Dana Commercial Credit Corporation, Respondent, Royal Oaks Construction, Inc., et al., Respondents, vs. Software Consultants, Inc., Appellant.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (1998).

STATE OF MINNESOTA

IN COURT OF APPEALS

Dana Commercial Credit Corporation,

Respondent,

Royal Oaks Construction, Inc., et al.,

Respondents,

vs.

Software Consultants, Inc.,

Appellant.

Filed June 6, 2000

Isanti County District Court

File No. C39964

William G. Cottrell, John A. Halpern & Associates, 500 Plymouth Building, 12 South Sixth Street, Minneapolis, MN  55402 (for respondent Dana Commercial Credit Corporation)

Randall E. Kahnke, Deborah A. Ellingboe, Faegre & Benson, LLP, 2200 Norwest Center, 90 South Seventh Street, Minneapolis, MN  55402 (for respondents Royal Oaks Construction, Inc., et al.)

Lewis A. Remele, Jr., Aklilu D. Dunlap, Bassford, Lockhart, Truesdell & Briggs, P.A., 3550 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN  55402 (for appellant)

            Considered and decided by Halbrooks, Presiding Judge, Kalitowski, Judge, and Willis, Judge.

U N P U B L I S H E D   O P I N I O N

WILLIS, Judge

Software Consultants, Inc., appeals from an order denying its motion to compel arbitration.  We affirm.

On February 10, 1997, respondents Wayne Overby and Royal Oaks Construction, Inc., contracted to purchase computer hardware and software from appellant Software Consultants, Inc.   Respondents financed the purchase through Dana Commercial Credit Corporation (Dana). 

 Respondents claim that during their negotiations, appellant represented that the computer system carried a 90-day, money-back guarantee, so when respondents found the computer system difficult to use, they returned it to appellant approximately a month after the purchase and requested that their account be credited for the purchase price.  Appellant refused, and, at Dana's direction, appellant shipped the computer system to Dana.  

Dana sued respondents for $29,907.70 in damages arising out of respondents' alleged breach of the finance lease between respondents and Dana.  Respondents brought a third-party action against appellant, seeking indemnity for any damages they might sustain in the main action, alleging that appellant fraudulently induced them to lease the computer system through Dana and represented that the computer system carried a money-back guarantee. 

     Appellant moved the district court to compel arbitration of its dispute with respondents pursuant to the arbitration clause of the sales contract between appellant and respondents.  The district court denied the motion on the ground that it was premature.  This appeal follows.  

An appeal may be taken from an order denying a motion to compel arbitration.  Minn. Stat. § 572.26, subd. 1(1) (1998).   This court reviews de novo a district court's denial of such a motion.  Michael-Curry Cos. v. Knutson Shareholders Liquidating Trust, 449 N.W.2d 139, 141 (Minn. 1989). 

Appellant argues that the district court erroneously denied its motion to compel arbitration on the grounds that (1) Minn. Stat. § 572.09(a) (1998) requires enforcement of valid arbitration agreements, (2) the arbitration clause is sufficiently broad to comprehend arbitration of a claim for fraudulent inducement, and (3) the respondents may not rescind the sales contract because they have affirmed it by seeking damages. 

Generally, when this court reviews a district court's denial of a motion to compel arbitration, our inquiry is limited to whether an enforceable arbitration agreement exists and "whether the dispute falls within the scope of the arbitration agreement."  Amdahl v. Green Giant Co., 497 N.W.2d 319, 322 (Minn. App. 1993).  But in the context of multiparty litigation, such as the case here,  

the precise issue involved is the extent to which an arbitration agreement binding two of the parties should be enforced when their interests and the policies supporting arbitration are balanced against the interests of the other parties and the policies supporting joinder of parties and claims. 

Prestressed Concrete, Inc. v. Adolfson & Peterson, Inc., 308 Minn. 20, 22, 240 N.W.2d 551, 552 (1976).  Rule 14.01 of the Minnesota Rules of Civil Procedure, which provides for third-party actions, is intended to encourage the efficient resolution of controversies by allowing joinder of all related parties and claims.  See id. at 22, 240 N.W.2d at 553. 

Without reaching the question of whether the arbitration clause is enforceable on these facts, we conclude that compelling arbitration at this time is not consistent with the efficient resolution of this controversy.  Appellant can be under no obligation to indemnify respondents until and unless there is a determination that respondents are liable to Dana for damages.  Respondents argued to this court that they will only seek damages from appellant to the extent that they are found liable to Dana.  Therefore, we agree with the district court that, in the absence of a determination of liability and damages in the main suit, it is premature to consider whether appellant has any liability to respondents, and this court declines to offer an advisory opinion on the ultimate arbitrability of this dispute.  See Izaak Walton League of Am. Endowment, Inc. v. State, Dep't of Natural Resources, 312 Minn. 587, 589, 252 N.W.2d 852, 854 (1977) ("[t]he judicial function does not comprehend the giving of advisory opinions").

Affirmed.