26 LLC v. Benjamin Welsh et al. (2013)

MEMORANDUM OF DECISION RE APPLICATION (DKT. ENTRY 107.00)

FACTS

This action arises from alleged water damage to a property owned by the plaintiff, 26 Taconic Road, LLC. The plaintiff alleges that defendant Chubb Custom Insurance Company (Chubb) failed to compensate the plaintiff for the alleged water damage pursuant to an insurance policy issued by Chubb.   Before the court is the plaintiff's application for an order to proceed with arbitration against Chubb pursuant to General Statutes § 52–410.   On September 19, 2012, Chubb moved to dismiss the application on the ground that the plaintiff did not comply with the § 52–410 service requirements.   Alternatively, if the court does not grant the motion to dismiss, Chubb objects to the application on grounds that it is premature and the plaintiff waived its right to arbitration by commencing the present action.   On October 23, 2012, the plaintiff filed an objection to Chubb's motion to dismiss.   On November 30, 2012, Chubb filed a reply to the plaintiff's objection.   The court heard oral argument on January 22, 2013.

DISCUSSION

In the application before the court, the plaintiff requests an order compelling arbitration against Chubb pursuant to General Statutes § 52–410,¹ asserting that the parties must arbitrate this dispute pursuant to an appraisal clause contained in the insurance contract between Chubb and the plaintiff.²  Although Chubb concedes that the appraisal clause constitutes a written agreement to arbitrate within the meaning of § 52–410;  see Covenant Ins. Co. v. Banks, 177 Conn. 273, 279–80, 413 A.2d 862 (1979);  it argues that the plaintiff's application should nevertheless be dismissed because it was not “by writ of summons and complaint” and was not “served in the manner provided by law” as required by § 52–410.   As a result, Chubb contends that this court lacks jurisdiction to hear the motion.³  Chubb also asserts, that the application should be denied as premature because coverage is an antecedent issue, which must be decided before the court may compel arbitration.   Finally, Chubb contends that the plaintiff waived the right to arbitration by commencing the present action.

The plaintiff does not dispute that he failed to serve Chubb pursuant to § 52–410, but objects to dismissal on the ground that it is not required to file a separate lawsuit to compel arbitration.   Citing state and federal public policy favoring arbitration, the plaintiff asserts that General Statutes § 52–409 ⁴ gives this court jurisdiction and authority to compel arbitration, despite the plaintiff's noncompliance with the service requirements of § 52–410.   The plaintiff takes issue with Chubb's position that an order compelling arbitration would be premature, claiming that Chubb's argument is refuted by the Connecticut Supreme Court's ruling in Giulietti v. Connecticut Ins. Placement Facility, 205 Conn. 424, 534 A.2d 213 (1987), and also disputes that it waived its right to arbitration.

In its reply memorandum, Chubb responds that § 52–409 is not applicable because the plaintiff is not asking for a mere stay of these proceedings, but for a court order compelling Chubb to proceed with arbitration.   In addition, Chubb argues that § 52–409 is intended to be used solely in situations where the party moving for a stay is sued by an adverse party in court and the moving party wishes to instead proceed with arbitration pursuant to an agreement, rather than defend a lawsuit.

As a preliminary matter, the court determines it will treat Chubb's arguments pertaining to its motion to dismiss as objections to the plaintiff's application for an order to proceed with arbitration.   See Bower v. D'Onfro, 45 Conn.App. 543, 547–48, 696 A.2d 1285 (1997) (court must look at substance of claim rather than form).   First, the court agrees with the plaintiff that the court has subject matter jurisdiction to decide this issue.   See Catrini v. Erickson, 113 Conn.App. 195, 197 n.2, 966 A.2d 275 (2009) (“[C]ourts have jurisdiction to enforce arbitration agreements and to enforce, modify or vacate arbitration awards, and are often called upon to interpret and construe the enforceability and scope of such agreements.   See General Statutes §§ 52–410, 52–417, 52–418 and 52–419”);  see also Bridgeport v. Debek, 210 Conn. 175, 179, 554 A.2d 728 (1989) (“Our precedents make it abundantly clear that, except in the special circumstances of administrative appeals, defects in process do not deprive a court of subject matter jurisdiction”).   However, Chubb has moved to dismiss based upon a lack of proper service, which implicates personal, not subject matter jurisdiction.  Bridgeport v. Debek, supra, 179.   The present situation is atypical, though, because the application subject to dismissal was not filed via summons and complaint, but rather during a pending action in which the court has already obtained personal jurisdiction over Chubb.   It follows that the plaintiff's application is not vulnerable to a motion to dismiss for lack of personal jurisdiction because, in this instance, § 52–410 is not being used as a basis to commence an action or to initially obtain jurisdiction over a defendant.   See Alldred v. Alldred, 132 Conn.App. 430, 436, 31 A.3d 1185 (2011), cert. dismissed, 303 Conn. 926, 35 A.3d 1075 (2012) (recognizing that postjudgment motion for contempt in family case necessitates service of contempt complaint and summons on alleged contemnor to effectuate proper notice and opportunity to be heard;  in contrast, prejudgment motion (pendente lite) does not require service of process because court would already have jurisdiction over alleged contemnor).   The court will therefore proceed to “either grant the order or deny the application according to the rights of the parties” pursuant to § 52–410.

