JOHN F. FISCHER, Presiding Judge.
¶ 1 Plaintiff, B.A.P., L.L.P. (BAP), filed this suit against Defendants Anesthesiologists of Bartlesville, P.C. (AOB), and Michael H. Pearman, M.D. Defendants responded with a motion to compel arbitration, seeking to enforce an arbitration clause contained in the BAP Partnership Agreement. Defendants
¶ 2 BAP is a limited liability partnership composed of five partners, including Michael H. Pearman, M.D., P.L.C., a professional entity owned by Dr. Pearman. Dr. Pearman is also the president and sole stockholder of AOB. AOB is a signatory to the BAP Partnership Agreement, and is designated as the manager of BAP in that Agreement. Dr. Pearman signed the Partnership Agreement on behalf of AOB and is designated as the agent and representative of BAP.
¶ 3 BAP sued AOB and Dr. Pearman in his individual capacity, seeking monetary damages, exemplary damages, injunctive and declaratory relief, reformation of contract, an accounting, a constructive or resulting trust, unjust enrichment, and disgorgement. The complaints center on allegations of fraud and abuse of confidence by Dr. Pearman and AOB to acquire funds owned by BAP. This appeal concerns BAP's obligation to arbitrate these claims.
¶ 4 In "proceedings governing applications to compel arbitration, the existence of an agreement to arbitrate is a question of law. Questions of law are reviewed de novo." Rogers v. Dell Computer Corp., 2005 OK 51, ¶ 18, 138 P.3d 826, 831 (citing Hill v. Blevins, 2005 OK 11, ¶ 3, 109 P.3d 332, 334; Cummings v. FedEx Ground Package Sys., Inc., 404 F.3d 1258, 1261 (10th Cir.2005)). "We review an order granting or denying a motion to compel arbitration de novo, the same standard of review employed by the trial court." Thompson v. Bar-S Foods Co., 2007 OK 75, ¶ 9, 174 P.3d 567, 572 (citing Fleming Cos., Inc. v. Tru Discount Foods, 1999 OK CIV APP 18, ¶ 11, 977 P.2d 367, 370; Towe, Hester & Erwin, Inc. v. Kansas City Fire & Marine Ins. Co., 1997 OK CIV APP 58, ¶ 4, 947 P.2d 594, 596). "Arbitration should be compelled unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id. See Fleming Cos., Inc., ¶ 16, 977 P.2d at 370-371.
¶ 5 The arbitration clause in the Partnership Agreement provides that any dispute among the parties to the Agreement that is not resolved by mediation "shall be submitted to binding arbitration. . . ." BAP argues that neither AOB nor Dr. Pearman can enforce the arbitration clause because that clause was only intended to apply to disputes among the partners to the BAP Partnership Agreement. As BAP construes the Agreement, the "partners" in the Agreement are the five professional entities that constitute BAP. Therefore, BAP concludes that AOB is not a "partner" in the Agreement but a signatory to the Agreement only in its capacity as designated manager, and the arbitration clause was not intended to apply to disputes between partners and a manager. Likewise, BAP contends that Dr. Pearman cannot enforce the arbitration clause because he is not a party to the Agreement in his individual capacity.
¶ 6 The district court found in favor of BAP and denied defendants' motion to compel arbitration. On appeal, defendants raise five issues, three of which we find dispositive:
¶ 7 "Courts generally favor arbitration. . . because [it] provide[s] substantial justice by an immediate and speedy resolution with a minimum of court interference." Voss v. City of Oklahoma City, 1980 OK 148, ¶ 6, 618 P.2d 925, 928. The role of the court is to determine whether there is a valid binding arbitration clause, and if so, whether "the arbitration clause is broad enough to include the alleged dispute. . . ." Id. If the court answers both these questions in the affirmative, "arbitration must be ordered." Id. The question of whether parties have an agreement to submit a dispute to arbitration is a question of law to be decided applying state contract law. Rogers v. Dell Computer Corp., 2005 OK 51, ¶ 19, 138 P.3d 826, 831 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943-44, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)).
