1. Arbitration and Mediation_choice of law in agreement_existence of
agreement_threshold procedural question
The trial court properly chose to apply the law of North Carolina rather than that of New
Jersey to an arbitration question even though the arbitration agreement specified application of
New Jersey law. Only one party signed the agreement and the existence of the agreement is a
procedural issue. Procedural rights are determined by the law of the forum.
2. Arbitration and Mediation_existence of agreement_document not signed by both
parties
The trial court's findings supported its conclusion that defendant did not show the
existence of a written agreement to arbitrate where defendant did not sign the agreement and
denied acceptance of the contract for purposes of defending the merits of plaintiff's claim.
Barber & Wilson, P.A., by Timothy C. Barber, Sean T. Partrick,
Andrew H. D. Wilson, and Leslie Hickman-Loucks, for defendant-
appellant Miss America Organization.
Barry Nakell for plaintiff-appellee.
ELMORE, Judge.
In this appeal, we must determine whether the trial court
erred in denying defendant Miss America Organization's (MAO)
amended motion to compel arbitration of the dispute between MAO and
plaintiff Rebekah Chantay Revels. For the reasons stated herein,
we conclude that the trial court did not err, and we affirm the
trial court's order. The factual and procedural background is as follows: On 22
June 2002, plaintiff was designated “Miss North Carolina 2002” by
defendant Miss North Carolina Pageant Organization, Inc. (MNCPO)
after winning a public contest sponsored by MNCPO. MNCPO is a
franchisee of MAO pursuant to a document entitled “Miss America
Organization Official Franchise Agreement,” (the Franchise
Agreement), the terms of which required MNCPO to conduct a public
contest (the State Finals) to select Miss North Carolina and to
prepare Miss North Carolina for participation in the Miss America
pageant (the National Finals). In return, MAO agreed to “accept
the winner of the State Finals conducted by [MNCPO] . . . as a
contestant in the National Finals provided that [MNCPO] has
complied with the terms hereof and with such other rules and
regulations as may be promulgated from time to time by MAO.”
Plaintiff and MNCPO executed a document entitled “Miss North
Carolina 2002 Contract” whereby plaintiff was recognized as Miss
North Carolina 2002 and agreed to “represent the State of North
Carolina and [MNCPO] in the [National Finals] . . . .”
On 24 June 2002, following her selection as Miss North
Carolina, plaintiff signed a document entitled “The Miss America
Organization Application and Contract for Participation in the
National Finals of the Miss America Competition” (the Application
and Contract), which set forth plaintiff's duties and obligations
regarding her competition in the National Finals. By signing the
Application and Contract, plaintiff represented, inter alia, that
she was “of good moral character and [she had] not been involved at
any time in any act of moral turpitude” and that she had “never .. . engaged in any activity . . . that is or could reasonably be
characterized as dishonest, immoral, or indecent.” The Application
and Contract also contained the following provisions, which are at
the heart of the present appeal:
2.8.4. Attorney Review of Application and Contract. I
have been given a sufficient opportunity to review this
Application and Contract. . . . I have also had the
opportunity to consult with an attorney of my own
choosing to give me legal advice with regard to this
Application and Contract. . . . (x) I have decided that
I do not need to do so (check applicable choice). . . .
. . . .
6.10. Applicability of New Jersey Law. This Application
and Contract and its attachments shall be construed and
interpreted under the laws of the State of New Jersey.
. . . .
6.12. Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Application and
Contract or any breach thereof shall be submitted to
arbitration in Atlantic City, New Jersey in accordance
with the Rules of the American Arbitration Association.
Judgment upon any award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof.
This section shall not in any way affect the rights of
MAO to (1) seek injunctive relief as provided in Section
6.9 of this Application and Contract, or (2) take any
action permitted by this Application and Contract to
enforce the eligibility standards of the Program in the
event that time does not permit the completion of an
arbitration process before action must be taken.
Significantly, the Application and Contract was signed by
plaintiff, but was never signed by any representative of MAO.
On 19 July 2002, MAO received an anonymous e-mail, later
determined to have been sent by plaintiff's ex-boyfriend, implying
that plaintiff had formerly cohabited with a “male non-relative”
and that nude photographs of plaintiff existed. MAO forwarded the
e-mail to MNCPO. Thereafter, in a meeting with MNCPO's Board of
Directors, plaintiff confirmed the existence of the photographs. On 22 July 2002, MAO's Board of Directors voted to ask plaintiff to
resign as Miss North Carolina, and if plaintiff refused to resign,
to exclude her from competing in the National Finals. After MAO's
decision was conveyed to MNCPO, the MNCPO Board of Directors
likewise voted to ask plaintiff to resign, and to terminate her
reign as Miss North Carolina 2002 if she did not. On 23 July 2002,
plaintiff tendered her resignation as Miss North Carolina 2002.
