Wilczewski v. Charter West Nat. Bank
295 Neb. 254
| Neb. | 2016Background
- Charter West National Bank foreclosed a deed of trust, acquired title at a trustee's sale, and then sold the residential property in Nebraska to Michael and Michelle Wilczewski under a purchase agreement that contained a broad arbitration clause.
- After discovering a superior lien existed, the Wilczewskis sued Charter for fraudulent misrepresentation, negligent misrepresentation, common-law fraud, and unjust enrichment, alleging Charter manipulated deed language and concealed the lien.
- Charter moved to compel arbitration under the purchase agreement; the Wilczewskis challenged arbitrability and argued the Federal Arbitration Act (FAA) did not apply because the transaction was purely intrastate and the agreement failed to comply with Nebraska’s Uniform Arbitration Act (UAA) notice requirements.
- The district court held the FAA governed (finding the contract involved commerce), concluded the arbitration clause covered the Wilczewskis’ claims, and dismissed the case after compelling arbitration.
- The Nebraska Supreme Court granted bypass review and affirmed: FAA applies to the transaction, the claims fall within the arbitration clause, dismissal (rather than stay) was within the court’s discretion, and the court lacked jurisdiction to review the prior discovery order.
Issues
| Issue | Wilczewskis' Argument | Charter's Argument | Held |
|---|---|---|---|
| Whether FAA or Nebraska UAA governs the arbitration clause | Transaction was purely intrastate; FAA does not apply; UAA notice required | Loan/foreclosure/resale is commercial lending activity affecting interstate commerce; FAA governs and preempts UAA | FAA applies because residential lending/foreclosure/resale falls within Commerce Clause reach and thus the FAA |
| Whether the arbitration clause covers the Wilczewskis' claims | Fraud and misrepresentation claims arose before formation and are not disputes about interpretation/enforcement of the agreement; unjust enrichment is inapplicable where a contract exists | Complaint itself relies on the purchase agreement and alleges inducement to sign it; clause is broad and covers tort and contract-related claims | Clause is broad; claims—including fraud in the inducement tied to the agreement—are arbitrable; merger doctrine does not bar arbitration where fraud is alleged |
| Whether the court should stay or dismiss the action after compelling arbitration | Dismissal risks prejudice (claims may become time-barred in arbitration) and stay should be ordered | Court may dismiss when all issues are subject to arbitration and dismissal will not prejudice parties | District court did not abuse discretion in dismissing rather than staying; Charter waived timeliness defense by seeking arbitration |
| Whether the appellate court can review district court’s discovery order on arbitrability | District court abused process by denying full discovery on arbitrability | Discovery order is interlocutory and not separately appealable from the final arbitration order | Nebraska Supreme Court lacked jurisdiction to review the separate discovery order; only the final order compelling arbitration is appealable |
Key Cases Cited
- Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (explains "involving commerce" as equivalent to "affecting commerce" and FAA's broad reach)
- Perry v. Thomas, 482 U.S. 483 (FAA preempts state laws that undermine arbitration agreements)
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (FAA applies broadly to disputes involving interstate commerce)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (arbitrability and separability principles)
- Southland Corp. v. Keating, 465 U.S. 1 (FAA limits states' ability to disfavor arbitration agreements)
- Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 ("involving" is broad; FAA extends to the full reach of Commerce Clause)
- Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (federal courts must compel arbitration of arbitrable claims)
- Aramark Uniform & Career Apparel v. Hunan, Inc., 276 Neb. 700 (Nebraska recognition of FAA's expansive scope)
- Kremer v. Rural Community Ins. Co., 280 Neb. 591 (Nebraska precedent on arbitration appeals)