Buried in many modern contracts (from standard construction industry contracts to employment agreements, and from consumer contracts to mortgages and leases) are agreements to arbitrate any existing or future disputes. These arbitration provisions may appear innocuous, but, when a subsequent dispute develops between the contracting parties and one party prefers to be in court, a dispute-within-the-dispute arises. The party wishing to arbitrate must ask the court for an order mandating that the parties resolve their dispute in arbitration. In considering a request for such an order, the court must determine whether the arbitration provision is valid and, if so, whether it applies to the parties’ dispute. The court then rules on whether to compel arbitration.
As in most litigation, the party that loses the fight over whether to proceed in court or arbitration may wish to appeal. In Wisconsin, most appeals fall into one of two categories: appeals as of right and permissive appeals. “A final judgment or final order … may be appealed as a matter of right … unless otherwise expressly provided by law” under Wis. Stat. § 808.03(1). This provision encompasses “a judgment, order or disposition that disposes of the entire matter in litigation as to one or more of the parties, whether rendered in an action or special proceeding.” Id. “A judgment or order not appealable as of right” cannot be appealed before final judgment, unless the party wishing to appeal asks permission from the appellate court and the request for leave to appeal is granted. Wis. Stat. § 808.03(2). Notably, the time allowed for requesting leave (14 days, per Wis. Stat. § 809.50) is shorter than the time for initiating an appeal as of right (generally 45 or 90 days, per Wis. Stat. § 808.04).
Whether an order on a motion to compel arbitration is immediately appealable as of right under § 808.03(1) was unclear until the Wisconsin Supreme Court’s recent decision in L.G. v. Aurora Residential Alternatives, Inc. In that case, the Court held that if a circuit court denies a motion to compel arbitration, the party wishing to arbitrate has an immediate opportunity to appeal.
L.G., a mentally disabled resident of one of Aurora’s facilities, accused an Aurora employee of sexually assaulting her. After the employee was convicted of fourth-degree sexual assault, L.G. filed suit against Aurora, seeking monetary damages. Aurora responded with a motion to compel arbitration (and to stay the lawsuit pending the outcome of the arbitration), relying on an arbitration agreement L.G. had signed. The circuit court denied Aurora’s motion.
When Aurora appealed, L.G. moved to dismiss the appeal for lack of jurisdiction, arguing that the underlying order was non-final and that Aurora therefore needed to seek permission to appeal. By the time Aurora filed its appeal, the 14-day window for seeking permission had closed, so the entire question was whether the circuit court’s order declining to mandate arbitration was a final order appealable as of right.
The court of appeal granted L.G.’s motion to dismiss the appeal. It held that, because the order denying arbitration does not dispose of the entire lawsuit, it is not a final order appealable as of right under § 808.03(1). In the court of appeals’ view, Aurora’s only avenue to appeal the circuit court’s arbitration order was § 808.03(2), which requires a request for permission to appeal within 14 days of the order. Since Aurora had not made a timely request for permission to appeal, the court of appeals dismissed Aurora’s appeal for lack of jurisdiction.
The Wisconsin Supreme Court reversed. Writing for the Court (which was unanimous, with two Justices not participating), Justice Daniel Kelly explained that a motion to compel arbitration and an accompanying request to stay litigation is a “special proceeding” within § 808.03(1). The Court held that the text of the Wisconsin Arbitration Act (Wis. Stat. Ch. 788) makes clear that the proceedings on whether the parties agreed to arbitrate a dispute are distinct from the merits of the dispute itself. When the circuit court issues an order resolving arbitrability, its order disposes of the entire special proceeding. Accordingly, even though the order denying Aurora’s arbitration request meant that the merits of L.G.’s case remained to be litigated before the circuit court, the order was nonetheless final for purposes of appeal under § 808.03(1).
Parties to modern contracts should take note of the Aurora decision. Under the Court’s holding, a party need not bear the expense and ordeal of a full trial (or a complete arbitration) before it has the right to appeal the circuit court’s ruling on a motion to compel arbitration. For parties who value mandatory arbitration, care should be taken to include a provision specifying that disputes will be governed by Wisconsin law and heard only in Wisconsin courts so that any arbitration dispute can be immediately appealed under Aurora.