In Re Shelburne Supermarket, No. 65-03 CnCv (Katz, J., Oct. 22, 2003)
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STATE OF VERMONT SUPERIOR COURT
Chittenden County, ss.: Docket No. 65-03 CnCv
SHELBURNE SUPERMARKET
ENTRY
Both parties now seek to have the court amend its findings issued
September 11, 2003. Steven Clayton seeks to have the court determine
the amount of dividends his parents, Harry and Lucille, must repay from
the time in which they held the contested stock, and thereby received the
dividends. Harry and Lucille seek to have the court determine how much
Steven must pay them under the original stock transfer deal, determined
by the arbitrator to still be in effect. On the present record, we decline to
do either.
This unfortunate state of events stems from the failure of the parties
of their arbitrator to clearly delineate the nature and scope of the dispute to
be resolved by arbitration. Because of this failure, the arbitrator issued an
award which did not deal with either of these issues, although they were
certainly both ripe for decision. We infer, from the arbitrator’s failure to
resolve either the remaining-purchase-price or intervening-dividends
issues, that no significant evidence regarding either such issue was
presented to the arbitrator. After the award was issued, and the parents
moved in this court to modify the award, that motion was couched strictly
in terms of the statute of limitation question. Although the original
purchase price, and the $55,000 figure are mentioned in the original
motion, here, they are something of an afterthought, and the implication is
that this original, underlying obligation is really not being contested–only
the statute of limitations question needed clarification here.
Similarly, we are of the view that the remaining-price and
intervening-dividend issues were mentioned in passing during trial in this
court, they were never flagged as substantial issues in contention.
Particularly the intervening dividends, which gross at over $1.6 million,
were never flagged as an issue in the evidence or the legal arguments of
the parties. And we emphasize this issue over the other only because of
its magnitude. The “smaller” issue seems to involve $11,000, plus the
possibility of 14 years interest. The “larger” a great deal more money.
The parents argue that O’Dea’s arbitration award should be held to
be preclusive of the intervening-dividends issue. They make this
argument on the basis of several items of Attorney Detora’s “Narrative
History” and Legal Memo submitted to O’Dea in advance of the
arbitration hearing. They point first to the third paragraph in the
Narrative:
The purchase price for the stock was to be $100,000 * * * By
July, 1987, Steven had paid $55,770.28 to Harry and Lucille for
the purchase of the shares of stock ....
Next, the parents point to Detora’s final sentence, page 3 of his “Legal
Memo:”
B. The entirety of the July 20, 1987 transactions should be
voided, with the additional shares of stock returned to Steven
Clayton, who is willing and able to complete the purchase.
In passing, we note that this final sentence has completely departed from
its context within the legal memo. Instead, it seems to be a prayer for
relief, which is apparently why the parents are now citing it. Their
argument seems to be: Steven made this prayer for relief to the arbitrator;
he was willing to complete the purchase; by implication he was not
counter-claiming regarding the dividends; he could have so counter-
claimed; res judicata. We reject this argument, because we think it falls
into the category of “heads I win, tails you lose.” Had the arbitrator taken
up the intervening-dividends issue, had he ruled in favor of Steven, the
parents would be fully justified in seeking to have such a award
overturned. There was never any explicit discussion putting that issue on
the table; at even half the $1.6 million (net of taxes), it dwarfs the other
issues in terms of dollar impact; an interest award might well bring it back
to gross amount; there was no evidence presented on the point. Under the
circumstances that these parties wholly failed to clearly define the scope
of their arbitration, it would be certainly unfair to hold one party to have
this issue precluded, while the other not at all. The preclusive effect of an
award is as much a creature of the arbitration contract as any other aspect
of the legal-dispute machinery established by such a contract. IDS Life
Ins. Co. v. Royal Alliance Assoc’s., 266 F.3d 645, 651 (7th Cir. 2001)
(Posner, J.) (“Arbitration is customized, not off-the-rack, dispute
resolution.”). O’Dea’s one-size-fits-all arbitration agreement, wholly
omitting (dare we say, precluding) any discussion of the scope of the
dispute, is no basis for broadly defining that dispute so as to include, and
thereby preclude, the dividend claim. And the basis for preclusion here–
Detora’s mention of willingness to complete the transaction–is anything
but an explicit waiver of the dividend matter. Cf. Agway v. Gray, 167 Vt.
313, 319 (1997) (suggesting that preclusion does not apply to a permissive
counterclaim that is not litigated). Finally, we note that the O’Dea
arbitration was set in motion not by these parties but by Attorney
Eggleston, on behalf of the corporation. He saw that the corporation
could not engage in effective governance when the dispute over share
ownership prevented any meaningful meetings or votes. This question of
share ownership was what drove these parties to arbitrate; it is what they
thought they were arbitrating; it is the issue on which they presented
evidence and argument.
We do not consider it fair to decide these issues on the present
record. Although the court joins counsel and the parties in disfavoring
serial trials, the fair resolution of these questions points to resolution other
than merely by amending findings. The remaining-price question seems
likely to involve disputed, material facts, hence pointing to trial, even if
only two witnesses will testify. The intervening dividends are more likely
to involve uncontested facts, as their payment is simply a question of
bookkeeping. Instead, they probably raise legal issues more appropriately
dealt with on summary judgment.
The court suggests that counsel discuss this entry and advise as to
their respective decisions.
Dated at Burlington, Vermont, _________________, 2003.
__________________________
Judge
In re Shelburne Supermarket
Combined Opinion