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Karo v. Nau Country Insurance Co.

Supreme Court of Nebraska

September 22, 2017

Matt Karo and Michael Karo, appellees,
v.
Nau Country Insurance Company, appellant.

          1. Judgments: Jurisdiction. A jurisdictional issue that does not involve a factual dispute presents a question of law.

         2. Arbitration and Award: Federal Acts: Contracts. If arbitration arises from a contract involving interstate commerce, it is governed by the Federal Arbitration Act.

         3. Arbitration and Award: Federal Acts: Contracts: Insurance: Crops. The arbitration of disputes arising under federally reinsured crop insurance contracts plainly involves interstate commerce and, as such, is governed exclusively by the Federal Arbitration Act.

         4. Jurisdiction: Appeal and Error. Before reaching the legal issues presented for review, it is the duty of an appellate court to determine whether it has jurisdiction over the matter before it. This is so even where neither party has raised the issue.

         5. Federal Acts: Jurisdiction: Time. To determine whether a time limit in a federal statute is a jurisdictional requirement, an appellate court inquires whether Congress has "clearly stated" that the rule is jurisdictional; absent such a clear statement, courts should treat the restriction as nonjurisdictional in character.

         6. Arbitration and Award: Federal Acts: Jurisdiction: Notice: Limitations of Actions: Appeal and Error. The clear language of 9 U.S.C. § 9 (2012) indicates Congress intended the statutory time limits on serving notice of an application for judicial review under the Federal Arbitration Act to be jurisdictional.

         7. Arbitration and Award: Federal Acts: Limitations of Actions: Appeal and Error. Under the Federal Arbitration Act, once the arbitrator has heard a case and entered an award, Congress has placed strict limitations on judicial review of the arbitration award by placing [297 Neb. 799] temporal limits on when a court is authorized to review an award and by limiting the grounds upon which a court is authorized to vacate or modify an award. In that regard, streamlined judicial review of an arbitrator's award under the Federal Arbitration Act is similar to a restricted appellate review.

         8. Jurisdiction: Limitations of Actions: Appeal and Error. Statutory time limits on appellate review are almost always considered jurisdictional in nature, both historically and presently, and strict compliance with such time limits is necessary.

         9. Jurisdiction: Limitations of Actions: Dismissal and Nonsuit: Appeal and Error. The statutory time limits on notices of appeal are more than simple claim-processing rules, and when an appeal has not been prosecuted in the manner directed, within the time limited by the acts of Congress, it must be dismissed for want of jurisdiction.

         10. Arbitration and Award: Federal Acts: Notice: Time: Appeal and Error. Similar to a notice of appeal, the Federal Arbitration Act's requirement that those seeking expedited judicial review must serve notice of their application in a certain manner and within a specified timeframe is more than a simple claim-processing rule; it is the statutory procedure that defines which forum has authority over the dispute and delineates the classes of cases the court may review.

         11. Arbitration and Award: Federal Acts: Jurisdiction: Motions to Vacate: Notice: Time. The notice requirement under 9 U.S.C. § 12 (2012) is jurisdictional in nature, and a party's failure to serve notice of an application for judicial vacatur in the manner directed and within the time limits required has jurisdictional consequences.

         12. Judgments: Jurisdiction. When a court lacks jurisdiction and nonetheless enters an order, such order is void.

         13. Judgments: Final Orders: Jurisdiction: Appeal and Error. A void order is a nullity which cannot constitute a judgment or final order that confers appellate jurisdiction on a court.

         Appeal from the District Court for Holt County: Mark D. Kozisek, Judge. Vacated and dismissed.

          Thomas M. Locher and Amy Locher, of Locher, Pavelka. Dostal, Braddy & Hammes, L.L.C., and Mitch D. Carthel, of Mullin, Hoard & Brown, L.L.P., for appellant.

          Sean A. Minahan, of Lamson, Dugan & Murray, L.L.P., for appellees.

         [297 Neb. 800] Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy. Kelch, and Funke, JJ.

          Stacy, J.

         This is an appeal from a judgment of the Holt County District Court vacating an arbitration award under the Federal Arbitration Act (FAA).[1] Because we conclude the district court lacked jurisdiction to vacate the arbitration award, we vacate the district court's judgment and dismiss the appeal.

         I. FACTS

         Matt Karo and Michael Karo farm together in Holt County, Nebraska. They each obtained federally reinsured crop insurance policies, serviced by NAU Country Insurance Company (NAU), for the acres at issue in this dispute.

         In 2012, the Karos submitted "prevented planting" claims under their crop insurance policies, claiming they were unable to plant corn on certain acres due to wet conditions. Federal crop insurance policies are uniform, and the provisions of the policies are codified at 7 C.F.R. § 457.8 (2017). "Prevented planting" for the purpose of federal crop insurance is defined as follows:

Failure to plant the insured crop by the final planting date designated in the Special Provisions for the insured crop in the county, or within any applicable late planting period, due to an insured cause of loss that is general to the surrounding area and that prevents other producers from planting acreage with similar characteristics. Failure to plant because of uninsured causes such as lack of proper equipment or labor to plant the acreage, or use of a particular production method, is not considered prevented planting.[2]

The policies issued to the Karos also provided, "[I]f it is possible for you to plant on or prior to the final planting date [297 Neb. 801] when other producers in the area are planting and you fail to plant, no prevented planting payment will be made."[3]

         It is undisputed that in 2012, the Karos did not plant their corn crop on the insured acres prior to the final planting date. The Karos claimed continuous wet conditions prevented them from doing so. The Karos did not attempt to plant corn during the late planting period, but did plant soybeans on some acres.

