of the LLC’s
properties, asserting that the “LLC Operating Agreement
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require[d] the parties [to] submit to binding arbitration.” Brothers
requested that “the court enjoin and restrain any further transfers
of the parcels/properties at issue pending resolution of the dispute
at Arbitration,” and they sought “an injunction to hold the status
quo pending Arbitration,” arguing that if an injunction was not
issued, they would “suffer irreparable harm if any of the LLC
parcels [were] sold prior to Arbitration.” Brothers also filed and
recorded a notice of lis pendens to encumber all thirty-two
properties identified in their complaint, plus an additional
property owned by Parents in trust. The court granted the TRO
on September 24.
¶5 Parents and Sisters timely answered the complaint and
asserted counterclaims. Brothers sought an extension of the TRO
and entry of a preliminary injunction, which Parents and Sisters
opposed. In response to the objections, Brothers reiterated that
they were seeking an injunction because the LLC was wrongfully
dissolved and “to prevent any further damage to the LLC pending
resolution of the case through mediation and, that failing, binding
arbitration.” The parties produced initial disclosures. Brothers
answered Parents’ and Sisters’ counterclaims and pleaded that
the counterclaims were precluded by mandatory arbitration.
¶6 The district court denied Brothers’ request to extend the ex
parte TRO. It ruled that Brothers had not provided adequate
notice to obtain such an order and also that Brothers could not
show that they would suffer irreparable harm unless the TRO
remained, nor did they demonstrate a substantial likelihood that
they would prevail on the merits of their claims. Thereafter, in
early December 2021, three months after filing their complaint,
Brothers filed a motion to compel arbitration under the terms of
the LLC’s operating agreement. Parents and Sisters objected to the
motion to compel, arguing that Brothers had waived the right to
participate in arbitration because they had substantially
participated in litigation and because Parents and Sisters would
be prejudiced by changing forums at that point in the litigation.
20220609-CA 4 2024 UT App 115Hardman v. Hardman
Before the district court resolved Brothers’ motion to compel,
Parents moved for summary judgment, the parties continued to
litigate the removal of the lis pendens remaining on several of the
disputed properties, and Parents and Sisters sought attorney fees
for what they alleged to be the wrongful filing of the ex parte TRO.
Brothers requested a stay on their response to Parents’ summary
judgment motion and to stay further discovery pending the
court’s determination of the motion to compel arbitration. But in
responding to Parents’ and Sisters’ motions to release the lis
pendens, Brothers included a proposed amended complaint
wherein Brothers identified and added more than a dozen new
claims they intended to pursue in the litigation.
¶7 The district court heard oral argument in April 2022 on
Brothers’ motion to compel, Sisters’ motion to remove the notice
of lis pendens, and Brothers’ motion to stay responsive pleadings.
In denying Brothers’ motion to compel arbitration, the district
court determined that Brothers had waived their right to
arbitration. Specifically, the court ruled that Brothers’ actions in
filing a complaint, filing a motion for an ex parte TRO, litigating
the TRO, filing answers to counterclaims, and exchanging
disclosures showed an intent to submit to the jurisdiction of the
court and pursue resolution of the dispute through litigation.
Moreover, the court found that Parents and Sisters incurred
considerable costs and fees that they would not have incurred had
alternative dispute resolution been pursued initially by Brothers.
Brothers timely appealed.
ISSUES AND STANDARDS OF REVIEW
¶8 Brothers contend that the district court erred in denying
their motion to compel alternative dispute resolution. 2 Our
2. As an initial matter, because Brothers’ pleading was titled
“Motion to Compel Alternative Dispute Resolution” and
(continued…)
20220609-CA 5 2024 UT App 115Hardman v. Hardman
analysis begins with a discussion of the correct standard of
review to apply to the question of whether Brothers waived
their right to arbitration. The determination of the appropriate
standard of appellate review for a particular issue is a
legal question that we must answer prior to addressing the issue
raised on appeal. See State v. Levin, 2006 UT 50, ¶ 25, 144 P.3d 1096(stating that the appropriate standard of review for an
issue depends on the level of deference the appellate court gives
the district court’s application of a specific legal doctrine to the
facts).
