Garlock v. 3DS Properties

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
07/26/2019 08:06 AM CDT
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Nebraska Supreme Court A dvance Sheets
303 Nebraska R eports
GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
John A. Garlock and John H. Garlock,
appellees, v. 3DS P roperties, L.L.C.,
a Nebraska limited liability
company, et al., appellants.
___ N.W.2d ___
Filed July 5, 2019. No. S-18-336.
1. Arbitration and Award: Appeal and Error. In reviewing a decision
to vacate, modify, or confirm an arbitration award, an appellate court is
obligated to reach a conclusion independent of the trial court’s ruling as
to questions of law. However, the trial court’s factual findings will not
be set aside on appeal unless clearly erroneous.
2. Arbitration and Award: Federal Acts: Contracts. Arbitration in
Nebraska is governed by the Federal Arbitration Act if it arises from
a contract involving interstate commerce; otherwise, it is governed by
Nebraska’s Uniform Arbitration Act. When determining whether an arbi-
tration clause is governed by the Uniform Arbitration Act or the Federal
Arbitration Act, the initial question is whether the parties’ contract evi-
dences a transaction “involving commerce” as defined by the Federal
Arbitration Act.
3. Contracts: Real Estate. While more complex transactions may impli-
cate interstate commerce, a simple contract for the sale of residential
real estate is an inherently intrastate activity.
4. Arbitration and Award: Waiver. As a general rule, voluntary participa-
tion in an arbitration proceeding on the merits of a dispute will result in
a waiver or forfeiture of the right to later challenge arbitrability. In other
words, a party may not voluntarily submit a dispute to arbitration and,
after an unfavorable result, petition the courts to find the dispute was
not arbitrable.
5. Arbitration and Award. If a party clearly and explicitly makes known
to the arbitrator, prior to a hearing on the merits, that he or she objects
to the arbitrability of an issue, that party’s participation in the arbitration
will not preclude a later judicial challenge to arbitrability.
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Nebraska Supreme Court A dvance Sheets
303 Nebraska R eports
GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
6. ____. A party who voluntarily participates in an arbitration proceeding
without raising objection may not thereafter rely on Neb. Rev. Stat.
§ 25-2613(a)(5) (Reissue 2016) to support judicial vacatur.
7. ____. When a party seeks to confirm an arbitration award pursuant to
the Uniform Arbitration Act, a court must confirm that award unless a
party has sought to vacate, modify, or correct the award and grounds for
such vacation, modification, or correction exist.
8. ____. Neb. Rev. Stat. § 25-2612 (Reissue 2016) of the Uniform
Arbitration Act does not allow for the exercise of discretion by the court
when a request of confirmation is made where there has been no appli-
cation for vacation or modification.
Appeal from the District Court for Douglas County: James T.
Gleason, Judge. Reversed and remanded with directions.
Douglas W. Ruge for appellant Ryan Basye.
William J. Bianco, of Bianco Stroh, L.L.C., for appellants
3DS Properties, L.L.C., and Keith Donner.
Justin D. Eichmann and Sarah E. Cavanagh, of Houghton,
Bradford & Whitted, P.C., L.L.O., for appellees.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg JJ.
Stacy, J.
The purchasers of a home filed suit against the sellers,
alleging several defects in the home had been concealed. The
district court stayed the lawsuit to permit either mediation or
arbitration as provided in the purchase agreement, and the par-
ties proceeded to arbitration. After an arbitration award was
entered in favor of the sellers, the purchasers moved the district
court to vacate the award, and the sellers moved to confirm it.
The district court vacated the award, and the sellers filed this
appeal. We reverse, and remand with directions to confirm the
arbitration award.
BACKGROUND
On or about March 26, 2015, John A. Garlock and John
H. Garlock entered into a purchase agreement with 3DS
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Nebraska Supreme Court A dvance Sheets
303 Nebraska R eports
GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
Properties, L.L.C. (3DS), for the sale of a home in Omaha,
Nebraska. The sellers’ disclosure statement had been signed by
3DS member Keith Donner, and the home was listed by Ryan
Basye, a licensed real estate agent in Nebraska. After closing,
the Garlocks discovered problems with the home.
