Bandler v. Charter One Bank, 2012 VT
83.
It’s tricky being a trial
court in the ten states in which decisions are directly appealable to the
state’s supreme court. The court’s
decisions must be within the boundaries of the law, such as it is when handed
down and codified by the Legislature or interpreted piecemeal by the supremes
(minus Florence Ballard). The trial
court’s decisions must simultaneously pass muster and creatively interpret the
precise contours of amorphous legal concepts.
Today’s case presents an
obscure and narrow legal question with little application to the everyday
Vermonter, on which the SCOV ultimately determines that the trial court got it
wrong. The question was whether a
Vermont trial court has limitless authority to review arbitration decisions on
class-action claims. The SCOV concludes
it does not, after wending its way through the somewhat confusing Vermont Arbitration
Act and the sparse case law surrounding arbitration in Vermont.
This case also highlights why
it’s important to pay attention to statutory limits that exist on one’s right
to appeal a decisions.
The facts of the underlying
claims matter little to the SCOV’s conclusion; the devil is in the procedural
details. Plaintiff had a bank account
with Defendant Charter One Bank. The
account was subject to an arbitration provision. In 2003, Plaintiff sued Bank claiming the
bank failed to honor its advertising promises regarding free checking
accounts. Bank asked for and received a
judgment order dismissing the case to allow the parties to arbitrate.
In 2005, Plaintiff demanded
arbitration of his claim. A year later,
he asked the arbitrator to allow him to amend his claim into a class-action and
include claims for all persons who opened “free-checking” accounts only to be
slammed with charges. The arbitration
provision in the contract said nothing about class-action claims. The arbitrator concluded that a class-action
claim was arbitrable, by reference to a United States Supreme Court case
considering a similar question, Green
Tree Financial Corp. v. Bazzle.
The arbitrator stayed the
arbitration for thirty days in the event the parties wanted to appeal it. Under 12 V.S.A. § 5277(c), a party has thirty
days from the decision to do so. The
thirty days came and went for the arbitrator’s class-action claim, with no
challenge by either side. The arbitrator
and the parties resumed the arbitration.
Fast-forward three years to
2009. The United States Supreme Court
granted certiorari in Stolt-Nielsen SA v.
AnimalFeeds Int’l Corp., a case reconsidering Green Tree Financial’s conclusion regarding class-claim arbitration
where the contract is silent on it. Bank
seized on this opportunity, and convinced the arbitrator to stay the
arbitration proceedings until Stolt-Nielsen
was decided.
In 2010, the SCOTUS issued
its Stolt-Nielsen decision. As sometimes happens when the High Court
cannot agree on a narrow question of law, the SCOTUS’ decision was split on
numerous points, and no particular line of reasoning got the support of a
majority of the justices. What was
clear, however, was that the SCOTUS did not believe a silent contract was
grounds for compelling class-action arbitration. Sadly, the SCOTUS did not touch on what
contract language would allow for
class-action arbitration.
Bank did not take long to
pick up on the mixed good fortune of the fractured Stolt-Nielsen decision. Within
a month of the SCOTUS deciding Stolt-Nielsen,
Bank bypassed the paused arbitration and went straight to the trial court that ordered
the arbitration back in 2004 with a motion for dismissal, claiming the
arbitrator got it wrong when it allowed the class-action claim to be arbitrated
in 2006. Plaintiff for his part asked
that the trial court take no action because the case was under the jurisdiction
of the arbitrator. Plaintiff also noted
that the trial court had dismissed it already at the insistence of Bank.
After a hearing, the trial
court dismissed the case and vacated the arbitrator’s class-action claim
decision. Its decision focused on Stolt-Nielsen, and concluded that even
though the Vermont Arbitration Act limits the court’s power to vacate an
arbitration decision to thirty days from the date of the decision, by not
raising the time limitation the parties waived the issue. The trial court directed the parties to
continue with their arbitration regarding just Plaintiff’s claim, as the
class-action was now closed. Plaintiff
appealed.
The question on appeal seems
to be, then, whether Stolt-Nielsen
would require the trial court to vacate the arbitration decision and allow
Plaintiff’s class-action claim to be arbitrated. But, the SCOV says in its infinite wisdom,
the threshold question is really whether the trial court even had the authority
to vacate the arbitration decision in the first place.
The SCOV explores the
statutory basis Vermont courts have for taking action with respect to matters
subject to arbitration. Under the Vermont
Arbitration Act, trial courts may make a very specific, enumerated set of
orders, and may only grant relief from an arbitration award if it’s requested
within thirty days.
Oh no, says Bank. It was not seeking to vacate the arbitration
award. Rather, Bank characterizes its
appeal as a challenge to the arbitrator’s subject-matter jurisdiction. As those who survived their first-year civil
procedure course may remember, subject-matter jurisdiction is an issue that is
always ripe for the raising as it is at any time in the proceedings grounds for
dismissal.
The SCOV smirks at this
challenge, and rephrases the question Bank is really asking as whether the
trial court had “unfettered authority to, at any time, consider and rule on the
arbitrability of class claims.” The SCOV
then proceeds to smack down this concept by reference to its own decisions and those
of other states.
The central thread in the
cases the SCOV cites is this: the boundaries set by the Legislature require
restraint on the part of the courts. In Springfield Teachers Ass’n v. Springfield
School Directors, the SCOV refused to go outside the specific grounds for
vacating an award set in the statute, some of which were “jurisdictional”
grounds. Likewise, in In re Denio, the SCOV refused to
consider a challenge to the Environmental Board’s Act 250 jurisdiction when it
was raised after the statutorily-allowed time period.
Arbitration is akin to a quasi-judicial
proceeding before an administrative body, in which the trial court has specific
and limited areas to review. Without restraints set by the Legislature on
the limits of judicial review, arbitration would not be as effective a means of
extrajudicial conflict resolution. It
would merely be another procedural hurdle between the parties and final
resolution. Arbitration is popular and
powerful because it is quick, informal, and final. Vermont is not alone in reaching this
decision, the SCOV notes, citing three other states and the Second Circuit Court
of Appeals.
The Vermont Arbitration Act,
the SCOV concludes, precludes “free-floating judicial authority” over
arbitration decisions. The cases cited
by Bank do nothing to dissuade the SCOV.
In fact, it finds a common thread underlying them and the SCOV’s
conclusion: the Vermont Arbitration Act sets the boundaries within which the
courts may review an arbitrator’s decision, and decisions such as the trial
court’s here exceed that authority.
What results from today’s
decision is a mixed bag for Plaintiff: he wins his appeal, gets a reversal, and
the trial court is directed to dismiss its motion to dismiss. The downside is he must now arbitrate his
class-action claim, and hope for an award in his favor.
At least he has the cold comfort
of knowing the trial court should never have considered the arbitrability of
his claim to begin with.
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