Loren Imhoff Homebuilder, Inc. v. Lisa Taylor ( 2022 )

2022 WI 12SUPREME COURT OF WISCONSIN
CASE NO.: 2019AP2205
COMPLETE TITLE: Loren Imhoff Homebuilder, Inc.,
Petitioner-Appellant,
v.
Lisa Taylor and Luis Cuevas,
Respondents-Respondents-Petitioners.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at 395 Wis. 2d 178,953 N.W.2d 353(2020 – unpublished)
OPINION FILED: March 1, 2022
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: October 4, 2021
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Dane
JUDGE: Frank D. Remington
JUSTICES:
ROGGENSACK, J., delivered the majority opinion for a unanimous
Court.
NOT PARTICIPATING:
KAROFSKY, J., did not participate.
ATTORNEYS:
For the respondents-respondents-petitioners, there were
briefs filed by Deborah C. Meiners, Barret V. Van Sicklen, Jordan
Rohlfing, and DeWitt LLP, Madison. There was an oral argument by
Barret V. Van Sicklen.
For the petitioner-appellant, there was a brief filed by Paul
W. Schwarzenbart, Jeffrey W. Younger, and Stafford Rosenbaum LLP,
Madison. There was an oral argument by Paul W. Schwarzenbart.
2022 WI 12NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2019AP2205
(L.C. No. 2016CV3177)
STATE OF WISCONSIN : IN SUPREME COURT
Loren Imhoff Homebuilder, Inc.,
Petitioner-Appellant, FILED
v. MAR 1, 2022
Lisa Taylor and Luis Cuevas, Sheila T. Reiff
Clerk of Supreme Court
Respondents-Respondents-Petitioners.
ROGGENSACK, J., delivered the majority opinion for a unanimous
Court.
KAROFSKY, J., did not participate.
REVIEW of a decision of the Court of Appeals. Reversed and
cause remanded.
¶1 PATIENCE DRAKE ROGGENSACK, J. We review the decision
of the court of appeals1 that applied the doctrine of forfeiture
as the basis for its reversal of the circuit court's2 vacatur of
1Loren Imhoff Homebuilder, Inc. v. Taylor, 2020 WI App 80,
395 Wis. 2d 178, 953 N.W.2d 353.
2The Honorable Frank D. Remington of Dane County Circuit
Court presided.
No. 2019AP2205
Loren Imhoff Homebuilder, Inc.'s ("Imhoff") arbitral award under
Wis. Stat. § 788.10(1) (2019-2020).3 On our review, Lisa Taylor
and Luis Cuevas ("the homeowners") urge us to reverse the court of
appeals, arguing that they did not forfeit their objections to the
arbitrator's conduct because they properly raised them before the
arbitral award was issued. Furthermore, they assert that the
arbitrator's sleeping was both misbehavior that resulted in
prejudice and indicative of a flawed process to the extent that
the vacatur of the arbitral award was required under both
§§ 788.10(1)(c) and (1)(d).
¶2 We conclude that, because the homeowners objected to the
arbitrator's sleeping before he issued the arbitral award, they
did not forfeit their objection. However, we are evenly divided
on whether the arbitration award should be vacated pursuant to
Wis. Stat. § 788.10. Therefore, we reverse the decision of the
court of appeals and remand the matter to the court of appeals for
consideration of § 788.10 issues.
I. BACKGROUND
¶3 This case originates from a construction contract that
Imhoff entered into with the homeowners for a remodeling project
on their home. Eight months into the contract, the homeowners
were dissatisfied with the work completed by Imhoff, alleging a
number of deficiencies that they asserted breached the
construction contract, as well as discrepancies in Imhoff's
3All references to the Wisconsin Statutes are to the 2019-
2020 version unless otherwise indicated.
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No. 2019AP2205
billing invoices. Following an unsuccessful attempt at mediation,
Imhoff filed a petition to compel arbitration under the terms of
the contract, which was granted by the circuit court.
¶4 The arbitration commenced before a single arbitrator and
consisted of a five-day evidentiary hearing. Following the
conclusion of the hearing, but prior to the conferment of the
arbitral award, the homeowners raised objections to the
arbitration proceedings and asked the arbitrator to recuse.
Specifically, the homeowners asserted that the arbitrator was
biased towards Imhoff, and that the arbitrator repeatedly fell
asleep and missed the presentation of evidence by their expert
witness. The arbitrator denied the homeowners' motion and awarded
Imhoff over $320,000 in damages and fees. The arbitrator did not
directly address the homeowners' allegation that he was sleeping
during the hearing.4 Imhoff subsequently brought a motion in
circuit court to confirm the arbitral award. The homeowners
opposed Imhoff's motion and moved to vacate the award based,
partly, on the arbitrator's sleeping.
