Petra, Inc v. McCoyPetra, Inc v. McCoy
I. Introduction
This case illustrates the problems a party may encounter when an arbitration is completed in one state, and the prevailing party seeks to have the arbitration award confirmed in another state. In this adversary proceeding, Plaintiff Petra, Inc. (“Petra“) seeks a determination that its claim against Defendant Christian McCoy (“McCoy“) based on an arbitration award is nondischargeable under
McCoy‘s Motion requests a determination that the state court judgment confirming the arbitration award is void because the Montana state court did not have personal jurisdiction over McCoy and it was obtained by fraud or misrepresentation. Further, McCoy argues that the arbitration award alone, without a judgment confirming it, is not entitled to preclusive effect.
II. Jurisdiction
“Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11 . . . .”
III. Undisputed Facts
A. Arbitration and Arbitration Award
Petra is an Idaho corporation.3 McCoy is a Montana resident and was the sole owner and managing member of McCoy Excavation, LLC (“Excavation“).4
Petra entered into a construction contract and agreed to act as general contractor for a 216-unit apartment complex in Bozeman, MT.5 McCoy Excavation, LLC (“Excavation“) entered a subcontractor agreement (“Subcontract“) with Petra.6 The Subcontract contained an arbitration and forum selection clause. It provided in part:
All other claims, disputes, and other matters in question between Contractor and Subcontractor arising out of, or relating to, the Main Contract or this Subcontract, the breach thereof, or Work thereunder . . . shall be decided by arbitration at Contractor‘s sole and exclusive option, otherwise all disputes shall be decided by litigation . . . . The arbitration proceedings will be administered by AAA in Boise, Idaho, with arbitrators appointed from the Construction Industry Panel under the Construction Industry Rules. Any litigation proceedings shall be in Ada County Court, Idaho. Contractor and Subcontractor agree to be bound by any findings and award of such arbitration.7
Following entry of the Subcontract, Petra and Excavation had a dispute. Petra commenced an arbitration proceeding against Excavation and McCoy on February 2, 2022, in Boise, Idaho.9 Excavation notified its insurer of the claims asserted in the arbitration demand. Excavation‘s insurer retained counsel for its insured, subject to a reservation of rights.10 The insurer filed a complaint and requested a declaration in the United States District Court for the District of Montana (“District Court“) that it owed no duty to defend or indemnify Excavation and McCoy under its policy.11 This complaint was filed in July 2022.12
In November 2022, the District Court entered judgment in favor of the insurer, finding that Petra‘s claims were not covered claims under its policy.13 Counsel retained by the insurer
On May 22, 2023, Petra submitted a brief with supporting documents to the Arbitrator.16 Neither Excavation nor McCoy responded or otherwise opposed the relief requested.17 The Arbitrator issued a “Final Award of Arbitrator” in August 2023.18 The total Arbitration Award was $511,302.47.19
B. Efforts to Confirm the Arbitration Award
After the Arbitration Award was entered, Petra filed a Petition to Confirm Arbitration Award (“Petition“) with the Montana Eighteenth Judicial District Court (“Montana Court“).20 In its Petition, Petra explained, “a party may file an application with a district court to confirm the arbitration award . . . . [t]he district court shall confirm an award unless the opposing party files a motion to vacate, modify, or correct the arbitration award.”21
The Petition was accompanied by a certificate of service which represented that a copy of was served upon Excavation and McCoy in the manner provided by
Except as otherwise provided, an application to the court under this chapter must be by motion and must be heard in the manner and upon the notice provided by law or rule of court for the making and hearing of motions. Unless the parties have agreed otherwise, notice of an initial application for an order must be served in the manner provided by law for the service of a summons in an action.
