Opinion
UWYCV156027925S
07-14-2016
Timothy B. Hayden v. Amy Hayden et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION TO STAY PENDING ARBITRATION (#128)
Andrew W. Roraback, J.
I
FACTS
This dispute arises out of the plaintiff, Timothy B. Hayden (Timothy), and his sister, the defendant Amy Hayden (Amy), sharing ownership of property known as 649 West Main Street, Waterbury (the real property). Timothy and Amy each own an undivided 50 percent interest in the real property as tenants in common. A co-owner's agreement dated May 8, 1991 governs the relationship between Timothy and Amy with respect to their joint ownership of the real property. The parties also share ownership of a corporation known as Century Plaza of Waterbury, Inc. (CPW). Amy owns two-thirds of the shares of CPW and Timothy owns the remaining third of the shares of this corporation. A stockholder's agreement dated May 8, 1991 governs the relationship between Timothy and Amy with respect to their ownership of all of the stock of CPW (the stock). A ground lease (the lease) dated March 10, 1994 sets forth the terms, under which CPW leases the real property from its owners, Timothy and Amy.
Initially, Edward A. Hayden was a party to and a signatory of each of the three agreements referenced above because at the time they were prepared he owned both an interest in the real property and some of the stock of CPW. Subsequently, Edward conveyed his interest in the real property to Timothy and Amy and transferred his CPW stock to Amy.
The co-owners' agreement, stockholders' agreement and lease each contain provisions relating to arbitration of disputes arising under those agreements. As grounds for this motion, Amy asserts that the arbitration provision of the co-owners agreement requires that the issues raised in this litigation be submitted to arbitration for resolution. The relevant language of that agreement reads as follows: " Any dispute whatsoever relating to interpretation, validity or performance of this agreement or any dispute arising out of this agreement . . . shall be settled by arbitration . . . It is the purpose of this agreement, and the intent of the parties hereto, to make the submission to arbitration an express condition precedent to any legal or equitable action or proceeding of any nature whatsoever."
Amy filed this motion to stay pending arbitration on March 1, 2016 after Timothy had filed a second revised complaint on January 19, 2016. Timothy then filed a third revised complaint dated April 12, 2016 against CPW as a corporate defendant and against Amy in her individual capacity, as property manager, and as president and majority shareholder of CPW. In the now operative complaint, Timothy has sued exclusively in his individual capacity as the owner of 50 percent of the real property.
CPW and Amy will be referred to collectively as the defendants.
At the oral argument on this motion on April 28, 2016, counsel for Amy posited that the terms of the co-owners agreement deprived Timothy of standing to bring this action in his individual capacity. Because this assertion implicated the subject matter jurisdiction of the court, the parties filed additional briefs on this issue at the direction of the court and a subsequent hearing on the question of subject matter jurisdiction was held on May 23, 2016.
II
DISCUSSION
The substance of this dispute relates to CPW's obligation under the lease to pay to Timothy and Amy as rent an amount " equal to eighty-five percent (85%) of the Adjusted Gross Annual Rental Income of the Shopping Center operated by the Tenant [CPW] on the Demises (sic) Premises." Amy's threshold and principal defense is that the co-owner's agreement requires Timothy to secure her consent prior to bringing any action to compel CPW to pay the rental amount specified in the lease. Amy argues that, by bringing the present action, Timothy has violated section V(c)(1) of the co-owner's agreement which prohibits any owner from " [doing] any act in contravention of this agreement."
The court's initial inquiry focuses on which forum, court or arbitrator, is vested with the legal authority to decide whether this question of standing is arbitrable. " The law in Connecticut is clear. Whether a particular dispute is arbitrable is a question for the court, unless, by appropriate language, the parties have agreed to arbitrate that question . . . Whether the parties intended to submit the issue of arbitrability, as well as the merits of a claim, to an arbitrator clearly depends on the parties' intent. Whether the parties intended to arbitrate the issue of arbitrability may be determined from an express provision to that effect or from the use of broad terms . . . Unless the agreement shows such intent, the determination of the question of arbitrability remains a function of the court . . . The courts, however, must not fail to examine the plain language of the contract and look at it as a whole in determining the parties' intent." (Citations omitted; internal quotation marks omitted.) Scinto v. Sosin, 51 Conn.App. 222, 227-28, 721 A.2d 552 (1998), cert. denied, 247 Conn. 963, 724 A.2d 1125 (1999).
