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Lamell Lumber Corp. v. Newstress International, Inc. (2005-567)
2007 VT 83
[Filed 31-Aug-2007
NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
order that corrections may be made before this opinion goes to press.
2007 VT 83
No. 2005-567
Lamell Lumber Corporation Supreme Court
On Appeal from
v. Chittenden Superior Court
Newstress International, Inc. February Term, 2007
Ben W. Joseph, J.
Lisa B. Shelkrot and Clara F. Gimenez of Langrock Sperry & Wool, LLP,
Burlington, for Plaintiff-Appellee.
Carrie J. Legus of Legus and Bisson PLC, Montpelier, for
Defendant-Appellant.
PRESENT: Reiber, C.J., Dooley, Johnson and Skoglund, JJ., and
DiMauro, D.J., Specially Assigned
1. SKOGLUND, J. Plaintiff Lamell Lumber Corp., a lumber
wholesaler and retailer based in Essex Junction, Vermont, entered into a
contract with defendant Newstress International, Inc., a New Hampshire
corporation, requiring defendant to fabricate a number of precast concrete
panels and to "design, manufacture, truck, and erect these components" into
a concrete kiln for plaintiff to use in the drying of lumber. After the
kiln was completed, plaintiff detected an increasing number of cracks and
holes in the concrete, which resulted in this lawsuit against defendant for
breach of contract, breach of implied warranty, and negligence. (FN1) The
jury returned a special verdict in favor of plaintiff, finding defendant to
be liable on all three counts, and awarded damages of $100,000. On appeal,
defendant contends the trial court erred in: (1) exercising subject matter
jurisdiction despite the presence of an arbitration clause in the contract;
(2) failing to dismiss the action as untimely under the four-year statute
of limitations applicable to the sale of goods; (3) submitting the
negligence claim to the jury; (4) instructing on damages; (5) excluding the
testimony of defendant's expert witnesses; and (6) imposing sanctions
against defendant. We affirm.
2. The basic facts may be briefly summarized. Additional material
facts will be set forth in the discussion which follows. In November 1993,
the parties entered into a contract calling for defendant to "design,
manufacture, truck, and erect" a number of precast, prestressed concrete
panels into a structure to be used by plaintiff as a kiln for drying lumber
at its mill in Essex Junction. The kiln was completed in late 1993 or
early 1994. Although the parties dispute the extent of defendant's
participation in the design of the project, plaintiff adduced evidence at
trial that defendant designed the concrete panels, the panel connections,
the arrangement and location of the insulation materials inside the panels,
and the building footings.
3. Plaintiff first noticed cracks in the kiln and reported them
to defendant in the spring of 1998. Efforts over the next several years to
repair the disintegrating concrete were unsuccessful, resulting in the
filing of this lawsuit in April 2003. Following a series of pretrial
motions, discussed more fully below, the case proceeded to trial in October
and November 2005. Plaintiff's engineering expert, David Mitchell,
testified that the building had not been properly designed to withstand the
heat of the kiln, and that the deterioration of the concrete was caused by
the improper arrangement of the insulation blocks inside the concrete
panels and the improper connection of the panels to each other. As noted,
the jury returned a special verdict in favor of plaintiff, awarding damages
of $100,000. This appeal followed.
I.