On 1 September 2002, Plaintiff commenced the litigation
underlying this appeal by filing a complaint, naming only MAO as a
party defendant, in Robeson County Superior Court. Plaintiff's
complaint asserted claims for breach of contract and specific
performance, and also sought injunctive relief. On 4 September
2002, Chief Justice I. Beverly Lake of the North Carolina Supreme
Court entered an order designating the matter as an exceptional
case pursuant to Rule 2.1 of the General Rules of Practice for
Superior and District Courts, and assigned the case to the
Honorable Narley L. Cashwell of Wake County Superior Court.
(See footnote 1)
On 5
September 2002, MAO filed a Notice of Removal in the United States
District Court for the Eastern District of North Carolina, Southern
Division, removing the matter to federal court on the basis of
diversity of citizenship.
(See footnote 2)
On 6 September 2002, MAO filed (1) a
Motion to Dismiss and Answer, and (2) a Motion to CompelArbitration. Following an evidentiary hearing, the Honorable James
C. Fox, Senior United States District Judge, denied plaintiff's
motion for a preliminary injunction by order entered 19 September
2002. MAO's motion to compel arbitration was held in abeyance
pending plaintiff's response.
On 21 October 2002, plaintiff filed a Motion For Leave to File
First Amended Complaint, by which plaintiff sought to add as
parties defendant MNCPO and the individual members of its Board of
Directors and Executive Committee.
(See footnote 3)
Plaintiff also sought to
assert additional claims against MAO. On 5 December 2002, Judge
Fox entered an order which allowed plaintiff's motion to amend,
and, because addition of the new parties defendant destroyed
diversity of citizenship, remanded the case to Robeson County
Superior Court.
(See footnote 4)
In pleading her breach of contract claim against MAO in the
amended complaint, plaintiff specifically alleged that “Plaintiffand Defendants MAO and MNCPO entered into the [Application and
Contract].” Plaintiff's breach of contract claim against MAO is
therefore grounded, at least in part, on the assertion that the
Application and Contract _ which contained an arbitration clause as
set forth above and was signed by plaintiff, but not by MAO _
represents a valid and binding agreement between plaintiff and MAO.
In its amended answer to plaintiff's first amended complaint MAO
acknowledged only that plaintiff signed the Application and
Contract. For purposes of defending against the merits of
plaintiff's breach of contract claim, MAO asserted therein, and
continues to assert before this Court, that the Application and
Contract does not represent a valid and binding agreement between
MAO and plaintiff.
On 17 January 2003, MAO filed an Amended Motion to Compel
Arbitration “pursuant to [the Application and Contract] signed by
Plaintiff . . . on or about June 24, 2002[.]” In support of its
motion, MAO alleged that “on or about June 24, 2002, Plaintiff . .
. signed [the Application and Contract][,]” and “pursuant to
Section 6.12 [of the Application and Contract], any controversy or
claim arising out of or relating to the application and contract or
any breach thereof shall be submitted to arbitration in Atlantic
City, New Jersey . . . .”
MAO's amended motion to compel arbitration came on for hearing
before Judge Cashwell on 3 February, 2003. By order entered 31
March 2003, Judge Cashwell denied MAO's motion to compel
arbitration. Judge Cashwell's order contained the following
pertinent findings of fact: 17. In her original and amended Complaints the
Plaintiff has alleged and asserted the existence of a
written contract between the Plaintiff and MAO.
Specifically, the Plaintiff has alleged and asserted that
Exhibit C (Court's Exhibit 1) to her First Amended
Complaint [the Application and Contract] is a copy of
that contract. While Court's Exhibit 1 does not bear the
signature of an agent or representative of MAO showing
acceptance of same, the Plaintiff has alleged in
conclusory language without supporting factual
allegations that MAO accepted this contract.
18. [The Application and Contract] provides in
pertinent part[] . . . [that] [a]ny controversy or claim
arising out of or relating to this Application and
Contract or any breach thereof shall be submitted to
arbitration in Atlantic City, New Jersey . . . .
