Midwest Neurosciences Associates, LLC v. Great Lakes Neurosurgical Associates, LLC

Opinion

2018 WI 112

SUPREME COURT OF WISCONSIN CASE NO.: 2016AP601 COMPLETE TITLE: Midwest Neurosciences Associates, LLC and Neurosurgery and Endovascular Associates, SC, Plaintiffs-Appellants, v. Great Lakes Neurosurgical Associates, LLC and Yashdip Pannu, M.D., Defendants-Respondents-Petitioners.

REVIEW OF DECISION OF THE COURT OF APPEALS Reported at 379 Wis. 2d 766, 909 N.W.2d 209 (2018 – unpublished)

OPINION FILED: December 19, 2018 SUBMITTED ON BRIEFS: ORAL ARGUMENT: October 10, 2018

SOURCE OF APPEAL: COURT: Circuit COUNTY: Ozaukee JUDGE: Paul V. Malloy

JUSTICES: CONCURRED: ABRAHAMSON, J. concurs. DISSENTED: R.G. BRADLEY, J. dissents. NOT PARTICIPATING: DALLET, J. did not participate.

ATTORNEYS:

For the defendants-respondents-petitioners, there were briefs filed by Joan M. Huffman, Paul R. Erickson, and Gutglass, Erickson, Bonville & Larson, S.C., Milwaukee. There was an oral argument by Joan M. Huffman.

For the plaintiffs-appellants, there was a brief filed by Frank M. Gumina, Patrick M. Harvey, and Husch Blackwell LLP, Milwaukee. There was an oral argument by Patrick M. Harvey. 2018 WI 112 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 2016AP601 (L.C. No. 2015CV324)

STATE OF WISCONSIN : IN SUPREME COURT

Midwest Neurosciences Associates, LLC and Neurosurgery and Endovascular Associates, SC,

Plaintiffs-Appellants, FILED v. DEC 19, 2018 Great Lakes Neurosurgical Associates, LLC and Sheila T. Reiff Yashdip Pannu, M.D., Clerk of Supreme Court

Defendants-Respondents-Petitioners.

REVIEW of a decision of the Court of Appeals. Reversed and

cause remanded.

¶1 ANNETTE KINGSLAND ZIEGLER, J. This is a review of an

unpublished decision of the court of appeals, Midwest

Neurosciences Assocs., LLC v. Great Lakes Neurosurgical Assocs.,

LLC, No. 2016AP601, unpublished slip op. (Wis. Ct. App. Dec. 20,

2017), reversing the Ozaukee County circuit court's1 non-final

order. The non-final order denied Midwest Neurosciences

Associates, LLC ("Midwest") and Neurosurgery and Endovascular

1 The Honorable Paul V. Malloy presided. No. 2016AP601

Associates S.C.'s ("NEA") motion to stay this action and compel

arbitration pursuant to the Amended and Restated Operating

Agreement ("Operating Agreement"), as well as the circuit

court's granting of Yashdip Pannu, M.D. ("Dr. Pannu") and Great

Lakes Neurosurgical Associates, LLC's ("Great Lakes") motion for

declaratory judgment seeking a declaration that the Membership

Interest Redemption Agreement ("Redemption Agreement") was a

valid contract. The court of appeals remanded to the circuit

court with instructions to grant Midwest's motion to compel

arbitration pursuant to the Operating Agreement. We reverse the

court of appeals and remand to the circuit court to determine

whether the Redemption Agreement is enforceable.

¶2 The crux of the issue before us concerns the circuit

court's role in determining the proper forum of dispute

resolution when a subsequent contract, if enforceable, does not

contain an arbitration clause as is present in an initial

contract. As a part of that analysis we consider whether a

contract which contains a merger clause and which does not contain an arbitration clause can change the forum of dispute

resolution when a prior agreement between the parties contains

an arbitration clause.2 The parties make competing arguments

2 The parties disagree as to whether the Redemption Agreement was validly formed. The JAMS Arbitration Rules in the Operating Agreement, however, require that even the issue of arbitrability be arbitrated. See infra note 7. "JAMS provides arbitration and mediation services worldwide," including the creation of rules that can be used to govern the arbitration of disputes at the parties' agreement. JAMS Comprehensive Arbitration Rules & Procedures Rule 1, at 1, 6 (July 1, 2014), (continued) 2 No. 2016AP601

regarding a court's role in determining the applicability of

this arbitration provision. They take contrary positions

regarding whether all disputes, even arbitrability itself, must

be submitted to arbitration. The parties present conflicting

views of precedent regarding the judiciary's role in deciding

motions to compel arbitration when a subsequent contract does

not select arbitration as the forum for dispute resolution and

does contain a merger clause which states that the subsequent

agreement supersedes all prior contracts. Relatedly, the

parties dispute whether all parties here can be compelled to

arbitrate when arguably only one co-defendant is contractually

required to arbitrate pursuant to the initial contract.

¶3 The claims in the underlying lawsuit that called upon

the court to decide whether the dispute belonged in arbitration,

involve whether Great Lakes and Dr. Pannu violated restrictive

covenants in the Operating Agreement and the Ancillary

Restrictive Covenant Agreement ("Ancillary Restrictive

Covenant"). The Redemption Agreement, however, does not contain an arbitration provision and in fact, purports to release those

restrictive covenants. Therefore, which contract controls is

seminal in the first instance as to whether arbitration should

be ordered. Ultimately, regardless of forum, the controlling

documents will also impact the underlying dispute itself.

https://www.jamsadr.com/files/Uploads/Documents/JAMS-Rules/ JAMS_comprehensive_arbitration_rules-2014.pdf.

3 No. 2016AP601

¶4 The circuit court concluded on summary judgment that

even though the initial agreement, here the Operating Agreement,

required arbitration it was superseded by a later, valid and

enforceable Redemption Agreement which did not so require the

parties to submit to arbitration. The court of appeals reversed

and remanded with instructions to grant Midwest's motion to

compel arbitration.3

¶5 We reverse the court of appeals and conclude that the

fundamental principles of freedom to contract allow parties to a

previous contract to subsequently contract for a different forum

of dispute resolution. Here, it is necessary that the circuit

court initially determine whether the parties contracted to

arbitrate. The court's authority to order arbitration is

dependent on the terms of a contract. If the Redemption

Agreement is the parties' contract, then the court lacks

authority to order arbitration. Thus, the court must first

ascertain which contract controls the forum of dispute

resolution. In sum, we conclude that it is a court's duty to determine whether a contract calls for arbitration and when a

dispute exists as to whether a second contract without an

arbitration clause supersedes a first contract with such a

3 Presiding Judge Reilly concurred, expressing concern that Cirilli v. Country Insurance & Financial Servs., 2009 WI App 167, 322 Wis. 2d 238, 776 N.W.2d 272, and Mortimore v. Merge Technologies Inc., 2012 WI App 109, 344 Wis. 2d 459, 824 N.W.2d 155, erode freedom of contract and prevent parties from subsequently contracting out of arbitration.

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clause, the determination of arbitrability must be decided in

the first instance by the circuit court rather than the

arbitrator.

¶6 We also conclude, however, that the cause must be

remanded to the circuit court, not to compel arbitration as was

ordered by the court of appeals, but rather, because the

parties' competing affidavits submitted in support of their

positions on summary judgment raised genuine issues of material

fact concerning whether the Redemption Agreement is a valid

contract.4 Therefore, we reverse and remand to the circuit court

for further proceedings.

I. FACTUAL BACKGROUND

¶7 Dr. Pannu was Great Lakes' president, 100 percent

owner, and sole practicing physician. Arvind Ahuja, M.D.

("Dr. Ahuja") was the sole Member of Midwest and later the sole

Member of NEA. William McCullough, M.D. ("Dr. McCullough") was

the sole Member of Metro Neurosurgical, S.C. ("Metro"). In 2015, the three Members of Midwest were NEA, Great Lakes, and

Metro. The presidents of each were also practicing

neurosurgeons and had offices adjacent to St. Luke's Medical

Center in Milwaukee, Wisconsin. The current dispute involves

4 We need not weigh in on the host of issues that might relate to a non-signatory being bound by an arbitration agreement, such as (1) assumption, (2) agency, (3) estoppel, (4) veil piercing, and (5) incorporation by reference. Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005).

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only Drs. Pannu and Ahuja and the applicability of an

arbitration provision from a contract entered into a decade

previous.

¶8 Specifically, on August 1, 2005, the parties at issue

executed an Operating Agreement which modified a previous

operating agreement of August, 2002 so to admit, among others,

Dr. Pannu to Midwest.5 Dr. Pannu executed the Operating

Agreement as President of Great Lakes and also signed a personal

guaranty for the obligations of Great Lakes. The Operating

Agreement contains the arbitration clause at issue.

¶9 The Operating Agreement created rights, obligations,

and restrictions for the Members of Midwest and the physicians

that worked for the Members. The document includes various

other provisions. For example, the Operating Agreement controls

how Midwest was to be managed and operated. For instance,

subsection 1.2(a) dictates that Midwest shall have a registered

office and subsection 5.5(b) grants Midwest's president the

power to unilaterally terminate Members. ¶10 Section 8.5 of the Operating Agreement grants Members

the right to voluntarily withdraw from Midwest. Under Section

8.5, a Member could withdraw from Midwest by "giving written

5 Midwest's primary purpose was to assist its Members, who employed physicians, in "the operation of their medical practices."

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notice to [Midwest] at least ninety (90) days before the stated

effective date of the withdrawal."6

¶11 Section 13.3 dictates that the "Operating Agreement

shall be governed by and construed in accordance with the laws

of the State of Wisconsin without regard to its choice of law

provisions."

¶12 Section 13.1 of the Operating Agreement provides:

Amendments to Operating Agreement. No Amendment or modification of this Operating Agreement shall be valid unless in writing and signed by all of the Members. Unless otherwise provided in such an amendment or modification, this Operating Agreement shall be considered to be amended only to the minimal extent necessary to give effect to this Operating Agreement, and the other terms and conditions of this Operating Agreement shall continue to apply with full force and effect. ¶13 Section 13.7 of the Operating Agreement is entitled

"Arbitration," and states, in pertinent part:

Arbitration. . . . [T]he parties hereto agree to resolve any and all disputes arising with respect to the terms and conditions of this Operating Agreement hereby by arbitration . . . . The arbitration shall be governed by the laws of the State of Wisconsin, this Operating Agreement and JAMS' Arbitration Rules[7] to the extent not inconsistent with the foregoing.

6 The provision of notice under Section 8.5 was subject to the provisions of Section 13.8, which provided that the notice was "valid only if in writing and upon actual receipt by the intended recipient of the notice." This provision factors into the arguments about the Redemption Agreement's enforceability. 7 JAMS Arbitration Rule 11, "Interpretation of Rules and Jurisdictional Challenges," in relevant part, provides:

(b) Jurisdictional and arbitrability disputes, including disputes over the formation, existence, (continued) 7 No. 2016AP601

¶14 Section 8.13 contains a "Covenant Not to Compete,"

which details, among other things, a restriction that the

doctors practice in their specialty for a designated period of

time, in a specified area, and at particular facilities.8 On

March 6, 2006, Dr. Pannu personally signed the Ancillary

Restrictive Covenant containing similar terms to Section 8.13 of

the Operating Agreement. The Ancillary Restrictive Covenant,

however, did not specifically incorporate by reference Section

13.7, the arbitration section, of the Operating Agreement.

¶15 Nearly ten years later, in 2015, Great Lakes and NEA

were two of three remaining Members of Midwest. On February 13,

2015, the Members unanimously voted to dissolve Midwest as of

March 31, 2015. One doctor relocated out of state and is not

part of this lawsuit.9 Dr. Ahuja, who had no hospital privileges

in the Milwaukee area, had previously announced his intention to

vacate his practice from the offices.

validity, interpretation or scope of the agreement under which Arbitration is sought, and who are proper Parties to the Arbitration, shall be submitted to and ruled on by the Arbitrator. The Arbitrator has the authority to determine jurisdiction and arbitrability issues as a preliminary matter.

JAMS Comprehensive Arbitration Rules & Procedures Rule 11(b), supra note 2, at 14. 8 The underlying litigation in this case claims that Great Lakes and Dr. Pannu violated non-compete restrictive covenants. 9 Dr. McCullough moved to Texas and vacated the offices.