Strangely, despite recognizing service of the Petition was required and knowing that as of October 16, 2023, it had not occurred, Petra provided the Montana Court with a proposed order confirming its Arbitration Award on November 22, 2023.28 A week later, the Montana Court entered an order confirming the Arbitration Award, and entered judgment confirming the Arbitration Award, against Excavation and McCoy.29
IV. Analysis
A. Summary Judgment Standard
Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
When a court is reviewing cross-motions for summary judgment, “each motion must be considered on its own merits.” Fair Housing Council of Riverside Cnty. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001) (quoting William W. Schwarzer, et al., The Analysis and Decision of Summary Judgment Motions, 139 F.R.D. 441, 449 (Feb. 1992)). The court must consider the evidence submitted in support of each motion separately. Fair Housing Council, 249 F.3d at 1136. The court has an independent duty to review the facts even when both parties
Petra‘s Motion seeks recognition of the judgment confirming the Arbitration Award and its preclusive effect on these proceedings. It argues that collateral estoppel or issue preclusion bar relitigation of the issues that are the subject of the Arbitration Award and judgment confirming it. According to Petra, application of collateral estoppel in this case entitles it to summary judgment on all of its causes of action and excepts its claims from McCoy‘s discharge. Integral to its argument is the validity and enforceability of the judgment confirming the award.30
McCoy‘s Motion asks this Court to find that the judgment confirming the award is void and that the Arbitration Award is not entitled to preclusive effect. McCoy first argues that the judgment was obtained through fraud, misrepresentation, and a failure to disclose to the Montana Court that service of the Petition did not comply with Montana law. As a result, the Montana Court lacked personal jurisdiction over him. Alternatively, he argues that the arbitration was not litigated and tantamount to a default proceeding, making collateral estoppel inapplicable.31
To determine the preclusive effect of the judgment and the Arbitration Award, this Court must first determine whether the judgment is void and, if so, whether the Arbitration Award carries the same preclusive effect that the judgment otherwise would. Petra argues that even if the judgment is void, the unconfirmed Arbitration Award is still entitled to preclusive treatment like a judgment. Accordingly, this Court will begin its analysis with McCoy‘s Motion. Since McCoy asks this Court to void a state court judgment, this Court would be remiss not to consider the limitations imposed on it by the Rooker-Feldman doctrine and
B. McCoy is Entitled to Summary Judgment because the Judgment is Void
1. Rooker-Feldman
Under the Rooker-Feldman doctrine, “inferior” courts are barred from hearing de facto appeals from state court judgments. See generally Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); D.C. Ct. App. v. Feldman, 460 U.S. 462 (1983). A federal court is barred from hearing a claim under the Rooker-Feldman doctrine if it was actually litigated in state court prior to filing the federal action or the federal claim is inextricably intertwined with the state adjudication. Knapper v. Bankers Trust Co., 407 F.3d 573, 580 (3d Cir. 2005). Here, there was no litigation before the Montana Court. Accordingly, this Court must determine if the claims in this adversary proceeding are inextricably intertwined with the Montana Court judgment.
A federal claim is inextricably intertwined with an issue adjudicated by a state court when: (1) the federal court must determine that the state court judgment was erroneously entered in order to grant the requested relief, or (2) the federal court must take an action that would negate the state court‘s judgment. In other words, Rooker-Feldman does not allow a plaintiff to seek relief that, if granted, would prevent a state court from enforcing its orders.
Id. at 581 (cleaned up) (quoting Walker v. Horn, 385 F.3d 321, 329 (3d Cir. 2004)).32 To begin, this Court notes that the typical circumstances of Rooker-Feldman are not present here. While the doctrine is structured to prevent losing parties from initiating complaints in federal court as plaintiffs, here we have a debtor asserting that a judgment a creditor seeks to except from discharge is void. If successful, Petra will have to establish both liability for its claims and that the liability is excepted from discharge.