Lawsuit
On May 13, 2016, the Garlocks filed a complaint in the
Douglas County District Court against 3DS, Donner, and Basye,
alleging multiple theories of recovery, including a violation of
Neb. Rev. Stat. § 76-2,120 (Cum. Supp. 2014), fraudulent con-
cealment, false representation, negligent misrepresentation, and
breach of contract. The complaint alleged the “Seller Property
Condition Disclosure,” signed by Donner, misrepresented the
condition of the home. In particular, the complaint alleged the
disclosure statement falsely indicated that the roof did not leak,
there was no damage to the roof, there was no water seepage
in the basement, and there were no structural problems with
the property.
Paragraph 35 of the purchase agreement was entitled
“Arbitration and Mediation” and provided in relevant part:
B. Mediation: In the event of any Dispute, any party
to the Dispute may seek non-binding mediation in an
attempt to resolve the dispute by giving fifteen (15) days
written notice of a request for such mediation to all other
parties to the Dispute. . . .
C. Arbitration: Any Dispute that is not resolved by
informal settlement or mediation shall be resolved exclu-
sively by binding arbitration. Such arbitration shall be
administered by the American Arbitration Association and
shall be conducted according to the American Arbitration
Association’s Commercial Rules — Real Estate Industry
Arbitration Rules (Including a Mediation Alternative).
The arbiter(s) shall apply Nebraska substantive and pro-
cedural law to the arbitration proceeding. Arbitration shall
be commenced by written demand made by any one
or more of the parties to the Dispute given to all other
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Nebraska Supreme Court A dvance Sheets
303 Nebraska R eports
GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
parties of the Dispute. . . . The prevailing party shall be
entitled to costs and fees of the arbitration and, in the
discretion of the arbitrator who shall take into account
the relative merits of the opponent’s case, the arbiter may
award attorney’s fees and arbitration costs to the prevail-
ing party.
(Emphasis omitted.) Above the signature line in the purchase
agreement appeared a sentence which read: “This contract
contains an arbitration provision which may be enforced by the
parties.” (Emphasis omitted.) This sentence appeared in font
which was bolded and capitalized, but was not underlined.
On July 5, 2016, 3DS and Donner jointly moved to dismiss
the lawsuit because the purchase agreement required that “any
dispute not resolved by informal settlement or mediation shall
be resolved exclusively by binding arbitration.” Shortly there-
after, Basye filed a motion seeking to “[d]ismiss or [s]tay” the
lawsuit for the same reason.
A hearing was held on the motions, but our record does not
include a transcription of that proceeding. After the hearing, the
court entered an order staying the case and deferring ruling on
the motions to dismiss. The court’s order, entered September
21, 2016, did not expressly order either mediation or arbitra-
tion, but instead stayed the lawsuit “until such time as the par-
ties have either entered into a form of mediation or by agree-
ment . . . submit[ted] to arbitration as set forth in Paragraph
C of Section 35.” No appeal was taken from this order.1
Thereafter, the Garlocks filed a written demand for expedited
arbitration, and all parties began the arbitration process.
Approximately 6 months later, on March 22, 2017, the
Garlocks filed what they styled a “Motion for Rehearing”
asking the court to reconsider its order of September 21,
2016, staying the lawsuit. In support, the Garlocks alleged
for the first time that the arbitration provision in the purchase
1
See Kremer v. Rural Community Ins. Co., 280 Neb. 591, 788 N.W.2d
538 (2010) (order compelling arbitration or staying judicial proceedings
pending arbitration is final order).
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GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
agreement violated Neb. Rev. Stat. § 25-2602.02 (Reissue
2016) of Nebraska’s Uniform Arbitration Act (UAA)2 because
certain language was not underlined. In response, 3DS and
Donner filed another motion to dismiss, again asserting that the
purchase agreement required the parties’ dispute to be settled
by binding arbitration.
