March 24, 2015 – The Wisconsin Supreme Court recently ruled that an arbitration panel, not a court, must decide whether a real estate company timely made a request to arbitrate issues on costs and attorney’s fees against another real estate company.
In 2009, First Weber Group obtained an arbitration award of $5,440 against Synergy Real Estate Group LLC and its owner, real estate broker James Graham.
The companies were both members of the Realtors Association of South Central Wisconsin. To be a member, parties must agree to arbitrate disputes with other members, and arbitration requests must be timely filed by a disputing party.
Specifically, a party had to request arbitration within 180 days of a disputed transaction closing date, or within 180 days after facts constituting the arbitrable matter could have been known in the exercise of reasonable diligence, whichever was later.
First Weber disputed a commission paid to Graham, who represented a buyer of property sold by First Weber. The parties agreed to arbitration, and First Weber won. First Weber filed a circuit court action to confirm the award when Graham didn’t pay.
In the circuit court action, First Weber also requested that Graham pay attorney’s fees and costs, arguing that under the Realtor Association’s arbitration agreement, losing parties must pay such costs if the winning party is forced to seek confirmation.
The court confirmed the arbitration award but declined to award attorney’s fees and costs, concluding courts cannot award costs when confirming arbitration awards.
First Weber went back to the Realtors Association and filed an arbitration request on the issue of attorney’s fees and costs incurred while seeking judicial confirmation at the circuit court. Graham declined to appear, and no hearing was held. First Weber then filed a motion to compel arbitration in circuit court, but it was denied as untimely.
The circuit court concluded that First Weber first knew Graham intended to contest attorney’s 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 fees and costs was improper.
That letter triggered the 180-day window to initiate arbitration on that issue, the circuit court ruled, and First Weber missed the window by filing the request on June 5, 2012.
Graham had also argued that First Weber was estopped from requesting arbitration on the fees and costs issue because it was litigated in circuit court and no appeal was filed.
On appeal, First Weber argued that the circuit court did not have authority to construe the time limitation and an arbitration panel must decide the timeliness issue.
However, a three-judge panel disagreed and affirmed. It said the circuit court could rule on the 180-day time limitation issue because the arbitration agreement was unclear.
In First Weber Group Inc. v. Synergy Real Estate Group LLC, 2015 WI 34 (March 24, 2015), a unanimous Wisconsin Supreme Court reversed, concluding that arbitration proceedings must decide whether First Weber’s arbitration request was untimely.
The court noted that both parties were bound by an arbitration agreement under the Realtor Association’s membership contract, and the timeliness of First Weber’s request was an issue of procedural arbitrability that must be decided by the arbitration panel.
“We determine that issues such as timeliness and estoppel are matters of procedural arbitrability are to be decided during the arbitration process, not by a court, unless the parties agreed otherwise,” wrote Justice Ziegler for the unanimous court.
In contrast to substantive arbitrability questions – which courts can decide and involve the arbitrability of the subject matter – timeliness issues are generally governed by the arbitration agreement and thus subject to arbitration process, the court explained.
“Graham does not dispute that the subject matter of costs and reasonable attorney’s fees is within the scope of the arbitration agreement,” wrote Ziegler.
The court pointed to U.S. Supreme Court cases deciding that the timeliness of an arbitration request was a matter of procedural arbitrability for an arbitration panel.
“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,” Justice Ziegler wrote.
The court noted that those presumptions on substantive and procedural arbitrability are consistent with Wisconsin law and the public policy of encouraging arbitration.
“Graham’s argument that First Weber’s arbitration request was untimely highlights why a court may not decide this timeliness issue,” Ziegler wrote.
“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,” noted Ziegler, referring to First Weber’s claim that Graham owed attorney’s fees and costs.