Loren Imhoff Homebuilder, Inc. v. Taylor

401 Wis.2d 510

973 N.W.2d 836

2022 WI App 14

LOREN IMHOFF HOMEBUILDER, INC., Petitioner-Appellant,

v.Lisa TAYLOR and Luis Cuevas, Respondents-Respondents.

Appeal No. 2019AP2205

Court of Appeals of Wisconsin.

Submitted on Briefs March 10, 2022

Opinion Filed March 31, 2022

On behalf of the petitioner-appellant, the cause was submitted on the briefs of Paul W. Schwarzenbart and Jeffrey W. Younger of Stafford Rosenbaum LLP, Madison.

On behalf of the respondents-respondents, the cause was submitted on the brief of Lisa Taylor, pro se, and Luis Cuevas, pro se.

Before Blanchard, P.J., Kloppenburg, and Graham, JJ.

BLANCHARD, P.J.

¶1 The circuit court granted a motion to compel arbitration in a dispute over a home remodeling project between Lisa Taylor and Luis Cuevas (the homeowners) and Loren Imhoff Homebuilder, Inc. (the builder). The arbitrator held a five-day hearing and produced an award. Based on a motion by the homeowners, the circuit court vacated the award and remanded for a new arbitration. The court found that the arbitrator missed key evidence because he slept during parts of the hearing. Based on that finding, the court concluded that the arbitrator "so imperfectly executed" his "powers" "that a mutual, final and definite award upon the subject matter submitted was not made." See WIS. STAT. § 788.10(1)(d) (2019-20) (including such "imperfect execut[ion]" as one ground on which a circuit court must vacate an arbitration award).¹

¶2 The builder appealed, seeking reversal and remand for confirmation of the award. Loren Imhoff Homebuilder, Inc. v. Taylor , 2020 WI App 80, ¶13, 395 Wis. 2d 178, 953 N.W.2d 353 ( Imhoff I ), rev'd , 2022 WI 12, ¶22, 400 Wis. 2d 611, 970 N.W.2d 831 ( Imhoff II ). This court reversed the circuit court based on our conclusion that the homeowners had forfeited their claim that the award should be vacated. Imhoff I , 395 Wis. 2d 178, ¶¶35-38, 953 N.W.2d 353. Given that dispositive decision, we did not reach the merits of the circuit court's decision to vacate the award. Id. , ¶15.

¶3 After accepting the homeowners’ petition for review, our supreme court reversed our forfeiture decision. Imhoff II , 400 Wis. 2d 611, ¶22, 970 N.W.2d 831. However, the six participating justices split evenly on the merits. Id. , ¶23. Accordingly, this court was directed to resolve the merits on appeal for the first time. Id.

¶4 We affirm the circuit court's decision to grant the statutory challenge to the award based on two conclusions: (1) the builder fails to show that the court clearly erred in crediting testimony that the homeowners gave in the circuit court, which the court interpreted to mean that the arbitrator slept through "substantial parts" of evidentiary portions of the hearing, including during "important portions" of testimony given by an expert called by the homeowners; and (2) given those facts, the homeowners show by clear and convincing evidence that the award must be vacated under WIS. STAT. § 788.10(1)(d), because the arbitrator "failed to perform the duty placed upon" him to avoid entirely missing significant pieces of material evidence. See Garstka v. Russo , 37 Wis. 2d 146, 149-50, 154 N.W.2d 286 (1967) (the arbitrators "failed to perform the duty placed upon them by the submission" for arbitration).

BACKGROUND

¶5 We need not repeat the extensive summary of pertinent background contained in Imhoff I and Imhoff II . The summaries of facts in Imhoff I and Imhoff II are consistent with each other and the supreme court did not indicate that this court misconstrued the record. It is sufficient here to detail the evidence and the circuit court's specific factual findings regarding the homeowners’ allegations that the arbitrator slept during substantial portions of the presentation of material evidence and the court's legal conclusion that this resulted in an award that must be vacated.

¶6 The circuit court held a hearing at which it took evidence and addressed issues that included alleged sleeping by the arbitrator. At this same hearing, the court rejected two alternative arguments for vacating the arbitration award: alleged partiality of the arbitrator and lack of evidence. The court's rulings on those alternative arguments are not at issue in this appeal and we discuss them no further.