Under Ninth Circuit precedent, a bankruptcy court cannot substitute a state court‘s determination of nondischargeability for its own. See M.O. v. Rosario (In re Del Rosario), 668 B.R. 618, 630 (BAP 2025). Consideration of Rooker-Feldman here to ensure this action will not prevent the Montana Court from enforcing its own orders is idiosyncratic because—ultimately—a debtor‘s discharge under
Additionally, the Ninth Circuit Court of Appeals has clarified, “our caselaw has further narrowed the doctrine as applying only to suits alleging errors by the state courts in rendering judgment, as opposed to misconduct by litigants in obtaining such a judgment.” Miroth v. Cnty. of Trinity, 136 F.4th 1141, 1152 (9th Cir. 2025) (quoting Cogan v. Tabucco, 114 F.4th 1054, 1064 (9th Cir. 2024)). McCoy has argued that the Montana Court judgment should be declared void because Petra failed to serve him as required by statute and then falsely represented to the Montana Court that he had been properly served. This Court finds that such relief would be within the exception outlined by Miroth and Cogan because it would be based on the misconduct of the litigant who obtained the judgment, not the Montana Court.34
The issues in this case do not ultimately seek relief from the Montana Court judgment. Instead, what is sought is a determination whether the Montana Court judgment or underlying Arbitration Award are excepted from discharge. The allegations are not that the Montana Court erred, but that the party obtaining the judgment engaged in misconduct. Therefore, this Court may determine whether Petra‘s judgment confirming the Arbitration Award is void without running afoul of Rooker-Feldman.
2. The Montana Court judgment confirming the Arbitration Award is void
Pursuant to the Uniform Arbitration Act, as adopted in Montana (“Montana Act“), a written agreement to arbitrate is enforceable, subject to a combination of general and specific exceptions. First, arbitration agreements are subject to challenge to the extent there are grounds at law or equity for the revocation of a contract.
Assuming a valid and enforceable agreement to arbitrate exists, an arbitrator‘s award to a prevailing party may be enforced. In most instances, enforcement of an arbitrator‘s award will require confirmation of the award by a court with jurisdiction and entry of a judgment confirming the award.
An application for confirmation of an award must be made “by motion and must be heard in the manner and upon the notice provided by law or rule of court for the making and hearing of motions.”
a. McCoy was not properly served under MCA § 27-5-321
To be preclusive, a final judgment must be a valid judgment, and a judgment cannot be valid if the court did not acquire jurisdiction over the defendant. Mountain W. Bank, N.A. v. Glacier Kitchens, Inc., 281 P.3d 600, 602–03 (Mont. 2012). “The nature of service is twofold: it serves notice to a party that litigation is pending, and it vests a court with jurisdiction.” Fonk v. Ulsher, 860 P.2d 145, 147 (Mont. 1993). The Montana Supreme Court has explained, “even where a defendant has actual notice of the summons and complaint[,] knowledge of the action is not a substitute for valid service.” Mountain W. Bank, 281 P.3d at 603 (internal quotations omitted) (quoting Fonk, 860 P.2d at 147).
Absent proper service, a court‘s jurisdiction over a party does not exist. Reservation Operations Center LLC v. Scottsdale Ins. Co., 419 P.3d 121, 127 (Mont. 2018) (citing Blaskovich v. Blaskovich, 815 P.2d 581, 582 (Mont. 1991)). The only way for service to be proper upon an individual is by either “delivering a copy of the summons and complaint to the individual personally; or delivering a copy of the summons and complaint to an agent authorized by appointment or law to receive such service of process.”
The Montana Supreme Court has construed “must” as “‘mandatory, rather than permissive‘” Dodds v. Tierney, 544 P.3d 857, 864 (Mont. 2024) (quoting Montco v. Simonich, 947 P.2d 1047, 1051 (1997)). While service may be completed by first-class mail, if an acknowledgement is not received within 21 days, then service must be made in person.
Further, a judgment that is void due to improper service is subject to collateral attack at any time in any proceeding. Kahle v. Smithers, 733 P.2d 844, 846 (Mont. 1987) (quoting Russel Realty Co. v. Kenneally, 605 P.2d 1107 (1980)). Petra concedes that McCoy was not properly served under
M. R. Civ. P. 4(e) .
To avoid entry of summary judgment for McCoy, Petra argues that the Montana Court acquired jurisdiction over the Idaho arbitration, despite the absence of personal service, because McCoy consented to service by mail when he signed the Subcontract as a guarantor.36 This argument rests on two premises. First, it assumes a valid arbitration agreement exists between Petra and McCoy in his individual capacity. Contrary to Petra‘s arguments, the record is devoid of any arbitration agreement signed by McCoy individually.37 Setting aside this glaring hole in the record, the Court will consider Petra‘s premise that McCoy was a party to the Subcontract for purposes of summary judgment and address Petra‘s waiver argument.