On May 16, 2017, a hearing was held on all pending motions
and evidence was adduced. Among the exhibits offered were
affidavits of the Garlocks in which they averred they had ini-
tiated arbitration proceedings, but were dissatisfied with (1)
how costly and complex the arbitration process was, (2) the
length of time the arbitration was taking, (3) the fact that they
would “still need the services of an attorney” during the arbi-
tration, and (4) the discovery limitations they had encountered
in arbitration. The Garlocks’ affidavits stated that if they had
known these things in advance, they would not have agreed
to arbitrate.
After receiving evidence and hearing argument, the court
took all motions under advisement. At the time of the hearing,
all parties were aware that an arbitration hearing was set for
June 12 and 13, 2017, in Omaha. However, no party advised
the court of this fact, and no party asked to stay or enjoin the
imminent arbitration hearing.3
Instead, the arbitration took place as scheduled and was
completed before the district court ruled on either the Garlocks’
motion to reconsider or the motion to dismiss filed by 3DS and
Donner. All parties to the district court action participated in
the arbitration hearing, and all were represented by counsel.
A rbitration
After the Garlocks filed a written demand for expedited arbi-
tration, the parties selected an arbitrator and the proceedings
2
Neb. Rev. Stat. §§ 25-2601 to 25-2622 (Reissue 2016).
3
See § 25-2603(b) (“[o]n application, the court may stay an arbitration
proceeding commenced or threatened on a showing that there is no
agreement to arbitrate”).
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GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
were expanded to include discovery and a multiday hearing.
The parties agreed to have a court reporter present for the
arbitration hearing, which was held in Omaha at an agreed-
upon location.
All parties consented to participate in the arbitration and
agreed to be bound by it. Before the arbitration hearing,
Basye’s attorney sent an email addressed to the arbitration
company and the Garlocks’ attorney, stating: “By this email,
my client consents and agrees to be bound by the arbitration.
This is contingent on a substantially similar representation by
the other parties.” At the start of the arbitration hearing on
June 12, 2017, the Garlocks’ attorney asked the arbitrator to
confirm, on the record, each party’s consent to arbitrate. The
arbitrator then individually confirmed the parties’ agreement to
proceed with the arbitration and to be bound by it. During the
2-day arbitration hearing that followed, more than 70 exhibits
were offered and 12 witnesses testified.
An arbitration award was issued July 14, 2017. The award
began by addressing procedural issues and expressly stated
that before the arbitration hearing, and again during the hear-
ing, a question was raised whether all parties had agreed
to be bound by arbitration. The arbitrator found that “all
Respondents agreed in writing to waive any challenge to
the binding nature of the arbitration proceedings” and that
“[t]he Parties also made the same representation on the record
before the close of [the] Hearing.” Additionally, the arbitrator
acknowledged he had been advised that the Garlocks had “a
pending motion before the state court regarding reconsidera-
tion of its remand of this matter to arbitration” but that they
had “agreed to move forward with the arbitration.” The arbi-
trator further stated: “No motion for continuance was made or
pending at the time of [the arbitration] Hearing and no court
order presented.”
The arbitrator’s award then discussed the merits of the
Garlocks’ claims and found there was “no credible evidence to
support” any of the Garlocks’ claims against 3DS, Donner, or
Basye. The arbitrator ordered the Garlocks to pay the costs of
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GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
the arbitration and ordered each party to pay their own attor-
ney fees.
Competing Motions to Vacate
and Confirm A rbitration
On August 11, 2017, the Garlocks filed, in the district court
action, an “Application to Vacate” the arbitration award. The
motion asserted three grounds for vacating the award: (1) The
arbitrator was partial to the defendants, (2) the award was con-
trary to Nebraska public policy, and (3) the arbitrator refused to
postpone the arbitration hearing despite a pending motion for
rehearing in the district court action.
