L & H AIRCO, INC. v. Rapistan Corp.

conditions as contained in this court’s order May

dated 1988.

3.During probation the course of the Respondent psycho- shall continue with

therapy discharged by until his current

therapist Respondent or until has obtain'ed thorough psychiatric evaluation indicat-

ing longer that counsel is no needed. AIRCO, (formerly

HL & L INC. & H Inc.),

Enterprises, Respondent, CORP., by merger

RAPISTAN successor Inc., Siegler,

to Lear Mammoth Divi

sion, al., Respondents (C2-88-1796), et (C4-88-1878),

Defendants Eidsness, al., Petitioners,

Alan C. et

Respondents (C2-88-1796),

Appellants (C4-88-1878), Michaud, Petitioner, Appellant

Robert L.

(C2-88-1796), Respondent

(C4-88-1878). C2-88-1796,

Nos. C4-88-1878.

Supreme Court of Minnesota.

Oct. 29, 1989.

Rehearing Denied Nov. O’Brien, P.A., Hart,

Hart, B.C. Bruner & Minneapolis, ap- Gregory Spalj, T. pellant, L. Michaud. Robert Arundel, Rider, Bennett, Eric Egan & J. Hvass, Sheryl Ramstad Magnuson, and Eids- Minneapolis, appellants, Alan C. Efrom, P.A. and Henson & ness building projects. construction These Lefler, LeFevre, Kennedy, O’Brien & upon proceedings all center Jr., consolidated Thomson, A. Drawz, Corrine J. James alleged and social con- Michaud’s business Roland, Minneapolis, Heine, David C. through Rapistan its officers tacts with Aireo. L & H respondent, related thereto. agents and matters Arundel, Bennett, Rider, Egan Eric J. & past that in the Mi- The record discloses Hvass, Minne- Sheryl Ramstad Magnuson, engineering specifications had drawn chaud Rapistan Corp. and respondents, apolis, for products allegedly Rapistan which favored Manning. Frank Rapistan’s unrelated to rela- on occasions that, social- tionship L & H Aireo and with ly, accepted invitations to Christmas he had trips Vegas, prior all parties and to Las ap- of his July notification on KEITH, the Justice. underly- in an arbitrator pointment as review of an order of We accelerated appointment His letter ing proceedings. sepa- denying the defendants’ district him as follows: instructed summary judgment and rate motions for you accept appointment If able to are ques- certifying important as and doubtful of the arbitrators in this case and as one relating to and an tions of the no association with either have liability. attorney’s potential tort We af- representatives which parties or their part. in part firm in and reverse disqualify you serving, would Rapistan Corporation, the successor copy please and return one execute Inc., merger Siegler, Mammoth Di- to Lear Appointment the enclosed Notice of (hereafter collectively designated as vision your earliest convenience. in “Rapistan”), engaged the manufacture July Michaud executed the notice of On heating, ventilating and air-con- and sale of following appointment contained the agree- ditioning equipment. It entered an caution: designated L & H ment in 1980 which important parties It is most Aireo, represent- Inc. as its manufacturer’s in the complete have Arbitra- confidence Rapis- in ative the western United States. Therefore, please dis- impartiality. tor’s agreement. tan terminated the As re- present relationship any past close sult, complaint February L H filed a in & counsel, parties or their direct Superior alleg- Court California financial, indirect, profession- whether contract, ing warranty, breach breach al, Any or other kind. doubt social negligent inter- fraud and intentional and in favor of disclosure. should be resolved relationship. ference with the business prior did not disclose Michaud litigation stayed The was when California Rapistan, social contacts with business or Rapistan right exercised under con- its agents. its its officers or provision dispute tract arbitrat- August three weeks ed in Minnesota. then filed its proceeding, Michaud the American scheduled arbitration claim for arbitration with fishing northern on a Association in Minnesota and traveled to Canada Arbitration Efron, Rapistan’s agents— trip firm & with three of retained law of Henson Rapistan’s president, represent pro- Manning, in Frank Rod P.A. to the arbitration McKinley, Rapistan’s manag- national sales ceedings. Petitioner Alan C. Eidsness Johnson, proceed- Eugene Rapistan’s exclu- chief counsel in those er and served as trip in The representative selected sive Minnesota. ings. One of the three arbitrators among arranged was months before Michaud's ar- circulated was from lists Michaud, registered appointment and Michaud claims petitioner L. bitration Robert firm, Michaud, he did not know who would be travel- professional engineer whose Associates, ing day departure. Manning until the Halberg, Cooley, Erickson trip, in- preparation of mechani- claims that he had specializes Rapistan’s cal, systems counsel Eidsness that and communications formed electrical trip inquired panel Michaud would attend the A different considered dispute in resulting late 1985 in an propriety; as to the he later was not as L H damages award