author: LANSING, Judge.

text:
    In the Matter of the RUTH EASTON FUND, a Separate Fund of the Edelstein Family Foundation Trust.
    No. A03-1365.
    Court of Appeals of Minnesota.
    June 1, 2004.

      Michael V. Ciresi, David P. Pinto, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN, for appellant Ordway Center for Performing Arts.
    Eric J. Magnuson, Gregory M. Weyandt, Mario Weber Turcotte, Rider Bennett, LLP, Minneapolis, MN, for respondent Thomas A. Keller, III, et al.
    Considered and decided by LANSING, Presiding Judge; PETERSON, Judge; and HUSPENI, Judge.

       Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

   OPINION

LANSING, Judge.

The Ordway Center for the Performing Arts (Ordway) appeals the district court’s order suspending distributions to Ordway from the Ruth Easton Fund, a segregated charitable fund within the Edelstein Family Foundation Trust, and authorizing the trustees to distribute funds instead to other charitable organizations. We conclude that the district court acted within its discretion by confirming the trustees’ suspension of distributions based on its finding, supported by the record, that Ordway curtailed its program for the development of new works. But because the conditions enumerated in Easton’s will for redirection of funds did not occur, we reverse the district court’s order authorizing the trustees to pay income and discretionary principal to an alternative charitable organization under Minn.Stat. § 501B.31 (2002).

FACTS

This litigation involves a dispute over the distribution of income and principal from a charitable fund created by Ruth Easton. Easton was a Broadway actress who was born and raised in Minnesota. Although she retired from the stage in the late 1930’s, she maintained an active interest in the theater, particularly in the production of new theatrical works.

Easton had a testamentary power of appointment over the Ruth Easton Trust, which had been created by her brother, Jacob E. Edelstein, in his 1945 will. In 1997 her longtime attorney and advisor, Thomas E. Keller III, introduced her to Kevin McCollum, then Chief Executive Officer of the Ordway, for the purpose of discussing a charitable gift. The Ordway board of directors had recently adopted a strategic plan including a stated goal of “establishing] leadership in producing and presenting new musical theater independently and in local and national partnerships.” The plan defined a “new work” as a “[p]iece of theater that has never been produced or seen by an audience before. It may be based on an existing book, an original concept or idea, or it could be the adaptation of an existing play into a musical.”

As part of this “new work” program, the Ordway joined with the 5th Avenue Musical Theater in Seattle and the Theatre Under The Stars in Houston to form a research-and-development consortium, New Musicals/Studio USA. Hot Shoe Shuffle was the only show developed by this consortium that was produced at the Ord-way. Ordway produced a different category of theatrical works, referred to as Ord-way Originals, which were not necessarily new works as defined in the Ordway strategic plan.

After meeting with McCollum, Easton agreed to support the creation of new works at the Ordway with funding from the Ruth Easton Trust. During negotiations over the structure and terms of this funding, Keller wrote Ordway representatives describing Easton’s frustrations in attempting to effectuate the purposes for which she had made a previous gift to another charitable organization. In one letter discussing the proposed Ordway gift, Keller enclosed a Wall Street Journal article that recommended a policy of designated restrictions on charitable gifts.

Easton, by codicil to her will dated September 26,1997, created a segregated fund within the Edelstein Family Foundation for the balance of assets remaining in the Ruth Easton Trust. Easton exercised her power of appointment over the trust, instructing the named trustees, Keller and U.S. Bank, to pay the net income at least annually, and principal in the trustees’ discretion, to Ordway in accordance with the agreement between Easton and Ordway bearing the same date. The codicil further provided that “[i]n the event that said agreement with Ordway shall have been terminated and not replaced with any subsequent agreement governing the same subject, or Ordway shall no longer be in operation, the Trustees ... shall pay” such amounts of income and/or principal to other charitable organizations as they determine, in their discretion, to comport with her intent.

On the same day, Easton executed an agreement with Ordway. The agreement provided that she would leave binding instructions to the trustees of the foundation to hold the Easton fund as a segregated fund within the foundation “to be used exclusively to produce new full length theatrical productions” or for other purposes as approved by the trustees from time to time. The distribution of funds was to “be made ... not less frequently than annually.” The trustees “reserve[d] the right to limit or suspend (temporarily or permanently) gifts to the Ordway Easton fund ... if,” among other stated conditions, “the Ordway curtails its program to mount new productions or if the Ordway ceases to mount new productions altogether.... ” When Ruth Easton died in 1998, the Ea-ston fund was worth approximately $6 million.

The Easton fund contributed annually to Ordway from 1998-2002, distributing total gifts of approximately $1.1 million. Under the funding procedure in place, Ordway would propose a project for Easton funding, and Keller would exercise his discretion as trustee to determine whether the proposed project fit the definition of “new work” to qualify for Easton funding. He rejected a funding proposal if it appeared to be “mostly derivative of a prior work.” Applying this standard, Keller approved distributions of about $867,000 for a production of Adventures in Love, $200,000 for Ten Years Apart, and $337,000 for The Prince and the Pauper. He rejected, however, proposals for productions of Romeo and Juliet and South Pacific. The Easton fund did not contribute to every new Ordway production, and Ordway also received other funding for new works, such as a Dayton-Hudson-funded program called Ordworks, which produced a workshop reading with three Minnesota artists.

In September 1999, Ordway requested information from Keller about the process of interpreting the agreement with Easton. Keller wrote back that only the agreement governed the terms and Ordway must refer to that written agreement.

In 2001 McCollum approached Keller about Easton funding for Plaid Tidings, a musical revue derived from Forever Plaid that had originally been produced at the Pasadena Playhouse. Keller declined to distribute Easton funds for Plaid Tidings and expressed concern to McCollum that Ordway was not financially committed to the program for new works. Keller also declined Ordway’s proposal for Easton funding for 8-Track, the Sounds of the '70’s, a revue of music from the 1970’s that had premiered at the Milwaukee Repertory Theater and had an eighteen-week run in Detroit before it was produced at Ord-way.

McCollum left Ordway as CEO in 2002; Ordway reorganized with David Galligan as the new president and CEO. Galligan, the former chief operating officer of the Walker Art Center, did not have direct theater experience equivalent to McCol-lum’s, and he had no experience developing new, full-length theatrical productions. McCollum maintained contact with Ord-way as artistic advisor but had no formal contract that defined the relationship.

In August 2002 Galligan wrote to Keller requesting Easton money to cover a loss of $284,926.54 sustained by the Easton-fund-ed Ordway production of The Prince and the Pauper. Keller responded that, as a result of McCollum’s departure, the program needed fixing, that it would take time to find superior leadership, and that Easton money for the production deficit would be made only in recognition of McCollum’s leadership. In early September the Easton fund contributed $250,000 to Ordway in recognition of McCollum’s tenure and efforts.

A month after the honorary contribution, Keller notified Ordway that the Ea-ston fund was suspending its gifts to Ordway under the terms of the 1997 agreement. Keller stated that “[w]ith Kevin’s departure the program to mount new full length theatrical productions was, by that fact, curtailed,” and that [”t]he purpose of the Easton gifts was not to create a program,” but instead to lend support to an existing program. In a follow-up letter to Galligan, Keller expressed his doubts about Ordway’s commitment to funding new work and pointed to the lack of a well-staffed program dedicated to new works and the absence of a financial commitment. U.S. Bank, as co-trustee, agreed with Keller’s decision to suspend funding.

Keller contacted the Children’s Theatre, an organization that maintained an active program to produce new theatrical works, as a possible substitute recipient of Easton funding. When Ordway learned of this contact, the Vice Chair of Ordway’s board of directors notified Keller of Ordway’s position that the trustees had no power to make gifts from the Easton fund to a charitable beneficiary other than Ordway.

Keller and U.S. Bank petitioned the district court to confirm their suspension of distributions to Ordway and to authorize them to distribute net income and discretionary principal to charitable organizations that they determined to be in accordance with Easton’s intentions of producing new, full-length theatrical works. The trustees asserted that Ord-way had curtailed its program for developing new works but did not assert that the agreement with Ordway. had been terminated. Ordway opposed the petition on the ground that it had not curtailed its program for the production of new works, that compliance with Easton’s intent remained practicable, and that the trustees had abused their discretion in suspending distributions.

A probate court referee conducted a hearing on the petition in June 2003. At the hearing, Ordway presented testimony through Galligan that both Plaid Tidings and 8-Track qualified as new works. Galligan also testified that several new projects were currently under discussion, including a proposed joint project with Penumbra Theater and a production of The Grapes of Wrath commissioned by the Minnesota Opera and the Utah Opera. Galligan acknowledged that a reading program that sometimes led to a possible production had been dropped and that Ordway currently had no new works in workshop. Galligan attributed the absence of new works on the current schedule to the lack of Easton funding. Ord-way’s vice president of marketing and programming confirmed that Ordway was facing financial difficulties unrelated to the Easton fund and had laid off the equivalent of ten employees in the five months before the hearing.

The probate court.referee issued findings, conclusions, and an order, affirmed by the district court, granting the trustees’ petition. Relying on the definition of “new work” in Ordway’s strategic plan, the referee found that “Ordway ha[d] curtailed its program to develop new productions.” The conclusions of law stated that under the agreement between Ordway and Ea-ston the trustees were justified in not making payments to Ordway. The court authorized payments to other charitable organizations that the trustees determined in their discretion to comport with Ea-ston’s intentions. This appeal followed.

ISSUES

I. Did the district court abuse its discretion in confirming the trustees’ decision to suspend Easton fund distributions on the stated ground that Ordway had curtailed its program to develop new theatrical works?
II. Did the district court abuse its discretion by authorizing the trustees to distribute the net income and discretionary principal to “other charitable organizations that they determine in their discretion to be in accordance with the donor’s intentions?”

