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Nebraska State Bar Association NE Law Express for March 28, 2008

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Case Summaries
Judge, Prejudice

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The sole issue presented in this appeal is whether the current dispute between the State of Nebraska and various tobacco companies is subject to arbitration under the arbitration provisions of the Master Settlement Agreement (the MSA) to which the State and the tobacco companies are parties. The Nebraska Supreme Court affirmed the district court’s, determination that the terms of the MSA required that the issue raised in the complaint should be decided by arbitration and entered an order compelling arbitration and dismissing the complaint.

State ex rel. Bruning. R.J. Reynolds Tobacco Co., 275 Neb. 310 (2008)



Supreme Court Headnotes

Jurisdiction:

1.  Appeal and Error. A jurisdictional question which does not involve a factual dispute is determined by an appellate court as a matter of law. ••• Before reaching the legal issues presented for review, it is the duty of an appellate court to determine whether it has jurisdiction over the matter before it.

Contracts:

1.  A contract must receive a reasonable construction and must be construed as a whole, and if possible, effect must be given to every part of the contract.

2.  Appeal and Error. The interpretation of a contract involves a question of law, in connection with which an appellate court has an obligation to reach its conclusions independently of the determinations made by the court below.

3.  Arbitration and Award. Arbitration is purely a matter of contract.Contracts. A court interpreting a contract must first determine as a matter of law whether the contract is ambiguous. ••• A contract written in clear and unambiguous language is not subject to interpretation or construction and must be enforced according to its terms.

4.  Words and Phrases. A contract is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings.

Final Orders:

1.  Appeal and Error. Under Neb. Rev. Stat. § 25-1902 (Reissue 1995), the three types of final orders which may be reviewed on appeal are (1) an order which affects a substantial right and which determines the action and prevents a judgment, (2) an order affecting a substantial right made during a special proceeding, and (3) an order affecting a substantial right made on summary application in an action after judgment is rendered.

Arbitration and Award.

1.  A party cannot be required to submit a dispute to arbitration unless he or she has agreed to do so.



Date Filed and Case No.: March 28, 2008. No. S-06-1027.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/march/mar28/s06-1027.pdf

Court Appealed From: District Court for Lancaster County: Paul D. Merritt, Jr., Judge.

Attorneys for the Appeal: Jon Bruning, David Cookson, and Frederick J. Coffman for State of Nebraska ex rel. Jon Bruning, Attorney General of the State of Nebraska, appellant. Patrick O’Brien and, of Counsel, Robert J. Brookhiser and Elizabeth B. McCallum for Commonwealth Brands, Inc., et al., appellees. Michael F. Coyle, Danene J. Tushar and Thomas J. Frederick for Philip Morris USA, Inc., appellee. Gerald Friedrichsen and Andrew M. Bath for RJ. Reynolds Tobacco Company and Lorillard Tobacco Company, appellees. Stephen R. Patton, and Douglas G. Smith for R.J. Reynolds Tobacco Company, appellee. Gayle Rosenstein for Lorillard Tobacco Company, appellee.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack and Miller-Lerman, J.J.

Authored By: Miller-Lerman, J.

Summary: The State of Nebraska and various other states and jurisdictions (the settling states) are parties to the MSA with various tobacco companies, including, R.J. Reynolds Tobacco Company; Philip Morris USA, Inc.; and Lorillard Tobacco Company (collectively the tobacco companies). The parties entered into the MSA in 1998 after various states separately sued the major U.S. tobacco companies to recover costs the states had incurred in treating smoking-related illnesses. The State of Nebraska had sued the tobacco companies in the district court for Lancaster County. A consent decree was entered in the district court in December 1998 approving the MSA. The above-named tobacco companies were the original parties to the MSA; approximately 40 other tobacco companies subsequently joined as parties to the MSA. The MSA requires that the tobacco companies make an annual payment to the settling states to offset public health costs. The annual payment is determined each year by an independent auditor who is required to follow a complex formula set forth in the MSA. The independent auditor is given the responsibility for calculating and determining the amount of all payments owed by the tobacco companies under the MSA, including any adjustments, reductions, and offsets, as well the allocation of such payments. Because the auditor is required to determine various calculations, the MSA permits the independent auditor to make certain assumptions.

