Tedesco v. Home Savings Bancorp, Inc.
2017 MT 304
| Mont. | 2017Background
- Tedesco, a Montana resident, began working for Home Savings of America (HSOA), a federally chartered Minnesota savings & loan, in March 2008 and signed an Employment Agreement in July 2008 containing a binding AAA arbitration clause. HSOA later went into FDIC receivership.
- Tedesco was terminated in June 2011 and sued Dirk Adams (HSOA CEO/Chair) and Home Savings Bancorp (HSBC, HSOA’s parent) for wrongful discharge (under Montana’s WDEA), breach of contract, and various fraud claims. HSOA (the nominal employer) was not a party to the arbitration or this appeal.
- Defendants moved to compel arbitration; the District Court ordered arbitration and stayed the case. An arbitrator dismissed Tedesco’s claims on summary judgment. The District Court confirmed the award; Tedesco appealed both the order compelling arbitration and the confirmation.
- Key factual contentions included whether there was mutual assent to arbitrate, whether the Employment Agreement was adhesive/unconscionable, whether claims fell within the arbitration clause, and whether the arbitrator manifestly disregarded law (including rules choice, discovery handling, statute of limitations, employer identity, and corporate veil issues).
- The Montana Supreme Court affirmed both the interlocutory order compelling arbitration (holding such an order stayed pending arbitration is not immediately appealable under the FAA) and the District Court’s confirmation of the arbitrator’s award.
Issues
| Issue | Plaintiff's Argument (Tedesco) | Defendant's Argument (Adams/HSBC) | Held |
|---|---|---|---|
| Timeliness/appealability of order compelling arbitration | Order compelling arbitration was final and immediately appealable; appeal timely | Order compelling arbitration with a stay is interlocutory and not immediately appealable under FAA and Montana rules | Court held orders compelling arbitration that stay proceedings are not immediately appealable; Tedesco’s appeal of that order was timely (court modified prior Montana precedent) |
| Enforceability of arbitration clause (formation/unconscionability) | Agreement was adhesive, signed under duress (take-it-or-leave-it), unconscionable; lack of provided AAA rules renders clause unenforceable | Parties mutually assented; clause reciprocal and within reasonable expectations; FAA/UAA presumption favors arbitration | Court held clause enforceable: mutual assent, not a contract of adhesion, not unconscionable; failure to supply AAA rules alone insufficient to void clause |
| Scope—whether breach of contract and fraud claims are arbitrable | Breach and fraud fall outside arbitration clause and should proceed in court | Clause covers “any and all disputes arising under or related to the Agreement,” so claims are arbitrable | Applying presumption of arbitrability, court held those claims fell within the arbitration clause and were properly sent to arbitration |
| Confirmation of award — manifest disregard / procedural errors (rules choice, discovery, SOL, employer identity, veil piercing) | Arbitrator manifestly disregarded Montana law by applying wrong AAA rules, allowing discovery abuses, misapplying WDEA/limitations/privity law | Arbitrator’s procedural choices and factual applications are for arbitrator; review is narrow under UAA/FAA; state court has jurisdiction to confirm/vacate | Court upheld confirmation: state court had jurisdiction; arbitrator did not manifestly disregard law—procedural rulings and factual findings are for arbitrator and outside merits review; no abuse of discretion by district court |
Key Cases Cited
- Kelker v. Geneva-Roth Ventures, Inc., 369 Mont. 254, 303 P.3d 777 (Mont. 2013) (FAA applies when agreement involves interstate commerce; arbitration challenges to whole-contract go to arbitrator)
- Paulson v. Flathead Conservation Dist., 321 Mont. 364, 91 P.3d 569 (Mont. 2004) (Montana UAA limits court review of arbitration awards)
- Geissler v. Sanem, 285 Mont. 411, 949 P.2d 234 (Mont. 1997) (review of arbitration award confined; manifest disregard requires more than error)
- Iwen v. U.S. W. Direct, 293 Mont. 512, 977 P.2d 989 (Mont. 1999) (discussed appealability of orders compelling arbitration; Court here narrows that precedent)
- Larsen v. Opie, 237 Mont. 108, 771 P.2d 977 (Mont. 1989) (prior Montana decision treating order compelling arbitration as appealable; modified by this opinion)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA preempts state rules that prohibit arbitration of particular claims)
- Nitro-Lift Techs., L.L.C. v. Howard, 568 U.S. 17 (U.S. 2012) (when challenge attacks the contract as a whole, arbitrator decides validity)
- Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir. 2015) (FAA preemption analysis; state law available only if not conflicting with FAA)