Lexington Marketing Group, Inc. v. Goldbelt Eagle, LLC

157 P.3d 470, 2007 Alas. LEXIS 48, 2007 WL 1300448
CourtAlaska Supreme Court
DecidedMay 4, 2007
DocketS-12171
StatusPublished
Cited by14 cases

This text of 157 P.3d 470 (Lexington Marketing Group, Inc. v. Goldbelt Eagle, LLC) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lexington Marketing Group, Inc. v. Goldbelt Eagle, LLC, 157 P.3d 470, 2007 Alas. LEXIS 48, 2007 WL 1300448 (Ala. 2007).

Opinion

OPINION

FABE, Chief Justice.

I. INTRODUCTION

Goldbelt Corporation is a majority shareholder of both Goldbelt Eagle, LLC and CP Leasing, Inc. Goldbelt Eagle entered into a contract for marketing services with Lexington Marketing Group (Lexington), a Virginia corporation wholly owned by Lisbeth Gnug-noli. The agreement contained an arbitration clause. In May 2005 Lexington filed a complaint in superior court, requesting that the court compel arbitration of a dispute over whether Goldbelt Eagle owed it compensation for a referral under the marketing contract. The superior court granted summary judgment to Goldbelt Eagle, ruling that Lexington's agreement with Goldbelt Eagle became unenforceable on public policy grounds when Gnugnoli became an employee of CP Leasing. Lexington appeals, claiming the superior court erred under federal and state law when it adjudicated the validity of the underlying contract. We conclude that federal and state arbitration law prohibit courts from adjudicating the validity of the underlying contract when determining arbitrability. We hold that the arbitration agreement covers Lexington's claim, and we reverse the decision of the superior court.

II. FACTS AND PROCEEDINGS

Goldbelt is a corporation formed pursuant to the Alaska Native Claims Settlement Act. Goldbelt is a majority shareholder in several business entities, including Goldbelt Eagle, LLC and CP Leasing, Inc. Goldbelt Eagle and CP Leasing are eligible to receive preferences in government contracts under the United States Small Business Administration's Section 8(a) program, which is designed to "assist eligible small disadvantaged business concerns [to] compete in the American economy through business development." 1

In August 2001 Lisbeth Gnugnoli incorporated Lexington Marketing Group, Inc. (Lexington), a Virginia corporation licensed to do business in Alaska and wholly owned by Gnugnoli. Lexington provides marketing services to assist corporations in obtaining government contracts. On August 27, 2001, Lexington entered into an agreement with CP Leasing to provide marketing services related to Section 8(a) contracts.

Goldbelt formed Goldbelt Eagle in December 2001 as a vehicle for Section 8(a) contracts. In October 2002 Goldbelt Eagle entered into an agreement with Lexington for marketing services. The agreement provided that Goldbelt Eagle would pay Lexington a commission of twenty percent of gross profits from business opportunities registered by Lexington.

In October 2008 Gary Droubay, the Chief Operating Officer of Goldbelt, Inc., offered Gnugnoli employment with CP Leasing. Her job was to identify opportunities for CP Leasing to obtain Section 8(a) contracts. The parties agreed that when Gnugnoli became an employee of CP Leasing, she would no longer be paid commissions on the Lexington contract with CP Leasing. The parties dispute whether this agreement also terminated Lexington's contract with Goldbelt Eagle.

In the spring of 2004 Cnugnoli learned of a contract opportunity to provide training for Army personnel. She met with representatives of a Virginia corporation willing and able to subcontract the work for a Section 8(a) entity such as Goldbelt Eagle or CP Leasing. Gnugnoli referred the opportunity to Goldbelt Eagle. In an evidentiary hearing before the superior court, Gnugnoli claimed she referred the opportunity to Goldbelt Eagle because the contract called for personnel *472 services, which she claimed CP Leasing was not equipped to provide. Gnugnoli then requested a commission for the referral. Gold-belt Eagle refused payment on the ground that the agreement between Goldbelt Eagle and Lexington was void as of October 2008, when Gnugnoli became an employee of CP Leasing.

In May 2005 Lexington filed a complaint in superior court, requesting that the court compel arbitration under AS 09.48.020. 2 Lexington invoked an arbitration clause in its agreement with Goldbelt Eagle. That clause provides: "All disputes or claims arising under this Agreement shall be submitted to binding arbitration before a single arbitrator in Juneau, Alaska if demand for arbitration is made in a notice given by either party."

Goldbelt Eagle filed a motion for summary judgment on July 6, 2005, arguing that the entire agreement-including the arbitration provision-became void when Gnugnoli became an employee of CP Leasing. On July 21, 2005, Lexington filed a cross-motion for summary judgment, claiming genuine issues of material fact should prevent Goldbelt Eagle from prevailing and requesting that the court refer the matter to an arbitrator.

The superior court initially found that "there was an apparent factual dispute as to whether the parties agreed to terminate the Lexington Agreement between Gnugnoli and Goldbelt Eagle, which in turn contains the arbitration agreement, when Ms. Gnugnoli accepted employment with CP Leasing." The court held an evidentiary hearing on October 24, 2005. On November 8, 2005, the superior court granted Goldbelt Eagle's motion for summary judgment. The court found that Goldbelt Eagle's agreement with Lexington was unenforceable on public policy grounds. It reasoned that Gnugnoli "could not ethically seek opportunities for Goldbelt Eagle and be privately remunerated pursuant to the Lexington Agreement without in turn violating her duty of loyalty to CP Leasing since both 8(a) firms are capable of bidding on the same projects." The superior court concluded that the agreement became impossible to perform without violation of fiduciary duty following Gnugoli's employment with CP Leasing and ruled that there was no duty to arbitrate claims related to an unenforceable agreement.

Lexington filed this appeal of the superior court's ruling. Lexington claims that the trial court violated federal and state law by refusing to compel arbitration and further contends that the trial court erred in granting summary judgment.

III DISCUSSION

A. Standard of Review

Whether Lexington's claim is arbi-trable is a question of law subject to de novo review. 3 We "adopt the rule of law that is most persuasive in light of precedent, reason, and policy." 4 We "affirm a grant of summary judgment if there are no genuine issues of material fact and if the movant is entitled to judgment as a matter of law. When making this determination, we draw all reasonable inferences in favor of the non-movant." 5

B. The Superior Court Had Jurisdiction To Decide Arbitrability.

Lexington first challenges the superior court's jurisdiction to decide the question of arbitrability-in other words, to decide whether the terms of the agreement called for the dispute to be referred to an arbitrator. It argues that in the absence of allegations of fraud or unconscionability with respect to the arbitration agreement itself, only the arbitrator can determine arbitrabili *473 ty. Goldbelt Eagle responds that the court properly decided arbitrability.

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Bluebook (online)
157 P.3d 470, 2007 Alas. LEXIS 48, 2007 WL 1300448, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lexington-marketing-group-inc-v-goldbelt-eagle-llc-alaska-2007.