Elsenpeter v. St. Michael Mall, Inc.

794 N.W.2d 667, 2011 Minn. App. LEXIS 18, 2011 WL 691765
CourtCourt of Appeals of Minnesota
DecidedMarch 1, 2011
DocketNo. A10-875
StatusPublished
Cited by6 cases

This text of 794 N.W.2d 667 (Elsenpeter v. St. Michael Mall, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Elsenpeter v. St. Michael Mall, Inc., 794 N.W.2d 667, 2011 Minn. App. LEXIS 18, 2011 WL 691765 (Mich. Ct. App. 2011).

Opinions

OPINION

SCHELLHAS, Judge.

Appellant challenges the district court’s award of attorney fees and costs to respondent, arguing that the district court erred by (1) compelling arbitration of the parties’ lease dispute and (2) determining that respondent was entitled to an award of fees and costs as a prevailing party because he succeeded in obtaining an order compelling arbitration, even though he did not succeed on the merits in the underlying action. Because we conclude that the parties’ lease dispute was arbitrable, we affirm the district court’s order compelling arbitration. But because respondent was not a prevailing party on the merits in the underlying action, we reverse the award of fees and costs to him.

FACTS

Appellant St. Michael Mall Inc. (the mall), was formed in 1998 to own and operate a strip mall in St. Michael. The mall has 12 shareholders, including respondent Michael Elsenpeter and his wife, all of whom rent retail space in the mall. On September 8, 1998, Elsenpeter entered into a 15-year lease with the mall for the [670]*670rental of approximately 8,620 square feet of retail space to operate A & M Liquor.

Article 3.05 of the lease, entitled “ARBITRATION,” provides: “Any matter which is specifically set forth in this Lease to be resolved in accordance with the provision of this paragraph shall be determined by binding arbitration....” After setting out the method for choosing the arbitrator and the applicable procedure, the lease further provides: “The costs and expenses of the arbitrators, the fees of the arbitrators, and all attorneys’ fees and costs incurred, shall be paid by the losing party in the arbitration proceeding, and the definition of ‘losing party’ shall be a proper subject of the arbitration proceeding.”

Lease Addendum 9, entitled “Attorney’s Fees,” provides: “In the event either party hereto institutes legal action or proceedings arising out of or in any way connected with this Lease, the non-prevailing party shall reimburse the prevailing party for all reasonable attorney fees and costs incurred in connection therewith.”

In early 2007, Elsenpeter determined that his square footage of retail lease space contained less area than described in his lease. After the mall property manager refused to reduce his rent, Elsenpeter requested arbitration. When he received no response to his request, Elsenpeter commenced suit against the mall and sought an order compelling arbitration and awarding costs and fees. The mall answered Elsenpeter’s complaint, denied that the dispute was arbitrable, counterclaimed that Elsenpeter had breached his fiduciary duty to the mall and wasted corporate assets under Minn.Stat. § 302A.751, subd. 1(b)(5) (2006), and sought an order for the sale of Elsenpeter’s shares in the Mall back to the Mall, pursuant to Minn.Stat. § 802A.751, subd. 2 (2006).

Both parties moved for summary judgment. On August 6, 2008, the district court denied the parties’ cross-motions for summary judgment and ordered the parties to “comply with paragraph 3.05 of the Lease” and arbitrate their lease dispute. The court ruled that an award of attorney fees and costs is a question of fact and reserved the issue for trial.

The parties arbitrated the lease dispute. On February 23, 2009, the arbitrator issued his decision in favor of the mall. The arbitrator determined that a discrepancy existed between Elsenpeter’s leased space and the space set forth in the lease but that the discrepancy was “not significant.” The arbitrator also determined that when Elsenpeter negotiated and entered into the lease, he “decided to forego any accurate measurement of the building and its constituent spaces” and “accepted the erroneous measurements that had been used by the previous owner/lessor.” The arbitrator also determined that Elsenpeter and a neighboring tenant “constructed a wall on their own, without prior required landlord approval, in a location of their choice,” and that had the wall been constructed differently, “the discrepancy in [Elsenpeterj’s claim would have been reduced to 213 square feet rather than 352 square feet.” Noting that “Lease Section 3.05 mandates that the losing party be responsible for the attorneys fees and costs and cost of arbitration,” the arbitrator said, “[Elsenpeter] is the losing party in this proceeding.” The arbitrator ordered Elsenpeter to pay “$4,000 for [the mallj’s legal fees and costs.”

On December 18, 2009, the parties stipulated to dismiss without prejudice the mail’s counterclaims against Elsenpeter. The district court’s order for dismissal provides that the mail’s counterclaims “be dismissed without prejudice and each party to bear their own costs.” The parties then submitted memoranda to the court on their fees and costs associated with Elsen-[671]*671peter’s suit to compel arbitration. Elsen-peter argued that because his suit to compel arbitration sought to enforce article 3.05 of the lease, he was entitled to fees and costs under Addendum 9, which provides recompense to the prevailing party in any “legal action or proceedings arising out of or in any way connected with this Lease.” The mall argued that it was the prevailing party because it prevailed in the arbitration on the merits of the lease dispute.

The district court awarded Elsenpeter $27,167.30 in attorney fees and costs “of the action to compel arbitration in the underlying litigation, pursuant to Section 9 of the parties’ lease addendum.” This appeal follows.

ISSUES

I. Did the district court err by compelling the parties to arbitrate the lease dispute?
II. Did the district court err by awarding Elsenpeter attorney fees and costs as a prevailing party in his suit to compel arbitration?
III. Did the district court err by denying the mall’s request for attorney fees in excess of the amount awarded by the arbitrator?

ANALYSIS

I

The mall argues that the district court erred by ordering the parties to arbitrate Elsenpeter’s dispute because arbitration is not mandated by the language in the lease agreement. Elsenpeter argues that the issue of arbitrability of the parties’ lease dispute is not properly before the court for three reasons: (1) the mall did not identify the order compelling arbitration as an issue in its notice of appeal; (2) “[b]y failing to appeal the requirement that it arbitrate and by submitting the dispute to arbitration, [the mall] effectively waived any challenge to the relief that [Elsenpeter] sought and was granted by the District Court”; and (3) the issue of arbitrability “should have been properly placed before the arbitrator as part of the arbitration proceedings.” We reject Elsenpeter’s reasoning and conclude that the issue of arbitrability is properly before this court.

First, in its notice of appeal, the mall identified the final judgment entered on March 19, 2010, and the district court’s order regarding summary judgment on August 6, 2008. That March 19, 2010 judgment followed the district court’s confirmation of the arbitrator’s decision, and the mall properly appealed from that judgment. The order compelling arbitration is not an appealable order. Fedie v. Mid-Century Ins. Co., 631 N.W.2d 815, 818 (Minn.App.2001), review denied (Minn. Oct. 16, 2001). Second, the mall did not waive its right to challenge the relief sought by Elsenpeter by submitting to arbitration.

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Cite This Page — Counsel Stack

Bluebook (online)
794 N.W.2d 667, 2011 Minn. App. LEXIS 18, 2011 WL 691765, Counsel Stack Legal Research, https://law.counselstack.com/opinion/elsenpeter-v-st-michael-mall-inc-minnctapp-2011.