Garlock v. 3DS Properties
303 Neb. 521
| Neb. | 2019Background
- March 2015: John A. and John H. Garlock purchased an Omaha home from 3DS Properties, L.L.C.; seller disclosure signed by 3DS member Keith Donner; agent Ryan Basye listed property.
- May 2016: Garlocks sued 3DS, Donner, and Basye alleging concealed defects, fraud, negligent misrepresentation, and related claims; purchase agreement contained an arbitration-and-mediation clause (bolded notice of arbitration but not underlined).
- District court stayed litigation (Sept. 2016) pending mediation or arbitration; Garlocks demanded expedited arbitration and all parties proceeded to a multi-day arbitration in June 2017, each party on the record agreeing to be bound.
- Arbitrator issued an award for defendants (July 2017); Garlocks then filed an application to vacate the award in district court asserting partiality, public policy violation, and refusal to postpone while a rehearing motion on the stay was pending.
- District court (March 2018) granted rehearing, held the arbitration clause unenforceable under Neb. Rev. Stat. § 25-2602.02 (because the arbitration notice was not underlined), vacated the arbitration award, reallocated arbitration costs, and denied confirmation; defendants appealed.
Issues
| Issue | Garlocks' Argument | 3DS/Donner/Basye's Argument | Held |
|---|---|---|---|
| Whether the FAA or Nebraska UAA governs the arbitration clause | Arbitration invalid under state UAA; impliedly UAA governs | FAA applies because interstate commerce was involved (internet advertising, appliances) | UAA governs: this was a simple intrastate residential sale, not a program affecting interstate commerce (UAA applies) |
| Whether Garlocks waived challenge to arbitrability by participating in arbitration | Arbitration clause void under UAA; challenge may be raised later | Garlocks voluntarily participated, agreed on record to be bound, so they waived arbitrability challenge | Waiver: Garlocks knowingly proceeded and agreed to be bound, so they cannot now contest arbitrability |
| Whether district court properly vacated the arbitration award under §25-2613 | Award should be vacated for partiality, public policy, and refusal to postpone | No evidentiary support for vacatur; §25-2613(a)(5) inapplicable because Garlocks participated without objection | Vacatur was erroneous: Garlocks produced no evidence of statutory grounds and cannot rely on §25-2613(a)(5) after participating without objection |
| Whether the court should have confirmed the arbitration award under §25-2612 | Court denied confirmation due to clause unenforceability and vacatur | Award must be confirmed absent valid grounds for vacatur/modification; court has no discretion to refuse confirmation when no proper grounds exist | Court erred by denying confirmation and reallocating costs; appellate court reversed and remanded with directions to confirm and enter judgment in conformity |
Key Cases Cited
- Kremer v. Rural Community Ins. Co., 280 Neb. 591 (recognizing stay/compel arbitration orders as final)
- Wilczewski v. Charter West Nat. Bank, 295 Neb. 254 (residential sale part of broader lending program can invoke FAA)
- Ronald J. Palagi, P.C. v. Prospect Funding Holdings, 302 Neb. 769 (discussion of FAA vs UAA and commerce inquiry)
- State v. Henderson, 277 Neb. 240 (public policy can bar enforcement of arbitration awards in narrow circumstances)
- Drummond v. State Farm Mut. Auto. Ins. Co., 280 Neb. 258 (procedural rules for confirming arbitration awards under UAA)