Petra‘s waiver argument rests on its combined reading of its Subcontract and the AAA rules. Petra contends without citation to the record, “[t]he Subcontract expressly specified that the AAA Construction Industry Rules would govern any arbitration between the parties.”38 It asks this Court to construe the Subcontract in conjunction with the AAA rules. In essence, it contends the AAA rules are incorporated into its Subcontract and form the basis of McCoy‘s waiver of strict compliance with
Incorporation of the AAA rules into the Subcontract as Petra urges produces multiple instances of equally plausible interpretations. The Subcontract‘s choice-of-law provision requires it to be interpreted under the laws of the state of the project, i.e. Montana.39 The existence of equally plausible but different interpretations results in ambiguity. Hill v. Ellinghouse, 553 P.3d 365, 372 (Mont. 2024). Ambiguities are construed against the drafter. AWIN Real Estate, LLC v. Whitehead Homes, Inc., 472 P.3d 165, 223 (Mont. 2020) (citing Mary J. Baker Revocable Trust v. Cenex Harvest States, Coops. Inc., 164 P.3d 851, 860 (Mont. 2007) and Ophus v. Fritz, 11 P.3d 1192, 1197 (Mont. 2000)). Consideration of the specific ambiguities undermines Petra‘s waiver argument.
Assuming arguendo that the AAA rules are incorporated into the Subcontract under the later construction, Petra relies on Rule 44(a) which states:
Any papers, notices, or process necessary or proper for the initiation or continuation of an arbitration under these rules; for any court action in connection therewith; or for the entry of judgment on any award made under these rules may be served on a party by mail addressed to the party or its representative at the last known address or by personal service, in or outside the state where the arbitration is to be held, provided that reasonable opportunity to be heard with regard thereto has been granted to the party.41
According to Petra, Rule 44(a) permitted service of the Petition by mail in Montana. Petra‘s consideration of Rule 44(a) in a vacuum cannot be reconciled with its own Subcontract, which limits the reach of Rule 44(a).
If this Court incorporates Rule 44(a) into the Subcontract, it must apply the rule according to its plain language. Wurl v. Polson School Dist. No. 23, 127 P.3d 436, 442 (Mont. 2006).42 Pursuant to the Subcontract, any litigation must be in Ada County, Idaho.43 This contractual provision modifies the phrase “any court action” in Rule 44(a). Harmonizing the Subcontract and Rule 44(a) results in Rule 44(a) being limited to court actions or entry of judgment in Ada County, Idaho.44 It does not apply to Gallatin County, Montana. Absent such an
When a provision in a contract is ambiguous, the parties’ course of performance is very informing, “if not controlling.” Ophus, 11 P.3d at 1196. If Petra‘s Subcontract constituted a waiver of strict compliance with
Finally, even if this Court further indulged Petra‘s argument that the Subcontract constituted a waiver of strict compliance with
McCoy is entitled to summary judgment because the undisputed facts show Petra‘s efforts to confirm the Arbitration Award were ineffective because Petra failed to strictly comply with
C. Petra is not Entitled to Judgment as a Matter of Law because the Judgment Confirming it is Void and the Unconfirmed Arbitration Award is not Entitled to Preclusive Effect.
Independent of McCoy‘s Motion, Petra also requested summary judgment arguing that under collateral estoppel principles, its judgment and the Arbitration Award are entitled to preclusive effect. If Petra is correct, relitigation of issues adjudicated by the arbitrator should be barred. Although this Court has already determined McCoy is entitled to summary judgement, it must undertake an independent review of Petra‘s Motion and consider it on its own merits. Fair Housing Council, 249 F.3d at 1136.
The material facts surrounding contract formation between Petra and Excavation, the arbitration, Arbitration Award, and efforts to confirm the Arbitration Award are not disputed.47 Based on those facts, McCoy argued the judgment was void. Based on the same facts, Petra argues the judgment is entitled to preclusive effect or, alternatively, that even if the judgment is void, this Court should construe the Arbitration Award as if it was a judgment for purposes of issue preclusion and summary judgment. This Court cannot conclude that the judgment is void for purposes of McCoy‘s Motion and resurrect it for Petra‘s Motion. As explained above, the judgment is void; and there are additional reasons for concluding Petra is not entitled to judgment as matter of law.
