June 26, 1995
HOWARD A. AND JUDITH GRAD, APPELLANTS,
WETHERHOLT GALLERIES, APPELLEE
Appeal from the Superior Court of the District of Columbia. (Hon. John H. Suda, Trial Judge).
Before Schwelb and Ruiz, Associate Judges, and Belson, Senior Judge.
The opinion of the court was delivered by: Ruiz
Ruiz, Associate Judge : Appellants, Howard and Judith Grad, asked the Superior Court to vacate an arbitration award rendered against them and in favor of appellee, Wetherholt Galleries ("Wetherholt"), on the ground that they were not parties to any arbitration agreement with Wetherholt. The Superior Court denied the application and confirmed the award, holding that the arbitrator had the authority to determine who was a party to the agreement and that, in any event, the Grads had by their failure to object agreed to submit the question to arbitration. Because the trial court erred in deferring to the arbitrator's decision re garding the Grads' consent to arbitration and in finding that the Grads had participated in the arbitration proceeding without objecting, we reverse and remand for further proceedings.
Although the record in this case is incomplete, it appears that the facts material to our consideration of the case are undisputed. A corporation called Gallery Marketing, of which one or both of the Grads were either owners or officers, contracted with Wetherholt to render certain services, the nature of which is unimportant for present purposes. The contract contained a clause requiring that "any dispute between the parties shall be submitted to binding arbitration under American Arbitration Association auspices." *fn1
A dispute arose between Gallery Marketing and Wetherholt, resulting in cross-claims being filed with the American Arbitration Association. During the course of the proceedings, Wetherholt amended its claims to assert them against the Grads as well. Wetherholt's theory was that Gallery Marketing was merely the Grads' alter-ego. The arbitrator rendered a substantial award in favor of Wetherholt against Gallery Marketing and the Grads jointly and severally.
After an unsuccessful effort to have the arbitrator modify her award, the Grads and Gallery Marketing filed an application in the Superior Court to have the award modified or vacated. They contended that the arbitrator had exceeded her authority in rendering an award against the Grads. Wetherholt filed a cross-application seeking to have the award confirmed. The trial court held a hearing on the pending cross-applications. At the close of the hearing, the trial court ruled that it would confirm the award as to all parties. The Grads then noted this timely appeal. *fn2
We review the trial court's decision in this case de novo. Superior Court Civil Rule 70-I provides that proceedings on applications to confirm arbitration awards shall be conducted summarily. *fn3 Proceeding summarily means, first, determining whether material facts are disputed and then, if necessary, conducting an expedited trial. Haynes v. Kuder, 591 A.2d 1286, 1290 (D.C. 1991). The Grads did request a hearing. However, no testimony and only one undisputed document was presented at the hearing granted by the trial court. *fn4 Because the trial court was not called on to resolve any disputed facts, the question presented to this court is one of law. See Carter v. Cathedral Ave. Coop., 566 A.2d 716, 717 n.6 (D.C. 1989) (treating arbitrability issue as question of law where parties did); see also Poire v. Kaplan, 491 A.2d 529, 533 (D.C. 1985) ("The question of whether an issue is arbitrable is one of law, and a court must make its own determination on the issue.").
Wetherholt essentially contends that the trial court, and hence this court, are precluded from reviewing the arbitrator's decision that Wetherholt's claims against the Grads were subject to arbitration. It advances two theories, both adopted by the trial court: First, by participating in the arbitration proceeding, the Grads irrevocably submitted to the authority of the arbitrator. Second, the arbitrator had exclusive authority to decide who was a party to the agreement containing the arbitration clause. We disagree on both points.
The District of Columbia Uniform Arbitration Act (DCUAA) specifically contemplates a determination by a court whether an arbitration agreement requires a person to submit to arbitration. D.C. Code §§ 16-4302, *fn5 16-4311 (a)(5) (1989). Moreover, the DCUAA contemplates such proceedings either before or after the award is made. See Koch v. Waller & Co., 439 So. 2d 1041, 1043 (Fla. Dist. Ct. App. 1983) (applying the Florida version of the Uniform Arbitration Act). Under the DCUAA, the court may vacate an arbitral award where "there was no arbitration agreement and the issue was not adversely determined in proceedings under § 16-4312 and the party did not participate in the arbitration hearing without raising the objection." D.C. Code § 16-4311(a)(5). *fn6 To require the objecting party to refuse to participate in the arbitration proceeding as a prerequisite to attacking the resulting award would render part of section 16-4311 (a)(5) a nullity. That section only requires that the party seeking to vacate an award because there was no agreement between the parties to arbitrate have "raised the objection" during the proceeding. Thus, a party that participates in an arbitration over its objection is not barred from raising that objection after the award. See Hot Springs County Sch. Dist. v. Strube Constr., 715 P.2d 540, 546 (Wyo. 1986) (applying the Wyoming version of the Uniform Arbitration Act).