     A concern of the parties to the MSA was that tobacco manufacturers who did not participate in the MSA would have an unfair market advantage over participating tobacco companies because such nonparticipating manufacturers would not be required to contribute to the annual payment and would not be subject to marketing and advertising restrictions placed on the participating tobacco companies pursuant to the MSA. To address such concerns, the MSA provides for a “Non-Participating Manufacturer” (NPM) adjustment if certain market and economic conditions exist. The present case involves a dispute over an NPM adjustment for the year 2003. The independent auditor determined that no NPM downward adjustment should be applied for the year 2003, in response, the tobacco companies have disagreed and asserted that the NPM adjustment should have been applied to reduce their annual payments due in 2006. The tobacco companies disputed the refusal to apply the NPM adjustment and in view of this dispute, the tobacco companies withheld a portion of the annual payment for 2006.

     The settling states filed actions in their respective jurisdictions seeking to compel the tobacco companies to pay the full annual payment. In response to the State’s complaint, the tobacco companies moved the district court to compel arbitration and to dismiss or stay the declaratory judgment action pending the outcome of such arbitration. The court concluded that the determination of whether a settling state diligently enforced its qualifying statute was an integral part of the independent auditor’s calculations under the MSA and as such the determination was subject to the binding arbitration requirement of the MSA. The court therefore ordered arbitration and dismissed the State’s action. The State appealed the order and the Nebraska Supreme Court granted the tobacco companies’ petition to bypass the Nebraska Court of Appeals.

Was the order compelling arbitration and dismissing the action is final and appealable? The tobacco companies argued that the order compelling arbitration was not a final, appealable order. The Court determined that the order compelling arbitration and dismissing the declaratory judgment action is a final order and that this court has jurisdiction to consider the appeal.

Did the district court err in ordering arbitration of the dispute regarding the State’s diligent enforcement of its qualifying statute? The State generally argues that under the MSA, the dispute is subject to judicial resolution in the court designated in the MSA, rather than to arbitration. The Court concluded that the MSA requires that the dispute at issue in this case is subject to arbitration and that therefore, the district court did not err in ordering arbitration and dismissing the case. Courts in numerous other settling states have dealt with this issue and almost without exception, such courts have held that the MSA requires arbitration of the dispute and Nebraska law independently, required the same conclusion.

Conclusion: The Nebraska Supreme Court here concludes that the district court’s order compelling arbitration and dismissing the State’s action for declaratory judgment was a final order and that they had jurisdiction to determine this appeal. The Court further concluded that the district court did not err in determining that the MSA requires arbitration of the dispute over diligent enforcement of the qualifying statute. AFFIRMED.


Jurisdiction, Arbitration, Contracts

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In this case, the Nebraska Supreme Court determines that a hearing in a probate case seeking to remove a personal representative, appoint a special personal representative regarding a matter and appoint a second personal representative, was conducted improperly. Because that judge had been exposed in that improper hearing to possibly prejudicial evidence, the case was remanded to be heard before a different judge.

In re Estate of Cooper, 275 Neb. 322 (2008)



Supreme Court Headnotes

Decedents’ Estates:

1.  Appeal and Error. In the absence of an equity question, an appellate court, reviewing probate matters, examines for error appearing on the record made in the county court.

