Burch v. Heatron, Inc.

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NOT DESIGNATED FOR PUBLICATION

No. 119,060

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

SCOTT BURCH,
Appellant,

v.

HEATRON, INC. and
EC MANUFACTURING, LLC,
Appellees.


MEMORANDUM OPINION

Appeal from Leavenworth District Court; DAVID J. KING, judge. Opinion filed December 7,
2018. Affirmed.

Tedrick A. Housh III and Amanda E. Sisney, of Lathrop Gage, LLP, of Kansas City, Missouri, for
appellant.

Jason M. Hans and Charles W. German, of German May PC, of Kansas City, Missouri, and C.
Brooks Wood, of Wood Law Office LLC, of Kansas City, Missouri, for appellees.

Before MALONE, P.J., PIERRON, J., and BURGESS, S.J.

PER CURIAM: Scott Burch sued his former employer, Heatron, Inc. (Heatron), and
its subsidiary, EC Manufacturing, LLC (ECM), alleging that Heatron and ECM failed to
pay him commissions as agreed and that they owed him monetary damages under
theories of breach of contract, promissory estoppel, and quantum meruit. Heatron and
ECM moved to compel arbitration, and the district court granted the motion. A panel of
arbitrators issued an award in favor of Heatron and ECM on all of Burch's claims.
Heatron and ECM moved in the district court to confirm the award, and Burch moved to
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vacate it. After a hearing, the district court confirmed the arbitration award. Burch
appeals, arguing that the district court erred by ordering arbitration and also by
confirming the resulting arbitration award. For the reasons stated below, we affirm the
district court's judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Burch began working for Heatron in 2010 as a regional sales and business
manager. Throughout his employment by Heatron, Burch worked in various sales
positions. In the course of his employment, in December 2011, Burch participated in
negotiations with R.J. Reynolds Company (RJR) for Heatron to manufacture a heating
element for an electronic cigarette.

On February 27, 2012, Burch signed an employment agreement (the 2012
Agreement), which set forth Burch's compensation plan, including "a salary, 'variable
compensation,' and a 'bonus' provision for up to 2% on 'new business' and on
'substantially new revenue from existing customers.'" The 2012 Agreement set forth that
Burch's bonus, if he met "100% of [his] goal," would be $40,000. The 2012 Agreement
was "effective and applies to all contracts entered into between 10/01/2011 and
9/3[0]/2012"—Heatron's 2012 fiscal year—"and supersede[d] all plans and terms
previously in effect." The 2012 Agreement contained the following arbitration provision:

"All disputes which involve claims for $3000 or more, and which arise out of the
participant's employment or termination thereof, whether or not such claims are based
exclusively on the terms of this Plan, shall be submitted to binding arbitration in the State
of Kansas if the parties are unable to resolve their dispute within thirty (30) days after
exercising good faith efforts. The Uniform Arbitration Act of the State of Kansas shall
apply to all aspects of the arbitration between the parties. The parties agree that after
arbitration has been initiated[,] all other civil actions between the parties shall be stayed
until after the arbitration proceeding is concluded.
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"This Plan shall be governed in all respects by the law of the State of Kansas.
The arbitrators shall honor the terms and conditions of the Plan and construe it in
accordance with the laws of the State of Kansas. The arbitration shall be binding on the
parties and be honored by them without resort to any further court proceedings. An
Arbitration award shall be entered as a judgment in any court of competent jurisdiction.
"Neither party may demand arbitration or institute any lawsuit in any form
arising out [of] this Plan, or arising in any way out of the employment relationship
between the parties, more than one (1) year after the claim or cause of action has arisen."

At about the same time Burch signed the 2012 Agreement, he sent a multiyear
proposal to RJR about Heatron's development of the heating element and other
components of the electronic cigarette. Burch claims that on June 6, 2012, Heatron's
president and co-owner of ECM, H.B. Turner, orally agreed that Heatron would
continually pay Burch 2 percent of RJR gross sales revenue, rather than limiting the 2
percent bonus to the first year of work for RJR. This oral agreement contradicted
language in the 2012 Agreement that limited the 2 percent bonus to "new business" and
"substantially new revenue from existing customers."

Ultimately, because of the potential tort liability risk to Heatron from working
within the tobacco industry, Heatron decided to create a new and separate corporation to
conduct the RJR business. As a result, on or about September 30, 2012, some of
Heatron's shareholders created ECM, which then began production of the RJR electronic
cigarettes. For fiscal year 2012, Burch received a 2 percent bonus of $18,690 for the RJR
business. That same fiscal year, Burch also received a 2 percent bonus for his work in
growing other core business for Heatron, such as the Ametek account, for which Heatron
manufactured aircraft heaters. In fiscal year 2012, Burch's total bonus was $40,000.

Although Heatron asked Burch to sign employment agreements much like the
2012 Agreement for fiscal years 2013 and 2014, Burch did not do so. Even so, Burch
received more than $40,000 in bonus compensation in fiscal years 2013 and 2014. Burch
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contends that he had additional conversations with Turner in fiscal year 2013 in which
Turner promised that he would continue to receive the 2 percent bonus on RJR revenue
throughout the coming years. For fiscal year 2013, at least part of Burch's $84,000 bonus
was based on revenue from RJR. For fiscal year 2014, however, Burch contends that
none of his $90,000 bonus was based on RJR revenues, despite ECM doing $85.3 million
in assembly business for RJR.

Heatron ultimately informed Burch that he would not receive any further bonus or
commission compensation for the RJR business. After Burch complained, Heatron
terminated his employment as of January 30, 2015.

On April 29, 2015, Burch filed suit in Leavenworth County District Court. He
brought claims of breach of contract, promissory estoppel, and quantum meruit against
Heatron, and he also sued ECM under an alter ego theory of liability. Based on the
alleged oral contracts with Turner, Burch sought "commissions on gross sales revenue
from the RJR project" for fiscal years 2014 and 2015. Under quantum meruit, Burch
sought compensation for "the full market value of his sales efforts that benefitted"
Heatron and ECM.

