Bush v. Paragon Property, Inc.

WOLLHEIM, J.,

concurring.

I concur with the majority opinion only in the result that it reaches. Because the issue before us can be resolved by applying Oregon law in accordance with the Federal Arbitration Act (FAA), 9 USC §§ 1-16 , there is no need to reach the constitutional issues raised by the majority opinion nor is there a need to overrule Berger Farms v. First Interstate *711 Bank, 148 Or App 33 , 939 P2d 64 (1997), rev allowed 327 Or 192 (1998).

The principal purpose of the FAA is to ensure that arbitration agreements are enforced by courts in the same manner as other contracts. Allied-Bruce Terminex Cos. v. Dobson, 513 US 265, 270 , 115 S Ct 834 , 130 L Ed 2d 753 (1995). By enacting the FAA, Congress declared a national policy favoring arbitration that ensures that those who have contracted to arbitrate will be permitted to do so. Southland Corp. v. Keating, 465 US 1,10-14 , 104 S Ct 852 , 79 L Ed 2d 1 (1984). The FAA prohibits state courts from applying state statutes that invalidate arbitration agreements. Allied-Bruce, 513 US at 272 . However, the FAA does not reflect a congressional intent to occupy the entire field of arbitration nor does it contain an express preemption provision. Volt Info. Sciences v. Leland Stanford Jr. U., 489 US 468,477 , 109 S Ct 1248 , 103 L Ed 2d 488 (1989). Thus, the question becomes whether the application of state statutes that are invoked by an arbitration agreement undermines the goals and policies of the FAA. Id. It is important to note that “[t]here is no federal policy favoring arbitration under a certain set of procedural rules; the federal policy is simply to ensure the enforceability, according to their terms, of private agreements to arbitrate.” Id. at 476 ; see also Prima Paint v. Flood & Conklin, 388 US 395, 403-04 , 87 S Ct 1801 , 18 L Ed 2d 1270 (1967) (discussing enforceability of arbitration procedures selected by the parties to a contract). In recognition of the importance of effectuating the intent of the parties, the United States Supreme Court has held that when the parties to a contract agree to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA. Volt, 489 US at 479 . The Court stated that, even if the result of following state procedural rules is that arbitration is stayed when the FAA would have otherwise permitted arbitration to go forward, those rules should not be preempted if the parties intended for them to govern arbitration. Id.

The issue before us is whether the FAA or Oregon law governs the resolution of this contract dispute. Unlike the parties in Berger, the parties in this instance did not *712 explicitly state that arbitration was to be conducted in accordance with the FAA. 148 Or App at 35 . Furthermore, because the contract here does not contain a choice-of-law clause, we must determine what law generally governs the contract so we can, in turn, determine what law governs the arbitration clause. So long as those laws do not undermine the purposes of the FAA, they will apply to the case at hand.

In contract actions, Oregon generally applies the law of the state that has the most significant relationship to the parties and to the transaction. Citizens First Bank v. Intercontinental Express, 77 Or App 655, 657 , 713 P2d 1097 (1986). In this instance, because both of the parties are located in Oregon, the contract was signed in Oregon, and the property purchased is also located in Oregon, Oregon law governs this contract. That the parties intended Oregon law to apply to the contract is also evident from the terms of the contract itself. Oregon laws, agencies and institutions are mentioned at least seven times in the sale agreement and receipt for earnest money. In addition, the contract’s arbitration clause expressly invokes ORCP 68 to govern the award of attorney fees to the prevailing party in arbitration. Lastly, the contract’s small claims provision makes specific reference to Oregon’s courts. I therefore conclude that the parties to the contract intended to arbitrate contract disputes in accordance with the laws of Oregon.

Oregon’s arbitration laws are similar, but not identical, to the provisions of the FAA. ORS 36.305, like section 2 of the FAA, requires that written arbitration agreements be enforced. 1 Likewise, ORS 36.315 mirrors section 3 of the FAA and, on a determination by the presiding judge that the dispute is subject to arbitration, authorizes the judge to stay litigation so that arbitration may be conducted in accordance with the terms of an arbitration agreement. 2 However, *713 Oregon’s arbitration statutes diverge from the provisions of the FAA in those instances when a judge determines that a dispute is not subject to the arbitration clause contained in a contract. Section 16 of the FAA permits an interlocutory appeal for any order refusing a motion to stay litigation brought under section 3 of the FAA. Oregon statutes do not permit interlocutory appeals in such instances. Proceedings under Oregon arbitration statutes are special proceedings and appeals from trial court orders denying motions to stay are governed by ORS 19.205. See Berger Farms, 148 Or App at 38 (discussing appeals of special statutory proceedings). 3 That statute states that appeals of special statutory proceedings will proceed “in the same manner and with like effect” as other cases from circuit court. In Dept. of Rev. v. Universal Foods Corp., 311 Or 537, 544 , 815 P2d 1237 (1991), the Supreme Court held that the statute “requires a final and complete determination of the matter in the special proceeding before an appeal is appropriate.” Since denial of a motion to stay made pursuant to ORS 36.315 will not “determine[ ] the action or suit so as to prevent a judgment or decree therein,” ORS 19.205(2)(a), a trial court order denying a stay is not immediately appealable under Oregon procedural law. Berger Farms, 148 Or App at 38 .

A denial does not mean that an appellant will not be able to appeal the trial court’s arbitrability decision under Oregon law, it simply means that an appellant will have to wait until there is a final judgment before doing so. As we have previously observed, “The object that Congress sought to achieve [with the FAA] is simply that the aggrieved party have a right to appeal at some time.” Marr v. Smith Barney, Harris Upham & Co., Inc., 116 Or App 517,524 , 842 P2d 801 (1992), rev den 315 Or 442 (1993). The distinction between federal and Oregon law is that the FAA permits an immediate appeal of a trial court’s arbitrability determination whereas Oregon law postpones judicial review of such determinations to a later point in time.

