PER CURIAM.
We review, on leave granted, the trial court's interpretation of an arbitration clause in a partnership agreement among a subset of the parties to this suit. Because the language of the clause, read as a whole, does not support the court's construction of the partnership agreement, we reverse.
This matter arises out of a dispute involving the purchase and operation of two Dunkin' Donuts franchises over the course of ten years. Because the facts of this dispute are not relevant to the issue under review, they are not related here. We note only that the partnership consisted of four partners, three of whom, plaintiffs Kirit D. Patel and Jagdish D. Patel, and third party defendant Falgun Dharia, are aligned against the fourth, defendant Arpan M. Patel.
In response to the verified complaint filed against him by Kirit D. Patel, Jagdish D. Patel, and others not parties to this appeal, defendant Arpan M. Patel filed a counterclaim against them and a third party complaint against Falgun Dharia and others also not parties to this appeal. Kirit D. Patel, Jagdish D. Patel, and Falgun Dharia, represented by the same law firm, moved to dismiss the counterclaim and third party complaint and refer the claims to arbitration pursuant to their partnership agreement. The judge granted the motion and ordered that any claims asserted in the verified complaint, counterclaim, or third party complaint by any signatory to the partnership agreement, that is Kirit D. Patel, Jagdish D. Patel, Falgun Dharia, and Arpan M. Patel, against any other signatory be dismissed without prejudice and referred to arbitration, and that any claims asserted by or against any non-signatory were to remain in the trial court for resolution.
Kirit D. Patel, Jagdish D. Patel, and Falgun Dharia (hereinafter collectively, plaintiffs)
Defendant objected to the obvious unfairness of such a lopsided panel and filed a motion with the trial court seeking to establish that each side should select one arbitrator with the court to appoint the third. The court denied the motion reasoning that as the arbitration clause required each party to appoint one arbitrator and for each arbitrator to appoint another, plaintiffs' interpretation of the agreement was sound. The court rejected defendant's concerns of unfairness finding there was no showing that the party-appointed arbitrators would be inclined to favor the party appointing them, and that defendant could always move to vacate any award resulting from evident partiality. We granted leave to appeal the ensuing order.
We review a trial court's construction of an arbitration clause de novo.
The partnership agreement, which was signed in 1996, would certainly not win any awards for legal drafting. We quote the arbitration provision in full.
There is no question but that this appears as a somewhat unusual arbitration provision. The question is whether that was by design or inadvertence. The mechanism for the appointment of the arbitrators appears very similar to the ordinary tripartite arrangement in which each party appoints an arbitrator and those arbitrators appoint a third. The specific wording of subsection (a) of the provision, however, provides that "[e]ach party shall appoint one ... arbitrator, and such arbitrator shall appoint another arbitrator." The agreement then continues somewhat incongruously that "[t]he decision of (sic) majority of such arbitrators ... shall be conclusive upon the parties."
We say somewhat incongruously because, as the trial court interpreted the agreement, there will always be an even number of arbitrators, regardless of how one defines "party," and none will be neutral. Subsection (d) continues, even more incongruously, "[i]f the arbitrator appointed shall fail, within ten (10) days after the last of the arbitrators shall have been appointed, to select another arbitrator," then a court "shall be authorized and empowered to appoint such
Our goal in interpreting the provisions of a contract is to ascertain the intention of the parties as revealed by the language used, taken as a whole, the parties' situation, the circumstances attendant to their agreement, and the objects they were striving to attain.
Although the case has been aggressively litigated in the trial court with several motions filed, neither plaintiffs nor defendant has offered any information whatsoever with regard to the drafting of this clause. Neither has explained their purpose in 1996 of entering into an arbitration agreement in which each side picks an arbitrator and then each of those arbitrators picks another resulting in an unusually large, and consequently expensive, panel comprised entirely of party-appointed arbitrators and no neutral. Certainly no party has asserted that the partners bargained for the right to each appoint two arbitrators. Nor do they offer any explanation for the contradictory provision calling for a court to appoint a "third arbitrator" in the event of failure of an arbitrator, "after the last of the arbitrators shall have been appointed, to select another arbitrator."