4. Defendant first claims that the superior court lacked subject
matter jurisdiction over this action. The basis of the claim is a clause in
the parties' contract providing that all disputes arising out of the
agreement shall be decided by arbitration. Although defendant raised the
arbitration clause as an affirmative defense in its answer to the
complaint, filed in June 2003, it proceeded to actively litigate the case
over the next two years, responding to plaintiff's discovery requests and
propounding requests of its own, attending depositions and other court
proceedings, scheduling and canceling a mediation, and seeking several
continuances of the jury draw. In early July 2005, however, about one
month before trial was scheduled to commence, defendant filed a motion for
summary judgment, arguing that the arbitration clause in the agreement
deprived the court of subject matter jurisdiction and "estopped" plaintiff
from pursuing its claims. Although plaintiff's counsel thereafter agreed
to submit to arbitration, defendant rejected the offer on the ground that
"any effort on the part of [plaintiff] to initiate arbitration at this time
on its claims would be time-barred." Plaintiff thereupon filed an
opposition to the motion, disputing defendant's claim that the court lacked
subject matter jurisdiction and arguing that, by actively engaging in the
litigation process for over two years, defendant had waived the arbitration
agreement.(FN2)
5. The court issued a decision in October 2005, rejecting
defendant's claim that it lacked subject matter jurisdiction and agreeing
with plaintiff that defendant had waived the right to arbitration.
Defendant contends the court erred, arguing that where, as here, a dispute
is subject to an arbitration agreement, the Vermont Arbitration Act, 12
V.S.A. 5651 to 5681 (VAA) confines the court's jurisdiction to certain
statutorily defined proceedings and excludes civil actions based on the
contract. As explained below, the claim is unpersuasive.
6. "Subject matter jurisdiction" refers to the power of a court
to hear and determine a general class or category of cases. See In re
B.C., 169 Vt. 1, 7, 726 A.2d 45, 49 (1999) (noting that family court
"possessed subject matter jurisdiction over the general type of controversy
before it"). In Vermont, the superior court is broadly vested with
"original and exclusive jurisdiction of all civil actions," subject to
certain specific exceptions not applicable here. 4 V.S.A. 113. While the
scope of authority of a court of limited jurisdiction - such as the Vermont
family court - is "strictly construe[d]," Office of Child Support ex rel.
Lewis v. Lewis, 2004 VT 127, 7, 178 Vt. 204, 882 A.2d 1128, the
opposite is true of courts of general jurisdiction such as the superior
court. For "courts of general jurisdiction . . . the presumption is that
they have subject matter jurisdiction . . . unless a showing can be made to
the contrary." 13 C. Wright, et al., Federal Practice & Procedure, 3522,
at 60 (2d ed. 1984). See also, KBR Rural Pub. Power Dist. v. Kidder, 128
N.W.2d 687, 689 (Neb. 1964) (observing that Nebraska district court "is a
court of general jurisdiction and as such its powers are to be liberally
construed in favor of vesting jurisdiction") (citation omitted); Thompson
v. City of Atlantic City, 921 A.2d 427, 438 (N.J. 2007) (noting the general
principle that "subject matter jurisdiction is presumed for courts of
general jurisdiction unless proved otherwise"); Dubai Petroleum Co. v.
Kazi, 12 S.W.3d 71, 75 (Tex. 2000) (because it is a court of general
jurisdiction "all claims are presumed to fall within the jurisdiction of
the [Texas] district court unless the Legislature or the Congress has
provided that they must be heard elsewhere").
7. Notwithstanding its presumptively broad jurisdiction, defendant
asserts that the superior court here lacked subject matter jurisdiction
over plaintiff's contract and negligence claims as a result of the
arbitration clause in the contract. Defendant relies on the VAA section
authorizing the superior court to issue nine specific orders in relation to
an agreement to arbitrate, including orders to compel arbitration, appoint
arbitrators, confirm or vacate an arbitration award, and enter judgment on
an award. 12 V.S.A. 5671. Defendant claims that 5671 effectively limits
or "demarcates the parameters of the superior court's jurisdiction" and by
implication divests the court of other authority. However, the superior
court is presumed to retain jurisdiction over all civil actions unless the
Legislature has clearly indicated to the contrary. Contrary to defendant's
assertion, we find nothing in the language of 5671 or the VAA as a whole
that suggests a legislative intent - implied or otherwise - to "oust" the
superior court of general jurisdiction over a civil suit arising from a
contract containing an arbitration agreement.
