Fetterman v. Michelson

200 N.E.3d 534 (Table)

Elsie FETTERMAN

v.Kevin MICHELSON.

22-P-122

Appeals Court of Massachusetts.

Entered: December 23, 2022

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

Pursuant to the terms of contracts drafted by the defendant, Kevin Michelson, for a loan from the plaintiff, Elsie Fetterman, to Michelson, a Superior Court judge compelled arbitration. Rather than complying with the order, Michelson repeatedly delayed and thwarted arbitration. After an evidentiary hearing, the judge entered a default judgment and sanctions for attorney's fees, holding that Michelson intentionally avoided arbitration in bad faith. On appeal, Michelson argues that once the judge referred the matter to arbitration, the judge lacked the authority to issue the default judgment or sanctions. Michelson further argues that even if the judge had the authority, the judge erred in imposing sanctions, as the appropriate remedy was contempt. We affirm.

Background.² a. The loans. The underlying matter concerns three loans advanced by Fetterman to Michelson. Fetterman trusted Michelson, whom she knew through her connection to his father; she viewed Michelson like a member of her family. The first loan originated on February 6, 2015. Fetterman was then eighty-seven years old and loaned Michelson $36,000. Michelson represented that he would repay the loan as soon as his credit improved and that he would pay interest in the meantime. In June 2015, again at Michelson's request, Fetterman loaned him an additional $30,000. At that time, the parties executed a "[p]ersonal [l]oan [c]ontract," drafted by Michelson, which required him to make payments until he paid the $66,000 principal, but with the option to pay only interest, and no principal. Finally, in November 2017, once again at Michelson's request, Fetterman loaned him an additional $20,000. The parties executed a further "[p]ersonal [l]oan [c]ontract," again drafted by Michelson, which required him to make payments until he repaid $86,000 in principal with the option to make payments of interest only (accruing at 8.4 percent). The two written contracts provided, "[b]oth parties agree to arbitration."

As of September 2019, Michelson had never made a payment towards the principal of the loans. On September 16, 2019, Fetterman filed suit against Michelson alleging breach of contract and unjust enrichment. Michelson did make interest payments until approximately December 2019. Since December 2019, Michelson has only intermittently paid Fetterman interest. As of August 2021, accrued interest payments were in arrears in the amount of $4,314.

b. Attempts to arbitrate. On October 31, 2019, Michelson served a motion to dismiss pursuant to Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974), in part based on the arbitration language in the written loan agreements. Fetterman opposed. The motion judge construed Fetterman's opposition as a motion to stay further proceedings and compel arbitration and allowed the motion. The judge ordered that "[w]ithin 60 days the parties will institute binding arbitration through the Hampden County Bar Association [Arbitration and Mediation Service (HCBA)] using a Business Law arbitrator from the list, and splitting the arbitration costs evenly" (February 28, 2020 order).

Within three days, on March 2, 2020, Fetterman attempted to schedule arbitration with Michelson through their respective counsel, consistent with the February 28, 2020 order. Upon expiration of the time period provided in the February 28, 2020 order, the parties filed a joint motion to extend the time to institute arbitration for an additional sixty days (to approximately June 30, 2020), which was granted. Despite repeated requests, Michelson's counsel did not provide a substantive response to Fetterman's proposed arbitrators until June 28, 2020, two days before the extension was to expire. In July 2020, the parties agreed to hold a remote virtual arbitration before the HCBA-list arbitrator. Arbitration was scheduled for August 12, 2020.

Fetterman and her counsel prepared for the August 12, 2020 arbitration. But, on the afternoon of August 11, 2020, Michelson notified Fetterman and the arbitrator that he would not be appearing for arbitration, claiming that he was "not feeling well." He offered no other evidence of any medical issues related to that claim. For the next month, on at least five occasions, Fetterman attempted to solicit proposed dates from Michelson to reschedule arbitration but received no substantive response.

On September 14, 2020, Fetterman served Michelson with a motion to compel arbitration. After Michelson received the motion, the parties agreed to an arbitration date of October 15, 2020. Once again, Fetterman and her counsel prepared for the scheduled arbitration. Yet, three days prior to the scheduled date, Michelson's counsel notified Fetterman and the HCBA that Michelson had "directed that I cancel this arbitration ... as he did not understand the [February 28, 2020] [o]rder to be for ‘binding arbitration’ which he discovered over the weekend in reviewing his file." Thereafter, Michelson's counsel withdrew.