The record shows that the Grads did raise the objection to arbitration during the proceedings. The brief filed with the arbitrator by Howard Grad as president of Gallery Marketing vigorously and repeatedly asserts that the Grads are not parties to the arbitration agreement in the contract between Gallery Marketing and Wetherholt:
The parties to this Agreement are Wetherholt Galleries, Inc. and Gallery Marketing, Inc. The parties clearly were not Howard Grad, Judith Grad, Roger Wetherholt, or Sonia Bernhardt. In fact, and fundamentally, if the agreement had been contemplated to be between the parties individually, the contract never would have been executed. Both parties discussed (and in fact requested) each other to enter into these obligations personally, with full knowledge and understanding that they were limiting their liability as corporate partners, and both principals declined to enter into an agreement with personal guarantees or signatures.
Finally, arbitration is an act that takes place consensually between the parties. It is inappropriate and impossible to require entities or individuals who are not parties to an agreement to arbitrate, who have not in fact consented to arbitration, to participate under duress to arbitration. Arbitration is a mutual act between the parties to an agreement who have decided mutually to submit any dispute jointly to the resolution of a third party. The individuals and entities, including Howard Grad, Judy Grad, and the Michael Stone Collection, Inc., are certainly not parties to this Agreement and have not submitted themselves by reason of their consent to arbitration of a matter to which they are not a party. Arbitration under duress, by definition, is not arbitration.
We conclude that the foregoing is sufficient to raise an objection to arbitrability. That the pro se memorandum also attempts to argue the merits of Wetherholt's alter-ego theory does not vitiate the objection raised in the memorandum. The Grads' continued participation in the arbitration after this question was determined adversely to them does not constitute a waiver of the objection. See D.C. Code § 16-4311 (a)(5); cf. Hercules & Co. v. Shama Restaurant, 613 A.2d 916, 920-21 (D.C. 1992) (holding that question of arbitrability was properly before the court notwithstanding the fact that application to vacate award was filed after ninety-day period, where applicant had previously requested and been denied a stay on the same grounds prior to arbitration). To hold otherwise would not only contradict the terms of the statute, but would also either require judicial proceedings regarding arbitrability that may be mooted by an award favorable to the objecting party, or else require the objecting party to risk an adverse adjudication after absenting herself from the proceedings in order to preserve her objection to arbitrability. *fn7 See Hot Springs County Sch. Dist., supra, 715 P.2d at 546. We decline to place such a gloss on the statute. *fn8
The objection having been properly raised and preserved, the Grads had a right under the DCUAA to a judicial determination of the arbitrability of Wetherholt's claim against them. The trial court in the present case did not make an independent determination of arbitrability. Instead it held that the ruling of the arbitrator was conclusive on the matter. Because we must remand for a judicial determination, we address whether the arbitrator's decision regarding arbitrability of the claim against the Grads is entitled to any judicial deference.
The arbitrator did, of course, have authority to decide initially whether the Grads could be made parties to the arbitration, subject to subsequent judicial determination. The arbitrator's decision was not entitled, however, to any degree of deference by the trial court. *fn9 See Haynes, supra, 591 A.2d at 1290 & n.6 (contrasting claim of fraudulent inducement of arbitration clause, which denies existence of an agreement to arbitrate and is therefore decided by the court, with attack on contract based on fraud, which is resolved by arbitrator).
Under the DCUAA, the arbitrator's authority derives from the consent of the parties. See D.C. Code § 16-4301 (declaring the enforceability of written agreements to arbitrate present or future disputes). To ensure that this principle of authority by consent is respected, the DCUAA allows an objecting party to seek judicial determination of the scope of consent either before, during or after an arbitration. See D.C. Code § 16-4302 (b) (permitting motion to stay proceeding "commenced or threatened"); D.C. Code § 16-4311 (a)(5) (permitting application to vacate award where there was no agreement to arbitrate). To require any degree of judicial deference to an arbitrator's decision regarding arbitrability where a proper objection to the arbitrator's authority has been lodged would vitiate the consent basis of statutory arbi tration by permitting an arbitrator to clothe herself with actual authority, based on the agreement of the one party asserting the claim. Because under the DCUAA each party must hold a shoulder before the arbitrator may don her cloak of authority, any judicial determination of arbitrability is necessarily de novo. *fn10 The decision of the arbitrator may, of course, influence the court's determination to the extent that its reasoning merits. In other words, it may well be persuasive, but it is not due legal deference.
We reverse and remand for further proceedings consistent with this opinion.