Heatron and ECM filed separate answers on June 1, 2015. In its answer, Heatron
asserted that Burch's claims "are subject to arbitration pursuant to provisions contained in
the written incentive plans provided to" Burch, so "this action should be dismissed or
stayed pending arbitration." ECM did not expressly assert that arbitration was required,
but it incorporated by reference Heatron's affirmative defenses. Heatron and ECM
informally asked Burch to participate in arbitration, but when Heatron and ECM would
not or could not produce a signed copy of the 2012 Agreement, which Burch disputed
applied to the present disputes in any case, Burch refused to participate in arbitration.

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On July 16, 2015, the parties and the district court engaged in a case management
conference hearing, which resulted in the case management conference order. That order
set the close of discovery for January 22, 2016; set the pretrial motions filing deadline for
February 5, 2016; set the pretrial motions hearing and pretrial conference for March 31,
2016; and set trial for May 23, 2016.

The parties conducted discovery and, in November 2015, Heatron discovered what
appeared to be a photocopy of the 2012 Agreement with Burch's signature. At his
deposition in January 2016, Burch contested the authenticity of his purported signature
on the photocopy produced by Heatron. Experts retained by the parties all agreed that the
signature on the document was not authentic.

The parties continued with discovery and, on January 22, 2016, they filed a joint
motion for extension of the discovery deadline, the pretrial motion deadline, and the
expert witness designation deadline because of the large volume of discovery already
produced. The parties indicated in the joint motion that they did not expect that the trial
date would need to be delayed. On February 26, 2016, Heatron filed an independent
motion seeking to file pretrial motions despite it being past the deadline on which such
motions needed to be filed. The district court denied Heatron's motion.

In early June 2016, Heatron's offices flooded, requiring Turner to move offices.
While moving, Turner discovered a copy of the 2012 Agreement with Burch's original
signature. The same day, Heatron produced the document to Burch, but Burch informed
Heatron on July 14, 2016, that he would not stipulate to its authenticity. On July 25,
2016, Heatron supplemented its pretrial questionnaire purporting to add to its list of trial
exhibits and to identify an expert witness who would testify to the document's
authenticity. Burch filed objections, arguing that the expert disclosure was untimely.

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On August 26, 2016, the district court issued its pretrial order. The pretrial order
did not address Heatron's request to supplement its expert witness list and its trial exhibit
list, but it set trial for September 19, 2016.

On September 7, 2016, Heatron moved to compel arbitration and stay the civil
proceedings. Heatron argued that the arbitration provision in the 2012 Agreement
encompassed all of Burch's claims and that the timing of the motion to compel arbitration
"was based on a misplaced arbitration agreement and not based on litigation tactics or
improper motive." ECM joined the motion on September 8, 2016. Burch filed a
memorandum in opposition to the motion to compel arbitration.

On September 12, 2016, the district court held a hearing on the motion. At the
hearing, Heatron argued that the arbitration provision in the 2012 Agreement controlled
Burch's claims and that they now had the original signed agreement. Heatron noted that it
had asserted in its answer that the arbitration provision of the 2012 Agreement controlled.
Heatron also informed the district court that it had informally suggested arbitration early
in the litigation, but that Burch would not agree to arbitration. Heatron conceded that it
could have moved to compel arbitration when the case was initially filed but stated that it
had not done so because it did not believe it had the proof necessary to show arbitrability
of the claims until discovery of the original 2012 Agreement in May 2016.

For his part, Burch argued first that his claims were not encompassed by the 2012
Agreement because he only sought damages for bonuses unpaid after fiscal year 2012,
while the 2012 Agreement, by its terms, applied only to fiscal year 2012. Burch
explained that although the initial alleged oral agreement with Turner about multiyear
bonuses on RJR revenue was purportedly made during fiscal year 2012, he based his
current claims on subsequent promises that Turner allegedly made after the 2012 fiscal
year. Burch also argued that to the extent the 2012 Agreement did apply, Heatron had
waived its right to arbitration through its litigation conduct. Even so, Burch conceded at
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the hearing that waiver and timeliness were issues that should be decided by arbitrators if
the underlying claims were within the scope of the arbitration agreement.

After hearing argument, the district court ruled from the bench. The district court
set forth the basic facts of the case, including the relevant language from the 2012
Agreement, then stated:

"4. This Court's review of the present motion is limited to whether the claims in
this lawsuit are arbitrable. The issues related to waiver, timing, and other procedural
matters of arbitration rights, are to be [decided] by the arbitrators. And that's from
[Portfolio Recovery Assocs. v. Dixon, 52 Kan. App. 2d 365, 366 P.3d 245 (2016)], . . .
which is also supported by certain other decisions that have been shown to me, including
the BG Group[, PLC] v. Republic of Argentina[, 572 U.S. 25, 134 S. Ct. 1198, 188 L. Ed.
2d 220 (2014),]. . . . And, also, the City of Lenexa v. C.L. Fairley [Constr. Co., Inc., 15
Kan. App. 2d 207, 805 P.2d 507, rev. denied 248 Kan. 994 (1991)].
"5. The agreement Defendant bases its motion to compel arbitration on was
signed on February 27, 2012. It is purported to be signed on February 27, 2012. And by
its terms, ["]was effective between October 1, 2011 and September 31 [sic], 2012[."]
Some, but not all, of Plaintiff's claims relate to ["]disputes["] ["]which arise out of
Plaintiff's employment["] during the effective time of agreement.
"6. . . . Plaintiff's claims are based on a June 6, 2012 oral agreement that was
reaffirmed periodically after the time of the effective date of the written agreement. The
alleged oral promise or agreement on June 6, 2012, would have been during the effective
timeframe of the written agreement that included the arbitration provision. It is a dispute
which arose out of his employment. Accordingly, it would be arbitrable."

