First Weber Group, Inc. v. Synergy Real Estate Group, LLC , 361 Wis. 2d 496 ( 2015 )

2015 WI 34
SUPREME COURT OF WISCONSIN
CASE NO.: 2013AP1205
COMPLETE TITLE: First Weber Group, Inc. and James R. Imhoff,
Jr.,
Petitioners-Appellants-Petitioners,
v.
Synergy Real Estate Group, LLC and James N.
Graham,
Respondents-Respondents.
REVIEW OF A DECISION OF THE COURT OF APPEALS
(Reported at 353 Wis. 2d 492, 846 N.W.2d 348)
(Ct. App. 2014 – Published)
PDC No: 2014 WI App 41
OPINION FILED: March 24, 2015
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: February 4, 2014
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Dane
JUDGE: Juan B. Colás
JUSTICES:
CONCURRED:
DISSENTED:
NOT PARTICIPATING:
ATTORNEYS:
For the petitioners-appellants-petitioners, there were
briefs by Kim Moermond, General Counsel, Madison, and oral
argument by Kim Moermond.
For the respondents-respondents, there was a brief filed by
James N. Graham, Accession Law LLC, Madison, and oral argument
by James N. Graham.
An amicus curiae brief was filed by Debra P. Conrad on
behalf of the Wisconsin Realtors Association.
2015 WI 34
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2013AP1205
(L.C. No. 2012CV4349)
STATE OF WISCONSIN : IN SUPREME COURT
First Weber Group, Inc. and James R. Imhoff,
Jr.,
Petitioners-Appellants-Petitioners,
FILED
v. MAR 24, 2015
Synergy Real Estate Group, LLC and James N. Diane M. Fremgen
Clerk of Supreme Court
Graham,
Respondents-Respondents.
REVIEW of a decision of the Court of Appeals. Reversed and
cause remanded.
¶1 ANNETTE KINGSLAND ZIEGLER, J. This is a review of a
published decision of the court of appeals, First Weber Group,
Inc. v. Synergy Real Estate Group, LLC, 2014 WI App 41, 353
Wis. 2d 492, 846 N.W.2d 348, which affirmed the circuit court's1
order denying First Weber Group, Inc.'s petition to compel
arbitration.2
1
The Honorable Juan B. Colás, Dane County Circuit Court,
presided.
2
First Weber Group, Inc. and James R. Imhoff, Jr.
(continued)
No. 2013AP1205
¶2 An arbitration panel ordered James N. Graham3 to pay
First Weber for a disputed real estate brokerage commission.
After Graham failed to pay, First Weber filed an action in
circuit court to confirm the arbitration award. In that
confirmation action, First Weber also requested the court to
award it "costs and reasonable attorney fees" and "such other
relief as the Court deems just and equitable." The circuit
court ordered Graham to pay First Weber the commission awarded
in the arbitration. However, the circuit court denied First
Weber's request for costs and reasonable attorney's fees,
reasoning that, "[u]nder Wis. Stat. § 814.01, no costs may be
awarded when confirming an arbitration award." Graham paid only
the commission award.
¶3 First Weber subsequently filed an arbitration request
with the Realtors Association of South Central Wisconsin, Inc.
("Realtors Association"), of which First Weber and Graham were
("Imhoff") are the named petitioners. First Weber Group and
Imhoff are members of the Realtors Associations of South Central
Wisconsin, Inc. Imhoff is a licensed real estate broker and the
owner and chief executive officer of First Weber Group, which is
a real estate business entity licensed to do business in
Wisconsin. We will refer to the petitioners as "First Weber."
3
Graham and Synergy Real Estate Group, LLC ("Synergy") are
the two named respondents. Graham was an officer and a member
of Synergy until he resigned his membership therein, on
October 16, 2009. On December 31, 2009, Graham dissolved
Synergy. Synergy was a real estate business entity licensed to
do business in Wisconsin. Graham is a licensed real estate
broker and was a member of the Realtors Association of South
Central Wisconsin, Inc. We will refer to the respondents as
"Graham."
2
No. 2013AP1205
members. First Weber's arbitration request asked the Realtors
Association to arbitrate a contractual dispute over "costs and
reasonable attorney's fees" because judicial confirmation of the
commission award was necessary. The Realtors Association
scheduled the matter regarding costs and reasonable attorney's
fees for arbitration. Graham refused to attend the arbitration
hearing regarding costs and reasonable attorney's fees. As a
result, no arbitration hearing was held. First Weber then filed
a petition in circuit court to compel arbitration of the dispute
over costs and reasonable attorney's fees, arguing that Graham
was bound by an arbitration agreement. The circuit court denied
the petition, holding that First Weber's arbitration request was
untimely. The court of appeals affirmed, also concluding that
the arbitration request was untimely.
¶4 Graham argues that First Weber's petition to compel
arbitration was correctly denied because it was untimely.
Although Graham concedes that he is bound by an arbitration
agreement, he argues that it does not require him to arbitrate
untimely claims. Graham also argues that, on grounds of
estoppel, First Weber cannot arbitrate the dispute over costs
and reasonable attorney's fees because it did not appeal the
circuit court's resolution of this dispute in the previously
filed action confirming the arbitrator's award of the
commission.
¶5 First Weber argues that an arbitrator, rather than a
court, should decide whether its arbitration request was timely.
First Weber also argues that its arbitration request was timely.
3
No. 2013AP1205
First Weber further argues that it is not barred on grounds of
estoppel from arbitrating the dispute over costs and reasonable
attorney's fees. Finally, First Weber argues that the circuit
court in the present action erred by failing to defer to the
Realtors Association's determination that this dispute is
arbitrable.
¶6 We conclude that under the arbitration agreement,
Graham's timeliness and estoppel defenses against arbitration
are to be determined in the arbitration proceedings, not by a
court in a proceeding under Wis. Stat. § 788.034 to compel
4
All subsequent references to the Wisconsin Statutes are to
the 2011-12 version unless otherwise indicated. Wisconsin Stat.
