LLC v. LLC (2011)

MEMORANDUM OF DECISION

The plaintiffs, Rega Beach Store, LLC and Glen Rega, have moved to vacate an arbitration award against them and the defendant, Lexgroup, LLC moved to confirm the same award.

The plaintiffs executed a standard listing agreement for the sale of a business which was signed on behalf of the plaintiff.   The agreement was also signed on behalf of an entity entitled Lexington Group, LLC. The real estate broker services were provided to the plaintiffs, and Lexgroup, LLC requested arbitration pursuant to a provision contained in the listing agreement.   The defendant Lexgroup, LLC requested the right to arbitration noting that the listing agreement was signed by Lexington Group, LLC and not Lexgroup, LLC and the arbitration was requested by Lexgroup, LLC. The plaintiffs advised the American Arbitration Association (AAA) that they had no authority to proceed because there was no agreement filed by the claimant to arbitrate disputes and the only agreement submitted was on behalf of Lexington Group LLC which was a non-existent entity.   Accordingly, the plaintiff, did not participate in the arbitration proceedings.   The heading of the arbitration was changed so as to indicate Lexgroup LLC was the claimant.   The arbitrator issued an award favoring the claimant.   In the award the arbitrator noted that the listing agreement was signed Lexington Group, LLC as the broker and that designation was incorrect and the correct name of the broker is Lexgroup, LLC. The arbitrator also noted the failure of the listing agreement to list the claimant's correct name “was a harmless error which neither benefitted claimant nor harmed respondents.”

The provision in the listing agreement agreeing to arbitration is found in paragraph 27 and provides that “any controversy between the parties to this agreement involving a construction or application of any of the terms, covenants or conditions shall be submitted to binding arbitration.”   These are the provisions of the American Arbitration Association.   The agreement then provides that “the arbitrator shall have no authority to change any provisions of this agreement and the arbitrator's sole authority shall be to interpret or apply the provisions of this agreement A.”

“[B]ecause an arbitrators jurisdiction is rooted in the agreement of the parties ․ a party who contests the making of a contract containing an arbitration provision cannot be compelled to arbitrate the threshold issue of the existence of an agreement to arbitrate.”  (Emphasis in original.)  MBNA America Bank NA v. Boata, 283 Conn. 381, 386–87 (2007), quoting from Nussbaum v. Kimberly Timbers, Ltd., 271 Conn. 65, 72–73 (2004).

The arbitration clause contained in the listing agreement does not give the arbitrator the authority to decide the issue as to whether Lexgroup, LLC made an agreement subject to arbitration.   It does not matter if the arbitrator may have been correct in his decision, the arbitrator simply did not have the authority under the listing agreement to make that determination.

Accordingly, the motion to vacate the arbitration award is hereby granted and the motion to confirm that award is hereby denied.

RUSH, J.T.R.

Rush, William B., J.T.R.