The next issue is whether § 52–410 or § 52–409 provides a mechanism by which this court may properly compel arbitration at this time.   Our Supreme Court has set forth the intended purpose of the two statutes and explained the interplay between them:  “Under § 52–409, when an action is brought in the trial court by a party to a written agreement that includes provisions for arbitration, and the trial court is satisfied that an issue involved in the action is arbitrable, the court, on motion of any party to the agreement, shall stay the action until arbitration has been had in compliance with the agreement ․ As a condition precedent to the issuance of a stay order by the trial court, the moving party must be ready and willing to proceed with arbitration.   The authority of the court to stay a pending action under § 52–409 thus provides an incentive to participate to the party reluctant to engage in arbitration.   On the other hand, the trial court's denial of a § 52–409 motion leaves the parties where the court found them, requiring them to proceed with the pending litigation.

“The trial court's authority under § 52–410 is quite different from its authority under § 52–409.  Section 52–410 creates an independent action that can be instituted only by a properly served writ of summons and complaint ․ No civil action need be pending between the parties for a § 52–410 action to be commenced ․ Pursuant to § 52–410, a party to a written agreement for arbitration claiming the neglect or refusal of another to proceed with arbitration can apply to the trial court for an ‘order directing the parties to proceed with the arbitration in compliance with their agreement.’

“We are persuaded that §§ 52–409 and 52–410 serve distinct functions.   Section 52–409 provides relief when a party to a contract that contains an arbitration clause desires arbitration of a dispute, and the other party, instead of proceeding with arbitration, institutes a civil action to resolve the dispute.   The party desiring arbitration can then seek a stay of the civil action.   In contrast, § 52–410 comes into play when no action is pending between the parties, the parties have a contract providing for arbitration, and the parties are unable to agree about the arbitrability of the dispute.   In that case, one of the parties may apply to the trial court, in accordance with the distinct statutory procedure provided by § 52–410, for an order directing the parties to proceed with arbitration.

“In either case, in granting or denying a stay under § 52–409, or in granting or denying an order directing the parties to proceed with arbitration under § 52–410, the trial court must determine whether the contract between the parties provides for arbitration.   Because, however, a civil action must be pending for a § 52–409 order to be issued, we have held that such an order is interlocutory and, therefore, not appealable ․ Section 52–410, on the other hand, allows a party to an arbitration agreement to commence an independent action in the Superior Court to compel arbitration when no civil action is pending between the parties.   The trial court's decision in a § 52–410 action, therefore, terminates the action between the parties.   Thus, we have construed a court order made pursuant to § 52–410 as a final order from which either party to the agreement may appeal.”  (Citations omitted;  emphasis in original.)  Success Centers v. Huntington Learning Centers, 223 Conn. 761, 767–69, 613 A.2d 1320 (1992).

It is clear that the plaintiff cannot succeed in compelling Chubb to arbitrate under § 52–410.   The obvious reason is that the plaintiff did not comply with the requirement that “[t]he application shall be by writ of summons and complaint, served in the manner provided by law.”  General Statutes § 52–410.   Furthermore, as noted in the plaintiff's own brief, § 52–410 was contemplated to “enforce [arbitration] agreements in cases in which there is no action pending between the parties ․” (Emphasis added.)  Nussbaum v. Kimberly Timbers, Ltd., 271 Conn. 65, 71, 856 A.2d 364 (2004);  see also Success Centers v. Huntington Learning Centers, supra, 223 Conn. 769 (“Section 52–410 ․ allows a party to an arbitration agreement to commence an independent action in the Superior Court to compel arbitration when no civil action is pending between the parties.”  [Emphasis added] ).   Here, the plaintiff has not commenced an independent action pursuant to § 52–410.   Instead, the plaintiff chose to commence a civil action and then file an application to compel arbitration as part of that action.   This is not a permissible manner in which to compel arbitration pursuant to § 52–410.   A recitation of the public policy favoring arbitration does not change the fact that the plaintiff has failed to comply with the statute.