8. Apart from the absence of any clear evidence of legislative
intent, defendant's argument also lacks support in case law or other
authority. Indeed, jurisdictional claims similar to defendant's have been
uniformly rejected in other states. See, e.g., Multi-Service Contractors,
Inc. v. Town of Vernon, 435 A.2d 983, 985 (Conn. 1980) (reversing trial
court's ruling that it lacked subject matter jurisdiction where agreement
contained arbitration clause and holding that arbitration proceeding was
not a "condition precedent" to court action); JKL Components Corp. v.
Insul-Reps, Inc., 596 N.E.2d 945, 949 ( Ind. Ct. App. 1992) ("JKL cites no
authority, and we can find none, to support its claim that a party's
failure to arbitrate divests a trial court of jurisdiction over a breach of
contract claim."); Hanslin Builders, Inc. v. Britt Dev. Corp., 445 N.E.2d
188, 190 (Mass. App. Ct. 1983) ("It is well settled that a clause providing
for the resolution by arbitration of disputes arising under an agreement is
not jurisdictional . . . .") (citations omitted); Campbell v. St. John
Hosp., 455 N.W.2d 695, 697 (Mich. 1990) (holding that trial court was not
deprived of subject matter jurisdiction over medical malpractice dispute
subject to arbitration agreement); State ex rel. Barden & Robeson Corp. v.
Hill, 539 S.E.2d 106, 108 (W. Va. 2000) (observing that "an agreement to
arbitrate a dispute does not divest a court of subject matter
jurisdiction").
9. In further support of its claim that the arbitration agreement
was jurisdictional - and therefore could not be voluntarily waived -
defendant cites a section of the VAA providing that a written arbitration
agreement "creates a duty to arbitrate, and is valid, enforceable and
irrevocable. 12 V.S.A. 5652(a). As that section implies, Vermont law and
public policy strongly favor arbitration as an alternative to litigation
for the "efficient resolution of disputes." Springfield Teachers Ass'n v.
Springfield Sch. Dirs., 167 Vt. 180, 183, 705 A.2d 541, 543 (1997). An
arbitration agreement, however, remains a creature of contract reflecting a
voluntary agreement between the parties and as such may be waived by the
parties. See Gates v. Gates, 168 Vt. 64, 72, 716 A.2d 794, 800 (1998)
(holding that courts cannot order parties to submit to arbitration absent a
voluntary agreement between the parties or a statute authorizing such an
order); Greenmoss Builders, Inc. v. King, 155 Vt. 1, 6, 580 A.2d 971, 974
(1990) ("There is no question that a party to a contract may lose the right
to assert a term of the contract, or to require performance of a part of
the contract, by waiver or estoppel.").
10. Although we have not previously addressed this precise issue,
numerous decisions from other jurisdictions have endorsed this view. See,
e.g., Shahan v. Brinegar, 390 N.E.2d 1036, 1041 (Ind. Ct. App. 1979)
(holding that the "right to require . . . arbitration, as in the case of
other contractual matters, may be waived by the parties where they fail to
request arbitration"); Dufrene v. HBOS Mfg., 872 So. 2d 1206, 1211 (La. Ct.
App. 2004) (despite statutory provision that arbitration agreement is
"irrevocable," a party's "conduct can effect a waiver of its rights to
demand arbitration") (citation omitted); Home Gas Corp. of Mass. v.
