The University of Iowa, Board of Regents, State of Iowa v. The American Arbitration Association and Modern Piping, Inc.

• Court: Court of Appeals of Iowa
• Decided: January 9, 2019
• Docket: 17-0949
• Status: Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 17-0949 Filed January 9, 2019

THE UNIVERSITY OF IOWA, BOARD OF REGENTS, STATE OF IOWA, Plaintiffs-Appellants,

vs.

THE AMERICAN ARBITRATION ASSOCIATION, Defendant-Appellee,

MODERN PIPING, INC., Intervenor/Appellee. ________________________________________________________________

Appeal from the Iowa District Court for Johnson County, Mary E. Chicchelly,

Judge.

The petitioners appeal the order granting summary judgment on their action

to enjoin the American Arbitration Association from arbitrating a contract dispute.

AFFIRMED.

Thomas J. Miller, Attorney General, and George A. Carroll, Assistant

Attorney General, for appellants.

John A. Templer Jr. and Zachary J. Hermsen of Whitfield & Eddy, P.L.C.,

Des Moines, for appellee The American Arbitration Association.

Jeffrey A. Stone and Gail Brashers-Krug of Simmons Perrine Moyer

Bergman PLC, Cedar Rapids, for appellee Modern Piping, Inc.

Heard by Potterfield, P.J., Doyle, J., and Danilson, S.J.

*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2019). 2

DOYLE, Judge.

The University of Iowa, Board of Regents, and State of Iowa (petitioners)

appeal from the order granting summary judgment on their action to enjoin the

American Arbitration Association (AAA) from arbitrating a contract dispute. They

contend the district court erred in determining the doctrine of arbitral immunity

prevents them from enjoining the AAA from arbitrating the dispute.

I. Background Facts and Proceedings.

Modern Piping, Inc. contracted to perform work on two building projects at

the University of Iowa. Both contracts contain the following arbitration provision:

[A]ny claim, dispute or other matter in question between the Contractor and the Owner referred to the Design Professional, except those which have been waived by the making or acceptance of final payment as provided in the Uniform General Conditions of the Contract, shall be subject to arbitration in accordance with the provisions of the Uniform General Conditions of the Contract.

When disputes arose with regard to each contract, Modern Piping filed demands

for arbitration with the AAA.

The petitioners filed an action against the AAA,1 seeking to enjoin it from

arbitrating the disputes. The district court issued a temporary injunction but

dissolved it after determining that the doctrine of arbitral immunity applied. The

court granted the AAA’s motion for summary judgment, dismissing the action on

the same ground. The petitioners appealed.

1 Modern Piping was not named as a party to the action but successfully moved to intervene. 3

II. Scope and Standard of Review.

We review summary judgment rulings for correction of errors at law. See

Honomichl v. Valley View Swine, LLC, 914 N.W.2d 223, 230 (Iowa 2018).

Summary judgment is appropriate when the only conflict concerns the legal

consequences that flow from the undisputed facts. See id. We will affirm the grant

of summary judgment if, when viewing the facts and all inferences that may be

taken from them in the light most favorable to the nonmoving party, the moving

party is entitled to judgment as a matter of law. See id.

III. Discussion.

The sole question before us is whether the doctrine of arbitral immunity

applies. The doctrine provides that arbitrators are immune from liability for acts

performed in their arbitral capacity. See 4 Am. Jur. 2d Alternative Dispute

Resolution § 154. It “generally shields all functions which are integrally related to

the arbitral process.” Id. In determining whether a claim against an arbitrator

arises out of a decisional act, the question is “whether the claim effectively seeks

to challenge the decisional act of an arbitrator or arbitration panel.” Id. If so, the

doctrine applies; if not, the doctrine is inapplicable. See id. This immunity extends

to associations administering arbitration procedures. See, e.g., Corey v. NYSE,

691 F.2d 1205, 1211 (6th Cir. 1982) (“Extension of arbitral immunity to encompass

boards which sponsor arbitration is a natural and necessary product of the policies

underlying arbitral immunity; otherwise the immunity extended to arbitrators is

illusionary. It would be of little value to the whole arbitral procedure to merely shift

the liability to the sponsoring association.”). 4

The petitioners argue that arbitral immunity does not apply to the AAA

because it is without jurisdiction to arbitrate the dispute. Although no Iowa case

has addressed the issue, other courts have rejected this contention. See Int’l Med.

Grp., Inc. v. Am. Arbitration Ass’n, Inc., 312 F.3d 833, 842 (7th Cir. 2002) (noting

“[t]he cases uniformly support arbitral immunity in situations such as occurred

here” in reaching its conclusion that the AAA was immune from a suit based on

wrongful exercise of jurisdiction). Those courts have found that arbitral immunity

applies unless there is a “clear absence” of jurisdiction. New England Cleaning

Servs., Inc. v. Am. Arbitration Ass’n, 199 F.3d 542, 545 (1st Cir. 1999). To hold

otherwise

would require arbitral organizations, not courts or arbitrators, to themselves resolve what might well turn out to be significant threshold legal issues long before any hearing. . . . Forcing the AAA itself to preliminarily address potentially complex legal issues would not only impose an unwelcome burden, but would interfere with the organization’s neutrality and likely add further cost and delay to the arbitral process.

Id. at 546. “Unless the parties clearly and unmistakably provide otherwise, the

question of arbitrability is to be decided by a court, not by an arbitrator.” Int’l Med.

Grp., 312 F.3d at 842-43.

The petitioners argue the lack of court order determining the AAA had

jurisdiction to arbitrate the dispute indicates a clear absence of its jurisdiction.

However, the question is not whether a court has determined the AAA has

jurisdiction to arbitrate a dispute; the question is whether the arbitration demand

“was not facially valid so that jurisdiction was clearly lacking.” See New England

Cleaning Servs., 199 F.3d at 545-46 (holding the AAA maintained arbitral immunity

even though the district court determined it lacked jurisdiction or authority to 5

arbitrate the dispute where the demand for arbitration was not so deficient on its

face as to signal a “clear absence” of jurisdiction). The petitioners fall short of

showing the “clear absence” of jurisdiction required to divest the AAA of its arbitral

immunity, as this litigation illustrates. See id. at 545 (finding the question of

jurisdiction “was not facially obvious” where “it took a nine-page memorandum and

order by the district court and a full opinion of this court to deal with the legal issues

involved”).

Although arbitral immunity prevents the petitioners from enjoining the AAA

from arbitrating the dispute, they were not without a remedy. “[A]ny party to an

arbitration can obtain relief by seeking a stay against the party bringing the

arbitration. There is no need to seek a stay against the sponsoring organization.”

Int’l Med. Grp., 312 F.3d at 843-44 (noting that “[t]he appropriate remedy . . . would

be for the wronged party to seek injunctive relief against the party initiating the

arbitration in an appropriate court,” an action that the AAA “need not be a party to”

because the AAA “should be spared the burden of litigating the appropriateness of

its exercise of jurisdiction”).

Because the doctrine of arbitral immunity applies, the district court properly

granted summary judgment in the AAA’s favor.