§ 788.03 (2011-12) provides in relevant part:
The party aggrieved by the alleged failure, neglect or
refusal of another to perform under a written
agreement for arbitration may petition any court of
record having jurisdiction of the parties . . . for an
order directing that such arbitration proceed as
provided for in such agreement. . . . The court shall
hear the parties, and upon being satisfied that the
making of the agreement for arbitration or the failure
to comply therewith is not in issue, the court shall
make an order directing the parties to proceed to
arbitration in accordance with the terms of the
agreement. If the making of the arbitration agreement
or the failure, neglect or refusal to perform the same
is in issue, the court shall proceed summarily to the
trial thereof.
4
No. 2013AP1205
arbitration.5 Graham's timeliness and estoppel defenses against
arbitration are procedural arbitrability issues to be determined
during the arbitration process, rather than by a court. Graham
has not overcome the presumption in favor of arbitration.
Accordingly, we reverse the court of appeals' decision and
remand the cause to the circuit court with the instruction that
First Weber's petition to compel arbitration be granted.6
5
The circuit court and court of appeals did not rely on
Graham's estoppel argument. Before the circuit court, Graham's
estoppel argument relied on issue preclusion and claim
preclusion. However, Graham's response brief to this court
devotes less than one page to his estoppel argument and does not
indicate which type of estoppel he is relying upon. We do not
separately address Graham's estoppel argument. For the same
reasons that we conclude that Graham's timeliness argument is to
be determined during the arbitration process, we conclude that
his estoppel argument is to be determined during the arbitration
process, not by a court. See also Cirilli v. Country Ins. &
Fin. Servs., 2009 WI App 167, ¶18, 322 Wis. 2d 238, 776
N.W.2d 272 ("Evaluating the collateral estoppel effect of the
prior judgment does not challenge the validity of the
arbitration clause or call into question whether this dispute
falls within the scope of the arbitration clause. Therefore,
the effect of the prior judgment on this dispute is an issue to
be decided by an arbitrator.") (citations omitted).
6
We do not resolve whether First Weber's arbitration
request is barred on grounds of timeliness or estoppel because
these issues are to be determined in the arbitration process.
We express no opinion on whether these issues of timeliness or
estoppel have already been decided in the arbitration process or
how a Realtors Association arbitrator should rule on these
issues if subsequently confronted with them. Because we
conclude that the circuit court erred by determining the
procedural question of whether First Weber's arbitration request
was timely, we do not determine whether the circuit court erred
by showing no deference to the Realtors Association's
determination that the present dispute is arbitrable.
5
No. 2013AP1205
I. FACTUAL BACKGROUND
¶7 First Weber is a member of the Realtors Association.
Graham was a member of the Realtors Association from January
2006 through the end of 2011. In order to become a member of
the Realtors Association, every prospective member must sign a
membership application form that states: "I agree to abide by
the Code of Ethics of the National Association of REALTORS®, and
the Constitution, Bylaws, Rules and Regulations of [the Realtors
Association of South Central Wisconsin], the State Association
and the National Association." It is undisputed that Graham and
First Weber signed this document.
¶8 The agreement to arbitrate is contained in the Code of
Ethics of the National Association of Realtors ("Code of
Ethics"), which Realtors Association members are obliged to
follow. Article 17 of the Code of Ethics and Standards of
Practice reads in relevant part:
In the event of contractual disputes or specific
non-contractual disputes as defined in Standard of
Practice 17-4 between REALTORS® (principals)
associated with different firms, arising out of their
relationship as REALTORS®, the REALTORS® shall submit
the dispute to arbitration in accordance with the
regulations of their Board or Boards rather than
litigate the matter.
Article V, section 7 of the Constitution of the Realtors
Association states that its members must follow the Code of
Ethics' arbitration requirement.
¶9 The Code of Ethics also requires that a request for
arbitration be filed in a timely manner. Section 47(a) of the
6
No. 2013AP1205
Code of Ethics and Arbitration Manual provides in relevant part:
"Requests for arbitration must be filed within one hundred
eighty (180) days after the closing of the transaction, if any,
or within one hundred eighty (180) days after the facts
constituting the arbitrable matter could have been known in the
exercise of reasonable diligence, whichever is later." Several
Realtors Association publications, including its standardized
form for requesting arbitration, contain a similar timeliness
requirement with virtually identical language. Section 47(a)
further provides that the 180-day time limit is suspended under
certain circumstances and that questions concerning this
suspension "will be determined by the Board President or the
President's designee."7
¶10 First Weber paid a brokerage commission to Graham
because he represented a buyer who purchased real estate
7
Section 47(a) of the Code of Ethics and Arbitration Manual
provides in relevant part:
Suspension of filing deadlines: If the Board's
informal dispute resolution processes (e.g.,
ombudsmen, mediation, etc.) are invoked or initiated
by a complainant (or potential complainant) with
respect to an otherwise potentially arbitrable matter
that becomes the subject of a subsequent arbitration
request, the one hundred eighty (180) day filing
deadline shall be suspended beginning with the date of
the complainant's (or potential complainant's) request
for informal dispute resolution service or assistance
and shall resume when the informal dispute resolution
procedures are concluded or terminated. Questions
about when informal dispute resolution began or ended
will be determined by the Board President or the
President's designee.
7
No. 2013AP1205
property being sold by First Weber in the fall of 2008. First
Weber later determined that Graham was not entitled to the
commission.
¶11 First Weber and Graham agreed to arbitrate the dispute
over the brokerage commission. Specifically, on February 25,
2009, First Weber signed a standardized Realtors Association
form for requesting arbitration. On April 8, 2009, Graham
signed a standardized Realtors Association form agreeing to
First Weber's arbitration request. Each form stated:
In the event I do not comply with the arbitration
award and it is necessary for any party to this
arbitration to obtain judicial confirmation and
enforcement of the arbitration award against me, I
agree to pay the party obtaining such confirmation the
costs and reasonable attorney's fees incurred in
obtaining such confirmation and enforcement.
