Ronald J. Palagi, PC, LLC, and Edrie Arlene Wheat, appellants,
Prospect Funding Holdings (NY), LLC, appellee.
Judgments: Arbitration and Award: Federal Acts:
Appeal and Error. In reviewing a decision to vacate,
modify, or confirm an arbitration award under the Federal
Arbitration Act, an appellate court is obligated to reach a
conclusion independent of the trial court's ruling as to
questions of law. However, the trial court's factual
findings will not be set aside on appeal unless clearly
Summary Judgment. Summary judgment is proper
when the pleadings and evidence admitted at the hearing
disclose no genuine issue regarding any material fact or the
ultimate inferences that may be drawn from those facts and
that the moving party is entitled to judgment as a matter of
Summary Judgment: Appeal and Error. In
reviewing a summary judgment, an appellate court views the
evidence in the light most favorable to the party against
whom the judgment is granted and gives such party the benefit
of all reasonable inferences deducible from the evidence.
Arbitration and Award: Federal Acts:
Contracts. Arbitration in Nebraska is governed by
the Federal Arbitration Act if it arises from a contract
involving interstate commerce; otherwise, it is governed by
Nebraska's Uniform Arbitration Act.
Arbitration and Award: Federal Acts: Statutes:
Contracts. When determining if an arbitration clause
is governed by Nebraska's Uniform Arbitration Act or the
Federal Arbitration Act, the initial question is whether the
parties' contract evidences a transaction "involving
commerce" as defined by the Federal Arbitration Act.
Arbitration and Award: Contracts: Motions to
Vacate. When arbitration has already occurred and a
party seeks to vacate, modify, or [302 Neb. 770] confirm an
award, a court's role is limited by the act governing the
Summary Judgment: Motions for Continuance:
Affidavits. Neb. Rev. Stat. § 25-1335 (Reissue
2016) provides a safeguard against an improvident or
premature grant of summary judgment.
___: ___. As a prerequisite for a continuance, or additional
time or other relief under Neb. Rev. Stat. § 25-1335
(Reissue 2016), a party must submit an affidavit stating a
reasonable excuse or good cause for the party's inability
to oppose a summary judgment motion. Such affidavits should
specifically identify the relevant information that will be
obtained with additional time and indicate some basis for the
conclusion that the sought information actually exists.
from the District Court for Douglas County: Leigh Ann
J. Palagi and Donna S. Colley, of Law Offices of Ronald J.
Palagi, P.C., L.L.C., for appellants.
W. Barney, of Cline, Williams, Wright, Johnson &
Oldfather, L.L.P, for appellee.
Heavican, C.J., Cassel, Stacy, Funke, and Freudenberg, JJ.,
and Pirtle and Bishop, Judges.
selling an interest in her personal injury claim to Prospect
Funding Holdings (NY), LLC (Prospect), Edrie Arlene Wheat
settled her claim. Thereafter, a dispute arose over the
amount due Prospect. Prospect initiated arbitration
proceedings against Wheat and the law firm representing her,
identified in this case as Ronald J. Palagi, PC, LLC
(Palagi). Neither Wheat nor Palagi participated in the
arbitrations, and awards were eventually entered against each
of them in favor of Prospect. Wheat and Palagi brought this
interpleader action against Prospect in the district court
for Douglas County, but did not seek to vacate, modify, or
correct the arbitration awards. Prospect filed a motion to
confirm the arbitration awards and a motion for summary
judgment, [302 Neb. 771] and the district court granted both.
Wheat and Palagi appeal. We affirm.
At all relevant times, Palagi represented Wheat in connection
with her personal injury claim. On July 5, 2016, with
Palagi's knowledge, Wheat and Prospect entered into what
was captioned a "Sale and Repurchase Agreement."
Under that agreement, Wheat sold Prospect the rights to any
sums recovered on her personal injury claim, up to $23, 120,
in exchange for a net payment of $5, 000. The agreement
included a "[Repurchase [s]chedule" which allowed
Wheat to repurchase the proceeds of her claim for a set
amount that increased every 6 months, up through January 1,
2020. The repurchase schedule applied a 60-percent annual
percentage rate. As relevant here, Wheat could have
repurchased the proceeds of her claim on or before January 1,
2017, for $8, 840.
event of a breach, the agreement called for liquidated
damages "in the amount of twice the prospect ownership
amount regardless of the outcome of the legal claim or the
amount of the proceeds. In addition, [the] breaching party
shall pay for all collection costs, including reasonable
attorney's fees and expenses of [the] non-breaching
party.'' The agreement also contained an arbitration
provision which expressly referenced the Federal Arbitration
Act (FAA) and provided in relevant part:
The parties waive the right to trial by jury and waive any
right to pursue disputes on a class wide basis in any action
or proceeding instituted with respect to this agreement. The
parties agree that the issue of arbitra-bility shall be
decided by the arbitrator and not by any other person. That
is, the question of whether a dispute itself is subject to
arbitration shall be decided solely by [302 Neb. 772] the
arbitrator and not, for example, by any court. In so doing,
the intent of the parties is to divest any and all courts of
jurisdiction in disputes involving the parties, except for
the confirmation of the award and enforcement. The [FAA]
applies to this agreement and arbitration provision. We each
agree that the FAA's provisions-not state law-govern all
questions of whether a dispute is subject to arbitration. Any
dispute or disagreement between these parties arising under
this agreement or otherwise of any nature whatsoever
including, but not limited to, those sounding in
constitutional, statutory, or common law theories as to the
performance of any obligations, the satisfaction of any
rights, and/or the enforceability hereof, shall be resolved
through demand by any party and/or interested party to
arbitrate the dispute in New York in and under the laws of
the State of New York and shall submit the same to a neutral
arbitration association for resolution pursuant to its single
arbitrator, expedited rules. . . . The arbitration decision
shall be final and binding in all respects and shall be
non-appealable. Any person may have a court of competent
jurisdiction confirm the arbitration award as a judgment of
such court and enter into its record the findings of such
arbitrators for all purposes, including for the enforcement
of the award. The prevailing party in any dispute shall be
entitled to all reasonable attorneys' fees and costs,
expenses and disbursements with respect to such dispute.
agreement, which was signed by Wheat as the
"seller'' and a Prospect representative as the
"purchaser," included the following paragraph which
was signed by Palagi:
[Palagi] hereby certifies to [Prospect] that [Palagi] has
reviewed the terms and conditions of this Sales [sic] and
Repurchase Agreement and explained such terms and conditions
to [Wheat], including all costs and fees and including
[Wheat's] ability to repurchase the Prospect [302 Neb.