19. The Plaintiff asserts two approaches in arguing
her opposition to MAO's Amended Motion to Compel
Arbitration. Under neither approach does the Plaintiff
deny the existence of a contract, [the Application and
Contract], between the Plaintiff and MAO.
20. Under her first approach the Plaintiff argues
the Amended Motion to Compel Arbitration should be denied
because MAO has denied in its Amended Answer that [the
Application and Contract] is a contract between MAO and
Plaintiff and further that MAO has denied accepting same
and acting in reliance on it as a valid contract binding
on MAO and thusly MAO has not carried its burden of
satisfying the requirement of N.C.G.S. [§] 1-567.3 of
“showing an agreement described in G.S. 1-567.2.”
. . . .
24. The [Application and Contract] does not show on
its face that the document was accepted by MAO as a
contract and MAO has denied acceptance of same. MAO has
not shown the existence of a contract containing an
arbitration agreement between MAO and the Plaintiff.
. . . .
Based on these findings, Judge Cashwell concluded that “MAO
has not satisfied the requirements of N.C.G.S. 1-567.3(a)[]” to
prove the existence of a written agreement between plaintiff and
MAO to arbitrate, and denied MAO's amended motion to compel
arbitration. From this order, MAO now appeals. At the outset, we note that “an order denying arbitration,
although interlocutory, is immediately appealable because it
involves a substantial right which might be lost if appeal is
delayed.” Prime South Homes v. Byrd, 102 N.C. App. 255, 258, 401
S.E.2d 822, 825 (1991); see also Park v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 159 N.C. App. 120, 582 S.E.2d 375, 377
(2003). “[T]he first task of a court asked to compel arbitration
of a dispute is to determine whether the parties agreed to
arbitrate that dispute.” Mitsubishi Motors v. Soler
Chrysler-Plymouth, 473 U.S. 614, 626, 87 L. Ed. 2d 444, 454 (1985);
see also Routh v. Snap-On Tools Corp., 108 N.C. App. 268, 271-72,
423 S.E.2d 791, 794 (1992).
MAO contends that the trial court erred by denying its amended
motion to compel arbitration on the grounds that the arbitration
clause in the Application and Contract, which was signed by
plaintiff but not by any representative of MAO, evidenced an
agreement by the parties to submit any dispute arising out of the
Application and Contract to arbitration. We disagree.
[1] We must first address MAO's contention that the trial
court erroneously applied North Carolina law in determining whether
the parties had in fact agreed to arbitrate their dispute. MAO
argues that because the Application and Contract contains a
provision stating that it “shall be construed and interpreted under
the laws of the State of New Jersey[,]” the trial court was
required to apply New Jersey law in determining whether an
agreement to arbitrate existed. However, in order to determine
whether the parties had agreed to arbitrate their dispute, thefacts of the present case required the trial court not to
interpret, construe, or otherwise determine the validity of the
Application and Contract's arbitration clause, but rather to
determine whether the parties had mutually agreed to be bound by
the Application and Contract itself, specifically the arbitration
clause contained therein. Because the existence of such an
agreement is a threshold requirement to compel arbitration, see
Mitsubishi Motors, 473 U.S. at 626, 87 L. Ed. 2d at 454, we discern
this to be a procedural, rather than substantive, issue. “Our
traditional conflict of laws rule is that matters affecting the
substantial rights of the parties are determined by lex loci, the
law of the situs of the claim, and remedial or procedural rights
are determined by lex fori, the law of the forum.” Boudreau v.
Baughman, 322 N.C. 331, 335, 368 S.E.2d 849, 853-54 (1988). Thus,
we conclude that the trial court's application of North Carolina
law was proper. Sears Roebuck and Co. v. Avery, 163 N.C. App. 207,
211, 593 S.E.2d 424, 428 (2004) (applying Arizona law, pursuant to
choice of law provision in undisputed contract between the parties,
to interpret and determine validity of arbitration clause also
contained therein); Park v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 159 N.C. App. 120, 122-23, 582 S.E.2d 375, 378 (2003) (same,
applying New York law).
[2] Pursuant to N.C. Gen. Stat. § 1-567.2(a) (2003) (Repealed
by Session Laws 2003-345, s.1, effective January 1, 2004 and
applicable to agreements to arbitrate made on or after that date),
“Two or more parties . . . may include in a written contract a
provision for the settlement by arbitration of any controversythereafter arising between them relating to such contract or the
failure or refusal to perform the whole or any part thereof.”