Standing alone, the use of broad terms, absent a clearly expressed intent to submit a question of arbitrability to arbitration, is insufficient to shift the responsibility for making this determination from the court to an arbitrator. Id. See also Ficca v. Basile, Superior Court, judicial district of Litchfield, Docket No. CV-98-0077879-S, (March 17, 2000, Frazzini, J.) (27 Conn.L.Rptr. 7, 9) (" Nothing in this arbitration clause expresses any intent by the parties for issues of arbitrability to be decided by an arbitrator"). The co-owners agreement in this case is silent on whether disputes as to arbitrability are subject to arbitration, and this court will therefore retain jurisdiction to make this determination.
In Scinto the arbitration clause of the construction contract at issue stated that " [A]ny controversy or claim arising out of or related to the contract, or the breach thereof, shall be settled by arbitration . . ." . Scinto v. Sosin, supra, 51 Conn.App. at 226. That language was found to be insufficient to support a finding that the parties intended to submit issues of arbitrability to arbitration.
In determining which forum, court or arbitrator, will resolve the issue of standing, it is appropriate to consider General Statutes § 52-409 which provides in pertinent part as follows: " If any action for legal . . . relief . . . is brought by any party to a written agreement to arbitrate, the court in which the action or proceeding is pending, upon being satisfied that any issue involved in the action or proceeding is referable to arbitration under the agreement, shall, on motion of any party to the arbitration agreement, stay the action or proceeding until an arbitration has been had in compliance with the agreement, provided the person making application for the stay shall be ready and willing to proceed with the arbitration."
" [O]ur courts have wholeheartedly endorsed arbitration as an effective alternative method of settling disputes intended to avoid the formalities, delay, expense and vexation of ordinary litigation." (Internal quotation marks omitted.) MSO, LLC v. DeSimone, 313 Conn. 54, 63, 94 A.3d 1189 (2014); see also AFSCME, Council 4, Local 704 v. Dept. of Public Health, 272 Conn. 617, 626, 866 A.2d 582 (2005) (noting " the strong public policy favoring arbitration"); Nussbaum v. Kimberly Timbers, Ltd., 271 Conn. 65, 71, 856 A.2d 364 (2004) (" Connecticut has adopted a clear public policy in favor of arbitrating disputes"); L& R Realty v. Connecticut National Bank, 246 Conn. 1, 12, 715 A.2d 748 (1998) (" Arbitration agreements illustrate the strong public policy favoring freedom of contract and the efficient resolution of disputes"); Waterbury Teachers Assn. v. Waterbury, 164 Conn. 426, 434, 324 A.2d 267 (1973) (" arbitration is a favored procedure in this state"). " An order to arbitrate the particular [dispute] should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." (Emphasis omitted; internal quotation marks omitted.) Board of Education v. Frey, 174 Conn. 578, 582, 392 A.2d 466 (1978).
Applying this standard to the facts presented in this case, the court concludes that the question of whether the co-owner's agreement operates to strip Timothy of standing to enforce the lease is properly referred to arbitration. This lawsuit must therefore be stayed pending a determination of that issue by the arbitrator. If the arbitrator concludes that the terms of the co-owners agreement divest Timothy of any legal authority to maintain a suit individually to enforce the terms of the lease, that decision will be subject to review only to the extent permitted by law. If the arbitrator concludes that Timothy has standing to bring an action to enforce the terms of the lease, the stay will be lifted to allow for further proceedings in the Superior Court in connection with the above-captioned action.