¶12 On October 8, 2009, a Realtors Association arbitration
panel held a hearing and ordered Graham to pay $5,440 to First
Weber within the next 15 days. Graham failed to pay. On
October 7, 2010——almost one year after the arbitration award was
ordered——First Weber filed an action under Wis. Stat. § 788.09
(2009-10)8 to confirm the $5,440 arbitration award.9 In its
8
Wisconsin Stat. § 788.09 (2009-10) provides:
At any time within one year after the award is
made any party to the arbitration may apply to the
court in and for the county within which such award
was made for an order confirming the award, and
thereupon the court must grant such an order unless
the award is vacated, modified or corrected under s.
788.10 or 788.11.
9
Dane County case no. 10CV5329.
8
No. 2013AP1205
initial filing, First Weber "pray[ed] for an order confirming
the arbitration award, for entry of judgment in conformity
therewith, against the Respondents individually (jointly and
severally liable), and award [First Weber] costs and reasonable
attorney fees, and for such other and further relief as the
Court deems just and equitable."
¶13 On March 8, 2011, in a non-final written order,10 the
circuit court11 confirmed the $5,440 arbitration award for the
commission. On March 16, 2011, in a non-final written order,12
the circuit court denied First Weber's claim for costs and
reasonable attorney's fees. The circuit court reasoned that
[t]he exception to the American rule is narrowly drawn
to permit arbitrators, not the court, to award costs
and fees where such fees are expressly provided for in
the arbitration agreement. [citations omitted] Under
Wis. Stat. § 814.01, no costs may be awarded when
confirming an arbitration award. [citation omitted]
This statutory rule is not altered by a contract
provision.
First Weber filed a motion for reconsideration 14 days later.
10
The circuit court stated that "[t]his Order is not the
final document this Court will issue for purposes of the time
limit for appeal."
11
The Honorable John C. Albert, Dane County Circuit Court,
presided over the confirmation action.
12
See Werner v. Hendree, 2011 WI 10, ¶62, 331 Wis. 2d 511,
795 N.W.2d 423 (citation omitted) ("[A] document must meet three
conditions in order to be considered a final judgment or order
for purposes of appeal: the document must (1) be entered by the
circuit court, (2) dispose of the entire matter in litigation as
to one or more parties, and (3) state on its face that it is the
final document for purposes of appeal.").
9
No. 2013AP1205
¶14 On October 14, 2011, in a non-final oral ruling, the
circuit court again confirmed the arbitration award and ordered
Graham to pay the $5,440 commission awarded in the arbitration
within 30 days. The court denied First Weber's claim for costs
and reasonable attorney's fees, reasoning that "the weight of
authority precludes me from awarding attorney's fees especially
in this case where both parties are attorneys . . . ." On
October 31, 2011, Graham sent a check to First Weber in the
amount of $5,440. The check was accompanied by a letter stating
that, by cashing the check, First Weber would agree to "satisfy
any and all claims against [Graham] which were raised or which
could have been raised in [the confirmation action] or in the
underlying commission and arbitration dispute. [First Weber]
release[s] [Graham] from any further liability arising
therefrom."
¶15 On December 5, 2011, the circuit court issued a final
written order denying costs and reasonable attorney's fees,
reasoning that the court "does not have authority to award costs
and fees in a confirmation proceeding." The circuit court also
explained that its decision
resolves only the confirmation itself, and does not
involve any other claims, or potential claims, from
the underlying transaction; nor does it address, or
negate the validity and/or enforceability of the
Arbitration Agreement between the parties, or any
other issues arising from it, excepting only the award
provided in the arbitration proceedings.
¶16 On or about May 8, 2012, First Weber requested the
Realtors Association to arbitrate the contractual dispute with
10
No. 2013AP1205
Graham over costs and reasonable attorney's fees allegedly due
because First Weber previously had to file a Wis. Stat. § 788.03
action to confirm the arbitration award for the commission. On
June 5, 2012, the Realtors Association notified Graham that
First Weber's arbitration request had been referred to a
Realtors Association hearing panel. On August 27, 2012, the
Realtors Association notified Graham that an arbitration hearing
was scheduled for September 26, 2012. On September 11, 2012,
Graham sent an e-mail to the Realtors Association's professional
standards administrator, stating that he would not attend the
hearing. On September 26, 2012, the arbitration panel convened
at the scheduled time and Graham did not appear. At the
hearing, a Realtors Association official called Graham, who said
that he would not attend the hearing. The arbitration panel
determined that it could not arbitrate the matter without Graham
present, so it cancelled the hearing.
II. PROCEDURAL HISTORY
¶17 On November 2, 2012, First Weber filed a Wis. Stat.
§ 788.03 petition to compel Graham to arbitrate. The petition
sought to compel arbitration of the parties' dispute over
payment of costs and reasonable attorney's fees. According to
First Weber, Graham was contractually obligated, under the
language of the agreement to arbitrate, to pay the costs and
reasonable attorney's fees that First Weber incurred in the
previous court confirmation action.
¶18 On April 12, 2013, the circuit court denied the
petition to compel arbitration. In its ruling, the circuit
11
No. 2013AP1205
court first rejected Graham's argument that First Weber's claim
for costs and reasonable attorney's fees was barred by issue
preclusion or claim preclusion.13 In so doing, the court
reasoned that Graham, by virtue of his membership in the
Realtors Association, "agreed to submit to arbitration any
dispute with another member arising from their relationship as
Realtors. A dispute about payment of fees and costs incurred in
confirming an arbitration award under the agreement is within
the scope of arbitrable disputes." However, the court
nonetheless denied the petition to compel arbitration because it
concluded that the request to arbitrate was untimely.