Walter's of Hadley, Inc., 532 N.E.2d 681, 683 (Mass. 1989) ("The right to
arbitration may be lost, as any contractual right which exists in favor of
a party may be lost through a failure properly and timely to assert the
right.") (quotations and citation omitted); Carolyn B. Beasley Cotton Co.
v. Ralph, 59 S.W.3d 110, 113 (Tenn. Ct. App. 2000) ("[I]n general, even in
those jurisdictions where a contract for arbitration is irrevocable, the
right to arbitrate under a contract may be waived . . . .") (citation
omitted); Interconex, Inc. v. Ugarov, 224 S.W.3d 523, 533 (Tex. App. 2007)
("As with any contractual right, a party may waive its right to
arbitration.") (citation omitted); Barden, 539 S.E.2d at 110-11 (observing
that "[a]n arbitration agreement is nothing more than a contractual
arrangement for resolving disputes by means other than court-supervised
litigation" and as such may be waived). See generally J. Smith,
Annotation, Defendant's Participation in Action as Waiver of Right to
Arbitration of Disputes Involved Therein, 98 A.L.R.3d 767 (1980).(FN3)
11. Accordingly, we discern nothing in the VAA or other authority
to support the claim that the arbitration agreement could not be waived as
a matter of law, or to invalidate the trial court's finding that
defendant's active participation in the litigation process and failure to
assert the arbitration agreement in a timely fashion resulted in a waiver.
The waiver issue is generally held to be a question of fact to be resolved
under the circumstances of each case, considering such factors as the
timing of the request for arbitration, the extent to which the party
seeking arbitration has participated in the judicial process, and whether
the party opposing arbitration has suffered prejudice through the incursion
of litigation time, costs, and expenses. See Home Gas, 532 N.E.2d at 683-84
(listing factors which court should consider in determining whether
arbitration has been waived). Although defendant here argued in its
original brief that the VAA barred a waiver of the arbitration agreement as
a matter of law, it did not assert that the court's finding was an abuse of
discretion under the particular facts and circumstances presented.
Therefore, any argument along these lines was waived on appeal. See Gallipo
v. City of Rutland. 2005 VT 83, 52, 178 Vt. 244, 882 A.2d 1172 (claims
not raised in appellant's original brief will not be considered on
appeal).(FN4)
II.
12. Defendant next contends the court applied the wrong statute of
limitations in ruling that plaintiff's complaint was timely filed within
six years of discovery of the injury under 12 V.S.A. 511. Defendant
argues that the court should have applied the four-year statute of
limitations applicable to the sale of goods under Article 2 of the Uniform
Commercial Code (UCC), codified at 9A V.S.A. 2-725(1).(FN5) Defendant
argues that plaintiff's claim was barred by the UCC's four-year statute of
limitations. As noted, although the contract here provided for the sale of
goods consisting of prestressed concrete slabs, it also called for
defendant to "design, manufacture, truck and erect the components," and the
trial court concluded that these service aspects of the contract controlled
for purposes of determining the correct statute of limitations. See
Congdon v. Taggart Bros., 153 Vt. 324, 325, 571 A.2d 656, 657 (1989)
(applying six-year statute of limitations of 511 to action against
builder for improper "design and construction" of fireplace); Union Sch.
Dist. No. 20 v. Lench, 134 Vt. 424, 424-25, 365 A.2d 508, 509 (1976) (in
action for breach of contract and negligent "design" of roof by defendant
architects "the applicable statute of limitations, whether the action
sounds in tort or contract, is 12 V.S.A. 511").
13. It is well settled that where, as here, a transaction contains
elements of both sales and service, application of the UCC, including the
four-year statute of limitations under 2-725(1), turns on whether the
transaction "predominantly," or essentially, relates to goods or services.
Lucien Bourque, Inc. v. Cronkite, 557 A.2d 193, 195 (Me. 1989). See also
Nora Beverages, Inc. v. Perrier Group of Am., Inc., 164 F.3d 736, 747 (2d
Cir. 1998) ("To determine whether a contract . . . is governed by the
U.C.C., the court must determine whether the dominant factor or essence of
the transaction is the sale of the materials or the services.") (quotations
and citation omitted); Belleville Toyota, Inc. v. Toyota Motor Sales,
U.S.A., 770 N.E.2d 177, 194 (Ill. 2002) ("Where . . . a contract provides
both for the sale of goods and for the rendition of services, Illinois
courts apply the 'predominant purpose' test in determining whether the
contract falls within Article 2 of the UCC."); Insul-Mark Midwest, Inc. v.