“[T]he preclusive effect of a state court judgment in a subsequent bankruptcy proceeding is determined by the preclusion law of the state in which the judgment was issued.” Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1245 (9th Cir. 2001) (citing Gayden v. Nourbakhsh (In re Nourbakhsh), 57 F.3d 798, 800 (9th Cir. 1995)). In Montana, issue preclusion is applied after weighing four factors:
- Was the issue decided in the prior adjudication identical to the issue raised in the action in question?
- Was there a final judgment on the merits in the prior adjudication?
- Was the party against whom preclusion is asserted a party or in privity with a party to the prior adjudication?
- Was the party against whom preclusion is asserted afforded a full and fair opportunity to litigate the issue that may be barred?
Petra is not entitled to judgment as a matter of law because there was no final judgment on the merits in the arbitration proceeding and an unconfirmed Arbitration Award is not synonymous with a judgment. Under Ninth Circuit precedent,
The doctrine of issue preclusion applies in dischargeability proceedings . . . . The party asserting the doctrine has the burden of proving that all of the threshold requirements have been met. To meet this burden, the moving party must have pinpointed the exact issues litigated in the prior action and introduced a record revealing the controlling facts. Reasonable doubts about what was decided in the prior action should be resolved against the party seeking to assert preclusion.
Honkanen v. Hopper (In re Honkanen), 446 B.R. 373, 382 (BAP 9th Cir. 2011) (citations omitted). Petra cannot establish that a final judgment exists for purposes of issue preclusion.48
1. Petra has not met its burden to show a final judgment exists
Much of the Court‘s analysis here mirrors its analysis above, but there remain additional points that merit emphasis. Petra correctly notes that a “confirmed arbitration award is a final judgment with preclusive effect.” Galilea, LLC v. Pantaenius Am. Ltd., 2021 WL 2250862, at *6 (D. Mont. Apr. 14, 2021), report and recommendation adopted, 2021 WL 2206968 (D. Mont. June 1, 2021). Unlike Galilea, this case does not involve the FAA. Instead, it requires application of the Montana Act. Scrutiny of the Montana Act further demonstrates Petra has ignored controlling statutes and principles in its effort to obtain a judgment confirming the Arbitration Award.
Under the Montana Act, the jurisdiction of the Montana Court to confirm an arbitration award is conditioned on an agreement that provides for arbitration in Montana.
The Supreme Court of Tennessee concluded that an agreement to arbitrate in Tennessee was necessary to confer jurisdiction on its courts “to enter judgment on an award thereunder.”49 Id. at *3. In its decision, it concluded that in order for Tennessee to have subject matter jurisdiction, the agreement must provide for arbitration in Tennessee. It recognized that where the parties designate the place for arbitration, that state has exclusive jurisdiction to determine the validity of an arbitrator‘s award. Id. at *4.
The Berkeley Court‘s interpretation of its statute and its jurisdictional limitations follows other state court decisions that have considered the question and echoes comments to the most recent version of the Uniform Arbitration Act. According to the comments:
Section 26(b) follows the almost unanimous holdings of courts under the present, same language of Section 17 of the UAA that if the parties in their agreement designate a place for the arbitration proceeding, then that State has exclusive jurisdiction to determine the validity of an arbitrator‘s award in accordance with Section 25. The rationale of these courts has been to prevent forum-shopping in confirmation proceedings and to allow party autonomy in the choice of the location of the arbitration and its subsequent confirmation proceeding.
Unif. Arb. Act § 26 cmt. 3 (Unif. L. Comm‘n 2000). Both Idaho and Montana have adopted the previous version of this provision into their own statutes. See
Like the statute in Berkeley, the applicable Montana statute explicitly states, “an agreement providing for arbitration in this state confers jurisdiction on the district court to enforce the agreement under this chapter and to enter judgment on an award under the agreement.”