¶9 For the reasons described below, we conclude that
the district court’s determination that Brothers substantially
participated in litigation to a point inconsistent with the right to
arbitrate is a legal conclusion we review for correctness. ASC
Utah, Inc. v. Wolf Mountain Resorts, LC, 2010 UT 65, ¶ 11, 245 P.3d
184.
¶10 We then assess whether Brothers waived their right to
arbitration, which requires application of the two-part test from
the Utah Supreme Court’s decision in Chandler v. Blue Cross Blue
Shield of Utah, 833 P.2d 356 (Utah 1992). We consider whether the
district court erred in concluding that Brothers substantially
participated in litigation. As part of our consideration of this issue,
requested an order requiring the parties to mediate and then
proceed to arbitration, Sisters question whether this court has
jurisdiction to review the district court’s ruling under Utah Code
section 78B-11-129(1), which provides that “[a]n appeal may be
taken from . . . an order denying a motion to compel arbitration.”
Our supreme court has recognized that “appellate jurisdiction
exists” to hear an appeal concerning the denial of a “motion to
compel arbitration.” Pledger v. Gillespie, 1999 UT 54, ¶ 18, 982 P.2d
572. As the court’s ruling below was one that clearly denied
Brothers’ request to pursue arbitration, we have jurisdiction to
hear this appeal.
20220609-CA 6 2024 UT App 115Hardman v. Hardman
we determine that the 1996 version of the Utah Arbitration Act
applies to resolution of Brothers’ motion to compel. And, finally,
we will look at whether Brothers’ participation in litigation
prejudiced Parents and Sisters.
ANALYSIS
¶11 The Utah Supreme Court first articulated the two-part test
for whether a party has waived its right to arbitrate many years
ago in Chandler v. Blue Cross Blue Shield of Utah, 833 P.2d 356 (Utah
1992). In that case, the court stated that “waiver of a right of
arbitration must be based on both a finding of participation in
litigation to a point inconsistent with the intent to arbitrate and a
finding of prejudice.” Id. at 360. 3 Because policy favors arbitration,
“there is also a strong presumption against waiver of the right to
arbitrate.” Central Fla. Invs., Inc. v. Parkwest Assocs., 2002 UT 3,
¶ 24, 40 P.3d 599. “The party claiming waiver has the burden of
establishing substantial participation and prejudice.” Id.
3. We note that several years ago in Mounteer Enterprises, Inc. v.
Homeowners Ass’n, 2018 UT 23, 422 P.3d 809, a non-arbitration
case, the Utah Supreme Court observed that “[t]he prejudice
requirement is a doctrinal misfit in the law of waiver,” and it thus
“repudiate[d] [its] prior decisions that speak of prejudice as an
element of waiver.” Id. ¶¶ 33–34. And we further note that in
Turpin v. Valley Obstetrics & Gynecology, 2021 UT App 12, ¶ 28,
n.10, 482 P.3d 831, and in Livingston v. Finco Holdings Corp., 2022
UT App 71, ¶ 25, n.7, 513 P.3d 94, this court recognized that
whether prejudice still must be shown in arbitration cases remains
an open question. As we did in Turpin and Livingston, because
none of the parties has argued that prejudice is no longer an
element of the Chandler waiver test, and because we do not reach
the prejudice question anyway, we assume for purposes of our
review that the prejudice prong still applies.
20220609-CA 7 2024 UT App 115Hardman v. Hardman
¶12 Before we address the two parts of the Chandler test, we
must first resolve the parties’ dispute over the proper standard of
review.
