This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
STATE OF MINNESOTA
IN COURT OF APPEALS
In re the Matter of:
Leon J. Simon, et al.,
John R. Rupp, et al.,
Filed March 20, 2007
Ramsey County District Court
File Nos. C8-03-12265/CX-03-12266
Madge S. Thorsen, Thorsen Kaplan LLP,
Charles E. Keenan, Christoffel & Elliott, P.A., 1111 Piper Jaffray Plaza, 444 Cedar Street, St. Paul, MN 55101 (for respondents)
Considered and decided by Halbrooks, Presiding Judge, Ross, Judge, and Crippen, Judge.
Appellants challenge the district court’s confirmation of an arbitration award on the grounds that the arbitration panel exceeded its powers and the award violates public policy. We affirm.
October 1992, the parties formed Minnesota Building, Inc. (MBI) for the purpose
of buying, renting, and selling the
In addition to their capital contributions, appellants each loaned MBI $165,000. Appellants’ identical promissory notes required the outstanding principal balance to be “repaid to the holder no later than September 30, 1993.” By September 30, 1993, MBI had not paid any of the principal balance on the notes. And six years later, when the statute of limitations ran, appellants had not commenced an action to collect on the notes, but MBI continued to carry the two loans as due in its books and tax returns.
April 2003, MBI sold the
In Phase I of the arbitration proceedings, the panel affirmed that appellants each held a 25% ownership interest in MBI, but in Phase II, the panel concluded that appellants’ right to repayment for each of the $165,000 loans was time barred by the six-year statute of limitations. The panel also found that no facts justified tolling the applicable statute. At the parties’ request, the panel appointed a receiver to wind-up the corporation; in closing, the panel determined that the receiver would finally resolve all other issues remaining within the panel’s jurisdiction, absent further court orders or agreements of the parties.
Appellants moved to vacate the Phase II award, but the district court granted respondent’s motion to confirm the award. This appeal follows.
awards are highly favored in
Stat. § 572.19, subd. 1, provides, in part, that upon the parties’ application,
the court “shall” vacate an arbitration award on a showing of corruption,
arbitrator partiality, or that the arbitrators “exceeded their powers. Minn. Stat. § 572.19, subd. 1(1)-(3). We will not vacate an arbitration award
simply because we disagree with the panel’s decision on the merits. AFSCME
Council 96 v. Arrowhead Reg’l Corrs. Bd., 356 N.W.2d 295, 299-300 (
arbitrator “is the final judge of both law and fact.” Cournoyer
v. Am. Television & Radio Co., 249
have the burden to show, as they assert, that the arbitration panel exceeded
its power. Hilltop Constr., Inc. v. Lou Park Apartments, 324 N.W.2d 236, 239 (
we note two considerations that suggest cause to dismiss appellants’ argument
without reaching its merits. First, the
record does not clearly indicate that appellants raised the omitted-topic
argument for the district court’s consideration. It is well established that this court will
not review issues that were not first argued, considered, and decided in the
court below. Thiele v. Stich, 425 N.W.2d 580, 582 (
the question of whether arbitrators “exceed their powers” by omitting issues
before them is only settled in the federal courts. Moreover, we note that in contrast to
Minnesota’s corresponding arbitration act, Minn. Stat. Ch. 572 (2006), the federal
arbitration act permits vacation of an award “[w]here the arbitrators exceeded
their powers, or so imperfectly executed them that a mutual, final, and
definite award upon the subject matter submitted was not made,” 9 U.S.C.
§ 10(a)(4) (2004); the federal directive that an arbitration award be
“final” and “definite” is not contained in the text of the Minnesota
statute. Accordingly, the relevance of
federal case law to our analysis of the panel’s award under the
Notwithstanding these potential means to dismiss this issue, we address appellants’ argument and conclude that it fails on the merits.
Based on our comparison of the court order governing the scope of the panel’s jurisdiction with the panel’s awards, it is evident that the arbitrators addressed the issues before them. The initial order for arbitration, stipulated to by all parties and adopted by the district court, provided that the court-ordered arbitration was “intended only to address the issues as set forth [in the order].” Furthermore, the order did not “preclude any party from bringing or pursuing any other claim or cause of action against any other party, in court or arbitration.”