On September 12, 2017, 3DS and Donner filed another
motion to dismiss, this time alleging the lawsuit should be
dismissed because binding arbitration had been completed
by the parties. Thereafter, on November 14, 3DS and Donner
filed a motion seeking judicial confirmation of the arbitra-
tion award.
On November 17, 2017, a hearing was held before the dis-
trict court on all pending motions. Evidence was adduced, and
the matter was taken under advisement.
Order Finding A rbitration Void
and Vacating Award
In an order entered March 8, 2018, the district court noted
that while the motion for rehearing of its order staying the
lawsuit was under advisement, “the parties proceeded with
arbitration.” It recognized that the Garlocks were now seeking
to vacate the arbitration award, while 3DS and Donner were
seeking to confirm it.
The court first took up the motion for rehearing and found
that the arbitration provision in the purchase agreement was
unenforceable, citing § 25-2602.02 and reasoning:
[T]he language “This contract contains [an] arbitration
provision which may be enforced by the parties” was not
underlined as required by Statute. Although the language
was set forth in bold face type, this does not comply with
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GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
[§ 25-2602.02] and our Court has required strict compli-
ance with this Statute in order to enforce [an] arbitration
clause. [Citation omitted.] This failure is fatal to the
enforcement of the arbitration clause.
The court also stated: “Because this court is of the opinion that
the motion for rehearing should be granted, the Court must
determine that the arbitration proceedings which the parties
involved themselves in while this matter was under advise-
ment, are a nullity.”
The court then sustained the Garlocks’ motion to vacate the
arbitration award, reasoning that the parties “would not have
participated in arbitration but for the exigent circumstances
and for that reason, this Court determines that the arbitration
itself was void.” The court also ordered that the costs of the
arbitration be reallocated so that the plaintiffs and defendants
were each responsible for one-half of the costs. Finally, the
court denied both the motion to dismiss and the motion to con-
firm the arbitration award.
Various Motions A fter Order
Vacating A rbitration Award
In response to the March 8, 2018, order vacating the arbi-
tration award, the defendants filed several motions on March
12, including a motion to reconsider and a motion to alter
or amend. The motion to reconsider alleged that because the
parties had “willingly participated” in arbitration and agreed
to be bound by the results, it was immaterial that the arbitra-
tion clause in the purchase agreement did not comply with
§ 25-2602.02 of the UAA. The motion also alleged there was
no evidence to support the court’s finding that arbitration took
place only due to “exigent circumstances.” The motion to alter
or amend was filed only by Basye. He generally alleged the
court had improperly applied the UAA to invalidate the arbi-
tration agreement when the agreement was governed by the
Federal Arbitration Act (FAA).4
4
9 U.S.C. §§ 1 to 16 (2012).
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Nebraska Supreme Court A dvance Sheets
303 Nebraska R eports
GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
In an order entered March 20, 2018, the court overruled the
motion to reconsider and the motion to alter or amend. 3DS,
Donner, and Basye filed a joint notice of appeal on March 31,
appealing from the orders of March 8 and 20.
ASSIGNMENTS OF ERROR
3DS, Donner, and Basye assign, restated and consolidated,
that the district court erred by (1) implicitly finding that the
FAA did not apply, (2) finding the arbitration provision in the
purchase agreement was unenforceable under the UAA, (3)
vacating the arbitration award, and (4) failing to confirm the
arbitration award.
STANDARD OF REVIEW
[1] In reviewing a decision to vacate, modify, or confirm
an arbitration award, an appellate court is obligated to reach
a conclusion independent of the trial court’s ruling as to ques-
tions of law.5 However, the trial court’s factual findings will
not be set aside on appeal unless clearly erroneous.6
ANALYSIS
A pplicable Law
[2] Before addressing the arbitration issues raised by the
parties on appeal, we consider whether our analysis is gov-
erned by the UAA or the FAA. Arbitration in Nebraska is
governed by the FAA if it arises from a contract involving
interstate commerce; otherwise, it is governed by the UAA.7
When determining whether an arbitration clause is governed
by the UAA or the FAA, the initial question is whether the par-
ties’ contract evidences a transaction “involving commerce” as
defined by the FAA.8
5
Ronald J. Palagi, P.C. v. Prospect Funding Holdings, 302 Neb. 769, 925
N.W.2d 344 (2019); State v. Henderson, 277 Neb. 240, 762 N.W.2d 1
(2009).