8 No. 2016AP601

¶16 On March 16, 2015, the Members restructured the

dissolution process such that NEA would buy out the Members'

interests in Midwest. Great Lakes would vacate the premises no

later than May 15, 2015. Great Lakes, however, was subject to

the non-compete provisions of the Operating Agreement. After

discussing the logistics of how the purchases would work, the

Members unanimously voted to rescind the vote to dissolve

Midwest.10

¶17 On March 30, 2015, Midwest's attorney sent an e-mail

to Dr. Pannu, Dr. Ahuja, and Great Lakes' and Midwest's

accountants attaching a "proposed [Redemption Agreement] and

[an] Assignment Agreement" which concerned, in part, the release

of the non-compete provision with Midwest. The recipients of

the e-mail were instructed to ask any questions at their

"earliest opportunity" because "we intend to exchange funds and

sign documents tomorrow." On March 31, 2015, in response to a

suggestion from Great Lakes' accountant, Midwest's attorney

added one paragraph to the Redemption Agreement and confirmed

10 NEA's offer to buy the other Members' interests came in response to the Members being advised that there were unforeseen difficulties with winding down Midwest related to expenses and lease obligations. Prior to voting, the Members had a lengthy discussion regarding retirement plans and lease obligations. With respect to the retirement plans, it was determined that actuarial calculations would be done to determine how much Dr. Pannu and Dr. McCullough would pay. In addition, it was agreed that Midwest's accountant would calculate the projected wind-down expense budget for Midwest and that Dr. Pannu and Dr. McCullough would pay their projected wind-down expenses based on that budget.

9 No. 2016AP601

that his assistant had sent the "the final agreement." The e-

mail also contained the following instructions: "Please sign and

deliver per my earlier email."11

¶18 On the same day, Dr. Pannu executed the Redemption

Agreement and the accompanying Assignment Agreement12 and

delivered them to Midwest's attorney. The Redemption Agreement

distinguishes Great Lakes from Dr. Pannu as "Pannu" and

"Y. Pannu," respectively, and also notes that it is Great Lakes,

"Pannu", that holds a one-third membership interest in Midwest.

¶19 The Redemption Agreement outlines Great Lakes and

Midwest's desire to "set forth the terms upon which [Great

Lakes] will sell and [Midwest] will redeem [Great Lakes'] entire

Membership Interest" in Midwest. For instance, the Redemption

Agreement indicates that Great Lakes "desires to voluntarily

surrender [Great Lakes'] membership in [Midwest] effective

March 31, 2015, pursuant to Section 8.5 of the Operating

11 Great Lakes and Dr. Pannu assert that Midwest's attorney was acting as both Midwest's and NEA's attorney when he circulated the Redemption Agreement. They allege that this does not create a conflict of interest because Dr. Ahuja cannot approve the transaction with respect to Midwest, while rejecting the same transaction with respect to NEA. Midwest and NEA, however, allege that if Midwest's attorney "was representing Midwest, he could not also represent NEA" because Great Lakes was still a Member of Midwest. It is not necessary for us to answer this disagreement. 12 The Assignment Agreement states that, as of March 31, 2015, Great Lakes "transfer[red] and assign[ed] to [Midwest] . . . all of [Great Lakes'] right, title and interest in and to the Membership Interests."

10 No. 2016AP601

Agreement," and Section 2 of the Redemption Agreement dictates

that Great Lakes "shall sell, assign and transfer to [Midwest],

free and clear of all liens, claims, agreements and

encumbrances, and [Midwest] shall purchase and acquire from

[Great Lakes], the entire Membership Interest." The Redemption

Agreement outlines the purchase price for Great Lakes'

membership interest and specifically identified and allocated to

Great Lakes the amount that it was required to pay to Midwest

for its share of the costs associated with winding down Midwest,

as well as requiring Great Lakes to pay a set amount relating to

retirement plans. The Redemption Agreement also establishes

that Great Lakes must "fully vacate" its office suite by

April 30, 2015.

¶20 Section 6 of the Redemption Agreement is entitled,

"Mutual Release," and provides:

[Midwest] Releasees [, defined as "[Midwest] and each of [Midwest's] Members and the Members' shareholders, members, owners, successors, assigns, agents, directors, officers, employees, representatives, attorneys, heirs, executors and administrators of such of the foregoing as are natural persons, and all persons acting by, through, under or in concert with any of the foregoing,] hereby jointly and severally, irrevocably and unconditionally release, acquit and forever discharge [Great Lakes and Dr. Pannu] and each of [Great Lakes'] shareholders, members, owners, successors, assigns, agents, directors, officers, employees, representatives, attorneys, heirs, executors and administrators of such of the foregoing as are natural persons, and all persons acting by, through, under or in concert with any of the foregoing (collectively, "Pannu Releasees"), or any of them, from any and all Claims[, defined as charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions,

11 No. 2016AP601

causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys' fees and costs actually incurred), known and unknown, of any nature whatsoever, including without limitation, any and all claims under the Expense Sharing Agreement, the Operating Agreement, and any and all other claims, whether at common law, in contract or tort,] which [Midwest] Releasees now have or claim to have or which [Midwest] Releasees at any time heretofore had or claimed to have or which [Midwest] Releasees at any time hereafter may have or claim to have for any claims arising or accruing to the date hereof against each or any of the Pannu Releasees, other than for a breach of this Agreement. (Emphases added.) ¶21 Section 7 of the Redemption Agreement, "Release of

Non-Compete Restrictions," states: "[Great Lakes and Dr. Pannu]

are currently subject to non-compete restrictions contained in

the Operating Agreement and in the [Ancillary Restrictive

Covenant]. In consideration for the terms of this Agreement,

[Great Lakes and Dr. Pannu's] restrictions against competition

are hereby released and made void."

¶22 Section 10.3 of the Redemption Agreement, "Applicable

Law," does not reference arbitration, nor does an arbitration

clause exist elsewhere in the Redemption Agreement. Section

10.3 reads: "All questions concerning the construction, validity

and interpretation of this Agreement and the performance of the

obligations imposed by this Agreement shall be governed by the

internal law, not the law of conflicts, of the State of

Wisconsin."

¶23 According to Dr. Pannu's affidavit, he and Great Lakes

had performed all of their obligations under the Redemption Agreement other than moving out of their office by April 8,

12 No. 2016AP601

2015. For instance, Dr. Pannu said he delivered a check for

Great Lakes' share of the wind-down expenses to Midwest's

attorney and hand-delivered a check for Great Lakes' retirement

plan contributions to Midwest's accounting firm. It is

undisputed that one of Great Lakes' checks was cashed.13

¶24 On April 8, 2015, Dr. Pannu attempted to get a copy of

the Redemption Agreement as signed by Dr. Ahuja. Initially,

Dr. Pannu exchanged text messages with Dr. Ahuja:

Dr. Pannu: Hi Can u get me a copy of the [Redemption Agreement] signed by you Thx

Dr. Ahuja: Will work on it when I am back ? Anything up

Dr. Pannu: No Attorney wants it So it is clean

Dr. Ahuja: Yea and it appears not going to let us out of lease But I will take care of it

Dr. Pannu: Ok

Dr. Ahuja: ? Who is your lawyer thx

Dr. Pannu: [Lawyer's name]14

13 According to Dr. Ahuja's affidavit, the check was cashed in error by a clerical employee and a cashier's check in the same amount was sent to Dr. Pannu once the error was discovered. 14 The attorney that Dr. Pannu named clarified on the record at a motion hearing on December 17, 2015, that he "was not involved in this" prior to April 8, 2015, and had not been "copied on anything . . . prior to that."

13 No. 2016AP601

Dr. Ahuja: K great ¶25 Further, within ten minutes of sending the initial

text message, Dr. Pannu sent an e-mail to Midwest's attorney,

and carbon copied Dr. Ahuja and Midwest's and Great Lakes'

accountants, asking Midwest's attorney to "let [him] know when

you get a signed copy of the agreement from [Dr. Ahuja]."

Midwest's attorney responded that he would meet with Dr. Ahuja

to get his signature "[a]s soon as all of the documentation is

accounted for."15

¶26 According to Dr. Ahuja's affidavit, he (and thus

Midwest and NEA) never agreed to the terms of the Redemption

Agreement. Initially, Dr. Ahuja said he never instructed

Midwest's attorney to include a complete release of Great Lakes'

or Dr. Pannu's non-compete obligations in the Redemption

Agreement and that Dr. Ahuja in fact disagreed with releasing

the restrictions. Further, Dr. Ahuja stated that during an

April 20, 2015 phone call with Dr. Pannu, he told Dr. Pannu that

he was still reviewing the Redemption Agreement. Moreover, Dr. Ahuja stated that once he had more thoroughly reviewed the

Redemption Agreement, he determined he was not willing to sign

it.

15 In the e-mail, Midwest's attorney stated that they were waiting on retirement plan documents from Great Lakes. According to Dr. Pannu's affidavit, Great Lakes and Dr. Pannu had already provided the requested documents to Midwest's accountant.

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¶27 On April 30, 2015, Great Lakes vacated the office and

moved into different office space in the same facility that was

shared with a physician unaffiliated with Midwest.16

¶28 In May of 2015, Great Lakes and Dr. Pannu were advised

that Midwest and NEA considered the Redemption Agreement to be a

mere proposal that was subsequently rejected by Midwest and NEA.

Thus, Midwest and NEA alleged that Great Lakes and Dr. Pannu

were violating the non-compete covenants in the Operating

Agreement and the Ancillary Restrictive Covenant.

¶29 On July 1, 2015, Dr. Ahuja, on behalf of Midwest, sent

a letter to Dr. Pannu informing him that Great Lakes' membership

status in Midwest was being terminated effective immediately

pursuant to Section 5.5(b) of the Operating Agreement. The

letter also demanded that Great Lakes and Dr. Pannu comply with

the non-compete restrictions in the Operating Agreement and the

Ancillary Restrictive Covenant.

II. PROCEDURAL POSTURE ¶30 On September 2, 2015, Midwest and NEA filed a

complaint against Great Lakes and Dr. Pannu alleging that Great

Lakes and Dr. Pannu breached the non-compete covenants of the

16 Great Lakes and Dr. Pannu subsequently moved back into their old office that was shared with Midwest from June of 2015 to January of 2016, but moved out once more in January of 2016.

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2005 Operating Agreement and the 2006 Ancillary Restrictive

Covenant.17

¶31 Before a responsive pleading was filed, Midwest and

NEA moved to stay the proceedings and compel arbitration in

accordance with Section 13.7 of the Operating Agreement.

Midwest and NEA argued that the Operating Agreement was the

governing contract between the parties and that Section 13.7

within that agreement unambiguously required the parties to

arbitrate violations of Section 8.13 of the Operating Agreement

and the Ancillary Restrictive Covenant. Midwest and NEA argued

that the Operating Agreement governed because there was never a

meeting of the minds on the Redemption Agreement, as well as the

fact that the Redemption Agreement was never signed by all of

the parties which was required to amend the Operating Agreement

per Section 13.1. Further, Midwest and NEA argued that any

challenge to the validity of the Operating Agreement must be

decided by an arbitrator, not the circuit court.

¶32 On October 6, 2015, Great Lakes and Dr. Pannu filed an answer containing affirmative defenses and counterclaims,18 as 17 On February 29, 2016, Midwest and NEA filed an amended complaint, reiterating the causes of action in the initial complaint and pleading additional causes of action against Great Lakes and Dr. Pannu related to Great Lakes and Dr. Pannu's payment of rent to Midwest, as well as Great Lakes and Dr. Pannu's alleged tortious interference with Midwest and NEA's prospective and current contractual relationships. 18 On February 29, 2016, Great Lakes and Dr. Pannu filed an amended counterclaim. On April 15, 2016, Great Lakes and Dr. Pannu filed an amended answer containing affirmative defenses and counterclaims.

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well as a motion for declaratory judgment seeking, among other

things, an order declaring that the Redemption Agreement was a

valid contract. They contended that as of March 31, 2015, the

Operating Agreement and the non-compete provisions of the

Ancillary Restrictive Covenant were invalid, unenforceable,

and/or inapplicable to Great Lakes and Dr. Pannu. Great Lakes

and Dr. Pannu argued that the Redemption Agreement is binding

and released them from the non-compete restrictions in the

Operating Agreement and the Ancillary Restrictive Covenant.

They argued that the Redemption Agreement was binding because

Midwest and NEA manifested their intention to sign the

Redemption Agreement and reaffirmed their intention by allowing

Great Lakes and Dr. Pannu to fully perform the obligations

therein. Accordingly, the motion further sought an order

declaring that Midwest and NEA are not entitled to arbitration.

In subsequent responses, Great Lakes and Dr. Pannu argued that

the circuit court must decide whether the Redemption Agreement

is enforceable and that, at best, it is premature to compel arbitration because the merits of the case hinge entirely on the

enforceability of the Redemption Agreement, which contains no

arbitration clause and in fact, fully releases them from the

claims asserted. The parties filed briefs and affidavits in

support of their respective positions.

¶33 On December 17, 2015, the circuit court held a hearing

on both motions. Initially, the circuit court stated that the

motion for declaratory judgment was "similar to a summary judgment motion" and that "maybe there[ are] some" factual 17 No. 2016AP601

disputes. Nonetheless, the court found that Dr. Ahuja, through

Midwest's attorney, made an offer that he intended to be bound

by when the e-mail containing the "final agreement" was sent.