¶ 8 It is undisputed that AOB is a signatory to the BAP Partnership Agreement and is designated as the manager in the Agreement. The Agreement confers rights and obligations on AOB, including responsibility for "[a]ll decisions with respect to any matter set forth [in the Agreement] affecting or arising from the conduct of the business of the Partnership. . . ." Nonetheless, BAP claims that the dispute resolution procedure provided in the Agreement was not intended to apply to disputes between managers and partners. It bases this argument on the fact that the arbitration clause provides that the initial step in the dispute resolution process is to submit the dispute to the manager. BAP concludes that because it would not make sense to submit a dispute involving a manager to the manager, the dispute resolution procedures in the Agreement were not intended to apply to the manager. The district court found this argument dispositive of the parties' intent. Although this language invokes some ambiguity, we find that pursuant to Oklahoma contract law the dispute resolution process provided in the Agreement reflects that the parties intended it to apply to partners and managers, and that for that purpose, AOB is a "party" to the Agreement.
¶ 9 When there is a written agreement, "[t]he whole of the contract is to be taken together" and "the intention of the parties is to be ascertained from the writing alone, if possible. . . ." Oklahoma Southern Life Ins. Co. v. Mantz, 1942 OK 392, ¶¶ 11-12, 131 P.2d 70, 72 (citing 15 O.S.2001 §§ 155, 157). "The courts will read the provisions of a contract in their entirety to give effect to the intention of the parties as ascertained from the four corners of the contract, and where the language is ambiguous, it will be interpreted in a fair and reasonable sense." Oklahoma Oncology & Hematology, P.C. v. U.S. Oncology, Inc., 2007 OK 12, ¶ 27, 160 P.3d 936, 946. "The intention of the parties must be deduced from the entire agreement, and every provision must be construed
¶ 10 The dispute resolution procedure in the Agreement provides for resolution of disputes between "parties" to the Agreement. "Parties" is not a defined term in the Agreement. However, in other provisions of the Agreement "partners" and "manager" are specifically referenced. The term "parties" appears only in the dispute resolution section of the Agreement.
¶ 11 BAP's construction of the term "parties" would require us to substitute "partners" for "parties" where the latter term appears in the dispute resolution provision. The drafters of the Agreement were in a better position to do so than this Court. "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." 15 O.S.2001 § 154. Elsewhere in the Agreement, except in the non-compete section, the Agreement consistently uses the terms "partners" and "manager." Consequently, the most consistent interpretation of this language leads to the conclusion that "parties" in the dispute resolution section was intended to refer to both "partners" and the "manager."
¶ 12 Further, this interpretation is consistent with the normal meaning of the word "parties." "The words of a contract are to be understood in their ordinary and popular sense. . . ." 15 O.S.2001 § 160. It is undisputed that AOB is a signatory to the Agreement and that the Agreement establishes the rights and obligations of the manager. It would be inconsistent to conclude that AOB can enforce those rights but that it is not a party to the Agreement. Unless clearly contrary to the intention of the parties, a contract is to be construed so that it is capable of being carried into effect. 15 O.S.2001 § 159. Finally, if the parties in fact did not intend the dispute resolution procedure to apply to the manager, they could have easily made this clear by using the term "partners" rather than "parties." See 15 O.S.2001 § 155. Therefore, we find that as a party to the BAP Partnership Agreement, AOB is entitled to enforce the dispute resolution procedures in the Agreement and compel arbitration of this dispute.
¶ 13 Based on these same principles of contract construction, it is clear that Dr. Pearman is not a party to the Partnership Agreement. However, it is also undisputed that Dr. Pearman signed the Partnership Agreement as the manager of AOB, and as the agent of his professional entity, one of the five BAP partners. Dr. Pearman is also designated as BAP's agent in the Agreement. Dr. Pearman argues that he is entitled to enforce the arbitration clause based on either principles of agency or estoppel. Many courts have permitted a nonsignatory to enforce an arbitration clause when the dispute arises out of or relates to the agreement containing the arbitration clause.