The issues set forth in the order were the respective ownership interests of the parties and seven others on which the board reached an impasse at a corporation shareholder meeting. These other seven issues were identified by the incorporated board resolutions over which the parties reached a deadlock. By the second phase of arbitration, only two of the seven issues remained in dispute, the enforceability of appellants’ promissory notes, and whether respondent should be removed from his corporate positions.
In neither of the two disputed issues before the arbitration panel is it suggested, as appellants now propose, that in the event the panel decides against the enforceability of the notes, it must decide whether the notes become capital contributions or must analyze the tax consequences of the determination. Neither the parties’ stipulation to the panel’s jurisdiction, the court order, nor the incorporated resolutions require the panel to analyze the potential legal implications of a non-enforceability determination. The panel’s interpretation of its jurisdictional scope was reasonable and based on the plain language of the court order and incorporated resolutions. Appellants’ argument is without merit, and the arbitrators did not “exceed their powers” under Minn. Stat. § 572.19, subd. 1(3).
Appellants assert that enforcement of the panel’s arbitration award violates Minnesota public policy protecting minority shareholders from fraud and oppression. Even though appellants are 50% shareholders in the corporation, they argue that they are entitled to the equities enjoyed by minority shareholders and that it offends public policy to decide that their promissory notes are unenforceable in allegedly fraudulent circumstances where respondent carried the notes on the corporation’s books and thereby represented that the notes were due.
again we reach the issue despite our preliminary concerns. First, it is not evident that appellants’
public-policy argument was properly before the district court. Appellants raised, and the district court
addressed, alleged fraud only in the context of the assertion that the award is
in “manifest disregard of the law,” a standard
the applicability of the public-policy exception in
these preliminary concerns, we observe the failings of appellants’
public-policy argument. When we have
applied the public-policy exception, we have recognized that “[t]he question of
public policy is ultimately one for resolution by the courts, and therefore we
need not show deference to the district court’s conclusion.” City of
Brooklyn Ctr., 635 N.W.2d at 241 (citation omitted). But to benefit from the public-policy
exception, appellants must identify a policy that is “‘well defined and dominant’”;
such a policy “‘is to be ascertained by reference to the laws and legal
precedents and not from general considerations of supposed public
interests.’” Id. at 241 (quoting W.R.
Grace & Co. v. Local Union 759, Int’l Union of United Rubber Workers, 461
U.S. 757, 766, 103 S. Ct. 2177, 2183 (1983)).
When we have discussed the doctrine, we have been careful to observe
that “[t]he public policy exception is . . . narrowly defined, and a court may
set aside an arbitration award only if (1) the  agreement contains terms
which violate public policy, or (2) the arbitration award creates an explicit conflict
with other laws and legal precedents.”
argue that the arbitration award conflicts with
while [appellants] have raised serious allegations about Respondent’s potential self-dealing and usurpation of corporate opportunity, because [appellants] have elected not to pursue these claims at the Phase II hearing, but rather to reserve them for any subsequent proceeding . . . no change in the status of the current officers of the Corporation is presently appropriate . . . .
(Emphasis added.) Moreover, appellants have made no showing and cited no legal authority for the proposition that respondent’s reporting of the notes as due was improper. Without factual findings that respondent engaged in fraud or breached his fiduciary duty with respect to the promissory notes, we cannot conclude that a breach of public policy occurred. Finally, we note that appellants are free to raise further claims in a subsequent arbitration proceeding insofar as those claims are not barred by prior arbitration proceedings.
Because the arbitration panel did not exceed its powers and the arbitration award does not violate public policy, we affirm.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
 The arbitration panel observed that the parties initially contemplated converting appellants’ $165,000 loans into capital contributions upon transformation of the business enterprise into a Limited Liability Company (LLC). But as the panel noted, the contemplated LLC was never formed and the promissory notes continued to be carried on the books of the corporation. The district court similarly observed the record that the parties at one time contemplated changing the notes into capital contributions but decided against it. However, neither of these observations indicates that the status of the notes upon a determination of their non-enforceability was before the panel or the district court.