The district court also briefly addressed the issues of timeliness and waiver,
although it expressly noted that "to the extent that these are matters that are for the
arbitrators, then obviously any of my findings are—are not effective." The district court
granted the motion to compel arbitration and stayed the civil proceedings pending
arbitration of all of Burch's claims.
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A panel of three arbitrators was selected, and on November 23, 2016, Burch filed
a motion with the arbitration panel seeking remand to the district court because Heatron
and ECM waived their right to arbitration and/or did not timely seek arbitration. Heatron
filed an opposition to the motion, which ECM joined, on December 7, 2016. On
December 16, 2016, Burch filed his reply in support of the motion.

In a written order issued on December 21, 2016, the arbitration panel denied
Burch's motion to remand. Noting that the case "presents close questions" about waiver
and timeliness, the arbitration panel nevertheless found that Heatron and ECM notified
Burch of their intent to arbitrate within the one-year timeframe set forth in the 2012
Agreement and that they had not waived their right to arbitrate through their litigation
conduct, as they moved to compel arbitration within a reasonable period after the May
2016 discovery of the 2012 Agreement with Burch's original signature.

The arbitration panel held an evidentiary hearing on Burch's claims on June 13-16,
2017. On October 17, 2017, the arbitration panel issued its written order unanimously
finding in favor of Heatron and ECM and against Burch on all claims. As to the breach of
oral contract claim, the arbitrators found "that Burch failed to meet his burden of proving
that Heatron promised him that he would continually receive a 2% commission on all
RJR business or any other 'new business' which, after the first year, was no longer 'new
business' to the company." The arbitrators also found that Burch failed to meet his burden
of proving his claims under promissory estoppel and quantum meruit.

On October 23, 2017, Heatron filed in the district court a motion to confirm the
arbitration award, which ECM joined. On November 30, 2017, Burch moved to vacate
the award.

On January 23, 2018, the district court held a hearing on the motions. Burch
argued for the first time that waiver of the right to arbitration is a question for the district
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court, not the arbitration panel; he then reasserted his argument that Heatron and ECM's
litigation conduct waived any right to arbitration. He also reasserted that his claims were
not within the scope of the arbitration provision because the 2012 Agreement covered
only fiscal year 2012 and he sought damages for fiscal years 2013 and 2014. Finally,
Burch argued that the arbitrators manifestly disregarded Kansas law on quantum meruit,
in that they misunderstood and misapplied the test for quantum meruit.

For its part, Heatron reasserted its positions that waiver was an issue for the
arbitrators and that Burch's claims were within the scope of the arbitration provision in
the 2012 Agreement because they stemmed from an oral contract that allegedly occurred
in June 2012. Heatron disputed the other arguments made by Burch and asserted that the
arbitrators' decision should be upheld in its entirety. ECM did not present oral argument
at the hearing. The district court ruled from the bench:

"[B]ased on the argument and briefing that the parties have done, the Court is granting
the motion to confirm the arbitration award and denying the motion to vacate the
arbitration award.
"The Court finds that the matters addressed were all determined by the
arbitrator[s] against the plaintiff's positions, that the opportunity to present and determine
the waiver issues were given to the arbitrators, considered and determined adverse to the
plaintiff.
"The Court would indicate, also, that even if—and the reason I'm making this is
for the potential that if I'm wrong about litigation waiver is a matter for the arbitrators to
decide, that even if I were to determine the issue of litigation waiver at this time I would
find that there was no such waiver. And—and the principle difference would be that the
late determination of the existence of a signed agreement which compelled or provided
for arbitration explains to my satisfaction the delay in asserting that position, and that
although it was late in the process and as [Burch] has indicated but for scheduling issues
the case could have been tried in—in May of 2016 before the discovery and—and the
assertion of the motion to compel arbitration, but that—that that explains and
distinguishes it from the other cases where litigation waiver has been determined by the
Court as opposed to the arbitrators. So even if that matter was left for my determination, I
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would not find that there was a waiver of—of the litigation—or a waiver of the right to
arbitrate.
"The Court finds, also, contrary to what Plaintiff argues, that the claims that were
submitted and determined by the arbitrators were arbitrable claims. They did not exceed
the scope of the arbitration agreement. The Court finds that the arbitrators did not exceed
the authority that they were granted in making the determination of the issues in the—in
the matter.
"And also the Court finds that the arbitrators did not decide contrary to Kansas
law the issue of quantum meruit and apply a[n] incorrect legal standard for a
determination. The statement that [Burch] has indicated from page 10 of their—their
order cannot be looked at in isolation, you have to look at the opinion as a whole. And
they spend the better part of page 8 of the Opinion discussing the quantum meruit claim,
the elements that are required of proof, and what their findings were in relation to that.
"And it is clear from my reading of that, that they did not take the position that
we're not even considering quantum meruit because we found that there was not an oral
agreement and without such an agreement there can be no quantum meruit claim. That
was not in my judgment what the arbitrators found.
"So for those reasons as well as I've been persuaded by more extensively the
briefing that was done by the defendant on—on—on the particular issues raised by the
plaintiff in their motion to vacate the arbitration award, that the defendants' motion to
confirm the award should be granted."

On January 25, 2018, the district court issued its journal entry granting the motion
to confirm the arbitration award and denying the motion to vacate it "[f]or the reasons
stated on the record." Burch timely filed a notice of appeal.

On appeal, Burch asserts that the district court erred both before and after ordering
the arbitration. First, he argues that the district court erred prior to the arbitration by
finding that Burch's claims were arbitrable and by leaving the timeliness and waiver
issues for the arbitrators to decide. Second, he argues that the district court erred after the
arbitration by declining to vacate the arbitration award despite the arbitration panel's error
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in applying the Federal Arbitration Act instead of the Kansas Uniform Arbitration Act
and the panel's error in manifestly disregarding Kansas law on quantum meruit claims.