6
Id.
7
Ronald J. Palagi, P.C., supra note 5.
8
Id.
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GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
The U.S. Supreme Court has interpreted the term “involv-
ing commerce” in the FAA as the functional equivalent of
the more familiar term “affecting commerce”—words of art
that ordinarily signal the broadest permissible exercise of
Congress’ Commerce Clause power.9 As such, we have held the
FAA “‘embodies Congress’ intent to provide for the enforce-
ment of arbitration agreements within the full reach of the
Commerce Clause.’”10
We applied this reasoning in Wilczewski v. Charter West Nat.
Bank 11 to hold that an arbitration provision in a purchase agree-
ment for the sale of residential property was governed by the
FAA because the residential property was being sold by a bank
as part of a foreclosure. We reasoned:
The nationwide impact of residential real estate lend-
ing was a central focus of the Housing and Economic
Recovery Act of 2008, which Congress passed in response
to a national financial crisis. Generally, residential real
estate lending affects interstate commerce. And the sale
to the [buyers] was merely the last step of [the selling
bank’s] loan, foreclosure, acquisition of title, and resale
of its security.12
But in Wilczewski, we confined our holding to the foreclosure
sale at issue, which was part of a “comprehensive practice or
activity of lending money on residential real estate, enforc-
ing liens, acquiring title, and reselling.”13 And even though
the commercial transaction in Wilczewski culminated in the
sale of a residential home, we distinguished it from transac-
tions that “merely addressed individual sales of residential
9
Wilczewski v. Charter West Nat. Bank, 295 Neb. 254, 889 N.W.2d 63
(2016).
10
Id. at 260, 889 N.W.2d at 68.
11
Wilczewski, supra note 9.
12
Id. at 263, 889 N.W.2d at 69-70.
13
Id. at 264, 889 N.W.2d at 70.
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real estate”14 and left for another day the question of “whether
the FAA applies to a simple contract for the sale of residential
real estate.”15
3DS, Donner, and Basye argue that the FAA applies to the
purchase agreement in this case, because “[i]nstruments of
interstate commerce were utilized.”16 They point to the use of
the internet to advertise the property and the purchase of appli-
ances when preparing the house for sale. But in Wilczewski, we
held that such tangential details should not control.17 Rather,
we determined the proper inquiry is whether the “program or
activity” at issue affects interstate commerce.18
[3] In Wilczewski, interstate commerce was affected
because the sale was part of a program or activity of loaning
money secured by residential real estate. But here, the activ-
ity involved nothing more than a simple contract for the sale
of residential real estate. Although there was evidence that
3DS and Donner are engaged in the business of acquiring and
reselling residential real estate for profit, we find this case
presents “a simple contract for the sale of residential real
estate.”19 And, while more complex transactions may impli-
cate interstate commerce, we hold that a simple contract for
the sale of residential real estate is an inherently intrastate
activity.20 On the facts of this case, the UAA governs the
purchase agreement. The district court did not err in applying
14
Id.
15
Id.
16
Brief for appellant Basye at 25.
17
Wilczewski, supra note 9.
18
Id. at 264, 889 N.W.2d at 70.
19
Id.
20
See, Garrison v. Palmas Del Mar Homeowners Ass’n., Inc., 538 F. Supp.
2d 468 (2008); Saneil v. Robards, 289 F. Supp. 2d 855 (W.D. Ky. 2003);
SI V, LLC v. FMC Corp., 223 F. Supp. 2d 1059 (N.D. Cal. 2002); Cecala
v. Moore, 982 F. Supp. 609 (N.D. Ill. 1997); Bradley v. Brentwood Homes,
Inc., 398 S.C. 447, 730 S.E.2d 312 (2012).