favor of & of clear about whether the conversation oc- $219,990. The district court confirmed the Although disputes curred. award and entry judgment. directed the following conversation took whether Rapistan paid judgment with interest. place, Manning claims that he in- was problem that there no formed would be This action was commenced in November long as there was no discussion of the Rapistan, Manning, pending During day arbitration. the four Eidsness, Efron, Henson & P.A. and Mi- trip, stayed fraud, individuals fished and to- alleging chaud negligent misrepre- gether they claim but did not discuss sentation and breach of good covenants of pending dealing regard faith and fair arbitration. to their failure existing to disclose the relation- proceeding The arbitration commenced ships. It damages claimed as a result of September as scheduled on 1982. Dur- expenses, disbursements and fees in- ing proceeding, Rapistan the course of the having original curred in award vacated sought Manning to add and other participating by and in necessity in a sec- officers as defendants. When the arbitra- proceeding. ond arbitration The defen- panel requested parties stipu- tion that the grounds dants for moved dismissal on the defendants, naming late to the of additional complaint by that the filed & failed to agreed, asserting L & H later upon state a claim which relief could be agreement predicated had on an been ex- or, granted alternative, summary for none, press oral condition that of the addi- judgment. granted The trial Rapis- court any tional defendants had social or busi- Manning’s dismiss, tan and motions to but ness contacts with the arbitrators. No dis- denied the motions of the defendants Eids- fishing trip closure was made of the or of Michaud, certifying important ness and as of the other social or business questions and doubtful of whether Mi- argues L accordingly contacts. & H that it chaud was entitled to arbitral agreed naming par- of the additional subject and whether Eidsness could be to ties. liability tort to his client’s for failing divulge to relevant information.1 In November the three member separate appeals The of Michaud and Eids- panel arbitration rendered its unanimous petitions ness were consolidated and their awarding damages decision no to either granted. for accelerated review were Thereafter, party. L & H commenced investigation relationship into the between 1. first examine L We & H’s Rapistan and Michaud which disclosed the in granting claim that the trial court erred August fishing trip and the other Rapistan Manning’s motion to dismiss brought contacts. L & H then complaint alleged negli its which fraud and motion before district court to vacate gent misrepresentation resulting in out-of- pursuant award arbitration to Minn. pocket damages incurred in connection (1988). Although Stat. 572.19 the trial required pro with the second arbitration found no evidence of in actual bias ceeding. concluding complaint that the decision, the arbitrators’ it was convinced legally failed to set forth a sufficient claim that the fact of undisclosed social and busi- relief, 12.02, pursuant to Minn.R.Civ.P. required ness contacts that the award be party the trial court reasoned that a can not, vacated and that the matter be subsequent rearbitrat- in a action original party, ed. adverse recover following questions pursu- attorney, allegedly 1. The were Is an who obtains infor- certified 103.03(h) Minn.R.Civ.App.P. important ant to a client in the course of his mation from and doubtful: professional legal proceed- duties in contested ings, subject to tort to his client’s 1. Is the defendant Robert L. Michaud entitled divulge immunity against that informa- to arbitral the claims assert- by plaintiff adversary? complaint? ed in its tion to the expenses propriety next consider the litigation fees or incurred 2. We Goward, denial of Michaud’s motion prior proceeding. Stickney 161 trial court’s 458-59, summary judgment and its certification as Minn. 201 N.W. 630-31 question important and doubtful Chaffee, 181 See also Smith v. he entitled to arbitral immuni- (1930). whether was Minn. N.W. L H in ty by from the claims asserted & its Rapistan Manning parties both were complaint. proceedings the two commenced arbitration exception may L H. An to this rule underlying dispute The prior litigation arise where the and its re- agreed this case their differences resolve sulting expenses were occasioned through binding under the rules arbitration wrongful non-party conduct of a and the of the American Arbitration Association subsequent action to recover the fees (AAA). original The proceeding expenses is maintained that non- pursuant instituted was to those rules Co., party. Okay Hill v. Constr. required any possible disclosure 252 N.W.2d conflicts of interest. AAA Commercial However, presented not facts do invoke Rules, undisput- Arbitration Rule 19. It is exception general appli- and the rule is signed appointment ed that Michaud his against Rapis- cable to the claims asserted letter AAA disclosing without therein Perl, Manning. and tan See Gilchrist v. his business and social contacts with (Minn.1986) 412, (quoting 387 N.W.2d 418 Rapistan. Whether this failure is entitled Realty Chrysler Realty Chris/Rob claims, immunity to arbitral from civil (Minn.1977)). Corp., 260 N.W.2d 460 negligent misrepresentation whether of fraud, is at issue. dismissal, affirming In the trial court’s we must comment that L H& was not long enjoyed Arbitrators have im First, remedy. pursuant without a to munity Melady from civil suit. v. South (1988), Minn.Stat. 549.21 it could have § Paul Live 142 Exchange, St. Stock Minn. asserted its motion for fees and 194, 197, (1919). 