2.  Executors and Administrators: Taken together, Neb. Rev. Stat. §§ 30-2454 and 30-2457 (Reissue 1995) set forth a procedure by which to suspend and remove a personal representative and appoint a special administrator.

     a.  Notice. Neb. Rev. Stat. § 30-2457 (Reissue 1995) permits a special administrator to be appointed after notice when a personal representative cannot or should not act and also permits the appointment of a special administrator without notice when an emergency exists. ••• Under Neb. Rev. Stat. § 30-2454 (Reissue 1995), once the personal representative receives notice of a petition seeking his or her removal, he or she “shall not act,” except in limited circumstances. Thus, notice to the personal representative under § 30-2454 effectively suspends the personal representative. ••• Once a personal representative is prohibited from acting under Neb. Rev. Stat. § 30-2454 (Reissue 1995), an interested party may thereafter move under Neb. Rev. Stat. § 30-2457 (Reissue 1995) for the appointment of a special administrator, based on the facts that the personal representative has received notice under § 30-2454 and cannot act and that the appointment of a special administrator would be appropriate to preserve the estate or to secure its proper administration.

     b.  Evidence. In the absence of evidence, no emergency basis under Neb. Rev. Stat. § 30-2457 (Reissue 1995) can be established upon which a county court could base its suspension of a personal representative and the appointment of a temporary special administrator.

Judgments:

1.  Appeal and Error. On a question of law, an appellate court is obligated to reach a conclusion independent of the determination reached by the court below.

Judges:

1.  Recusal: Proof. A trial judge should be recused when a litigant demonstrates that a reasonable person who knew the circumstances of the case would question the judge’s impartiality under an objective standard of reasonableness, even though no actual bias or prejudice is shown.



Date Filed and Case No.: March 28, 2008. Nos. S-06-1400, S-07-109.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/march/mar28/s06-1400.pdf

Court Appealed From: County Court for Douglas County: Lyn V. White, Judge.

Attorneys for the Appeal: Kristopher J. Covi, Lisa M. Lehan, and J. Terry Macnamara for Joe M. Richardson, Former Successor Personal Representative of the Estate of Richard N. Cooper, Deceased, appellant in case No.S-06-1400. Michael D. Kozlik for W.G. Yates & Sons Construction Company, appellee. L. Steven Grasz and Michael C. Schilken for Robyn Cooper, appellee in No. S-06-1400. L. Steven Grasz, Michael C. Schilken, Trenten P. Bausch, Rebecca B. Gregory, and Lindsay K. Edwards for appellant in No. S-07-109. T. Randall Wright and Brandon R. Tomjack for Marshall Investment Corporation, appellee. Frederick D. Stehlik and Michael J. Whaley for DeSoto County Medical Office and Stevan Himmelstein, appellees. David J. Koukol and Christopher D. Curzon for W Gerald Ezell Estate, appellee.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack, and Miller-Lerman, JJ.

Authored By: Miller-Lerman, J.

Summary: These appeals were brought from separate orders entered in the county court for Douglas County from one underlying estate case involving the estate of Richard N. Cooper. In case No. S-06-1400 (the “appointment case”), appellant Joe M. Richardson appealed from the county court’s orders in which it overruled his motion challenging the county court’s suspension of him as the successor personal representative and appointment of a temporary special administrator, appointed a second successor personal representative, and denied his motion for sanctions. In case No. S-07-109 (the “asset case”) the issue on appeal is whether the county court erred in determining that a certain brokerage account was an estate asset and therefore subject to the claims of estate creditors. These appeals were consolidated by the Nebraska Supreme Court for purposes of opinion and disposition.

     In the appointment case, Richardson questions the propriety of the statutory procedure used to remove him under the facts of this case and challenges the ex parte nature of one of the hearings held during the appointment proceedings. In the asset case, it is claimed that the county court’s procedure and decision in the appointment case caused the court to improperly prejudge the issue of whether to include a brokerage account as an asset in the estate.

