Stein v. Geonerco, Inc.

17 P.3d 1266
Court of Appeals of Washington·Decided February 20, 2001·No. 46056-1-I·Published·Cited by 55 cases

Opinion

17 P.3d 1266 (2001)

Jerry STEIN, on behalf of himself and all others similarly situated, Appellant,
v.
GEONERCO, INC., a Washington corporation, d/b/a Harbour Homes, Respondent.

No. 46056-1-I.

Court of Appeals of Washington, Division 1.

February 20, 2001.

*1268 Beth Ellen Terrell, Kim D. Stephens, Amanda M. Steiner, Seattle, for Appellant.

Mark Griffin, Lynn Lincoln Sarko, Sheryl Gordon McCloud, for Respondent.

*1267 WEBSTER, J.

Stein sued Geonerco for poor installation and finishing of exterior siding on his house. Geonerco brought a motion to compel arbitration, citing a clause in a warranty agreement. The trial court denied the motion. Geonerco appeals arguing that the clause covers Stein's claims. We reverse because the clause is broad enough to include Stein's claims.

FACTS

In May 1996, Jerry Stein purchased a house from Geonerco, Inc. Geonerco had advertised the house with a 25 year manufacturer's warranty on the siding. Upon purchasing the house, Stein also entered into a 10-year warranty agreement with Geonerco in which he agreed to submit any unresolved disputes to binding arbitration.

After living in the house for some time, Stein complained to Geonerco about siding defects. Geonerco inspected the siding and applied a bleaching solution. Not satisfied with the repair, Stein sued Geonerco under the Consumer Protection Act. Geonerco brought a motion to compel arbitration, citing the arbitration clause in the 10-year warranty agreement. The trial court denied the motion to compel arbitration. Geonerco appeals this order interlocutory.

DISCUSSION

I.

Interlocutory Appeal

Stein contends that Geonerco may not seek an interlocutory appeal of the trial court's order denying its motion to compel arbitration. RAP 2.2(a)(3) allows an appeal as a matter of right from "[a]ny written decision affecting a substantial right in a civil case which in effect determines the action and prevents a final judgment or discontinues the action." This Court has ruled that the right to arbitrate is a "substantial right" under RAP 2.2(a)(3). Herzog v. Foster & Marshall, Inc., 56 Wash.App. 437, 440, 783 P.2d 1124 (1989). A court decision that discontinues an "action" for arbitration falls within the meaning of RAP 2.2(a)(3) because it involves issues wholly separate from the merits of the dispute and because an effective challenge to the order is not possible without an interlocutory appeal. Herzog, 56 Wash.App. at 440-41, 783 P.2d 1124.

First, a motion to compel arbitration invokes special proceedings under RCW 7.04.040, possibly setting up a mini-trial on the existence or validity of an arbitration agreement, even if there is no action on the merits. Herzog, 56 Wash.App. at 441-42, 783 P.2d 1124. The objective of such a motion is to initiate a separate action in the forum of arbitration. Herzog, 56 Wash.App. at 442, 783 P.2d 1124. Denial of a motion to compel arbitration effectively discontinues such action. Herzog, 56 Wash.App. at 442, 783 P.2d 1124. Because the ruling is upon an action separate from any related proceeding, it is appealable as a matter of right under RAP 2.2(a)(3). Herzog, 56 Wash.App. at 443, 783 P.2d 1124.

Second, the benefits of arbitration will be irretrievably lost without an interlocutory right to appeal. Herzog, 56 Wash.App. at 443, 783 P.2d 1124. If a trial court does not compel arbitration and there is no immediate right to appeal, the party seeking arbitration must proceed through costly and lengthy litigation before having the opportunity to appeal by which time such an appeal is too late to be effective. Herzog, 56 Wash.App. at 443, 783 P.2d 1124. This result would frustrate strong public policy favoring arbitration as well as the parties' own arbitration agreement. Herzog, 56 Wash.App. at 443, 783 P.2d 1124.

Stein's citation to cases from other jurisdictions is not persuasive. The Oregon Court of Appeals determined that Oregon statute does not provide it with jurisdiction to hear an interlocutory appeal of an order *1269 denying a motion to compel arbitration. Bush v. Paragon Property, Inc., 165 Or.App. 700, 997 P.2d 882, 887-88 (2000) (in banc) (court held that provisions in the Federal Arbitration Act that require an interlocutory appeal did not preempt state law that failed to provide the appellate court with such jurisdiction). Oregon Revised Statute 19.205 (West 1999) states:

(1) A judgment or decree may be reviewed on appeal as prescribed in this chapter.

(2) For the purpose of being reviewed on appeal the following shall be deemed a judgment or decree:

(a) An order affecting a substantial right, and which in effect determines the action or suit so as to prevent a judgment or decree therein.

Unlike the Oregon statute, RAP 2.2(a)(3) also includes as appealable an order that "discontinues the action." An order denying a motion to compel arbitration discontinues the action for arbitration and, therefore, is immediately appealable. Based on this construction of RAP 2.2(a)(3), as well as the policy reasons stated above, we find that Bush is distinguishable and decline to follow that case. Stein's citation of other jurisdictions is similarly unpersuasive. Instead, we continue to follow Herzog and conclude that an order denying a motion to compel arbitration is appealable interlocutory.

II.

Arbitration Clause

The main issue on appeal is whether Stein's claim is subject to arbitration. We review questions of arbitrability de novo. Kamaya Co. v. American Property Consultants, Ltd., 91 Wash.App. 703, 713, 959 P.2d 1140 (1998), rev. denied, 137 Wash.2d 1012, 978 P.2d 1099 (1999). In determining whether the two parties agreed to arbitrate the particular dispute, we consider four guiding principles: 1) the duty to arbitrate arises from the contract; 2) a question of arbitrability is a judicial question unless the parties clearly provide otherwise; 3) a court should not reach the underlying merits of the controversy when determining arbitrability; and 4) as a matter of policy, courts favor arbitration of disputes. Kamaya, 91 Wash.App. at 713-14, 959 P.2d 1140. As a rule, a contractual dispute is arbitrable unless the court can say with positive assurance that no interpretation of the arbitration clause could cover the particular dispute.

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Stein v. Geonerco, Inc., 17 P.3d 1266 (Wash. Ct. App. 2001).

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