¶5 The circuit court took testimony from the parties and
their counsel regarding the arbitrator's sleeping during the
arbitration hearing. The homeowners testified that his sleeping
happened repeatedly and that "[t]here was never a day . . . where
4 The allegation that the arbitrator was sleeping was not
mentioned in his arbitral Decision and Order. It was mentioned in
note 2 of the Order Denying Recusal: "Ms. Taylor's suggestion
that my drowsiness somehow explains why I was unaware of recordings
having been made continuously over the course of a five-day
arbitration hearing is incredible on its face."
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No. 2019AP2205
he was not sleeping." Specifically, the homeowners noted that the
arbitrator had "glazed eyes, haziness, drowsiness, and sometimes
[went into a state of outright] sleep." The homeowners further
testified that the arbitrator's sleeping prejudiced their case
because it often coincided with their expert witness's testimony.
¶6 After hearing testimony from the parties and Imhoff's
attorney in regard to the allegation that the arbitrator was
sleeping, the circuit court said it found the homeowners' testimony
regarding the sleeping to be "credible." Conversely, it found
Imhoff's counsel's testimony——that he did not see the arbitrator
sleeping——to be "more [of] an acknowledgment" and "certainly not
a denial" because he did not reject "the general proposition that
[the arbitrator] was sleeping."
¶7 Following the testimony, the circuit court concluded
that the homeowners had "satisfied [their] burden by clear and
convincing evidence that [the arbitrator] so imperfectly executed
his power that an award upon the subject was not made."
Accordingly, the circuit court denied Imhoff's motion to confirm
the award, granted the homeowners' motion to vacate, and remanded
the case for a new arbitration of the dispute with a different
arbitrator. Imhoff appealed.
¶8 The court of appeals reversed, holding that by failing
to raise the arbitrator's sleeping during evidentiary testimony at
the hearing, failing to voice an objection requesting the
arbitrator to reconsider any missed evidence, and waiting to raise
the issue of sleeping until after the close of evidence, "the
homeowners forfeited drowsiness or sleeping by the arbitrator as
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No. 2019AP2205
a basis to vacate the award."5 Loren Imhoff Homebuilder, Inc. v.
Taylor, 2020 WI App 80, ¶14, 395 Wis. 2d 178, 953 N.W.2d 353.
¶9 We granted the homeowners' petition for review. We
determine: (1) whether the doctrine of forfeiture may be applied
in an arbitration setting and, if so, (2) whether it should have
been applied here.
II. DISCUSSION
A. Standard of Review
¶10 Whether a party has forfeited its right to raise an issue
on appeal is a question of law that we review independently. City
of Eau Claire v. Booth, 2016 WI 65, ¶6, 370 Wis. 2d 595, 882 N.W.2d
738. See also State v. Coffee, 2020 WI 1, ¶17, 389 Wis. 2d 627,
937 N.W.2d 579 ("Whether a claim is forfeited or adequately
preserved for appeal is a question of law this court reviews de
novo."). Additionally, whether a violation of Wis. Stat.
§ 788.10(1) occurred, thereby requiring vacatur of an arbitral
award, is a question of law that we review independently. Racine
Cnty. v. Int'l Ass'n of Machinists & Aerospace Workers Dist. 10,
AFL-CIO, 2008 WI 70, ¶11, 310 Wis. 2d 508, 751 N.W.2d 312. And
finally, we affirm the "circuit court's findings of fact unless
they are unsupported by the record and are . . . clearly
Because the court of appeals resolved the appeal based on
5
the forfeiture issue, it did not consider the issue of vacatur of
the arbitral award. Id., ¶15 ("Because we resolve this appeal
based on the homeowners' forfeiture, we need not reach the
statutory and common law standards that guide courts in addressing
a request to vacate an arbitration award.").
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No. 2019AP2205
erroneous." Royster-Clark, Inc. v. Olsen's Mill, Inc., 2006 WI
46, ¶11, 290 Wis. 2d 264, 714 N.W.2d 530.
B Arbitration Generally
¶11 Arbitration is, first and foremost, a matter of
contract. Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67,
(2010). It is "a method of dispute resolution in which the parties
submit a dispute to an impartial person who has been selected by
the parties for a final and binding decision." 7 Jay E. Grenig &
Nathan A. Fishbach, Wisconsin Practice Series: Arbitration §
86:40 (5th ed. 2021). Arbitration can provide a "prompt and
efficient method for resolving disputes without the expense,
delays, or complications that are inherent in litigation." Id.
Because arbitration occurs outside of the court system, it does
not carry with it the same formality inherent in the judicial
process. Id.