Modern Materials, Inc., 612 N.E.2d 550, 553-54 (Ind. 1993) (with mixed
contracts for goods and services courts look to the "predominant thrust" of
the transaction to determine applicability of UCC); DeGroft v. Lancaster
Silo Co., 527 A.2d 1316, 1321 (Md. Ct. Spec. App. 1987) (determination of
whether UCC or common law statute of limitations governs transaction turns
on whether the sale of goods or the provision of services was the
"predominant factor" in the contract). See generally D. Marchitelli,
Annotation, Causes of Action Governed by Limitations Period in UCC 2-725,
49 A.L.R.5th 1 (1997); S. Soehnel, Annotation, Applicability of UCC Article
2 to Mixed Contracts for Sale of Goods and Services, 5 A.L.R.4th 501
(1981).(FN6)
14. In determining the essential or predominant aspect of an
agreement, courts typically look to several factors. Foremost among these
are the language of the agreement itself and the circumstances of its
making and performance. See Insul-Mark, 612 N.E.2d at 554 (courts examine
the "terms describing the performance required of the parties" to determine
its "predominant thrust"); DeGroft, 527 A.2d at 1322-23 ("Courts have
generally looked principally to the language of the parties' agreement and
the circumstances surrounding its making in determining the predominant
thrust of the transaction.") (citations omitted). As noted, the contract
here called for defendant to design the kiln, manufacture the prestressed
concrete slabs that formed its sides and roof, and erect these and other
components into a concrete kiln. Plaintiff adduced substantial evidence at
trial that defendant did, in fact, provide the design for the kiln and the
concrete panels, arrange their manner of connection and the placement of
the insulating liners inside the panels, and assemble the building on site.
15. The terms of the contract and the circumstances of its
performance thus demonstrate that the purchase and sale of the component
materials themselves, while necessary to the project, were incidental to
the overall objective of designing, engineering, and erecting the kiln
according to the plans provided by defendant. Ample authority supports the
conclusion that, in such circumstances, the contract was not subject to the
UCC. See, e.g., Lincoln Pulp & Paper Co. v. Dravo Corp., 436 F. Supp. 262,
275 (D. Me. 1977) (contract calling for sale, engineering and construction
of heat recovery unit was not subject to UCC); Care Display, Inc. v.
Didde-Glaser, Inc., 589 P.2d 599, 605 (Kan. 1979) (contract calling for
sale, construction, and design of trade show exhibit was "principally for
the rendition of services"); Smith v. Urethane Installations, Inc., 492
A.2d 1266, 1268-69 (Me. 1985) (concluding that the "predominant feature" of
a contract that provided for defendant to supply and install insulation was
the provision of a service); DeGroft, 527 A.2d at 1323 (contract calling
for sale of materials and construction of grain silo "predominantly
concerned the rendition of services"); Texas Dev. Co. v. Exxon Mobil Corp.,
119 S.W.3d 875, 881 (Tex. App. 2003) (holding that "essence" of contract
for "design, fabrication, and installation" of oil rig modifications was
for service, not sale of goods) (quotations omitted). The court's decision
to apply the six-year limitation period set forth in 12 V.S.A. 511 was
thus amply supported by the law and the facts, and therefore will not be
disturbed.
III.
16. Defendant's remaining claims do not require extended
discussion. First, defendant contends that the court erred in submitting
the negligence claim to the jury, asserting on appeal - as it did at trial
- that the evidence failed to demonstrate a tort duty separate from the
contractual obligation. Plaintiff adduced substantial evidence to support
a theory of liability premised upon defendant's negligent design and
construction of the kiln, and we have elsewhere recognized the tort of
professional negligence for breach of a duty to exercise reasonable care
and responsibility in the design and construction of a project arising out
of a contractual commitment. See Howard v. Usiak, 172 Vt. 227, 235, 775
A.2d 909, 916 (2001) (observing, in context of action against architect for
negligent design, that the duty against which the "negligence standard is
applied generally arises from the contractual responsibilities the
architect assumed"); Colgan v. Agway, Inc., 150 Vt. 373, 373, 553 A.2d 143,
144 (1988) (plaintiff brought combined action against contractor for breach
of contract for failure to construct facility in conformance with contract
and negligence in design and construction); So. Burlington Sch. Dist. v.