Despite its noncompliance with § 52–410, the plaintiff cites case law interpreting § 52–409 for the proposition that it is not required to file a separate action to invoke the court's power to compel arbitration.   The problem with this proposition is that the plaintiff applied to this court for an order compelling arbitration pursuant to § 52–410, not a stay of the instant proceedings pursuant to § 52–409.   As set forth above, the two statutes serve different functions and have different procedural requirements, the former being an independent action to be brought by summons and complaint, the latter being a motion to stay existing civil proceedings between the parties.   Because they are to be invoked by separate procedural mechanisms and serve different ends for different circumstances, the plaintiff cannot support an application made pursuant to § 52–410 with case law interpreting § 52–409.   In addition, the requirement that an application for an order compelling arbitration must be brought pursuant to § 52–410 ensures that the order is an appealable final judgment, as opposed to an interlocutory order for a stay pursuant to § 52–409.

More to the point, § 52–409, unlike § 52–410, cannot be used as a basis to order arbitration, as the plaintiff claims, but only to stay current proceedings.   This was clarified in Success Centers v. Huntington Learning Centers, supra, 223 Conn. 767 n.9, where the court stated:  “General Statutes § 52–409 only provides for a litigant to seek an order from the trial court to ‘stay the action or proceeding until an arbitration has been had in compliance with the agreement,’ our statements in Schwarzschild v. Martin, 191 Conn. 316, 323–24, 464 A.2d 774 (1983), referring to a § 52–409 order to compel arbitration and a § 52–409 order requiring arbitration, are inaccurate.   A § 52–409 order does not compel arbitration;  rather, it merely stays the pending civil action until arbitration has been completed.”   (Emphasis in original.)   Thus, the proposition for which the plaintiff cites Schwarzschild —that § 52–409 may be used to require, order or compel arbitration—has since been rejected by our Supreme Court.   The same holds true for KND Corp. v. Hartcom, Inc., 5 Conn.App. 333, 337, 497 A.2d 1038 (1985), which quoted Schwarzschild for that same proposition.   This is consistent with the notion that § 52–409 “provides an incentive to participate to the party reluctant to engage in arbitration.”  Success Centers v. Huntington Learning Centers, supra, 767–68.   In other words, § 52–409 was intended to be used as a shield against an adverse party that institutes a civil action instead of proceeding with arbitration, despite the existence of a binding arbitration agreement.   It was not intended to be used as a sword by a plaintiff who brings a lawsuit and subsequently wishes to arbitrate the dispute.   If a potential plaintiff wishes to apply for an order compelling arbitration, it must be done pursuant to § 52–410 instead of bringing a civil action.   See Zarchen v. Union Equipment Co., 20 Conn.Sup. 44, 47, 121 A.2d 287 (1956) (“The plaintiff may resort to [§ 52–410] or he may adopt another course ․ But if he elects to apply for a court order, he must bring his application as provided in § [52–410]”).

This interpretation is consistent with this state's preference for arbitration as a method of dispute resolution because it incentivizes arbitration in place of rather than in addition to litigation.   It does so by forcing a potential plaintiff subject to an arbitration agreement to seek arbitration from the inception of the dispute.   Were it otherwise, a party could file a civil action merely to test the waters and subsequently seek to compel arbitration if the lawsuit is proceeding unfavorably.   See, e.g., Romprey v. Safeco Ins. Co. of America, Superior Court, judicial district of New Haven, Docket No. CV 08 5018442 (Dec. 4, 2009, Keegan, J.), aff'd, 129 Conn.App. 481, 21 A.3d 889, cert. granted on other grounds, 302 Conn. 934, 28 A.3d 991 (2011) (instead of seeking to compel arbitration pursuant to § 52–410, plaintiffs commenced civil action, and in response to defendant's motion for summary judgment, argued for first time, unsuccessfully, that court should compel arbitration should motion for summary judgment be granted).   Thus, once a plaintiff chooses to initiate a civil action, that plaintiff's right to compel arbitration pursuant to § 52–410 is lost while the civil action is pending.   At this point, the only relief contemplated by the statutory arbitration scheme is a stay of the civil action or proceeding pursuant to § 52–409.⁵  The plaintiff in the present matter, however, has not requested a stay.

For the above reasons the plaintiff's application for an order to proceed with arbitration pursuant to General Statutes § 52–410 is denied.⁶