ANALYSIS

We review a district court’s exercise of its equitable jurisdiction over a charitable trust under an abuse-of-discretion standard. In re Trust Created by Hill, 509 N.W.2d 168, 172 (Minn.App.1993), review denied (Minn. Feb. 1, 1994). A decision that is arbitrary, capricious, or not in conformity with law is an abuse of discretion. Plunkett v. Lampert, 231 Minn. 484, 492, 43 N.W.2d 489, 494 (1950). Factual issues embedded in a discretionary determination are reviewed for clear error. Toombs v. Daniels, 361 N.W.2d 801, 805 (Minn.1985); see also Minn. R. Civ. P. 52.01 (reciting clear-error standard). And legal issues, including the construction of unambiguous written documents, are reviewed de novo. In re Trust Created by Hill, 499 N.W.2d 475, 482 (Minn.App.1993), review denied (Minn. July 15,1993).

I

Ordway presents the dispute over the interpretation of the September 1997 agreement between Easton and Ordway as a contract dispute, subject to principles of contract interpretation. The trustees argue that the agreement was testamentary in nature and must be construed as a testamentary instrument.

The agreement between Easton and Ordway was incorporated by reference into Easton’s will. The incorporation permits the construction of the agreement together with the codicil executed on the same date to determine Easton’s intent in setting standards for the suspension of funding to Ordway. See Restatement (Third) of Property, Wills and. other Dona-tive Transfers § 3.6 cmt. h (1999) (“[a] writing that is incorporated into a will by reference is treated as part of the will for purposes of distribution, construction, and administration of the estate ... ”). Minn. Stat. § 524.2-510 (2002) provides that “[a]ny writing in existence when a will is executed may be incorporated by reference if the language of the will manifests this intent and describes the writing sufficiently to permit its identification.” For purposes of the doctrine of incorporation by reference, a will is considered executed on the date that the last codicil to the will is executed, and a writing dated on or before the day the will was executed is “presumed to have been in existence when the will was executed.” Restatement (Third) of Property, Wills and other Dona-tive Transfers § 3.6 cmt. b (1999).

The codicil to Easton’s will and the agreement with Ordway were executed on the same day. Because the documents bear the same date, the agreement is presumed to have been in existence when the will was executed. The codicil specifically refers to the Ordway agreement that created the segregated Easton fund and provides that the trustees pay the net income and, in their discretion, the principal of the segregated assets to Ordway “in accordance with [Easton’s] agreement with Ord-way effective on or about September 29, 1997, or any subsequent agreement [Ea-ston] shall make with Ordway governing the same subject.” Thus, the codicil sufficiently describes the agreement and confirms Easton’s intent to incorporate it into her will. The prerequisites for incorporating the agreement by reference are met; we conclude that the agreement with Ord-way was incorporated into Easton’s will.

In light of the incorporation, the creation of the Easton fund under the codicil to Easton’s will essentially created a testamentary trust. See Bush v. Crowther (In re Bush’s Trust), 249 Minn.36, 43, 81 N.W.2d 615, 620 (Minn. 1957) (affirming creation of trust when document designated trustee’s enforceable duties, designated beneficiary’s enforceable rights, and identified definite trust res). The guiding principle in construing a testamentary trust is to “give effect to the testator’s intent as expressed in the plain language of the will.” In re Kischel, 299 N.W.2d 920, 923 (Minn.1980). To discern the testator’s intent, the trust instrument is read as a whole, “aided by surrounding circumstances, due weight being given to all its language, with some meaning being given, if possible, to all parts, expressions, and words used.” In re Anneke’s Trust, 229 Minn. 60, 71, 38 N.W.2d 177, 183 (1949) (quotation omitted).

The plain language of the Ordway agreement provided that the monies of the Easton fund be used “exclusively to produce new full length theatrical productions” and that the trustees reserved the right “to limit or suspend (temporarily or permanently) gifts to the Ordway ... in the event that ... the Ordway curtails its program to mount new productions.” The meaning of “new works” was expressly defined in Ordway’s strategic plan, which had been adopted during McCollum’s tenure only a few months before .Easton executed the codicil and the incorporated agreement. The strategic plan, which included a goal of developing “leadership in producing and presenting new musical theater,” defined a “new work” as one that had “never been produced or seen by an audience before.” In testimony at the probate hearing, Keller used a similar definition for a new work, describing it as a theatrical production that was not “mostly derivative of a prior work.”

Ordway contends that it was only McCollum’s departure as CEO that caused the trustees to suspend distributions and that this departure, by itself, did not provide a basis to determine that the program for new works had been curtailed. But the record reflects that it was not solely McCollum’s departure that precipitated the suspension of funds by the Easton trustees. The new CEO did not have comparable direct theater experience or comparable experience in producing new works. Keller protested that a lack of experienced leadership would weaken the program, writing to Galligan that “[i]t is obvious that a program of the level which existed in 1997 cannot be maintained without the leadership of a person of experience comparable to Kevin’s.... The purpose of the Easton gifts was not to create a program, but to lend some support to a program which already existed in full-blown form.”

Ordway also demonstrated a shift away from producing new works within the definition of its strategic plan. During an economically challenging period, Ordway requested Easton funding for two previously produced works with demonstrated audience success, 8-Track and Plaid Tidings. Testimony showed that while Ord-way had some possible new works in the early stages of discussion, none had been placed on the theater’s upcoming schedule. Workshops and reading programs had been cut back or eliminated. The record contains adequate evidence to support the district court’s finding that Ordway had curtailed its program for producing new works within the meaning designated in its strategic plan, and it was that meaning that provided a foundation for Easton’s agreement with Ordway as incorporated in her will.

Easton’s agreement with Ordway provided that, once it was determined that Ordway had curtailed its program for producing new works, the trustees retained discretion to suspend Easton fund distributions. The trustees’ decision to suspend funding is subject to an abuse-of-discretion standard. See In re Trusts A & B of Divine, 672 N.W.2d 912, 919-20 (Minn.App.2001) (adopting trustee abuse-of-discretion factors, including discretionary power conferred by trust terms; trust’s purposes; nature of trustees’ power and motives in exercising that power; existence and terms of external standards for judging trustees’ conduct; and any trustee conflicts of interest with beneficiaries).

A trustee may not exercise its discretion in a manner that defeats the trustor’s intent or the purpose of the trust. United States v. O’Shaughnessy, 517 N.W.2d 574, 577 (Minn.1994). But “[s]o long as the trustees act in good faith, from proper motives, and within the bounds of reasonable judgment, the court will not interfere with their decisions.” Id. (citation omitted). The evidence demonstrates that the trustees acted reasonably and in good faith, in conformance with Easton’s intent, in suspending distributions from the fund. The district court did not abuse its discretion in issuing an order confirming their decision.

II

The Easton trustees petitioned for authorization to make distributions to charities that they believed fit Easton’s charitable intent without regard to restrictions in the codicil or agreement designating Ordway as the beneficiary. In petitioning for this authorization, the trustees relied on Minn.Stat. § 501B.31 (2002), the legislative expression in Minnesota of the doctrine of cy pres. Cy pres is an equitable doctrine designed to preserve, as nearly as possible, the general equitable intent expressed in a charitable gift when strict accomplishment of the terms of the gift has become impracticable, inexpedient, or impossible. This common law doctrine was legislatively enacted in Minnesota in 1927 to allow courts the power to approximate the donor’s intention when the exact intention, for some reason, may not be carried out. See Lundquist v. First Evangelical Lutheran Church (In re Estate of Lundquist), 193 Minn. 474, 479-80, 259 N.W. 9, 11 (1935) (citing Mason’s Minn. St.1927, §§ 8090-1 to 8090-4 and recognizing lengthy history of equitable cy pres doctrine).

The current statute allows the interpretation of a trust to “accomplish the general purposes of the instrument and the object and intention of the donor ... free from any specific restriction” contained in the trust, if “circumstances have so changed since the execution of the instrument creating the trust as to render impracticable, inexpedient, or impossible a literal compliance with the terms of the instrument.” Minn.Stat. § 501B.31, subd. 2. After a hearing, the district court may fashion an order that it considers appropriate. Minn.Stat. § 501B.21 (2002). An order is “appropriate” if it is legally justified. In re Trust Created by Hormel, 504 N.W.2d 505, 512 (Minn.App.1993), review denied (Minn. Oct. 19,1993).

An appellate court will not reverse a district court’s decision to modify a trust absent an abuse of discretion. In re Trust Created by Hill, 509 N.W.2d at 172. But the district court has no authority to modify trust provisions if there is not a compelling reason for modification. See id. at 172-73 (holding that district court exceeded its authority by allowing amendment of foundation’s articles of incorporation when no evidence of changed circumstances made compliance with existing articles impracticable, inexpedient, or impossible). A prerequisite to the application of the doctrine of cy pres is the determination that it is currently impracticable, inexpedient, or impossible to carry out the settlor’s intentions without modifying the trust instrument. In construing Easton’s testamentary documents, the district court summarily concluded, without accompanying findings, that the trustees could make payments to alternative charitable organizations that they determined would comport with Easton’s intent.

The plain language of the codicil to Easton’s will provides that the trustees shall pay the income or principal from Easton fund assets to other charitable organizations “[i]n the event that said agreement with Ordway shall have been terminated and not replaced with any subsequent agreement on the same subject, or Ordway shall no longer be in operation.” It is undisputed that neither of these conditions occurred: Ordway is still in operation, and the agreement with Ord-way has not been terminated. The unambiguous language of the codicil authorizes the redirection of funds only on the occurrence of one of two stated conditions, neither of which has been met.