While ordinarily lack of subject matter jurisdiction does not divest a judgment of its preclusive effect, Petra‘s failure to properly serve McCoy deprived him of the opportunity to contest the Montana Court‘s subject matter jurisdiction. See Des Moines N. & R. Co v. Iowa Homestead Co., 123 U.S. 552, 557 (1887) (finding that lack of subject matter jurisdiction did not preclude issue preclusion). Petra requests its judgment be given preclusive effect, but the judgment was a nullity and void because it was not properly served and was entered without personal jurisdiction over McCoy. See Kalb v. Feuerstein, 308 U.S. 433, 439 (1940) (finding that bankruptcy law is Congressionally granted and divests state court jurisdiction of the power to enforce judgment subject to attack as a nullity); See generally Jackson v. FIE Corp., 302 F.3d 515 (5th Cir. 2002) (finding that a lack of personal jurisdiction by service invalidates any findings). As a void judgment, it is not entitled to preclusive effect, and Petra is not entitled to summary judgment.
2. An unconfirmed arbitration award is not entitled to preclusive effect under claim preclusion principles
An unconfirmed arbitration award is not synonymous with a final judgment, and a final judgment is required for issue preclusion to apply. HomeRiver Grp. v. Anders Bus. Solutions, LLC, 202 WL 1938206, at *3 n.2 (Mont. July 15, 2025) (citing Baltrusch v. Baltrusch, 130 P.3d 1267,1274 (Mont. 2006)). Once an arbitrator makes an award, the parties must make an application to the court to confirm the award.
Enforcing arbitration awards without requiring confirmation by a court with subject matter or personal jurisdiction over a party would render specific statutory provisions in the Montana Act utterly meaningless and make the distinctions between the terms “award,” “order,” and “judgment” superfluous.52 Other state courts have reached similar conclusions when tasked with interpreting applicable arbitration statutes.
Petra has cited cases to the contrary, including Ives v. Lyon (In re Ives), 2020 WL 1456479 (Bankr. D. Or. Mar. 20, 2020). In that case, the Oregon bankruptcy court made no distinction between an unconfirmed arbitrator‘s award and a judgment. Without significant analysis, the court treated the unconfirmed award as a judgment for issue preclusion purposes. Some California courts have adopted similarly strained rationales. See Thibodeau v. Crum, 4 Cal. App. 4th 749, 758–60 (Cal. Ct. App. 1992) (compiling cases).54 Variations in state law may explain these different outcomes. Despite these differences, this Court remains unpersuaded it should wholly disregard the process that the Montana legislature endorsed when it passed
V. Conclusion
For reasons that are not clear to this Court, Petra abandoned the forum selection clause in its Subcontract following completion of the arbitration in Idaho and endeavored to have the Arbitration Award confirmed in Montana without establishing personal jurisdiction over McCoy by a court that lacked subject matter jurisdiction. These mistakes will require Petra to litigate both liability and dischargeability before this Court because the Montana Court judgment is void ab initio, and the unconfirmed Arbitration Award is not preclusive. An Order will be entered separately.
Dated March 24, 2026.
BY THE COURT:
Hon. Benjamin P. Hursh
United States Bankruptcy Court
District of Montana
Notes
Subcontract: This Agreement
Contractor: Petra Incorporated, A Corporation of Idaho
Subcontractor: McCoy Excavation, LLC
Work: The Subcontractor shall furnish and perform all labor, materials, tools, supplies, equipment, services, facilities, and supervision necessary for the complete and proper performance of the following portions of work See Exhibit A (Scope of Work)
Main Contract: [T]he contract agreement dated 05/13/21, between Owner and Contractor; the terms and conditions (including the supplementary, and any special and/or other conditions, the specifications, drawings and any addenda).
The remaining capitalized terms are not defined within the Subcontract.- Not making a false statement of fact to a tribunal.
- If a lawyer makes a statement about a fact to the tribunal and he later learns that his statement was both false and material to the proceeding, the lawyer must correct the false statement of fact.
The making of an agreement described in this section providing for arbitration in this state confers jurisdiction on the court to enforce the agreement under this part and to enter judgment on an award thereunder.
U.S. v. Castleman, 572 U.S. 157, 178 (2014) (Scalia, J., Concurring) (“Congress presumably does not enact useless laws.“);