171 N.W. 807 Their litigation expenses at the time it moved immunity upon pub rests considerations original district court to vacate the award. policy, purpose lic which has as its generally Minn.Stat. 572.18-572.19 §§ preservation integrity indepen of the (1988). Alternatively, might have relied quasi-judicial dence of officers. See Gam upon language the broad of the arbitration Ernst, mel v. Ernst & agreement “any controversy or claim 72 368 N.W.2d Arbitrators — arising relating agreement to this shall protected must from the be harassment of * * * by be settled arbitration ”—to assert personal brought against suits them that the tort scope claims were within the that, parties dissatisfied judges, so like proceeding. Finally, of the costs and attor- they upon are able to “act their convictions neys pursuant fees are recoverable to sec- apprehensions possible free from the Minn, tions 43 and 50 of the AAA Id., Commercial consequences.” at Rules, parties Arbitration agreed which the N.W.2d at 368. The doctrine of arbitral govern however, would their proceeding. immunity, designed was. not protect See also Minn.Stat. 572.17 protect every and indeed does not § Minn, fact, L & H asserted claims for costs and action Melady, arbitrator. attorneys fees at the second arbitration at N.W. 807. Yet when the hearing including $27,540 immunity applies, a claim of it is so absolute that it legal hearing. fees associated with protects the first the exercise essentially ju of that The claim for those amounts was authority denied dicial from civil suit “however panel. Thus, the second arbitration may erroneous have been.” Id. [the actor] independent maintenance of this problem presented action is The is whether failure not authorized and the possible district court was to disclose protect conflicts can be dismissing complaint against correct in part ed quasi-judicial exercise of Manning. authority. remote, contacts, remembering however problem all approached court The trial parties to the arbitration. upon the fundamental differ- by focusing the role of an arbitrator ences between grant extension of the This judge. It found that because the that of dismayed by mean that are not does not we pri- authority his from a arbitrator draws possibility Michaud’s failure to disclose agreement between vate contractual of a conflict of interest. It should have of those contractual obli- parties, breach simple to note that he had been matter judicial the exercise of gations fell outside or, parties had contacts with the involved authority protected by not arbitral and was certain, the event he was not at least state immunity. Michaud’s failure It considered might impermissible that he had con- prior contacts a violation of con- appointment to disclose The AAA letter he re- tacts. Therefore, parties. clearly tractual duties ceived stated that doubts were subject to civil suit and was resolved in favor of disclosure. his failure was be Nevertheless, stated, for the reasons we unprotected by immunity. of the district court reverse decision upon The decisions which the trial denying summary motion Michaud’s distinguished between the contractu relied judgment question and answer the certified the issues duty of an arbitrator to decide al in the affirmative. presented judicial and the function of arriv aggrieved Our decision does not leave ing Tiger made. Baar v. at the decision remediless, however. Minn.Stat. man, Cal.App.3d 211 Cal. 572.19, (1988) provides subd. (1983) (holding that Rptr. breach “[ujpon application party, the court of a gave rise to a of an arbitration contract * ** [tjhere shall vacate an award where arbitrator); against civil cause of action ap partiality by was evident an arbitrator Ernst, Inc. v. Manhattan Constr. E.C. corruption pointed as a neutral or of Cir.1977) Co., (5th 1033 551 F.2d prejudicing the arbitrators or misconduct (holding the failure of an arbitrator to that * * rights any party of *.” We believe the him caused loss of decide the issue before proper remedy lies therein rather than the immunity). per Whereas claim arbitral against the arbitrator. in a civil suit Cf. judicial function in each formance of the Corp. v. Coatings Conti Commonwealth suit, immunity from civil the case received 145, 