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Tedesco v. Home Savings Bancorp, Inc.

Supreme Court of Montana

December 12, 2017

MATTHEW J. TEDESCO, Plaintiff and Appellant,

          Submitted on Briefs: October 11, 2017.

         APPEAL FROM: District Court of the Tenth Judicial District, In and For the County of Fergus, Cause No. DV 11-77 Honorable Jon A. Oldenburg, Presiding Judge

          For Appellant: Thomas A. Marra, Antonia P. Marra, Marra, Evenson & Bell, P.C., Great Falls, Montana.

          For Appellees: Craig R. Buehler, Buehler Law Office, Lewistown, Montana.


         ¶1 Matthew Tedesco began working in March 2008 for Home Savings of America (HSOA), a federally chartered savings and loan association. After a few months on the job, Tedesco signed an employment agreement containing a provision that required the parties to submit any disputes to binding arbitration. HSOA terminated Tedesco's employment in 2011. Tedesco sued HSOA, its CEO and Board Chair Dirk Adams, and Home Savings Bancorp (HSBC), which owned all of HSOA's stock. Tedesco alleged wrongful discharge, breach of contract, and fraud. The District Court ordered the parties to proceed to binding arbitration. The Arbitrator issued an award in favor of Adams and HSBC, [1] and the District Court confirmed the award. Tedesco appeals both the order compelling arbitration and the order confirming the award. We affirm both orders.


         ¶2 Tedesco worked as a regional manager for First National Mortgage Sources until 2008. In that position, he oversaw lending branches and created a lending platform to secure mortgages for First National Bank. When First National Bank decided to shed First National Mortgage Sources, it granted Tedesco permission to move his branches and lending platform to another institution.

         ¶3 Tedesco contacted Adams, and the two negotiated an agreement under which HSOA-a Minnesota corporation-would employ Tedesco to move his branches and lending platform to HSOA. Tedesco signed HSOA's Employee Handbook Acknowledgment and an Alternative Dispute Resolution Agreement on February 22, 2008. The Alternative Dispute Resolution Agreement stated that Tedesco agreed to arbitrate any disputes arising from his employment with HSOA. Tedesco began his work with HSOA in March 2008.

         ¶4 Shortly after Tedesco signed the Handbook Acknowledgment and the Alternative Dispute Resolution Agreement, Adams asked Tedesco to prepare an employment agreement. Tedesco prepared a proposed agreement with the assistance of counsel and presented it to Adams in April 2008. Adams rejected Tedesco's proposed agreement.

         ¶5 In July 2008, Adams presented Tedesco with a "Retail Regional Manager Terms of Employment" (Employment Agreement). The Employment Agreement contained this "Enforcement" provision: "Any and all disputes arising under or related to the Agreement shall be resolved by binding arbitration under the auspices of, and according to the rules promulgated by, the American Arbitration Association - Commercial Mediation Rules." The Employment Agreement also stated that Tedesco's employment was "terminable at the will of either party." Tedesco signed the Employment Agreement on July 30, 2008. Tedesco later testified that he would have faced immediate termination had he not signed the agreement. He claimed also that, by July 2008, he already had moved his branches and lending platform to HSOA and relocated his family.

         ¶6 HSOA terminated Tedesco's employment on June 1, 2011. Tedesco filed a complaint in August 2011 against Adams and "Home Savings Bancorp, Inc., d/b/a Home Savings of America." He asserted wrongful discharge under the Montana Wrongful Discharge from Employment Act (WDEA), breach of contract, fraud, constructive fraud, and fraud in the inducement.

         ¶7 When Tedesco refused to submit to arbitration, HSBC and Adams filed a motion to compel arbitration and to stay the action, or to dismiss the complaint under M. R. Civ. P. 12. The District Court issued an order in February 2015 compelling arbitration through the American Arbitration Association (AAA) and staying the proceedings pending the outcome of the arbitration. The court found that, although the February 2008 Handbook Acknowledgment and Alternative Dispute Resolution Agreement did not constitute valid contracts, the July 2008 Employment Agreement's arbitration provision was binding on the parties.

         ¶8 At arbitration, the parties submitted evidence and participated in an evidentiary hearing, at which Tedesco and Adams testified. In August 2016, the Arbitrator granted summary judgment to Adams and HSBC on Tedesco's wrongful discharge, breach of contract, and fraud claims.

