This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
STATE OF MINNESOTA
IN COURT OF APPEALS
Greenway Cooperative Service Co.,
Frontier Commodities, Inc., et al.,
Filed May 23, 2000
Olmsted County District Court
File No. C2-99-1914
Robert B. Spelhaug, Heuel, Carlson & Spelhaug, P.A., 404 Marquette Bank Building, P.O Box 1057, Rochester, MN 55903 (for appellant)
Bryan J. Baudler, Lee A. Bjorndal, Baudler Baudler Maus & Blahnik, 108 North Main Street, Austin, MN 55912 (for respondents)
Considered and decided by Schumacher, Presiding Judge, Harten, Judge, and Shumaker, Judge.
After an arbitrator resolved the parties’ dispute in appellant’s favor, respondents moved the district court to vacate the award. The district court ordered vacation based on the arbitrator’s evident partiality and misconduct. Appellant challenges the vacation. Because we see no error of law, we affirm.
Respondents Frontier Commodities, Inc. and Mark, David, and Thomas Wilcox alleged that appellant Greenway Cooperative Service Co., was responsible for the poor quality of the alfalfa harvested from respondents’ field. The parties agreed to submit their dispute to binding arbitration and to proceed without counsel. Lisa Behnken was chosen as the arbitrator.
Respondent David Wilcox was to represent respondents at the first hearing. He realized he would be late and telephoned the arbitrator. Although she received his message, she and appellant proceeded with the hearing in his absence. When David Wilcox arrived, the arbitrator summarized appellant’s evidence for him and asked him to present respondents’ evidence, which he did.
During the course of the arbitration, the arbitrator personally gathered evidence, which she presented to the parties at subsequent hearings. At the final hearing, she provided a written decision that appellant was not liable for the damage to respondents’ alfalfa crop.
Appellant then sued respondents in district court for damages. Respondents counterclaimed and moved to vacate the arbitration award. Appellant’s attorney of record was served by facsimile and by mail with respondents’ application to vacate the arbitrator’s award.
Following a hearing, the district court issued an order vacating the award. Appellant challenges this order, arguing that (1) respondents’ application to vacate was not properly served, (2) the arbitrator’s conduct did not constitute evident partiality, and (3) respondents waived their right to challenge the arbitrator’s conduct.
D E C I S I O N
1. Service of the Motion to Vacate
Determination of whether service of process was proper is a question of law. Amdahl v. Stonewall Ins. Co., 484 N.W.2d 811, 814 (Minn. App. 1992), review denied (Minn. July 16, 1992). This court need not defer to the district court’s application of the law. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).
Minn. Stat. § 572.19, subd. 2, (1998) provides that notice of a motion to vacate must be served within 90 days of the arbitrator’s order. Respondents both faxed and mailed notice to appellant’s attorney within 90 days. Appellant’s attorney conceded in district court that he received the notice.
On appeal, however, appellant challenges jurisdiction on the grounds of ineffective service. Appellant relies on a provision of the Uniform Arbitration Act, Minn. Stat. § 572.23 (1998):
[A]n application to the court under this chapter shall be by motion and shall be heard in the manner and upon the notice provided by law or rule of court for the making and hearing of motions. * * * [N]otice of an initial application for an order shall be served in the manner provided by law for the service of a summons in an action.
Appellant claims that the last sentence required respondents to serve their application as if it were a summons, i.e. not by facsimile to appellant’s attorney, but in person or by mail on appellant’s designated agent. See Minn. R. Civ. P. 4.03(c), setting the procedure for personal service of a summons on a corporation, and Minn. R. Civ. P. 4.05, setting the procedure for service of a summons by mail.
But appellant’s argument ignores the phrase “notice of an initial application for an order * * *.” By June 30, 1999, when respondents faxed and mailed notice to appellant’s attorney that they would seek vacation of the arbitration award, both parties had obtained legal counsel and appellant had sued respondent in district court for damages under the arbitration award (May 18, 1999); respondents had answered and counterclaimed, denying liability (June 8, 1999), and appellant had replied to the counterclaim, raising the arbitrator’s decision as an affirmative defense to the counterclaim (June 10, 1999). Respondents’ notice of their intent to seek vacation bears the same trial court file number as the summons, the answer and counterclaim, and the reply.