(Emphasis added) In addition, N.C. Gen. Stat. § 1-567.3(a) (2003)
(Repealed by Session Laws 2003-345, s.1, effective January 1, 2004
and applicable to agreements to arbitrate made on or after that
date) provides in pertinent part as follows:
On application of a party showing an agreement described
in G.S. 1-567.2; and the opposing party's refusal to
arbitrate, the court shall order the parties to proceed
with arbitration, but if the opposing party denies the
existence of the agreement to arbitrate, the court shall
proceed summarily to the determination of the issue so
raised and shall order arbitration if found for the
moving party, otherwise, the application shall be
denied.
(See footnote 5)
(Emphasis added)
MAO argues that its burden under N.C. Gen. Stat. § 1-567.3 of
showing a written agreement to arbitrate has been met by
plaintiff's own pleadings, which uniformly allege the existence of
a valid and binding contract between plaintiff and MAO in the form
of the Application and Contract, which contains an arbitration
clause. We are not persuaded by this argument.
In a recent opinion affirming the trial court's denial of a
motion to compel arbitration, this Court stated as follows:
“The question of whether a dispute is subject to
arbitration is an issue for judicial determination.”
[Raspet v. Buck, 147 N.C. App. 133, 136, 554 S.E.2d 676,
678 (2001) (citing AT&T Technologies v. Communications
Workers, 475 U.S. 643, 89 L. Ed. 2d 648 (1986))]. This
determination involves a two-step analysis requiring the
trial court to “ascertain both (1) whether the parties
had a valid agreement to arbitrate, and also (2) whether
'the specific dispute falls within the substantive scope
of that agreement.'” Raspet, 147 N.C. App. at 136, 554S.E.2d at 678 (quoting PaineWebber Inc. v. Hartmann, 921
F.2d 507, 511 (3d Cir. 1990)).
A dispute can only be settled by arbitration if a valid
arbitration agreement exists. N.C.G.S. § 1-567.2 (2001).
“The party seeking arbitration must show that the parties
mutually agreed to arbitrate their disputes.” Routh v.
Snap-On Tools Corp., 108 N.C. App. 268, 271-72, 423
S.E.2d 791, 794 (1992); see Thompson v. Norfolk S. Ry.
Co., 140 N.C. App. 115, 120, 535 S.E.2d 397, 400 (2000).
“The trial court's findings regarding the existence of an
arbitration agreement are conclusive on appeal where
supported by competent evidence, even where the evidence
might have supported findings to the contrary.” Sciolino
v. TD Waterhouse Investor Servs., Inc., 149 N.C. App.
642, 645, 562 S.E.2d 64, 66 (citing Routh, 108 N.C. App.
at 272, 423 S.E.2d at 794), disc. review denied, 356 N.C.
167, 568 S.E.2d 611 (2002). However, the trial court's
determination of whether a dispute is subject to
arbitration is a conclusion of law that is reviewable de
novo on appeal. Raspet, 147 N.C. App. at 136, 554 S.E.2d
at 678; Brevorka v. Wolfe Constr., Inc., 155 N.C. App.
353, 356, 573 S.E.2d 656, 659 (2002), disc. review
denied, 357 N.C. 61, 579 S.E.2d 385 (2003).
Slaughter v. Swicegood, 162 N.C. App. 457, 461, 591 S.E.2d 577, 580
(2004).
In the present case, our review of the record indicates there
is competent evidence to support the trial court's findings that
the Application and Contract “does not bear the signature of an
agent or representative of MAO showing acceptance of same” and
“does not show on its face that the document was accepted by MAO as
a contract and MAO has denied acceptance of same.” It is
undisputed that the Application and Contract was not signed by MAO.
Moreover, it is clear from MAO's pleadings and the arguments of its
counsel that, for purposes of defending against the merits of
plaintiff's breach of contract claims, MAO has throughout this
litigation denied acceptance of the Application and Contract as a
contract between itself and plaintiff. Because the arbitration
clause contained within the Application and Contract was the solebasis for MAO's amended motion to compel arbitration, we hold that
the trial court's findings support its conclusion that MAO failed
to carry its burden of proving the existence of a written agreement
between plaintiff and MAO to arbitrate, as required by N.C. Gen.
Stat. § 1-567.3(a). Accordingly, the trial court's order denying
MAO's amended motion to compel arbitration is
Affirmed.
Judges MCGEE and MCCULLOUGH concur.
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