This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF APPEALS
In the Matter of the Arbitration Between:
Cedar Fair, an
MOA Entertainment Company, LLC,
Filed August 29, 2006
Hennepin County District Court
File No. 05-12336
Mark P. Privratsky, Lindquist & Vennum, P.L.L.P., 4200 IDS Center, 80 South 8th Street, Minneapolis, MN 55402; and
Jeffrey H. Reeves (pro hac vice), Gibson Dunn &
Crutcher, LLP, 4 Park Plaza,
John A. Cotter, Adam S. Huhta, Peter D. Favorite, Molly McKee, Larkin Hoffman Daly & Lindgren Ltd., 7900 Xerxes Avenue South, 1500 Wells Fargo Plaza, Minneapolis, MN 55431; and
Mark J. Briol, Vicki J. Bitner, William G. Carpenter, Briol & Associates, PLLC, 3700 IDS Center, 80 South 8th Street, Minneapolis, MN 55402 (for appellant)
Considered and decided by Halbrooks, Presiding Judge; Kalitowski, Judge; and Hudson, Judge.
On appeal from the district court’s stay of the parties’ arbitration, appellant argues both that arbitration should not have been stayed because the parties’ dispute fell within the scope of the parties’ arbitration clause and that failing to compel arbitration in this case violates the public policy favoring arbitration. We affirm.
Mall of America Entertainment Company, LLC, and respondent Cedar Fair were parties
to a Management Agreement that governed Cedar Fair’s management of
The management agreement provided a process by which either the manager and the owner may terminate the other, either with or without cause. Relevant here are the provisions of the agreement that allowed the owner to terminate the manager with or without cause.
In December 2004, pursuant to the termination provisions of the management agreement, appellant sent respondent notice of an owner termination without cause. Respondent demanded arbitration, seeking over $5 million in compensation. Appellant cross-claimed for damages and a declaration in part that respondent was due only $1 because of fraud and other misconduct related to the calculation of certain financial figures in the course of their business together. In May 2005, the arbitrator entered his final award, determining that appellant’s notice of termination without cause was effective March 28, 2005, that appellant was not entitled to damages on its cross-claim, and that appellant owed respondent a termination payment totaling over $3.7 million in addition to costs and fees incurred during the arbitration.
Appellant moved the district court to vacate the arbitration award. Appellant argued five grounds in support of vacation: (1) the arbitrator exceeded his powers; (2) the arbitrator refused to hear testimony from a material witness; (3) the arbitrator manifestly disregarded the law; (4) public policy required vacating the award; and (5) the award was procured by fraud or undue means. As to the allegation of fraud or undue means, appellant told the court that “what we will argue is that there was a failure to disclose that materially impacted the arbitration[.]” Appellant detailed the fraud allegations in its memorandum supporting its motion, explaining that the dispute concerned the failure to disclose the existence of certain licensing agreements encumbering rights to the Peanuts characters.
Less than two weeks after appellant moved to vacate the arbitration award, appellant gave respondent a notice of termination for cause under the management agreement, asserting that respondent had defaulted under the management agreement by failing to notify appellant of certain agreements between one of respondent’s affiliates and United Feature Syndicates (UFS) concerning licensing rights to the Peanuts characters. Respondent in turn moved the district court for an injunction against appellant under Minn. R. Civ. P. 65 or an order staying the second arbitration pursuant to Minn. Stat. § 572.09 (2004). The district court granted the motion to stay the arbitration.
Appellant moved the district court to stay the motion to vacate pending appeal of the order staying the second arbitration; the district court denied the stay. On appeal, this court denied the stay of the motion to vacate. The district court subsequently denied appellant’s motion to vacate the first arbitration award. This appeal follows from the district court’s order staying the second arbitration.
contends that the district court erred by staying the second arbitration
proceeding because the present dispute falls within the arbitration clause and
because it represents a novel dispute not already determined at the first arbitration. Respondent argues that the management
agreement does not provide for serial arbitrations and that appellant seeks to
relitigate the very issues that were determined in the first arbitration:
whether respondent was terminated as manager of
The procedural posture of this case is somewhat unusual. Respondent brought the motion for temporary relief under alternative theories: for a stay of arbitration pursuant to Minn. Stat. § 572.09 (2004), or for injunctive relief under Minn. R. Civ. P. 65. The district court granted respondent’s motion to stay the second arbitration, but did so by analyzing the factors for granting injunctive relief.
is favored in
a court may protect a party from arbitration “if there is no agreement to
arbitrate, or if the controversy sought to be arbitrated is not within the
scope of the contract’s arbitration clause.”
(a) On application of a party showing an agreement [to arbitrate], and the opposing party’s refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied.
(b) On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. Such an issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party. If found for the opposing party, the court shall order the parties to proceed to arbitration.
while a court will generally compel arbitration if an agreement to arbitrate
exists and if the issue to be arbitrated is within the scope of the arbitration
clause, id, the Minnesota Supreme Court has “allowed for judicial
discretion and the balancing of considerations in the application of these
provisions,” Stillwater Leased Hous. Assocs. v. Kraus-Anderson Constr. Co.,
319 N.W.2d 424, 426-27 (
appellant sought to litigate in the second arbitration one of the very same
issues it presented to the district court in its motion to vacate the first
arbitration award: the issue of fraud as it relates to respondent’s alleged failure
to disclose the existence of certain licensing agreements concerning the
Peanuts characters. The district court’s
primary rationale for staying the second arbitration hearing was to allow the
court to first make a decision on the motion to vacate. We also note the district court’s concerns
about possible collateral-estoppel effects, given the fact that both the
vacation proceeding and the second arbitration would be addressing the fraud
In addition, the district court’s decision to temporarily stay the second arbitration proceeding is consistent with Minnesota’s policy favoring arbitration, in light of the underlying principles of sound judicial administration and the efficient dispensation of justice. Given the procedural morass that would be created by having concurrent arbitration and vacation proceedings addressing the issue of fraud related to the disclosure of the Peanuts licensing agreements, we conclude that the temporary stay of arbitration proceedings represented an appropriate exercise of the district court’s discretion.