TAGGART D. ADAMS

JUDGE TRIAL REFEREE

FOOTNOTES

FN1. General Statutes § 52–410 provides in relevant part:  “(a) A party to a written agreement for arbitration claiming the neglect or refusal of another to proceed with an arbitration thereunder may make application to the superior court for the judicial district in which one of the parties resides ․ for an order directing the parties to proceed with the arbitration in compliance with their agreement.   The application shall be by writ of summons and complaint, served in the manner provided by law ․ (c) The parties shall be considered as at issue on the allegations of the complaint unless the defendant files answer thereto within five days from the return day, and the court or judge shall hear the matter either at a short calendar session, or as a privileged case, or otherwise, in order to dispose of the case with the least possible delay, and shall either grant the order or deny the application, according to the rights of the parties.”.  FN1. General Statutes § 52–410 provides in relevant part:  “(a) A party to a written agreement for arbitration claiming the neglect or refusal of another to proceed with an arbitration thereunder may make application to the superior court for the judicial district in which one of the parties resides ․ for an order directing the parties to proceed with the arbitration in compliance with their agreement.   The application shall be by writ of summons and complaint, served in the manner provided by law ․ (c) The parties shall be considered as at issue on the allegations of the complaint unless the defendant files answer thereto within five days from the return day, and the court or judge shall hear the matter either at a short calendar session, or as a privileged case, or otherwise, in order to dispose of the case with the least possible delay, and shall either grant the order or deny the application, according to the rights of the parties.”

FN2. According to the plaintiff's application, the appraisal clause provides in relevant part:  “If [Chubb] and [the plaintiff] disagree on the value of the property or the amount of loss, either [party] may make written demand for an appraisal of the loss.   In this event, each party will select a competent and impartial appraiser.   The two appraisers will select an umpire.   If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction.   The appraisers will state separately the value of the property and amount of loss.   If they fail to agree, they will submit their differences to the umpire.   A decision agreed to by any two will be binding.”.  FN2. According to the plaintiff's application, the appraisal clause provides in relevant part:  “If [Chubb] and [the plaintiff] disagree on the value of the property or the amount of loss, either [party] may make written demand for an appraisal of the loss.   In this event, each party will select a competent and impartial appraiser.   The two appraisers will select an umpire.   If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction.   The appraisers will state separately the value of the property and amount of loss.   If they fail to agree, they will submit their differences to the umpire.   A decision agreed to by any two will be binding.”

FN3. Chubb argued at short calendar that failure to comply with the service requirements in § 52–410 was also grounds for denial of the application, in addition to grounds for dismissal..  FN3. Chubb argued at short calendar that failure to comply with the service requirements in § 52–410 was also grounds for denial of the application, in addition to grounds for dismissal.

FN4. Section 52–409 provides:  “If any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate, the court in which the action or proceeding is pending, upon being satisfied that any issue involved in the action or proceeding is referable to arbitration under the agreement, shall, on motion of any party to the arbitration agreement, stay the action or proceeding until an arbitration has been had in compliance with the agreement, provided the person making application for the stay shall be ready and willing to proceed with the arbitration.”.  FN4. Section 52–409 provides:  “If any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate, the court in which the action or proceeding is pending, upon being satisfied that any issue involved in the action or proceeding is referable to arbitration under the agreement, shall, on motion of any party to the arbitration agreement, stay the action or proceeding until an arbitration has been had in compliance with the agreement, provided the person making application for the stay shall be ready and willing to proceed with the arbitration.”

FN5. By the plain language of § 52–409, which states that any party to the arbitration agreement may move for a stay of pending litigation between the parties, it seems at first glance that there is nothing barring the party that initiated a lawsuit to move for a stay, even though that party may not compel arbitration, as previously discussed.  Zarchen v. Union Equipment Co., supra, 20 Conn.Sup. 46 (“It does not matter that the moving party is the one who has brought the suit.  [Section 52–409] does not exclude such a situation”).   But this interpretation is apparently in conflict with a similar provision of the Federal Arbitration Act, 9 U.S.C. § 3, which has been construed as allowing only plaintiffs that are aggrieved by a failure to stay litigation to move for a stay of that litigation.   See 6 C.J.S. 123–24, Arbitration § 55 (2004).   Nevertheless, that issue is not currently before the court..  FN5. By the plain language of § 52–409, which states that any party to the arbitration agreement may move for a stay of pending litigation between the parties, it seems at first glance that there is nothing barring the party that initiated a lawsuit to move for a stay, even though that party may not compel arbitration, as previously discussed.  Zarchen v. Union Equipment Co., supra, 20 Conn.Sup. 46 (“It does not matter that the moving party is the one who has brought the suit.  [Section 52–409] does not exclude such a situation”).   But this interpretation is apparently in conflict with a similar provision of the Federal Arbitration Act, 9 U.S.C. § 3, which has been construed as allowing only plaintiffs that are aggrieved by a failure to stay litigation to move for a stay of that litigation.   See 6 C.J.S. 123–24, Arbitration § 55 (2004).   Nevertheless, that issue is not currently before the court.

FN6. Because the court denies the plaintiff's application on the ground that it failed comply with § 52–410, the court does not reach Chubb's additional arguments in support of denial..  FN6. Because the court denies the plaintiff's application on the ground that it failed comply with § 52–410, the court does not reach Chubb's additional arguments in support of denial.

Adams, Taggart D., J.T.R.