*714 Because the parties before us have invoked Oregon substantive and procedural law to govern their contract disputes, application of state procedural laws here is consistent with the purpose and goals of the FAA and is not subject to preemption. Volt, 489 US at 479 . 4 Therefore, we do not have jurisdiction to hear an interlocutory appeal. Appeal of the trial court’s denial of a motion to stay must await a final judgment.

Appellant argues that Berger Farms requires that we hear this interlocutory appeal to the trial court’s order denying the motion to stay. Berger Farms is significantly distinguishable from the case before us and its reasoning is not applicable in this instance. The arbitration clause in Berger Farms specifically invoked the FAA. 148 Or App at 35 . There, the parties intended for federal substantive and procedural laws to apply to arbitration of disputes. Here, the parties have not expressly invoked the FAA and I have concluded that the parties intended for Oregon substantive and procedural laws to apply to the agreement. The analysis of state procedural law conducted when the parties have intended federal law to resolve contract disputes, as in Berger Farms, will not necessarily be similar to, or relevant to, the analysis *715 of the same state procedural law when the parties have intended state law to resolve contract disputes.

The Berger Farms analysis of ORS 19:205, and the conclusion that its application undermined the basic objective of the FAA, was conducted in the context of the application of federal law. When federal laws are applied in state courts, the court is bound to apply federal substantive law but is free to apply state procedural law so long as those procedures do not undermine the goals and policies of the federal substantive law. 148 Or App at 37 . In Berger Farms, the state procedural laws conflicted with the interlocutory appeal provisions of the FAA that the parties had intended would govern the arbitration of disputes. Therefore, in Berger Farms, we properly held that the federal provisions preempted the state provisions. In the present case, the parties intended that state procedures be followed in arbitrating disputes. Preemption of ORS 19.205 by section 16 of the FAA would be contrary to the intent of the parties and the terms of the agreement. As the United States Supreme Court noted in Volt, even if the result of applying state procedural rules is that an arbitration does not proceed when the FAA would otherwise have permitted it to go forward, when the parties to a contract agree to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement does not undermine the goals and policies of the FAA. 489 US at 479 . Our ruling in Berger Farms is distinguishable on these points and is not applicable in this instance. There is no need to overrule Berger Farms.

Further, there is no need to reach the federalism concerns raised by the majority opinion. Because the FAA permits us to resolve this action by applying state statutes, the preemption issue is not even before this court. Only when it is absolutely necessary to the determination of an issue before us should we decide a case on constitutional grounds. State v. House, 299 Or 78,81 , 698 P2d 951 (1985). That is particularly true when, as here, we are interpreting the constitutionality of a federal statute. We generally follow the principle that we do not decide constitutional issues when there is an adequate statutory basis for a decision. Planned Parenthood Assn. v. Dept. of Human Res., 297 Or 562, 564 , 687 P2d *716 785 (1984). We should follow that principle here. Furthermore, I do not believe we have the appropriate factual setting requiring a decision based on constitutional grounds. See Stevens v. City of Cannon Beach, 317 Or 131, 147 , 854 P2d 449 , cert den 114 S Ct 1332 (1993) (constitutionality of statutes ought not be decided except in actual factual setting that makes such decision necessary). Therefore, I would not reach the constitutional issues addressed by the majority opinion.

For the aforementioned reasons, I believe we do not have jurisdiction to hear an interlocutory appeal in this instance. I therefore concur with the majority’s decision to grant the motion for summary determination of appealability and dismiss the appeal.

Edmonds, J., joins in this concurrence.

The relevant portion of ORS 36.305 states:

“A provision in any written contract to settle by arbitration a controversy thereafter arising out of such contract * * * shall * * * be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

The relevant portion of ORS 36.315 states:

“[A]ny judge of a circuit court, upon being satisfied that the issue is referable to arbitration, shall abate the action, suit or proceeding so that arbitration may be had in accordance with the terms of the agreement.”

*713 The Oregon statute uses the term “abate” whereas the FAA uses the term “stay.” For the purposes of clarity, I will use the term “stay” throughout the opinion.

Berger Farms applies former ORS 19.010 (1995), renumbered as ORS 19.205 (1997). For purposes of clarity, I use ORS 19.205 throughout this opinion.

The application of state arbitration laws in Volt is analogous to the application here. In Volt, a private university and a construction firm entered into a construction contract that included an arbitration clause in their agreement. The contract also contained a choice-of-law clause that stated the contract “shall be governed by the law of the place where the [p]roject is located” — California. A dispute arose between the university and the firm. The university brought an action against the firm and two other companies that were not parties to the contract and, thus, not subject to the arbitration clause. The firm moved to compel arbitration. The university moved to stay arbitration pursuant to a California procedural statute that permitted a stay of arbitration pending resolution of related litigation where there was a possibility of conflicting rulings on common issues of law or fact. The motion was granted. The United States Supreme Court held that, because the arbitration clause specifically invoked California’s laws, application of the stay did not undermine the goals and policies of the FAA even though arbitration would be delayed until the conclusion of litigation. The fact that the application of the FAA’s procedures would have permitted the arbitration to proceed more quickly than it would under the application of state procedures did not necessarily warrant preemption by the FAA because the parties intended for the state statutes to apply and because the state statutes did not invalidate the arbitration agreement. Similarly, here, the mere fact that appeal of the trial court’s arbitrability decision is delayed until the conclusion of litigation does not warrant preemption of the Oregon procedural statutes that the parties intended to govern arbitration.