While the defendant maintains that disputes arising under the lease are subject to compulsory arbitration, the language of that document belies that claim. Paragraph 24 governs " any arbitration according to this lease" but nothing in the lease obligates the parties to submit any dispute to arbitration. Rather, paragraphs 25.7 (attorneys fees) and 25.8 (waiver of jury trial) expressly contemplate that litigation with respect to lease provisions might occur. In addition, in paragraph 26, the tenant expressly waives any right to notice and hearing it might otherwise have under Connecticut's prejudgment remedies statutes.
Against the backdrop of the clear public policy favoring arbitration, Timothy asserts that this motion should nevertheless be denied because Amy has waived her right to submit this dispute to arbitration. " In Advest, Inc. v. Wachtel, 235 Conn. 559, 569, 668 A.2d 367 (1995), [our Supreme Court] . . . stated that [a] party seeking to assert the defense of waiver must show that he was substantially prejudiced. The court further stated that, [i]n order to determine whether a party has been substantially prejudiced, many factors must be considered, not the least of which is whether the claims that the defendants seek to assert in the arbitration are the same as those asserted in the prior litigation and whether initiation of the arbitration constituted an unjustifiable delay . . . Today, we clarify that the court in Advest, Inc. . . . did not announce a new waiver standard, but, rather, made explicit a prejudice requirement that was implicit in our prior case law regarding waiver of arbitration. That is, each factor that our court previously had identified as potentially supporting an inference of waiver--for instance, an unjustifiable delay or going to trial on identical issues as those claimed for arbitration . . . is conduct that may be prejudicial, either procedurally or substantively, to the party opposing arbitration. Appropriately, our courts have examined these and other relevant factors that may be indicative of prejudice to the party opposing arbitration on the grounds of waiver." (Citations omitted; internal quotation marks omitted.) MSO, LLC v. DeSimone, supra, 313 Conn. 67-68.
In this case, the plaintiff filed his original complaint on July 24, 2015. On August 26, 2015, the defendants filed a request to revise and the plaintiff filed a revised complaint on September 10, 2015. On October 8, 2015, the defendants filed another request to revise, to which the plaintiff filed an objection on November 18, 2015. The court ruled on the objection on January 11, 2016, and in response to the court's ruling the plaintiff filed a second revised complaint on January 19, 2016. The plaintiff filed a motion for appointment of a temporary receiver on January 12, 2016, and an application for a prejudgment remedy and a motion for disclosure of assets on February 1, 2016. There was considerable discovery activity in February of 2016, and on March 1, 2016, the defendants filed this motion to stay pending arbitration. The plaintiff filed the third revised complaint on April 12, 2016. The defendants have not filed an answer given that the court has not yet ruled on this motion to stay pending arbitration. In addition, in September of 2015, the plaintiff filed his initial discovery requests, and on October 8, 2015, the defendants filed objections to those requests stating that " by responding to the Discovery Requests, Defendants do not waive and specifically preserve any right to seek, require or enforce any provisions regarding Arbitration." In reviewing this sequence of events, it is evident that despite the early spate of intense activity in this litigation, there has been no prejudice to the plaintiff which would support a finding of waiver of arbitration by the defendants under the criteria set forth in MSO, LLC.
The plaintiff's last claim is that Amy has neglected to comply with the procedural prerequisites for submitting a dispute to arbitration under the co-owner's agreement. Section XIII of that agreement dictates that disputes arising out of that agreement which are " not resolved by the parties to such a dispute within thirty (30) days after one party gives the other party written notice of the dispute, shall be settled by arbitration." The filing of this lawsuit clearly serves as " written notice" of the dispute, and more than thirty days have passed since Amy was served with this action. As such, the plaintiff's claim that the defendants have not met the conditions precedent to seeking arbitration fails.
III
CONCLUSION
The defendants' motion to stay pending arbitration is granted. Prosecution of this action is ordered to be stayed until an arbitration decision is issued which rules on the validity of the defendants' defense that the co-owner's agreement bars the plaintiff from maintaining this action to enforce his rights under the lease.