Further, the circuit court noted that Dr. Pannu accepted the

offer when he signed the Redemption Agreement and returned it

with the check that was subsequently cashed. Moreover, the

circuit court held that the "minor problems" after March 31,

2015, or Dr. Ahuja's "ambiguous" text message to Dr. Pannu on

April 8, 2015, that a reasonable person could view as saying

"I'm questioning the agreement," do not change the analysis

because the Redemption Agreement was already a "done deal" and

the "horse was kind of out of the barn and you can't put it

back." The circuit court granted Great Lakes and Dr. Pannu's

motion and concluded that the Redemption Agreement was an

enforceable contract and thus, that Great Lakes and Dr. Pannu

were not restricted by the covenants not to compete in either

the Operating Agreement or the Ancillary Restrictive Covenant.

¶34 On March 16, 2016, the circuit court issued a written order granting Great Lakes and Dr. Pannu's motion and declaring

that the Redemption Agreement was a valid contract. The court

determined that as of March 31, 2015, the Operating Agreement

and the non-compete provisions of the Ancillary Restrictive

Covenant were invalid, unenforceable and/or inapplicable to

Great Lakes and Dr. Pannu. The order also denied Midwest and

NEA's motion to stay the action and compel arbitration.

¶35 On March 23, 2016, Midwest and NEA petitioned for leave to appeal the circuit court's March 16 order, which the 18 No. 2016AP601

court of appeals granted. On December 20, 2017, the court of

appeals issued its decision concluding that the "determinative

question is whether the circuit court erred by not ordering the

parties to submit their dispute to arbitration." Midwest

Neurosciences, No. 2016AP601, ¶8. The court of appeals held

"that the question of whether the arbitration clause was

superseded should have been submitted to arbitration." Id., ¶2.

As such, the court of appeals declined to address the multiple

other issues that Midwest and NEA raised on appeal and reversed

and remanded, instructing the circuit court to grant Midwest and

NEA's motion to compel arbitration. Id., ¶¶2, 8, 23.

¶36 On February 5, 2018, Great Lakes and Dr. Pannu

petitioned this court for review. On May 18, 2018, we granted

the petition. We now reverse and remand the cause for further

proceedings consistent with this opinion.

III. STANDARD OF REVIEW

¶37 This case comes to us on summary judgment.19 "We review summary judgment rulings independently, applying the

19 The circuit court understood Great Lakes and Dr. Pannu's motion for declaratory judgment to be "similar to a summary judgment motion" and applied the summary judgment methodology. Thus, while the motion was entitled a motion for declaratory judgment, it was actually a motion for summary judgment. See WEA Prop. & Cas. Ins. Co. v. Krisik, 2013 WI App 139, ¶¶1, 4 n.2, 8, 352 Wis. 2d 73, 841 N.W.2d 290 (reviewing a motion for declaratory judgment as a summary judgment motion because the circuit court understood the motion to "in essence [] be a motion for summary judgment and applied the summary judgment methodology").

19 No. 2016AP601

well-established standards set forth in Wis. Stat. § 802.08 20 [(2015-16)]." Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20,

¶20, 338 Wis. 2d 761, 809 N.W.2d 2d 529. Thus, we independently

review whether the circuit court correctly granted summary

judgment to Great Lakes and Dr. Pannu. Tatera v. FMC Corp.,

2010 WI 90, ¶15, 328 Wis. 2d 320, 786 N.W.2d 810 (citing Racine

Cty. v. Oracular Milwaukee, Inc., 2010 WI 25, ¶24, 323

Wis. 2d 682, 781 N.W.2d 88). Summary judgment "shall be

rendered if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to a

judgment as a matter of law." Id.; § 802.08(2).

¶38 "[A] petition to compel arbitration involves contract

interpretation, which is a question of law that we review de

novo." First Weber Grp., Inc. v. Synergy Real Estate Grp., LLC,

2015 WI 34, ¶20, 361 Wis. 2d 496, 860 N.W.2d 498. Thus,

"determination[s] of substantive arbitrability . . . [are] questions of law we review de novo." Cirilli v. Country Ins. &

Fin. Servs., 2009 WI App 167, ¶10, 322 Wis. 2d 238, 776

N.W.2d 272. Similarly, issues of contract interpretation are

reviewed de novo. Mortimore v. Merge Technologies Inc., 2012 WI

App 109, ¶13, 344 Wis. 2d 459, 824 N.W.2d 155.

20 All subsequent references to the Wisconsin Statutes are to the 2015-16 version unless otherwise indicated.

20 No. 2016AP601

IV. ANALYSIS

A. Fundamental Principles

1. Freedom to contract and laws governing arbitration

¶39 "Freedom of contract is based on the idea that

individuals should have the power to govern their own affairs

without interference." Solowicz v. Forward Geneva Nat'l, LLC,

2010 WI 20, ¶34, 323 Wis. 2d 556, 780 N.W.2d 111. As such, "if

there is one thing which more than another public policy

requires it is that [individuals] of full age and competent

understanding shall have the utmost liberty of contracting, and

that their contracts, when entered into freely and voluntarily,

shall be held sacred, and shall be enforced by courts of

justice." Merten v. Nathan, 108 Wis. 2d 205, 212 n.5, 321

N.W.2d 173 (1982) (quoting Balt. & Ohio Sw. Ry. Co. v. Voigt,

176 U.S. 498, 505 (1900)). Thus, Wisconsin courts have

generally sought "to enforce contracts deliberately made by the

parties rather than set them aside." Baierl v. McTaggart, 2001

WI 107, ¶12, 245 Wis. 2d 632, 629 N.W.2d 277. ¶40 Arbitration agreements are "a matter of contract."

Joint Sch. Dist. No. 10 v. Jefferson Educ. Ass'n, 78 Wis. 2d 94,

101, 253 N.W.2d 536 (1977) (quoting United Steelworkers v.

Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)); First

Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943 (1995). As

such, "[a]rbitrators derive their authority only from the

parties' advance agreement that they will submit such grievances

to arbitration" and thus, parties cannot be "required to submit any dispute to arbitration unless [they have] agreed to do so." 21 No. 2016AP601

Kimberly Area Sch. Dist. v. Zdanovec, 222 Wis. 2d 27, 39, 586

N.W.2d 41 (Ct. App. 1998) (citing AT&T Technologies, Inc. v.

Commc'ns Workers of America, 475 U.S. 643, 648-49 (1986)).

Parties may contract broadly and agree to arbitrate, even the

issue of arbitrability. Mortimore, 344 Wis. 2d 459, ¶¶15, 20.

¶41 Wisconsin law recognizes the need to defer to the

parties' agreement to arbitrate and the "policy of encouraging

arbitration as an alternative to litigation." First Weber Grp.,

361 Wis. 2d 496, ¶24. When parties agree to arbitration, a

court's role is limited because a different forum of dispute

resolution has been selected. In fact, the Wisconsin

legislature has codified the limited role of the court. See

Wis. Stat. ch. 788. In Mortimore, the court of appeals

explained that when the parties have contracted to arbitrate,

the court's "function is limited to a determination of whether:

(1) there is a construction of the arbitration clause that would

cover the grievance on its face and (2) whether any other

provision of the contract specifically excludes it." Mortimore, 344 Wis. 2d 459, ¶16.

¶42 Wisconsin's "policy of encouraging arbitration as an

alternative to litigation," see First Weber Grp., 361

Wis. 2d 496, ¶24, however, is not limitless. Even Midwest

acknowledges that courts typically decide the initial issue of

arbitrability. "[A]rbitrators cannot determine whether they

have the authority to decide arbitrability unless the parties

give arbitrators such authority." Kimberly Area Sch. Dist., 222 Wis. 2d at 39-40; see generally Joint Sch. Dist. No. 10, 78 22 No. 2016AP601

Wis. 2d at 110 (stating that "parties may submit arbitrability

to an arbitrator"). "[T]he evidence of this grant [of

authority] must be 'clear and unmistakable,'" otherwise, "the

question of whether the parties agreed to arbitrate is to be

decided by the court, not the arbitrator." Kimberly Area Sch.

Dist., 222 Wis. 2d at 39-40; see also Kaplan, 514 U.S. at 944-45

("silence or ambiguity" affects the presumption of

arbitrability).

¶43 Consequently, only those disputes that the parties

have agreed to so submit to arbitration are relegated to proceed

in that forum. Granite Rock Co. v. Int'l Bhd. of Teamsters, 561

U.S. 287, 299 (2010). A court should order arbitration "only

where the court is satisfied that neither the formation of the

parties' arbitration agreement nor (absent a valid provision

specifically committing such disputes to an arbitrator) its

enforceability or applicability to the dispute is in issue."

Id. at 299; id. at 300 (stating all of the United States Supreme

Court's opinions compelling arbitration did so only "after the Court was persuaded that the parties' arbitration agreement was

validly formed and that it covered the dispute in question and

was legally enforceable").

¶44 In Granite Rock Co., the Court clarified that "[t]he

test for arbitrability remains whether the parties consented to

arbitrate the dispute in question." Id. at 304 n.11. Thus, in

Granite Rock Co., the Court concluded that judicial resolution

was required "to determine whether the parties consented to arbitrate the matters covered by the [arbitration] demand." Id. 23 No. 2016AP601

at 303 n.9 & 304 (referencing Buckeye Check Cashing, Inc. v.

Cardegna, 546 U.S. 440, 444 n.1 (2006)). This rule stems from

the "principle that underscores all of our arbitration

decisions: Arbitration is strictly 'a matter of consent,' and

thus 'is a way to resolve those disputes——but only those

disputes——that the parties have agreed to submit to

arbitration.'" Id. at 299 (citation omitted).

¶45 In answering both who determines arbitrability and

what is subject to arbitration, Wisconsin courts apply state-law

contract principles and chapter 788. Kaplan, 514 U.S. at 944.

Utilization of the Wisconsin contract principles requires

"courts to place arbitration agreements 'on equal footing with

all other contracts.'" Kindred Nursing Ctrs. Ltd. P'ship v.

Clark, 581 U.S. ___, 137 S. Ct. 1421, 1424, 1426 (2017).

Accordingly, "[a] court may invalidate an arbitration agreement

based on 'generally applicable contract defenses' like fraud or

unconscionability, but not on legal rules that 'apply only to

arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.'" Id. at 1426.

¶46 Chapter 788 of the Wisconsin Statutes is also referred

to as the "Wisconsin Arbitration Act" and limits a court's role

with respect to issues concerning arbitration. A court,

however, must still, when called upon to do so, determine in the

first instance whether the parties agreed to arbitrate. Then it

becomes a court's duty to determine whether a contract calls for

arbitration and when a dispute exists as to whether a second contract without an arbitration clause supersedes a first 24 No. 2016AP601

contract with such a clause, the determination of arbitrability

must be decided in the first instance by the circuit court

rather than the arbitrator.

¶47 Wisconsin Stat. § 788.01, entitled "Arbitration

clauses in contracts enforceable," provides that a written

arbitration agreement "shall be valid, irrevocable and

enforceable except upon such grounds as exist at law or in

equity for the revocation of any contract" (emphasis added). As

a result, it is a court's duty to determine whether a contract

calls for arbitration. Another contract that clearly and

expressly supersedes a first contract is "grounds as exist at

law or in equity for the revocation of a contract."

¶48 Wisconsin Stat. § 788.02 informs when a court must

stay proceedings to permit arbitration, as follows:

If any suit or proceeding be brought upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration. Section 788.03 directs how a court ordering arbitration is to

proceed and states in part as follows:

The party aggrieved by the alleged failure, neglect or refusal of another to perform under a written agreement for arbitration may petition any court of record having jurisdiction of the parties or of the property for an order directing that such arbitration proceed as provided for in such agreement. . . . The court shall hear the parties, and upon being satisfied

25 No. 2016AP601

that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. Wis. Stat. § 788.03.

¶49 The court may, after arbitration, vacate an

arbitrator's award or order a rehearing by the arbitrator,

pursuant to Wis. Stat. § 788.10. In addition, the court may,

after arbitration, modify an arbitrator's award pursuant to Wis.

Stat. § 788.11. Finally, pursuant to Wis. Stat. § 788.12, a circuit court may enter judgment "[u]pon the granting of an

order confirming, modifying or correcting an award," in

conformity therewith.

¶50 Thus, when parties have contracted for arbitration as

the forum for dispute resolution, a court's role is limited. In

this case, however, the court must first ascertain whether the

controlling contract calls for arbitration. Thus, we are

presented with the question of the court's role when the parties

once contracted to arbitrate, but the court is presented with a

later written contract that does not contain an arbitration

clause. Fundamental principles clearly militate in favor of the

ability to freely contract, even if that changes the forum of

dispute resolution. Which contract controls is seminal to a

determination of whether arbitration must be ordered.

2. The contracts at issue

¶51 The contracts at issue require closer examination because whether the parties entered into the later contract

26 No. 2016AP601

controls initially the court's determination regarding the

proper forum of dispute resolution, but also later may impact

the underlying dispute. If the Redemption Agreement is

enforceable, its terms do not choose arbitration as the forum

for dispute resolution. If it is not, the matter must proceed

according to the Operating Agreement and the Ancillary

Restrictive Covenant. Thus, it is the court that must first

determine whether a valid contract requires arbitration. The

dispute regarding the Redemption Agreement presents "such

grounds as exist at law or in equity for the revocation of" the

Operating Agreement and Ancillary Restrictive Covenant. Wis.

