John A. Garlock and John H. Garlock, appellees,
3DS Properties, L.L.C., a Nebraska limited liability company, et al., appellants.
Arbitration and Award: Appeal and Error. In
reviewing a decision to vacate, modify, or confirm an
arbitration award, 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
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. When determining
whether an arbitration clause is governed by the 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.
Contracts: Real Estate. While more complex
transactions may implicate interstate commerce, a simple
contract for the sale of residential real estate is an
inherently intrastate activity.
Arbitration and Award: Waiver. As a general
rule, voluntary participation in an arbitration proceeding on
the merits of a dispute will result in a waiver or forfeiture
of the right to later challenge arbitrability. In other
words, a party may not voluntarily submit a dispute to
arbitration and, after an unfavorable result, petition the
courts to find the dispute was not arbitrable.
Arbitration and Award. If a party clearly
and explicitly makes known to the arbitrator, prior to a
hearing on the merits, that he or she objects to the
arbitrability of an issue, that party's participation in
the arbitration will not preclude a later judicial challenge
Neb. 522] 6. __.A party who voluntarily participates in an
arbitration proceeding without raising objection may not
thereafter rely on Neb. Rev. Stat. § 25-2613(a)(5)
(Reissue 2016) to support judicial vacatur.
When a party seeks to confirm an arbitration award pursuant
to the Uniform Arbitration Act, a court must confirm that
award unless a party has sought to vacate, modify, or correct
the award and grounds for such vacation, modification, or
Neb. Rev. Stat. § 25-2612 (Reissue 2016) of the Uniform
Arbitration Act does not allow for the exercise of discretion
by the court when a request of confirmation is made where
there has been no application for vacation or modification.
from the District Court for Douglas County: James T. Gleason,
Judge. Reversed and remanded with directions.
Douglas W. Ruge for appellant Ryan Basye.
William J. Bianco, of Bianco Stroh, L.L.C., for appellants
3DS Properties, L.L.C., and Keith Donner.
D. Eichmann and Sarah E. Cavanagh, of Houghton, Bradford
& Whitted, PC, L.L.O., for appellees.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik,
and Freudenberg JJ.
purchasers of a home filed suit against the sellers, alleging
several defects in the home had been concealed. The district
court stayed the lawsuit to permit either mediation or
arbitration as provided in the purchase agreement, and the
parties proceeded to arbitration. After an arbitration award
was entered in favor of the sellers, the purchasers moved the
district court to vacate the award, and the sellers moved to
confirm it. The district court vacated the award, and the
sellers filed this appeal. We reverse, and remand with
directions to confirm the arbitration award.
about March 26, 2015, John A. Garlock and John H. Garlock
entered into a purchase agreement with 3DS [303 Neb. 523]
Properties, L.L.C. (3DS), for the sale of a home in Omaha.
Nebraska. The sellers' disclosure statement had been
signed by 3DS member Keith Donner, and the home was listed by
Ryan Basye, a licensed real estate agent in Nebraska. After
closing, the Garlocks discovered problems with the home.
13, 2016, the Garlocks filed a complaint in the Douglas
County District Court against 3DS, Donner, and Basye,
alleging multiple theories of recovery, including a violation
of Neb. Rev. Stat. § 76-2, 120 (Cum. Supp. 2014),
fraudulent concealment, false representation, negligent
misrepresentation, and breach of contract. The complaint
alleged the "Seller Property Condition Disclosure,"
signed by Donner, misrepresented the condition of the home.
In particular, the complaint alleged the disclosure statement
falsely indicated that the roof did not leak, there was no
damage to the roof, there was no water seepage in the
basement, and there were no structural problems with the
35 of the purchase agreement was entitled "Arbitration
and Mediation" and provided in relevant part:
B. Mediation: In the event of any Dispute, any party to the
Dispute may seek non-binding mediation in an attempt to
resolve the dispute by giving fifteen (15) days written
notice of a request for such mediation to all other parties
to the Dispute. . . .
C. Arbitration: Any Dispute that is not resolved by informal
settlement or mediation shall be resolved exclusively by
binding arbitration. Such arbitration shall be administered
by the American Arbitration Association and shall be
conducted according to the American Arbitration
Association's Commercial Rules - Real Estate Industry
Arbitration Rules (Including a Mediation Alternative). The
arbiter(s) shall apply Nebraska substantive and procedural
law to the arbitration proceeding. Arbitration shall be
commenced by written demand made by any one or more of the
parties to the Dispute given to all other [303 Neb. 524]
parties of the Dispute. . . . The prevailing party shall be
entitled to costs and fees of the arbitration and, in the
discretion of the arbitrator who shall take into account the
relative merits of the opponent's case, the arbiter may
award attorney's fees and arbitration costs to the
(Emphasis omitted.) Above the signature line in the purchase
agreement appeared a sentence which read: "This contract
contains an arbitration provision which may be enforced by
the parties." (Emphasis omitted.) This sentence appeared
in font which was bolded and capitalized, but was not
5, 2016, 3DS and Donner jointly moved to dismiss the lawsuit
because the purchase agreement required that "any
dispute not resolved by informal settlement or mediation
shall be resolved exclusively by binding arbitration."
