Opinion
No. CV095026130S
January 7, 2010
MEMORANDUM OF DECISION RE DEFENDANT'S MOTION FOR STAY
On July 7, 2009, the plaintiff, Leslie M. Kutcher, a medical doctor, filed a four-count complaint against the Connecticut Vascular Thoracic Surgical Associates, P.C. (the corporation), and the medical doctors Seth B. Blattman, Paul Demartini and James V. Lettera. The complaint alleges the following facts: The corporation was organized in 1999 by Kutcher and Demartini, who had practiced together since 1983. Kutcher and Demartini added other "shareholder-surgeons" to the corporation as its practice grew, reducing Kutcher's ownership interest to that of a 25 percent minority shareholder. On June 6, 2007, Kutcher became disabled and was unable to perform further surgical services. Kutcher continued to provide nonsurgical services and Demartini assured him the corporation would employ Kutcher in this capacity as long as he was able to do so.
Kutcher further alleges that he subsequently agreed to sell his 25 percent interest in the corporation as partial consideration for a new employment contract with the corporation. On October 22, 2008, Kutcher was presented with the draft of a new employment agreement, which was to be executed simultaneously with the sale of his interest in the corporation. At the closing in late October 2008, the corporation refused to sign an employment agreement with Kutcher, but led him to believe an acceptable agreement would be forthcoming after the sale of his 25 percent interest was completed and Kutcher had resigned as an officer and director of the corporation. The parties then completed the sale of the 25 percent interest and Kutcher signed a letter of resignation based on the belief that this document was identical to one the defendants had previously provided him to review. The resignation letter, however, was not identical to the document that Kutcher reviewed and included Kutcher's resignation as a corporation employee. Kutcher continued to work for the corporation without a new employment contract until January 7, 2009, when the corporation terminated his employment pursuant to his letter of resignation as a corporation employee. Kutcher's resignation as an employee also allowed the corporation to classify his termination as voluntary, which deprived him of additional financial benefits.
On February 26, 2009, Kutcher alleges he sent the defendants a notice of rescission for the sale of his 25 percent interest in the corporation. On July 7, 2009, Kutcher filed a complaint sounding in fraud, a minority shareholder action, violations of CUTPA, General Statutes § 42-110a et seq., and intentional infliction of emotional distress. The defendants have filed a motion to stay the action pending arbitration pursuant to General Statutes § 52-409 which is opposed by Kutcher. "The court has the inherent power to stay proceedings before it in the interest of the just resolution of controversies . . . An order staying proceedings does not terminate the action but merely postpones its disposition. It may be modified or vacated by the court whenever, in the exercise of a sound discretion, it is considered necessary or proper to do so . . . Motions to stay proceedings are interlocutory." (Citations omitted, internal quotation marks omitted.) EJD Development, LLC v. CRC Real Estate Development, LLC, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 08 5009105 (March 12, 2009, Pavia, J.) ( 47 Conn. L. Rptr. 365).
The defendants argue that because they meet the requirements of § 52-409 the court must stay the entire four-count complaint. Specifically, on the issue of the arbitrability of Kutcher's claims, the defendants argue that each claim is a controversy with respect to the terms or conditions of the "Amended and Restated Stockholders Agreement" (Stockholders Agreement) and a dispute with respect to the "Employment Agreement," both of which were executed concurrently on August 1, 2007. The defendants argue that Kutcher's claims "relate to [Kutcher's] obligations as a stockholder and an employee" and that the disputes "involve the termination of Kutcher's employment . . . and the purchase and sale of his shares." The defendants stress that the broad wording of the two arbitration clauses in the 2007 agreements requires the court to submit the issue to arbitrators to decide the issue of arbitrability.
In opposition to the motion to stay, Kutcher argues that his claims are not arbitrable under either 2007 agreement because he is suing on a separate contract not governed by the arbitration clauses in these agreements. As such, Kutcher contends that the defendants cannot fulfill the requirements of § 52-409. Alternatively, Kutcher argues that the court does not have to, and should not, stay any nonarbitrable claims.
"[A]rbitration is a creature of contract . . . It is designed to avoid litigation and secure prompt settlement of disputes . . ." (Internal quotation marks omitted.) State v. Philip Morris, Inc., 289 Conn. 633, 642, CT Page 2260 959 A.2d 997 (2008). Section 52-409 provides: "If any action for legal or equitable relief or other proceeding 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."