¶12 Arbitration proceedings are not required to follow
procedures that are applicable to a court. Arbitration procedures
are established by contract and are "enforceable except upon such
grounds as exist at law or in equity for the revocation of any
contract." Wis. Stat. § 788.01. The arbitrators are not required
to have any legal education or background and are, instead, chosen
based on "their integrity and impartiality as well as for their
professional competence and knowledge of business affairs."
Grenig & Fishbach, supra, § 86:44; see also Newark Stereotypers'
Union No. 18 v. Newark Morning Ledger Co., 397 F.2d 594, 599 (3d
Cir. 1968) (describing that most arbitrators are laymen). Unless
limited by statute, rule, or arbitration agreement, "arbitrators
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No. 2019AP2205
have considerable discretion as to the mode of conduct[ing] the
proceeding." See Grenig & Fishbach, supra, § 86:45. In addition,
representation by counsel is not required in all arbitrations.
Id.
C. Forfeiture in Arbitration
¶13 We "often [have] referred to the issue preservation rule
as the 'waiver rule' in the past." State v. Huebner, 2000 WI 59,
¶11 n.2, 235 Wis. 2d 486, 611 N.W.2d 727. Although opinions
sometimes use "'forfeiture' and 'waiver' interchangeably, the two
words embody very different legal concepts. 'Whereas forfeiture
is the failure to make the timely assertion of a right, waiver is
the intentional relinquishment or abandonment of a known right.'"
State v. Ndina, 2009 WI 21, ¶29, 315 Wis. 2d 653, 761 N.W.2d 612(quoting United States v. Olano, 507 U.S. 725, 733 (1993)).
¶14 Whether a right is forfeited or waived depends, in part,
on the state of mind of the non-objecting party. Forfeiture has
been consistently understood as failing to claim a right at trial
or the simple failure to object. Ndina, 315 Wis. 2d 653, ¶30.
Non-actions may result in forfeiture of the right on appellate
review. Id. There is no subjective component to the forfeiture
analysis; it occurs by operation of law. See State v. Kelty, 2006
WI 101, ¶18 n.11, 294 Wis. 2d 62, 716 N.W.2d 886 (citing Peter
Westen, Away from Waiver: A Rationale for the Forfeiture of
Constitutional Rights in Criminal Procedure, 75 Mich. L. Rev.
1214, 1214 (1975) (explaining that forfeiture "occurs by operation
of law without regard to the defendant's state of mind")).
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No. 2019AP2205
¶15 Conversely, because waiver is the intentional
relinquishment of a known right, see Ndina, 315 Wis. 2d 653, ¶29,
there is a subjective component to determine whether the failure
to assert the right was done knowingly. The determination of
whether there has been a knowing waiver depends, in each case,
"upon the particular facts and circumstances surrounding that
case, including the background, experience, and conduct of the
accused." Johnson v. Zerbst, 304 U.S. 458, 464 (1938). Therefore,
as the court of appeals correctly determined,6 because this case
involves the potential failure to object, it implicates issues of
forfeiture rather than waiver.
¶16 As part of the adversarial system, forfeiture
historically has been applied to aspects of the arbitration process
in Wisconsin. For example, in 1876, we determined that a party's
argument regarding an arbitrator's possible bias had not been
preserved and that "by accepting him as an arbitrator, [the party
had] waived[7] any right to object to him for that reason." Kane
v. City of Fond du Lac, 40 Wis. 495, 501 (1876); see also Borst v.
Allstate Ins. Co., 2006 WI 70, ¶36, 291 Wis. 2d 361, 717 N.W.2d 42("A failure to initially object to the selection of an arbitrator,
based on the information disclosed prior to the arbitration, may
act as a forfeiture of any subsequent post-arbitration challenge
6 See id, ¶21 n.5.
7 Because this case involved a litigant's failure to raise an
issue as the reason for its non-preservation, it should properly
be understood to constitute forfeiture rather than waiver. See
State v. Ndina, 2009 WI 21, ¶29, 315 Wis. 2d 653, 761 N.W.2d 612.
8
No. 2019AP2205
[based] on the disclosed information."). Furthermore, in a
challenge to the scope of an arbitrator's authority, Wisconsin
courts have held that "a party cannot complain to the courts that
the arbitrator acted outside the scope of his or her authority if
the objection was not first raised before the arbitrator." De Pue
v. Mastermold, Inc., 161 Wis. 2d 697, 705, 468 N.W.2d 750 (Ct.
App. 1991).