         ¶9 Tedesco filed an application with the District Court in October 2016 to vacate, correct, or modify the Arbitrator's award. The court denied Tedesco's application. It reasoned that its role was not to "review the merits of the controversy, " and it referenced the Arbitrator's "broad authority and powers to determine all issues." The District Court then entered judgment confirming the Arbitrator's award. Tedesco appeals.


         ¶10 This Court reviews de novo a district court's order on a motion to compel arbitration. Global Client Solutions, LLC v. Ossello, 2016 MT 50, ¶ 19, 382 Mont. 345, 367 P.3d 361.

         ¶11 A district court's review of an arbitration award is strictly limited by Montana's Uniform Arbitration Act (UAA). Paulson v. Flathead Conservation Dist., 2004 MT 136, ¶ 24, 321 Mont. 364, 91 P.3d 569; Geissler v. Sanem, 285 Mont. 411, 415, 949 P.2d 234, 237 (1997). We review district court decisions on arbitration awards like any other district court decision, accepting findings of fact that are not clearly erroneous but deciding questions of law de novo. City of Livingston v. Mont. Pub. Emps. Ass'n ex rel. Tubaugh, 2014 MT 314, ¶ 11, 377 Mont. 184, 339 P.3d 41. We review a district court's ultimate decision to confirm an arbitration award for an abuse of discretion. Colstrip Energy Ltd. P'ship v. Nw. Corp., 2011 MT 99, ¶ 18, 360 Mont. 298, 253 P.3d 870.

         ¶12 The test for an abuse of discretion is whether the trial court acted arbitrarily, without employment of conscientious judgment, or exceeded the bounds of reason resulting in substantial injustice. Colstrip Energy Ltd. P'ship, ¶ 18. In reviewing whether the District Court abused its discretion in confirming the arbitration award, we apply the law that a court cannot review the merits of the controversy, but may only confirm, vacate, modify, or correct an arbitration award pursuant to §§ 27-5-311, -312, and -313, MCA. Roberts v. Lame Deer Pub. Sch. Dist. #6, 2013 MT 358, ¶ 7, 373 Mont. 49, 314 P.3d 647.


         ¶13 "The Federal Arbitration Act (FAA) governs contracts that involve interstate commerce." Kelker v. Geneva-Roth Ventures, Inc., 2013 MT 62, ¶ 11, 369 Mont. 254, 303 P.3d 777. The FAA preempts state laws that "prohibit outright the arbitration of a particular type of claim." Kelker, ¶ 15 (citing AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341, 131 S.Ct. 1740, 1747 (2011)). "However, when a state law does not conflict with the FAA so as to frustrate the objectives of Congress, it is not necessarily preempted." Keystone, Inc. v. Triad Sys. Corp., 1998 MT 326, ¶ 23, 292 Mont. 229, 971 P.2d 1240. The FAA preempts a state law "to the extent that it stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" in enacting the FAA. Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 432 (9th Cir. 2015). The Employment Agreement between Tedesco and HSOA involved interstate commerce: HSOA was a Minnesota corporation, Tedesco was a Montana resident, and Tedesco's work with HSOA involved doing business across state lines. The FAA therefore applies to the Employment Agreement's arbitration clause. See Kelker, ¶ 11. Montana's UAA also applies to the extent that it does not conflict with the FAA's objectives. See Sakkab, 803 F.3d at 432.

         ¶14 1. Whether the District Court erred in compelling arbitration.

         ¶15 Tedesco argues that the District Court erred in ordering the parties to proceed to arbitration. He contends that the Employment Agreement generally and the arbitration clause specifically were invalid. In his view, because there was no valid agreement between the parties to arbitrate their disputes, the District Court should have denied Adams's and HSBC's motion to compel arbitration. Adams and HSBC challenge Tedesco's appeal of the District Court's order compelling arbitration as untimely.

         A. Timeliness of Tedesco's Appeal of the Order Compelling Arbitration.

         ¶16 The District Court issued its order compelling arbitration on February 26, 2015, and it simultaneously stayed the proceedings. Adams and HSBC argue that the order was "final and appealable" and therefore that Tedesco had thirty days to appeal it. Because Tedesco did not appeal the order compelling arbitration until March ...

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