DUNBAR ENGINEERING CORP. v. RHINOSYSTEMS, INC.

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DUNBAR ENGINEERING CORP. v. RHINOSYSTEMS, INC.
2010 OK CIV APP 49
232 P.3d 931
Case Number: 106109
Decided: 04/06/2010
Mandate Issued: 05/06/2010
DIVISION II
THE COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION II

DUNBAR ENGINEERING CORPORATION, Plaintiff/Appellee,
v.
RHINOSYSTEMS, INC., Defendant/Appellant.

APPEAL FROM THE DISTRICT COURT OF TULSA COUNTY, OKLAHOMA

HONORABLE REBECCA BRETT NIGHTINGALE, TRIAL JUDGE

REVERSED AND REMANDED FOR FURTHER PROCEEDINGS

Douglas R. Scott, THE BAKER LAW FIRM, PLLC, Owasso, Oklahoma, for Plaintiff/Appellee
Robert J. Bartz, Joe M. Fears, David M. vonHartitzsch, BARBER & BARTZ, Tulsa, Oklahoma, for Defendant/Appellant

DEBORAH B. BARNES, JUDGE:

¶1 Rhinosystems, Inc., appeals the trial court's Order Compelling Arbitration filed on June 25, 2008, in which the trial court ordered Rhinosystems and Dunbar Engineering Corporation (Dunbar), to "proceed to arbitrate [their] controversy in accordance with the terms of the arbitration provision contained in the Engineering Services Proposal . . . ." We find that the trial court erred in refusing to conduct an evidentiary hearing on Dunbar's Motion to Compel Arbitration and in overruling Rhinosystems's Motion to Reconsider. Therefore, we reverse and remand this case to the trial court to conduct an evidentiary hearing to resolve the contested issues of fact regarding whether a contract was formed to arbitrate disputes between the parties.

FACTS AND PROCEDURAL BACKGROUND

¶2 Rhinosystems, an Ohio corporation, develops, manufactures, and markets nasal irrigation devices. In 2007, Rhinosystems completed the initial development of such a device.

¶3 Dunbar is an engineering firm located in Oklahoma. After preliminary emails and telephone conversations between Dunbar and Rhinosystems regarding the device in early November 2007, Dunbar, pursuant to Rhinosystems's request,1 sent Rhinosystems an "Engineering Services Proposal" and "Rate Schedule" (the Proposal) on November 13, 2007. The Proposal set forth, inter alia, the tasks Dunbar would undertake (divided into three "phases"), the per hour rate of Dunbar's staff, and contained the following arbitration provision:

Any disputes are subject to binding arbitration with a [Dunbar] selected Tulsa attorney or arbitration firm. [Dunbar's] client will pay [Dunbar's] attorney, arbitration and court fees incurred. [Dunbar's] liability for damages due to professional negligence will be limited to the fee or appropriate portion.2

¶5 After a dispute over billing arose between the parties, Dunbar commenced this case by filing an Initial Application and Motion to Compel Arbitration on February 27, 2008. Dunbar requested the trial court to order Rhinosystems "to proceed to arbitration in accordance with the Arbitration Agreement between the parties."

¶6 In its Brief in Opposition filed on April 15, 2008, Rhinosystems objected to Dunbar's motion. Rhinosystems attached an affidavit from its president, who averred that he ultimately rejected the Proposal, did not sign it, and that he had never discussed the arbitration clause with Dunbar.

Attached as Exhibit B is [the Proposal] provided by Dunbar identifying the work that Dunbar was to do, the cost for completing the work and the associated rate schedule. [The Proposal] was never signed by [Rhinosystems]; however, Dunbar was orally instructed to proceed with the work identified as Phase One by [the Proposal].

In its complaint to the Board, Rhinosystems also complained that "Dunbar has not completed the tasks of its Proposal, Phase One . . . ." Dunbar also attached some emails between Rhinosystems and Dunbar which, it argues, further support its claim that Rhinosystems accepted the Proposal.