Calcagni-Frazier-Zajchowski Architects, Inc., 138 Vt. 33, 41-42, 410 A.2d
1359, 1362-63 (1980) (discussing elements of action for "negligent . . .
performance of . . . [the] obligation to exercise reasonable skill and care
in the design and selection of material" for school roof). We thus find no
error in the court's decision to submit the negligence claim to the
jury.(FN7)
17. Defendant next contends that the court erroneously instructed
the jury that it could award damages for the "reasonable cost of either
repairing or replacing" the entire kiln, including the cost of tearing down
the building, in view of a contract provision limiting damages to the cost
of correcting or replacing any defective or non-conforming material. The
provision in question, however, by its terms deals exclusively with the
remedies available for "defective materials." Plaintiff adduced evidence
at trial that the disintegration of the concrete was, in fact, caused by
the improper design or arrangement of the insulation inside the concrete
panels and the connections of the panels to each other, not by defects in
the materials per se. Thus, the contract provision did not by its terms
limit the damages available as defendant contends. Nor, by its terms, did
it exclude any potential tort remedies flowing from the negligent design
and construction. See Colgan, 150 Vt. at 375-76, 553 A.2d at 145-46
(holding that contractual language purporting to limit tort liability for
negligent design must be clear and specific). Accordingly, we find no
error in the court's instruction.
18. Defendant next contends that the court abused its discretion
in excluding the testimony of three proposed expert witnesses. Under our
discovery rules a party may compel its opponent to identify the experts
that it intends to call at trial, the subject matter on which the expert is
expected to testify, and the grounds for the expert's opinion. V.R.C.P.
26(b)(4)(A)(i). We have held that the trial court has the inherent
authority and discretion to enforce the discovery requirements of Rule 26,
and that its imposition of discovery sanctions will not be overturned
absent an abuse of that discretion. Greene v. Bell, 171 Vt. 280, 283, 762
A.2d 865, 869 (2000).
19. The record here reveals that defendant failed to respond to
plaintiff's request to identify expert witnesses, resulting in a court
order providing for "[n]o expert disclosure by Defendant after July 11,
2005." Four days after the court's deadline, defendant filed a brief
notice indicating an intention to call Chad Phillips, an engineer, as an
expert witness "to rebut the conclusions contained in the Richard Servidio
report." Plaintiff thereupon moved to preclude the expert based on the
untimely disclosure. Defendant filed no response to the motion and failed
to supplement the disclosure by August 15, 2005, as permitted by the trial
court at a hearing on August 1, 2005. Accordingly, the court issued an
order, dated August 23, 2005, that plaintiff would be precluded from
calling expert witnesses.
20. Defendant asserts that the belated disclosure of Mr. Phillips
was justified by plaintiff's disclosure, shortly before the July 11
deadline, of a new expert witness, David Mitchell, propounding new theories
of liability. The claim, however, is belied by defendant's own
expert-witness disclosure indicating that Mr. Phillips would be called to
rebut Richard Servidio, an expert whom plaintiff had disclosed much
earlier. Nor does defendant explain or justify its failure to supplement
the disclosure with additional information about Phillips' testimony or the
names of other experts between the original July 11 deadline and the
court's August 23 order. Accordingly, we find no basis to conclude that
the court abused its discretion in barring defendant from calling Phillips
as an expert witness.