Specifically, the court held that "the dispute was no longer
arbitrable"14 because it found that First Weber's arbitration
request was filed beyond a 180-day time limit imposed by the
arbitration agreement and Realtors Association's rules. Hence,
13
The circuit court stated that, in the prior confirmation
action, the circuit court:
did not consider or decide on the merits whether
[First Weber] was entitled under the arbitration
agreement to recover the costs of confirming the
award. The court simply decided that the statutory
fees and costs did not apply . . . and that in an
[sic] confirmation of award case it lacked authority,
i.e. competency to proceed, to decide whether a party
was entitled to fees and costs of the confirmation
proceeding under the terms of the arbitration
agreement.
14
Relying on Kimberly Area School District v. Zdanovec, 222
Wis. 2d 27, 39, 586 N.W.2d 41 (Ct. App. 1998), the circuit court
stated that "[i]t is a general rule that arbitrability is to be
determined by the courts."
12
No. 2013AP1205
while the circuit court did deny the petition to compel
arbitration, the basis for the denial was that the court deemed
the arbitration request to be untimely, not because the costs
and reasonable attorney's fees issue was an improper subject for
arbitration.
¶19 On March 20, 2014, the court of appeals affirmed the
circuit court's order denying First Weber's petition to compel
arbitration. First Weber Grp., Inc., 353 Wis. 2d 492, ¶2. The
court of appeals likewise held that Graham was bound by an
arbitration agreement and assumed, without deciding, that the
dispute over costs and reasonable attorney's fees was within the
scope of that agreement. Id., ¶¶4-7, 29, 31, 33. The court of
appeals reasoned that the 180-day time limit for requesting
arbitration "is an issue of substantive arbitrability reserved
for judicial determination." Id., ¶43. The court of appeals
concluded that First Weber's arbitration request was untimely
and affirmed the circuit court's order on that basis. Id.,
¶¶49-55.
III. STANDARD OF REVIEW
¶20 First Weber's petition to compel arbitration involves
contract interpretation, which is a question of law that we
review de novo. Cirilli v. Country Ins. & Fin. Servs., 2009 WI
App 167, ¶10, 322 Wis. 2d 238, 776 N.W.2d 272 (citations
omitted).
IV. ANALYSIS
¶21 The parties seem to agree that Graham is bound by an
agreement to arbitrate contractual disputes with other Realtors
13
No. 2013AP1205
arising from their relationship as Realtors.15 The parties also
seem to agree that the arbitration agreement covers the subject
matter of the dispute at issue. Thus, the crux of the issue
before us is whether the timeliness of the arbitration request
should be decided by a court or in arbitration.
¶22 Graham argues that First Weber's claim for costs and
reasonable attorney's fees is not arbitrable because First
Weber's arbitration request was untimely.16 Graham also argues
that this timeliness issue is for a court, rather than an
arbitrator, to decide. First Weber argues that the issue of
timeliness is procedural and for an arbitrator, rather than a
court, to decide.
¶23 We hold that Graham's timeliness and estoppel defenses
against arbitration are to be determined in the arbitration
proceedings, not by a court in a proceeding under Wis. Stat.
§ 788.03 to compel arbitration. We base our decision on
Wisconsin's public policy favoring arbitration, the arbitration
agreement, the Realtors Association's arbitration procedures,
15
Courts routinely hold that Realtors are parties to an
arbitration agreement by virtue of their membership in a local
Realtors association that requires them to arbitrate certain
disputes. See Lane v. Urgitus, 145 P.3d 672, 681 (Colo. 2006)
(collecting cases).
16
Graham argues in his brief to this court that, although
the present dispute "was 'arbitrable' in the sense that it was
the type of claim that could have been arbitrated if pursued in
a timely manner in the proper venue, the claim was not
'arbitrable' when pursued more than a year after first pursuing
the claim in litigation."
14
No. 2013AP1205
the limited role of courts in actions to compel arbitration
under § 788.03, and relevant case law.
A. Public Policy Favoring Arbitration
¶24 Wisconsin has a "policy of encouraging arbitration as
an alternative to litigation . . . ." Kemp v. Fisher, 89
Wis. 2d 94, 100, 277 N.W.2d 859 (1979). "The Wisconsin
Arbitration Act embodies this state's clearly established public
policy to enforce agreements to arbitrate." Cirilli, 322
Wis. 2d 238, ¶11 (citation omitted). "[A]rbitration is meant to
be a swift and inexpensive process that is guided by a
contractual agreement." Employers Ins. of Wausau v. Jackson,
190 Wis. 2d 597, 611, 527 N.W.2d 681 (1995). Indeed, "the goal
of arbitration is 'to resolve the entire controversy out of
court without the formality and expense that normally attaches
to the judicial process.'" Borst v. Allstate Ins. Co., 2006 WI
70, ¶61, 291 Wis. 2d 361, 717 N.W.2d 42 (quoted source omitted).
¶25 In an action to compel arbitration, a court presumes
that its role is limited to determining whether the parties
agreed to arbitrate the subject matter of the dispute at issue.
See Kimberly Area Sch. Dist. v. Zdanovec, 222 Wis. 2d 27, 37-39,
586 N.W.2d 41 (Ct. App. 1998). When exercising that role, a
court employs a "strong presumption" that the parties agreed to
arbitrate the subject matter of the dispute at issue when "the
contract in question contains an arbitration clause." Cirilli,
322 Wis. 2d 238, ¶14 (citing Kimberly Area Sch. Dist., 222
Wis. 2d at 39).
