794 N.W.2d 667
Minn. Ct. App.2011Background
- Mall formed in 1998 to own/operate a strip mall; Elsenpeter and 11 others rent space there.
- Elsenpeter entered a 15-year lease for about 8,620 square feet to operate A & M Liquor.
- Lease Article 3.05 provides binding arbitration for matters covered by the lease and that losing party pays arbitration costs and attorneys’ fees.
- Addendum 9 requires the non-prevailing party to reimburse the prevailing party for reasonable attorney fees and costs arising out of or connected with the lease.
- In 2007, Elsenpeter claimed space discrepancy and sought arbitration; when denied, he sued to compel arbitration and for costs; Mall counterclaimed fiduciary duty and asset-waste claims.
- District court ordered arbitration in 2008; arbitrator ruled for Mall on merits in 2009, and Mall was awarded attorney fees of $4,000.
- In 2009, counterclaims were dismissed; districts court awarded Elsenpeter $27,167.30 in fees/costs for the action to compel arbitration; Mall appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the lease arbitration clause compels arbitration of the dispute | Mall argues clause not specific enough to compel arbitration. | Elsenpeter argues arbitration clause is broad and arbitrable. | Arbitration compelled; district court acted properly. |
| Whether Elsenpeter is a prevailing party entitled to fees for compelling arbitration | Elsenpeter seeks fees under Addendum 9 as prevailing party. | Mall contends no merits dispute won; no prevailing party on merits. | Elsenpeter not prevailing on merits; reversal of fee award. |
| Whether the district court erred by denying excess fees beyond arbitrator’s award | Mall seeks fees under 3.03 for defense and arbitration-related work. | Arbitrator’s $4,000 award controls; motions outside arbitration governed by lease terms. | District court proper to deny excess fees; affirmed. |
Key Cases Cited
- Vaubel Farms, Inc. v. Shelby Farmers Mut., 679 N.W.2d 411 (Minn.App. 2004) (arbitration clause broadly construed; must read ‘arbitration’ language as intended)
- Zelle v. Chicago & N.W. Ry., 65 N.W.2d 583 (1954) (arbitration contract may be in general terms without enumerating disputes)
- Turner v. Alpha Phi Sorority House, 276 N.W.2d 63 (Minn. 1979) (ambiguous arbitrability resolved in favor of forwarding to arbitration)
- Heyer v. Moldenhauer, 538 N.W.2d 714 (Minn.App. 1995) (if reasonably debatable, dispute should be referred to arbitration)
- Fedie v. Mid-Century Ins. Co., 631 N.W.2d 815 (Minn.App. 2001) (appealability of an order to compel arbitration)
- Borchert v. Maloney, 581 N.W.2d 838 (Minn. 1998) (prevailing party standard; merits-based outcome matters)
- Smyth v. Rivero, 282 F.3d 268 (4th Cir. 2002) (fees awarded only if merits relief obtained)
- Pitchford v. Oakwood Mobile Homes, Inc., 212 F.Supp.2d 613 (W.D. Va. 2002) (motion to compel arbitration is procedural; not merits-based)
- Acosta v. Kerrigan, 150 Cal.App.4th 1124 (Cal.App. 2007) (fees for motions to compel arbitration may be adjudicated by district court where merits would follow)