Did the county court err in overruling Richardson’s motion to reconsider its previous order suspending his authority as the successor personal representative and appointing a temporary special administrator? The motion to remove Richardson as personal representative, was based upon a filing by a claimant in the estate. The claimant alleged that Richardson had been acting in regards to the brokerage account in ways which were The Court noted the record, in which the hearing on Given our review of the applicable statutes and record, we conclude that under the procedure utilized in the appointment case, the appointment of a special administrator was not warranted and we reverse the county court’s order overruling Richardson’s motion for reconsideration and remand the cause as indicated below. In the present case, in the absence of evidence, no emergency basis under § 30-2457 was established upon which the county court could base its suspension of Richardson and its appointment of a temporary special administrator. We therefore conclude that the county court erred when it overruled Richardson’s motion to reconsider its September 19, 2006, order suspending Richardson and appointing a temporary special administrator.

On appeal, Richardson also argues that the nature and resultant findings from the ex parte hearing caused the court to prejudge the issues raised at the October 31, 2006, hearing that resulted in the subsequent order in which the court ultimately removed Richardson as the successor personal representative and appointed a second successor personal representative. As we suggested above, we agree with Richardson that the county court’s handling of Yates’ petition was problematic. In addition to the fact that factual findings were made without evidence being taken, we note that the bill of exceptions from the September 19, 2006, hearing indicates that much of the dialog developing the case was initiated by the trial judge. Although we recognize that § 30-2457 permits a hearing without notice, it is nevertheless not advisable for the court to develop the record, as this bears unfavorably on the judge’s impartiality. It is apparent that the decision to suspend Richardson and appoint a temporary special administrator was based on communications occurring at a nonevidentiary hearing, when there was a “discussion” rather than a formal hearing to enable the trial court to decide the matter then pending before it on the basis of evidence. Looking at the record and the manner in which the September 19, 2006, hearing was conducted, the impartiality of the trial judge could be questioned and the rulings could appear to have prejudicially affected the interested parties’ substantial rights. We have previously stated to the effect that a trial judge should be recused when a litigant demonstrates that a reasonable person who knew the circumstances of the case would question the judge’s impartiality under an objective standard of reasonableness, even though no actual bias or prejudice is shown. Under the circumstances, we determine that it is necessary upon remand for the county court judge to recuse herself from further proceedings in the estate case. Given our analysis, we further conclude it is appropriate to vacate that portion of the county court’s order permanently removing Richardson as successor personal representative and appointing a second successor personal representative. Finally, we vacate the county court’s order denying Richardson’s motion for sanctions and remand such motion for consideration by a different judge.

By virtue of the proceedings, Richardson has received notice of Yates’ petition to remove him as successor personal representative. Therefore, in accordance with the provisions of § 30-2454, we conclude that following remand, Richardson “shall not act except to account, to correct maladministration or preserve the estate.” Pursuant to § 30-2457, Yates may seek to have a hearing before the new county court judge assigned to the estate case regarding the appointment of a special administrator to preserve the estate.

In summary, we determine that the county court erred in suspending Richardson and appointing a temporary special administrator. Accordingly, we reverse the county court’s order denying Richardson’s motion for reconsideration. We determine that the county court’s orders permanently removing Richardson as the successor personal representative, appointing a second successor personal representative, and denying Richardson’s motion for sanctions should be vacated. We also determine that by virtue, inter alia, of the court’s factual findings in the absence of evidence, it is necessary for the trial judge to recuse herself to avoid the appearance of partiality. We reverse and vacate, and remand for further proceedings consistent with this opinion.

Case No. S-07-109: The County Court’s Order Determining That the PrimeVest Account Is an Asset of the Estate Is Vacated.

In the asset case, the issue on appeal is whether the county court erred in determining that the PrimeVest account is an estate asset subject to the claims of creditors. After making this determination, the county court ordered that any transfers from that account were void and it further ordered the second successor personal representative to “trace the assets” from any transfers from the account. As noted above, an argument raised in the asset case is that certain of the proceedings in the appointment case caused the county court to prejudge matters relating to the PrimeVest account. We determine that there is merit to this argument and therefore conclude that it is appropriate to vacate the county court’s order in the asset case and remand the cause for further proceedings before a different judge consistent with this opinion.