147-50, Co., 89 393 U.S. nental Cas. provision to reach of the contractual breach 338-40, 21 L.Ed.2d 301 S.Ct. decision did not. The issue before this a granted un (reversing vacating and award court, however, not failure to make a is part neu impression of on the of der bias contract, required by but decision as arbitrator). tral possible failure to disclose con whether us, the of In the case before vacation grounds'for civil flicts of interest should be trial exactly what occurred. The award is against an suit arbitrator. upon the basis the award vacated requi- to make the that Michaud had failed possible Failure to disclose conflicts though the court did site disclosure even impres an of interest creates at the least of bias the deci- not find direct evidence impression An of bias con sion of bias. action of re- sion-making process. The making process the decision taminates manding for a second arbitration corrected not con neutrality is essential and is when provided error and Michaud’s Nevertheless, de by this court. we doned per- a forum free from actual with new against the arbi permit cline to a civil suit influence. ceived prior business trator for failure to disclose policy of our of or social contacts because Although immunity as we protecting and of encouraging against today prohibits civil suits it define independence of the decision made. for failure to disclose busi arbitrators contacts, Permitting lapse in disclo it does not insulate civil suit for ness or social criminal for willingness of arbitra sure would chill the an arbitrator See, v. difficulty corruption. e.g., Earle serve of fraud or tors to because held Johnson, attorney an can be liable Minn. 84 N.W. whether of (1900). Moreover, is al- for commission an arbitrator his client’s imposed depends in the first ways subject to sanctions The answer tort.3 body, care is governing analysis which includes on whether a owed. arbitrator’s involving AAA disqualification present as an arbitrator. an attor In the context Rules, Rules adversary, Arbitration we cannot ney Commercial and his client’s Therefore, L & H’s recognize duty. such a against must fail. claim question impor- The second certified trial court law, and doubtful is general tant tort concepts of Under “ attorney subject to tort liabil- an ‘obligation, whether “duty” is defined as an allegedly client’s ity to his recognition give the law will provide failing to information obtained effect, particular to conform to a standard ” profes- during from a client the course conduct another.’ toward Rasmussen proceed- representation in contested Co., sional Prudential v. Ins. Rapistan’s H claims counsel ings. L & that (1967) (quoting N.W.2d Pros- negligent under tort (3d 1964)). is liable theories ser, An analysis Torts ed. § misrepresentation and fraud or not of care is owed to of whether between Mi- disclose contacts plaintiff particular “begs the essential its officers. chaud question plaintiff’s interests —whether legal protection entitled to are L H’s claim 3. We turn first to & defendant’s conduct.” Prosser & Keaton Eidsness, Rapistan’s attorney, is liable 1984). (5th 53 at ed. If on Torts misrepresentation. Although negligent a duty owes to his client’s adver- recognized negligent the tort we sary, recognizes it is because the law misrepresentation, Graff, Bonhiver public policy protection of that favors Ill, 121-22, Minn. 248 N.W.2d 298-99 attorney’s person’s interests (1976),2 and have clarified that is an negligent conduct. tort does not contem unintentional context, part litigation intent to In the it is understand- plate an deceive on making extremely that courts person misrepresentation, Flo able have been reluc- Olson, 168, attorneys impose duty upon a renzano v. 387 N.W.2d 177 tant to to J., See, (Minn.1986) (Simonett, concurring spe adversary. e.g., their client’s Beech v. 90, (Iowa 1981); cially), Kapalis, we have 302 N.W.2d 97 never before considered Bonhiver, recipient recognized we the tort’s formula- ence or knows that the so intends or 2. (Second) as stated in The Restatement substantially tion of in a similar transaction. (Tent. 12). Torts 552 Draft No. The most (3)The § liability public a of one who is under appears recent definition as follows: give duty to the information extends to loss Supplied Negligently 552. Information for by any persons suffered the class of of for the Guidance (1) Others created, duty any in whose benefit the is who, business, in One the course of his the transactions in which it is intended to profession employment, or in other protect them. pecuniary in transaction which he has a inter- (Second) The Restatement of Torts § 552 est, supplies guid- false for the information (1976). transactions, others in ance of their business liability subject pecuniary to loss is for caused Although complaint 3. the count in the was one justifiable by upon them their reliance to negligent provi- misrepresentation, the actual information, if he fails to exercise