DID THE DISTRICT COURT ERR BY ORDERING ARBITRATION?

Burch argues that the district court erred by ordering arbitration because (1) the
arbitration provision did not apply to his claims, which were based on the alleged oral
agreement with Turner; (2) the demand for arbitration was untimely; and (3) Heatron and
ECM waived arbitration, which should have been considered by the district court, not the
arbitrators. Heatron and ECM reply that the district court correctly found that (1) Burch's
claims fell within the scope of the arbitration provision; (2) whether the arbitration
demand was timely and whether arbitration was waived were matters properly left to the
arbitrators; (3) the arbitration demand was timely; and (4) arbitration was not waived.

Arbitrability of Burch's claims


"An arbitrator's power to resolve a dispute originates from an agreement to
arbitrate between the parties. Without such an agreement to establish the parties' consent,
the arbitrator has no jurisdiction. When deciding whether to compel arbitration, a court
must first consider whether there is an agreement to arbitrate between the parties. If there
is such an agreement, the court must then determine whether the arbitration agreement
includes the specific point at issue. An appellate court reviews an alleged arbitration
agreement like any other contract, applying a de novo standard of review. [Citations
omitted.]" Anderson v. Dillard's, Inc., 283 Kan. 432, 436, 153 P.3d 550 (2007).

The parties do not dispute whether there was an agreement to arbitrate; instead,
they focus on whether the arbitration agreement encompasses Burch's claims. Burch
contends that his claims were not within the scope of the arbitration clause in the 2012
Agreement because the claims are not based on the 2012 Agreement itself but on Burch's
alleged oral contracts with Turner. Specifically, Burch points to the oral promises Turner
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allegedly made to Burch after fiscal year 2012 to continue paying the 2 percent bonus on
RJR business. Burch contends that because the purported renewed promises for bonuses
occurred after fiscal year 2012, they are not covered by the 2012 Agreement and thus
Burch's claims are not subject to the arbitration provision in the 2012 Agreement.

Burch's argument hinges on the persuasiveness of his assertion that the oral
promises allegedly made by Turner after fiscal year 2012 to continue paying Burch a
2 percent bonus on RJR business are distinct from the promise to do so that Turner
allegedly made during fiscal year 2012. Burch raised this argument at the September 12,
2016 hearing on the motion to compel arbitration, and at the January 23, 2018 hearing on
the motion to confirm or vacate the arbitration award. The district court rejected it both
times, finding that the alleged June 6, 2012 oral agreement was the genesis of the present
disputes and all later agreements between Turner and Burch were "reaffirmations" of that
agreement. Burch now claims that this finding by the district court was error.

To support his claim, Burch cites DynaResource de Mexico, S.A. de C.V. v.
Goldgroup Resources, Inc., No. 14-cv-01527-MSK-KMT, 2015 WL 13730675 (D. Colo.
2015) (unpublished opinion), report and recommendation rejected by 2015 WL 5693560
(2015) (hereinafter referred to as "DynaResource"). This case involved a dispute over
performance under an option agreement entered into in 2006 by two companies,
Goldgroup and Dyna Mexico. Under the option agreement, which contained a mandatory
arbitration provision, Goldgroup could obtain an equity stake in Dyna Mexico in
exchange for capital contributions to Dyna Mexico. In 2011, Goldgroup exercised the
option and obtained 50 percent equity in Dyna Mexico. 2015 WL 5693560, at *1. In
2014, Goldgroup filed a demand for arbitration, claiming that Dyna Mexico had
improperly issued additional shares of its stock, diluting GoldGroup's equity stake in
Dyna Mexico. Dyna Mexico sued in Colorado federal district court—the chosen venue in
the option agreement's arbitration provision—and it argued that the option agreement
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expired in 2011 when GoldGroup exercised its option, so neither the option agreement
nor the arbitration provision therein remained operative. 2015 WL 5693560, at *1.

Burch cites DynaResource to support his claim that arbitration provisions are no
longer binding after the expiration of the relevant agreement. There are several problems
with Burch's argument. First, Burch does not acknowledge that the opinion issued in
DynaResource on the date he cites (August 27, 2015) was a report and recommendation
from a United States magistrate judge that ultimately was rejected by a United States
district court judge. Second, the language Burch quotes is not found in the case he cites,
but in the United States district judge's order, issued on September 29, 2015.

Moreover, when read in full, DynaResource is materially distinguishable. The
Colorado United States District Court did state that if the option agreement containing the
arbitration provision "has unambiguously expired, the parties' agreement to arbitrate
would no longer be valid." 2015 WL 5693560, at *7. But the federal court went on to
find that because some of the provisions of the option agreement "impose obligations on
the parties that seemingly continue indefinitely" and the option agreement contained no
express provision setting a termination date, the option agreement "remains in effect in
some respects, and thus, the parties' agreement to arbitrate disputes" remained operative
as well. 2015 WL 5693560, at *7. Unlike DynaResource, this case depends on whether
an arbitration provision in a written employment contract governs both an oral agreement
made within the express timeframe of the employment agreement and later renewals of
that oral agreement made after the timeframe of the employment agreement.

Burch also cites Heidebrecht v. Letterese, No. 90,522, 2004 WL 944251 (Kan.
App. 2004) (unpublished opinion). In Heidebrecht, the parties entered into a written
contract agreeing that the defendant would provide management and/or mentoring
services in exchange for payment from the plaintiff. The contract included a mandatory
arbitration provision stating that "'[i]f a dispute arises under this contract,'" the parties
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agreed to arbitration. 2004 WL 944251, at *3. The contract also stated that the "'remedies
prescribed within this contract' were to be used to resolve 'any and all future
disagreements that may arise between the parties.'" 2004 WL 944251, at *3. The plaintiff
and defendant later entered into an oral agreement under which the defendant agreed to
provide self-defense training for the plaintiff's staff in exchange for monetary payment.
After paying the defendant, however, the plaintiff changed his mind and asked for a
refund, which the defendant did not provide.