Stat. § 788.01. Before an action can be stayed to permit

arbitration, the court must be "satisfied that the issue

involved in such suit or proceeding is referable to arbitration

under such an agreement." Wis. Stat. § 788.02. Before the

court can order arbitration, the court must be "satisfied that

the making of the agreement for arbitration or the failure to

comply therewith is not in issue." Wis. Stat. § 788.03. ¶52 Initially in 2005, the parties entered into an

Operating Agreement which "memorialize[d] certain amendments and

modifications to the Operating Agreement of [Midwest] dated

August 1, 2002." This Operating Agreement changed the 2002

contract to admit new Members but it clearly provided for

arbitration in Section 13.7. The Operating Agreement contained

a restrictive covenant between Great Lakes and Midwest in

Section 8.13. Dr. Pannu and Midwest separately entered into an Ancillary Restrictive Covenant a year later. Then about ten 27 No. 2016AP601

years later, in 2015, the dynamic and composition of the group

changed and the parties purportedly entered into a Redemption

Agreement, which contains a mutual release and indemnification

as a part of winding down the business, provides for the

surrender of Great Lakes and Dr. Pannu's membership in Midwest,

and releases Great Lakes and Dr. Pannu from the 2005 and 2006

restrictive covenants. The Redemption Agreement specifically

supersedes "all prior agreements, promises, covenants,

arrangements, communications, representations or warranties,

whether oral or written" in its merger clause.

¶53 A determination as to whether the issue of

arbitrability is to be submitted to the arbitrator is examined

in light of the pertinent contract. In order to determine

whether the parties have always and forever agreed to arbitrate

arbitrability by virtue of the JAMS Arbitration Rules in the

Operating Agreement from 2005, as the court of appeals

concluded, we must further examine the language of the

contracts. "[N]o party can be compelled to arbitrate a matter which he or she has not agreed to submit to arbitration."

Mortimore, 344 Wis. 2d 459, ¶15 (citing Cirilli, 322

Wis. 2d 238, ¶12); see also Wis. Stat. ch. 788.

¶54 While a court's role is limited, courts are indeed

called upon to determine whether a contract calls for

arbitration. Wis. Stat. §§ 788.01, 788.02, 788.03. Only then,

if the forum chosen by the contract is arbitration, will the

presumption of arbitrability control the dispute. Granite Rock Co., 561 U.S. at 301. Here, serious questions exist as to 28 No. 2016AP601

whether the Operating Agreement still controls the issue of

arbitrability, whether the Redemption Agreement supersedes that

agreement, and to what extent, if any, one co-defendant,

Dr. Pannu individually, ever agreed to arbitrate.

¶55 We now turn to the relevant contracts at issue.

Dr. Pannu signed the 2005 Operating Agreement as President of

Great Lakes, not individually. While the Operating Agreement

contains a guaranty signed by Dr. Pannu, it is separate from the

signature page of the Operating Agreement where he signed as

President. The guaranty and acknowledgement serve to guaranty

the obligations of the signator to the contract, Great Lakes.

If the parties were only contesting the requirement to arbitrate

under the Operating Agreement alone, the court's role would

perhaps be different. See Wis. Stats. ch. 788. That, however,

is not the question with which we are presented.

¶56 The parties demonstrated a willingness to later

contract in 2006 concerning the individual restrictive covenant,

outlined in the Ancillary Restrictive Covenant, which Dr. Pannu signed individually as a physician. The Ancillary Restrictive

Covenant does not specifically contain an arbitration clause.

Why a subsequent restrictive agreement was necessary in 2006

might be an additional consideration for the court if these were

the only two agreements at issue. This is not critical to our

analysis, however, because the circuit court must first

determine whether the Redemption Agreement is the parties'

contract. The Redemption Agreement from a decade later is the only of the three documents at issue that sets forth by its 29 No. 2016AP601

terms the distinct contractual obligations of Great Lakes the

entity, and Dr. Pannu individually. The Redemption Agreement

does not contain an arbitration provision and by its terms

supersedes prior contracts and releases Great Lakes and

Dr. Pannu from the non-compete restrictions. These conflicting

written contractual provisions militate against the presumption

of arbitrating arbitrability. The court is required by chapter

788 of the Wisconsin Statutes to determine whether the contract

calls for arbitration. In order to do so, it must determine

which is the controlling contract.

¶57 A closer examination of the terms of the contracts

further explains why it cannot be assumed that the Operating

Agreement alone ends the analysis as to arbitration. Most

typically, a challenge might be made to a contractual clause,

but the court nonetheless orders even that issue to arbitration

because the pertinent contract calls for arbitration. Here, the

language of the relevant documents call into question which of

the contracts controls. ¶58 The combination of the merger clause in Section 10.2

of the Redemption Agreement, the explicit reference to the

Operating Agreement in the "Mutual Release" in Section 6, the

"Applicable Law" provision in Section 10.3, and the non-

existence of an arbitration provision in the Redemption

Agreement, make evident that, if enforceable, the parties did

not consent to arbitration in the Redemption Agreement. If the

Redemption Agreement revokes the Operating Agreement, the court would not order arbitration pursuant to the Operating Agreement. 30 No. 2016AP601

¶59 Section 10.2 utilizes different capitalization to

denote "this Agreement" (referring to the Redemption Agreement)

and "the entire agreement," calling into question whether

Midwest, Great Lakes, and Dr. Pannu intended the Redemption

Agreement to revoke the Operating Agreement. The Redemption

Agreement, unlike the Operating Agreement or the Ancillary

Restrictive Covenant, addresses the relationship between all

three.

¶60 For example, the merger clause in Section 10.2 states

that "[t]his Agreement" (meaning the Redemption Agreement)

constitutes the "entire agreement" between the "parties"

(meaning Great Lakes, Dr. Pannu, and Midwest)21 "pertaining to

its subject matter" and that it "supersedes all prior

agreements, promises, covenants, arrangements, communications,

representations, or warranties, whether oral or written, by

[Great Lakes] or [Midwest]." It "expressly negatives

collateral or antecedent understandings." See Town Bank v. City

Real Estate Dev., LLC, 2010 WI 134, ¶39, 330 Wis. 2d 340, 793 N.W.2d 476 (defining a merger clause as a "written provision

which expressly negatives collateral or antecedent

understandings"). No reference is made to the Arbitration

section of the Operating Agreement.

21 Dr. Ahuja was only designated as a party "for purposes of the Mutual Releases and Indemnification set forth in Sections 6 and 8," not Section 10.2.

31 No. 2016AP601

¶61 Furthermore, Section 6 of the Redemption Agreement by

its terms is to "release, acquit and forever discharge" Great

Lakes and Dr. Pannu from "any and all" "charges, complaints,

claims, liabilities, obligations, promises, agreements,

controversies, damages, actions, causes of action, suits,

rights, demands, costs, losses, debts and expenses" of "any

nature whatsoever" under "the Operating Agreement." The

obligation or promise to "resolve any and all disputes arising

with respect to the terms and conditions of this Operating

Agreement . . . by arbitration" seemingly fits within this

release. See Town Bank, 330 Wis. 2d 340, ¶46 (refusing to

require contract drafters to "expressly identify and exclude in

their contracts any prior oral or written communication between

the parties that may rise to the level of an agreement").

¶62 In addition, the "Applicable Law" provisions in each

of the agreements are different. The Operating Agreement's

"Applicable Law" provision provides that the "Operating

Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin without regard to its choice

of law provisions." The arbitration clause in the Operating

Agreement specifically incorporates the JAMS Arbitration Rules

which state that "disputes over the formation, existence,

validity, interpretation or scope of the agreement under which

Arbitration is sought, and who are proper Parties to the

Arbitration, shall be submitted to and ruled on by the

Arbitrator" (emphases added). JAMS Comprehensive Arbitration Rules & Procedures, Rule 11(b), 14 (July 1, 2014), 32 No. 2016AP601

https://www.jamsadr.com/files/Uploads/Documents/JAMS-Rules/JAMS_

comprehensive_arbitration_rules-2014.pdf.

¶63 The Applicable Law section in the Redemption

Agreement, on the other hand, is quite different. It contains

no arbitration clause and states that "[a]ll questions

concerning the construction, validity and interpretation of this

Agreement and the performance of the obligations imposed by this

Agreement shall be governed by the internal law, not the law of

conflicts, of the State of Wisconsin" (emphases added). Simply

stated, the applicable law and forum selection in one contract

is very different from the other.

¶64 Therefore, the Redemption Agreement, if enforceable,

supersedes by its very language the Operating Agreement's mode

of adjudication, including its incorporation of JAMS Arbitration

Rules that granted the authority to the arbitrator to determine

arbitrability. See Thomas W. Ward & Assoc., Inc. v. Spinks, 574

So. 2d 169, 170 (Fla. Dist. Ct. App. 1990) (per curiam) (holding

"the trial court cannot leave it to the arbitrators themselves to determine which claims are subject to arbitration when it has

not established which agreement applies").

¶65 Due to the foregoing, Midwest and NEA failed to

demonstrate "clear and unmistakable" intent to arbitrate. Riley

Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 780-81

(10th Cir. 1998). Thus, the question of whether the parties

agreed to arbitrate must, in this instance, be decided by the

circuit court. See Wis. Stat. ch. 788; see also Riley Mfg. Co., 157 F.3d at 780-81 (holding "the existence of the merger clause 33 No. 2016AP601

in the Settlement Agreement [in combination with the lack of

arbitration clause] raises at least an ambiguity on the question

of the intent of the parties to allow an arbitrator to decide

the validity of the 1991 arbitration clause" because it "raises

legitimate questions as to the continuing existence and scope of

the arbitration clause in the Manufacturing Agreement" and thus,

"the question of whether an agreement to arbitrate continues to

exist . . . is a question for the courts").

¶66 Consequently, this matter requires a judicial

determination of "whether the parties consented to arbitrate the

matters covered by the [arbitration] demand." Granite Rock Co.,

561 U.S. at 303 n.9 & 304 (referencing Buckeye Check Cashing,

546 U.S. at 444 n.1). As will later be discussed, it is for the

circuit court to further explore the validity and enforceability

of the Redemption Agreement.

3. Clarifying precedents

¶67 No Wisconsin or federal case establishes that once arbitration is contracted as the forum for dispute resolution,

parties can never later contract for an alternative forum for

dispute resolution. To the extent Cirilli, 322 Wis. 2d 238, and

Mortimore, 344 Wis. 2d 459, are read as concluding that a

contract to arbitrate is irrevocable, that interpretation is

inconsistent with the law. Clearly, section 788.01 of the

Wisconsin Arbitration Act contemplates that a court will enforce

"[a] provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract" and that

34 No. 2016AP601

such contractual provision to arbitrate "shall be valid,

irrevocable and enforceable except upon such grounds as exist at

law or in equity for the revocation of a contract." Wis. Stat.

§ 788.01 (emphasis added). Another contract that clearly and

expressly supersedes a first contract is "grounds as exist at

law or in equity for the revocation of a contract." Thus,

Cirilli and Mortimore must not stand for the proposition that

once parties contract for arbitration, that decision is always

irrevocable.

¶68 Midwest and NEA rely on Cirilli for the proposition

that whether a subsequent agreement revokes the consent to

arbitrate found in an earlier agreement is for an arbitrator to

decide because it goes to the merits of the dispute. This,

however, construes Cirilli too broadly.

¶69 Cirilli, unlike this case, did not involve the same

parties entering into a subsequent contract. 322 Wis. 2d 238,

¶¶5, 8 n.2, 8-9, 15 n.6. Instead, in Cirilli, the plaintiffs

claimed that a subsequent settlement the defendants reached with different parties released them from their duty to arbitrate

under their original contract. Id., ¶¶1-2. Cirilli says

nothing about whether parties can enter into a subsequent,

superseding contract and agree to remove their disputes from

arbitration. Moreover, Cirilli neither addresses nor concludes

that there can never be "grounds as exist at law or in equity

for the revocation of a contract." In the case at issue, unlike

Cirilli, there is a dispute as to whether a second contract without an arbitration clause supersedes the first contract with 35 No. 2016AP601

such a clause. As a result, unlike Cirilli, the determination

of arbitrability, whether the Operating Agreement is an

unrevoked contract, must be decided, in the first instance, by

the circuit court rather than the arbitrator.

¶70 Midwest and NEA also assert that Mortimore, a case

where the court of appeals remanded the matter for arbitration,

lends further support for their cause. See 344 Wis. 2d 459, ¶1.

Midwest and NEA claim that there is no fundamental difference

between the oral agreement in Mortimore and the Redemption

Agreement here, because neither was fully executed. At a

minimum, Midwest and NEA seemingly acknowledge, however, that

there is a material factual dispute in both cases upon whether

there was a binding subsequent agreement.