reasonable alleged that sion "Eidsness competence obtaining or care or in communi- negligent by representations made omission" cating the information. Rapistan’s when he failed to disclose con- (3), (2) Except as stated in Subsection added). (Emphasis with tacts Michaud. in stated Subsection is limited to negligent representation by a Whether omission loss suffered equivalent negligent misrepresentation to a is (a) by person one of a limited group here, case tort irrelevant because in either liabil- persons guidance whose benefit and he ity negligence depends in in the first instance on supply intends to the information or knows party the tort whether accused of owes a it; recipient supply that the to intends duty accusing party. to (b) through upon reliance it in transac- tion that he intends to the information influ- Annotation, whether those assertions were true and Attorney’s Liability see also Client, then communicate that information to the Than Immediate to One Other adversary. recognize cannot Legal We such a with Negligence Connection 615, Duties, Any duty. attorney’s It would undermine the 61 A.L.R. 4th protect duty zealously represent to imposed upon attorney an to client and duty adversary It the client’s would resolve all doubts favor of the client. an interest of necessarily duty by owed would also undermine the trust between conflict with the client, attorney and an essen- attorney to his or her client. Green the which is 304, Thus, Kersten, relationship. v. 136 Wis.2d tial element of the we Spring Farms duty The ad- hold that Eidsness owed no of care to 401 N.W.2d H, precludes an L & and therefore cannot be to L versarial nature of lawsuit liable owing failing H for to or communicate attorney from concurrent duties & discover care to his or her client and the client’s to them his clients had social and opponent. dutyA to use reasonable care business contacts with the arbitrator Mi- protect the interests of the client’s ad- chaud. attorney versary prevent could an turn next to We the asserted devoting energy to the client’s inter- full claim of fraud In their Eidsness. attorney’s duty of care is ests. An owed complaint, L H alleged amended court, the client and the not to the client’s Eidsness knew that and some of opponent.4 its officers had business and social contacts The issue of whether a is owed Michaud with abritrator party attorney an to an has hearing, including fishing arbitration jurisdictions in other in the context arisen trip allegedly occurred one month can be liable to an of whether “in hearing, and that Eidsness before adversary party adequately tentionally knowledge concealed” his filing a investigate the client’s claim before those contacts “allowed arbitration addressing this issue lawsuit. Jurisdictions disclosing to continue without the true rejected the assertion that an attor- facts, subsequently made a motion ney of care to the owes the court to confirm the Tappen F.2d party. Ager, v. particular theory award.” This of fraud is (10th Cir.1979); Smart, 378-79 Parnell v. broadly After a careful exami too stated. 833, 837-38, Cal.Rptr. Cal.App.3d complaint, taking nation of the the facts Pucciarelli, (1977); Beecy v. true, being it must alleged by & as be 441 N.E.2d 1040-41 Mass. alleged the fraud concluded (1982); Dozorc, 412 Mich. Friedman complaint solely on nondisclosure. is based 585, 588, 16, 22-30, 312 N.W.2d 590-94 affirm Nowhere is it claimed that Eidsness (1981); Tipton Subscription v. Willamette misrepresented had atively that his client 79, 83, Television, Or.App. P.2d 85 735 Michaud, prior no contacts with nor are 1250, (1987). 1252 supporting allegation an any there facts actively steps to conceal claim- that Eidsness took plaintiff present The case is prior relationships. During that a the facts of the ing in effect Eidsness owed similar hearing, L & H independently investigate original the asser- duty to stipulation agreed to they prior that had no entered a which tions of his clients against corporate allow the claims it had contacts with the arbitrators to determine levy recognized the adver- an at- sheriff before he had made a on 4. Our own case law has duty oppo- sary’s property. the attor- torney This court ruled that owes no of care to his client’s 459, 461, ney negligence to his Crosby, be liable for nent. Farmer v. 43 Minn. 45 could not 866, (1890), only for opponent, but could be liable N.W. 866 overruled on other client’s prosecution fraud. Id. See also grounds, & Ontario Power malicious or Erickson v. Minnesota 241, 224, 209, 215, 979, Co., Klapperich, 28 Hoppe 224 Minn. 134 Minn. 158 N.W. 981 v. 780, Farmer, (attorney (1916). lia- attorney is not In an directed a sher- N.W.2d 791-92 instituting judgment attorney crimi- execute a which the ble client’s iff to to his attorney by judgment unless is motivated proceedings his client. The was later had won for vacated, nal malice). attorney but the failed to recall the fraud or 380 present case, Eidsness, In also be