B. The Arbitration Agreement and Procedure
15
No. 2013AP1205
¶26 First Weber and Graham are parties to an arbitration
agreement. When they became members of the Realtors
Association, they agreed to comply with the National Association
of Realtors' Code of Ethics. Article 17 of the Code of Ethics
provides that, in the event of a contractual dispute "between
REALTORS® (principals) associated with different firms, arising
out of their relationship as REALTORS®, the REALTORS® shall
submit the dispute to arbitration in accordance with the
regulations of their Board or Boards rather than litigate the
matter." Under section 44(a) of the Code of Ethics and
Arbitration Manual, "[t]he duty to submit to arbitration
continues in effect even after membership lapses or is
terminated, provided that the dispute arose while the respondent
was a REALTOR® . . . ." The Realtors Association's rules
expressly require its members to obey this agreement to
arbitrate. For example, Article V, section 7 of the Realtors
Association's Constitution requires its members to obey "the
duty to arbitrate controversies arising out of real estate
transactions as specified by Article 17 of the Code of
Ethics . . . ." The Realtors Association provides penalties for
failure to comply with the duty to arbitrate. Specifically,
Article V, section 2 of the Realtors Association's Constitution
provides that "[a]ny member of the [Realtors Association] may be
reprimanded, fined, placed on probation, suspended, or expelled
by the Board of Directors for a violation of this
Constitution . . . ."
16
No. 2013AP1205
¶27 The arbitration agreement at issue requires an
arbitration request to be timely filed. Section 47(a) of the
Code of Ethics and Arbitration Manual, which is binding on
Realtors Association members, provides: "Requests for
arbitration must be filed within one hundred eighty (180) days
after the closing of the transaction, if any, or within one
hundred eighty (180) days after the facts constituting the
arbitrable matter could have been known in the exercise of
reasonable diligence, whichever is later." This provision is
not statutory. It is not agreed upon outside of the arbitration
process. It is not a statute of limitations or a statute of
repose. The 180-day time limit is required only because it is
contained in the Realtors' agreement to arbitrate by reference
to the Realtors Association's rules and the National Association
of Realtors' Code of Ethics. In addition, this time limit
comprises an element of reasonableness and can be suspended
under certain circumstances. The Realtors Association arbiters
are "comparatively more expert [than a court] about the meaning
of their own rule" and "comparatively better able to interpret
and to apply it." Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79, 85 (2002). Thus, "it is reasonable to infer that the
parties intended the [arbitration] agreement to reflect that
understanding." Id. (citing First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 944-45 (1995)). "[P]arties to an
arbitration contract would normally expect a forum-based
decisionmaker to decide forum-specific procedural gateway
matters." Id. at 86.
17
No. 2013AP1205
¶28 Likewise, the Realtors Association's arbitration
procedures are designed to allow disputes to be resolved through
the arbitration process.17 The arbitration procedures provide a
process by which a controversy will be determined to be
arbitrable or be dismissed. Nowhere is it contemplated that
courts may make this determination. In particular, after
receiving an arbitration request, the Realtors Association
forwards the request to a Grievance Panel, which determines,
inter alia, "whether the controversy described is an arbitrable
matter." The Grievance Panel either dismisses the arbitration
request or refers the matter for arbitration before a Hearing
Panel. Either decision by the Grievance Panel may be appealed
to the Realtors Association's Board of Directors, which
determines whether to dismiss the matter or refer it for
arbitration.18 If arbitrable, the matter is arbitrated before a
Hearing Panel, which renders a binding decision. The fact that
the Realtors Association's arbitration process is to determine
"whether the controversy described is an arbitrable matter"
supports a conclusion that the timeliness issue is for the
17
This procedure is described in various documents in the
record, including a document titled "REALTORS® Association of
South Central Wisconsin, Inc. Filing Ethics Complaints and
Arbitration Requests" and the Realtors Association's
standardized forms for requesting and agreeing to arbitration.
18
In the present case, the Grievance Panel referred the
matter for arbitration and notified Graham to that effect.
Graham did not appeal that decision or argue to the Realtors
Association that First Weber's arbitration request was untimely.
18
No. 2013AP1205
Realtors Association's arbitration process, not a court, to
decide. See Howsam, 537 U.S. at 86.
¶29 In sum, the Realtors Association's rules and grievance
process intend that disputes between its members be resolved out
of court and demonstrate that its arbitration process may
determine whether an arbitration request was timely.
C. Courts Have a Limited Role in Arbitration
¶30 We now turn to the limited role that Wisconsin courts
have in arbitration. We first discuss a court's role under Wis.
Stat. § 788.03, which authorizes courts to compel arbitration
according to the terms of an arbitration agreement. We will
next discuss case law that explains that a court's role in an
action to compel arbitration is generally limited to determining
whether the parties agreed to arbitrate the subject matter of
the dispute at issue.
1. Legislative Guidance
¶31 The legislature has determined that the courts have a
limited role in the context of arbitration. "Judicial review of
arbitration awards is very limited." Milwaukee Prof'l
Firefighters, Local 215, IAFF, AFL-CIO v. City of Milwaukee, 78
Wis. 2d 1, 21, 253 N.W.2d 481 (1977). The legislature has
recognized, however, that not all disputes can be resolved
without court intervention. For example, if a party refuses to
pay an arbitration award, that award can be enforced through a
petition to confirm under Wis. Stat. § 788.09. Similarly, Wis.
Stat. § 788.03 authorizes a circuit court to compel parties to
arbitrate a dispute according to the terms of their arbitration
19
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agreement. Employers Ins. of Wausau, 190 Wis. 2d at 613-14.
The case at issue is an action under § 788.03 seeking to compel
Graham to arbitrate.
¶32 In an action to compel arbitration under Wis. Stat.
§ 788.03, "the issues are limited to 'the making of the
arbitration agreement or the failure, neglect or refusal to
perform' under the agreement."19 Pilgrim Inv. Corp. v. Reed, 156
Wis. 2d 677, 684, 457 N.W.2d 544 (Ct. App. 1990) (quoting Wis.
Stat. § 788.03). When determining whether a dispute is
arbitrable, a "court's function is limited to a determination
whether there is a construction of the arbitration clause that
would cover the grievance on its face and whether any other
provision of the contract specifically excludes it." Joint Sch.
Dist. No. 10, City of Jefferson v. Jefferson Ed. Ass'n, 78
Wis. 2d 94, 111, 253 N.W.2d 536 (1977); see also Cirilli, 322
Wis. 2d 238, ¶14. "When the court determines arbitrability it
must exercise great caution. The court has no business weighing
19
In an action to compel arbitration, a court also may
consider whether a party failed to appoint an arbitrator as
required by the terms of an arbitration agreement. Employers
Ins. of Wausau v. Jackson, 190 Wis. 2d 597, 613-16, 527
N.W.2d 681 (1995).