The plaintiff later sued for breach of contract of the oral agreement, and the
defendant moved for arbitration under the written contract; the district court denied the
motion. On appeal, this court noted that the arbitration provision of the written contract
"clearly refers to a dispute that 'arises under this contract,'" so the pivotal question was
whether the oral agreement arose under the written contract. 2004 WL 944251, at *3.
This court held that the written contract's terms were not ambiguous and did not provide
for the type of training agreed to in the oral agreement, so the oral agreement did not arise
from the written contract and was not subject to the arbitration clause therein. 2004 WL
944251, at *4.

Burch argues that, as in Heidebrecht, the post-2012 fiscal year oral agreements on
which he bases his current claims relate to "different services" than those in the 2012
Agreement. But Burch does not explain how the oral agreements allegedly made after
fiscal year 2012 relate to different services than those at issue in the 2012 oral agreement
he purportedly entered into with Turner. Indeed, all the alleged oral agreements with
Turner related to the bonuses Burch would receive on multiyear business with RJR,
which materially distinguishes this case from the circumstances in Heidebrecht. In any
event, this court need not go beyond the plain language of the 2012 agreement to resolve
the arbitrability dispute.

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"It is well established that 'arbitration is a matter of contract and a party cannot be
required to submit to arbitration any dispute which [that party] has not agreed so to
submit.'" Portfolio Recovery Assocs. v. Dixon, 52 Kan. App. 2d 365, 369, 366 P.3d 245
(2016). If the terms of a contract including an arbitration provision are clear, the court
shall determine the parties' intent from the plain language of the contract. Anderson, 283
Kan. at 436. If there are doubts about whether an issue falls within an arbitration
agreement, however, those doubts should be resolved in favor of arbitration. Portfolio
Recovery Assocs., 52 Kan. App. 2d at 370. Even "when interpreting provisions that
determine the scope of the arbitration agreement, normal state-law canons of contract
construction—such as construing ambiguous provisions against the party that drafted it—
generally are trumped by the . . . policy in favor of arbitration." Hague v. Hallmark
Cards, Inc., 48 Kan. App. 2d 118, 121, 284 P.3d 369 (2012).

The plain language of the arbitration clause in the 2012 Agreement is very broad
and applies to "[a]ll disputes . . . which arise out of the participant's employment or
termination thereof," even if the claims were not "based exclusively on the terms of" the
2012 Agreement. The 2012 Agreement set forth Burch's compensation plan with
Heatron. Burch's initial alleged oral agreement with Turner occurred on June 6, 2012,
during the same fiscal year covered by the written agreement, and addressed the same
subject matter as the written agreement, i.e., the bonus compensation Burch was entitled
to receive from Heatron for the business he brought to the company. As the district court
found, the later alleged oral agreements between Turner and Burch were only a
reaffirmation of the June 6, 2012 agreement. All of Burch's claims in his civil lawsuit,
whether based on the written agreement between the parties or alleged oral modifications,
are disputes arising out of his employment with Heatron and are subject to the broad
language of the arbitration clause in the 2012 Agreement.

In sum, the arbitration clause in the 2012 Agreement applies to disputes arising
from the written agreement between the parties as well as the alleged oral agreement on
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June 6, 2012, along with all later renewals of that oral agreement. Based on the plain
language of the arbitration agreement, and given the strong policy in favor of allowing
arbitration when parties have agreed to submit to arbitration, we conclude the district
court did not err in finding that the claims in Burch's civil litigation fell within the scope
of the arbitration provision of the 2012 Agreement.

Timeliness

As stated above, the 2012 Agreement's arbitration clause provided: "Neither party
may demand arbitration or institute any lawsuit in any form arising out [of] this Plan, or
arising in any way out of the employment relationship between the parties, more than one
(1) year after the claim or cause of action has arisen." Burch argues that the district court
"erred in finding Defendants demanded arbitration within one year of Plaintiff's lawsuit."
We reject Burch's claim on the issue of timeliness for multiple reasons.

First, Burch may not challenge whether the district court erred by deciding that the
arbitration was timely under the 2012 Agreement because the district court did not make
such a finding. Although the district court did address the timeliness issue when it ruled
from the bench at the hearing on Heatron's motion to compel arbitration, it did so only in
an advisory manner. At the September 12, 2016 hearing on Heatron's motion to compel
arbitration, the district court found that timeliness was a matter for the arbitrators, not the
court. The district court did discuss whether it would find the arbitration was barred as
untimely if the decision were before it, but it then stated: "[T]o the extent that these are
matters for the arbitrators, then obviously any of my findings are—are not effective."
Thus, to the extent that Burch argues that the district court erred by finding on the merits
that the arbitration was timely sought, that argument fails.

Second, Burch is likely judicially estopped from making the argument he does on
appeal because he did not initially argue that timeliness was an issue for the court instead
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of the arbitrators. "Judicial estoppel precludes a party from taking one position in a case
to induce the court to act in a certain way and then taking a contrary or conflicting
position in a related proceeding involving the same opposing parties." Estate of Belden v.
Brown County, 46 Kan. App. 2d 247, 262, 261 P.3d 943 (2011). At the September 12,
2016 hearing, Burch agreed that timeliness was an issue for the arbitrators to decide. In
particular, Burch stated that "I think the issue of timeliness, like I said, can be for the
arbitrator on the one-year bar." Later in the hearing, Burch referred to timeliness and
waiver as "threshold issues that go to [the] arbitrator[s]."