¶71 In Mortimore, Mortimore's written employment contract

(entered in 2004) contained an arbitration clause and prohibited

oral modifications of the contract. Id., ¶3. Specifically, the

contract stated that "[n]o amendment or modification of this

Agreement shall be: valid or binding upon [Merge Technologies] unless made in writing and signed by an officer of [Merge

Technologies] . . . or upon the Executive unless made in writing

and signed by him." Id. In 2006 Merge Technologies and

Mortimore began working towards drafting a new written contract

for Mortimore. Id., ¶7. As of June 19, 2016, "two

substantively different contract drafts were being edited by two

different people——one draft was a new contract, the other

amended Mortimore's 2004 contract." Id. A cover letter was prepared by the head of the compensation committee for one of 36 No. 2016AP601

the contracts——which contained no arbitration clause——but the

cover letter and the contract were never sent nor signed. Id.

The following day Merge Technologies decided to not offer

Mortimore a new contract for a period and eventually decided to

seek his resignation instead. Id., ¶8.

¶72 Based on these facts, the court of appeals held that

Merge Technologies and Mortimore had, through "a process of

negotiation," agreed to an amendment or modification to

Mortimore's 2004 employment contract. Id., ¶19. The court of

appeals relied on the adoption of the Commercial Arbitration

Rules of the American Arbitration Association as a "clear and

unmistakable expression of the parties' intent to reserve the

question of arbitrability for the arbitrator and not the court."

Id., ¶20. This conclusion of the court of appeals however was

based upon the fact that the "2004 contract contemplated that

amendments or modifications, such as those negotiated between

Mortimore and Merge [Technologies], would be enforceable and

binding only if made in writing." Id., ¶19. Notably, despite this provision, "the record show[ed] that no such modifications

or changes eliminating an arbitration requirement were ever made

in writing." Id. The court of appeals concluded that

Mortimore's "conten[tions] that this alleged oral agreement is

enforceable . . . [and] his breach of contract claims are not

subject to arbitration . . . is mistaken." Id., ¶18. Thus,

Mortimore neither addresses nor concludes that once contracted

for, there can never be "grounds as exist at law or in equity for the revocation of a contract." In the case at issue, unlike 37 No. 2016AP601

Mortimore, there is a material factual dispute as to whether a

second written contract, which does not have an arbitration

clause, supersedes the first written contract which does, such

that the determination of arbitrability here must first be

decided by the circuit court rather than the arbitrator.

¶73 In sum, Cirilli and Mortimore do not stand for the

proposition that once parties contract for arbitration, that

decision is always irrevocable. Even in Mortimore, the circuit

court was called upon to determine whether the initial contract

had been revoked. See Mortimore, 344 Wis. 2d 459, ¶19.

Clearly, section 788.01 of the Wisconsin Arbitration Act

contemplates that a court will enforce "[a] provision in any

written contract to settle by arbitration a controversy

thereafter arising out of the contract" and that such

contractual provision to arbitrate "shall be valid, irrevocable

and enforceable except upon such grounds as exist at law or in

equity for the revocation of a contract." Wis. Stat. § 788.01.

Another contract that clearly and expressly supersedes a first contract is "grounds as exist at law or in equity for the

revocation of a contract." To the extent that language in

Mortimore or Cirilli suggests that contracts to arbitrate are

forever irrevocable, that language is limited by the facts of

those cases.

¶74 Midwest and NEA also argue that Great Lakes and

Dr. Pannu's challenge to the Operating Agreement is governed by

Buckeye Check Cashing, 546 U.S. 440, and Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), and that those 38 No. 2016AP601

cases require the enforcement of the Operating Agreement.22

Midwest and NEA argue that this is so because the challenge is

not itself to the arbitration provision, but instead hinges on

whether the Redemption Agreement superseded the Operating

Agreement. See Buckeye Check Cashing, 546 U.S. at 445-46

("[U]nless the challenge is to the arbitration clause itself,

the issue of the contract's validity is considered by the

arbitrator in the first instance."); Prima Paint, 388 U.S. at

404 ("But the statutory language does not permit the federal

court to consider claims of fraud in the inducement of the

contract generally.").

¶75 The challenges in Buckeye Check Cashing and Prima

Paint, however, are also distinguishable from the challenge in

22 Midwest and NEA also allege that Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), explained that "before formation" and "after formation" challenges (words that Midwest and NEA used, not the Supreme Court) should be treated differently because not to do so would "permit[] a court to deny effect to an arbitration provision in a contract that the court later finds to be perfectly enforceable." See Buckeye Check Cashing, 546 U.S. at 448–49. Midwest and NEA's argument completely lacks merit. Buckeye Check Cashing's explanation was in reference to why "a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator." Id. at 449. It is unsurprising that Buckeye Check Cashing did not make a distinction between labels "before formation" and "after formation" as "it is not the mere labeling of a dispute . . . that determines whether an issue is arbitrable"; it is "whether the parties consented to arbitrate the dispute in question." Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 304 n.11 (2010). Tellingly, if a court found a superseding agreement revoked the parties' consent to arbitrate, the court could not later find that the arbitration provision was enforceable.

39 No. 2016AP601

this case. In both Buckeye Check Cashing and Prima Paint there

was only one contract. Neither of the parties' challenges went

to the subsequent contracting out of arbitration. In Buckeye

Check Cashing, the parties resisting arbitration alleged that

"the contract as a whole (including its arbitration provision)

[was] rendered invalid by [a] usurious finance charge" that was

in violation of various laws. 546 U.S. at 443-44. The parties,

however, acknowledged that they "concluded" an agreement to

arbitrate and never alleged that the finance charge impacted or

revoked their consent to arbitrate. See id. at 444 n.1; Granite

Rock Co., 561 U.S. at 300-01.

¶76 Similarly, in Prima Paint, the parties resisting

arbitration alleged that the entire contract should be rescinded

because they were fraudulently induced into entering the

contract as whole, but "no claim [was] advanced by [the

resisting party] that [the other party] fraudulently induced it

to enter into the agreement to arbitrate." 388 U.S. at 398-99,

406. Here, however, Great Lakes and Dr. Pannu argue that the Redemption Agreement superseded the Operating Agreement. In

fact, it is because of this genuine issue of material fact that

we send this matter back for further determination. See, e.g.,

Joint Sch. Dist. No. 10, 78 Wis. 2d at 101 ("For arbitration is

a matter of contract and a party cannot be required to submit to

arbitration any dispute which he has not agreed so to submit."

(quoting United Steelworkers, 363 U.S. at 582)). Thus, neither

Buckeye Check Cashing nor Prima Paint address nor prohibit

40 No. 2016AP601

parties from subsequently contracting out of arbitration as the

forum of dispute resolution.

¶77 Finally, fundamental principles of freedom to contract

support the proposition that parties can subsequently contract

to modify the terms of a previous contract. In fact, here,

various parties in various capacities did contract in 2005 and

2006. Contracts can involve mutual agreement to change certain

obligations, including a duty to arbitrate. Wisconsin law,

including Wis. Stat. ch. 788, does not limit such freedom to

contract, but rather chapter 788 reinforces the freedom of

contract by enforcing parties' contractual agreements. In fact,

this view comports with the Federal Arbitration Act if "grounds

exist at law or in equity for the revocation of any contract"

and places "arbitration agreements 'on equal footing with all

other contracts.'" Kindred Nursing Ctrs., 137 S. Ct. at 1424;

Wis. Stat. § 788.01; see, e.g., Sipple v. Zimmerman, 39

Wis. 2d 481, 492, 159 N.W.2d 706 (1968) ("The contract was

legally binding unless mutually rescinded by the parties to it."); Town Bank, 330 Wis. 2d 340, ¶39 (describing the fact that

"when [a] contract contains an unambiguous merger or integration

clause, the court is barred from considering evidence of any

prior or contemporaneous understandings or agreements between

the parties" as a "principle [that] stems from basic contract

law"). Courts should remain mindful of the limited role endowed

to them under chapter 788 and not endeavor into the province of

the parties' contractual choice to arbitrate.

41 No. 2016AP601

¶78 The notion that no parties can ever contract out of

arbitration is antithetical to these values and principles than

the idea of a prohibition on contracting out of arbitration

through mutual agreement and thus, a

"limitless . . . contractual obligation to arbitrate." Litton

Fin. Printing Div. v. NLRB, 501 U.S. 190, 209 (1991); see id.

("[The United States Supreme Court] refuse[d] to apply [the]

presumption [of arbitrability] wholesale in the context of an

expired bargaining agreement, for to do so would make limitless

the contractual obligation to arbitrate" and "determine[d]

whether the parties agreed to arbitrate this dispute" because a

court "cannot avoid that duty because it requires us to

interpret a provision of a bargaining agreement."). Neither

Cirilli, Mortimore, Buckeye Check Cashing, nor Prima Paint

require a competing result under these facts. Therefore, this

court's conclusion that a party can subsequently contract out of

the obligation to arbitrate is not only consistent with federal

and Wisconsin law, it is also necessitated by the fundamental principles underlying freedom to contract.

B. Summary Judgment

¶79 Finally, we briefly address why we remand this case to

the circuit court. The principles of summary judgment are well-

defined. Summary judgment is granted if "the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party

42 No. 2016AP601

is entitled to a judgment as a matter of law." Wis. Stat.

§ 802.08(2); Hirschhorn, 338 Wis. 2d 761, ¶20. Stated

differently, summary judgment should not be granted "unless the

facts presented conclusively show that the plaintiff's action

has no merit and cannot be maintained." Mrozek v. Intra Fin.

Corp., 2005 WI 73, ¶14, 281 Wis. 2d 448, 699 N.W.2d 54.

¶80 In determining whether to grant summary judgment, "the

court decides whether there is a genuine issue of material fact;

the court does not decide the fact." Racine Cty., 323

Wis. 2d 682, ¶25. The moving party bears the burden of

establishing the absence of a genuine, that is, disputed, issue

of material fact. AccuWeb, Inc. v. Foley & Lardner, 2008 WI 24,

¶21, 308 Wis. 2d 258, 746 N.W.2d 447; Grams v. Boss, 97

Wis. 2d 332, 338, 294 N.W.2d 473 (1980). Moreover, we view

summary judgment materials in the light most favorable to the

non-moving party. AccuWeb, 308 Wis. 2d 258, ¶21. A factual

issue is "genuine" if the evidence is such that a reasonable

jury could return a verdict in favor of the non-moving party. Baxter v. DNR, 165 Wis. 2d 298, 312, 477 N.W.2d 648 (Ct. App.

1991). A "material fact" is one that is "of consequence to the

merits of the litigation." Michael R.B. v. State, 175

Wis. 2d 713, 724, 499 N.W.2d 641 (1993). "Any reasonable doubt

as to the existence of a genuine issue of material fact must be

resolved against the moving party" for summary judgment. Heck &

Paetow Claim Serv., Inc. v. Heck, 93 Wis. 2d 349, 356, 286

N.W.2d 831 (1980).

43 No. 2016AP601

¶81 The question that was before the circuit court on

summary judgment was whether the Redemption Agreement was a

valid and enforceable contract. Competing affidavits were

submitted which presented genuine issues of material fact.

¶82 Nonetheless, the circuit court granted summary

judgment in favor of Great Lakes and Dr. Pannu concluding that

the Redemption Agreement was validly formed. The circuit court

found that Dr. Ahuja, through Midwest's attorney, made an offer

that he intended to be bound by when the e-mail containing the

"final agreement" was sent, and that Dr. Pannu accepted the

offer when he signed the Redemption Agreement and returned it

with the check that was subsequently cashed. Prior to granting

summary judgment, however, the circuit court acknowledged that

"maybe there[ are] some" factual disputes.

¶83 In this case, we conclude that the circuit court

improperly granted summary judgment to Great Lakes and

Dr. Pannu. In support of their competing motions, the parties

presented affidavits attempting to demonstrate their mutual assent, or lack thereof, to forming the Redemption Agreement.

See Wis. Stat. § 802.08(2) (precluding summary judgment if there

is a "genuine issue as to any material fact" (emphasis added)).

¶84 In support of the position that the Redemption

Agreement was validly formed and is enforceable, Dr. Pannu

submitted an affidavit representing that Great Lakes and

Dr. Pannu had performed all of their obligations under the

Redemption Agreement other than moving out of their office by April 8, 2015, including delivering a check that was 44 No. 2016AP601

subsequently cashed. That evidence, however, was refuted by

Dr. Ahuja's affidavit. Dr. Ahuja asserted that the check was

cashed in error by a clerical employee, and that a cashier's

check in the same amount was sent to Dr. Pannu once the error

was discovered. Further, Dr. Ahuja asserted that he had never

agreed to the terms of the Redemption Agreement; had never

instructed Midwest's attorney to include a complete release of

Great Lakes' or Dr. Pannu's non-compete obligations in the

Redemption Agreement, and in fact disagreed with releasing the

restrictions; and that in April he told Dr. Pannu in a phone

conversation about signing the Redemption Agreement that he was

still reviewing it and shortly after the phone call determined

that he was not willing to sign it. He noted that the agreement

does not contain his signature.