¶ 15 Although we recognize that our decision is not controlled by Long because that case was resolved pursuant to New York state law, we find no distinction in Oklahoma agency or arbitration law that prevents us from adopting the Long analysis in this case. The relevant facts in Long and the facts in this case are essentially identical. The parties agree that Dr. Pearman acted as the agent of AOB when he signed the Partnership Agreement containing the arbitration clause. The actions BAP complains of arose out of Dr. Pearman's performance of his duties as the manager and agent of AOB, just as the actions complained of in Long arose out of the nonsignatory agent's performance of his duties in relation to the agreement containing the arbitration clause. BAP cannot sue AOB by and through Dr. Pearman, and sue Dr. Pearman in his individual capacity, for actions arising out of duties conferred by the Partnership Agreement to which AOB is a party, and at the same time claim that Dr. Pearman is not entitled to compel arbitration pursuant to the Agreement. Clearly AOB "could take no actions . . . except through its employees." See id. ¶ 9. Dr. Pearman is the sole stockholder and manager of AOB, and pursuant to
¶ 16 Oklahoma also recognizes the line of federal cases reaching the same result as Long. In Carter v. Schuster, the Oklahoma Supreme Court recognized that "the Second Circuit has identified five theories for binding nonsignatories to arbitration agreements," including the "agency" theory, whereby "traditional principles of agency law may bind a nonsignatory to an arbitration agreement," and the defense of "estoppel, when the claims are integrally related to the contract containing the arbitration clause." 2009 OK 94, ¶ 14, 227 P.3d 149, 153 (citing Thomson-CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 773, 776-79 (2d Cir.1995)). In Carter the Court rejected the agency argument, but the facts in that case are distinguishable from the facts at hand. In Carter, a signatory to the contract sought to bind a nonsignatory agent of a principal who had signed the agreement. The Court noted that based on agency principles an agent who signs on behalf of a disclosed principal does not bind himself "in his individual capacity," and therefore absent any fraudulent action on behalf of the agent, the agent could not be bound by the arbitration clause in his individual capacity. Id. ¶¶ 18-20, 227 P.3d at 154-55. The Court pointed out the distinction between the facts in Carter, in which a signatory was attempting to compel a nonsignatory to arbitrate, and the federal cases in which the nonsignatory agreed to arbitrate, and the signatory was "merely being held to his previous agreement to arbitrate." Id. ¶¶ 22, 25, 227 P.3d at 155-56.
¶ 17 BAP contends that Oklahoma Oncology & Hematology, P.C. v. U.S. Oncology, Inc., 2007 OK 12, 160 P.3d 936, is controlling in this case. We find the facts in that case distinguishable from the case before us. Oklahoma Oncology involved a suit against a parent and a subsidiary corporation. The plaintiff in that case had executed an arbitration agreement with the subsidiary corporation, but not the parent corporation, and the parent corporation had not taken control of the subsidiary until after execution of the agreement containing the arbitration clause. Therefore, the Court found the parent corporation could not compel arbitration, as it was "a stranger to the contract," and "neither enjoys the contract benefits nor carries the contract obligations." Id. ¶ 25, 160 P.3d at 945-46.
¶ 18 Further, given the scarcity of authority on the issue in Oklahoma law, and the similarities between federal and Oklahoma
¶ 19 We find no distinction under Oklahoma agency or arbitration law that is contrary to this reasoning. As a question of first impression in Oklahoma, we look to federal law in resolving this issue. See Carter, 2009 OK 94, ¶¶ 14, 25, 227 P.3d at 153, 156 (recognizing the federal circuit decisions adopting the rule that a nonsignatory may compel arbitration with a signatory as "a matter of contract," when "the nonsignatory is agreeing to arbitrate"). We find it was error for the district court to conclude that because Dr. Pearman was not a signatory to the Agreement in his individual capacity that he cannot compel arbitration of claims arising out of and relating to his duties under the Agreement.
¶ 20 BAP claims that even if the defendants can enforce the dispute resolution procedures in the Agreement, they waived the right to compel arbitration by failing to comply with the mediation procedure. Waiver of a "`contractual right to compel arbitration'. . . `is not easily inferred' and `[t]he party asserting waiver has the burden of proof regarding that issue.'" Willco Enterprises, L.L.C. v. Woodruff, 2010 OK CIV APP 18, ¶ 15, 231 P.3d 767, 772 (quoting Northland Ins. Co. v. Kellogg, 1995 OK CIV APP 84, ¶ 7, 897 P.2d 1161, 1162 (alteration in original)). "Courts `should . . . resolve[] in favor of coverage' any doubts concerning the arbitrability of a particular dispute." Id. ¶ 14 (quoting City of Muskogee v. Martin, 1990 OK 70, ¶ 8, 796 P.2d 337, 340 (alteration in original)). Here, the district court's determination that the defendants had waived the right to arbitrate was based on its construction of the Partnership Agreement. Therefore we review the district court's finding of waiver de novo. As stated in Northland Ins. Co., ¶ 5, 897 P.2d at 1162, "whether the trial court applied the correct legal standards is a de novo review."