Graham argues that the petition to compel arbitration must
be denied because his failure to arbitrate is not a failure "to
perform under a written arbitration agreement," see id. at 613,
because the arbitration agreement does not require him to
arbitrate untimely claims. This argument hinges on whether the
arbitration request was untimely. As we conclude in this
opinion, Graham's timeliness argument is to be decided in the
arbitration process, not by a court.
20
No. 2013AP1205
the merits of the grievance. It is the arbitrators' decision for
which the parties bargained." Joint Sch. Dist. No. 10, 78
Wis. 2d at 111.
¶33 First Weber and Graham seem to agree that a
controversy over costs and reasonable attorney's fees is
arbitrable under their arbitration agreement. The disagreement
between First Weber and Graham rests on whether arbitration of
First Weber's claim is precluded on the basis of timeliness or
estoppel and whether a court or arbitration should decide these
issues.20
2. Substantive Arbitrability and Procedural Arbitrability
¶34 "Arbitrability questions generally fall into one of
two categories." 1 Larry Edmonson, Domke on Commercial
Arbitration § 15:4 (3d ed. 2014). "Substantive arbitrability
refers to whether the dispute involves a subject matter which
the parties have contracted to submit to arbitration." Id.
"Procedural arbitrability concerns issues such as whether
certain procedures apply to a particular dispute, whether such
procedures were followed or excused, and whether unexcused
failure to follow procedure avoids the duty to arbitrate." Id.
"The threshold question of whether a matter is subject to
20
As we explained earlier, we do not separately address
estoppel. Our discussion of why the timeliness issue is to be
decided in the arbitration process explains why the estoppel
issue is to be decided in the arbitration process. See supra
note 4.
21
No. 2013AP1205
arbitration must be determined from the terms of the parties'
agreement." Id.
¶35 Graham and First Weber dispute whether the time limit
at issue is a matter of procedural arbitrability. Although
Graham concedes that timeliness "may be" a procedural issue, he
contends that it "is also a substantive issue." The distinction
between substantive arbitrability and procedural arbitrability
issues is important because issues of substantive arbitrability
generally are decided by courts, whereas issues of procedural
arbitrability generally are determined during the arbitration
process. Graham also argues that we should not follow Howsam
because it is distinguishable. First Weber argues that an
arbitrator, rather than a court, may decide the time limit issue
because it is a matter of procedural arbitrability. First Weber
urges us to rely on Howsam and BG Group, PLC v. Republic of
Argentina, 572 U.S. ___, 134 S. Ct. 1198 (2014), in which the
United States Supreme Court held that a time limit for seeking
arbitration is an issue of procedural arbitrability. We
determine that issues such as timeliness and estoppel are
matters of procedural arbitrability and are to be decided during
the arbitration process, not by a court, unless the parties
agreed otherwise.
¶36 In an action to compel arbitration, a court's role
generally is limited to determining the question of substantive
arbitrability, unless the parties specifically agreed otherwise.
See Kimberly Area Sch. Dist., 222 Wis. 2d at 37-39.
Specifically, the court decides "whether the [arbitration]
22
No. 2013AP1205
agreement could cover the controversy," not whether the
agreement "expressly covers the dispute." Racine Educ. Ass'n v.
Racine Unified Sch. Dist., 176 Wis. 2d 273, 284, 500 N.W.2d 379
(Ct. App. 1993) (citing Joint Sch. Dist. No. 10, 78 Wis. 2d at
111). Given the limited role of a court, the court must order
arbitration if the arbitration agreement could cover the subject
matter of the dispute. Id. at 284-85. Any doubt concerning the
scope of the agreement must be resolved in favor of compelling
arbitration. Cirilli, 322 Wis. 2d 238, ¶14 (citing AT & T
Techs. v. Commc'ns Workers, 475 U.S. 643, 650 (1986)).
¶37 Issues of procedural arbitrability are to be resolved
during arbitration, rather than by a court, unless the parties
agreed otherwise. BG Grp., 134 S. Ct. at 1207-08; Howsam, 537
U.S. at 83-84. Issues of procedural arbitrability "include
claims of 'waiver, delay, or a like defense to arbitrability.'"
BG Grp., 134 S. Ct. at 1207 (quoting Moses H. Cone Memorial
Hospital v. Mercury Constr. Corp., 460 U.S. 1, 25 (1983)). They
also include "the satisfaction of 'prerequisites such as time
limits, notice, laches, estoppel, and other conditions precedent
to an obligation to arbitrate.'" Id. (quoting Howsam, 537 U.S.
at 85) (emphasis added) (quotation marks omitted). "Questions
of mere delay, laches, statute of limitations, and untimeliness
raised to defeat compelled arbitration are issues of procedural
arbitrability exclusively reserved for resolution by the
arbitrator." Edmonson, supra, § 15:4. The vast majority of
state courts hold that these procedural issues are presumptively
for an arbitrator to decide. BG Grp., 134 S. Ct. at 1207
23
No. 2013AP1205
(citing Revised Uniform Arbitration Act of 2000 § 6, Comment 2,
7 U.L.A. 13 (Supp. 2002)). "The timeliness of a demand for
arbitration is an issue for arbitrators, rather than the
courts." Edmonson, supra, § 19:2 (3d ed. Supp. 2014).
¶38 In the present case, the circuit court determined that
the subject matter of costs and reasonable attorney's fees was
within the scope of the arbitration agreement. The court of
appeals assumed, without deciding, that this determination was
correct. Graham does not dispute that the subject matter of
costs and reasonable attorney's fees is within the scope of the
arbitration agreement. Instead, the circuit court, court of
appeals, and Graham all reason that the timeliness of the
request to arbitrate is an issue for the court to decide. In
light of the distinction between a substantive arbitrability
issue and a procedural arbitrability issue, we conclude that
timeliness and estoppel clearly fall within the latter
category.21 By way of further example, we now discuss Howsam, BG
Group, and Kimberly Area School District.
