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Kramlich v. Hale

Supreme Court of North Dakota

August 29, 2017

Gary Kramlich and Glory Kramlich, Plaintiffs, Appellants and Cross-Appellees
v.
Robert Hale and Susan Hale, Individually, Defendants, Appellees and Cross-Appellants and Somerset Court Partnership, LP, Somerset-Minot, LLC, Vision Management Services, LLC, and Bullwinkle Builders, LLC, Defendants

         Appeal from the District Court of Ward County, North Central Judicial District, the Honorable Douglas L. Mattson, Judge.

          Michael Ward, Minot, ND, for plaintiffs, appellants and cross-appellees.

          Lynn M. Boughey, Bismarck, ND, for defendants, appellees and cross-appellants.

          OPINION

          Crothers, Justice.

         [¶ 1] Gary and Glory Kramlich appeal, and Robert and Susan Hale cross-appeal, from an order dismissing the Kramlichs' lawsuit against the Hales and various entities, and directing the parties to submit their disputes to binding arbitration. We conclude the district court correctly ordered arbitration of the Kramlichs' claims relating to the operating agreement for Somerset-Minot, LLC, but erred in ordering arbitration of claims relating to Somerset Court Partnership. We affirm in part, reverse in part, and remand for further proceedings.

         I

         [¶ 2] Somerset Court Partnership owns the land on which an assisted living facility is located in Minot. Its partners include the Kramlichs and the Hales. The Kramlichs have a 25 percent interest in the partnership. The Hales have a 62 percent interest in the partnership. Somerset-Minot, LLC, formerly known as Spectrum Care, LLC, operates the facility. Its members include Gary Kramlich and Robert Hale, but not Glory Kramlich or Susan Hale. Robert Hale owns 2, 850 and Gary Kramlich owns 950 of the LLC's 4, 000 voting shares. The operating agreement for Somerset-Minot, then Spectrum Care, was executed on May 28, 1999, and contains an arbitration clause. The partnership agreement for Somerset Court was executed on July 24, 2000, and does not contain an arbitration clause.

         [¶ 3] The Hales sought to buy out Gary Kramlich's shares in the LLC and the Kramlichs' interest in the partnership. The Kramlichs declined the offer and brought this action. The Kramlichs sued the Hales, the partnership, the LLC, and other entities not relevant to this appeal, alleging breach of contract, fraud and misrepresentation, "attempt at purchase, " embezzlement and fraud, "failure of equal distribution, " "misrepresentation in corporate documents, " and "Robert Hale was acting attorney for all parties."

         [¶ 4] In a pretrial order addressing numerous motions, the district court denied the Hales' motion to dismiss the case as moot after they withdrew their offer to buy out the Kramlichs. The court, however, dismissed the action and ordered the parties to submit their disputes to arbitration based on the "broad" arbitration provision in the LLC operating agreement, which provides:

"Any dispute, claim, or controversy arising out of or relating to this agreement or the breach thereof shall be settled by arbitration in accordance with the then current rules of the American Arbitration Association. Judgment upon the award rendered by said arbitration may be entered in any court having jurisdiction. Costs of arbitration shall be borne equally."

         [¶ 5] The district court explained:

"In the end, the Court's decision rests on the strong state and federal policy favoring the arbitration process, and any doubt the Court may have concerning the scope of arbitrable issues in the instant case is decided in favor of arbitration.
"Furthermore, the Complaint in this action is not a model of clarity. The causes of action included in the Complaint are a mix of allegations, some of which sound pertinent to the identified cause of action and some of which do not, and it is often difficult to determine which of the entities involved in this action are implicated in the various causes of action. The Kramlichs, as plaintiffs, were responsible for formulating the issues, and any lack of clarity in the Complaint and any confusion of issues falls squarely at the feet of the Plaintiffs.
"As a result, the issues raised by the Kramlichs in their Complaint are as interwoven as the entities upon which they are based. Combining the lack of clarity with the inter-relatedness of the issues and entities, the Court finds that the arbitration clauses in the two Operating ...

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