I. Standard of Review
¶13 Parents and Sisters assert that review of the determination
that a contractual right to arbitration has been waived presents
mixed questions of law and fact and cite several Utah Supreme
Court decisions for this proposition. See Pledger v. Gillespie, 1999
UT 54, ¶ 16, 982 P.2d 572 (“[W]hether the trial court employed the
proper standard of waiver presents a legal question which is
reviewed for correctness, but the actions or events allegedly
supporting waiver are factual in nature and should be reviewed
as factual determinations . . . .”). See also Baker v. Stevens, 2005 UT
32, ¶ 14, 114 P.3d 580; Central Fla. Invs., Inc. v. Parkwest Assocs.,
2002 UT 3, ¶ 20, 40 P.3d 599 (same). Sisters acknowledge that in
ASC Utah, Inc. v. Wolf Mountain Resorts, LC, 2010 UT 65, 245 P.3d
184, our supreme court took a different tack and clarified that a
challenge to a district court’s denial of a motion to compel
arbitration is a challenge to “the legal conclusions of the district
court based on the undisputed factual record,” id. ¶ 25, and that
this court determined in Turpin v. Valley Obstetrics & Gynecology,
2021 UT App 12, 482 P.3d 831, that when evaluation of waiver is
based upon undisputed facts and on documents in the record, we
review it for correctness, id. ¶ 17.
¶14 Sisters argue, however, that while there was no evidentiary
hearing held below to examine Brothers’ intent, there was
extensive litigation, during which the district court conducted
multiple hearings with the parties and extensively interacted with
them. So, Sisters posit, based on its observations of the parties at
those hearings, the court was in a position from which it could
observe the attitudes and the positions of the parties and make
factual determinations about Brothers’ intent that are entitled to
deference on appeal.
20220609-CA 8 2024 UT App 115Hardman v. Hardman
¶15 Sisters may have a point if this is what had actually
happened below. But here, the district court did not make any
factual findings about Brothers’ intent based upon its
observations of the parties at the hearings. The court based its
waiver determination on Brothers’ litigation activities alone:
[Brothers’] actions show an intent to submit to the
jurisdiction of the [c]ourt and pursue redress
through litigation. . . . [They] have filed a Complaint
and filed an Ex Parte Motion for TRO. [Brothers] also
filed for an extension of the TRO. [Brothers’]
Complaint is devoid [of] anything informing the
[c]ourt or the parties that they were only seeking to
file the complaint to avail themselves of the
equitable powers of the [c]ourt and seek a lis pendens
or TRO. [Brothers] then filed Answers to the
counterclaims. They participated in fact discovery
by issuing initial disclosures. [Brothers] engaged in
motion work before the court. These action[s]
evidence an intent to submit to the jurisdiction of
the district court and pursue redress through
litigation.
¶16 As set forth above, our supreme court has determined that
factual findings based only on documentary evidence submitted
in the context of pleadings and filings merit correctness review.
See id. We therefore review the district court’s determination as to
whether Brothers waived their right to arbitration for correctness.
II. Chandler Test
¶17 We turn now to the merits of Brothers’ appeal, which
requires the application of our supreme court’s Chandler test. See
Chandler v. Blue Cross Blue Shield of Utah, 833 P.2d 356, 360 (Utah
1992). Utah courts have long recognized “a strong policy favoring
arbitration,” Edwards v. Carey, 2017 UT App 73, ¶ 13, 397 P.3d 797,
and thus “a strong presumption against waiver of the right to
20220609-CA 9 2024 UT App 115Hardman v. Hardman
arbitrate,” Baker v. Stevens, 2005 UT 32, ¶ 12, 114 P.3d 580(quotation simplified). “Consequently, a waiver of the right to
arbitrate must be intentional and may be inferred only if the facts
demonstrate that the party seeking to enforce arbitration intended
to disregard its right to arbitrate.” Baker, 2005 UT 32, ¶ 12
(quotation simplified). A waiver of a right to arbitrate occurs
when the party seeking arbitration substantially participates in
litigation to a point inconsistent with the right to arbitrate and that
participation causes prejudice to the opposing side. See Chandler,
833 P.2d at 360.
A. Chandler Test Part I: Substantial Participation in Litigation
¶18 We apply the precedent from our appellate courts to assess
what substantial participation in litigation means. We consider
especially important whether Brothers’ requests of the district
court demonstrate an intent to pursue litigation or whether they
demonstrate an intent to avoid litigation and a desire to arbitrate.