¶85 At a minimum, these competing affidavits raise genuine

issues of material fact rendering summary judgment improper.

Hence, we reverse and remand the cause to the circuit court.

V. CONCLUSION

¶86 The crux of the issue before us concerns the circuit

court's role in determining the proper forum of dispute

resolution when a subsequent contract, if enforceable, does not

contain an arbitration clause as is present in an initial

contract. As a part of that analysis we consider whether a

contract which contains a merger clause and which does not

contain an arbitration clause can change the forum of dispute resolution when a prior agreement between the parties contains

45 No. 2016AP601

an arbitration clause. The parties make competing arguments

regarding a court's role in determining the applicability of

this arbitration provision. They take contrary positions

regarding whether all disputes, even arbitrability itself, must

be submitted to arbitration. The parties present conflicting

views of precedent regarding the judiciary's role in deciding

motions to compel arbitration when a subsequent contract does

not select arbitration as the forum for dispute resolution and

does contain a merger clause which states that the subsequent

agreement supersedes all prior contracts. Relatedly, the

parties dispute whether all parties here can be compelled to

arbitrate when arguably only one co-defendant is contractually

required to arbitrate pursuant to the initial contract.

¶87 The claims in the underlying lawsuit that called upon

the court to decide whether the dispute belonged in arbitration,

involve whether Great Lakes and Dr. Pannu violated restrictive

covenants in the Operating Agreement and the Ancillary

Restrictive Covenant. The Redemption Agreement, however, does not contain an arbitration provision and in fact, purports to

release those restrictive covenants. Therefore, which contract

controls is seminal in the first instance as to whether

arbitration should be ordered. Ultimately, regardless of forum,

the controlling documents will also impact the underlying

dispute itself.

¶88 The circuit court concluded on summary judgment that

even though the initial agreement, here the Operating Agreement, required arbitration it was superseded by a later, valid and 46 No. 2016AP601

enforceable Redemption Agreement which did not so require the

parties to submit to arbitration. The court of appeals reversed

and remanded with instructions to grant Midwest's motion to

compel arbitration.

¶89 We reverse the court of appeals and conclude that the

fundamental principles of freedom to contract allow parties to a

previous contract to subsequently contract for a different forum

of dispute resolution. Here, it is necessary that the circuit

court initially determine whether the parties contracted to

arbitrate. The court's authority to order arbitration is

dependent on the terms of a contract. If the Redemption

Agreement is the parties' contract, then the court lacks

authority to order arbitration. Thus, the court must first

ascertain which contract controls the forum of dispute

resolution. In sum, we conclude that it is a court's duty to

determine whether a contract calls for arbitration and when a

dispute exists as to whether a second contract without an

arbitration clause supersedes a first contract with such a clause, the determination of arbitrability must be decided in

the first instance by the circuit court rather than the

arbitrator.

¶90 We also conclude, however, that the cause must be

remanded to the circuit court, not to compel arbitration as was

ordered by the court of appeals, but rather, because the

parties' competing affidavits submitted in support of their

positions on summary judgment raised genuine issues of material fact concerning whether the Redemption Agreement is a valid 47 No. 2016AP601

contract. Therefore, we reverse and remand to the circuit court

for further proceedings.

By the Court.—The decision of the court of appeals is

reversed, and the cause is remanded to the circuit court for

further proceedings consistent with this opinion.

¶91 REBECCA FRANK DALLET, J., withdrew from participation.

48 No. 2016AP601.ssa

¶92 SHIRLEY S. ABRAHAMSON, J. (concurring). There are

two primary agreements in the instant case. The Operating

Agreement says that all disputes will be submitted to

arbitration and issues of substantive arbitrability will also be

decided by the arbitrator. The Redemption Agreement purports to

release Great Lakes and Pannu from any and all obligations

imposed upon them by the Operating Agreement, including any

agreement to arbitrate disputes.

¶93 The legal issues about which the parties disagree are

the effect of the Redemption Agreement on the Operating

Agreement and whether the Redemption Agreement is a valid

contract.

¶94 I agree with the majority that, if valid, the

Redemption Agreement releases Great Lakes and Pannu from the

agreement to arbitrate contained in the Operating Agreement, and

that the cause should be remanded to the circuit court to

determine whether the Redemption Agreement is a valid contract.

¶95 However, I write separately because the majority fails to set forth a clear analytical framework through which the

legal issues presented in the instant case should be resolved

and mishandles federal case law in the process. Additionally,

the majority stumbles in its application of the law to the facts

in such a way that warrants both clarification and correction.

I

¶96 Although they are not binding on this court, several

decisions by the federal circuit courts of appeals have

1 No. 2016AP601.ssa

addressed the issue presented by the instant case.1 Of these

cases, Dasher v. RBC Bank (USA), 745 F.3d 1111 (11th Cir. 2014),

is the most helpful and worthy of special consideration.

¶97 In Dasher, Dasher sued the bank for allegedly charging

excessive overdraft fees in breach of his 2008 account

agreement. The 2008 Agreement contained an arbitration clause.

In 2012, a new account agreement was issued and Dasher accepted

that agreement. The 2012 Agreement did not contain an

arbitration clause. When the bank moved to compel arbitration

per the 2008 Agreement's arbitration clause, an issue arose as

to whether that clause was effective, given that the 2012

Agreement had superseded the 2008 Agreement.

¶98 The Dasher court rejected the bank's argument that an

arbitration clause in an entirely superseded agreement remains

effective unless specifically eliminated in the superseding

agreement. The Dasher court explained that "[d]espite [the

language in the cases cited by RBC], which certainly appears to

support RBC's contention, closer examination reveals a critical distinction: in each case cited by RBC, the prior agreement

remained effective to some extent for various reasons, whereas

1 See, e.g., Dasher v. RBC Bank (USA), 745 F.3d 1111 (11th Cir. 2014); Dottore v. Huntington Nat'l Bank, No. 1:09-cv-2636, 2010 WL 3861010 (N.D. Ohio Sept. 28, 2010), aff'd, 480 Fed. Appx. 351 (6th Cir. 2012); Applied Energetics, Inc. v. NewOak Capital Mkts., LLC, 645 F.3d 522 (2d Cir. 2011); Bank Julius Baer & Co., Ltd. v. Waxfield Ltd., 424 F.3d 278 (2d Cir. 2005); Riley Mfg. Co., Inc. v. Anchor Glass Container Corp, 157 F.3d 775 (10th Cir. 1998); Patten Sec. Corp., Inc. v. Diamond Greyhound & Genetics, Inc., 819 F.2d 400 (3d Cir. 1987); Matterhorn, Inc. v. NCR Corp., 763 F.2d 866 (7th Cir. 1985).

2 No. 2016AP601.ssa

here, the prior agreement is entirely superseded."2 The cases

cited by the bank could not stand for the proposition that

arbitration clauses in entirely superseded agreements remain

effective unless specifically eliminated because none of those

cases dealt with an entirely superseded agreement.3

¶99 In my view, the Dasher case persuasively articulates

the correct analytical framework.

¶100 Whether, and to what extent, a second contract

supersedes a prior contract containing an arbitration clause

such that the prior contract's arbitration clause is rendered

ineffective is an issue that must be decided by the court rather

than an arbitrator. The assertion that the prior contract's

arbitration clause was superseded calls into question the

enforceability of the arbitration clause specifically, including

the agreement to arbitrate issues of substantive arbitrability.4

¶101 In determining whether, and to what extent, a

subsequent contract supersedes a prior contract, the court

"should apply ordinary state-law principles that govern the

2 Dasher, 745 F.3d at 1120. 3 Id. 4 Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444 & n.1 (2006) (stating that a party resisting arbitration may dispute that an agreement to arbitrate "ever concluded" or "challenge[] specifically the validity of the agreement to arbitrate"); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402-04 (1967); see also Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 297-300 (2010).

3 No. 2016AP601.ssa

formation of contracts."5 "If the subsequent agreement only

partially supersedes the prior agreement, amends it, or waives

some but not all of its provisions, the second question is

whether the arbitration provision was among the superseded,

amended, or waived provisions."6 If, however, the subsequent

agreement entirely supersedes the prior agreement, the court

should determine "whether the subsequent agreement alone

supports a motion to compel arbitration."7

II

¶102 I now apply the relevant state-law principles that

govern the formation of contracts.

¶103 The Wisconsin Arbitration Act provides, in pertinent

part, that arbitration clauses "shall be valid, irrevocable and

enforceable except upon such grounds as exist at law or in

equity for the revocation of any contract."8 A subsequent

contract that supersedes a prior contract constitutes "grounds

as exist at law or in equity for the revocation of any

contract."9 The question, then, is whether, and to what extent, the Redemption Agreement, the second contract, supersedes the

Operating Agreement, the first contract.

5 First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) 6 Dasher, 745 F.3d at 1122. 7 Id. at 1123. 8 Wis. Stat. § 788.01. 9 Majority op., ¶47.

4 No. 2016AP601.ssa

¶104 A subsequent agreement's supersession of a prior

agreement is typically accomplished by including a merger clause

in the subsequent agreement. In Wisconsin, this court stated

the following with respect to merger clauses:

[The appellant] argues . . . that an exception exists to the general rule that parol evidence is admissible with respect to the issue of integration; that evidence of contemporaneous or prior agreements, written or oral, which relate to the same subject matter as the agreement in question is not admissible when the written agreement embodies written terms excluding additional understandings or agreements not contained in the writing, i.e., 'merger' clauses. With this much we can agree. Absent claims of duress, fraud, or mutual mistake, a written provision which expressly negatives collateral or antecedent understandings makes the document a complete 10 integration. ¶105 A recent decision concerning merger clauses and

supersession of contracts, Town Bank v. City Real Estate

Development, LLC, 2010 WI 134, 330 Wis. 2d 340, 793 N.W.2d 476,

is instructive in resolving the dispute in the instant case.

¶106 Town Bank involved a two-phase financing agreement

between a bank and a developer for the purchase and

redevelopment of a building in downtown Milwaukee. A Commitment Letter pledged financing for both phases of the project, but a

subsequent Term Credit Agreement (TCA) executed by the parties

provided financing for only the first phase. The TCA contained

the following clause:

10 Dairyland Equip. Leasing, Inc. v. Bohen, 94 Wis. 2d 600, 855-56, 288 N.W.2d 852 (1980); see also Matthew v. Am. Family Mut. Ins. Co., 54 Wis. 2d 336, 341-42, 195 N.W.2d 611 (1972).

5 No. 2016AP601.ssa

This Agreement, including the Exhibits attached or referring to it, the Note and the Security Documents, are intended by Customer and Lender as a final expression of their agreement and as a complete and exclusive statement of its terms, there being no conditions to the full effectiveness of their agreement except as set forth in this Agreement, the Note and the Security Documents.11 ¶107 The bank provided the first phase of financing as

provided by the TCA, but refused to finance the second phase as

referenced in the Commitment Letter. The bank sued the

developer seeking a declaratory judgment that the bank was not obligated to provide additional funding to the developer.

¶108 The Town Bank court concluded that because the TCA

contained an unambiguous merger clause, quoted above, the

developer was precluded from introducing any evidence of prior

understandings or agreements that may have existed between the

parties, including the Commitment Letter.12

¶109 Implicit in the court's holding was the conclusion

that the TCA and Commitment Letter related to the same subject

matter. That is, the Town Bank court (incorrectly, in my view)

must have concluded that the TCA was the final expression of the

parties' financing agreement altogether, as opposed to being the

final expression of only the first phase of financing. Were

this not the case, Town Bank would stand for the absurd

proposition that a fully integrated contract with respect to one

subject can extinguish contracts between the same parties with

11 Town Bank v. City Real Estate Dev., LLC, 2010 WI 134, ¶14, 330 Wis. 2d 340, 793 N.W.2d 476. 12 Id., ¶¶40-41.

6 No. 2016AP601.ssa

respect to entirely unrelated subjects.13 This is not, and has

never been, how merger clauses operate in Wisconsin or

elsewhere.14

¶110 Thus, with these state-law principles in mind, I turn

to whether, and to what extent, the Redemption Agreement, if

valid, supersedes the Operating Agreement.

III

¶111 The majority suggests that, if valid, the Redemption

Agreement supersedes the Operating Agreement in its entirety.15

The Redemption Agreement does no such thing.

¶112 The merger clause in the Redemption Agreement states

that the Redemption Agreement "constitutes the entire agreement

between the parties pertaining to its subject matter and

supersedes all prior agreements, promises, covenants,

arrangements, communications, representations or warranties,

whether oral or written, by [Great Lakes] or [Midwest]."

(Emphasis added.)

¶113 Is the "subject matter" of the Redemption Agreement identical to the "subject matter" of the Operating Agreement

such that the former entirely supersedes the latter? The answer

is clearly, "No."