Even if we determined that the language of the codicil is ambiguous, we would reach the same conclusion by applying external canons of contract construction. Under the doctrine of expres-sio unius est exclusio alterius, meaning “the expression of one thing implies the exclusion of all not expressed,” we attach significance to the differences in the provisions. We may presume that Easton’s failure to authorize the redirection of funds if Ordway curtailed its program for the development of new works, in contradistinction to authorizing redirection if the agreement were terminated or Ordway were no longer in existence, implies that Easton intended stricter standards for the redirection of funds to another charitable organization. See Anderson v. Twin City Rapid Transit Co., 250 Minn. 167, 175, 84 N.W.2d 593, 599 (1957) (applying doctrine to construction of a contract); see also Colangelo v. Norwest Mortgage, Inc., 598 N.W.2d 14, 17-18 (Minn.App.1999) (discussing doctrine in context of mortgage), review denied (Minn. Oct. 21, 1999).

Because Easton’s testamentary documents provided that the trustees could limit or suspend funds for Ordway’s failure to produce new works and could select an alternative charitable organization for fund distributions on termination of the agreement or Ordway’s cessation of operation, we are unable to discern a basis for the district court’s summary conclusion that the trustees are now justified in making payments to other charitable organizations. The record does not support a determination that literal compliance with the terms of the instrument is impracticable, impossible, or inexpedient and that therefore the redirection of payments is necessary under Minn.Stat. § 501B.31. See, e.g., Sister Elizabeth Kenny Found., Inc. v. Nat'l Found. (In re Application of Sister Elizabeth Kenny Found., Inc.), 267 Minn. 352, 362, 126 N.W.2d 640, 646 (1964) (concluding that district court did not abuse its discretion in refusing to permit foundation, which hoped to benefit from cy pres doctrine, to intervene in proceeding to modify charitable trust when record indicated that original beneficiary was presently able to comply with terms of trust).

The cy pres doctrine is appropriately applied only when reasonable efforts to comply with the literal language of the trust have failed. See, e.g., Museum of Fine Arts v. Beland, 432 Mass. 540, 735 N.E.2d 1248, 1252 (2000) (holding that doctrine of cy pres did not apply to allow museum to sell paintings bequeathed to charitable trust, absent showing that trustees had made reasonable efforts to exhibit paintings and that the efforts were futile). Keller, in an October 2002 letter to Ord-way, expressed his intention to continue to fund the Ordway new-works program if it was re-instituted at its previous level. Thus, the evidence presented did not establish either that the agreement with Ordway had been terminated or that efforts could not be made in the future to support Easton’s intent to fund the production of new works at Ordway.

At the same time, we recognize that tying up funds intended for charitable purposes based on a “thin thread of a theoretically possible (but unlikely) change in circumstances” serves no purpose, least of all the donor’s. Wesley United Methodist Church v. Harvard College, 366 Mass. 247, 316 N.E.2d 620, 624 (1974). The Easton trustees reasonably point to Easton’s requirement for annual fund distributions as a clear indication that Easton intended the money to be used promptly, not accumulated. The record in this proceeding, however, discloses no evidence of insurmountable problems that prevent the trustees at this point from operating within the provisions of Easton’s testamentary documents. We cannot foretell whether those circumstances will change through the passage of time or because of other exigencies. See IVA Austin W. Scott and William F. Fratcher, The Law of Trusts § 399.4 (4th ed.1989) (observing that “[t]he public interest is not promoted by the creation of a charity that by the lapse of time ceases to be useful”); see also Hormel, 504 N.W.2d at 510 (holding that collateral estoppel applies to litigation of settlor’s intent but does not preclude future challenges to application of intent on changed facts or legal circumstances).

Any order providing for the redirection of funds, however, must be supported by specific findings and evidence. To properly invoke the cy pres doctrine, the record should establish that the trustees are carrying out the essential purpose of the donor while preserving as far as reasonably practicable the details of her original framework. “The primary function of the court in exercising jurisdiction over trusts is to preserve them and to secure their administration according to their terms. Just as the court lacks power to remake a will, it also lacks the power to remake a trust.” Northwestern Nat’l Bank of Minneapolis v. Balch (In re Cosgrave’s Will), 225 Minn. 443, 466, 31 N.W.2d 20, 33 (1948). Easton chose language that recited differing standards for the suspension of payments and for the redirection of those payments. Neither the record nor the district court findings provide a basis for concluding that literal compliance with the terms of the instrument was impracticable, inexpedient, or impossible. Consequently the district court exceeded its discretion in allowing the trustees to pay distributions to an alternative charitable organization.

DECISION

The district court acted within its discretion by confirming the Easton fund trustees’ suspension of distributions to Ordway on the stated ground, recited in the Ord-way agreement, that Ordway had curtailed its program to mount new theatrical productions. But the cy pres doctrine embodied in Minn.Stat. § 501B.31 (2002) does not provide authority for the trustees to redistribute funds to an alternative charitable organization because they have not demonstrated circumstances that make literal compliance with the terms of the trust impracticable, impossible, or inexpedient.

Affirmed in part and reversed in part.


source: Caselaw Access Project

author: HALBROOKS, Judge.

license: Public Domain

text:
    AMERICAN FAMILY INSURANCE GROUP, petitioner, Appellant, v. Mark KIESS, Respondent.
    No. A03-1764.
    Court of Appeals of Minnesota.
    June 1, 2004.

      LeAnne Bartishofski, Rajkowski Han-smeier, Ltd., St. Cloud, MN, for appellant.
    Francis E. Stephens, L. Michael Hall, P.A., St. Cloud, MN, for respondent.
    Considered and decided by HALBROOKS, Presiding Judge, TOUSSAINT, Chief Judge, and HUSPENI, Judge.

       Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

   OPINION

HALBROOKS, Judge.

Appellant American Family Insurance Group challenges the district court’s order confirming a no-fault arbitration award in favor of respondent Mark Kiess. Appellant argues that the award should be vacated because (1) the amount of the award, including penalty interest, exceeded the no-fault statute’s jurisdictional limit; (2) the arbitrator lacked the authority to award respondent interest on his award; (3) appellant was entitled to collateral-source deductions; and (4) respondent lacked standing to assert the no-fault claim against appellant. We affirm the district court’s order with the exception of its calculation of penalty interest, which we remand for modification consistent with this opinion.

FACTS

Respondent suffered spine and shoulder injuries in a motor vehicle accident in February 1996 when his car was rear-ended. At the time of the accident, appellant was respondent’s no-fault automobile insurer. Following the accident, appellant paid no-fault benefits to respondent or on his behalf for approximately six months. In July 1996, an independent medical examiner concluded that respondent required no further medical treatment for injuries arising from the motor vehicle accident. In August 1996, appellant notified respondent by letter of its intent to immediately “deny any further claims or payment for diagnostic testing, chiropractic and/or medical care. All no-fault benefits from your auto policy for [the February 1996] accident will be discontinued at this time.” The letter further advised respondent of his “right to demand arbitration of this claim.”

In June 1997, as a result of persistent neck symptoms, respondent underwent cervical fusion surgery at a cost of approximately $12,600. Because appellant had terminated respondent’s no-fault benefits as of August 1996, respondent submitted his medical bills to Blue Cross and Blue Shield (Blue Cross), his health insurer at the time. Blue Cross paid some of the medical bills, including a portion of the cost of the surgery. Respondent did not submit medical bills to appellant at that time or otherwise notify appellant of the surgery.

In March 1999, Blue Cross notified respondent that the subrogation-recovery provision in his health insurance policy entitled it to recover the amount of benefits paid for hospital expenses if benefits were collected from a third party for payment of those expenses. Respondent subsequently filed a liability claim against the other driver in the February 1996 accident; in September 2001, after respondent settled the claim with the other driver’s liability carrier, Blue Cross notified respondent of its intention to waive its sub-rogation interest in the matter.

In November 2001, respondent filed a petition for no-fault arbitration with the American Arbitration Association (AAA) requesting resolution of the dispute concerning appellant’s refusal to honor respondent’s claim for medical expenses (the cost of the June 1997 neck surgery) arising out of the February 1996 accident. The petition included an itemization of claim related to the neck surgery for $10,000, the statutory maximum for no-fault claims submitted to binding arbitration. See Minn.Stat. § 65B.525, subd. 1 (2002). In order to bring his claim within the statutory limit, respondent waived approximately $2,600 of the cost of the surgery.

In April 2002, following appointment of an arbitrator but before the hearing, respondent submitted an amended itemization of claim that included 57 months of penalty interest totaling $7,125 on the unpaid surgery bills. See Minn.Stat. § 65B.54, subds. 1, 2 (2002) (providing that a no-fault insurer must pay 15 percent per annum interest on benefit payments made more than 30 days after receiving reasonable proof of an insured’s medical expenses). With the addition of a request for reimbursement of a $60 filing fee, the total amount at issue at the arbitration hearing was $17,185. Before the hearing, the arbitrator rejected appellant’s challenge to the AAA’s jurisdiction to hear the claim on the grounds that Minn.Stat. § 65B.525, subd. 1, only requires arbitration where the claim is $10,000 or less at the commencement of arbitration.

The arbitrator awarded respondent the full amount of the medical expenses and interest requested in his amended itemization of claim. The arbitrator found that the AAA properly exercised jurisdiction over the dispute because the interest portion of appellant’s claim—the portion in excess of the $10,000 statutory maximum—“is intended as a penalty and is separate from and in addition to a claim submitted by an injured party.” The arbitrator also found that respondent’s medical expenses arising out of the February 1996 accident were reasonable, necessary, and related to the accident.

Following the award, appellant filed a motion with the arbitrator to reduce the amount of the award by the $10,000 paid by Blue Cross pursuant to the collateral-source statute, Minn.Stat. § 548.36, subd. 2 (2002). The arbitrator denied the motion.