21. Defendant also claims that the court erred in barring the
expert testimony of a licensed engineer, Terry Waite. However, defendant
offers no argument to support the claim, and we therefore find no error.
In addition, defendant claims the court abused its discretion in precluding
Nishan Nahikian, its owner and principal, from testifying as an expert.
Mr. Nahikian was identified as a fact witness and ultimately provided
extensive testimony at trial. The court refused to allow him to testify
as an expert witness based on defendant's failure to identify him as such
by the disclosure deadline.
22. We have recognized that an expert "whose knowledge or opinions
are relevant because of his participation in the events giving rise to suit
should be treated for discovery purposes as an ordinary witness." Hutchins
v. Fletcher Allen Health Care, 172 Vt. 580, 582, 776 A.2d 376, 379 (2001)
(mem.) (citation omitted). Conversely, a defendant whose expert opinion is
proffered not as a product of his or her immediate participation in the
case but rather as a conventional expert for trial purposes must be
disclosed as any other expert. Id. Defendant does not argue or attempt to
demonstrate here that the expert opinions it sought to elicit from Mr.
Nahikian were formed as a result of his participation in the transaction.
Defendant simply asserts that the court erred in barring Mr. Nahikian from
testifying as an expert in rebuttal to plaintiff's experts. Accordingly,
we find no basis to conclude that the court erred in precluding his expert
testimony because of defendant's untimely disclosure.(FN8)
23. Finally, defendant disputes the court's award of sanctions
against Newstress rather than against defense counsel based on their joint
failure to appear at a jury draw scheduled for July 27, 2005. The court
imposed a monetary sanction of $4,718.25 against Newstress, consisting of
the attorney's fees and costs incurred by plaintiff in attending the jury
draw. Defendant summarily "requests that the sanction apply to trial
counsel instead" but makes virtually no argument or showing that the trial
court either lacked the authority to impose the sanction or abused its
discretion in doing so. We have observed that the trial court has inherent
authority to impose sanctions when necessary, in its discretion, to protect
the integrity of the judicial system or "instill respect in both litigants
and litigators for law and the legal process." Van Eps v. Johnston, 150
Vt. 324, 327-28, 553 A.2d 1089, 1091-92 (1988). We find no basis here to
conclude that the order imposing sanctions against Newstress was in error,
or should be modified.
Affirmed.
FOR THE COURT:
_______________________________________
Associate Justice
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Footnotes
FN1. The original complaint did not include a claim for negligence, but the
court granted plaintiff's subsequent motion for leave to add the count.
The original complaint also included a claim for consumer fraud, but the
court granted summary judgment in favor of defendant on this count, and
plaintiff has not appealed from the ruling.
FN2. We note that defendant has retained new counsel on appeal.
FN3. Although defendant contends that the VAA is more restrictive of the
court's jurisdiction than either the Federal Arbitration Act or the Uniform
Arbitration Act, and that decisions from other jurisdictions are therefore
distinguishable, we find nothing in either the VAA or the federal or
uniform acts to support the claim. Nevertheless, we need not, and do not,
rely on federal law to conclude that the VAA did not divest the superior
court of jurisdiction or preclude its finding that defendant waivedthe
arbitration agreement. Defendant also relies on several out-of-state
decisions, but careful examination shows that they do not support its
position. Defendant cites Hughley v. Rocky Mountain Health Maintenance
Organization, Inc., 927 P.2d 1325 (Colo. 1996) and Burkhart v. Semitool,
Inc., 5 P.3d 1031 (Mont. 2000) for the proposition that a valid arbitration
agreement divests trial courts of jurisdiction over issues subject to
arbitration. Both cases, however, simply hold that the court lacks
jurisdiction once the matter has proceeded to arbitration. See Hughley,
927 P.2d at 1330 (court is divested of jurisdiction "pending the conclusion
of arbitration"); Burkhart, 5 P.3d at 1035 (holding that court lacked
jurisdiction to consider merits of claim after defendant had moved to
compel, and defendant had accepted, arbitration). Both Colorado and
Montana courts adhere to the view that arbitration is a contractual right
that may be waived by the parties. See Peterman v. State Farm Mut. Auto.