CONCLUSION

For the reasons stated above, in case No. S-06-1400, we conclude that the county court erred in suspending Richardson and appointing a temporary special administrator, and we reverse that portion of the county court’s order denying Richardson’s motion for reconsideration. We determine that under the circumstances, those portions of the county court’s orders that permanently removed Richardson as the successor personal representative, appointed a second successor personal representative, and denied Richardson’s motion for sanctions should be vacated and the cause remanded for further proceedings consistent with this opinion. We also determine that it is necessary for the trial judge to recuse herself upon remand.

Nebraska Advance Sheets

334 275 NebRASkA RePORTS

In case No. S-07-109, we vacate the county court’s order and remand the cause for further proceedings before a different judge.

Judgment in No. S-06-1400 REVERSED IN PART AND IN PART VACATED, AND CAUSE REMANDED FOR FURTHER PROCEEDINGS.

Judgment in No. S-07-109 VACATED, AND CAUSE REMANDED FOR FURTHER PROCEEDINGS.


Probate, Filings, Unauthorized Practice of Law

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In this probate proceeding, a claimant, moved to strike two documents entitled "Statement of Claim" and "Demand for Notice" filed on behalf of another claimant because neither document had been filed by an attorney licensed to practice law in Nebraska. The Nebraska Supreme Court concluded that neither the filing of the statement of claim nor the filing of the demand for notice constituted the unauthorized practice of law in Nebraska

In re Estate of Cooper, 275 Neb. 297 (2008)



Supreme Court Headnotes

Decedents’ Estates:

1.  Appeal and Error. In the absence of an equity question, an appellate court, reviewing probate matters, examines for error appearing on the record made in the county court.

2.  Executors and Administrators: Claims: Notice. The filing of a statement of claim is an administrative step by which the personal representative is advised, in accordance with the probate statutes, of the identities of the creditors and the amounts of their claims.

Judgments:

1.  Appeal and Error. On a question of law, an appellate court is obligated to reach a conclusion independent of the determination reached by the court below.

Statutes.

1.  Statutory interpretation presents a question of law.

2.  Appeal and Error. Absent anything to the contrary, an appellate court will give statutory language its plain and ordinary meaning. ••• When confronted with a statutory construction issue, an appellate court resolves the issue independently and irrespective of the lower court’s conclusion. ••• An appellate court’s role, to the extent possible, is to give effect to the statute’s entire language, and to reconcile different provisions of the statute so they are consistent, harmonious, and sensible. ••• When possible, an appellate court will try to avoid a statutory construction that would lead to an absurd result.

3.  Decedents’ Estates: Claims: Attorney and Client. Giving the language in Neb. Rev. Stat. § 30-2486 (Reissue 1995) a consistent, harmonious, and sensible construction, it is apparent that the filing of a claim is a separate and distinct act from the initiation of a legal proceeding to pursue payment of the claim. Therefore, the filing of a claim does not commence an action and does not in and of itself require the services of an attorney.

Attorneys at Law:

1.  Words and Phrases. The term “practice of law” includes the trial of causes in court and the preparation of pleadings to be filed in court.

Rules of the Supreme Court:

1.  Attorneys at Law: States. Neb. Ct. R. of Prof. Cond. 5.5(c) (rev. 2004) permits a lawyer who is licensed to practice in another state but has not been admitted to practice in Nebraska to nonetheless on a temporary basis perform certain legal actions in this jurisdiction, so long as those actions “arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice.”



Date Filed and Case No.: March 28, 2008. No. S-06-1016.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/march/mar28/s06-1016.pdf

Court Appealed From: County Court for Douglas County: Lyn V. White, Judge.