Appellant filed a motion in district court to vacate the arbitration award,, arguing that the arbitrator erred or exceeded his authority in (1) extending jurisdiction over the dispute where the total claim, including interest, exceeded $10,000; (2) awarding respondent penalty interest; (3) concluding that appellant was not entitled to collateral-source deductions; and (4) concluding that respondent had standing to assert the claim where the entire claim had already been paid by Blue Cross. The district court denied appellant’s motion, issued an order confirming the award, and entered judgment. This appeal follows.

ISSUES

1. Did the district court err in concluding that the arbitrator has jurisdiction pursuant to Minn.Stat. § 65B.525 (2002) over a dispute where the total claim, including interest, exceeds $10,000?
2. Did the district court err in concluding that the arbitrator was authorized to award interest payments pursuant to Minn.Stat. § 65B.54 (2002)?
3. Did the district court err in concluding that appellant is not entitled to collateral-source deductions pursuant to Minn.Stat. § 548.36 (2002)?
4. Did the district court err in concluding that respondent has standing?

ANALYSIS

Appellant contends that the district court erred in determining that appellant must pay no-fault benefits and interest under the Minnesota No Fault Automobile Insurance Act, Minn.Stat. §§ 65B.41-.71 (2002), and that it is not entitled to a collateral-source offset under Minn.Stat. § 548.36 (2002). Statutory construction and the application of statutes to the undisputed facts of a case involve questions of law, which we review de novo. Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn.1998); O’Malley v. Ulland Bros., 549 N.W.2d 889, 892 (Minn.1996).

I.

Minn.Stat. § 65B.525, subd. 1 (2002), provides that the American Arbitration Association (AAA) has jurisdiction to arbitrate no-fault disputes only “where the claim at the commencement of arbitration is in an amount of $10,000 or less.” Respondent’s initial arbitration petition asserted a claim for $10,000; he then amended his claim prior to the hearing to add a claim for $7,125 in interest. See Minn.Stat. § 65B.54, subds. 1, 2 (providing that no-fault benefits are overdue if not paid within 30 days after the insurer receives reasonable proof of loss and mandating that overdue payments bear interest).

Appellant argues that because the sum of the claim and the interest exceeds $10,000, the AAA lacked jurisdiction to hear the dispute. Respondent argues that insofar as the interest is mandated by statute and serves a penal function, it must not be included in determining the total amount of the claim for the purposes of Minn.Stat. § 65B.525.

The question of whether interest on overdue benefits payments must be included in calculating the $10,000 jurisdictional limit on “the claim at the commencement of arbitration” established by Minn.Stat. § 65B.525 is a matter of first impression. “Claim” is not defined in the no-fault statute. Appellant relies on the supreme court’s statement in Brown v. Allstate Ins. Co., 481 N.W.2d 17, 19 (Minn.1992), that “claim ... is simply referring to the amount that the claimant is asking for” in support of its position that' the AAA lacked jurisdiction to hear the dispute because respondent was “asking for” more than $10,000. Appellant also cites to the holding in Brown that “a claimant with a claim in excess of [the statutory jurisdictional limit] at the time the arbitration petition is filed may waive the excess in order to qualify for arbitration,” id. at 18, to support its argument that respondent is required to waive the interest portion of his claim in order to meet the $10,000 limit and preserve the AAA’s jurisdiction.

We find appellant’s reliance on Brown misplaced in that Brown held only that a claimant may waive medical expenses in excess of the jurisdictional limit in order to bring a no-fault claim within that limit. Id. at 19. And, in fact, respondent did that here. Because the amount claimed in Brown consisted entirely of medical expenses, the court did not address whether interest arising from an insurer’s failure to timely pay those expenses should be included in a calculation of the claim’s amount for the purposes of Minn.Stat. § 65B.525. Brown is therefore inapposite to the issue before us.

The supreme court has observed that interest under Minn.Stat. § 65B.54, subd. 2, has both a compensatory purpose, “to compensate the consumer for [the insurer’s] use of the funds,” and a penal purpose, “to encourage prompt payment of benefits.” Burniece v. Ill. Farmers Ins. Co., 398 N.W.2d 542, 544 (Minn.1987). Respondent argues that neither purpose recognized in Bumiece would be served by requiring claimants to include the interest in the claim calculation for the purposes of the jurisdictional limit. Respondent contends that claimants would thereby be forced to either include the interest in the claim or waive it, thereby permitting no-fault carriers who fail to timely pay claims to avoid paying penalty interest.

We agree, and find instructive on this point our decision in McGoff v. AMCO Ins. Co., 575 N.W.2d 118, 120-21 (Minn.App.1998), review denied (Minn, june 17, 1998), where we concluded that holding a no-fault insurer liable for statutory interest in excess of the insured’s policy limit would further section 65B.54’s compensatory and penal purposes. Although McGoff addressed the claim limit established by the insured’s policy, and not the statutory jurisdictional claim limit, the case supports respondent’s contention that statutory interest should not be included in determining whether a claim exceeds the statutory limit. In McGoff, we wrote that

if we accepted [the insurer’s] position that statutory interest payments cannot exceed policy limits ... [t]he insured would receive no more than if the insurer had paid in a timely manner, and is therefore not compensated for the insurer’s use of the funds. Also, to the extent the insurer’s delay resulted in no negative consequence, timely payment would not be encouraged.

Id. at 119. Because the same reasoning applies here, we conclude that in order to further the penal and compensatory purposes of the statutory-interest provision, interest payments must be considered as separate from and in addition to the amount of the underlying claim.

We further observe that the AAA’s standard Petition for No-fault Arbitration—the form document completed and fried by appellant—limits the types of claims appropriately included in the total amount claimed to “medical claims” and “wage-loss claims.” The form makes no reference to statutory interest, indicating that such interest is to be considered separately from the underlying amount claimed. Moreover, the Minnesota No-Fault Automobile Insurance Act, Minn.Stat. §§ 65B.41-.71 (2002), addresses basic economic-loss benefits in section 44 and interest on overdue payments in section 54, entitled “Reparation Obligor’s Duty to Respond to Claims.” Therefore, we conclude that the legislature, by providing for benefits and interest in separate statutory sections, did not intend that interest be included in the calculation of the benefits claimed for the purposes of statutory jurisdiction. For these reasons, we conclude that the arbitrator had jurisdiction to hear this matter pursuant to Minn.Stat. § 65B.525.

II.

Appellant argues that the district court erred in concluding that the arbitrator was authorized to award interest payments against it pursuant to Minn.Stat. § 65B.54. No-fault benefits are “overdue” if not paid within 30 days after the insurer receives “reasonable proof of the fact and amount of loss realized.” Minn.Stat. § 65B.54, subd. 1. “Overdue payments shall bear simple interest at the rate of 15 percent per annum.” Id., subd. 2. Minn. R. No-Fault Arb. 32 states that “the arbitrator must award interest when required by [Minn.Stat.] § 65B.54.”

Appellant terminated respondent’s no-fault benefits in August 1996. Following neck surgery in June 1997, respondent submitted medical bills directly to Blue Cross, his health-insurance provider. It is undisputed that appellant did not receive actual notice of the expenses associated with respondent’s surgery until November 2001, when respondent submitted the first no-fault arbitration petition.

Appellant argues that it cannot be required to pay interest because it did not receive “reasonable proof of the fact and amount of loss realized” at the time of the surgery as required by statute. Minn.Stat. § 65B.54, subd. 1. Respondent contends that appellant’s termination of his benefits in August 1996 constituted a constructive denial of all subsequent claims and that he was thereby relieved of his statutory obligation to provide appellant with actual proof of those claims as they arose. Respondent contends that because filing for benefits after surgery would have been futile in light of appellant’s prior termination of his benefits, those benefits became overdue, and interest began to accrue, 30 days after his surgery.

Neither this court nor the supreme court has previously addressed whether a no-fault carrier can be required—under a theory of constructive denial—to pay interest on benefits that become “overdue” by virtue of the carrier’s denial of a claim of which the carrier did not receive actual notice.

Respondent’s theory of constructive denial is drawn largely from Perry v. State Farm Mut. Auto. Ins. Co., 506 F.Supp. 130, 134 (D.Minn.1980), which held that under Minn.Stat. § 65B.54, when a no-fault carrier terminates benefits, the insured is “not compelled to do a useless act by filing a claim for ... benefits and waiting until [the carrier] denie[s the] claim before [seeking payment from] ... other parties.” The court in Perry concluded that under section 65B.54, subd. 2, “the date for the beginning of interest is ... the date [the carrier] constructively denied ... benefits and the date after which filing for ... benefits would have been a useless act.” Id.

It is undisputed both that appellant had no actual notice of the claims in question at the time they arose and that appellant’s termination of respondent’s benefits seemingly rendered futile any subsequent attempt by respondent to claim benefits. We must, however, follow the general rule of statutory construction. When the words of a statute are clear and unambiguous, we will not disregard their plain meaning. Minn.Stat. § 645.16 (2002); Tuma v. Comm’r of Econ. Sec., 386 N.W.2d 702, 706 (Minn.1986). Minn.Stat. § 65B.54, subd. 1, plainly provides that the penalty interest is incurred 30 days after the insurer receives “reasonable proof of the fact and amount of loss realized” by the insured. The record before us is clear that appellant had no actual knowledge of respondent’s June 1997 medical expenses until respondent filed the arbitration petition in November 2001. On these facts, respondent’s theory of constructive denial does not justify the conclusion that appellant had reasonable proof of respondent’s loss in June 1997.

Respondent correctly argues that the award of statutory interest is mandated by statute upon an award of contested medical bills. But we disagree with respondent’s contention that the interest began accruing 30 days after the June 1997 surgery when respondent had no actual knowledge of the surgery. We therefore hold that the district court erred in awarding respondent interest in the amount of $7,125 and reverse and remand the portion of the district court’s order awarding penalty interest for modification consistent with our conclusion, as mandated by statute, that appellant received notice of the fact and amount of respondent’s loss on November 1, 2001, when he filed his no-fault petition.

