Arbitration board does not lose jurisdiction where parties bargained for continued arbitration

By Joe Forward, Legal Writer, State Bar of Wisconsin

Sept. 15, 2010 – The arbitration confirmation statute that requires a party to confirm an arbitration award within one year delays when parties agree to continued arbitration, a Wisconsin Appeals Court recently held.

In 2005, Michael and Lynn Sewart and Silvercryst Limited Inc. (Silvercryst) agreed to submit a dispute to the Construction Arbitration Board (CAB) of the Metropolitan Builders Association (MBA). The Sewarts had purchased a Silvercryst-constructed home in 2003 and experienced continued flooding in the basement.

In November of 2006, CAB memorialized a three-page award that gave Silvercryst an opportunity to repair the basement within 90 days. The award also noted that CAB retained the right to “assign money values to any items of work not completed in a timely fashion.” Disagreements and delays ensued, and the dispute continued for 18 months.

In March 2008, CAB ordered Silvercryst to make repairs or the MBA would issue a money award to the Sewarts. In response, Silvercryst requested that CAB reconsider the November 2006 award. CAB refused. In July 2008, CAB ruled that if flooding occurred within an extended two-year warranty period, it would issue a monetary award to complete repair work.

Despite attempted repairs, the Sewart’s basement flooded again six months later. In May 2009, CAB awarded the Sewarts $92,030, and the Sewarts immediately filed a petition in circuit court to confirm the award under Wis. Stat section 788.09, which allows a party to seek judicial confirmation of a final arbitration award within one year after the award is made.

But the circuit court accepted Silvercryst’s argument that CAB lost jurisdiction over arbitration proceedings a year after the initial award in November 2006 because the Sewarts failed to confirm the award within a year under section 788.09. Thus, the circuit court denied the petition for confirmation of the monetary award issued by CAB. The Sewarts appealed.

Reversing the circuit court, the appeals court in Sewart v. Silvercryst Limited, Inc., 2009AP2415 (Sept. 15, 2010), ruled that the Sewarts’ motion for confirmation was not barred by section 788.09’s one-year limitation because the parties “contracted for an ongoing arbitration process that provided for the continuing jurisdiction of the arbitration board.”

The appeals court examined the 2005 arbitration agreement, which gave Silvercryst an opportunity to make repairs, CAB the authority to ensure repairs were performed satisfactorily, and authority to issue a monetary award if repairs were not made.

“Examining the arbitration agreement entered into by the parties, this court concludes that the Sewarts and Silvercryst bargained for the continuing arbitration process that the CAB engaged in. … Both parties agreed that that the failure to make the necessary repairs could result in a monetary award that was confirmable in court,” the appeal court wrote.

The appeals court rejected Silvercryst’s argument that arbitration was final – and the section 788.09 one-year confirmation clock started ticking – after the CAB issued its initial November 2006 award defining the process that would take place in the ensuing months.

Instead, the court held that arbitration was final when the CAB issued the monetary award in May 2009 that ended the arbitration process set by the 2005 arbitration agreement and administered through subsequent CAB decisions.

“Chapter 788 does not prohibit an arbitration agreement providing for interim decisions flowing from continuing jurisdiction of arbitrators. … The November 15, 2006 decision was not a final decision but rather an interim order, whereby the parties expressly agreed that the CAB arbitration process would continue,” the appeals court explained.

The appeals court also rejected Silvercryst’s argument that the CAB was not impartial and, therefore, the court should vacate the CAB’s decision to award $92,030 to the Sewarts. Silvercryst, the court explained, “offers no evidence that the arbitrators were [not] impartial.”