¶7 In a Notice of Hearing to set the date for a status conference, filed on May 14, 2008, the trial court granted Dunbar's Motion to Compel Arbitration. On May 29, 2008, Rhinosystems filed a Motion to Reconsider in which, inter alia, it requested that the trial court conduct "an evidentiary hearing to resolve the fact issues between the parties as to whether an agreement to arbitrate existed and, if so, whether enforcement of such provision would be unconscionable."

¶8 The trial court denied Rhinosystems's Motion to Reconsider and its request for an evidentiary hearing found therein. In an Order Compelling Arbitration filed on June 25, 2008, the trial court found that (1) the parties entered into an agreement for engineering services according to the terms of the Proposal drafted and submitted by Dunbar to Rhinosystems, (2) the terms of the parties' agreement contained a provision that any disputes would be subject to binding arbitration, and (3) a dispute has arisen between the parties concerning payment and services under the agreement and this dispute is subject to the arbitration provision in the agreement. Therefore, the trial court ordered Rhinosystems and Dunbar to "proceed to arbitrate [their] controversy in accordance with the terms of the arbitration provision contained in [the Proposal] . . . ." From this order, and the order denying its Motion to Reconsider, Rhinosystems appeals.

STANDARD OF REVIEW

¶9 Either party may request an evidentiary hearing on the motion to compel arbitration. Rogers v. Dell Computer Corp.,

¶10 A motion to reconsider is not recognized in Oklahoma procedural statutes. McMillian v. Holcomb,

ANALYSIS

¶11 As stated above, either party may request an evidentiary hearing on the motion to compel arbitration. Rogers,

¶12 Highly contested fact issues exist regarding the terms of the agreement for engineering services entered into by the parties. In particular, the parties dispute whether the arbitration clause was part of their agreement. As quoted in full above, Rhinosystems admitted in its complaint to the Board that it "instructed [Dunbar] to proceed with the work identified as Phase One by [the Proposal]." Rhinosystems complained that the invoices it received from Dunbar substantially exceeded the amount set forth for Phase One in the Proposal and "the work completed was substantially less than what had been promised for Phase One."

¶14 Dunbar's Motion to Compel Arbitration and its replies to Rhinosystems's response are not verified and the factual contentions contained therein are not supported by any sworn testimony contesting statements in Rhinosystems's affidavit. The only evidence offered by Dunbar to controvert Rhinosystems's affidavit is contained in various exhibits, none of which, if ultimately authenticated, conclusively establishes Rhinosystems's acceptance of the arbitration clause contained in the Proposal.

¶15 Because the existence of an agreement to arbitrate is controverted, the better procedure is for the trial court to conduct an evidentiary hearing. Rogers, at ¶ 17, 138 P.3d at 830. In fact, because Rhinosystems requested an evidentiary hearing on this highly contested fact issue before the June 25, 2008 Order Compelling Arbitration, the trial court was duty-bound under Rule 4(c) of the Rules for District Courts to grant the requested evidentiary hearing. Oklahoma Oncology & Hematology P.C., at ¶ 36, 160 P.3d at 950. We find no difference between a request for an evidentiary hearing made before the trial court rules on the motion to compel arbitration and a request made in a motion to reconsider that ruling, particularly where, as here, Rhinosystems requested a hearing almost a month before the trial court's Order Compelling Arbitration was filed. Requiring an evidentiary hearing under these circumstances comports with precepts of procedural due process. Id.

CONCLUSION

¶16 We find that the trial court erred in refusing to conduct an evidentiary hearing on Dunbar's Motion to Compel Arbitration and in overruling Rhinosystems's Motion to Reconsider. Therefore, we reverse and remand this case to the trial court to conduct an evidentiary hearing to resolve the contested issues of fact regarding whether a contract was formed to arbitrate disputes between the parties.

WISEMAN, C.J., and FISCHER, P.J., concur.

FOOTNOTES

1 Record, p. 18.

2 R., p. 7.

3 R., p. 35.

4 R., p. 18.

5 R., p. 9.