III.

Appellant argues that the district court erred in failing to reduce the amount of the arbitration award by $10,000—the portion of respondent’s medical expenses paid by Blue Cross—pursuant to Minnesota’s collateral-source statute, which provides in pertinent part:

Subd. 2. Motion. In a civil action, whether based on contract or tort, when liability is admitted or is determined by the trier of fact, and when damages include an award to compensate the plaintiff for losses available to the date of the verdict by collateral sources, a party may file a motion within ten days of the date of entry of the verdict requesting determination of collateral sources. If the motion is filed, the parties shall submit written evidence of, and the court shall determine:
(1) amounts of collateral sources that have been paid for the benefit of the plaintiff or are otherwise available to the plaintiff as a result of losses except those for which a subrogation right has been asserted; and
(2) amounts that have been paid, contributed, or forfeited by, or on behalf of, the plaintiff or members of the plaintiffs immediate family for the two-year period immediately before the accrual of the action to secure the right to a collateral source benefit that the plaintiff is receiving as a result of losses.
Subd. 3. Duties of the court, (a) The court shall reduce the award by the amounts determined under subdivision 2, clause (1), and offset any reduction in the award by the amounts determined under subdivision 2, clause (2).

Minn.Stat. § 548.36, subds. 2, 3 (2002).

The primary purpose of the collateral-source statute is to avoid double recovery by a plaintiff. Imlay v. City of Lake Crystal, 453 N.W.2d 326, 331 (Minn.1990). Appellant contends that it is entitled to a collateral-source deduction to prevent respondent from recovering the cost of his surgery from both Blue Cross and appellant. We disagree.

In Stout v. AMCO Ins. Co., 645 N.W.2d 108, 114 (Minn.2002), the supreme court considered and rejected a nearly identical argument, holding that a no-fault insurer may not “attempt^ to reduce its obligation to provide basic economic loss benefits on the ground that another source of benefits has stepped in and decreased the amount of the injured person’s medical bills— whether by paying them, obtaining discounts, or some other means.” In Stout, an uninsured pedestrian brought a claim against a no-fault carrier to recover the full amount of his medical expenses, which had been discounted through negotiation by the Department of Human Services. Id. at 109-10. The court observed that “a no-fault insurer has a duty to provide basic economic loss benefits to reimburse an injured person’s loss even when the injured person is entitled to compensation for the same loss from a different source.” Id. at 112. The court further stated that because the no-fault insurer’s duty is to compensate the insured for the actual expense incurred, and not the amount billed, Id. at 113 (footnote omitted); see also Collins v. Farmers Ins. Exch., 271 Minn. 239, 244, 135 N.W.2d 503, 507 (1965) (holding that a no-fault insurer must reimburse an insured the amount of medical expenses incurred and “not the amount he paid as a result of a collateral transaction”).

[a] reduction in the amount billed, whether obtained pursuant to a settlement agreement or a health insurer’s fee schedule, does not modify the amount of medical expense incurred. We therefore conclude that the medical expense incurred by [the claimant] is the full amount reflected on his medical bills, and not the amount that was paid in satisfaction of those bills as the result of collateral transactions involving [the claimant’s] health insurer.

As to appellant’s argument that allowing respondent to recover from both Blue Cross and appellant would constitute a windfall, Stout held that “[u]nder our case law, if there is to be a windfall either to an insurer or to an insured, the windfall should go to the insured.” 645 N.W.2d at 114. We therefore conclude that appellant is not entitled to a collateral-source deduction.

IV.

Appellant argues that the district court erred in concluding that respondent had standing to bring a claim for no-fault benefits because Blue Cross had already paid respondent’s medical bills and waived its subrogation rights. Appellant’s argument on this issue relies on the same logic as its argument concerning the collateral-source deduction: because Blue Cross paid respondent’s medical expenses, his right to seek benefits from appellant was extinguished. Like the collateral source analysis, we find Stout apposite as to the issue of respondent’s standing. In Stout, the court held that a claimant may assert a claim against a no-fault carrier for the full amount of medical expenses incurred by the claimant regardless of whether that amount was subsequently reduced as a result of collateral transactions involving the claimant’s health insurer. 645 N.W.2d at 113. We conclude that the district court did not err here in applying Stout and concluding that respondent had standing to arbitrate the matter.

Appellant argues that Strand v. Ill. Farmers Ins. Co., 429 N.W.2d 266 (Minn.App.1988), compels a different result. In Strand, we held that “[w]hen the no-fault carrier settles a claim directly with a sub-rogated health insurer, the insured is not entitled to recover the difference between the amount claimed by the health insurer and the amount paid in settlement.” Id. at 268. But Strand is inapposite in that there, the health-insurance carrier paid the claimant’s medical expenses, asserted its right of subrogation, and then settled a subrogation claim against the insured’s no-fault insurance carrier. Id. at 270-71. Here, Blue Cross waived its subrogation right, and appellant did not settle or offer to pay any portion of respondent’s medical expenses arising out of the accident. We therefore conclude that respondent had standing to bring his claim for no-fault benefits.

DECISION

We conclude that the arbitrator properly exercised jurisdiction over this matter after determining that statutory interest payments are not properly included in the statutory claim limit established by Minn. Stat. § 65B.525 (2002). We further conclude that respondent had standing to bring his no-fault arbitration claim and that appellant was not entitled to a collateral-source deduction. We therefore affirm the district court’s order awarding respondent $10,000 for medical bills as set forth in his petition for no-fault arbitration. But because we conclude that appellant only received reasonable notice of respondent’s claim as of the date of his arbitration petition, we reverse and remand that portion of the district court’s order awarding respondent penalty interest for recalculation consistent with this opinion.

Affirmed in part, reversed in part, and remanded.


author: HARTEN, Judge. MINGE, Judge

text:
    Willie ALLEN, Appellant, v. HENNEPIN COUNTY, Respondent, Minnesota Teamster Public and Law Enforcement Employees’ Union Local No. 320, Respondent.
    No. A03-1752.
    Court of Appeals of Minnesota.
    June 1, 2004.

      Matthew L. Fling, Edina, MN, for appellant.
    Amy Klobuchar, Hennepin County Attorney, Martin D. Munic, Assistant County Attorney, Minneapolis, MN, for respondent Hennepin County.

      Patrick J. Kelly, Sarah J. Sonsalla, Kelly & Fawcett, P.A., St. Paul, MN, for respondent Minnesota Teamsters Public and Law Enforcement Employees’ Union Local No. 320.
    Karin E. Peterson, Ann E. Walther, Rice, Michels & Johnson, LLP, Minneapolis, MN, Amicus Curiae for Brooklyn Park Police Federation, International Association of Firefighters, Local 82, The Minnesota State Patrol Troopers Association, Olmsted County Sheriffs Deputies Association, The Police Officers Federation of Minneapolis, and the St. Paul Supervisors Association.
    Considered and decided by HARTEN, Presiding Judge; HALBROOKS, Judge; and MINGE, Judge.
   OPINION

HARTEN, Judge.

Appellant employee challenges the district court’s dismissal of his claims of wrongful discharge against his employer and breach of the duty of fair representation against his union for being untimely. He argues that rather than the 90-day statute of limitations for vacating arbitration awards under the Uniform Arbitration Act, the court should have applied the six-month period found in federal labor law, or alternatively, the six-year period used in tort and other claims. Because public policy favors prompt resolution of labor disputes and because other comparable Minnesota claims have short limitation periods, we affirm.

FACTS

From 1994 to 2001, appellant Willie Allen was employed by respondent Hennepin County (the county) as a Juvenile Corrections Officer at the Hennepin County Home School. In November 2001, the county gave appellant a notice of intent to dismiss, citing gross insubordination for appellant’s alleged failure to comply with the school’s dress code, which prohibited wearing sunglasses indoors. The Director of Community Corrections upheld the dismissal upon appellant’s administrative appeal.

At the time, a collective bargaining agreement (CBA) existed between the county and appellant’s union, respondent Minnesota Teamsters Public and Law Enforcement Employees’ Union, Local No. 320 (the union). The CBA guaranteed that employees would only be disciplined for just cause and established a procedure for the settlement of grievances. Pursuant to the CBA, appellant protested his discharge to the union and requested that it invoke the grievance procedure. The union filed a grievance on 4 January 2002. On 19 June 2002, however, it informed appellant that it would not process his grievance to arbitration.

On 18 December 2002, appellant commenced this action against the county for wrongful discharge and, the following day, he sued the union for breach of its duty of fair representation. His complaint additionally made reference to the unfair labor practice statute but did not include a separate count alleging such a claim. Respondents moved for judgment on the pleadings, asserting the affirmative defense that appellant’s claims were barred by the statute of limitations. The district court applied the 90-day statute of limitations in Minn.Stat. § 572.19, subd. 2 (2002), for vacating arbitration awards under the Uniform Arbitration Act and dismissed appellant’s claims as untimely. This appeal followed.

ISSUES

1. What statute of limitations applies to appellant’s claims of wrongful discharge and breach of the duty of fair representation?

2. Does appellant’s allegation of fraud by the union toll the 90 days?

3. Does appellant’s unfair labor practices claim against the county survive his failure to satisfy the jurisdictional requirements?

ANALYSIS

1. Statute of Limitations Under the Public Employment Labor Relations Act

Appellant argues the district court applied the wrong statute of limitations in dismissing his claims. The construction and applicability of a statute of limitations is a question of law, reviewed de novo. Benigni v. County of St. Louis, 585 N.W.2d 51, 54 (Minn.1998).