Finally, the record reflects that, as anticipated at the September 12, 2016 hearing
in the district court, Burch raised the issue of timeliness to the arbitration panel, and he
did not contend that timeliness should be decided by the district court. The arbitration
panel rejected the argument, finding that Heatron and ECM notified Burch of their intent
to arbitrate within the one-year timeframe of the 2012 Agreement. Burch does not argue
anywhere in his appellate brief that the arbitration panel erred in this decision. "Where
the appellant fails to brief an issue, that issue is waived or abandoned." In re Adoption of
T.M.M.H., 307 Kan. 902, Syl. ¶ 6, 416 P.3d 999 (2018). Because Burch has failed to brief
the propriety of the arbitration panel's decision on timeliness—the only decision on the
merits of timeliness—the propriety of that decision is not properly before this court.

Litigation-conduct waiver

Burch also contends that the district court erred by leaving to the arbitration panel
whether Heatron and ECM had waived their right to arbitrate through their litigation
conduct. Burch argues that the district court should have determined waiver itself and
that, had it done so, it would have found that Heatron and ECM waived any right to
arbitration. Although Burch devotes much of his appellate brief to arguing that Heatron
and ECM waived their right to arbitration, this argument suffers from some fundamental
problems like those that undermine his timeliness argument.
18

First, at the September 12, 2016 hearing on Heatron's motion to compel
arbitration, Burch agreed that "the majority rule is that waiver is an issue for the
arbitrators." Thus, it is at best questionable whether Burch was judicially estopped from
later arguing the opposite or, at least, whether he invited the alleged error of which he
now complains.

However, unlike his timeliness argument, Burch did at least argue to the district
court that it, and not the arbitration panel, should decide the waiver issue. But he did so,
for the first time, at the post-arbitration hearing on the motions to vacate or confirm the
arbitration award. This court has held that if a party participates in an arbitration hearing
without raising an objection, it may not raise an issue for the first time, post-arbitration,
in a motion to vacate an adverse arbitration award. See MBNA America Bank, N.A. v.
Barben, No. 92,085, 2005 WL 1214244, at *5 (Kan. App. 2005) (unpublished opinion)
("If a party does participate in the arbitration hearing without raising the objection, the
party cannot raise the issue for the first time in an application to vacate the award.").

In any event, Burch's argument that the district court erred in determining that
waiver was an issue for the arbitrators fails on the merits. As Heatron and EMC point out,
this argument was addressed and rejected in Portfolio Recovery Associates:

"[I]n [BG Group, PLC v. Republic of Argentina, 572 U.S. 25, 134 S. Ct. 1198, 188 L. Ed.
2d 220 (2014)], as already discussed, the United States Supreme Court reiterated, without
carving out an exception for questions related to litigation conduct, that courts presume
procedural issues related to waiver-of-arbitration are to be decided through arbitration.
Given that the United States Supreme Court has reaffirmed the more general rule without
specifically following the circuits cited by [the defendant], we are compelled to follow
BG Group. Working under the assumption that the arbitration agreement is both binding
on the parties and intended for waiver-of-arbitration issues to be decided through
arbitration, we find that the issue of whether [the plaintiff's] litigation conduct constitutes
a waiver of its right to arbitrate [the defendant's] counterclaims must be decided by an
arbitrator. [Citations omitted.]" 52 Kan. App. 2d at 372.
19

Burch cites several cases to support his argument that this court erred in Portfolio
Recovery Associates. Some of those cases were decided before BG Group and, as such,
are not persuasive. See Hill v. Ricoh Americas Corp., 603 F.3d 766 (10th Cir. 2010);
Funderburke v. Midland Funding, L.L.C., No. 12-2221-JAR/DJW, 2013 WL 394198 (D.
Kan. 2013) (unpublished opinion); Kendall State Bank v. West Point Underwriters, LLC,
No. 10-2319-JTM/KGG, 2013 WL 593957 (D. Kan. 2013) (unpublished opinion).
Others, although issued post-BG Group, do not mention BG Group at all and simply
decide litigation-conduct waiver without addressing whether the question should be
decided by courts or by arbitrators. See BOSC, Inc. v. Board of County Commissioners of
County of Bernalillo, 853 F.3d 1165, 1174-75 (10th Cir. 2017); In re Cox Enterprises,
Inc., 835 F.3d 1195, 1205-09 (10th Cir. 2016); Martin v. Yasuda, 829 F.3d 1118, 1124-26
(9th Cir. 2016); Renteria-Camacho v. DirecTV, Inc., 175 F. Supp. 3d 1308, 1311-13 (D.
Kan. 2016); City of Udall, Kan. v. Poe & Associates, No. 13-1314-KHV, 2014 WL
3427297, at *3-5 (D. Kan. 2014) (unpublished opinion); First National Bank of Omaha v.
Price, No. 111,062, 2014 WL 6777441 (Kan. App. 2014) (unpublished opinion), rev.
denied 302 Kan. 1009 (2015).

The only case Burch cites that directly addresses BG Group's effect on who should
decide issues of litigation-conduct waiver of arbitration is an unpublished opinion from
the Fifth Circuit. In Vine v. PLS Financial Services, Inc., 689 Fed. Appx. 800, 802-03
(5th Cir. 2017) (unpublished opinion), the Fifth Circuit Court of Appeals addressed the
argument that BG Group abrogated its previous decisions recognizing that a court, not an
arbitrator, "is in the best position to decide whether the [litigation] conduct amounts to a
waiver under applicable law." 689 Fed. Appx. at 802. The Fifth Circuit rejected the
argument: "Despite the surface appeal of this argument, a careful reading of BG Group
and [Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S. Ct. 588, 154 L. Ed.
2d 491 (2002), a case which also stated that claims "'of waiver, delay, or a like defense to
arbitrability'" should be decided by arbitrators,] demonstrates that it is misguided." Vine,
689 Fed. Appx. at 803. Citing pre-BG Group Fifth Circuit precedent and noting that pre-
20

BG Group federal caselaw indicated the majority rule across circuits was that courts
should presumptively decide litigation-conduct waiver, the Fifth Circuit concluded: "We
note that a majority of the decisions addressing litigation-conduct waiver pre-date BG
Group, but the logic of those decisions interpreting Howsam is equally applicable to BG
Group. Consequently, the district court did not err [in deciding the waiver issue]." 689
Fed. Appx. at 803.

