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The Minnesota Court of Appeals held that an arbitration award did not violate public policy, while expressing uncertainty as to whether the state even recognizes the public policy exception in cases not presenting "exceptional circumstances."
In In re Simon, Nos. A06-475, A06-476, 2007 WL 823854 (Minn. Ct. App. Mar. 20, 2007), the parties formed a corporation to buy, rent and sell a building. Two of the parties, Simon and Eginton, each loaned the corporation $165,000. The corporation failed to pay back either loan by the date promised, and Simon and Eginton commenced this action.
The parties agreed to submit the dispute to arbitration, and the arbitrator found that the statute of limitations for seeking repayment had expired. Following arbitration, Simon and Eginton filed a motion to vacate the award, arguing that it violated the public policy of protecting minority shareholders from fraud.
The Court denied the motion to vacate and instead confirmed the award. The Court first pointed out that "the applicability of the public policy exception [to confirming arbitration awards] in Minnesota . . . remains questionable." Although one recent Minnesota case applied the exception, see City of Brooklyn Ctr. v. Law Enforcement Labor Servs., Inc., 635 N.W.2d 236, 242 (Minn. Ct. App. 2001), the Court noted that this case presented "exceptional circumstances."
Finally, the Court held that even if the public policy exception were applied in this case, it would not serve as a basis for vacatur because nothing in the arbitrator's award indicated a factual basis for Simon and Eginton's allegations of fraud.
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