Minnesota’s Public Employment Labor Relations Act (PELRA) governs labor relations between public employees and them employers. MinmStat. §§ 179A.01-.30 (2002). Under PELRA, if a majority of public employees in a bargaining unit indicate that they want a union, the union becomes their exclusive bargaining representative. See Minn.Stat. § 179A.12, subd. 2. As such, the union has a judicially created duty to fairly represent its members in collective bargaining and enforcing the agreement. Eisen v. State, Dept. of Pub. Welfare, 352 N.W.2d 731, 735 (Minn.1984).

A discharged employee whose union decides not to take his or her grievance to arbitration may sue both the union for breach of the duty of fair representation (DFR) and the employer for breach of the labor contract. See Lipka v. Minn. Sch. Employees Ass’n, Local 1980, 550 N.W.2d 618, 621 n. 7 (Minn.1996). In these so-called hybrid claims, the employee must plead and prove the case against the union in order to succeed against the employer. Paoletti v. Northwestern Bell Telephone Co., 370 N.W.2d 672, 675 (Minn.App.1985), review denied (Minn. 26 Sept. 1989).

PELRA does not specify, however, nor has this court addressed, the statute of limitations for these hybrid claims. Respondents argue, and the district court ruled, that the appropriate period is the 90-day period for vacating arbitration awards under the Minnesota Uniform Arbitration Act (the UAA). See Minn.Stat. § 572.19, subd. 2 (2002). The' district court concluded that Eisen, which states that the UAA governs the authority and procedure for judicial review of labor arbi-trations under PELRA, mandated the use of the UAA’s statute of limitations. Additionally, the district court noted that the public policy behind PELRA and the differences between it and the National Labor Relations Act (NLRA), governing the private labor sector, supported application of the 90-day period.

Nonetheless, appellant argues that the more appropriate statute of limitations is the six-month period the United States Supreme Court applied in DelCostello v. Int’l Bhd. of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983). Alternatively, he urges this court to follow other states in applying the statute of limitations for claims most analogous to these hybrid claims. We decline to accept these arguments, and conclude that the 90-day statute of limitations found in the UAA is the least objectionable law in cases such as the one before us.

In DelCostello, the Court concluded that the six-month period in § 10(b) of the NLRA for bringing unfair labor practices charges also applied to DFR and wrongful termination claims brought by private-sector employees under federal law. 462 U.S. at 152, 103 S.Ct. at 2284. Prior to this decision, because no federal statute of limitations expressly governed these causes of action, courts applied the state statute of limitations for claims most similar to hybrid claims. Id. at 158, 108 S.Ct. at 2287. The DelCostello Court found, however, that “[i]n some circumstances ... state statutes of limitations can be unsatisfactory vehicles for the enforcement of federal law ... and it is the duty of the federal courts to assure that the importation of state law will not frustrate or interfere with the implementation of national policies.” Id. at 161, 103 S.Ct. at 2289 (quotation omitted). The Court criticized the use of arbitration statutes in these cases because they “fail to provide an aggrieved employee with a satisfactory opportunity to vindicate his rights under [applicable federal law]. Id. at 166, 103 S.Ct. at 2291. The Court then found no need to rely on state law, as § 10(b) of the NLRA was “designed to accommodate a balance of interests very similar to that at stake ... [and was] an analogy to the present lawsuit more apt than any of the suggested state-law parallels.” Id. at 169, 103 S.Ct. at 2293.

Appellant uses DelCostello to argue that an action to vacate an arbitration award is not analogous to a hybrid claim in which no arbitration has taken place and that the 90-day period is unreasonable as it provides insufficient time to discover relevant facts, frame the issue, and hire counsel. But DelCostello’s analysis under the NLRA is not binding on this court, and we find its analysis unpersuasive as to PEL-RA. See Int’l Union of Operating Eng’rs, Local No. 49 v. City of Minneapolis, 305 Minn. 364, 369, 233 N.W.2d 748, 752 (1975) (concluding that decisions under the NLRA are not binding when interpreting PELRA). DelCostello looked to NLRA’s unfair labor practices claims because “the family resemblance [to hybrid claims] is undeniable.” 462 U.S. at 170, 103 S.Ct. at 2293.

The differences between NLRA and PELRA show that NLRA is not the most appropriate statute for our purposes herein. PELRA was enacted to promote orderly and constructive relationships between public employees and their employers. Minn.Stat. § 179A.01 (2002). The act recognizes that ongoing “[u]nresolved disputes between the public employer and its employees are injurious to the public.... [Therefore, a]dequate means must be established for minimizing them and providing for their resolution.” Id. As a result, PELRA mandates that “[a]ll contracts must include a grievance procedure providing for compulsory binding arbitration of grievances including all written disciplinary actions.” Minn.Stat. § 179A.20, subd. 4(a). NLRA does not include such requirement. Further, PELRA does not contain a statute of limitations for unfair labor practices claims. Compare Minn. Stat. § 179A.13 and 29 U.S.C. § 160(b) (1998) (six-month statute of limitations for claims of unfair labor practices). The limitation period for unfair labor practices under the NLRA was pivotal to the Supreme Court’s adoption of that period as against the 90-day period. See DelCostello, 462 U.S. at 169, 103 S.Ct. at 2293.

While we recognize the difficulties faced by employees in applying the 90-day period, the inclusion of mandatory arbitration in all public employee labor contracts and the public injury that would result from drawn-out labor disputes persuades us that a shorter period is required. Minnesota favors prompt settlement of employment disputes. See Michael-Curry Cos. v. Knutson Shareholders Liquidating Trust, 434 N.W.2d 671, 673 (Minn.App.1989) (stating that one of the fundamental objectives of the UAA is speedy resolution of labor disputes), aff'd, 449 N.W.2d 139 (Minn.1989). Labor relationships require stability, and the longer the period in which an employee has to bring his claim, the more uncertainty an employer faces in future hiring and staffing decisions.

We also find persuasive the fact that provisions involving challenges by other public employees contain similar comparatively short periods. A timely petition for a writ of certiorari is the exclusive method by which a discharged employee may secure judicial review of a county’s employment decision. Dietz v. Dodge County, 487 N.W.2d 237, 239 (Minn.1992). Appeals by a writ of certiorari must be filed within 60 days of due notice of the proceeding to be reviewed. Minn.Stat. § 606.01 (2002). Similarly, a veteran must request a hearing “within 60 days of receipt of the notice of intent to discharge” or the right to a hearing is waived. Minn. Stat. § 197.46 (2002). Appellant does not demonstrate how any additional hurdles an employee may face in bringing a hybrid claim are so onerous as to require more than 90 days when the aforesaid claimants receive only 60 days.

For these reasons, we also reject appellant’s contention that'we should follow other states in finding hybrid claims most analogous to other causes of action with longer statutes of limitation. In Graham v. Quincy Food Serv. Employees Ass’n, 407 Mass. 601, 555 N.E.2d 543, 549 (1990), the court applied the 3-year statute of limitations for actions in tort to hybrid claims, reasoning that a hybrid claim was similar to a tort claim because the plaintiff alleges that the union breached the duty it owed to the plaintiff. Hybrid claims were also found to be similar to attorney-malpractice claims because an employee depends on the union for representation in a quasi-legal proceeding similarly to the way a client relies on an attorney. Id. at 549-50. See also Casner v. Am. Fed’n of State, County & Mun. Employees, 658 A.2d 865, 870-71 (Pa.Commw.Ct.1995) (finding hybrid claims most .analogous to attorney-malpractice claims); Norton v. Adair County, 441 N.W.2d 347, 355 (Iowa 1989) (applying statute of limitations for attorney-malpractice actions).

These cases do not involve factors similar to those that generated Minnesota’s labor laws, and therefore, appellant’s reasoning is unpersuasive. First, the public-employment laws of Iowa and Massachusetts do not require-mandatory arbitration; instead these laws only enforce voluntary arbitration agreements. Iowa Code § 20.18 (2001); Mass. Gen. Laws ch. 150C § 1 (1999). Second, these states’ courts have not applied arbitration acts to their labor laws as has Minnesota, to-wit, in Eisen, the Minnesota Supreme Court stated that the UAA governs the authority and procedure for judicial review of labor arbitrations under PELRA. 352 N.W.2d at 734. While Eisen did not involve a statute of limitations question, it also did not limit the application of the UAA to particular contexts. The general language in Eisen suggests that the UAA’s statute of limitations applies in the labor context. Eisen was decided in 1984, and the Minnesota legislature has not reacted by amending PELRA to specify a different statute of limitations. We conclude that the 90-day period in the UAA for vacating arbitration awards applies to employees’ hybrid claims under PELRA because it is the least problematic of our limited options.

2. Commencement Of the 90 Days

Appellant argues that even if the 90-day period applied, it did not start running immediately upon his receipt of the union’s letter. An appeal from an arbitration award “shall be made within 90 days after delivery of a copy of the award to the applicant, except that, if predicated upon corruption, fraud or other undue means, it shall be made within 90 days after such grounds are known or should have been known.” Minn.Stat. § 572.19, subd. 2 (2002). Appellant contends that an action for breach of DFR is akin to conduct “predicated upon corruption, fraud or other undue means” and therefore a factual determination must be made as to when he knew or should have known of the union’s breach.

A union breaches its duty of fair representation only when its conduct toward a bargaining unit member is “arbitrary, discriminatory or in bad faith,” which is “substantially evidenced by fraud, deceitful action or dishonest conduct” by the union. Sonenstahl v. L.E.L.S., Inc., 372 N.W.2d 1, 5 (Minn.App.1985) (quotations omitted). Appellant correctly argues that the grounds for a breach of DFR claim can be similar to a claim of fraud in an action to vacate an arbitration award. But, the so-called fraud in a DFR claim is premised on the union not pursuing the employee’s claim, which is known to the employee and employer upon the union’s notification that it is not pursing the grievance.