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the UAA rather than the FAA. The first assignment of error
has no merit.
Jurisdiction
Having determined the UAA governs the purchase agree-
ment in this case, we next address our jurisdiction to consider
this interlocutory appeal. It is the duty of an appellate court to
determine whether it has jurisdiction over the matter before it,
even where no party has raised the issue.21
Section 25-2620 of the UAA provides:
(a) An appeal may be taken from:
(1) An order denying an application to compel arbitra-
tion made under section 25-2603;
(2) An order granting an application to stay arbitration
made under subsection (b) of section 25-2603;
(3) An order confirming or denying confirmation of
an award;
(4) An order modifying or correcting an award;
(5) An order vacating an award without directing a
rehearing; or
(6) A judgment or decree entered pursuant to the provi-
sions of the [UAA].
(b) The appeal shall be taken in the manner and to the
same extent as from orders or judgments in a civil action.
This appeal was taken from an order that denied confirmation
of an arbitration award and vacated an award without directing
a rehearing. We therefore have appellate jurisdiction pursuant
to § 25-2620(a)(3) and (5), and it is unnecessary to consider
whether the orders appealed from are also final, appealable
orders under Neb. Rev. Stat. § 25-1902 (Reissue 2016).22
Waiver of Challenge to A rbitrability
The trial court’s order of March 8, 2018, and the parties’
briefs on appeal focus primarily on the enforceability of the
21
See McCullough v. McCullough, 299 Neb. 719, 910 N.W.2d 515 (2018).
22
See, generally, Kremer, supra note 1.
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arbitration provision in the purchase agreement and the arbitra-
bility of the parties’ dispute. But given the procedural posture
of this case and the parties’ agreement on the record before the
arbitrator to proceed with arbitration of their dispute, we first
address whether the Garlocks’ challenge to arbitrability has
been waived in this case.
After the litigation was stayed by the district court to per-
mit mediation or arbitration—an order from which no party
appealed23—all parties voluntarily submitted to and completed
binding arbitration. And they did so despite a pending motion
for rehearing before the district court that ordered the stay.
The arbitrator found that “all Respondents agreed in writ-
ing to waive any challenge to the binding nature of the
arbitration proceedings” and that “[t]he Parties also made
the same representation on the record before the close of
[the] Hearing.”
Nebraska’s appellate courts have not yet addressed whether,
or under what circumstances, a party’s participation in an arbi-
tration proceeding without objection may result in a waiver of
that party’s right to subsequently challenge arbitrability under
state law. But many other states and several U.S. Circuit Courts
of Appeal have considered the question.24
[4,5] As a general rule, these courts hold that voluntary
participation in an arbitration proceeding on the merits of a
dispute will result in a waiver or forfeiture of the right to later
challenge arbitrability.25 In other words, a party may not volun-
tarily submit a dispute to arbitration and, after an unfavor-
able result, petition the courts to find the dispute was not
23
See id.
24
See Annot., Participation in Arbitration Proceedings as Waiver of
Objections to Arbitrability Under State Law, 56 A.L.R. 5th 757 (1998).
25
Id., §§ 2 and 3. See 21 Richard A. Lord, A Treatise on the Law of Contracts
by Samuel Williston § 57:102 (4th ed. 2017) (“one who voluntarily and
without objection participates in arbitration proceedings waives the right
to object thereafter to the arbitrability of previously decided issues”).