¶ 21 The Partnership Agreement provides:
BAP claims that the following procedures were not followed: "action taken by a Christian Conciliation administrator, the signing of a `conciliation agreement', introduction and opening prayer, closing comments and prayer." Even though BAP consistently maintained that defendants were not entitled to utilize the dispute resolution process provided in the Agreement, it did agree to mediate its dispute with AOB and Pearman. Defendants initiated the mediation process by selecting Dispute Resolution Consultants, Inc., as mediator. BAP participated in the mediation and did not object or request that the rules of procedure for the Christian Conciliation be followed until after defendants moved to compel arbitration. Although BAP contends that the defendants waived the right to arbitrate by failing to follow the exact dispute resolution procedures set out in the Agreement, not only did BAP voluntarily participate in the substituted procedure, but also it does not point to any aspect of the mediation procedure that was followed that had an adverse impact on the effectiveness of the mediation. BAP fails to demonstrate that the mediation procedure actually followed was, in the first instance, deficient, or, in the second that it departed in any meaningful way from the dispute resolution procedures provided in the Agreement. Finally, BAP's concern for strict compliance with the procedures specified in the Agreement should have been raised before the mediation was conducted.
¶ 22 Although we agree that the dispute resolution provision should be interpreted as requiring a good faith effort to mediate before invoking the arbitration provision, we do not find that the failure to comply with the specific mediation procedures in the Agreement constituted a waiver of defendants' right to compel arbitration in this case. It does not follow that the Christian Conciliation procedure set out in the Agreement was irrevocably established as the only procedure available for mediation. That construction is inconsistent with the provision in section 1, defining "Agreement" as, "this Agreement, as amended from time to time." Further, Osprey L.L.C. v. Kelly-Moore Paint Co., 1999 OK 50, 984 P.2d 194, supports our interpretation. In Osprey, notice sent by facsimile was found sufficient to extend a lease term despite the requirement in the written lease that notice be delivered personally or sent by mail. The Oklahoma Supreme Court recognized that:
Id. ¶ 12, 984 P.2d at 197-98. Applying the usual rules for interpreting contracts, the Court found the lease terms to be unambiguous, because the lease "clearly requires that notice `shall' be in writing. The provision for delivery, either personally or by ... mail, uses the permissive `may' and it does not bar other modes of transmission which are just as effective." Id. ¶ 14, 984 P.2d at 199. Therefore any "substituted method of notice which performs the same function and serves the same purpose as an authorized method of notice is not defective." Id. ¶ 15. The analysis
¶ 23 Finally, BAP argues on appeal that the arbitration provision is unenforceable because it was induced by fraud in the formation of the contract. Oklahoma law holds "that an agreement to arbitrate is voidable when either the arbitration provision of the agreement or the contract containing that agreement is fraudulently induced," and "plaintiffs must be given the opportunity to prove the existence of the fraud they allege occurred." Shaffer v. Jeffery, 1996 OK 47, ¶ 33, 915 P.2d 910, 918.
¶ 24 BAP claims that fraud in the inducement was alleged in its original petition in paragraph 12:
paragraph 20:
and paragraph 21:
Defendants argue that BAP did not plead fraud with the required specificity.
¶ 25 This appeal requires construction of the dispute resolution provisions of the BAP Partnership Agreement. Properly construed, both AOB and Dr. Pearman are entitled to enforce the arbitration provision in the Partnership Agreement and have not waived the right to compel arbitration. Because the order appealed does not reflect whether BAP's allegation of fraud in the inducement of formation of the contract and the arbitration provision was properly raised, or, if so, resolved, we must remand this case for further proceedings.
¶ 26
WISEMAN, C.J., and BARNES, J., concur.