officers to arbitrated. stipula- attorney, may H it entered this as an have had an ethical L & claims receiving duty prior only after assurances from to disclose the contacts between tion See they had no his client and the arbitrator. Minn.R. Rapistan and its officers 3.3(a)(2) (“A lawyer Eids- Prof.Conduct shall not contacts with of the arbitrators. * * * knowingly L H a simply did not disclose to & his fail to disclose a fact to ness alleged knowledge necessary of the contacts. tribunal when disclosure is to * * * liable, assisting a act Thus if Eidsness is it is for to avoid fraudulent client”). However, alleged knowledge duty an ethical disclose his his clients had with Michaud. disclosure is not intended to run to the contacts personal attorney’s benefit of an adver Nondisclosure does not consti Rather, sary. duty of disclosure is for equitable “legal fraud or tute absent the benefit of the an tribunal and is obli par obligation” to communicate facts to gation imposed upon attorney an to aid the person person ticular and that is entitled to Hoppe See v. justice. administration Bank & Trust that information. Richfield Klapperich, 224, 240-41, 28 Sjogren, Minn. 244 309 N.W.2d (1947). duty N.W.2d to This dis (1976). general rule The is that close imposing cannot be the basis for civil party duty “one to a transaction has no liability attorney. on an A violation of the disclose material facts to the other.” Rules of give Professional Conduct cannot Bank, v. First Edina Klein Nat’l private attorney. rise to a action Minn. N.W.2d see also Scope, Conduct; Minn.R.Prof. may A to disclose facts exist under Dickason, Sloan, Rodey, Garcia v. Akin & circumstances, certain such as a con when Robb, P.A., 106 N.M. 750 P.2d fiduciary relationship fidential or exists be (1988). The Rules are intended to disci tween the or when disclosure would pline attorneys, provide not basis civil necessary clarify already be information liability. although Thus we conclude that disclosed, which would otherwise be mis may have been under an ethical Id.; see also Restatement leading. (Sec duty to disclose to the his tribunal client's ond) Torts We have also Michaud, prior contacts with his failure to special stated that who has knowl “[o]ne disclose those contacts to his client’s adver edge of material facts to other fraud, sary was not actionable because party may does not have access have a Eidsness owed no direct of disclosure duty to disclose these facts to the other liability to & on which civil could be Minn, party.” Klein, at 196 based. However, rarely N.W.2d we have particular theory