Fetterman sought to proceed with the arbitration but received no further cooperation in scheduling from Michelson. In response, on December 1, 2020, Fetterman served another motion to compel arbitration on Michelson, and on December 21, 2020, she filed it along with his opposition in Superior Court. Michelson then obtained successor counsel.

After a February 4, 2021 hearing on the motion to compel, the judge entered an order (February 4, 2021 order) which provided in relevant part: "It is ordered that the parties submit, participate, and complete arbitration by April 5, 2021. Parties are advised that if the Court finds that either avoids arbitration without good cause, the court will entertain the other party's motion for default judgment and conduct an evidentiary hearing on the issue of damages."

On February 24, 2021, the parties agreed to submit to and conduct arbitration on March 25, 2021, at noon. Fetterman then paid $700 for her portion of the arbitration fees and costs. On March 22, 2021, three days before the scheduled arbitration, Michelson's counsel filed an emergency motion to withdraw. While the judge allowed counsel to withdraw, he reiterated that the February 4, 2021 order compelling arbitration remained in effect. The next day, Fetterman filed her case overview with the arbitrator. On that same day, the HCBA emailed Michelson confirming the time of arbitration, re-sending an invoice for his portion of the costs, and re-sending the invitation to the Zoom arbitration. Michelson received and replied to the email. On March 24, 2021, the day before the scheduled arbitration, Michelson filed motions in the Superior Court to disqualify Fetterman's attorney and his firm; to continue the arbitration; and to have the Superior Court judge recuse himself. The motion judge denied all three motions and ordered that the next day's arbitration proceed.

Michelson was in contact with the HCBA during the week leading up to the scheduled arbitration hearing. In that time he received and responded to the email with the Zoom invitation; informed the HCBA he would not be participating in the arbitration; insisted the arbitration be recorded; asked to be allowed to attend and make a statement, but not otherwise participate; alleged the arbitration process was "a setup to deny my civil rights," "a lynching with the judge picked by ... opposing counsel who is in clear conflict," and that he believed there was "a little bit of corruption" between the HCBA and the Superior Court in denying his motions; and requested the HCBA's insurance information, implying he would be filing a claim against the HCBA.

c. Day of scheduled arbitration. On March 25, 2021, the day of the scheduled arbitration, Fetterman, HCBA facilitating staff, and the arbitrator joined the Zoom meeting in advance of its scheduled noon start time. Michelson did not appear via Zoom or otherwise contact the HCBA. The arbitrator opened the arbitration and waited for Michelson to appear. After some time, the arbitrator closed the arbitration, directing Fetterman to seek her remedy as stated in the February 4, 2021 order.

At 12:50 P.M. that day, Fetterman's counsel discovered that Michelson had sent an email at exactly noon claiming not to have the Zoom link and requesting it be resent. Michelson alleged the same thing in further emails. At 12:52 P.M. and then 12:55 P.M. , Michelson sent two emails, one to the HCBA, and another to the HCBA and copying Fetterman's attorney, stating that he would be going back to work because he had not received the Zoom link.³ Immediately thereafter, at 12:57 P.M. , the HCBA advised Michelson that the link to the Zoom meeting was in the email chain to which Michelson was responding.⁴ The HCBA and Fetterman also let Michelson know they were both available to hold the arbitration at 1:30 P.M. Yet, at 1:30 P.M. , when Fetterman, the HCBA facilitating staff, and the arbitrator rejoined the arbitration, Michelson did not. The HCBA attempted to contact Michelson, but he did not respond or join.

The arbitrator concluded the arbitration at 1:51 P.M. She issued a written report summarizing the frustrated attempts to arbitrate, and finding that Michelson "failed to appear[ ] despite being provided with the means necessary and every opportunity to attend. [Par.]Accordingly, the arbitration as ordered by the Court did not go forward specifically and solely due to [Michelson's] refusal to submit, participate, and complete the arbitration."

d. Postarbitration proceedings. Citing the February 4, 2021 order, Fetterman filed a motion for entry of default judgment and imposition of sanctions. On August 13, 2021, an evidentiary hearing was held where both parties were represented by counsel and both testified.

After the hearing, the judge found that Michelson had "no reasonable or adequate reason for failing to participate in...