¶39 In Howsam, Karen Howsam relied on investment advice
from Dean Witter Reynolds, Inc. Howsam, 537 U.S. at 81. Their
client service agreement contained a clause requiring
arbitration of any dispute between them that concerned or arose
21
We reject Graham's argument that the timeliness issue is
a matter of both substantive and procedural arbitrability. He
cites no authority for that proposition. The overwhelming
weight of authority, which we find highly persuasive, holds that
timeliness is a matter of procedural arbitrability.
24
No. 2013AP1205
from their client relationship. Id. The agreement also
provided that Howsam could select the arbitration forum. Id. at
82. Howsam requested the National Association of Securities
Dealers ("NASD") to arbitrate her dispute with Dean Witter. Id.
Under the NASD's rules, an arbitration request must be filed
within six years of the event giving rise to the dispute. Id.
Dean Witter filed suit, asking a U.S. district court to declare
the dispute ineligible for arbitration because the arbitration
request was filed beyond the NASD's six-year time limit. Id.
The district court dismissed the action, holding that an NASD
arbitrator, not the court, should decide whether the request was
timely. Id. The United States Court of Appeals for the Tenth
Circuit reversed, concluding that the time limit concerned the
dispute's "arbitrability" and thus was an issue for a court to
decide. Id.
¶40 The Supreme Court reversed the court of appeals,
holding that the time limit was an issue for an arbitrator to
decide. Id. at 82-83. The Court held that the timeliness issue
was a matter of procedural arbitrability and hence was
presumptively for an arbitrator to decide. Id. at 84-85. The
Court also held that Howsam failed to overcome that presumption
because she failed to demonstrate that the parties intended to
have a court decide the timeliness issue. Id. at 85-86. The
Court relied on the similarity between a time limit and other
potential defenses against arbitration, such as waiver and
delay, which the Court in previous decisions held were matters
of procedural arbitrability. Id. at 84-85. The Court also
25
No. 2013AP1205
relied on the Revised Uniform Arbitration Act of 2000, which
sought to incorporate the law of the vast majority of states and
which explained that time limits are matters of procedural
arbitrability. Id. (citing Revised Uniform Arbitration Act of
2000 § 6(c), and comment 2, 7 U.L.A. 12-13 (Supp. 2002)).
¶41 Similarly, in BG Group, the United States Supreme
Court reaffirmed that a time limit for seeking arbitration is a
matter of procedural arbitrability. In that case, the United
Kingdom and Argentina had a treaty for resolving disputes
between one of those nations and an investor from the other
nation. BG Grp., 134 S. Ct. at 1203. The treaty allowed for a
dispute to be arbitrated if it had been submitted to a court and
18 months had elapsed without a final decision. Id. Argentina
and a British investor, BG Group, agreed to arbitrate a dispute
in Washington, D.C. Id. at 1204. The arbitrators determined
that they had jurisdiction notwithstanding the fact that BG
Group did not file suit and wait 18 months before seeking
arbitration. Id. at 1205. The arbitrators awarded BG Group
$185 million in damages. Id. Each side filed a petition for
review in the District Court for the District of Columbia, with
BG Group seeking to have the award confirmed and Argentina
seeking to have the award vacated. Id. Argentina argued in
part that the arbitrators lacked jurisdiction because BG Group
did not file suit and wait 18 months before seeking arbitration.
Id. The district court confirmed the award. Id. The Court of
Appeals for the District of Columbia Circuit reversed the
district court's decision. Id. Interpreting and applying the
26
No. 2013AP1205
treaty's litigation requirement de novo, the court of appeals
held that the arbitrators lacked jurisdiction. Id.
¶42 The Supreme Court reversed the court of appeals,
holding that a court must defer to the arbitrators' decision
that they had jurisdiction, because the litigation requirement
was a matter of procedural arbitrability. Id. at 1206-08, 1213.
The Court reasoned that the litigation requirement "determines
when the contractual duty to arbitrate arises, not whether there
is a contractual duty to arbitrate at all." Id. at 1207
(citation omitted). Furthermore, that requirement's 18-month
waiting period was "highly analogous" to the time limit at issue
in Howsam, which was also a matter of procedural arbitrability.
Id. at 1207-08. Argentina failed to overcome the presumption
that the litigation requirement issue, as a matter of procedural
arbitrability, was presumptively for an arbitrator to decide.
Id. at 1210. Therefore, when reviewing the arbitration award, a
court must show "considerable deference" to the arbitrators'
decision that the litigation requirement was not applicable.
Id.
¶43 In contrast to Howsam and BG Group, the court of
appeals in Kimberly Area School District was presented with a
dispute over substantive arbitrability. In that case, a federal
lawsuit was filed against a teacher for her allegedly
inappropriate discipline of students. Kimberly Area Sch. Dist.,
222 Wis. 2d at 31-32. The parties to the federal lawsuit signed
a settlement agreement providing that a three-person panel would
decide whether the teacher should be fired, the panel's decision
27
No. 2013AP1205
would be final and binding, and the teacher would not contest
the panel's decision. Id. at 32-33. The panel voted to fire
the teacher. Id. at 34. The teacher then filed a grievance
seeking to arbitrate the settlement agreement, because she had a
right to arbitrate under the teachers union's collective
bargaining agreement. Id. at 35.
¶44 The court of appeals held that the teacher had no
right to arbitrate over the settlement agreement. Id. at 46.
The court of appeals first determined that it had jurisdiction
to decide the question because it was one of substantive
arbitrability. Id. at 41-42. The court of appeals next
determined that the dispute was not arbitrable. Id. at 45-46.
