In the Matter of the Arbitration Between:  Cedar Fair, an Ohio general partnership, Respondent, vs. Minntertainment Company, Defendant, MOA Entertainment Company, LLC, a Delaware limited liability company, Appellant.

In the Matter of the Arbitration Between:  Cedar Fair, an Ohio general partnership, Respondent, vs. Minntertainment Company, Defendant, MOA Entertainment Company, LLC, a Delaware limited liability company, Appellant. A05-2204, Court of Appeals Unpublished, August 29, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-2204

 

 

In the Matter of the Arbitration Between: 

Cedar Fair, an Ohio general partnership,

Respondent,

 

vs.

 

Minntertainment Company,

Defendant,

 

MOA Entertainment Company, LLC,

a Delaware limited liability company,

Appellant.

 

 

Filed August 29, 2006

Affirmed

Halbrooks, Judge

 

 

Hennepin County District Court

File No. 05-12336

 

 

Mark P. Privratsky, Lindquist & Vennum, P.L.L.P., 4200 IDS Center, 80 South 8th Street, Minneapolis, MN 55402; and

 

Jeffrey H. Reeves (pro hac vice), Gibson Dunn & Crutcher, LLP, 4 Park Plaza, Suite 1400, Irvine, CA 92614 (for respondent)

 

John A. Cotter, Adam S. Huhta, Peter D. Favorite, Molly McKee, Larkin Hoffman Daly & Lindgren Ltd., 7900 Xerxes Avenue South, 1500 Wells Fargo Plaza, Minneapolis, MN 55431; and

 

Mark J. Briol, Vicki J. Bitner, William G. Carpenter, Briol & Associates, PLLC, 3700 IDS Center, 80 South 8th Street, Minneapolis, MN 55402 (for appellant)

 

 

            Considered and decided by Halbrooks, Presiding Judge; Kalitowski, Judge; and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N

HALBROOKS, Judge

            On appeal from the district court's stay of the parties' arbitration, appellant argues both that arbitration should not have been stayed because the parties' dispute fell within the scope of the parties' arbitration clause and that failing to compel arbitration in this case violates the public policy favoring arbitration.  We affirm.

FACTS

            Appellant Mall of America Entertainment Company, LLC, and respondent Cedar Fair were parties to a Management Agreement that governed Cedar Fair's management of Camp Snoopy at the Mall of America.  Under the terms of the agreement, appellant was known as the "owner" and respondent was the "manager."  The agreement was entered into in 1990, and its original term was 20 years. 

            The management agreement provided a process by which either the manager and the owner may terminate the other, either with or without cause.  Relevant here are the provisions of the agreement that allowed the owner to terminate the manager with or without cause.

            In December 2004, pursuant to the termination provisions of the management agreement, appellant sent respondent notice of an owner termination without cause.  Respondent demanded arbitration, seeking over $5 million in compensation.  Appellant cross-claimed for damages and a declaration in part that respondent was due only $1 because of fraud and other misconduct related to the calculation of certain financial figures in the course of their business together.  In May 2005, the arbitrator entered his final award, determining that appellant's notice of termination without cause was effective March 28, 2005, that appellant was not entitled to damages on its cross-claim, and that appellant owed respondent a termination payment totaling over $3.7 million in addition to costs and fees incurred during the arbitration. 

            Appellant moved the district court to vacate the arbitration award.  Appellant argued five grounds in support of vacation:  (1) the arbitrator exceeded his powers; (2) the arbitrator refused to hear testimony from a material witness; (3) the arbitrator manifestly disregarded the law; (4) public policy required vacating the award; and (5) the award was procured by fraud or undue means.  As to the allegation of fraud or undue means, appellant told the court that "what we will argue is that there was a failure to disclose that materially impacted the arbitration[.]"  Appellant detailed the fraud allegations in its memorandum supporting its motion, explaining that the dispute concerned the failure to disclose the existence of certain licensing agreements encumbering rights to the Peanuts characters. 

            Less than two weeks after appellant moved to vacate the arbitration award, appellant gave respondent a notice of termination for cause under the management agreement, asserting that respondent had defaulted under the management agreement by failing to notify appellant of certain agreements between one of respondent's affiliates and United Feature Syndicates (UFS) concerning licensing rights to the Peanuts characters.  Respondent in turn moved the district court for an injunction against appellant under Minn. R. Civ. P. 65 or an order staying the second arbitration pursuant to Minn. Stat. § 572.09 (2004).  The district court granted the motion to stay the arbitration. 