Attorneys for the Appeal: Richard J. Gilloon, Charles D. Humble, and Bradley B. Mallberg for First Tennessee Bank, National Association, appellant. Kristopher J. Covi, Lisa M. Lehan, and J. Terry Macnamara for Joe M. Richardson, Successor Personal Representative of the Estate of Richard N. Cooper, Deceased, et al., appellees. Michael D. Kozlik for W.G. Yates & Sons Construction Company, appellee.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack, and Miller-Lerman, JJ.

Authored By: Miller-Lerman, J.

Summary: In this probate proceeding involving the estate of Richard N. Cooper, appellee, W.G. Yates & Sons Construction Company (Yates), a claimant, moved to strike two documents entitled “Statement of Claim” and “Demand for Notice” filed by or on behalf of another claimant, appellant First Tennessee Bank, National Association (First Tennessee), because neither document had been filed by an attorney licensed to practice law in Nebraska. Christopher D. Brown, the manager of special assets for First Tennessee, had filed the statements. Brown is not an attorney, and he is not licensed to practice law in Nebraska. Kristen C. Wright, an attorney in Memphis, filed a demand for notice on behalf of First Tennessee, requesting that all orders and other filings relevant to the Cooper estate be sent to Wright or another attorney at Wright's office address in Memphis. Wright is not licensed to practice law in Nebraska, and at the time she filed the demand for notice, she had not sought admission pro hac vice. Following an evidentiary hearing, the county court determined that the filing of the “Statement of Claim” and “Demand for Notice” constituted the unauthorized practice of law in violation of Neb. Rev. Stat. § 7-101 (Reissue 1997), sustained Yates’ motions, and ordered both the statement of claim and the demand for notice stricken from the file. First Tennessee appealed and the Nebraska Supreme Court issued the opinion.

Did the county court err as a matter of law when it concluded that the statement of claim filed on behalf of First Tennessee by one of First Tennessee’s employees, constituted the unauthorized practice of law? First Tennessee asserted that the filing of the statement of claim did not constitute the commencement of a proceeding or action but instead is an administrative matter designed to advise the personal representative of the nature and amount of a claim against the estate. Given the purpose of the statement of claim, First Tennessee argued that the statement of claim can be filed by a claimant or a representative of the claimant without the assistance of counsel and that such a filing does not constitute the practice of law and does not violate § 7-101. The Nebraska Supreme Court agreed. Yates argued, and the county court agreed, that the filing of a claim constituted the initiation of a legal proceeding requiring the services of an attorney, and because a corporation cannot appear pro se in litigation, a lawyer licensed in Nebraska must file a statement of claim on behalf of a corporation. Neb. Rev. Stat. § 30-2486(1) provides that a “claimant may file a written statement of the claim.” The Court said that the county court’s conclusion that the filing of a statement of claim commenced a proceeding is not warranted by § 30-2486, other statutes, or their jurisprudence. Giving the language in subsections (1) through (3) a consistent, harmonious, and sensible construction, the Court said that it is apparent that the filing of a claim is a separate and distinct act from the initiation of a legal proceeding to pursue payment of the claim. Therefore, the filing of a claim does not commence an action and does not in and of itself require the services of an attorney. The Court said the county court erred as a matter of law when it concluded that Brown’s filing of the statement of claim on behalf of First Tennessee constituted the unauthorized practice of law and ordered the statement of claim struck. “Such order is reversed.”

Did the county court err as a matter of law when it concluded that the demand for notice filed on behalf of First Tennessee by Wright constituted the unauthorized practice of law? First Tennessee argued in effect that the county court misconstrued rule 5.5(c)(4) of the Nebraska Rules of Professional Conduct governing the unauthorized practice of law when the court concluded that Wright’s filing of the demand for notice violated the unauthorized practice of law statute, § 7-101. The Nebraska Supreme Court agreed with First Tennessee that the county court erred. Looking to rule 5.5(c)(4) and the comments thereon, the Court found that the record reflected that First Tennessee is a Tennessee banking corporation, with its principal place of business in Memphis, Tennessee, the same city and state where Wright maintains her law practice. First Tennessee is a client of hers. The request for notice sought to have copies of all filings made in the underlying estate case mailed to Wright, in the same state where she offices and First Tennessee has its principal place of business. The Court said that the “risk” involved to either the client, the public, or the courts was de minimis. The filing of the request for notice was effectively an administrative matter and did not in and of itself involve either rendering a legal opinion to First Tennessee or engaging in a legal contest on behalf of First Tennessee in Nebraska. Given these facts, the Court concluded that the county court erred as a matter of law when it determined that Wright’s filing of the demand for notice constituted the unauthorized practice of law under either rule 5.5(c) or § 7-101 and ordered the demand struck.