While Vine may be persuasive authority, it is largely based on pre-BG Group Fifth
Circuit precedent and is not binding on this court. The holding in Portfolio Recovery
Associates, while also not binding, is more in line with the apparent intent of BG Group.
The United States Supreme Court stated:

"[C]ourts presume that the parties intend arbitrators, not courts, to decide
disputes about the meaning and application of particular procedural preconditions for the
use of arbitration. These procedural matters include claims of 'waiver, delay, or a like
defense to arbitrability.' And they include the satisfaction of '"prerequisites such as time
limits, notice, laches, estoppel, and other conditions precedent to an obligation to
arbitrate."'" BG Group, PLC, 572 U.S. at 34-35.

Contrary to Burch's argument and the conclusion of the Fifth Circuit in Vine, the
language in BG Group does not limit arbitrators' consideration of "procedural matters" to
those that do not particularly implicate the judicial process. In essence, the issue of
litigation-conduct waiver is one that considers "delay," which is specifically noted in BG
Group as a procedural matter presumptively left for arbitrators to decide. Similarly,
"[l]aches is the neglect or omission to assert a right that, taken in conjunction with lapse
of time and other circumstances, causes prejudice to an adverse party." State ex rel.
Stovall v. Meneley, 271 Kan. 355, 389, 22 P.3d 124 (2001). An analysis of whether laches
applies to bar arbitration could include litigation conduct and is explicitly noted by BG
Group as a procedural matter presumptively left to arbitrators.

21

Based on the reasoned analysis in Portfolio Recovery Associates, the lack of
binding precedent to the contrary, and the Supreme Court's holding in BG Group, we
conclude the district court did not err in holding that the matter of litigation-conduct
waiver should be determined by the arbitrators. As a result of this conclusion, we need
not address the district court's alternative finding that even if it had decided the litigation-
conduct issue, it would have found that Heatron and ECM did not waive their right to
arbitration through their litigation conduct.

DID THE DISTRICT COURT ERR BY DECLINING TO VACATE THE ARBITRATOR'S AWARD?

"Once an arbitration award is entered, the finality that courts should afford the arbitration
process weighs heavily in favor of upholding the award. Kansas courts must exercise
immense caution when asked to vacate an arbitration award. Because a focal purpose of
arbitration agreements is to avoid the expense and delay of court proceedings, judicial
review of an arbitration award is very narrowly limited. [Citation omitted.]" Heartland
Surgical Specialty Hospital v. Reed, 48 Kan. App. 2d 237, 244, 287 P.3d 933 (2012).

"An appellate court must affirm an arbitration award as long as the arbitrator[s]
acted within the scope of [their] authority, and is bound by [the] arbitrator[s'] findings of
fact and conclusions of law unless an error was made in bad faith or amounts to
affirmative misconduct." Unified Gov't of Wyandotte County/KCK v. IBEW Local 53, 48
Kan. App. 2d 128, 132-33, 286 P.3d 570 (2012).

Burch argues that the district court erred by denying his motion to vacate the
arbitration award because (1) the Kansas Uniform Arbitration Act (KUAA) governed the
arbitration, and it does not permit arbitration of employment disputes; and, in the
alternative, (2) if the Federal Arbitration Act (FAA) applies, the arbitrators manifestly
disregarded Kansas law on quantum meruit. Heatron and ECM reply that (1) the FAA
preempts the KUAA's ban on arbitration of employment disputes, and (2) the arbitrators
did not manifestly disregard Kansas law on quantum meruit.
22

Which arbitration act controls

Burch argues that the version of the KUAA which was in effect at all times
relevant to this case but was repealed effective July 1, 2018, did not permit arbitration of
employment disputes. K.S.A. 5-401 stated:

"(b) Except as provided in subsection (c), a provision in a written contract to
submit to arbitration any controversy thereafter arising between the parties is valid,
enforceable and irrevocable except upon such grounds as exist at law or in equity for the
revocation of any contract.
"(c) The provisions of subsection (b) shall not apply to: . . . (2) contracts between
an employer and employees."

Under this language, Burch contends, the arbitration provision in the 2012
Agreement is not valid or enforceable. As a threshold issue, Heatron and ECM contend
that Burch has not preserved this issue for appeal.

In his motion to vacate the arbitration award, Burch argued that the KUAA
prevented the arbitration of this employment dispute. But before the arbitration, at the
hearing on Heatron's motion to compel arbitration, Burch's counsel explicitly stated:

"I'm not arguing that the FAA doesn't apply, I think it does. Even though they specifically
and expressly mention the Kansas Uniform Arbitration Act, I think the FAA applies. I
don't think I can argue interstate commerce is not involved, even though I have a Kansas
employee who lives in Kansas who's dealing with Kansas companies. I can make that
argument, but I think ultimately what will be decided is he's dealing with interstate
commerce."

Burch's counsel affirmatively stated that he believed the FAA applied to this case.
At the very least, he did not object to the application of the FAA and thus could not raise
the argument for the first time in his motion to vacate the arbitration award. See MBNA
23

America Bank, N.A., 2005 WL 1214244, at *5 ("If a party does participate in the
arbitration hearing without raising the objection, the party cannot raise the issue for the
first time in an application to vacate the award.").

In any event, Burch's argument that the KUAA bars arbitration of employment
disputes that would otherwise be arbitrable under the FAA has been rejected in Kansas.
See Portfolio Recovery Assocs., 52 Kan. App. 2d at 370 ("[T]his court has recognized
that the FAA preempts state law concerning the enforcement of arbitration agreements
involving interstate commerce."). Similarly, the Kansas Supreme Court has held that
where the KUAA's prohibition of arbitration of tort claims conflicts with the FAA, the
KUAA is preempted. See Skewes v. Shearson Lehman Bros., 250 Kan. 574, 581, 829
P.2d 874 (1992) ("[T]he FAA preempts conflicting state law which exempts enforcement
of arbitration agreements involving interstate commerce."). Burch does not argue that the
2012 Agreement did not involve interstate commerce. Thus, to the extent that the KUAA
prohibits arbitration of employment disputes, the FAA preempts that prohibition when, as
here, the contract containing the arbitration provision involves interstate commerce.