            Appellant moved the district court to stay the motion to vacate pending appeal of the order staying the second arbitration; the district court denied the stay.  On appeal, this court denied the stay of the motion to vacate.  The district court subsequently denied appellant's motion to vacate the first arbitration award.  This appeal follows from the district court's order staying the second arbitration.

D E C I S I O N

            Appellant contends that the district court erred by staying the second arbitration proceeding because the present dispute falls within the arbitration clause and because it represents a novel dispute not already determined at the first arbitration.  Respondent argues that the management agreement does not provide for serial arbitrations and that appellant seeks to relitigate the very issues that were determined in the first arbitration: whether respondent was terminated as manager of Camp Snoopy and what termination payment is due as a result of that termination. 

            The procedural posture of this case is somewhat unusual.  Respondent brought the motion for temporary relief under alternative theories:  for a stay of arbitration pursuant to Minn. Stat. § 572.09 (2004), or for injunctive relief under Minn. R. Civ. P. 65.  The district court granted respondent's motion to stay the second arbitration, but did so by analyzing the factors for granting injunctive relief. 

            Arbitration is favored in Minnesota "as a speedy, informal, and relatively inexpensive procedure for resolving controversies."  Lickteig v. Alderson, Ondov, Leonard & Sween, P.A., 556 N.W.2d 557, 562 (Minn. 1996).[1] Consistent with our policy favoring arbitration, written agreements to arbitrate are presumed to be "valid, enforceable, and irrevocable."  Minn. Stat. § 572.08 (2004).  Contracting parties are generally free to establish the bounds of an agreement to arbitrate, and the contracted provisions are considered binding.  Cmty. Partners Designs, Inc. v. City of Lonsdale, 697 N.W.2d 629, 632 (Minn. App. 2005). 

            But a court may protect a party from arbitration "if there is no agreement to arbitrate, or if the controversy sought to be arbitrated is not within the scope of the contract's arbitration clause."  Id. Indeed, Minn. Stat. § 572.09 provides procedures by which parties may seek to compel or stay arbitration:

(a) On application of a party showing an agreement [to arbitrate], and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied. 

 

(b) On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate.  Such an issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party.  If found for the opposing party, the court shall order the parties to proceed to arbitration.   

 

            But while a court will generally compel arbitration if an agreement to arbitrate exists and if the issue to be arbitrated is within the scope of the arbitration clause, id, the Minnesota Supreme Court has "allowed for judicial discretion and the balancing of considerations in the application of these provisions," Stillwater Leased Hous. Assocs. v. Kraus-Anderson Constr. Co., 319 N.W.2d 424, 426-27 (Minn. 1982) (applying 1980 version of statute).  Further, "[t]he basis for the favored status which arbitration usually enjoys in this court [is] that it generally expedites the settlement of disputes simply, clearly, and inexpensively . . . .  Where arbitration would increase rather than decrease delay, complexity, and costs, it should not receive favored treatment."  Prestressed Concrete, Inc. v. Adolfson & Peterson, Inc, 308 Minn. 20, 24, 240 N.W.2d 551, 553 (1976).  Thus, the district court has discretion to determine whether, under the particular circumstances of a given case, parties to a dispute should be ordered to arbitration.         

            Here, appellant sought to litigate in the second arbitration one of the very same issues it presented to the district court in its motion to vacate the first arbitration award: the issue of fraud as it relates to respondent's alleged failure to disclose the existence of certain licensing agreements concerning the Peanuts characters.  The district court's primary rationale for staying the second arbitration hearing was to allow the court to first make a decision on the motion to vacate.  We also note the district court's concerns about possible collateral-estoppel effects, given the fact that both the vacation proceeding and the second arbitration would be addressing the fraud issue.  Minnesota policy strongly favors the finality of arbitration awards.  Erickson v. Great Am. Ins. Cos., 466 N.W.2d 430, 432 (Minn. App. 1991).  Allowing a second arbitration to proceed under these circumstances would not further that policy. 

            In addition, the district court's decision to temporarily stay the second arbitration proceeding is consistent with Minnesota's policy favoring arbitration, in light of the underlying principles of sound judicial administration and the efficient dispensation of justice.  Given the procedural morass that would be created by having concurrent arbitration and vacation proceedings addressing the issue of fraud related to the disclosure of the Peanuts licensing agreements, we conclude that the temporary stay of arbitration proceedings represented an appropriate exercise of the district court's discretion.

            Affirmed.

[1] In fact, Minnesota was the first state to adopt the Uniform Arbitration Act.  See Uniform Arbitration Act, ch. 633, §§ 1-24, 1957 Minn. Laws 849, 849-56 (codified as Minn. Stat. §§ 572.08-.30 (1980)).