91视频

In my February column for the 91视频, I warned of the risks of arbitration. Recently, the dangerous arbitration statute ORS 36.695 came into play in an important Oregon Supreme Court decision, Couch Investments LLC v. Peverieri.

The dispute was about who should be liable for stormwater drainage improvements required by the Oregon Department of Environmental Quality. Peverieri, the landlord, believed that Couch Investments should be responsible. Couch Investments, the tenant, believed that Peverieri should be responsible. They both signed a stipulation to arbitrate and limit claims. In that stipulation, there was a very consequential phrase: 鈥淭he only issue to be resolved through arbitration is whether [tenant], as tenant, or [landlords], as landlord, are liable under the lease that is the subject of the above actions (the lease) for the cost of storm water drainage improvements required by the Oregon Department of Environmental Quality (the DEQ issue).鈥�

After the arbitration proceedings, the arbitrator ruled that Couch Investments should make the necessary improvements and that Peverieri should foot the bill (assuming the bill is under $32,500). Peverieri believed that the arbitrator overstepped his bounds in prescribing a remedy because the decision he was faced with per the stipulation was who was liable. He was not asked to do anything beyond that.

All the way up to and including the Oregon Supreme Court, the courts ruled in favor of Couch Investments. Why? Because the quoted section of the stipulation could easily be interpreted as 鈥渢he only issue we are covering is storm water drainage鈥� and not as 鈥渢he only thing the arbitrator can decide is liability for storm water drainage improvements.鈥� Couch Investments argued that there were many disputes involving the relationship between these two entities and the quoted section of the stipulation was to express that only the dispute concerning stormwater drainage would be covered in arbitration.

The court likely would have ruled in favor of Peverieri if it more explicitly expressed its intent to waive ORS 36.695(3), which gives the arbitrator broad powers by stating, 鈥淎s to all remedies other than those authorized by subsections (1) and (2) of this section, an arbitrator may order such remedies as the arbitrator considers just and appropriate under the circumstances of the arbitration proceeding. The fact that such a remedy could not or would not be granted by the court is not a ground for refusing to confirm an award under ORS 36.700 (confirmation of award) or for vacating an award under ORS 36.705 (vacating award).鈥�

In fact, in the opinion issued by the Oregon Supreme Court, Justice Martha Lee Walters draws attention to Peverieri鈥檚 failure to waive the rules of arbitration statutes numerous times. Specifically, she states, 鈥淚n this case, tenant contends, the parties did not waive or vary the arbitrator鈥檚 default authority to order remedies; the stipulation to arbitrate contains no express invocation of ORS 36.610(1), and a waiver cannot be implied from its wording.鈥�

That statute that Walters mentioned, ORS 36.610(1), gives parties the ability to waive or vary the effect of the requirements of ORS 36.600 to 36.740. Those are a lot of rules that can be changed, but only if they are altered before the arbitration agreement is signed. The real kicker is that Peverieri may very well have been trying to do just that. Yet, not only was it unable to receive the protections it was hoping for because the stipulation was too vague, but the stipulation was specific enough in other regards that it qualified as a valid agreement to arbitrate under ordinary principles of state contract law, and as a result it was unable to vacate the arbitration by proving the agreement to arbitrate was null. So, when entering an arbitration agreement, remember to invoke ORS 36.610(1) and be specific about what rules you want changed.

Roger Lenneberg is an attorney and chairman of Jordan Ramis PC鈥檚 construction law team. He previously worked as an arbitrator, mediator and in-house counsel for a national subcontractor and developer. Contact him at 503-598-5585 or [email protected].