¶17 Wisconsin's usage of forfeiture in the arbitration
context is consistent with the majority of other jurisdictions
around the country. See, e.g., Howard Univ. v. Metro. Campus
Police Officer's Union, 512 F.3d 716, 720 (D.C. Cir. 2008) ("[A]
party that does not object to the arbitrator's jurisdiction during
the arbitration may not later do so in court."); Cummings v. Future
Nissan, 27 Cal. Rptr. 3d 10, 14-16 (Cal. Ct. App. 2005), as
modified (Apr. 8, 2005) ("[A] party who knowingly participates in
the arbitration process without disclosing a ground for declaring
it invalid is properly cast into the outer darkness of
forfeiture.").
¶18 Specifically, in terms of "when" during an arbitration
an objection must be made in order to preserve it, many
jurisdictions, including Wisconsin, agree that a proper time to
raise an objection is before the arbitration award is issued. See
City of Manitowoc v. Manitowoc Police Dep't, 70 Wis. 2d 1006, 1021,
236 N.W.2d 231 (1975) ("A party cannot attack procedural
irregularities after an award when he was aware of them earlier
but remained silent until an unfavorable outcome."); see also
Ahluwalia v. QFA Royalties, LLC, 226 P.3d 1093, 1098 (Colo. App.
9
No. 2019AP2205
2009) ("If a party willingly allows an issue to be submitted to
arbitration, it cannot await the outcome and later argue that the
arbitrator lacked authority to decide the matter."); AAOT Foreign
Econ. Ass'n (VO) Technostroyexport v. Int'l Dev. & Trade Servs.,
Inc., 139 F.3d 980, 982 (2d Cir. 1998) ("The settled law of this
circuit precludes attacks on the qualifications of arbitrators on
grounds previously known but not raised until after an award has
been rendered.").
¶19 Here, the court of appeals determined that, because the
homeowners did not raise their objections regarding the
arbitrator's sleeping during the evidentiary hearing, they
forfeited any objection to his sleeping. Loren Imhoff Homebuilder,
Inc., 395 Wis. 2d 178, ¶35. However, unlike a judicial evidentiary
hearing, where case law directs a general rule that failure to
contemporaneously object to an issue may result in forfeiture of
the argument on appeal, this arbitration hearing had no such rule.
An arbitration hearing is subject to the conditions or rules of
arbitration chosen by the parties. Arbitration often is selected
in order to escape the formalities inherent in a judicial process.
Arbitration's chief concern is that the arbitration contract be
followed, unless "such grounds as exist at law or in equity for
the revocation of any contract" are present. Wis. Stat. § 788.01;
Grenig & Fishbach, supra, § 86:45.
¶20 In discerning whether the objection took place during
the hearing or after the hearing, the court of appeals failed to
consider the following: neither party had prior notice of the
issue now in dispute, i.e., the arbitrator's sleeping, and an
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No. 2019AP2205
arbitration is not concluded until the arbitral award is issued.
City of Manitowoc, 70 Wis. 2d at 1021.
¶21 The arbitral award is the arbitrator's decision on the
merits of the disputes that were subjected to arbitration.
Therefore, as long as an objection to a new issue is raised before
the merits are decided, the policy goals underlying forfeiture are
protected and the fairness of the proceeding is preserved. Before
the award is issued, the arbitrator can reopen testimony to hear
or rehear testimony and to correct any perceived errors without
resorting to the appeals process. Furthermore, by raising an issue
to the arbitrator, the danger of "sandbagging" the process and
claiming the unraised issues as a grounds for reversal is
mitigated.
¶22 Here, the homeowners raised their objection to the
arbitrator's sleeping to him before he issued the arbitral award.
Even though it was after the evidentiary hearing was completed,
there remained the opportunity for the arbitrator to make
corrections for his sleeping during the evidentiary hearing.
However, he failed to do so. Therefore, because the homeowners
raised their objection before the issuance of the arbitral award,
we conclude that the issue was not forfeited and was preserved for
review by the circuit court.
¶23 The homeowners also sought review of whether the
arbitrator's sleeping merited vacatur of the arbitral award under
Wis. Stat. § 788.10. However, we are evenly divided on whether
the award should be vacated pursuant to § 788.10. Accordingly,
because the court of appeals did not reach this question in its
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No. 2019AP2205
previous opinion,8 we remand this matter to the court of appeals
for consideration of § 788.10 issues.
III. CONCLUSION
¶24 We conclude that, because the homeowners objected to the
arbitrator's sleeping before he issued the arbitral award, they
did not forfeit their objection. However, we are evenly divided
on whether the arbitral award should be vacated pursuant to Wis.
Stat. § 788.10. Therefore, we reverse the decision of the court
of appeals and remand the matter to the court of appeals for
consideration of § 788.10 issues.
By the Court.—The decision of the court of appeals is reversed
and the cause is remanded to the court of appeals for further
consideration.
¶25 JILL J. KAROFSKY, J., did not participate.
8 Loren Imhoff Homebuilder, Inc., 395 Wis. 2d 178, ¶15.
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