¶7 The homeowners (primarily Taylor) alleged that the arbitrator had "glazed eyes," and displayed "haziness, drowsiness" at times during the arbitration hearing and was "sometimes outright sleep[ing] and going into that state."² This allegedly included "a number of instances" in which the arbitrator's head was "bobbing up and down," and he was "trying to keep" his eyes open, but managed "just a fixed stare." Taylor testified that, "a few times ... I literally tried to show him [a document] to wake him up." While the arbitrator "did not sleep through the whole five days," sleeping "happened each day." "It was particularly bad in the late mornings and towards the afternoon."

¶8 Taylor testified that the arbitrator appeared to sleep the most "while [the homeowners’] expert was testifying." On a related note, she testified that one aspect of the arbitrator's decision ignored testimony given by the expert called by the homeowners, which "might very well" have demonstrated that the arbitrator failed to comprehend or appreciate this aspect of the expert's testimony.

¶9 Cuevas supported Taylor's allegations "100%," telling the circuit court that he also observed the arbitrator's head "bobbing" and the arbitrator "coming to," and that what he observed could not have been the arbitrator merely resting his eyes while taking in testimony.

¶10 In contrast, the attorney who represented the builder during the arbitration testified that he did not observe the arbitrator sleeping at any time during the hearing. He further testified:

I'm confident that if he had been drowsy or sleeping during any part of the hearing—. There was questioning going on and answers going on the entire period of time [and] I would have noticed it. I dispute, wholeheartedly, the allegations that [the arbitrator] was asleep or drowsy during these proceedings. He was fully engaged the entire time. He took copious notes. He asked his own questions, directly, of every witness[,] including the expert witness [for the homeowners, who] is the focus of these allegations.

Elaborating on this last point, the attorney testified that the arbitrator was "fully engaged" in connection with evidence given by the homeowners’ expert, so much so that the arbitrator sometimes led questioning of the expert. The attorney also testified that the arbitrator in fact addressed the issues that the homeowners contended he missed, allegedly as a result of sleeping.

¶11 The builder's attorney further testified that he did not recall any incident in which Taylor appeared to attempt to wake up the arbitrator by showing him a document, as she represented had occurred.

¶12 The circuit court asked the builder's attorney why he was not testifying more categorically that the arbitrator never slept during the arbitration hearing. The attorney responded that he could not say that he watched the arbitrator "every single minute" of the five-day hearing. Further, the attorney testified, it is "just not my nature to go out on a limb and make a statement that I can't necessarily prove other than to say, ‘Here is what I observed. He was not sleeping. I was there the entire period of time.’ " The attorney testified that he disputed the allegation that the arbitrator's "head was bobbing and that he was jolting in and out of sleep. I can say that he ... asked questions of every single witness and took copious notes. I watched him write notes. He knew what was going on."

¶13 During the circuit court proceedings, the builder was represented by additional counsel, not only the attorney who represented the builder during the course of the arbitration and who testified in the circuit court. The builder's circuit court counsel argued that the record showed that the arbitrator had "addressed each issue that the [homeowners’] expert testified about and what was in [the expert's] report," and that the arbitrator relied on "the expert's spreadsheet" in explaining the award. Counsel also elicited admissions from the homeowners that they did not bring the sleeping issue to the attention of the arbitrator at any time during the arbitration hearing.

¶14 Turning to the arbitrator's responses or lack of responses to these allegations, the arbitrator did not testify or provide any written submission to the circuit court. The circuit court noted that, so far as the record revealed, the arbitrator's response to the allegations was limited to a single footnote that the arbitrator included in a response to a motion for reconsideration by the homeowners, a footnote that the circuit court deemed ambiguous and of limited value.

¶15 On the topic of positions taken or not taken by the arbitrator, the attorney who represented the builder in the arbitration testified that he was not surprised that the arbitrator did not more categorically deny sleeping, because the attorney himself "regarded the allegation as patently false and didn't give much thought or credibility to it whatsoever."

¶16 At the conclusion of the hearing, the circuit court found that the homeowners’ testimony about sleeping, and its effects on the arbitration, was all "credible" and "unrebutted." The court appeared to acknowledge that, at points in his testimony, the attorney for the builder expressed certitude that the arbitrator had not missed evidence as a result of sleeping. However, the court characterized the gist of the attorney's credible submissions and testimony as amounting to, "I didn't see it," which was not necessarily inconsistent with the testimony of the homeowners.

¶17 Expanding on this concept, the circuit court placed substantial weight on the failure of the builder to produce more categorical evidence to counter the homeowners’ allegations that...