Previously, Utah courts have considered participation in litigation
to be inconsistent with the intent to arbitrate when a party who is
seeking to compel arbitration chooses to “litigate[] the very issues
[they] originally sought to arbitrate,” Baker, 2005 UT 32, ¶ 15, or
when a party chooses to proceed in such a manner that “clearly
manifest[s] an intent to proceed to trial,” Smile Inc. Asia Pte. Ltd. v.
BriteSmile Mgmt., Inc., 2005 UT App 381, ¶ 27, 122 P.3d 654(quotation simplified), cert. denied, 126 P.3d 772 (Utah 2005), rather
than a legitimate “desire to arbitrate,” id. ¶ 26. See also ABF Freight
System, Inc. v. International Bhd. of Teamsters, 728 F.3d 853, 862 (8th
Cir. 2013) (“A party acts inconsistently with its right to arbitrate if
the party substantially invokes the litigation machinery before
asserting its arbitration right.” (quotation simplified)). There are
numerous examples of what belies a desire to arbitrate. See, e.g.,
Baker, 2005 UT 32, ¶ 15 (determining waiver where a party sought
summary judgment against the opposing party); Smile Inc., 2005
UT App 381, ¶ 27 (holding waiver when the moving party “did
not originally intend to have [the] matter arbitrated, but seriously
20220609-CA 10 2024 UT App 115Hardman v. Hardman
contemplated it only after” filing numerous motions,
participating in discovery, and taking and defending depositions
over the course of two years (quotation simplified)).
¶19 Here, Brothers participated in family discussions
regarding the dissolution of the LLC in early 2021, and the
dissolution allegedly wrapped up in August of that same year.
Unhappy with the alleged dissolution and the proposed
distribution of the LLC’s properties, Brothers filed a complaint in
September 2021 and moved ex parte for a TRO to stay the
distribution of and any possible sale of the LLC’s properties
“pending resolution of the dispute at Arbitration.” Brothers then
filed a motion to compel alternative dispute resolution in
December 2021, three months after filing their complaint. The
district court concluded that Brothers waived their right to
arbitrate by filing a complaint that did not mention an enforceable
arbitration agreement, by seeking an ex parte motion for
injunctive relief and then litigating the TRO, by filing a notice of
lis pendens on all the LLC’s properties, by filing answers to
Parents’ and Sisters’ counterclaims, and by exchanging initial
disclosures.
¶20 Brothers acknowledge that they filed a complaint with a
slew of claims. Brothers also admit that their complaint did not
mention the operating agreement’s mandatory arbitration clause
or explicitly indicate in that filing a desire to arbitrate. And
Brothers acknowledge this court’s precedent in Turpin v. Valley
Obstetrics & Gynecology, 2021 UT App 12, 482 P.3d 831, and
Educators Mutual Insurance Ass’n v. Evans, 2011 UT App 171, 258
P.3d 598, which Parents and Sisters argue are determinative. In
these cases, this court held that the filing of a complaint, by itself,
evidenced a clear intent to litigate and to waive the right to
arbitrate, see Turpin, 2021 UT App 12, ¶¶ 20–21; Educators, 2011
UT App 171, ¶ 66. But we see material differences between the
factual situations in those cases and the facts we have here. First,
there was no record evidence and no argument was made in
20220609-CA 11 2024 UT App 115Hardman v. Hardman
Turpin that the plaintiff submitted her medical malpractice claim
to a prelitigation panel or reluctantly filed that claim in district
court in order to maintain the status quo pending arbitration. See
2021 UT App 12, ¶¶ 21–25. Instead, the plaintiff was seeking
judicial resolution of her medical malpractice claim. Id. ¶ 21. And
in Educators, none of the parties sought to compel arbitration after
the plaintiff filed its complaint and pursued litigation. See
generally Educators, 2011 UT App 171, ¶¶ 61–69. Rather, this court
reversed the dismissal of the defendant’s third-party claims after
determining that the district court erred in enforcing the parties’
arbitration provision against the defendant when the parties all
waived arbitration. See id. ¶¶ 65–69; see also Turpin, 2021 UT App
12, ¶ 24 (“Absent some outward indication by [the plaintiff] that
she was pursuing litigation reluctantly or did not want to waive
her right to arbitrate, we see no relevant difference between this
case and Educators . . . .”).