We have analyzed the wording of this provision at length. Not having been provided by the litigants with any information regarding the choice of the language used, their intention in designing such an unusually large panel having no neutral members, or what object they were striving to attain by these choices, we fall back on another interpretive principle. Occam's razor posits that as between two competing theories, the simpler explanation is likely correct.
Similarly adding an "s" to the first line of subsection (d), changing the wording from "[i]f the arbitrator appointed shall fail, within ten (10) days after the last of the arbitrators shall have been appointed, to select another arbitrator, then any judgment of a Court upon application made by either party for that purpose, shall be authorized and empowered to appoint such third arbitrator," to "[i]f the arbitrators appointed shall fail, within ten (10) days after the last of the arbitrators shall have been appointed, to select another arbitrator, then any judgment of a Court upon application made by either party for that purpose, shall be authorized and empowered to appoint such third arbitrator," flows logically, and harmonizes the subsection with the other provisions of the clause.
Accordingly, accepting the simplest explanation for the wording of this clause, and in the absence of any other, we conclude that the unusual formulation of the arbitration panel here is the result of a simple drafting error. Our conclusion is buttressed by a similarly missing "s" in subsection (e) of the arbitration clause, which reads "[t]he award to be made by the arbitrator (sic) shall be made within five (5) days after the final arbitrator shall have been appointed." Further, paragraph 21 of the partnership agreement allows that all nouns and pronouns within the agreement "shall be construed in the singular or plural, ..., as shall be appropriate to the context in which made or used." Our interpretation harmonizes the whole and avoids any "artificial emphasis on one section, with a consequent disregard for others."
It does not resolve the whole of the dispute, however. Defendant is still left facing the prospect of a five-member arbitration panel, three of whom will have been appointed by his adversaries. This despite the fact that the interests of his three partners are so aligned that they are represented by one law firm.
"Party" is not a defined term in the agreement, although it is often used synonymously with partner. Defendant contends that equating party with partner in this instance will result in a lopsided panel inherently unfair to him. Although acknowledging that arbitration is largely a creature of contract,
Plaintiffs counter that at the time the agreement was executed, no one could anticipate the disputes that might arise, and a framework that allowed each partner to appoint an arbitrator, irrespective of how the partners might be aligned in their disagreement, was on its face fair and equitable. Thus they contend there is nothing inherently unfair in the composition of an arbitration panel in which they will choose the majority of the members. They maintain that
We agree with defendant that equating "party" with "partner" in this instance, with the result that each of the plaintiffs may appoint an arbitrator, despite their interests being so aligned that they are represented by the same law firm, is inherently unfair. Although we acknowledge that
Here, while we may accept plaintiffs' argument that at the time the parties entered into their agreement that none could anticipate the disputes that might arise, it is beyond belief that any would agree to allowing his partners the right to each appoint one arbitrator when they would be so completely aligned against him that they could be represented by the same lawyer. The proposition is so utterly at odds with common sense and fairness that it can be rejected out of hand. Accordingly, we interpret "party" in the context of this dispute to be synonymous with "side." In accordance with fairness and common sense, the three partners constituting plaintiffs will be considered as one party for purposes of this arbitration, with defendant being the other.
Defendant also notes that the agreement provides that the partnership, which no longer exists, is to pay the "[c]osts of arbitration and reasonable attorney's fees for each partner in the conduct of the arbitration proceedings." As the partnership cannot now pay these costs, the only way to give effect to this provision is to apply it to the respective ownership shares of each of the partners in the partnership as they appear in the agreement. Aggregate costs and reasonable attorney's fees are for the arbitrators to determine. Finally, we also defer to the arbitrators the timing of their award dependent as it will be on the presentation of the proofs. Any other necessary guidance is to be derived from the controlling statute,
We reverse the order of February 3, 2012, and remand for the entry of an order compelling plaintiffs and defendant to each select one arbitrator, which arbitrators shall select a third in accordance with the parties' agreement; directing that the costs and reasonable attorney'
Reversed and remanded.