The University of Iowa, Board of Regents, State of Iowa v. The American Arbitration Association and Modern Piping, Inc. ( 2019 )

IN THE COURT OF APPEALS OF IOWA
No. 17-0949
Filed January 9, 2019
THE UNIVERSITY OF IOWA, BOARD OF REGENTS, STATE OF IOWA,
Plaintiffs-Appellants,
vs.
THE AMERICAN ARBITRATION ASSOCIATION,
Defendant-Appellee,
MODERN PIPING, INC.,
Intervenor/Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Johnson County, Mary E. Chicchelly,
Judge.
The petitioners appeal the order granting summary judgment on their action
to enjoin the American Arbitration Association from arbitrating a contract dispute.
AFFIRMED.
Thomas J. Miller, Attorney General, and George A. Carroll, Assistant
Attorney General, for appellants.
John A. Templer Jr. and Zachary J. Hermsen of Whitfield & Eddy, P.L.C.,
Des Moines, for appellee The American Arbitration Association.
Jeffrey A. Stone and Gail Brashers-Krug of Simmons Perrine Moyer
Bergman PLC, Cedar Rapids, for appellee Modern Piping, Inc.
Heard by Potterfield, P.J., Doyle, J., and Danilson, S.J.
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2019).
2
DOYLE, Judge.
The University of Iowa, Board of Regents, and State of Iowa (petitioners)
appeal from the order granting summary judgment on their action to enjoin the
American Arbitration Association (AAA) from arbitrating a contract dispute. They
contend the district court erred in determining the doctrine of arbitral immunity
prevents them from enjoining the AAA from arbitrating the dispute.
I. Background Facts and Proceedings.
Modern Piping, Inc. contracted to perform work on two building projects at
the University of Iowa. Both contracts contain the following arbitration provision:
[A]ny claim, dispute or other matter in question between the
Contractor and the Owner referred to the Design Professional,
except those which have been waived by the making or acceptance
of final payment as provided in the Uniform General Conditions of
the Contract, shall be subject to arbitration in accordance with the
provisions of the Uniform General Conditions of the Contract.
When disputes arose with regard to each contract, Modern Piping filed demands
for arbitration with the AAA.
The petitioners filed an action against the AAA,1 seeking to enjoin it from
arbitrating the disputes. The district court issued a temporary injunction but
dissolved it after determining that the doctrine of arbitral immunity applied. The
court granted the AAA’s motion for summary judgment, dismissing the action on
the same ground. The petitioners appealed.
1
Modern Piping was not named as a party to the action but successfully moved to
intervene.
3
II. Scope and Standard of Review.
We review summary judgment rulings for correction of errors at law. See
Honomichl v. Valley View Swine, LLC, 914 N.W.2d 223, 230 (Iowa 2018).
Summary judgment is appropriate when the only conflict concerns the legal
consequences that flow from the undisputed facts. See id. We will affirm the grant
of summary judgment if, when viewing the facts and all inferences that may be
taken from them in the light most favorable to the nonmoving party, the moving
party is entitled to judgment as a matter of law. See id.
III. Discussion.
The sole question before us is whether the doctrine of arbitral immunity
applies. The doctrine provides that arbitrators are immune from liability for acts
performed in their arbitral capacity. See 4 Am. Jur. 2d Alternative Dispute
Resolution § 154. It “generally shields all functions which are integrally related to
the arbitral process.” Id. In determining whether a claim against an arbitrator
arises out of a decisional act, the question is “whether the claim effectively seeks
to challenge the decisional act of an arbitrator or arbitration panel.” Id. If so, the
doctrine applies; if not, the doctrine is inapplicable. See id. This immunity extends
to associations administering arbitration procedures. See, e.g., Corey v. NYSE,
691 F.2d 1205, 1211 (6th Cir. 1982) (“Extension of arbitral immunity to encompass
boards which sponsor arbitration is a natural and necessary product of the policies
underlying arbitral immunity; otherwise the immunity extended to arbitrators is
illusionary. It would be of little value to the whole arbitral procedure to merely shift
the liability to the sponsoring association.”).
4
The petitioners argue that arbitral immunity does not apply to the AAA
because it is without jurisdiction to arbitrate the dispute. Although no Iowa case
has addressed the issue, other courts have rejected this contention. See Int’l Med.
Grp., Inc. v. Am. Arbitration Ass’n, Inc., 312 F.3d 833, 842 (7th Cir. 2002) (noting
“[t]he cases uniformly support arbitral immunity in situations such as occurred
here” in reaching its conclusion that the AAA was immune from a suit based on
wrongful exercise of jurisdiction). Those courts have found that arbitral immunity
applies unless there is a “clear absence” of jurisdiction. New England Cleaning
Servs., Inc. v. Am. Arbitration Ass’n, 199 F.3d 542, 545 (1st Cir. 1999). To hold
otherwise
would require arbitral organizations, not courts or arbitrators, to
themselves resolve what might well turn out to be significant
threshold legal issues long before any hearing. . . . Forcing the AAA
itself to preliminarily address potentially complex legal issues would
not only impose an unwelcome burden, but would interfere with the
organization’s neutrality and likely add further cost and delay to the
arbitral process.
Id. at 546. “Unless the parties clearly and unmistakably provide otherwise, the
question of arbitrability is to be decided by a court, not by an arbitrator.” Int’l Med.
Grp., 312 F.3d at 842-43.
The petitioners argue the lack of court order determining the AAA had
jurisdiction to arbitrate the dispute indicates a clear absence of its jurisdiction.
However, the question is not whether a court has determined the AAA has
jurisdiction to arbitrate a dispute; the question is whether the arbitration demand
“was not facially valid so that jurisdiction was clearly lacking.” See New England
Cleaning Servs., 199 F.3d at 545-46 (holding the AAA maintained arbitral immunity
even though the district court determined it lacked jurisdiction or authority to
5
arbitrate the dispute where the demand for arbitration was not so deficient on its
face as to signal a “clear absence” of jurisdiction). The petitioners fall short of
showing the “clear absence” of jurisdiction required to divest the AAA of its arbitral
immunity, as this litigation illustrates. See id. at 545 (finding the question of
jurisdiction “was not facially obvious” where “it took a nine-page memorandum and
order by the district court and a full opinion of this court to deal with the legal issues
involved”).
Although arbitral immunity prevents the petitioners from enjoining the AAA
from arbitrating the dispute, they were not without a remedy. “[A]ny party to an
arbitration can obtain relief by seeking a stay against the party bringing the
arbitration. There is no need to seek a stay against the sponsoring organization.”
Int’l Med. Grp., 312 F.3d at 843-44 (noting that “[t]he appropriate remedy . . . would
be for the wronged party to seek injunctive relief against the party initiating the
arbitration in an appropriate court,” an action that the AAA “need not be a party to”
because the AAA “should be spared the burden of litigating the appropriateness of
its exercise of jurisdiction”).
Because the doctrine of arbitral immunity applies, the district court properly
granted summary judgment in the AAA’s favor.
AFFIRMED.