Shortly thereafter, Basye filed a motion seeking to
"[d]ismiss or [s]tay" the lawsuit for the same
hearing was held on the motions, but our record does not
include a transcription of that proceeding. After the
hearing, the court entered an order staying the case and
deferring ruling on the motions to dismiss. The court's
order, entered September 21, 2016, did not expressly order
either mediation or arbitration, but instead stayed the
lawsuit "until such time as the parties have either
entered into a form of mediation or by agreement . . .
submit[ted] to arbitration as set forth in Paragraph C of
Section 35." No appeal was taken from this
order.Thereafter, the Garlocks filed a written
demand for expedited arbitration, and all parties began the
6 months later, on March 22, 2017, the Garlocks filed what
they styled a "Motion for Rehearing" asking the
court to reconsider its order of September 21, 2016, staying
the lawsuit. In support, the Garlocks alleged for the first
time that the arbitration provision in the purchase [303 Neb.
525] agreement violated Neb. Rev. Stat. § 25-2602.02
(Reissue 2016) of Nebraska's Uniform Arbitration Act
(UAA) because certain language was not
underlined. In response, 3DS and Donner filed another motion
to dismiss, again asserting that the purchase agreement
required the parties' dispute to be settled by binding
16, 2017, a hearing was held on all pending motions and
evidence was adduced. Among the exhibits offered were
affidavits of the Garlocks in which they averred they had
initiated arbitration proceedings, but were dissatisfied with
(1) how costly and complex the arbitration process was, (2)
the length of time the arbitration was taking, (3) the fact
that they would "still need the services of an
attorney" during the arbitration, and (4) the discovery
limitations they had encountered in arbitration. The
Garlocks' affidavits stated that if they had known these
things in advance, they would not have agreed to arbitrate.
receiving evidence and hearing argument, the court took all
motions under advisement. At the time of the hearing, all
parties were aware that an arbitration hearing was set for
June 12 and 13, 2017, in Omaha. However, no party advised the
court of this fact, and no party asked to stay or enjoin the
imminent arbitration hearing.
the arbitration took place as scheduled and was completed
before the district court ruled on either the Garlocks'
motion to reconsider or the motion to dismiss filed by 3DS
and Donner. All parties to the district court action
participated in the arbitration hearing, and all were
represented by counsel.
the Garlocks filed a written demand for expedited
arbitration, the parties selected an arbitrator and the
proceedings [303 Neb. 526] were expanded to include discovery
and a multiday hearing. The parties agreed to have a court
reporter present for the arbitration hearing, which was held
in Omaha at an agreed-upon location.
parties consented to participate in the arbitration and
agreed to be bound by it. Before the arbitration hearing.
Basye's attorney sent an email addressed to the
arbitration company and the Garlocks' attorney, stating:
"By this email, my client consents and agrees to be
bound by the arbitration. This is contingent on a
substantially similar representation by the other
parties." At the start of the arbitration hearing on
June 12, 2017, the Garlocks' attorney asked the
arbitrator to confirm, on the record, each party's
consent to arbitrate. The arbitrator then individually
confirmed the parties' agreement to proceed with the
arbitration and to be bound by it. During the 2-day
arbitration hearing that followed, more than 70 exhibits were
offered and 12 witnesses testified.
arbitration award was issued July 14, 2017. The award began
by addressing procedural issues and expressly stated that
before the arbitration hearing, and again during the hearing,
a question was raised whether all parties had agreed to be
bound by arbitration. The arbitrator found that "all
Respondents agreed in writing to waive any challenge to the
binding nature of the arbitration proceedings" and that
"[t]he Parties also made the same representation on the
record before the close of [the] Hearing." Additionally,
the arbitrator acknowledged he had been advised that the
Garlocks had "a pending motion before the state court
regarding reconsideration of its remand of this matter to
arbitration" but that they had "agreed to move
forward with the arbitration." The arbitrator further
stated: "No motion for continuance was made or pending
at the time of [the arbitration] Hearing and no court order
arbitrator's award then discussed the merits of the
Garlocks' claims and found there was "no credible
evidence to support" any of the Garlocks' claims
against 3DS, Donner, or Basye. The arbitrator ordered the
Garlocks to pay the costs of [303 Neb. 527] the arbitration
and ordered each party to pay their own attorney fees.
Motions to Vacate and Confirm Arbitration
August 11, 2017, the Garlocks filed, in the district court
action, an "Application to Vacate" the arbitration
award. The motion asserted three grounds for vacating the
award: (1) The arbitrator was partial to the defendants, (2)
the award was contrary to Nebraska public policy, and (3) the
arbitrator refused to postpone the arbitration hearing
despite a pending motion for rehearing in the district court
September 12, 2017, 3DS and Donner filed another motion to
dismiss, this time alleging the lawsuit should be dismissed
because binding arbitration had been completed by the
parties. Thereafter, on November 14, 3DS and Donner filed a
motion seeking judicial confirmation of the arbitration
November 17, 2017, a hearing was held before the district
court on all pending motions. Evidence was adduced, and the
matter was taken under advisement.
Finding Arbitration Void and Vacating Award
order entered March 8, 2018, the district court noted that
while the motion for rehearing of its order staying the
lawsuit was under advisement, "the parties proceeded
with arbitration." It recognized that the Garlocks were
now seeking to vacate the arbitration award, while 3DS and
Donner were seeking to confirm it.
court first took up the motion for rehearing and found that
the arbitration provision in the purchase agreement was
unenforceable, citing § 25-2602.02 and reasoning:
[T]he language "This contract contains [an] arbitration
provision which may be enforced by the parties" was not
underlined as required by Statute. Although the language was
set forth in bold face type, this does not comply with [303
Neb. 528] [§ 25-2602.02] and our Court has required
strict compliance with this Statute in order to enforce [an]
arbitration clause. ...