The Sound of Silence

Lake Access

Knaresborough Enterprises, LTD v. Dizazzo, 2021 VT 1

By Elizabeth Kruska 

The facts of this case aren’t especially important to the reason for the appeal. Briefly, though, the dispute between the parties had to do with use of an easement over a property to access Lake Champlain. The matter kicked around in various stages of litigation until the spring of 2019 when the parties reached a partial settlement regarding the type of easement that existed and how it would be used going forward.

There was still a trial held on some unresolved issues. Testimony was taken, and at some point during the proceedings the court took a recess. The parties’ attorneys spoke to one another, and after the recess returned to the courtroom and told the court they had some revisions to the prior partial settlement.

Here’s where the problem started. The plaintiff’s lawyer told the court the parties had agreed to include a mandatory arbitration clause for future disputes. They didn’t create one right at the moment, telling the court that they knew they could meet later and figure it out. Sidenote: this happens. Lawyers are really picky about words. We lawyer-types need to make sure we’re using the right words so there’s no confusion about what anybody meant. Sometimes this takes some time and some drafting and some editing, so it doesn’t always work to create language like this in open court when time might be tight.

Anyway, during this exchange, the defendant’s lawyer started to say something about certain issues, and the plaintiff’s lawyer said he wasn’t quite finished. Defense lawyer said he’d wait until the plaintiff’s lawyer was done. When the plaintiff’s lawyer was done speaking, the defense lawyer got up and said some things but said nothing about the proposed arbitration clause.

The hearing finished, and the parties submitted proposed final orders that ended up being almost identical to one another. But the plaintiff included the binding arbitration language and the defendant didn’t. The court made an order, and likely based on the discussion on the record, included the arbitration agreement.

Then an issue arose and the defendant tried to come back to court and the court said no because they had to go to arbitration. And the defendant disagreed, noting that the arbitration clause shouldn’t even be there because there was no written agreement. The defendant moved to strike that clause. The court denied the motion and defendant appealed.

SCOV reverses and remands.

The Vermont Arbitration Act is clear that any agreement to impose binding arbitration has to be in writing. This agreement was not in writing. It appears (and I am summing this up very broadly) that when the attorneys went into the hearing back in 2019 that the plaintiff’s lawyer said on the record they believed this was an agreement, and that they’d all write it out later. The defense lawyer, on the other hand, didn’t say either way whether they agreed or not.

Generally, courts prefer some form of alternative dispute resolution over litigation and trials. Not because they don’t want to have hearings and trials, but because if parties can work out things in a different venue it saves them time, it gets them to an end result that is workable for them, and it permits the parties to use an intermediary of their choosing, and who may have expertise in the subject matter. Arbitration is serious because doing it requires the parties to waive certain rights, including the right to a jury trial. Because it requires this waiver of rights, for an arbitration clause to be enforceable, it’s got to be clearly voluntarily made and it’s generally got to be in writing. The writing also needs to include an acknowledgement of the waiver of rights.

In hindsight, when the judge learned from one party that there was an agreement (or the parties thought there was an agreement) about including an arbitration clause, the best thing to do would have been to get both parties in the courtroom and to do a colloquy of sorts on the record. At that point the judge could ask them if they did agree to a binding arbitration clause and the rights they are giving up by including that clause. SCOV pointed out a case from another jurisdiction where an incident like this occurred, and where that appeals court found the colloquy was sufficient to support creating an arbitration clause. SCOV adopts this and says that if there’s a knowing and voluntary waiver on the record, that could be sufficient to create an enforceable agreement.

The problem here was that while it likely appeared that the parties agreed to include the arbitration agreement, the defendant’s lawyer never actually took a position on the record. SCOV says there are times when silence can be an assent, but that doesn’t work here. Since the defendant would have to waive his or her rights voluntarily and unequivocally, silence can’t really be taken either way.

So, SCOV reverses to strike the arbitration clause and orders the trial court to determine whether the rest of the order can stand as-is, or whether that needs to be re-done, as well.