Did the arbitrators manifestly disregard Kansas law?

Finally, Burch contends that the district court should have vacated the arbitration
award because the arbitration panel manifestly disregarded Kansas law on quantum
meruit. Burch raised this argument before the district court at the January 23, 2018
hearing, and the district court rejected it; thus it is properly before this court.

This court has held that even given the narrow scope of review of an arbitration
award, courts may vacate an arbitration award "when there is a 'manifest disregard' of
Kansas law by the arbitrator. . . . [M]anifest disregard of the law occurs when an
arbitrator knows of a governing legal principle but refuses to apply it." Neighbors
24

Construction Co. v. Woodland Park at Soldier Creek, 48 Kan. App. 2d 33, 43, 284 P.3d
1057 (2012). The relevant portion of the arbitration award is as follows:

"Burch argues that even if there was no enforceable promise by Heatron to pay
him a 2% commission on all RJR or Ametek sales, equitable principles (i.e., quantum
meruit) demand that he be paid more than he received because of his contribution
bringing those projects (and revenue) to the company. Kansas law is clear that '[u]njust
enrichment/quantum meruit is an equitable doctrine. . . . The substance of an action for
unjust enrichment lies in a promise implied in law that one will restore to the person
entitled thereto that which in equity and good conscience belongs to that person.'
University of Kansas Hosp. [Auth. v. Board of Wabaunsee County Comm'rs], 299 Kan.
942, 960, 327 P.3d 430, 441 (2014) (quoting Haz-Mat Response, Inc. v. Certified Waste
Services Ltd., 259 Kan. 166, Syl. ¶ 5, 910 P.2d 839 (1996)). To establish an unjust
enrichment claim, 'a plaintiff must establish (1) the plaintiff conferred a benefit on the
defendant; (2) the defendant appreciated and has [sic] knowledge of the benefit; and (3)
the defendant accepted and retained the benefit under circumstances that make the
retention unjust.' Id. (citing Nelson v. Nelson, 288 Kan. 570, 580, 205 P.3d 715 (2009);
Haz-Mat Response, Inc., 259 Kan. 166, Syl. ¶ 6, 910 P.2d 839.)
"Without reaching the question of whether Burch conferred a benefit on Heatron
or ECM which was appreciated by those companies, we do not find that the
circumstances presented here mandate imposing an equitable remedy to require either
company to pay Burch more than he was already paid by Heatron. Burch's sales efforts
played an important part of Heatron's success, and it is unlikely that ECM would have
been presented with its opportunity to do business with RJR but for Burch's involvement.
However, to impose upon an employer an obligation to pay an employee more than they
agreed upon as part of the employee's bargained-for employment terms would open the
door for any other employee who played an important role in the companies' success to
claim that they too should be paid more than what they received. For example, but for
Heatron's engineering department, the companies would not have been successful in
generating the revenue from [RJR]. It would be unfair to find that Burch's contribution to
the companies' success could be differentiated from other employees' contributions, and it
would be equally unfair to reward Burch for his contribution to the projects beyond the
lucrative payments he has already received from Heatron. Accordingly, we decline to
25

create an equitable remedy here in the absence of evidence showing that Heatron
breached an agreement to pay Burch what he is due. Put simply, we find that a salaried
employee has no claim to compel his employer to pay him a bonus absent a contractual
obligation to do so; nor is the employer unjustly enriched when it fails to pay such a
commission."

Here, the arbitrators did not manifestly disregard Kansas law on quantum meruit.
Instead, the arbitration panel expressly set forth the three elements necessary to establish
an unjust enrichment claim under Kansas law. The third element is that the defendant
accepted and retained a benefit under circumstances that make the retention unjust. After
quoting the applicable law, the arbitration panel simply found under the circumstances of
this case that it would be "unfair to find that Burch's contribution to the companies'
success could be differentiated from other employees' contributions, and it would be
equally unfair to reward Burch for his contribution to the projects beyond the lucrative
payments he has already received from Heatron."

Burch points to the final portion of the above-quoted language in the award and
argues that the arbitration panel held that no employee can ever bring a quantum meruit
claim without first establishing a contract with the employer. Burch argues that such an
interpretation defeats the purpose of bringing an extra-contractual quantum meruit claim.
The district court rejected that argument and found that the arbitrator's opinion must be
considered as a whole without focusing on any single statement in isolation. The district
court noted that the arbitration panel spent "the better part of page 8 of the Opinion
discussing the quantum meruit claim, the elements that are required of proof, and what
their findings were in relation to [those elements]." The district court found that the
arbitration panel was not taking the position that no employee can ever bring a quantum
meruit claim for wages or bonuses without first establishing a contract with the employer,
stating: "That was not in my judgment what the arbitrators found."
We agree with the district court. Although the final portion of the arbitration
award may have been unartfully drafted, the language conflicts with the remainder of the
26

analysis in the opinion and should not be considered in isolation. The arbitration panel
essentially found that Burch failed to meet his burden of proving any of his claims. As to
the quantum meruit claim, the arbitration panel expressly set forth the three elements
necessary to establish an unjust enrichment claim in Kansas, quoting from applicable
Kansas Supreme Court decisions. The arbitrators found under the circumstances of the
case that Burch failed to establish the third element of an unjust enrichment claim under
Kansas law. We reject Burch's claim that the arbitrators manifestly disregarded Kansas
law on quantum meruit. As a result, we conclude the district court did not err by
declining to vacate the arbitrator's award.

Affirmed.