¶21 Admittedly, to let the district court know that they were
seeking to maintain the status quo until the dispute over
dissolution of the LLC was resolved by arbitration, Brothers’
better course would have been to explicitly request arbitration in
their complaint. But they argue convincingly that their desire not
to waive the right to arbitrate was evidenced by their
contemporaneously filed motion for a TRO, which explicitly
requested that the court enter an order to preserve the status quo
pending arbitration, and that their intent was reiterated when
they sought to extend the TRO. We also find persuasive Brothers’
assertion that filing a complaint in this circumstance was
procedurally necessary because there must be a mechanism for
them to stall the imminent sale of irreplaceable properties
pending arbitration of their dispute with Parents and Sisters.
¶22 At its core, this is a breach of contract case. And it is
undisputed that the LLC’s operating agreement, signed in 1996,
contains an arbitration requirement for the settling of disputes.
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¶23 Unlike the current version of the Utah Arbitration Act, the
version of the act in effect in 1996 does not provide for provisional
relief or explain how a party can preserve the status quo in an
arbitrable dispute pending the appointment of an arbitrator. See
Utah Code §§ 31a-78-1 to -20 (1996). In fact, it was not until the
2002 revision of the Arbitration Act that the Utah legislature
explicitly recognized the availability of provisional remedies. See
id. § 78-31a-109(1) (2002) (“Before an arbitrator is appointed and
is authorized and able to act, the court, upon motion of a party to
an arbitration proceeding and for good cause shown, may enter
an order for provisional remedies to protect the effectiveness of
the arbitration proceeding to the same extent and under the same
conditions as if the controversy were the subject of a civil
action.”).
¶24 But that does not mean that Brothers had no way to
preserve the status quo pending arbitration of the parties’ dispute
or that the lack of a specific provisional remedies section in the
1996 version of the Arbitration Act prevented Brothers from
seeking injunctive relief. Under our rules of civil procedure, a
district court can enjoin a party from taking certain action that
would render the arbitration a hollow formality—such as when
arbitration is required to resolve a dispute over how to divvy up
irreplaceable property and one of those parties plans to sell those
very properties before the arbitration. See Utah R. Civ. P.
65A(e)(2)–(3) (“A restraining order or preliminary injunction may
issue only upon a showing by the applicant that . . . the applicant
will suffer irreparable harm unless the order or injunction issues
[and] the threatened injury to the applicant outweighs whatever
damage the proposed order or injunction may cause the party
restrained or enjoined . . . .”); see also Merrill Lynch, Pierce, Fenner
& Smith, Inc. v. Bradley, 756 F.2d 1048, 1053–54 (4th Cir. 1985) (“The
arbitration process would be a hollow formality where the arbitral
award when rendered could not return the parties substantially
to the status quo ante.” (quotation simplified)). And here, the
parties themselves agreed that they would “be irreparably
20220609-CA 13 2024 UT App 115Hardman v. Hardman
damaged if [the operating] agreement is not specifically
enforced.”
¶25 The parties disagree about which version of the Arbitration
Act applies in this case. Though the Utah Supreme Court has
acknowledged that the Arbitration Act is procedural rather than
substantive, which might otherwise suggest application of the
current statute, see ASC Utah, Inc. v Wolf Mountain Resorts, LC, 2010
UT 65, ¶ 19, 245 P.3d 184, the plain language of the current version
of the Arbitration Act makes clear that it applies to only those
arbitration agreements “made on or after May 6, 2002, ” Utah
Code § 78B-11-104(1). The statute also “applies to any agreement
to arbitrate made before May 6, 2002, if all the parties to the
agreement or to the arbitration proceeding agree on the record.”