addressed that fraud. We do not intend this decision Trust, Bank we held that it to insulate an to his Richfield was fraud for a to not bank disclose to a or her An attorney fraud. depositor that a misrepresentations borrower bank with whom who makes affirmative dealing the borrower was was insolvent an adversary, conspires his client, engaging and was in fraudulent steps business her or takes other active practices when the bank had actual knowl conceal the client’s fraud from the adver Id., edge of sary may the fraudulent activities. Hoppe, fraud. be liable Minn, 369, 241, Mmn. at at 791; N.W.2d 651. We said see 28 N.W.2d at Stewart, duty that the also McDonald v. 35, bank had a to disclose facts knowledge prevent within its (1970). However, one of its 182 N.W.2d depositors committing merely from a fraud on the failing to disclose a client’s fraud to believe, however, Id. We community. the attorney will not make the particular theory liable, this is an inappropriate attorney absent a on the imposing liability basis for on an make such a disclosure. The Rules of Pro to disclose known facts to his fessional Conduct are sufficient to deter litigation client’s in a perpetrating context. attorneys from fraud of this charges negli- immune from Also, is not es is not adversary party nature. ** (cid:127)*. pursue gence remedy. He or she can without person actually fraud action Ernst, 245 Minn. v. Ernst & Gammel attorney’s client who causing the loss: the 255, 72 N.W.2d misrepresen- may made intentional have Rules The AAA Commercial Arbitration the attor- tation. Personal allow neutral arbitrators discretion do not The second certified ney is not warranted. relationships the arbitrator as to what negative. question is answered disclose; they mandate disclosure. should part, part in reversed in Affirmed provides: Rule 19 dismissed. A person appointed as neutral Arbitrator any the AAA circum- shall disclose to YETKA, KELLEY, COYNE AND J.J. likely stances to effect impartiality, [sic] * * * dissent. including any past present rela- tionship parties or their coun- with the YETKA, (concurring part in * * Justice * Thereafter, sel. the AAA shall de- dissenting part). termine whether the Arbitrator should be * * Although I con- respectfully I dissent. disqualified *. part majority opinion, I cur with (ef- AAA Arbitration Rule 19 Commercial in its affirm the trial court’s decision would 1, 1982) added). April (emphasis fective egregious acts of the entirety because the correspondence clearly AAA ar- informs integrity cut to the heart of the defendants requirement. of this For exam- bitrators Moreover, it judicial process. of the entire inviting ple, July 1982 letter Mi- my majority belief that the decision will acceptance stated: chaud’s govern our weaken the ethical rules * * * you If have had no association with when, profession anything, at a time if representa- parties either of the or their high requirements of ethical standards disqualify you tives which would strengthened. should be * * * en- serving, please execute According majority, to the arbitrators * * Appointment closed Notice of *. may impermissible now conceal social or Moreover, Appointment en- the Notice prospect of business contacts free of the July 1982letter contained closed with personal liability parties in the arbi- following admonition: (1) wrong tration. This result is because important parties that the to disclose relation- It is most arbitrator’s ships parties complete is not a confidence the Arbitrator’s Therefore, discretionary please disclose impartiality. decision entitled to arbitral immunity part present relationship this disclosure is with the past or counsel, indirect, preliminary administrative function of parties or their direct is, therefore, selecting financial, an arbitrator and professional, social or whether immunity. not entitled to arbitral Any should be re- other kind. doubt you disclosure. If are solved in favor of granted This court has relationship, please such a de- aware of where: of this form. The scribe on back provision called some contractual [has] AAA call the facts to the attention will independent judgment the exercise counsel. parties’ person acting or discretion as an appointment as an arbitrator Continued arbitrator and which made his determina- pursuant to the Commercial Rules Arbi- selecting binding upon tion contingent upon disclosure of re- tration is of contrac- him. But the absence such lationships parties. It is not with- with agreement provisions, tual or where the conceal, to in the arbitrator’s discretion judicial does not call for the exercise of disclose, par- relationships with rather than authority, ordinarily person selected Thus, under Minnesota ties or counsel. perform professional to skilled or servic- Corp. Coatings v. Conti- Commonwealth law, an immunity does not shield arbitral Co., 145, 149, Casualty nental 393 U.S. liability neglecting for this arbitrator from 21 L.Ed.2d 301 S.Ct. duty to disclose. the decision of the district I would affirm immunity for arbitral The standard for denying Michaud’s motion sum- judicial immunity. scope of related to the the first certi- mary judgment and answer immunity by the func is defined Judicial question negative. As to the fied is, immunity insu protects; it that tions Eidsness, Attorney adopt I conduct of liability judicial acts judge from for lates expressed in the of dissent Justice views administrative, legislative, or rather than Coyne. White, Forrester v. executive functions. 