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O'Rourke v. Lunde

Supreme Court of Vermont

August 8, 2014

R. Joseph O'Rourke, et al.
v.
Alfred W. Lunde and the Housing Group Limited Partnership

Page 93

[Copyrighted Material Omitted]

Page 94

Editorial Note:

This Opinion is subject to motion for reargument or formal revision before publication. See V.R.A.P. 40

On Appeal from Superior Court, Lamoille Unit, Civil Division. A. Gregory Rainville, J. (final judgment); Dennis R. Pearson, J. (appointment of receiver).

Affirmed in all respects, except that the matter is reversed and remanded for the trial court to conduct a further hearing on the issue of the apparent double-charge of attorney's fees to appellant.

James B. Anderson of Ryan Smith & Carbine, Ltd., Rutland, for Plaintiffs-Appellees.

Brice Simon of Breton & Simon, PLC, Stowe, for Defendant-Appellant Lunde.

Present: Skoglund, Robinson and Crawford, JJ., and Teachout, Supr. J., and Zimmerman, Supr. J. (Ret.), Specially Assigned

OPINION

Page 95

Crawford, J.

[¶1] This is a dispute between a general partner and limited partners over the proceeds from the dissolution of their partnership. Appellant Alfred Lunde seeks to reverse an arbitration award and a trial court order that assessed attorney's fees and receivership fees and costs against his share of the partnership assets. We affirm on the legal issues, but remand for a further hearing on a narrow issue regarding the amount of attorney's fees assessed against Lunde.

[¶2] The record reveals the following undisputed facts. In 1979, the parties entered into a limited partnership agreement. The purpose of the partnership was to purchase and manage a twenty-five-unit Section 8 apartment building for elderly residents in Morrisville, Vermont. Lunde was the general partner and plaintiffs were limited partners.

[¶3] The partnership agreement was for a thirty-year term that expired on December 31, 2009. At that time, the general partner was to liquidate the partnership's assets " as promptly as is consistent with obtaining the fair value thereof." The agreement called for fifty percent of the net proceeds to be distributed to the general partner and the remainder to be distributed to the limited partners. The partnership agreement included an arbitration clause that required arbitration of " [a]ny dispute or controversy arising in connection with this Agreement or in connection with the dissolution of the Partnership."

[¶4] Lunde did not promptly liquidate the partnership's assets after the agreement expired, and in February 2011 the limited partners filed suit in superior court seeking to have a receiver appointed to wind up the partnership, liquidate the assets, and distribute the proceeds. In March 2011 the trial court appointed a receiver who proceeded to wind down the business and sell the assets. The receivership was initially limited in nature and permitted Lunde to remain as general partner for purposes of day-to-day administration of the apartment complex. However, a few months later the court removed Lunde as general partner after he failed to cooperate with the receiver, jeopardizing both the reauthorization of the apartment complex as Section 8 housing and the sale of the asset.

[¶5] In January 2012, Lunde filed a pro se demand for arbitration with the American Arbitration Association (AAA). Plaintiffs filed a motion to stay the arbitration. The court denied the motion, holding that the arbitration clause governed the parties' dispute. The court's order denying the motion to stay created two exceptions for issues that it reserved for its own decision. These were plaintiffs' claim of fraudulent conveyance concerning the transfer of certain funds by Lunde, and plaintiffs' claim for attorney's fees " incurred in connection with all proceedings [in the trial court] with respect to the application to appoint a Receiver, through to conclusion of the Receiver's duties pursuant to court order(s). ..." [*]

[¶6] The AAA appointed an arbitrator, who issued a scheduling order for discovery and set a hearing date of November 13, 2012. Lunde emailed the arbitrator

Page 96

the night before the hearing asking for a continuance for medical reasons. He did not attend the hearing. The arbitrator decided to proceed in Lunde's absence, but kept the record open for an additional ten days to permit Lunde to submit evidence from a medical doctor that he was unable to attend the hearing for medical reasons as well as any other evidence regarding his claim. Lunde did not submit any supplemental evidence.

[¶7] The arbitrator issued an award in January 2013, which determined the amount of the proceeds on hand to be distributed to the partners. The arbitrator ruled that Lunde's fifty-percent partnership share was " to be surcharged with the Receiver's fees, AAA costs and arbitrator fees, and [plaintiffs'] attorney's fees in this arbitration." In conformance with the court order denying the stay of arbitration, the arbitrator made no finding about the final amount of attorney's fees. The arbitration award reduced Lunde's partnership share by $150,127 in attorney's fees, receivership expenses, and arbitration costs already paid out of partnership assets, plus $60,323 in pending claims for these expenses. The total surcharge was $210,450.

[¶8] The arbitrator noted that he was unable to determine with any certainty how much of the attorney's fees already incurred and paid were attributable to the arbitration proceeding. He found that all such fees were " avoidable had Mr. Lunde performed his required duties under the parties' agreement, and therefore all of which are to be paid by [Lunde]." He left the final determination of the amount of the fees to the superior court.

[¶9] Plaintiffs moved to confirm the arbitration order. On February 12, 2013 the court issued an entry order directing plaintiffs' counsel to prepare a confirmation order.

[¶10] On February 22, 2013, Lunde filed a pro se motion asking for additional time to review the arbitration award and seeking to stay the court's February 12 order. Although captioned as a " Notice of Appeal," Lunde indicated to the court that it was in fact a motion to vacate, and the court treated it as such.

[¶11] On May 22, 2013, the court denied Lunde's motion as untimely under the Vermont Arbitration Act (VAA), which requires a motion to vacate an award to be filed within thirty days after delivery of a copy of the award to the moving party. 12 V.S.A. § 5677(c). The court stated that the award was confirmed, including the surcharge for attorney's fees and receivership expenses. It ...


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