On 19 June 2002, appellant received the letter from the union. He makes no assertion that during the subsequent 90 days he was under the impression that the union was proceeding with his grievance. Accordingly, appellant discovered the cause of action on the day he received the union’s letter and had 90 days to file his claim.

3. Jurisdictional Requirements of Unfair Labor Practices Claims

Appellant argues that even if his breach of DFR and wrongful discharge claims are barred by the 90-day statute of limitations, his unfair labor practices claim against the county is not subject to the limitation period. “[A]ny employee ... aggrieved by an unfair labor practice ... may bring an action for injunctive relief and for damages caused by the unfair labor practice.... ” Minn.Stat. § 179.13, subd. 1 (2002). Appellant contends that these claims are private causes of action under Edina Educ. Assoc. v. Bd. of Educ. of Indep. School Dist. No. 273 (Edina), 562 N.W.2d 306, 310 (Minn.App.1997) (addressing a claim that derived from both state law and contract), review denied (Minn. 11 June 1997). As such, he argues that his claims do not require the utilization of the grievance mechanism or exhaustion of administrative remedies and are therefore not subject to the UAA and its statute of limitations. He argues that because unfair labor practices claims are statutorily created, the court should apply Minn.Stat. § 541.05, subd. 1(2) (2002), which states that actions upon liability created by statute shall be commenced within six years.

We do not reach the merits of appellant’s arguments. Minn.Stat. § 179A.13, subd. 1 (2002) requires that:

A copy of any complaint alleging an unfair labor practice must be filed with the commissioner at the time it is brought in district court. The party bringing an unfair labor practice action in district court shall also transmit to the commissioner any orders or judgments of the court within ten days of the order or judgment.

Filing a copy of the complaint with the commissioner is a “condition precedent to [bringing] a PELRA claim.” Lee v. Regents of the Univ. of Minn., 672 N.W.2d 366, 373 (Minn.App.2003). Appellant did not present any evidence that he filed the complaint. Further, in its brief, the county attached a letter from the Deputy Commissioner of the Bureau of Mediation Services stating that appellant did not file an unfair labor practice complaint with the department.

Although this letter was not part of the record below, we find that it falls within the exception to the rule that this court may not base its decision on matters outside the record on appeal. See Plowman v. Copeland, Buhl & Co., 261 N.W.2d 581, 583 (Minn.1977) (considering evidence not in the record when the evidence is documentary, of a conclusive nature, and will help sustain verdicts and judgments). The letter helps to affirm the district court judgment and conclusively shows that appellant did not file a copy of his complaint. Further, the filing status of appellant’s complaint can easily be determined by inquiring with the bureau, whose accuracy cannot be questioned. See Femrite v. Abbott Northwestern Hosp., 568 N.W.2d 535, 541 (Minn.App.1997) (taking judicial notice of facts that are “capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned” (quotation omitted)), review denied (Minn. 18 Nov. 1997).

We therefore take judicial notice of the letter and reject appellant’s unfair labor practices claim against the county based on failure to follow the statutory requirements for bringing such a claim.

DECISION

Public policy indicates that the 90-day statute of limitations in the Uniform Arbitration Act should apply to appellant’s hybrid claim. The period is not tolled by appellant’s allegation of fraud by the union. Because appellant did not file his claim within the 90 days and because he failed to satisfy the jurisdictional requirements for his unfair labor .practices claim, the district court did not err in dismissing his claims.

Affirmed.

MINGE, Judge

(dissenting).

I respectfully dissent. I recognize that statutes of limitation promote an important policy of bringing closure to disputes and protecting people from stale claims. Wschola v. Snyder, 478 N.W.2d 225, 227 (Minn.App.1991), review denied (Minn. Feb. 10, 1992). But because these statutes, especially those providing for short periods, can lead to harsh results, they have been narrowly construed. See Kittson County v. Wells, Denbrook & Assoc., 308 Minn. 237, 241, 241 N.W.2d 799, 801 (1976) (construing statute of limitations narrowly, in part, because failing to do so could have a harsh result); Rademacher v. Tountas, 474 N.W.2d 446, 449 n. 2 (Minn.App.1991) (citing Kittson for the proposition that ambiguous statutes of limitations are strictly construed against those invoking their protection). Cf. Kaiser v. Mem’l Blood Ctr. of Minneapolis, Inc., 486 N.W.2d 762 (Minn.1992) (narrowing the reach of a short medical limitation statute and applying the general six-year statute).

We face an awkward choice in this case. In part, it arises under the Public Employee Labor Relations Act (PELRA), which is structured to promote prompt resolution of disputes. See Minn.Stat. .§§ 179A.01-.30 (2002 & Supp.2003). However, PELRA does not include any provision limiting the time for bringing claims of the type in this proceeding. The general statute of limitation provides a six-year period for actions upon express or implied contracts or other obligations. Minn.Stat. § 541.05, subd. 1(1) (2002). It should apply to the case before us absent a shorter, specific statute. This six-year period is long, but the 90-day statute of limitation for appealing arbitration awards under the Uniform Arbitration Act that has been applied by the majority is very short.

Perhaps more important is the fact that the 90-day arbitration appeal- limitation on actions only applies to this case by analogy. See Minn.Stat. § 572.19, subd. 2 (2002). Appellant’s claim has not been the subject of any arbitration; only a refusal to arbitrate and an alleged breach of the duty of fair representation (DFR). There was no arbitration from which the appellant could appeal.

Equally important since the arbitration statute does not clearly apply, appellant Willie Allen and his attorney could not reasonably be expected to know that he would be subject to its terms. It is doubly harsh to unexpectedly face a short limitation of action statute.

Further, applying the 90-day limitation period in the arbitration law is not related to the PELRA’s public policy of “pro-vid[ing] for the protection of the rights of the public employee.” Minn.Stat. § 179A.01(3) (2002). Too tight a time-frame may deny an employee the opportunity to vindicate his or her rights. In DelCostello v. Int’l Bhd. Of Teamsters, the Supreme Court discussed the unfairness of a tight timeframe in this setting as follows:

In the labor setting .... the employee will often be unsophisticated in collective-bargaining matters, and he will almost always be represented solely by the union. He is called upon, within the limitations period, to evaluate the adequacy of the union’s representation, to retain counsel, to investigate substantial matters that were not at issue in the arbitration proceeding, and to frame his suit. Yet state arbitration statutes typically provide very short times in which to sue for vacation of arbitration awards.

462 U.S. 151, 165-66, 103 S.Ct. 2281, 2291, 76 L.Ed.2d 476 (1983).

When faced with this issue, courts in other jurisdictions have declined to apply the short arbitration statutes of limitation. In DelCostello, the Supreme Court criticized the analogy to and the short limit period of arbitration statutes because they “fail to provide an aggrieved employee with a satisfactory opportunity to vindicate his rights....” 462 U.S. at 166, 103 S.Ct. at 2291. Two states have applied the longer federal labor limitations period of six months. See Ray v. Org. of Sch. Admin. & Supervisors, Local 28, 141 Mich.App. 708, 367 N.W.2d 438, 439-40 (Mich.Ct.App.1985); Hrabinski v. Exxon Chemical Co. 258 N.J.Super. 143, 609 A.2d 120, 122-24 (Ct.Law Div.1992).

Other state courts have applied their general, multi-year limitation period for tort claims and attorney-malpractice claims rather than the short arbitration statutes of limitation. See Casner v. Am. Fed’n of State, County & Mun. Employees, 658 A.2d 865, 870-71 (Pa.Commw.Ct.1995); Norton v. Adair County, 441 N.W.2d 347, 355 (Iowa 1989); Graham v. Quincy Food Serv. Employees Ass’n, 407 Mass. 601, 612-14, 555 N.E.2d 543, 549-50 (1990); Baker v. Bd. of Educ. 70 N.Y.2d 314, 520 N.Y.S.2d 538, 514 N.E.2d 1109, 1111-1113 (1987). In applying the longer limitation period, some courts invited the legislature to determine whether a shorter period should be enacted. See Baker, 520 N.Y.S.2d 538, 514 N.E.2d at 1113. In some cases, the legislature has responded. See N.Y. C.P.L.R. 217(2)(a) (McKinney 2003) (shortening New York’s limitations period for breach of DFR claims to four months).

When presented with the limited options available to us, we should apply the six-year period found in Minn.Stat. § 541.05, subd. 1(1) and call the legislature’s attention to the absence of a limitation period in the PELRA.


author: ROBERT H. SCHUMACHER, Judge.

text:
    Mohamed D. ABD ALLA, a/k/a Mohamed D. Abd-Alla, a/k/a Mohamed D. Abdul-Allah, Respondent, v. Mohamed MOURSSI, a/k/a Mohamed Morsy, Appellant.
    No. A03-1736.
    Court of Appeals of Minnesota.
    June 1, 2004.

      Michael W. Bertelsen, Bell, Bertelsen Bright, Shoreview, MN, for respondent.
    Stephen H. Berndt, Fridley, MN, for appellant.
    Considered and decided by SCHUMACHER, Presiding Judge; KLAPHAKE, Judge; and STONEBURNER, Judge.
   OPINION

ROBERT H. SCHUMACHER, Judge.

Mohamed Mourssi, a/k/a Mohamed Mor-sy, appeals from the district court’s order confirming the decision of the Islamic Arbitration Committee and dismissing his motion to vacate the arbitration award. He argues he was denied his right to “appeal” to the committee and the committee exceeded its authority. We affirm.