"To establish its right to a stay of proceeding under [Section 52-409] a movant must establish the following facts: (1) that both it and the plaintiff in the action sought to be stayed are parties to a written arbitration agreement; (2) that at least one issue involved in the action to be stayed is referable to arbitration under the agreement; and (3) that the movant is ready and willing to proceed with the arbitration." (Internal quotation marks omitted.) Christiani v. Benefitpoint, Inc., Superior Court, complex litigation docket at Hartford, Docket No. X07 CV 04 4025119 (March 7, 2008, Berger, J.).
Notwithstanding the language in § 52-409, some Superior Court decisions have allowed nonarbitrable claims to proceed regardless of the stay. In one decision, the court explained: "Where the litigation involves both arbitrable and non-arbitrable claims courts of this state . . . have refused to stay the entire litigation, and have allowed the litigation to proceed with respect to any non-arbitrable claims . . . [T]he goal of . . . the Connecticut arbitration statutes . . . is not advanced by forcing a litigant that has not agreed to arbitrate to delay the prosecution of its claims [pending arbitration]." (Citations omitted, internal quotation marks omitted.) Office v. IEDI Group, Inc., Superior Court, judicial district of New Haven, Docket No. CV 01 0456900 (September 16, 2002, Booth, J.) ( 33 Conn. L. Rptr. 143, 145 n. 7). Similarly, in Beaumont v. Swiderski, Superior Court, judicial district of Waterbury, Docket No. 119276 (April 26, 1994, Sullivan, J.), the court stated that it would stay proceedings only on issues referable to arbitration. In a third decision, the court stated that it has discretion to stay nonarbitrable issues. Northeast Utilities v. Century Indemnity Co., Superior Court, complex litigation docket at New Britain, Docket No. X03 CV 99 0495495 (June 22, 1999, Aurigemma, J.) ( 25 Conn. L. Rptr. 81).
The cases allowing nonarbitrable claims to proceed are distinguishable from the present action. The stay of the entire action in Beaumont v. Swiderski, supra, Superior Court, Docket No. 119276 and Office v. IEDI Group, Inc., supra, 33 Conn. L. Rptr. 143, would have implicated the rights and claims of third parties who were not signatories to the arbitration clause. Likewise, in Northeast Utilities v. Century Indemnity Co., supra, 25 Conn. L. Rptr. 81, the issues to be litigated were unrelated to those sent to arbitration.
Decisions that do not allow arbitrable and nonarbitrable claims to be split typically do so on the basis of strict statutory construction, noting that under § 52-409 a defendant is entitled to a statutory stay. "We must interpret statutes as they are written . . . Where the language used by the legislature is plain and unambiguous, there is no room for construction by the courts and the statute will be applied as its words direct." (Citations omitted.) Muha v. United Oil Co., 180 Conn. 720, 730, 433 A.2d 1009 (1980). "[T]he remedy afforded to a successful movant under § 52-409 is `a stay of the action or proceeding,' not merely a stay of that part of the action or proceeding that involves arbitrable issues that pertain directly to the applicant." American Materials Corp. v. Eagle Crusher Co., Superior Court, judicial district of Hartford, Docket No. CV 03 0827738 (December 16, 2003, Sheldon, J.); see also Heritage Recruiting Group, LLC, v. Penwest Pharmaceutic Co., Superior Court, judicial district of Danbury, Docket No. CV 08 5005183 (November 24, 2008, Shaban, J.) (staying entire action to successful movant under § 52-409) ( 46 Conn. L. Rptr. 730); Herbert Construction v. Byelas, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 93 0133647 (July 27, 1994, Hickey, J.) (granting stay on all issues for reasons of judicial economy) (9 C.S.S.R. 872) [ 12 Conn. L. Rptr. 170]. In addition to adhering strictly to the statutory text, Connecticut's strong public policy favoring arbitration, the reviewability of an arbitration decision by the court granting the stay and the absence of prejudice to a plaintiff all favor this approach. State v. Philip Morris, Inc., 279 Conn. 785, 797 n. 10, 905 A.2d 42 (2006) (noting Connecticut's public policy favoring arbitration). For the foregoing reasons, it is submitted that the court stay the entire action if it finds for the movants.
