Delashmutt v. Parker Group Investments, LLC
366 P.3d 769
Or. Ct. App.2016Background
- In June 2007 five parties (Thornburgh Resort Co., Parker Group Investment LLC, Jeffrey Parker, Bill Wilt, and Kameron DeLashmutt) signed an Investment Agreement to develop a resort; the Agreement designates Parker Group as “Lender” and Thornburgh Resort as “Borrower.”
- Paragraph 12.3 of the Investment Agreement provides for binding arbitration of controversies or claims “between the Borrower and Lender” under Arbitration Services of Portland rules.
- The Trail Crossing Trust (with Agnes DeLashmutt as trustee) loaned $122,000 to Thornburgh; Thornburgh executed promissory notes and Parker Group, Parker, and Wilt guaranteed repayment; Agnes later held the assigned notes.
- Thornburgh defaulted; Agnes sued Parker Group, Parker, and Wilt to enforce guarantees. They counterclaimed against Agnes and added Kameron as a counterclaim/third-party defendant, asserting contractual and common-law indemnity claims against him.
- Kameron petitioned to compel arbitration of the claims against him based on Paragraph 12.3. The trial court denied the petition; Kameron timely appealed under ORS 36.730(1)(a).
- The Court of Appeals reviewed de novo legal interpretation of the arbitration clause and affirmed the denial, concluding the clause unambiguously covers only disputes between Parker Group (Lender) and Thornburgh Resort (Borrower).
Issues
| Issue | Plaintiff's Argument (K. DeLashmutt) | Defendant's Argument (Parker Group, Parker, Wilt) | Held |
|---|---|---|---|
| Whether the arbitration clause covers claims against Kameron | The clause should be read to require arbitration of claims involving any signatory, including Kameron; construing it narrowly defeats efficiency and the parties' expectations | The clause by its plain terms applies only to disputes between the Borrower (Thornburgh) and Lender (Parker Group), not to claims against individual signatories | The clause is unambiguous and limited to disputes between Thornburgh (Borrower) and Parker Group (Lender); claims against Kameron are not arbitrable under that clause |
| Proper interpretive approach for arbitration provisions | Ambiguity should be resolved in favor of arbitration to compel arbitration of Kameron’s disputes | Ordinary contract interpretation governs; presumption in favor of arbitration applies only when ambiguity remains after interpreting the contract | Applied ordinary contract interpretation; because the clause is unambiguous, the presumption in favor of arbitration did not alter the result |
| Whether court may rewrite clear contractual terms for efficiency | The court should favor functional outcomes and efficiency over literal labels | Courts must not rewrite contracts; they must enforce the clear terms the parties drafted | Court declined to rewrite the Agreement; enforced the plain text identifying Borrower and Lender |
| Appealability of denial to compel arbitration | (implicit) Appeal permitted under ORS 36.730(1)(a) | (implicit) Same | The appealable order affirmed — denial to compel arbitration is reviewable and was properly denied |
Key Cases Cited
- Citigroup Smith Barney v. Henderson, 241 Or. App. 65 (Or. Ct. App. 2011) (standards for reviewing arbitration decisions)
- Industra/Matrix Joint Venture v. Pope & Talbot, 341 Or. 321 (Or. 2006) (contract interpretation rules applied to arbitration clauses)
- Peace River Seed Co-Op v. Proseeds Marketing, 204 Or. App. 523 (Or. Ct. App. 2006) (contract construction principles in commercial agreements)
- Adair Homes, Inc. v. Dunn Carney, 262 Or. App. 273 (Or. Ct. App. 2014) (presumption in favor of arbitration applies only when contract ambiguity persists)