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arbitrable.26 If, however, a party clearly and explicitly makes
known to the arbitrator, prior to a hearing on the merits, that
he or she objects to the arbitrability of an issue, that party’s
participation in the arbitration will not preclude a later judicial
challenge to arbitrability.27
The principle that a party may waive arbitrability by not
timely objecting has been effectively codified under the UAA,
which authorizes judicial vacatur of an arbitration award when
“[t]here was no arbitration agreement and the issue was not
adversely determined in proceedings under section 25-2603,
and the party did not participate in the arbitration hearing
without raising the objection[.]”28
In the instant case, the conduct of the Garlocks resulted in a
waiver of the right to challenge arbitrability. After the district
court stayed the lawsuit pending either mediation or arbitra-
tion, the Garlocks initiated arbitration proceedings. Six months
later, the Garlocks asked the district court to reconsider its stay,
but they did not seek a judicial stay of the ongoing arbitration
proceedings under § 25-2603(b) despite the fact that the arbi-
tration hearing was imminent. Instead, the Garlocks voluntarily
proceeded with the arbitration hearing and never raised an
objection to arbitrability before the arbitrator. To the contrary,
they expressly agreed on the record to be bound by the deci-
sion of the arbitrator, and they asked the arbitrator to secure
similar agreements on the record from all other parties, which
he did. Thus, while it is possible for a party to participate in
26
See, e.g., Howard Univ. v. Metro. Campus Police Officer’s Un., 512 F.3d
716 (D.C. Cir. 2008); Fortune, Alsweet & Eldridge, Inc. v. Daniel, 724
F.2d 1355 (9th Cir. 1983); Bacon Const. Co. v. Dept. of Public Works, 294
Conn. 695, 987 A.2d 348 (2010); First Health Group Corp. v. Ruddick,
393 Ill. App. 3d 40, 911 N.E.2d 1201, 331 Ill. Dec. 971 (2009).
27
See, e.g., Opals on Ice Lingerie v. Body Lines Inc., 320 F.3d 362 (2d Cir.
2003); AGCO Corp. v. Anglin, 216 F.3d 589 (7th Cir. 2000); Azcon Const.
Co. v. Golden Hills Resort, 498 N.W.2d 630 (S.D. 1993).
28
§ 25-2613(a)(5) (emphasis supplied).
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an arbitration and still preserve an objection to arbitrability, the
Garlocks did not do so here.
We find, on this record, that all parties voluntarily submitted
their dispute to arbitration without objecting to arbitrability,
and thereby waived the right to seek a judicial determination
that the dispute was not arbitrable.
Court Erred in Ruling on
Motion for R ehearing
In their second assignment, 3DS, Donner, and Basye argue
the district court erred when it found the arbitration provision
in the purchase agreement was unenforceable. Given the con-
text and timing of the court’s finding in that regard, we agree
the court erred.
The court’s finding on arbitrability was not made until after
the parties had agreed to be bound by the arbitrator’s decision,
had participated in the arbitration hearing, and had received
the arbitrator’s award. Fully aware that the parties’ dispute had
already been arbitrated, and with the complete record of the
arbitration proceeding offered into evidence on the competing
motions to vacate and confirm the arbitration award, the court
nevertheless granted an earlier motion for rehearing and then
concluded, after the fact, that the entire arbitration was a nul-
lity because the arbitration provision in the purchase agreement
was unenforceable under the UAA.
But by the time the court ruled on the motion for rehearing,
the parties had already consented to, and completed, arbitra-
tion. Once the arbitration award was entered, challenges to
that award—including claims that there was no enforceable
arbitration agreement—were properly taken up in the context
of the Garlocks’ motion to vacate the award. Thus, instead of
ruling on a motion for rehearing that could no longer provide
the relief sought, the district court should have proceeded
directly to consideration of the Garlocks’ application to vacate
the arbitration award and the competing motion to confirm the
award brought by 3DS and Donner.
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Cite as 303 Neb. 521
Error to Vacate Award
Under § 25-2613
Section 25-2613 provides in relevant part:
(a) Upon application of a party, the court shall vacate
an award when:
(1) The award was procured by corruption, fraud, or
other undue means;
(2) There was evident partiality by an arbitrator
appointed as a neutral or corruption in any of the arbitra-
tors or misconduct prejudicing the rights of any party;
(3) The arbitrators exceeded their powers;
(4) The arbitrators refused to postpone the hearing
upon sufficient cause being shown therefor, refused to
hear evidence material to the controversy, or otherwise
so conducted the hearing, contrary to the provisions of
section 25-2606, as to prejudice substantially the rights
of a party;
(5) There was no arbitration agreement and the issue
was not adversely determined in proceedings under sec-
tion 25-2603, and the party did not participate in the arbi-
tration hearing without raising the objection; or
(6) An arbitrator was subject to disqualification pur-
suant to section 25-2604.01 and failed, upon receipt of
timely demand, to disqualify himself or herself as required
by such section.