In the present case, neither party contests that they entered into two 2007 contracts with arbitration agreements; rather, they disagree over whether those agreements govern the claims before the court. In support of the defendants' claim that the issues are arbitrable, they have attached the following documents: the Stockholders Agreement of August 1, 2007, signed by Kutcher and all of the defendants; the Employment Agreement of August 1, 2007, between Kutcher and the corporation; a demand for arbitration by the corporation and the notarized affidavit of Ann H. Rubin attesting to the truth and accuracy of the attached documents. The defendants' documents establish two prerequisites for a stay under § 52-409. The Stockholders and Employment Agreements show that all parties signed contracts with arbitration clauses and the defendants' demand for arbitration demonstrates that one party is ready and willing to arbitrate.
To meet the final requirement for a stay under § 52-409, the defendants must establish that at least one issue involved in the present action is referable to arbitration under either of the 2007 agreements. "Whether a particular dispute is arbitrable is typically a question for the court . . . It is well established [however] that arbitration is a matter of contract and that parties may agree to have questions concerning the arbitrability of their disputes decided by a separate arbitrator . . . In apportioning, between the court and the arbitrators, the responsibility for determining which disputes are arbitrable, the language of the contract controls and determines whether the arbitrability of a dispute is for the court or the arbitrators . . . The intention to have arbitrability determined by an arbitrator can be manifested by an express provision or through the use of broad terms to describe the scope of arbitration . . ." (Internal quotation marks omitted.) Wallingford v. Wallingford Police Union Local 1570, 45 Conn.App. 432, 436, 696 A.2d 1030 (1997). "Where . . . there is a broad arbitration clause, the identity and nature of the disputes to be submitted to arbitration should be determined by the arbitrators." Northeast Utilities v. Century Indemnity Co., supra, Superior Court, 25 Conn. L. Rptr. 85.
"[B]ecause we favor arbitration, we will defer to this alternative method of dispute resolution if the contractual arbitration provisions fall within the grey area of arbitrability, employing the positive assurance test . . . Under this test, judicial inquiry . . . must be strictly confined to the question whether the reluctant party did agree to arbitrate the grievance . . . An order to arbitrate the particular grievance 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." (Citation omitted; internal quotation marks omitted.) State v. Philips Morris, Inc., supra, 279 Conn. 797 n. 10. "[W]hen the issue of arbitrability does not fall within the so-called `grey area' the court makes the decision of arbitrability because the positive assurance test does not apply." (Internal quotation marks omitted.) Liebig v. Farley, Superior Court, judicial district of New London, Docket No. 08 5005405 (February 13, 2009, Martin, J.).
In the present case, the court must look to the language of each contract to assess whether Kutcher's claims are arbitrable under the 2007 agreements. The Stockholders Agreement arbitration clause provides that "[a]ny dispute arising under this Agreement or any disagreement as to the meaning of terms or conditions contained in this Agreement or any matter to be determined by arbitration under this Agreement shall be resolved by formal binding arbitration . . ." (Emphasis added.) The Employment Agreement arbitration clause provides that " [a]ny dispute between the parties hereto . . . shall be submitted to binding arbitration . . ." (Emphasis added.)
The parties disagree over whether the terms of the Stockholders Agreement or the Employment Agreement govern Kutcher's claims, which arise out of a transaction in which he sold his corporate stock as part of the consideration for a new employment contract. The phrases "any dispute arising under" and "any dispute between" are the type of broad language by which parties manifest their intention to have arbitrability determined by an arbitrator. Because the parties disagree over the meaning of the terms contained in the Stockholders Agreement with respect to whether it encompasses Kutcher's claims, the court cannot say with positive assurance that parties did not intend for this dispute to be decided by an arbitrator. Likewise, because Kutcher's claims could be interpreted as falling within the "any dispute" language of the Employment Agreement arbitration clause, the positive assurance test is not met and whether these issues are arbitrable should be decided by an arbitrator.
Although Kutcher argues that he is suing on a separate 2008 agreement, the basis of the 2008 contract is a transfer of stock pursuant to the Stockholders Agreement and Kutcher's termination is pursuant to the Employment Agreement. The fact that both aspects of the 2008 contract so closely relate to the subject matter of the 2007 agreements makes this court less apt to find that the arbitration clauses are "not susceptible [to] an interpretation that covers the asserted dispute." This position is reinforced by both the Connecticut public policy favoring arbitration as a method of dispute resolution and by case law dictating that "[d]oubts should be resolved in favor of coverage." Accordingly, disputes relating to the meaning of the Stockholders Agreement or having to do with the Employment Agreement should be submitted to arbitration and the entire action should be stayed pursuant to the requirements of § 52-409 and therefore the defendant's motion to stay is granted.