Preview:

FOR PUBLICATION

ATTORNEYS FOR APPELLANT: ALAN J. IRVIN PETER H. DONAHOE Gilday Donahoe & Irvin, P.C. Indianapolis, Indiana

ATTORNEYS FOR APPELLEES: ROBERT K. STANLEY KATHY L. OSBORN Baker & Daniels LLP Indianapolis, Indiana

FILED
of the supreme court, court of appeals and tax court

Dec 29 2008, 8:56 am

IN THE COURT OF APPEALS OF INDIANA
BERNICE SOMMERS, AS EXECUTRIX OF THE ESTATE OF SHELDON CHARLES SOMMERS, DECEASED, Appellant, vs. WENDY SOMMERS, MARY LEE SOMMERS GOSZ, and JULIE SOMMERS NEUMAN, Appellees. ) ) ) ) ) ) ) ) ) ) ) )

CLERK

No. 49A02-0710-CV-916

APPEAL FROM THE MARION SUPERIOR COURT The Honorable Charles J. Deiter, Judge Cause No. 49D08-0207-PL-1678

December 29, 2008

OPINION - FOR PUBLICATION

BAILEY, Judge

Case Summary Appellant Bernice Sommers, as executrix of the Estate of Sheldon Charles Sommers, (the "Estate") appeals the trial courts confirmation of an arbitration award in favor of Appellees Wendy Sommers, Mary Lee Sommers Gosz and Julie Sommers Neuman (collectively the "Nieces"). We affirm. Issues The Estate raises two issues that we restate as: I. II. Whether the trial court erred in ordering the parties to arbitration; and Whether the arbitration award should be vacated on grounds that it violates public policy. Facts and Procedural History In 2000, Dr. Sheldon Sommers sought the advice of counsel in Indiana as to planning his estate, including his collection of artwork. Dr. Sommers expressed his desire to give the artwork to his Nieces. To avoid issues with gift taxes, his Indiana counsel developed a plan where Dr. Sommers could gift the artwork to the Nieces over a two-year period through an LLC. After the artwork was appraised, the LLC was formed with Dr. Sommers owning most of the capital shares and the Nieces only owning small interests. In 2001, Dr. Sommers executed documents to transfer the artwork to the LLC and to gift some of the capital shares of the LLC to the Nieces. In January 2002, Dr. Sommers signed the second document effecting gifts of his remaining capital shares in the LLC to the Nieces. The parties agree that Dr. Sommers was competent to complete these transactions. During this time, the Nieces were Dr. Sommerss attorneys-in-fact. 2

When Dr. Sommers signed the gifting documents, the number of shares to be gifted to each Niece and the corresponding value on the documents were left blank. This was done because the appraisal of the LLC shares was not complete at the time of the execution of the documents. The Indiana counsel explained to Dr. Sommers before he signed the documents that the values would be filled in later according to the values in the appraisal report so as to not incur gift taxes on the transfers. The Indiana counsel filled in the blanks once the March 31, 2002 appraisal report was received. In early 2002, Dr. Sommers retained new counsel and executed a new will. Dr. Sommers also revoked the Niecess authority as his attorneys-in-fact. On June 4, 2002, Dr. Sommers filed a Complaint to Turn Over Property, For an Accounting By Powers of Attorneys and Conversion, challenging the validity of the LLC and the gifts of capital stock to his Nieces. On June 26, 2002, the Nieces filed a Motion to Compel Arbitration and For Partial Stay of Proceedings Pending Arbitration pursuant to the arbitration provision in the Operating Agreement of the LLC. Dr. Sommers died on November 1, 2002, and the Estate was substituted as the plaintiff. On April 19, 2004, the trial court granted the motion for arbitration as to the issues regarding the LLC and gifts of capital shares. Thereafter the parties jointly selected an Arbitrator. Following the arbitration hearing, the Arbitrator entered an award providing that "Dr. Sommers made a valid irrevocable transfer of the twelve pieces of artwork to the LLC in December 2001" and "thereafter made valid gifts in December 2001 and January 2002 of all of his capital shares of the LLC (both voting and non-voting) to his Nieces." Appellants Appendix at 623. The arbitration award

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was issued on September 27, 2005. On October 27, 2005, the Nieces filed a Verified Motion for Entry of Final Judgment Confirming Arbitration Award, Dismissing Arbitrated Claims, and Awarding Attorneys Fees. The Estate filed its response on February 3, 2006. After hearings on the motion to confirm on February 28 and August 28, 2006, the trial court issued its order confirming the award, dismissing the arbitrated claims, and awarding the Nieces attorneys fees and expenses. The Estate filed a motion to correct error, which the trial court denied. This appeal ensued. Discussion and Decision I. Order of Arbitration First, the Estate argues that the trial court erred in ordering arbitration because the creation of the LLC was presumptively the result of undue influence because the Nieces were his attorneys-in-fact at the time. The Estates argument is not timely. "An order compelling arbitration is a final, appealable order if severable from other claims in the lawsuit. Thus, a party may not contest arbitrability for the first time in its petition to vacate an arbitration award." Angell Enters., Inc. v. Abram & Hawkins Excavating Co., 643 N.E.2d 362, 364 (Ind. Ct. App. 1994) (internal quotations omitted). The Estate is challenging the arbitrability of its claims for the first time. Therefore, it has waived this argument because it did not appeal the trial courts order compelling arbitration. II. Arbitration Award as Violation of Public Policy Second, the Estate contends that the arbitration award should be vacated because it

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violates public policy. The Nieces argue that the Estate has waived this argument because it did not make a timely motion to vacate, modify or correct the arbitration award according to the Federal Arbitration Act. We agree. Under Section 11.01 of the Operating Agreement of the LLC, it provides that arbitration of any controversy among the members "shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1

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