Aramark Uniform & Career Apparel, Inc. v. Hunan, Inc.

757 N.W.2d 205, 276 Neb. 700, 2008 Neb. LEXIS 161
CourtNebraska Supreme Court
DecidedOctober 31, 2008
DocketS-07-881
StatusPublished
Cited by159 cases

This text of 757 N.W.2d 205 (Aramark Uniform & Career Apparel, Inc. v. Hunan, Inc.) is published on Counsel Stack Legal Research, covering Nebraska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Aramark Uniform & Career Apparel, Inc. v. Hunan, Inc., 757 N.W.2d 205, 276 Neb. 700, 2008 Neb. LEXIS 161 (Neb. 2008).

Opinion

757 N.W.2d 205 (2008)
276 Neb. 700

ARAMARK UNIFORM & CAREER APPAREL, INC., Appellant,
v.
HUNAN, INC., doing business as Hunan Restaurant, Appellee.

No. S-07-881.

Supreme Court of Nebraska.

October 31, 2008.

*207 Damien J. Wright, of Welch Law Firm, P.C., Omaha, for appellant.

Mark Porto and John A. Wolf, of Shamberg, Wolf, McDermott & Depue, Grand Island, for appellee.

HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

CONNOLLY, J.

I. SUMMARY

This appeal arises from a contract dispute between Aramark Uniform & Career Apparel, Inc. (Aramark), a Delaware corporation, and Hunan, Inc., a Nebraska corporation doing business as Hunan Restaurant. Aramark filed a demand for arbitration under the parties' arbitration agreement. Hunan, however, objected to arbitration, asserting that the parties' arbitration agreement was unenforceable because it did not comply with a notice provision under Nebraska's Uniform Arbitration Act (UAA).[1] The arbitrator agreed with Aramark's position. He determined that the Federal Arbitration Act (FAA) governed the agreement and that compliance with the UAA was irrelevant because the FAA preempted the UAA's notice provision.[2] The arbitration went forward, but Hunan refused to participate. The arbitrator awarded Aramark $13,144.54.

Aramark petitioned the district court for Douglas County to affirm the arbitration award. Hunan responded with a motion to vacate the award under § 25-2613 of the UAA. The district court found that the contract did not involve interstate commerce and vacated the arbitration award under § 25-2613(3) and (4). We reverse because we conclude that the contract does involve interstate commerce. Therefore, the FAA governs the contract. Because the UAA's notice provision directly conflicts with the FAA, federal law preempts it.

II. BACKGROUND

Aramark contracted to rent Hunan aprons, tablecloths, napkins, bar mops, laundry bags, and other products. The contract contained the following arbitration provision: "Any controversy or claim arising out of or relating to this Agreement shall be settled by binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof."

In September 2006, Aramark filed its demand for arbitration with the American Arbitration Association, alleging that Hunan had breached the contract. The arbitration association notified Hunan of the demand, and Hunan responded by objecting to arbitration. In a letter to the arbitration association, Hunan asserted that the arbitration provision contained in the parties' agreement was invalid because it did not comply with a notice requirement of the UAA. Specifically, Hunan *208 claimed that the arbitration provision was invalid because it failed to contain language required by § 25-2602.02, which provides: "The following statement shall appear in capitalized, underlined type adjoining the signature block of any standardized agreement in which binding arbitration is the sole remedy for dispute resolution: THIS CONTRACT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES."

Aramark responded that the arbitration provision was valid and enforceable. Aramark asserted that the FAA preempted the UAA because the parties' contract involved interstate commerce. The arbitrator determined that Aramark's position was correct and that the arbitration should proceed. The arbitrator held a hearing on Aramark's claim in Omaha, Nebraska. Aramark appeared and adduced testimony and evidence, but Hunan did not appear. Neither party sought a court order to stay or compel the arbitration proceedings.[3] The arbitrator awarded Aramark $13,144.54. The award included $11,044.54 as damages and $2,100 as expenses.

After the arbitration, Aramark filed both a motion and a petition to confirm the arbitration award in the Douglas County District Court. In response, Hunan requested that the court vacate the arbitration award. Hunan claimed that no valid arbitration agreement existed between the parties because the agreement failed to comply with § 25-2602.02. It also claimed the arbitrator exceeded his power by conducting the hearing in an improper venue under § 25-2606(c). Hunan also moved to transfer the case to the Hall County District Court.

The Douglas County District Court held a telephonic hearing regarding the motion to transfer. The parties briefly discussed Hunan's claim that the arbitration agreement was nonbinding because it failed to comply with § 25-2602.02. The parties did not discuss whether their contract implicated interstate commerce.

After the hearing, the district court entered an order vacating the arbitration award. The court determined that the FAA did not preempt the UAA because "there [was] nothing to suggest that the agreement in question was in interstate commerce or affected by interstate commerce." Because Nebraska law applied, the court declared the agreement was invalid because it did not contain the language required by § 25-2602.02. The court granted Hunan's motion to vacate the arbitration award under § 25-2613(a)(3) and (4).

III. ASSIGNMENTS OF ERROR

Aramark assigns, consolidated and restated, that the district court erred in concluding that (1) the contract was not one within or affecting interstate commerce and (2) the UAA governed the agreement.

IV. STANDARD OF REVIEW

[1] In reviewing a district court's decision to vacate, modify, or confirm an arbitration award under Nebraska's UAA, an appellate court is obligated to reach a conclusion independent of the trial court's ruling regarding questions of law.[4] However, the trial court's factual findings will not be set aside on appeal unless clearly erroneous.[5]

*209 V. ANALYSIS

1. PREEMPTION UNDER FAA

[2] Arbitration in Nebraska is governed by the UAA as enacted in Nebraska. But if arbitration arises from a contract involving interstate commerce, it is governed by the FAA. Under the FAA, written provisions for arbitration are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."[6] Nebraska law, in contrast, requires that when arbitration is the sole remedy for dispute resolution of a contract, the following statement "shall appear in capitalized, underlined type adjoining the signature block[:] THIS CONTRACT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES."[7] The failure to include this statement renders the arbitration agreement unenforceable under Nebraska law.[8]

Nebraska law is not unique in requiring a contract with an arbitration clause to contain a special notice of the clause.[9] But the U.S. Supreme Court has held that if a contract containing an arbitration clause involves interstate commerce, the FAA governs the contract. In that circumstance, the FAA preempts state law requirements that apply solely to arbitration agreements.[10] The Court has stated that if a state law notice requirement governs "not [just] `any contract,' but specifically and solely contracts `subject to arbitration,'" such requirement "conflicts with the FAA and is therefore displaced by the federal measure."[11]

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Cite This Page — Counsel Stack

Bluebook (online)
757 N.W.2d 205, 276 Neb. 700, 2008 Neb. LEXIS 161, Counsel Stack Legal Research, https://law.counselstack.com/opinion/aramark-uniform-career-apparel-inc-v-hunan-inc-neb-2008.