773] Ownership Amount according to the Repurchase Schedule
and Amount of Repurchase. I have a written fee agreement with
[Wheat] to pay my fees contingent on the outcome of the case.
I agree that all disputes regarding this agreement will be
resolved via arbitration and I have explained this to
[Wheat]. All proceeds of the legal claim will be disbursed
via the attorney's trust account and the attorney is
following the written instructions of [Wheat] with regard to
this Sale and Repurchase Agreement, and Irrevocable Letter of
Directions which [the] attorney has acknowledged.
Wheat signed the agreement, she also signed an
"Irrevocable Letter of Direction" addressed to
Palagi. This letter generally instructed Palagi, after
payment of all legal fees, to disburse any recovery amounts
to Prospect up to the amount covered in the contract before
disbursing the remainder to Wheat. The letter also directed
that if any dispute arose as to the amount owed to Prospect,
Palagi was to pay the non-disputed amount to Prospect and
hold the disputed amount in his client trust account until
the dispute was resolved through arbitration. The letter
included an attorney acknowledgment of all instructions
contained therein, and Palagi signed that acknowledgment.
December 2016, Wheat settled her personal injury claim for an
amount which is not disclosed in the record. Palagi set aside
$8, 840 of the settlement proceeds-an amount equal to the
repurchase amount at that time-in his client trust account
and disbursed the remainder of the settlement funds. The
record is unclear regarding any attempts made by Wheat or
Palagi thereafter to repurchase the proceeds under the terms
of the agreement. However, once Prospect learned it would not
be paid the full amount due under the agreement, it initiated
separate arbitration proceedings-one against Palagi and the
other against Wheat.
Neb. 774] Arbitration Proceedings and Award
arbitration proceedings were initiated, "Arbitration
Resolution Services" sent an email to Wheat, advising
that Prospect had initiated arbitration proceedings and that
Wheat "ha[d] failed to sign into the [arbitrator's]
website and verify [her] participation in the
arbitration." The email warned, "Unless you do so
by Feb[.] 02, 2017, the arbitration will proceed without your
involvement and an arbitration award may be entered against
you." An attorney with the Palagi law firm responded to
this email, arguing generally that the agreement was void
under Nebraska law. Neither Wheat nor Palagi otherwise
participated in the arbitrations, and they were found by the
arbitrator to have provided "no response."
8, 2017, the arbitrator issued an award in favor of Prospect
and against Palagi in the sum of $23, 120. Thereafter, on
August 3, 2017, the arbitrator issued an award in favor of
Prospect and against Wheat in the sum of $46, 240, a sum that
represented the amount of liquidated damages due under the
agreement. The arbitrator found the agreement between Wheat
and Prospect was valid and enforceable and had been breached.
days after the first arbitration award was issued, Wheat,
still represented by Palagi, filed what was styled an
interpleader action in the district court for Douglas County.
The complaint alleged Palagi was in possession of $8, 840 to
which both Wheat and Prospect claimed entitlement. The
complaint also alleged the agreement between Wheat and
Prospect was invalid and unenforceable for a variety of
reasons, including that Prospect was not registered to
transact business in Nebraska, the agreement did not comply
with Nebraska's Nonrecourse Civil Litigation Act,
the [302 Neb. 775] interest rate charged was usurious. The
complaint requested an order directing the disputed sums to
be deposited with the court pending further determination of
the proper allocation of the funds, and also asking the court
to determine the validity of the agreement and enjoin
Prospect's collection efforts in the meantime. Palagi
amended the complaint on June 27, 2017, to include the Palagi
law firm as a party plaintiff and filed a second amended
complaint on November 16 to correct Prospect's legal
name. Neither the original, amended, nor second amended
complaint mentioned the arbitration proceedings, and none
requested the awards be vacated, modified, or corrected.
November 20, 2017, Prospect filed an answer raising the
affirmative defense of "[arbitration and [a]ward"
and, in a counterclaim, seeking judicial confirmation of the
arbitration awards. At the same time, Prospect filed a motion
to confirm the arbitration awards pursuant to 9 U.S.C. §
9 of the FA A. Prospect also moved for summary judgment on
the amended complaint, arguing that there was no genuine
issue of material fact and that Prospect was entitled to
judgment as a matter of law on its affirmative defense of
arbitration and award.
hearing on Prospect's motions was held January 22, 2018.
Prospect offered an affidavit which included the agreement,
the arbitration notices, and the arbitration awards. This
evidence was received without objection, and no evidence was
offered in opposition. Neither Wheat nor Palagi argued they
lacked notice of the arbitration proceedings or awards.
the hearing, the judge observed that the operative complaint
appeared to be focused on rescinding or voiding the
agreement, remarking, "I'm concerned . . . about why
the arbitration award was not addressed within the
appropriate time frame." Wheat's counsel responded
it was the plaintiffs' position that "the overall
contract. . . was void" and that therefore, Prospect
"could not go forward with arbitration on a void