Conclusion: For those reasons, the Court concluded that the county court erred as a matter of law when it concluded that brown’s filing of the statement of claim and Wright’s filing of the demand for notice, each on behalf of First Tennessee, constituted the unauthorized practice of law in violation of § 7-101 and in striking the statement and demand. Accordingly, the Court reversed the county court’s order and remanded the cause with directions to reinstate both filings. REVERSED AND REMANDED WITH DIRECTIONS.


Probate, Removal of Personal Representative, Procedure

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The sole issue presented in this appeal is whether the current dispute between the State of Nebraska and various tobacco companies is subject to arbitration under the arbitration provisions of the Master Settlement Agreement (the MSA) to which the State and the tobacco companies are parties. The Nebraska Supreme Court affirmed the district court’s, determination that the terms of the MSA required that the issue raised in the complaint should be decided by arbitration and entered an order compelling arbitration and dismissing the complaint.

State ex rel. Bruning. R.J. Reynolds Tobacco Co., 275 Neb. 310 (2008)



Supreme Court Headnotes

Jurisdiction:

1.  Appeal and Error. A jurisdictional question which does not involve a factual dispute is determined by an appellate court as a matter of law. ••• Before reaching the legal issues presented for review, it is the duty of an appellate court to determine whether it has jurisdiction over the matter before it.

Contracts:

1.  A contract must receive a reasonable construction and must be construed as a whole, and if possible, effect must be given to every part of the contract.

2.  Appeal and Error. The interpretation of a contract involves a question of law, in connection with which an appellate court has an obligation to reach its conclusions independently of the determinations made by the court below.

3.  Arbitration and Award. Arbitration is purely a matter of contract.Contracts. A court interpreting a contract must first determine as a matter of law whether the contract is ambiguous. ••• A contract written in clear and unambiguous language is not subject to interpretation or construction and must be enforced according to its terms.

4.  Words and Phrases. A contract is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings.

Final Orders:

1.  Appeal and Error. Under Neb. Rev. Stat. § 25-1902 (Reissue 1995), the three types of final orders which may be reviewed on appeal are (1) an order which affects a substantial right and which determines the action and prevents a judgment, (2) an order affecting a substantial right made during a special proceeding, and (3) an order affecting a substantial right made on summary application in an action after judgment is rendered.

Arbitration and Award.

1.  A party cannot be required to submit a dispute to arbitration unless he or she has agreed to do so.



Date Filed and Case No.: March 28, 2008. No. S-06-1027.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/march/mar28/s06-1027.pdf

Court Appealed From: District Court for Lancaster County: Paul D. Merritt, Jr., Judge.

Attorneys for the Appeal: Jon Bruning, David Cookson, and Frederick J. Coffman for State of Nebraska ex rel. Jon Bruning, Attorney General of the State of Nebraska, appellant. Patrick O’Brien and, of Counsel, Robert J. Brookhiser and Elizabeth B. McCallum for Commonwealth Brands, Inc., et al., appellees. Michael F. Coyle, Danene J. Tushar and Thomas J. Frederick for Philip Morris USA, Inc., appellee. Gerald Friedrichsen and Andrew M. Bath for RJ. Reynolds Tobacco Company and Lorillard Tobacco Company, appellees. Stephen R. Patton, and Douglas G. Smith for R.J. Reynolds Tobacco Company, appellee. Gayle Rosenstein for Lorillard Tobacco Company, appellee.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack and Miller-Lerman, J.J.