Because respondents moved to vacate within the context of appellant’s action for damages, they appropriately followed the “rule of court for the making and hearing of motions” as mandated by the first sentence of Minn. Stat. § 572.23. Service of notice of motions upon a party represented by an attorney
shall be made upon the attorney unless service upon the party is ordered by the court. * * * . Service upon the attorney or upon a party shall be made by * * * transmitting a copy by facsimile machine to the attorney or party’s office.
Minn. R. Civ. P. 5.02.
Appellant relies on Allstate Ins. Co. v. Allen, 590 N.W.2d 820, 822 (Minn. App. 1999) (holding that facsimile service on a party’s agent of notice of motion and motion to vacate an arbitration award was ineffective). But Allstate is distinguishable. In Allstate, no legal action had been taken by either party during the 90 days following the arbitrator’s award, and the party desiring to vacate was therefore obligated to follow the procedure for service of a summons set out in Rule 4. Here, respondents had already appeared in the action with their counterclaim and answer, so proceeding under Rule 5 was appropriate. “‘Rule 5 applies * * * to papers served after any party makes an appearance.’” Id., (quoting David F. Herr and Roger S. Haydock, 1 Minnesota Practice § 5.4 (1998). Service of the application to vacate on appellant’s attorney by facsimile was effective.
2. Alleged “Evident Partiality”
Upon application of a party, the court shall vacate an [arbitration] award where:
* * * *
(2) There was evident partiality by an arbitrator appointed as a neutral * * *.
* * * *
(4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or * * * otherwise so conducted the hearing * * * as to prejudice substantially the rights of a party * * *.
Minn. Stat. § 572.19, subd. 1 (1998). “Whether challenged conduct constitutes ‘evident partiality’ or prejudicial misconduct is a legal question reviewed de novo.” Aaron v. Illinois Farmers Ins. Group, 590 N.W.2d 667, 669 (Minn. App. 1999) (citations omitted).
a. Ex Parte Conversations
It is undisputed that the arbitrator and appellant engaged in informal, friendly conversation relevant to the case before respondent David Wilcox arrived. The standard for “evident partiality” is very high: an arbitrator is required not merely to avoid it, but to avoid even its appearance.
In defining “evident partiality,” the Minnesota Supreme Court has held that contacts between an arbitrator and a party, or between arbitrators, that might create an impression of possible bias, require that the arbitration award be vacated.
Pirsig v. Pleasant Mound Mutual Fire Ins., 512 N.W.2d 342, 344 (Minn. App. 1994) (citing Northwest Mechanical Inc. v. Public Utils. Comm’n, 283 N.W.2d 522, 524 (Minn. 1979)). Here, the conversation between appellant and the arbitrator undoubtedly “might [have] create[d] an impression of possible bias” and thus provides a basis for vacating the award.
b. Admission of Evidence
It is undisputed that, although the arbitrator had been informed that respondent would be late, she went ahead and took appellant’s evidence in respondent’s absence. Respondent received only the arbitrator’s summary of the evidence, to which he was asked to reply. Not allowing one party to hear the other’s testimony was conducting a hearing so “as to prejudice substantially the rights of [that] party.” Minn. Stat. § 572.19, subd. 1(4). Moreover, Minn. Stat. § 572.12(b) (1998) provides that a party is entitled to cross-examine witnesses. Hearing a witness’s testimony is a prerequisite to effective cross-examination of that witness. Respondents were therefore effectively deprived of the statutory right to cross-examine. The arbitrator’s decision to hear appellant’s evidence in respondent’s absence provides another basis for vacating the award.
3. Alleged Waiver
Respondents had a statutory right to apply for vacation. See Minn. Stat. § 572.19, subd. 1. But appellant contends that respondents waived this right by signing the arbitration agreement and participating in the arbitration hearings. “The waiver of due process rights must be voluntary, knowing, and intelligently made.” Majestic Inc. v. Berry, 593 N.W.2d 251, 255 (Minn. App. 1999) (citing D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 185, 92 S. Ct. 775, 782 (1972)), review denied (Minn. Aug. 18, 1999).
Even if it were true that a party who signs an arbitration agreement and proceeds with arbitration after an incident of alleged bias waives the right to apply for vacation based on that incident, respondent David Wilcox, who was not an attorney, had no knowledge that he was waiving his right. Respondent’s delay in seeking legal counsel was no doubt influenced by the parties’ agreement to arbitrate without counsel. His alleged waiver was neither voluntary, knowing, nor intelligently made.
Because respondents’ service of the application to vacate was effective, because there are grounds to vacate the award, and because respondents did not waive their right to seek vacation, we affirm.