98 L.Ed.2d 484 U.S. 108 S.Ct. COYNE, (dissenting part). Justice to Requiring an arbitrator dis agree majority’s disposition I with close associations with to arbi against Rapistan, Manning, actions undertaking assignment tration before an Michaud, and of the count nothing immunity once delib has to do with alleging negligent misrepresentation. I am Grane, See Grane begin. erations however, opinion, of the that this court Ill.App.3d 98 Ill.Dec. 493 N.E.2d cannot countenance intentional fraudulent (arbitrator (App.Ct.1986) who fraudu would, therefore, misrepresentation lently induces another to enter into an arbi deny summary judgment respect with agreement protected tration is not arbi- lodged against the fraud count Eidsness. immunity). tral This information is needed Aireo, L H Eids- Inc.’s action act decide whether arbitrator should underlying disputed on an fact— ness rests require preliminary at all. This disclosure that & Aireo made the absence of component ment is a of the administrative acquaintance Rapis- officers between the selecting an function arbitrator. Corp. express an tan and the arbitrators Tigerman, Baar v. Cal.App.3d entry condition for L & H Airco’s into a Cal.Rptr. (Ct.App.1983) stipulation Manning to include and other (liability negligent selection of arbitra Rapistan officers as additional defendants immunity protected by tor not arbitral be proceeding. It strikes in the arbitration me function). cause selection is administrative conditioning stipulation expressly that Thus, does not shield the inclusion of additional individual defen- neglecting arbitrator this being unacquainted their dants on with the essential administrative function. unusual, highly arbitrator would be but if stipulation was indeed made on that Holding personally respon- the arbitrator condition, it me that then seems to Eids- sible for disclosure would not defeat fraudulently ness had a not to misre- policy encouraging arbitration as the present that the condition had been met. Indeed, majority fears. as the United words, if In other Eidsness knew that Mi- Supreme States Court notes: chaud had worked for and had should, anything, if even more be [W]e gone fishing Manning and other cor- scrupulous safeguard impartiality officers, porate he breached of fair- judges, of arbitrators than since the for- adversary by entering ness to the into the completely reign mer have free to decide stipulation on his client’s behalf because a the law as well as the facts and are not lawyer’s agreement execution subject appellate per- can review. We implicit representation carries with it an way in ceive no which the effectiveness position that it is the client’s that the condi- process will be ham- lawyer tion is met and that does not pered by simple requirement personally lawyer know otherwise. If a parties any disclose to the arbitrators stipulation knowing enters into such a dealings might impression create an met, the condition is not and cannot be possible lawyer’s bias. seems to me that the conduct has obligation ORDER lawyer’s gone beyond far concealment of the in- the client and that WHEREAS, August on this performance of the formation which makes Cargill, suspended Rolin L. III from to intentional impossible condition amounts practice period sixty of law for a misrepresentation. fraudulent days, and hand, If, Manning on the other told Eids- WHEREAS, Cargill, L. III Rolin has Manning were not ness that and Michaud stating this court an filed with affidavit acquainted, then Eidsness did not breach a fully complied that he has with the terms because, the ma- duty order, suspension of the court’s observes, duty lawyer has no jority WHEREAS, the Director of the Office of truthful. The decide whether the client is Lawyers Responsibility Professional has implicit lawyer’s exe- representation certifying filed with this court an affidavit only stipulation is that the cution Cargill, complied III Rolin L. has position with the stipulation is consonant order, suspension the terms of the personal lawyer client and the has no NOW, THEREFORE, ORDERED, IT Thus, IS contrary. knowledge to the Cargill, Rolin L. III is reinstated to the alleging negligent misrepresentation count practice of law in the State of Minnesota dismissed. should be immediately. effective Finally, underlying if the fact does not stipulation expressly exist—if the was not any acquain- on the

conditioned absence

tance between the officers of arbitrators, there can be no knew, lawyer

regardless what the for the

lawyer protect no has affirmative adversary.

the interest of the client’s The

absence, however, affirmative

to ferret out and disclose information to not, view, my does excuse lawyer’s deliberately misleading the ad- Minnesota, Respondent, STATE of versary by misrepresentation fraudulent misrepresentation explicit

whether the implicit. NOTCH, Daniel Herbert Petitioner, Appellant. KELLEY, (dissenting). Justice No. CO-89-785. join I the dissent of Justice COYNE.

Supreme Minnesota. Court of 13, 1989. Oct. of Rolin L. re Reinstatement CAR

GILL, III, Attorney Law of Minnesota. State

No. C3-89-974.

Supreme Court of Minnesota.

Oct.

Case Details

Case Name: L & H AIRCO, INC. v. Rapistan Corp.

Court Name: Supreme Court of Minnesota

Date Published: Oct 6, 1989

Citation: 446 N.W.2d 372

Docket Number: C2-88-1796, C4-88-1878

Court Abbreviation: Minn.