13 Id., ¶¶68-72 & nn.10-13 (A.W. Bradley, J., dissenting). 14 Dairyland, 94 Wis. 2d at 608-09; Matthew, 54 Wis. 2d at 341-42; 11 Richard A. Lord, Williston on Contracts § 33:14 (4th ed. 2002); Restatement (Second) of Contracts § 213. 15 See majority op., ¶¶47, 56, 64, 67, 75.

7 No. 2016AP601.ssa

¶114 The Operating Agreement's purpose is to provide "the

rights, obligations, and restrictions" that will apply to

Midwest and its Members. Within its scope are the subjects of

capital contributions, tax distributions, allocations of profits

and losses, the authority and powers of Midwest's officers and

Members, etc. It is a document that governs the internal

operations of Midwest. On the other hand, the Redemption

Agreement's purpose is to "set forth the terms upon which [Great

Lakes] will sell and [Midwest] will redeem [Great Lakes'] entire

Membership Interest[.]" It does not purport in any way to alter

or address the internal operations of Midwest and how those

operations are to be governed.

¶115 Although there is some overlap in subject matter

between the Operating Agreement and Redemption Agreement (e.g.,

how Great Lakes' Membership Interest is calculated and paid

out), the subject matter of the agreements is not identical.

¶116 The Redemption Agreement, if valid, would not entirely

revoke the Operating Agreement as the majority suggests.16 Even if the Redemption Agreement is valid, the Operating Agreement

will still have binding effect on Midwest and all of its Members

even if it will no longer have any binding effect on Great Lakes

or Pannu. Would Midwest lack a written agreement as to its

16 At ¶¶59-60, the majority appears to read the merger clause in a way that is untethered to the subject matter of the Redemption Agreement. This suggestion gives further support to the absurd proposition that merger clauses have the effect of extinguishing prior agreements between the parties unrelated to the subject matter of the contract in which the merger clause is contained. See supra ¶108 and notes 13-14.

8 No. 2016AP601.ssa

internal operations simply because it agreed to allow the

voluntary dissociation of a Member and release that Member from

obligations imposed by the Operating Agreement? I think not.

¶117 Indeed, we have an example of an entirely superseded

contract in the instant case, namely, the 2002 Original

Operating Agreement. Section 1.4 of the 2005 Operating

Agreement states: "This Operating Agreement and the terms

hereof supersede and replace the Original Agreement and its

terms." There is no ambiguity——the 2005 Operating Agreement

completely and entirely extinguished the terms of the 2002

Original Operating Agreement. If Midwest had intended the

Redemption Agreement to entirely supersede the Operating

Agreement, one would expect to see language similar to what

Midwest used to entirely supersede the 2002 Original Operating

Agreement.

¶118 Thus, if valid, the Redemption Agreement does not

entirely supersede the Operating Agreement. However, that does

not end the inquiry. The court must also determine if the Redemption Agreement supersedes the Operating Agreement at all,

and if so, whether the Operating Agreement's arbitration clause

is one of the superseded provisions.

¶119 The majority asserts that the Applicable Law provision

of the Redemption Agreement expressly supersedes "the Operating

Agreement's mode of adjudication, including its incorporation of

JAMS Arbitration Rules that granted the authority to the

arbitrator to determine arbitrability."17 17 Majority op., ¶64.

9 No. 2016AP601.ssa

¶120 The majority's assertion incorrectly conflates choice-

of-law provisions and arbitration clauses. Providing that

questions concerning the construction of a contract shall be

governed by Wisconsin law says nothing about the forum in which

those questions will be decided.

¶121 The majority finally finds its footing when it reaches

the Mutual Release provision of the Redemption Agreement. I

agree with the majority that "[t]he obligation or promise to

'resolve any and all disputes arising with respect to the terms

and conditions of this Operating Agreement . . . by arbitration'

seemingly fits within this release."18

¶122 Asserting that a subsequent contract released the

resisting party from its obligation to submit disputes to

arbitration is exactly the type of specific challenge to the

enforceability of a validly formed arbitration clause that the

United States Supreme Court requires.19 Great Lakes and Pannu do

not argue that the arbitration clause in the Operating Agreement

was invalidly formed. Rather, they argue that the arbitration clause in the Operating Agreement cannot be enforced because the

18 Id., ¶61. 19 Buckeye, 546 U.S. at 444 & n.1; Prima Paint, 388 U.S. at 402-04; see also Granite Rock, 561 U.S. at 297-300.

10 No. 2016AP601.ssa

Mutual Release provision specifically revokes any obligation on

their part to submit to arbitration.20

IV

¶123 The majority's focus on the principles undergirding

freedom of contract is not misplaced or inappropriate——those

principles support the majority's conclusion that parties that

agreed to arbitrate disputes may undo that agreement if they so

choose. However, these principles alone do not provide a clear

analytical framework through which the legal issue presented in

the instant case should be resolved

¶124 I would articulate that framework as follows.

¶125 Whether, and to what extent, a second contract

supersedes a prior contract containing an arbitration clause

such that the prior contract's arbitration clause is rendered

ineffective is an issue that must be decided by the court rather

than an arbitrator. The assertion that the prior contract's

arbitration clause was superseded calls into question the

enforceability of the arbitration clause specifically, including the agreement to arbitrate issues of substantive arbitrability.

¶126 In determining whether, and to what extent, a

subsequent contract supersedes a prior contract, the court

20 Puzzlingly, the majority calls into question this framework. See majority op., ¶74 n.22. To be clear, Supreme Court precedent establishes two ways in which arbitration clauses may be challenged in and resolved by a court. The resisting party may dispute that an agreement to arbitrate "ever concluded," Buckeye, 546 U.S. at 444 n.1, or "challenge[] specifically the validity of the agreement to arbitrate" as Great Lakes and Pannu do in the instant case, Buckeye, 546 U.S. at 444-45.

11 No. 2016AP601.ssa

should apply ordinary state-law principles that govern the

formation of contracts. If the subsequent contract only

partially supersedes the prior contract, amends it, or waives

some but not all of its provisions, the second question is

whether the arbitration provision was among the superseded,

amended, or waived provisions. If, however, the subsequent

contract entirely supersedes the prior contract, the court

should determine whether the subsequent contract alone supports

a motion to compel arbitration.

¶127 In the instant case, it appears that the purpose of

the Redemption Agreement was not to nullify or extinguish the

Operating Agreement in its entirety. Rather, the Redemption

Agreement sets forth the terms upon which Great Lakes will cease

to be a Member of Midwest and release Great Lakes and Pannu from

any and all obligations that the Operating Agreement might have

imposed upon them, including the obligation to submit disputes

arising out of the Operating Agreement to arbitration and to

allow the arbitrators to decide issues of substantive arbitrability.

¶128 However, there is a genuine issue of material fact

with regard to whether the Redemption Agreement is a valid

contract. Thus, the cause should be remanded to the circuit

court for the determination of this issue.

12 No. 2016AP601.rgb

¶129 REBECCA GRASSL BRADLEY, J. (dissenting). The

majority nullifies the parties' arbitration agreement by

creating a new rule bestowing on the judiciary the power to

decide arbitrability even though the parties agreed an

arbitrator would resolve this issue. Ironically, the majority

invokes "fundamental principles of freedom to contract"1 but

nonetheless infringes on the contracting rights of private

parties and expands the statutorily limited role of the courts

when parties contract for arbitration. I would honor the

parties' contractual agreement to let the arbitrator decide

what, if any, impact the partially-executed Redemption Agreement

had on the existence and validity of the Operating Agreement.

¶130 Because the parties dispute the formation of the

Redemption Agreement as well as its effect on the continued

existence of the Operating Agreement, this court must apply the

rules the parties agreed to follow under their existing

contract, for "any and all disputes arising with respect to the

terms and conditions of this Operating Agreement." See Operating Agreement, § 13.7. The dispute here is whether the

Redemption Agreement supersedes the Operating Agreement as to

Great Lakes and Dr. Pannu, thereby eliminating the arbitration

provision. This presents an issue of substantive arbitrability,

which the parties contractually agreed to have the arbitrator

decide. The majority acknowledges (albeit in a footnote) that

"[t]he JAMS Arbitration Rules in the Operating

1 Majority op., ¶5.

1 No. 2016AP601.rgb

Agreement . . . require that even the issue of arbitrability be

arbitrated"2 but overrides the parties' chosen method of dispute

resolution anyway.3 I would instead respect the parties'

contract, affirm the court of appeals, and remand the matter to

the circuit court with directions to send the case to the

arbitrator for resolution of this preliminary dispute.4 I

respectfully dissent.

2 Majority op., ¶2 n.2. "JAMS" is an acronym for Judicial Arbitration and Mediation Services, Inc. 3 While the foundation of the majority's preference for court resolution of arbitrability disputes is unclear, its disdain for arbitration as a method of dispute resolution is transparent in its declaration that "only those disputes that the parties have agreed to so submit to arbitration are relegated to proceed in that forum." Majority op., ¶43 (emphasis added). The majority misunderstands that the choice of method for dispute resolution belongs to the parties, not the court. 4 The arbitrator would first decide arbitrability, which involves two inquiries: (1) "whether there is a construction of the arbitration clause that would cover the grievance on its face" and (2) "whether any other provision of the contract specifically excludes it." Joint Sch. Dist. No. 10 v. Jefferson Educ. Ass'n, 78 Wis. 2d 94, 111, 253 N.W.2d 536 (1977). In this case, no party challenges the applicability of the arbitration clause in and of itself; rather, Great Lakes and Dr. Pannu dispute its enforceability, alleging that a second contract eliminated the arbitration provision. If the arbitrator determines that the arbitration clause in the Operating Agreement no longer exists or is invalidated by the Redemption Agreement, this case returns to court for ultimate disposition of the underlying issue. If the arbitrator determines the Redemption Agreement was never formed, the non-compete issue would be resolved in an arbitration of the merits.

2 No. 2016AP601.rgb

I

¶131 Principles governing arbitration disputes are rather

straightforward and should have controlled the disposition of

this case. First, Wis. Stat. § 788.01 (2015-16) recognizes

that:

A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part of the contract . . . shall be valid, irrevocable and enforceable except upon such grounds as exist at law or in equity for the revocation of any contract. Wisconsin has a longstanding "policy of encouraging arbitration

as an alternative to litigation," First Weber Grp., Inc. v.

Synergy Real Estate Grp., LLC, 2015 WI 34, ¶24, 361 Wis. 2d 496,

860 N.W.2d 498 (quoted source omitted), and "[t]here is a strong

presumption of arbitrability where the contract in question

contains an arbitration clause," Cirilli v. Country Ins. & Fin.

Servs., 2009 WI App 167, ¶14, 322 Wis. 2d 238, 776 N.W.2d 272.

¶132 Second, the circuit court generally decides

arbitrability unless the parties contract to have the arbitrator decide it, as they have done here. See First Weber Grp., Inc.,

361 Wis. 2d 496, ¶36. The arbitrability issue addresses whether

the parties agreed to submit a dispute to arbitration. See

Kimberly Area Sch. Dist. v. Zdanovec, 222 Wis. 2d 27, 37, 586

N.W.2d 41 (Ct. App. 1998). When parties "clearly and

unmistakably" contract to have arbitrability decided by the

arbitrator, the circuit court must honor the parties' choice.

See AT&T Techs., Inc. v. Commc'ns. Workers of Am., 475 U.S. 643, 649 (1986). When the parties specifically incorporate the JAMS' 3 No. 2016AP601.rgb

Arbitration Rules in their contract, the court views their

inclusion as a clear and unmistakable agreement to remove the

arbitrability determination from the circuit court and place it

with the arbitrator. Mortimore v. Merge Techs., 2012 WI App

109, ¶20, 344 Wis. 2d 459, 824 N.W.2d 155; Oracle Am., Inc. v.

Myriad Grp. A.G., 724 F.3d 1069, 1074 (9th Cir. 2013)

("Virtually every circuit to have considered the issue has

determined that incorporation of [formal] arbitration rules

constitutes clear and unmistakable evidence that the parties

agreed to arbitrate arbitrability.").

¶133 Finally, as the majority recognizes,5 Chapter 788

prescribes a limited role for the courts over arbitration

proceedings, enumerating specific judicial powers. Notably

absent from this narrow conferral of judicial authority is the

power to remove decisions over arbitrability from the arbitrator

when the parties contractually assigned that issue to the

arbitrator alone.

II ¶134 Applying these rules, the answer is obvious: whether

these parties will arbitrate their underlying dispute must be

decided by the arbitrator. The Operating Agreement upon which

Midwest bases its non-compete claim against Great Lakes and Dr.