The fact that the relief was such that it could not or
would not be granted by a court of law or equity is not
ground for vacating or refusing to confirm the award.
The Garlocks sought to vacate the award on three grounds:
(1) The arbitrator was “partial to the Defendants,” (2) the
award was “contrary to the public policy” of Nebraska, and
(3) the arbitrator “refused to postpone” the arbitration hearing.
The Garlocks’ first and third grounds for vacatur are recog-
nized in § 25-2613, and their second ground (that the award
was contrary to public policy) was recognized by this court in
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GARLOCK v. 3DS PROPERTIES
Cite as 303 Neb. 521
State v. Henderson 29 as a reason to refuse to enforce an arbitra-
tion award.
But at the hearing on the motion to vacate, the Garlocks
did not offer evidence to support any of these three grounds.
Instead, they offered only the record of the proceedings before
the arbitrator and argued the question of arbitrability, claiming
the “arbitration clause [in the purchase agreement] is void.”
[6] As stated, § 25-2613(a)(5) authorizes vacating an arbi-
tration award when “[t]here was no arbitration agreement and
the issue was not adversely determined in proceedings under
section 25-2603, and the party did not participate in the arbi-
tration hearing without raising the objection[.]” Because the
Garlocks voluntarily participated in the arbitration hearing
without raising any objection to arbitrability, they may not now
rely on § 25-2613(a)(5) to support judicial vacatur.
Without evidence to support any of the three grounds raised
in the Garlocks’ application, and because the Garlocks cannot
rely on § 25-2613(a)(5) to support their request for judicial
vacatur, it was error for the district court to vacate the arbitra-
tion award.
Error Not to Confirm Award
Under § 25-2612
Section 25-2612 provides:
Within sixty days of the application of a party, the
court shall confirm an award, unless within the time
limits hereinafter imposed grounds are urged for vacat-
ing or modifying or correcting the award, in which case
the court shall proceed as provided in sections 25-2613
[vacating an award] and 25-2614 [modifying or correct-
ing an award].
[7,8] When a party seeks to confirm an arbitration award
pursuant to the UAA, a court must confirm that award unless
29
Henderson, supra note 5 (holding court may refuse to enforce arbitration
award contrary to public policy that is explicit, well defined, and dominant).
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a party has sought to vacate, modify, or correct the award and
grounds for such vacation, modification, or correction exist.30
We have stated that Ҥ 25-2612 does not allow for the exer-
cise of discretion by the court when a request of confirmation
is made where there has been no application for vacation or
modification.”31
Here, no party sought to modify the award, and the Garlocks’
application to vacate the award was meritless. As such, it
was error to overrule the application to confirm the award.
Instead, the district court should have confirmed the arbitra-
tion award pursuant to § 25-2612 and then entered judgment
in conformity therewith pursuant to § 25-2615. For the sake
of completeness, we also note that absent a timely application
to modify under § 25-2614, it was plain error for the district
court to modify the arbitration award by reallocating the arbi-
tration expenses.32
CONCLUSION
For the foregoing reasons, we find the second, third, and
fourth assignments of error have merit and we reverse, and
remand with directions to confirm the arbitration award and to
enter judgment in conformity therewith.
R eversed and remanded with directions.
30
See Drummond v. State Farm Mut. Auto. Ins. Co., 280 Neb. 258, 785
N.W.2d 829 (2010).
31
Id. at 262, 785 N.W.2d at 833.
32
See § 25-2611 (“[u]nless otherwise provided in the agreement to arbitrate,
the arbitrators’ expenses and fees together with other expenses, not
including counsel fees, incurred in the conduct of the arbitration shall be
paid as provided in the award”).