         NAU denied the Karos' prevented planting claims. It found that excessive moisture was not general to the surrounding area and did not prevent other producers from planting acres with similar characteristics.

         1. Arbitration

         Pursuant to a mandatory arbitration clause in the crop insurance policies, [4] the parties submitted their disputes to binding arbitration. After an evidentiary hearing, the arbitrator issued a final arbitration award in favor of NAU, denying the Karos:claims under the "prevented planting coverage" of the crop insurance policies. The arbitration award denying coverage was issued January 21, 2014.

         In denying coverage, the arbitrator found "[t]he evidence as presented, concerning the excessive moisture in the area in early spring, did not prevent most other producers with acreage with similar characteristics from planting their acres."

         2. The Karos Seek to Judicially Vacate Arbitration Award

         On May 15, 2014, the Karos filed what they termed a "Petition for Judicial Review" in the Holt County District Court seeking to vacate the arbitration award under § 10 of the FAA.[5] Section 10(a) provides:

[297 Neb. 802] In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration-
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
(4) where 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.

         The Karos relied on § 10(a)(4) to support their request to vacate the award.

         NAU filed a motion to dismiss pursuant to Neb. Ct. R. Pldg. § 6-1112(b)(6), alleging the Karos had failed to state a claim upon which relief could be granted. The district court overruled the motion and required NAU to file an answer. NAU's answer generally denied the Karos' complaint for vacatur, and it set forth several affirmative defenses, but NAU did not file an application or motion to confirm the award.[6]

         In March 2016, all parties moved for summary judgment. After an evidentiary hearing, the court granted the Karos' summary judgment motion and vacated the arbitration award under § 10(a)(4) of the FAA, finding that the arbitrator exceeded his powers and manifestly disregarded the law.

         NAU timely appealed from that judgment, and we granted its petition to bypass the Nebraska Court of Appeals.

          [297 Neb. 803] II. ASSIGNMENTS OF ERROR

         NAU assigns, restated, that the district court erred in (1) reviewing and vacating the arbitration award; (2) applying the manifest disregard of the law doctrine; (3) ruling that the arbitrator exceeded his powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made; and (4) refusing to grant NAU's motion for summary judgment.

         III. STANDARD OF REVIEW

         A jurisdictional issue that does not involve a factual dispute presents a question of law.[7]

         IV. ANALYSIS

         1. FA A Governs This Appeal

         As a threshold matter, we agree with the district court and the parties that the issues presented in this appeal are governed by the FAA. It is well-settled that "if arbitration arises from a contract involving interstate commerce, it is governed by the FAA."[8] The arbitration of disputes arising under federally reinsured crop insurance contracts plainly involves interstate commerce and, as such, is governed exclusively by the FAA.[9]

         2. Iudicial Vacatur Under FAA

         Before reaching the legal issues presented for review, it is the duty of an appellate court to determine whether it [297 Neb. 804] has jurisdiction over the matter before it.[10] This is so even where, as here, neither party has raised the issue.[11] The threshold issue we must address is whether the Karos satisfied the statutory preconditions to seeking judicial vacatur under the FA A.

         "Congress enacted the FAA to replace judicial indisposition to arbitration with a 'national policy favoring [it] and plac[ing] arbitration agreements on equal footing with all other contracts.'"[12] The FAA includes mechanisms for enforcing arbitration awards in state and federal courts that have jurisdiction, [13] including provisions for obtaining judicial confirmation of the award, [14] and separate provisions for judicial vacatur[15] or modification[16] of an award. The U.S. Supreme Court has described these provisions as providing "expedited judicial review"[17] of arbitration awards, and it has observed that "[a]n application for any of these orders will get streamlined treatment as a motion, obviating the separate contract action that would usually be necessary to enforce or tinker with an arbitral award in court."[18]

         We observe that in the present case, the district court and the parties appear to have treated the Karos' request for [297 Neb. 805] judicial vacatur not as a motion, but, rather, as an ordinary civil complaint, governed by the Nebraska Court Rules of Pleading in Civil Cases and amenable to motions for summary judgment under Neb. Rev. Stat. § 25-1330 et seq. (Reissue 2016). While the procedure used here runs contrary to that mandated by the FAA and threatens to develop expedited judicial vacatur into full scale litigation with evidentiary hearings and dispositive motions, [19] no one assigns this as error, and in any event, the procedure followed does not drive our disposition of this case. Instead, our disposition focuses on the statutory 3-month notice requirement for seeking judicial vacatur under the FAA[20] and whether that requirement is jurisdictional in nature.

         Section 12 of the FAA governs motions to vacate and modify awards under §§ 10 and 11 of the FAA.[21] Section 12 provides, in relevant part:

Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered. If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.
[297 Neb. 806] Use of the terms "must" and "shall" in 9 U.S.C. § 12 of the FAA leaves little room to argue that the requirements of serving notice are permissive rather than mandatory. And we understand the 3-month notice requirement to implicitly require filing the application within the same timeframe.

         Here, the record shows the arbitration award was issued January 21, 2014. It was received January 23, but the Karos did not move to vacate the award until May 15, when they filed the application in the district court and provided NAU notice of the same via U.S. mail. Because the Karos' motion to vacate was filed and served outside the 3-month period mandated by § 12, we must determine the legal effect, if any, of the ...


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