Authored By: Miller-Lerman, J.

Summary: The State of Nebraska and various other states and jurisdictions (the settling states) are parties to the MSA with various tobacco companies, including, R.J. Reynolds Tobacco Company; Philip Morris USA, Inc.; and Lorillard Tobacco Company (collectively the tobacco companies). The parties entered into the MSA in 1998 after various states separately sued the major U.S. tobacco companies to recover costs the states had incurred in treating smoking-related illnesses. The State of Nebraska had sued the tobacco companies in the district court for Lancaster County. A consent decree was entered in the district court in December 1998 approving the MSA. The above-named tobacco companies were the original parties to the MSA; approximately 40 other tobacco companies subsequently joined as parties to the MSA. The MSA requires that the tobacco companies make an annual payment to the settling states to offset public health costs. The annual payment is determined each year by an independent auditor who is required to follow a complex formula set forth in the MSA. The independent auditor is given the responsibility for calculating and determining the amount of all payments owed by the tobacco companies under the MSA, including any adjustments, reductions, and offsets, as well the allocation of such payments. Because the auditor is required to determine various calculations, the MSA permits the independent auditor to make certain assumptions.

     A concern of the parties to the MSA was that tobacco manufacturers who did not participate in the MSA would have an unfair market advantage over participating tobacco companies because such nonparticipating manufacturers would not be required to contribute to the annual payment and would not be subject to marketing and advertising restrictions placed on the participating tobacco companies pursuant to the MSA. To address such concerns, the MSA provides for a “Non-Participating Manufacturer” (NPM) adjustment if certain market and economic conditions exist. The present case involves a dispute over an NPM adjustment for the year 2003. The independent auditor determined that no NPM downward adjustment should be applied for the year 2003, in response, the tobacco companies have disagreed and asserted that the NPM adjustment should have been applied to reduce their annual payments due in 2006. The tobacco companies disputed the refusal to apply the NPM adjustment and in view of this dispute, the tobacco companies withheld a portion of the annual payment for 2006.

     The settling states filed actions in their respective jurisdictions seeking to compel the tobacco companies to pay the full annual payment. In response to the State’s complaint, the tobacco companies moved the district court to compel arbitration and to dismiss or stay the declaratory judgment action pending the outcome of such arbitration. The court concluded that the determination of whether a settling state diligently enforced its qualifying statute was an integral part of the independent auditor’s calculations under the MSA and as such the determination was subject to the binding arbitration requirement of the MSA. The court therefore ordered arbitration and dismissed the State’s action. The State appealed the order and the Nebraska Supreme Court granted the tobacco companies’ petition to bypass the Nebraska Court of Appeals.

Was the order compelling arbitration and dismissing the action is final and appealable? The tobacco companies argued that the order compelling arbitration was not a final, appealable order. The Court determined that the order compelling arbitration and dismissing the declaratory judgment action is a final order and that this court has jurisdiction to consider the appeal.

Did the district court err in ordering arbitration of the dispute regarding the State’s diligent enforcement of its qualifying statute? The State generally argues that under the MSA, the dispute is subject to judicial resolution in the court designated in the MSA, rather than to arbitration. The Court concluded that the MSA requires that the dispute at issue in this case is subject to arbitration and that therefore, the district court did not err in ordering arbitration and dismissing the case. Courts in numerous other settling states have dealt with this issue and almost without exception, such courts have held that the MSA requires arbitration of the dispute and Nebraska law independently, required the same conclusion.

Conclusion: The Nebraska Supreme Court here concludes that the district court’s order compelling arbitration and dismissing the State’s action for declaratory judgment was a final order and that they had jurisdiction to determine this appeal. The Court further concluded that the district court did not err in determining that the MSA requires arbitration of the dispute over diligent enforcement of the qualifying statute. AFFIRMED.