Ronald J. Palagi, P.C. v. Prospect Funding Holdings
302 Neb. 769
| Neb. | 2019Background
- Wheat sold rights to her personal-injury settlement to Prospect under a sale-and-repurchase agreement for $5,000, with a repurchase schedule and liquidated-damages and attorney-fee provisions; the agreement included an FAA-governed arbitration clause and Palagi (her attorney) signed acknowledgments and an irrevocable letter of direction.
- Wheat settled her case; Palagi placed $8,840 (the then-repurchase amount) in his trust account and disbursed the remainder. Prospect initiated separate arbitrations against Wheat and Palagi after learning it would not be paid in full.
- Neither Wheat nor Palagi participated in the arbitrations; arbitration awards were entered for Prospect: $23,120 against Palagi and $46,240 against Wheat (liquidated damages).
- Wheat and Palagi then filed an interpleader action in state court over the $8,840, alleging the sale agreement was void or unenforceable for various reasons; they did not move to vacate, modify, or correct the arbitration awards within the FAA’s 3-month window.
- Prospect moved to confirm the arbitration awards under 9 U.S.C. § 9 and for summary judgment; the district court granted both and entered judgment for Prospect. Wheat and Palagi appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAA governs the agreement | (Wheat/Palagi did not dispute) argued contract invalid so FAA should not control | Prospect: FAA applies; parties contracted for FAA; transaction affects interstate commerce | FAA governs agreement; court analyzes under FAA |
| Whether court could consider validity of underlying agreement when confirming awards | Wheat/Palagi argued agreement is void/unenforceable for multiple reasons (usury, noncompliance with statutes, champerty, etc.) | Prospect argued awards are binding; challenges should have been raised in arbitration or by timely motion under FAA | Court held validity/enforceability challenges were not properly before it because no timely FAA §10/11 motion to vacate/modify/correct was filed; confirmation required under §9 |
| Whether confirmation of arbitration awards was proper | Wheat/Palagi contended they should be allowed to litigate agreement validity and that confirmation was premature | Prospect: §9 requires confirmation unless award is timely vacated/modified/corrected; no such motion was filed | Court confirmed awards under §9 of the FAA and entered judgment for Prospect |
| Whether summary judgment was premature for lack of discovery | Wheat/Palagi argued they lacked opportunity to complete discovery and needed more time | Prospect: evidence (agreement, arbitration notices, awards) was admitted; plaintiffs offered no opposing evidence or §25-1335 affidavit | Court found no §25-1335 continuance request or affidavit; summary judgment was not premature |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (standards for appellate review of arbitration questions and allocation of arbitrability questions).
- Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (limits judicial review under the FAA to statutory grounds).
- Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (2003) (FAA applies broadly to agreements "involving commerce").
- Wilczewski v. Charter West Nat. Bank, 295 Neb. 254 (2016) (application of FAA where contract affects interstate commerce).
- Hartman v. City of Grand Island, 265 Neb. 433 (2003) (confirming an arbitration award where opponent failed to timely move to vacate/modify under state arbitration act).