FACTS

In August 2001, Mourssi and respondent Mohamed D. Abd Ala, a/k/a Mohamed D. Abd-Ala, a/k/a Mohamed D. Abdul-Mlah, entered into a partnership to manage and acquire restaurants. The partnership was subject to a partnership agreement. The partnership agreement included an arbitration clause, which provides:

Any dispute, controversy or claim arising out of or in connection with or relating to this Agreement or any breach or alleged breach hereof shall, upon the request of any party involved, be submitted to and settled by arbitration before the Arbitration Court of an Islamic Mosque located in the State of Minnesota pursuant to the laws of Islam (or at any other place or under any other form of arbitration mutually acceptable to the parties so involved). Any award rendered shall be final and conclusive upon the parties and a judgment thereon may be entered in the highest court of the forum, state or Federal, having jurisdiction. The expenses of the arbitration shall be borne equally by the parties to the arbitration, provided that each party shall pay for and bear the costs of its own experts, evidence, and counsel.

At some point, the partnership acquired the A-Bustan Restaurant. Ater purchasing the restaurant, numerous disputes arose between the partners. The parties agreed to arbitrate their difference before an Islamic arbitration committee. In September 2002, the committee issued its decision, stating:

After many long meetings and review of all issues that occurred between [Mours-si and Abd Alla], the committee has decided in its last meeting the following:
1. [T]here shall be no link between the problem related to Al-Bustan Restaurant and any other previous problem that occurred between the two parties, may it be financial problems or any other problem[.]
2. [S]teps toward the sale of Al-Bus-tan Restaurant shall start on September 20, 2002, with the first priority to purchase it granted to [Mourssi] at a price of $210,000, which was agreed upon by the parties. He shall pay the full amount in a period of no more than two months from the date specified above. In case where [Mourssi] is not interested in purchasing the Al-Bustan Restaurant, the priority shall go to his associate [Abd Alla]. In case both parties do not want to purchase Al-Bustan Restaurant, the process of selling the restaurant shall be granted to the Arbitration Committee with no interference from either of the two parties. The Arbitration Committee then shall sell the restaurant and resolve all financial rights between the two parties.

The decision also states:

1. The Arbitration Committee decides that Al-Bustan Restaurant has been acquired by [Mourssi], and he assumes full responsibility over the restaurant since May 1st, 2002. Beginning at this date, all profits from sales shall go to [Mourssi]. Similarly, all losses, if any, shall be assumed by [Mourssi] alone. And any problem that arise with Al-Bustan Restaurant after this date shall be the sole responsibility of [Mourssi].
2. Any disagreement or issues, may it be financial or other, between the two parties, the Arbitration Committee shall have the sole right to study them, to determine the harm inherent in them, and to decree what it sees suitable.
3. All decisions of the Arbitration Committee shall be binding to all parties in the dispute as is accepted by them in a written statement, and in accordance to a condition in the sale contract specifying that all disputes regarding Al-Bus-tan Restaurant are to be resolved according to Islamic Jurisprudence.

In a letter dated November 10, 2002, Mourssi expressed his concerns to the committee regarding its decision and argued that the decision “could be considered as a frame for a possible solution but not a solution itself since there was not any issue or numbers determined or specified.” Mourssi concluded the letter stating:

Based on all the facts I specified above, I cannot accept the decision made by the arbitration committee, and I would urge them to reconsider looking into the issue deeper, and to allow both parties to bring in documents to be the bases for resolving all problems, or to move to the next choice in the partnership agreement by taking the whole issue to the American judicial system according to the laws of the state of Minnesota.

The committee did not receive the letter until April 7, 2003.

In April 2003, Abd Alla moved the district court to confirm the arbitration award. On May 14, 2003, Mourssi responded that the court should deny Abd Alla’s motion and vacate the arbitration award “on the grounds that it was procured by corruption, fraud or other undue means and that the Committee exceeded its authority.” During the hearing Abd Alla argued Mourssi had not timely contested the arbitration award and therefore could not now contest the award. Mourssi argued that under Islamic law there is no set time for appeal.

The district court remanded the matter to the committee to determine whether Mourssi had requested the committee to reconsider its decision in a timely manner, and if he did, was the decision “procured by corruption, fraud or other undue means and/or did the Committee exceed its authority.” The committee responded that no right to reconsideration existed, the committee did not exceed its authority, and the decision was not procured by corruption, fraud, or other undue means. After receiving the committee’s response, the district court confirmed the arbitration award.

ISSUE

Can the district court consider Mourssi’s motion to vacate the committee’s arbitration award?

ANALYSIS

On appeal, neither party contests whether the district court had jurisdiction to consider Mourssi’s motion to vacate the arbitration award. Therefore, we must independently determine the extent of the district court’s jurisdiction in this case. See Herubin v. Finn, 603 N.W.2d 133, 137 (Minn.App.1999) (“Subject matter jurisdiction cannot be conferred upon the court by consent of the parties.”).

Although the arbitration in this case was conducted pursuant to Islamic law, judicial review of any arbitration award is limited to those matters where jurisdiction is statutorily granted. Univ. of Minn. v. Woolley, 659 N.W.2d 300, 308 (Minn.App.2003) (stating aggrieved school employee who choose to submit matter to arbitration is only entitled to limited judicial review under chapter 572), review denied (Minn. Jun. 17, 2003); see also Park Const. v. Indep. Sch. Dist. No. 32, 216 Minn. 27, 33, 11 N.W.2d 649, 653 (1943) (“In the absence of statute ... the decisions of common-law arbitrators are not subject to judicial review and supervision.”).

Abd Alla sought judicial confirmation of the arbitration award. Chapter 572 provides: “Upon application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in sections 572.19 and 572.20.” Minn.Stat. § 572.18 (2002). Section 572.18 unambiguously requires the district court to confirm the arbitration award unless grounds to vacate or modify the award are properly brought before the court. See Mut. Serv. Cas. Ins. Co. v. League of Minn. Cities Ins. Trust, 659 N.W.2d 755, 760 (Minn.2003) (“[Wjhere the intention of the legislature is clearly manifested by plain and unambiguous language, [courts] have neither the need nor the permission to engage in statutory interpretation.”); Minn. Stat. § 645.44, subd. 16 (2002) (stating “ ‘shall’ is mandatory”).

Mourssi moved to vacate the award on the grounds that the award was procured by fraud, corruption, or undue influence and that the arbitration committee exceeded its authority. Even though Mourssi’s motion to vacate was filed in response to Abd Alla’s application to confirm the award, the motion is still subject to the time requirements of chapter 572. See Component Sys., Inc. v. Murray Enters., 300 Minn. 21, 24-25, 217 N.W.2d 514, 516 (Minn.1974) (rejecting appellants assertion that 90-day time limit does not prevent hearing on motion to vacate when it is asserted in answer in proceeding to confirm arbitration award).

Chapter 572 provides a court may consider vacating an arbitration award upon the application of a party where

(1) The award was procured by corruption, fraud or other undue means;
(2) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party;
(3) The arbitrators exceeded their powers;
(4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of section 572.12, as to prejudice substantially the rights of a party; or
(5) There was no arbitration agreement and the issue was not adversely determined in proceedings under section 572.09 and the party did not participate in the arbitration hearing without raising the objection;
But the fact that the relief was such that it could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award.

Minn.Stat. § 572.19, subd. 1 (2002).

Section 572.19 also provides that an application to vacate an arbitration award “shall be made within 90 days after delivery of a copy of the award to the applicant, except that, if predicated upon corruption, fraud or other undue means, it shall be made within 90 days after such grounds are known or should have been known.” MinmStat. § 572.19, subd. 2 (2002). Failure to file an application to vacate an arbitration award within 90 days when the application is not predicated on fraud, corruption, or other undue means prevents judicial review of the award. Wacker v. Allstate Ins. Co., 312 Minn. 242, 249, 251 N.W.2d 346, 349-50 (1977).

Here, the committee’s decision was issued on September 23, 2002. It is clear from the record that Mourssi had received a copy of the arbitration award by November 10, 2002. Mourssi moved the district court to vacate the arbitration award on May 14, 2003, considerably more than 90 days after he received a copy of the award. Thus, Mourssi is not entitled to judicial consideration unless his application to vacate was predicated on fraud, corruption, or other undue means.

Mourssi claims that the award was procured by corruption, fraud, or other undue means because “one of the arbitrators ... was meeting with a potential buyer prior to the issuance of the September 23, 2002 award.” Arbitration awards are strongly favored and a reviewing court must exercise “[ejvery reasonable presumption” in favor of the arbitration award’s finality and validity. State, Office of State Auditor v. Minn. Ass’n of Prof'l Employees, 504 N.W.2d 751, 754 (Minn.1993).

In light of the presumptions favoring an arbitration award, an application to vacate an arbitration award on the grounds that it was procured by fraud, corruption, or other undue means, must present an allegation that, if true, would clearly demonstrate the award was the result of these impermissible means. See Beebout v. St. Paul Fire & Marine Ins. Co., 365 N.W.2d 271, 273 (Minn.App.1985) (stating before district court may consider vacating arbitration award on grounds of fraud, “[f|raud must be established by ‘clear allegations and proof ” (citation omitted)), review denied (Minn. May, 31, 1985).

Mourssi’s allegation that the arbitrator spoke to a “potential buyer” does not clearly demonstrate the award was result of fraud, corruption, or other undue means when the arbitration award provided Mourssi with the first opportunity to purchase the restaurant at a price that the parties agreed was appropriate. Because we conclude that the district court was not presented with an application to vacate an arbitration award that was filed within the time limits prescribed by chapter 572, section 572.18 only granted the district court jurisdiction to confirm the arbitration award.

DECISION

The district court properly confirmed the arbitration award under Minn.Stat., ch. 572.

Affirmed.

      . Mourssi's claim is more appropriately characterized as a request for the committee to reconsider its decision and not an appeal to the committee.