March 25, 2014 – A circuit court was right to deny a real estate company’s request to compel arbitration against another company’s realtor on the issue of attorney fees and costs because the request came too late, a state appeals court has ruled.
In 2009, First Weber Group obtained an arbitration award of $5,440 against Synergy Real Estate and James Graham, resolving a dispute about a real estate commission.
Graham agreed to the arbitration as a member of the Realtors Association of South Central Wisconsin. Graham also agreed to pay reasonable attorney fees and costs if First Weber was required to seek confirmation and enforcement of the arbitration award.
Thus, when Graham did not pay the award, First Weber filed a petition in circuit court, seeking confirmation of the award and an order to pay First Weber. The real estate company also sought attorney fees and costs in connection with the confirmation.
Ultimately, the circuit court granted the confirmation and ordered Graham to pay the $5,440. But the court denied First Weber’s request for attorney fees and costs, which amounted to about $5,000. The court said it lacked authority to grant fees and costs.
Five months after the circuit court rendered its written order, First Weber sought to initiate arbitration on the attorney fees and costs issue. The arbitration request noted that Graham agreed to pay fees and costs when he agreed to arbitrate the first time.
This time, though, Graham declined the invitation to arbitrate on that issue. First Weber filed a petition to compel arbitration in circuit court. But the circuit court denied that request, concluding that First Weber missed the 180-day deadline to seek arbitration.
What Triggered the 180-day Deadline?
Under the contract, requests for arbitration needed to be filed within 180 days after the closing of the disputed transaction or within 180 days “after the facts constituting the arbitrable matter could have been known in the exercise of reasonable diligence.”
The circuit court said First Weber first knew that Graham intended to contest attorney fees and costs on March 11, 2011, the day Graham submitted a letter to the court (and First Weber) stating reasons why a demand for attorney fees and costs was improper.
The letter triggered the 180-day window to initiate arbitration on that issue, the circuit court ruled, and First Weber failed to initiate arbitration until June 5, 2012.
On appeal, First Weber argued the circuit court had no authority to construe the time limitation that was contained in the contract. It said the arbitration process that Graham agreed to participate in as a member of the realtor’s association must decide.
But in First Weber Group Inc. v. Graham, 2013AP1205 (March 20, 2014), a three-judge panel for the District IV appeals court affirmed, concluding that the circuit court had authority to rule on the time limitation issue because the contract was unclear.
The panel noted a presumption in favor of arbitration where a contract contains an arbitration clause. But the panel also noted that the presumption can be reversed, and the party claiming that arbitration applies bears the burden of proving arbitrability.
“First Weber has failed to carry its burden of demonstrating, by pointing to clear and unmistakable language in the agreement to arbitrate, an intent that the time limitation issue be decided as part of the arbitration process,” wrote Judge Brian Blanchard.
The panel assumed without deciding that attorney fees and costs was an arbitrable issue under the applicable realtor’s association contract.
It noted that Graham submitted to arbitration on a broad range of disputes that might arise in the course of his profession, but only if the request for arbitration was made within 180 days after the facts constituting the arbitrable matter came to light.
“The question here is whether the agreement to arbitrate expired by its explicit terms,” Judge Blanchard wrote. “This is a question that goes to the existence of an agreement to arbitrate in the first place. Thus it is an issue of substantive arbitrability reserved for judicial determination.”
The panel also rejected First Weber’s argument that time limitations are “procedural issues” that should always be decided by an arbitrator when an arbitration clause exists, and upheld the circuit court’s determination of the correct time limitation trigger date.