Ins. Co., 961 P.2d 487, 493 (Colo. 1998); Stewart v. Covill & Basham
Const., 75 P.3d 1276, 1278 (Mont. 2003). Defendant's reliance on Bloch v.
Bloch, 693 A.2d 364 (Md. Ct. Spec. App. 1997) and Teltech, Inc. v. Teltech
Comm'ns, Inc., 115 S.W.3d 441 (Mo. Ct. App. 2003) is also misplaced. Bloch
holds merely that the Maryland arbitration law confines the court's
jurisdiction in suits to compel arbitration to the question of the validity
and scope of the arbitration agreement, and in fact recognizes that the
right to arbitrate may be waived. Id. at 367-68. Teltech holds
unremarkably that jurisdiction under the Missouri arbitration statute is
governed by the place specified for arbitration in the agreement, and that
if the clause provides for arbitration in a different state then Missouri
courts lack jurisdiction. 115 S.W.3d at 443. None of these decisions
supports a different result here.
FN4. Although defendant subsequently raised the issue in its reply brief,
arguing that its motion for summary judgment to enforce the arbitration
clause was in fact timely, arguments raised initially in a reply brief will
generally not be considered on appeal. Montgomery v. Devoid, 2006 VT 127,
12, n.1, 915 A.2d 270.
FN5. Defendant raised the issue for the first time in a motion for judgment
on the pleadings, filed in late July 2005, within a month of the scheduled
trial date.
FN6. We addressed an analogous issue in DaimlerChrysler Services North
America v. Ouimette, 2003 VT 47, 9, 175 Vt. 316, 830 A.2d 38, holding
that, in an action for the deficiency on a retail installment sales
contract, the "hybrid" or combination sales-security agreement "more
closely related to the sales aspect of . . . [the] agreement rather than to
its security aspect" and was thus "controlled by the four-year [statute of]
limitation." (citation omitted).
FN7. In further support of the claim, defendant invokes the "economic loss"
doctrine, which generally prohibits recovery in tort for primarily economic
losses. Gus' Catering Inc. v. Menusoft Sys., 171 Vt. 556, 558, 762 A.2d
804, 807 (2000) (mem.). See also Springfield Hydroelectric Co. v. Copp,
172 Vt. 311, 316, 779 A.2d 67, 71-72 (2001) (noting that, despite the
general rule, tort recovery for economic loss resulting from professional
negligence may be available depending "on whether there is a duty of care
independent of any contractual obligation") (quotations and citation
omitted). Although defendant raises an interesting issue, it was not
raised below or addressed by the trial court, and therefore was not
preserved for review on appeal. Fletcher Hill, Inc. v. Crosbie, 2005 VT 1,
20, 178 Vt. 77, 872 A.2d 292. Nor does this strike us as so
exceptional a circumstance that application of the "plain error" doctrine
in the civil context is compelled to "prevent a miscarriage of justice."
Imported Car Ctr., Inc. v. Billings, 163 Vt. 76, 83, 653 A.2d 765, 776
(1994). Apart from any duty sounding in tort, defendant was required by
the contract itself to design, construct, and erect the kiln in a
reasonably competent manner, and plaintiff adduced substantial evidence
that defendant breached this contractual duty.
FN8. Defendant has appended a hearing transcript to its reply brief in which
the trial court indicates that it would consider permitting Mr. Nahikian
to testify as an expert on certain subjects if plaintiff had questioned him
about those subjects at his deposition, since there would then be no
prejudicial surprise. Although defendant asserts that the court forgot
this ruling at trial, defendant makes no claim or showing that the
testimony it unsuccessfully sought to elicit from Mr. Nahikian at trial
was, in fact, disclosed at the deposition. |