Id. § 78B-11-104(2). Thus, although the current version of the
Arbitration Act allows for provisional remedies—unlike the 1996
version, which did not—the current version does not apply to the
arbitration agreement here because the plain language of the
statute directs that it does not apply when the agreement was
made prior to 2002 and the parties have not agreed on the record
to its application. Accordingly, we determine that the 1996
version of the Arbitration Act applies to this case.
¶26 Given the unavailability of provisional remedies under the
1996 version of the Arbitration Act, the only way Brothers could
forestall the imminent sale of the properties was to do as they
did—file a complaint and then ask for a restraining order while
the parties pursued arbitration. Accordingly, though Brothers
initiated this lawsuit, we do not view Brothers’ mere filing of
mandatory initial disclosures as indicative of an intent to proceed
to trial. The timely production of initial disclosures, the answering
of Parents’ and Sisters’ counterclaims, and the response to Sisters’
requests for admissions are not voluntary undertakings. Rather,
timely compliance with discovery timelines and other aspects of
litigation that do not necessarily involve the court do not manifest
an intent to waive arbitration. See Central Fla. Invs., Inc. v. Parkwest
20220609-CA 14 2024 UT App 115Hardman v. Hardman
Assocs., 2002 UT 3, ¶ 29, 40 P.3d 599. As explained by our supreme
court to parties in another case, it is as if Brothers were
to a certain extent, compelled to file these [discovery
responses] to comply with the rules of civil
procedure. The Utah Rules of Civil Procedure
impose[] requirements and deadlines on [parties] to
participate . . . in pretrial discovery and in the filing
of pretrial motions. If we were to hold that [a
party’s] participation in the litigation process,
particularly discovery, regardless of [their] intent
regarding arbitration or the extent of [their]
participation in litigation, the result would be that
in subsequent cases parties would arguably always
waive arbitration in complying with deadlines
imposed by the rules governing litigation in the
courts.
Id. ¶ 32.
¶27 Moreover, the “motion work” the district court found
probative of Brothers’ intent to waive arbitration included a
request that the court stay the responsive briefing on Parents’
motion for summary judgment filed after Brothers moved to
compel arbitration and a request to stay further discovery
pending the court’s ruling on the motion to compel. Importantly,
these filings do not appear to invoke the authority of the district
court to further litigation, to manipulate the legal process to get a
second bite at a favorable outcome, or to gather evidence to build
Brothers’ case in arbitration. Rather, these filings suggest that
Brothers did not intend to litigate their claims to conclusion but
instead intended to maintain the status quo pending arbitration.
¶28 In sum, we determine that the district court erred in
concluding that Brothers substantially participated in litigation.
By filing a complaint, seeking injunctive relief, answering
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counterclaims, and participating in discovery, Brothers did not
demonstrate an intent to waive arbitration in this matter.
B. Chandler Test Part II: Prejudice
¶29 Assuming we need to reach this issue, because we
conclude Brothers did not participate in litigation to a point
inconsistent with the intent to arbitrate, we need not consider
whether Parents and Sisters were prejudiced due to the filing of
Brothers’ complaint and participation in the litigation process.
Under Chandler v. Blue Cross Blue Shield of Utah, 833 P.2d 356 (Utah
1992), both parts of the test must be met to establish waiver. See
id. at 358, 360. Since both parts of the test cannot be met here, we
conclude that Brothers did not waive their right to arbitrate the
family dispute with Parents and Sisters.
CONCLUSION
¶30 The LLC members agreed to arbitrate any dispute arising
under the LLC’s operating agreement. Brothers did not waive
their right to arbitrate the alleged dissolution of the LLC. As
Brothers disagreed with the LLC dissolution and sought to
arbitrate under the terms of the operating agreement, the district
court erred when it found that Brothers participated in litigation
to a point inconsistent with the intent to arbitrate. Therefore, we
reverse the district court’s denial of the motion to compel
arbitration and remand this case for proceedings consistent with
this opinion.
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