Pannu contains an arbitration clause, which plainly incorporates

JAMS Arbitration Rules:

5 Majority op., ¶46.

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Section 13.7. Arbitration. With the exception of any decision made by Midwest pursuant to the terms of Section 5.5 hereof ["Appointment of and Powers of the Company President."] (which shall be deemed final), the parties hereto agree to resolve any and all disputes arising with respect to the terms and conditions of this Operating Agreement hereby by arbitration conducted by a single arbitrator selected from a slate of potential arbitrators residing in the Milwaukee, Madison or Chicago metropolitan areas, from a slate of five, proposed by JAMS. The party requesting arbitration shall strike the first name from the slate and the other party shall strike the next, alternating until a final individual remains, who shall serve as arbitrator and conduct an arbitration proceeding in accordance with the Arbitration Rules of JAMS. The arbitrator shall have the power to order temporary and permanent injunctive relief, on an expedited basis if deemed necessary. Any decision made by such an arbitrator within the scope of his or her authority shall be binding upon the parties. Unless agreed otherwise by the parties and arbitrator, the arbitration shall take place in Milwaukee County. The arbitration shall be governed by the laws of the State of Wisconsin, this Operating Agreement and the JAMS' Arbitration Rules[.] (Emphasis added.) JAMS Rule 11(b) provides:

Jurisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought, and who are proper Parties to the Arbitration, shall be submitted to and ruled on by the Arbitrator. The Arbitrator has the authority to determine jurisdiction and arbitrability issues as a preliminary matter. (Emphasis added.) Accordingly, the arbitration provision of the

Operating Agreement evinces the parties' contractual agreement

to have the arbitrator, rather than the circuit court, decide

issues of arbitrability. The arbitration provision also

requires "any and all disputes arising with respect to the terms and conditions of this Operating Agreement" be resolved in

arbitration under JAMS rules. 5 No. 2016AP601.rgb

¶135 Application of these rules under Wisconsin law easily

resolves this preliminary issue. The parties entered into a

contract with an arbitration clause, which incorporates JAMS

Arbitration Rules. Those Rules confer exclusive authority on

the arbitrator to decide issues of arbitrability. Controlling

law holds that by doing so, the arbitrability question must be

decided by the arbitrator——not the circuit court. The dispute

about whether the Redemption Agreement was formed challenges the

existence and validity of the Operating Agreement. JAMS Rule

11(b) controls and assigns authority to resolve this preliminary

dispute to the arbitrator alone. Allegations that a partially-

executed Redemption Agreement superseded the Operating Agreement

do not alter the analysis.

¶136 The majority expresses concern that "serious questions

exist as to whether the Operating Agreement still controls the

issue of arbitrability, whether the Redemption Agreement

supersedes that agreement, and to what extent, if any, one co-

defendant, Dr. Pannu individually, ever agreed to arbitrate."6 I agree. But the parties' contract specifies that the arbitrator,

not a court, must answer these questions. The contract could

not be clearer: "arbitrability disputes, including disputes

over the . . . existence, [and] validity . . . of the agreement

under which Arbitration is sought, and who are proper Parties to

the Arbitration, shall be submitted to and ruled on by the

Arbitrator." Great Lakes and Dr. Pannu challenge the existence

6 Majority op., ¶54.

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and validity of the Operating Agreement in light of the

Redemption Agreement. The parties agreed the arbitrator would

decide this issue. Dr. Pannu disputes being a proper party to

the arbitration. The parties agreed the arbitrator would decide

this issue too. Contrary to the majority's minimization of the

arbitrator's authority to decide arbitrability as a mere

"presumption,"7 it is the parties' contract that requires

arbitrability to be decided by the arbitrator. The court errs

in interpreting Chapter 788 to require stripping the arbitrator

of his contractual authority; nothing in Chapter 788 empowers

the judiciary to override the parties' contracted method for

resolving this precursory issue.

¶137 Contrary to the majority's misconstruction of the

issue presented, this case is not about precluding parties from

entering into subsequent agreements or altering the parties'

preexisting choice of forum for dispute resolution. Certainly

parties are free to change their minds and revoke, cancel, or

otherwise invalidate the original agreement to arbitrate. But any decision to undo a contractual agreement to arbitrate must

be mutual. If the parties did not dispute the formation of the

Redemption Agreement or its applicability to each of them, the

court may not be considering arbitration at all, given the

unchallenged and fully executed Redemption Agreement with a

merger clause. See Town Bank v. City Real Estate Dev., LLC,

2010 WI 134, 330 Wis. 2d 340, 793 N.W.2d 476. A merger clause

7 Majority op., ¶54.

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in a contract executed only by the party seeking to enforce that

merger clause in order to evade a prior agreement to arbitrate

does not have the same superseding effect when another party

disputes its formation and application to all parties.8

¶138 This court has repeatedly protected parties' freedom

to contract. Id., ¶33 (collecting cases). Our goal when

interpreting contracts freely entered into by the parties "is to

ascertain the true intentions of the parties as expressed by the

contractual language." Id. (quoted source omitted). "[T]he

best indication of the parties' intent is the language of the

contract itself" and unless the contract is ambiguous, we stick

to "the four corners of the contract, without consideration of

extrinsic evidence." Id. (quoted source omitted). The only

undisputed, freely-made contract before the court is the

Operating Agreement and its plain language says the parties want

"any and all" disputes about its existence or validity to be

resolved by the arbitrator. I would honor the parties' contract

by enforcing the arbitration provision in the Operating Agreement.

¶139 The majority opinion quotes "fundamental principles of

freedom to contract" and acknowledges the "utmost liberty of

contracting" and holds these rights "sacred,"9 but then proceeds

8 Not only do Midwest and NEA challenge the formation of the Redemption Agreement, they also dispute the applicability of its merger clause to NEA based on language restricting its scope to Dr. Pannu and Midwest. 9 Majority op., ¶5, ¶39.

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to disregard the plain text of the parties' Operating Agreement

and to ignore well-established arbitration principles supporting

freedom of contract rights. The majority invents a new

procedure for circuit courts to follow when a party to an

existing contract requiring arbitration contends the fully-

executed first contract is void due to the parties' negotiations

over a second contract, which one party signed but the other

party refused to sign. This unprecedented judicial intrusion

directs courts to ignore the contractual conferral of authority

on the arbitrator to decide arbitrability, and instead conduct a

full-blown court trial over the existence and validity of the

fully-executed contract containing the arbitration clause. As a

result, the parties who previously decided to resolve disputes

out-of-court will be subjected to a circuit court calendar

delaying any hope of resolving the merits of the non-compete

allegations until a factfinder resolves this preliminary dispute

in a forum the parties previously rejected in favor of private

arbitration. ¶140 In reaching this result, the majority erroneously

distinguishes and "clarifies," but does not overrule, the only

two Wisconsin cases addressing similar factual scenarios:

Cirilli, 322 Wis. 2d 238, and Mortimore, 344 Wis. 2d 459.

¶141 Cirilli involved a dispute between insurance agents

and their former employer, Country Insurance. 322 Wis. 2d 238,

¶2. The Agents' written agreements with Country required

binding arbitration for "any claim or controversy relating to or arising out of the relationship between the Agent and the

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Companies." Id., ¶3. The Agents sued Country in circuit court

claiming Country owed them termination commissions under the

written agreements. Id., ¶2. Country filed a motion to compel

arbitration of the Agents' claims. Id., ¶3. The Agents argued

that a settlement agreement and release Country executed with

different former agents making similar claims superseded the

arbitration provision. Id., ¶5, ¶9. The Agents supported their

argument with the decision of an arbitrator, in a prior case

brought by different former agents, who determined the release

voided the arbitration requirement. Id., ¶¶6-7. The circuit

court agreed with the Agents' position and refused to order

arbitration. Id., ¶8. The court of appeals reversed and

ordered the matter sent to the arbitrator for determination.

Id., ¶19. The court of appeals held the Agents' claims for

termination commissions fell squarely within the agreement

requiring arbitration and the fact that another arbitrator

decided the release voided similarly situated agents' agreements

with Country cannot be the basis for avoiding the Cirilli Agents' contractual language. Id., ¶¶15-18. The court of

appeals ruled that by concluding the release controlled, the

circuit court erroneously determined the merits of the Cirilli

Agents' claims——a task assigned to the arbitrator, not the

circuit court. Id.

¶142 Cirilli prohibits circuit courts from deciding the

merits when the parties have agreed to arbitrate disputes, even

when the answer is obvious and even when another arbitrator has already ruled on the merits of an identical claim involving

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different claimants. Transferring a decision on the merits to

the circuit court usurps the freedom of contract and the mutual

decision two parties made to have disputes resolved by

arbitration.

¶143 What constitutes the "merits" of a case can be unclear

when one party argues a subsequent contract voided the

obligations under the original contract. Typically, the merits

will be the substantive allegation——here, Midwest's claim that

Dr. Pannu violated his non-compete obligation goes to the

"merits" of the dispute. However, the "merits" in this case

also include a determination that a subsequent contract voids

the existing contract because such a determination altogether

eliminates the non-compete claim. By having the circuit court

hold a trial whenever parties dispute the formation of a second

contract (despite the existing contract's requirement that

arbitrability be decided by the arbitrator), the majority

disregards both the parties' contract and longstanding

arbitration rules applied by both this court and the United States Supreme Court.10

10 "[A] court is not to rule on the potential merits of the underlying claims" even if the claims appear frivolous. AT&T Tech., Inc. v. Commc'ns. Workers of Am., 475 U.S. 643, 649-50 (1986). Courts "have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim." Id. Any doubts as to whether a claim should be arbitrated should be resolved in favor of arbitration. Id. at 650. "[A] challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 449 (2006).

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¶144 In attempting to distinguish Cirilli, the majority

ignores the fact that the Cirilli Agents argued the release——

which did not contain an arbitration clause——superseded the

underlying agreement between the parties, including its

arbitration clause. This is the very issue presented in this

case and the majority is simply wrong to state otherwise.

Whether a subsequent agreement supersedes an earlier agreement

containing an arbitration clause is a "question[] not properly

before the court[.]" Cirilli, 322 Wis. 2d at 253, ¶18. In this

case, whether the Redemption Agreement supersedes the Operating

Agreement inquires into the existence and validity of the

Operating Agreement, an issue the parties agreed the arbitrator

must decide. The majority's interference with the arbitrator's

exclusive province threatens the freedom to contract; it does

not advance it.

¶145 In Mortimore, the court of appeals ordered arbitration

in a factual scenario almost identical to Midwest's. Mortimore

and his employer, Merge, had a written employment contract, which contained an arbitration clause for claims "'arising out

of or relating to this Agreement.'" Mortimore, 344 Wis. 2d 459,

¶3. The arbitration clause incorporated American Arbitration

Association ("AAA") rules, and required any amendments to the

contract be "in writing and signed" by Merge. Id. Merge's

Compensation Committee and Mortimore were working on a new

contract for Mortimore and ostensibly reached an oral agreement

on a contract that did not contain an arbitration clause. Id., ¶7. The new contract was never signed, however, because Merge

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learned Mortimore had interfered with Merge's audit, and

Mortimore subsequently resigned at Merge's request. Id., ¶8.

Mortimore sued Merge in court for breach of contract and Merge

requested the circuit court send the matter to arbitration.

Id., ¶¶9-10. The circuit court held an evidentiary hearing and

concluded the oral contract superseded the contract requiring

arbitration. Id., ¶10.

¶146 The court of appeals reversed, ruling that the

question of whether the unsigned second contract superseded the

arbitration-requiring contract was a question for the

arbitrator. Id., ¶21. The court of appeals held: (1) deciding

the oral agreement trumped the existing employment contract is a

determination on the merits that courts "do not make," id., ¶19

(citing AT&T Tech., 475 U.S. at 648-50); and (2) the parties

unmistakably indicated they wanted the arbitrator to decide

arbitrability as evidenced by the existing employment contract's

adoption of AAA arbitration rules, including Rule 7(a): "[t]he

arbitrator shall have the power to rule on his or her own jurisdiction, including any objection with respect to the

existence, scope or validity of the arbitration agreement."

Id., ¶20 (brackets in Mortimore).

¶147 Mortimore is on all fours with the facts in the

current case. When parties have an existing contract with an

arbitration clause indicating the parties want the arbitrator to

decide arbitrability, whether a subsequent oral or partially

executed agreement supersedes the existing contract is an issue the arbitrator must decide.

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¶148 By favoring judicial resolution of the preliminary

issue of arbitrability due to the mere possibility that a second

contract might be valid, the majority ignores both the language

of the Operating Agreement as well as longstanding arbitration

principles. Because the parties dispute whether a second

contract superseded the first, the plain text of the first

contract, requiring that arbitrability be decided by the

arbitrator, governs. The parties, who agreed to resolve "any

and all disputes" by arbitration, should get the benefit of

their bargain. Instead of honoring the parties' contract to

arbitrate, the majority sets it aside.

¶149 The majority hollowly recites the pivotal precept that

"[f]reedom of contract is based on the idea that individuals

should have the power to govern their own affairs without

interference,"11 but nevertheless unseats the contractually-

chosen arbitrator in favor of a judicially-imposed circuit court

to resolve a dispute between parties who expressly rejected the

court system as a forum for dispute resolution. Because I would enforce the parties' contractual expectations, I respectfully

dissent.

11 Majority op., ¶39 (quoting Solowicz v. Forward Geneva Nat'l, LLC, 2010 WI 20, ¶34, 323 Wis. 2d 556, 780 N.W.2d 111).

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