The court of appeals stated that "a settlement agreement 'is an
arbitrable subject when the underlying dispute is arbitrable,
except in circumstances where the parties expressly exclude the
settlement agreement from being arbitrated.'" Id. at 46
(quoting Niro v. Fearn Int'l, Inc., 827 F.2d 173, 175 (7th Cir.
1987)). Because the settlement agreement expressly excluded the
possibility of arbitrating the panel's decision, the parties had
not agreed to arbitrate a dispute over the settlement agreement.
Id. Thus, Kimberly Area School District does not stand for the
proposition that an issue like timeliness or estoppel is a
proper matter for a court to consider in an action to compel
arbitration. Instead, that case is consistent with the
proposition that the court generally may weigh in on a
substantive arbitrability issue, such as whether the subject
matter of the dispute is subject to arbitration.
28
No. 2013AP1205
¶45 We find Howsam and BG Group highly persuasive.22 In
those cases, the Supreme Court explained that courts presume
that the question of substantive arbitrability is for a court to
decide and that matters of procedural arbitrability are for an
arbitrator to decide. BG Grp., 134 S. Ct. at 1206-07. These
presumptions are consistent with Wisconsin law.23 The rationale
behind the presumption associated with substantive arbitrability
is to protect parties from being compelled to arbitrate a
dispute that they did not agree to arbitrate. Howsam, 537 U.S.
at 83-84; First Options, 514 U.S. at 945; see also Kimberly Area
Sch. Dist., 222 Wis. 2d at 39. The rationale behind the
22
Graham argues that Howsam is distinguishable because the
time limit at issue in that case was not part of an arbitration
agreement, but rather was imposed only by the forum in which
arbitration was sought. However, the Supreme Court in BG Group
relied on Howsam, although the time limit at issue in BG
Group was part of an arbitration agreement. BG Grp., PLC v.
Republic of Argentina, 572 U.S. ___, 134 S. Ct. 1198, 1203,
1206-08 (2014). Moreover, the time limit at issue in Howsam was
"effectively incorporated . . . into the parties' agreement."
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 86 (2002).
Graham further argues that Howsam is distinguishable because it
involved federal law, not Wisconsin law. However, Wisconsin
courts traditionally have followed the United States Supreme
Court's principles regarding a court's limited function in
actions to compel arbitration. See Cirilli, 322 Wis. 2d 238,
¶¶12-14. Thus, Graham's arguments for distinguishing Howsam are
not persuasive. Graham's response brief does not address BG
Group, although First Weber's brief-in-chief devotes an entire
page to that case.
23
Wisconsin courts have already adopted the presumption
that the question of substantive arbitrability is generally for
a court to decide. See Kimberly Area Sch. Dist., 222 Wis. 2d at
39.
29
No. 2013AP1205
presumption associated with procedural arbitrability is that it
advances the public policy of encouraging arbitration and
enforcing arbitration agreements, see First Options, 514 U.S. at
945; promotes arbitration's goal of speedy dispute resolution,
see John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 558-59
(1964); and prevents courts from ruling on the merits of an
underlying claim when determining whether to compel arbitration,
see Cirilli, 322 Wis. 2d 238, ¶¶13, 17-18. Accordingly, the
presumption associated with procedural arbitrability is
consistent with Wisconsin's public policy favoring arbitration,
the arbitration agreement at issue, the Realtors Association's
arbitration procedure, and the limited role of our state courts
in actions under Wis. Stat. § 788.03 to compel arbitration. See
supra ¶¶24-32.
¶46 In sum, Howsam, BG Group, and Kimberly Area School
District demonstrate that a court's role in an action to compel
arbitration is limited. If the arbitration agreement could
cover the subject matter of the dispute, which is an issue of
substantive arbitrability, the court must order arbitration and
resolve all doubts as to the scope of the agreement in favor of
compelling arbitration. Issues like timeliness or estoppel are
matters of procedural arbitrability to be determined during the
arbitration process, not by a court, unless the parties agreed
otherwise.
V. CONCLUSION
¶47 The purpose of the court's limited role in arbitration
is to advance Wisconsin's public policy of encouraging
30
No. 2013AP1205
arbitration and enforcing agreements to arbitrate. Graham's
argument, if accepted, would conceivably conflate the important
distinction between issues of substantive arbitrability and
issues of procedural arbitrability. Such a result would
undermine the purpose of arbitration, wherein arbitrable
disputes are "to be decided, not by the court asked to order
arbitration, but as the parties have agreed, by the arbitrator."
See AT & T Techs., 475 U.S. at 650. Graham's argument that
First Weber's arbitration request was untimely highlights why a
court may not decide this timeliness issue. Graham argues that
First Weber's "claim was no longer valid" after the 180-day time
limit expired and that, "[a]fter 180 days, there is no longer a
viable claim." If we were to determine whether First Weber's
claim is "valid" or "viable," we would impermissibly rule on the
merits of First Weber's claim. See Cirilli, 322 Wis. 2d 238,
¶¶13, 17.
¶48 In the case at issue, whether we are considering the
public policy behind arbitration, the arbitration agreement and
procedure, a court's limited role in an action to compel
arbitration under Wis. Stat. § 788.03, and the relevant case
law, each militates in favor of a determination that Graham's
timeliness and estoppel arguments properly belong in the
arbitration process, not before the court.
¶49 We conclude that under the arbitration agreement,
Graham's timeliness and estoppel defenses against arbitration
are to be determined in the arbitration proceedings, not by a
court in a proceeding under Wis. Stat. § 788.03 to compel
31
No. 2013AP1205
arbitration. Graham's timeliness and estoppel defenses against
arbitration are procedural arbitrability issues to be determined
during the arbitration process, rather than by a court. Graham
has not overcome the presumption in favor of arbitration.
Accordingly, we reverse the court of appeals' decision and
remand the cause to the circuit court with the instruction that
First Weber's petition to compel arbitration be granted.
By the Court.—The decision of the court of appeals is
reversed, and the cause is remanded to the circuit court.
32
No. 2013AP1205
1