In Vermont, Participation In Prep Work Signals Commitment To Arbitration

Friday, February 23, 2018 4:35 am
March 2018 - Volume 40 Number 3


Adams Construction VT, LLC v. Barr Law Group, 2018 Vt. Lexis 10 (Feb. 2, 2018)

A construction company in Vermont waived its right to challenge the enforceability of an arbitration clause because it had spent nearly seven months participating---extensively and without objection---in preparatory arbitration proceedings. Jurisdictions disagree on how much preliminary arbitration participation constitutes this type of waiver.

Adams Construction VT, LLC (Adams) disputed whether it owed $40,000 in legal fees to Barr Law Group (Barr). Barr filed a demand for arbitration pursuant to the parties’ fee agreement, which included an arbitration clause. Both parties participated in multiple procedural hearings, conducted reciprocal discovery, inspected records, and attended at least one case management conference. Then, a week before the scheduled three-day arbitration hearing, Adams filed an objection to arbitration and a motion to dismiss the arbitration proceeding. The arbitrator denied the motion, held the hearing, and awarded Barr all the fees it sought. Adams then sought to vacate the arbitration award.

Adams’ argument was that the arbitration provision in the parties’ contract was invalid and unenforceable (because, allegedly, Barr had not ensured that its client’s consent to a pre-dispute, binding arbitration agreement was fully informed). As a result, Adams insisted it had the right to request the award be vacated.

Adams cited the Vermont Arbitration Act, which states in part: "Upon application of a party to confirm, modify or vacate an award, the court shall vacate an award where … a court has found that there was no arbitration agreement and the party did not participate in the arbitration hearing without raising the objection." 12 V.S.A. § 5677(a)(5).

Indeed, the above language "suggests that a party may object to the existence (or validity) of an arbitration agreement at any time throughout the arbitration proceeding until the arbitration hearing itself," the Supreme Court of Vermont acknowledged in this appeal of a trial court’s ruling against Adams. (Emphasis added.)

Challenge must come ‘at earliest possible mome[..]