Smith v. Pinnamaneni
227 Ariz. 170
| Ariz. Ct. App. | 2011Background
- Arbitration award awarded W Inc. damages and fees against Pioneer Family Investments, LLC for construction work.
- Pioneer waived its lack-of-licensure defense by not raising it in the arbitration.
- Pinnamaneni, though managing member of Pioneer, was not a party to the contract with W Inc. and thus not clearly bound by the arbitration clause.
- W Inc. sought confirmation of the arbitration award in superior court; Pinnamaneni contested personal liability later.
- Superior court confirmed against Pioneer, but reversed/withheld confirmation as to Pinnamaneni, remanding for a decision on his personal binding to the arbitration clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of licensure defense in arbitration | W Inc. contends defense waived by Defendants’ nonparticipation. | Pioneer/Pinnamaneni argue licensing defense could be raised at confirmation, not arbitration. | Licensing defense waived due to failure to raise it in arbitration. |
| Pinnamaneni's personal liability and binding to arbitrate | W Inc. asserts Pinnamaneni bound by arbitration as agent/party to contract. | Pinnamaneni argues he was not a party to the contract/arbitration clause. | Remand to decide whether Pinnamaneni was personally bound; not determined on record. |
| Authority to decide arbitrability of nonsignatory | Arbitrator determined issues; superior court should confirm per statute. | Some threshold issues, like binding nonsignatories, require court not arbitrator. | Superior court must decide whether Pinnamaneni was bound; arbitrator’s finding on this is immaterial if no binding agreement. |
Key Cases Cited
- Aesthetic Property Maintenance, Inc. v. Capitol Indemnity Corp., 183 Ariz. 74 (Ariz. 1995) (substantial compliance doctrine; licensure defense can be raised if substantially compliant)
- Reidy v. Blackwell, 140 Ariz. 333 (Ariz. App. 1983) (licensing defense as affirmative defense; waiver issue)
- Leone v. Precision Plumbing & Heating of S. Ariz., Inc., 121 Ariz. 514 (Ariz. App. 1979) (illegality/affirmative defense; pleading requirement)
- Migneault v. United Services Automobile Ass'n, 21 Ariz. App. 397 (Ariz. App. 1974) (parties who participate in arbitration without objection may be bound)
- MCI Telecomm. Corp. v. Exalon Indus., Inc., 138 F.3d 426 (1st Cir. 1998) (gateway issue of arbitrability to be decided by court)
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (U.S. Supreme Court, 1995) (arbitration gateway questions; courts decide arbitrability)
- Verdex Steel & Constr. Co. v. Bd. of Supervisors, Maricopa Cnty., 19 Ariz. App. 547 (Ariz. App. 1973) (substantial compliance; licensing statute purposes)
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (gateway matter to determine arbitrability by courts)