Missouri Supreme Court vacates ruling in arbitration dispute

The Missouri Supreme Court on Nov. 4 vacated and remanded a St. Louis County Circuit Court judgment in a dispute between the estate of attorney Neil Maune and his former law partner, Marcus Raichle.

The higher court directed the lower court to grant a motion to compel arbitration, finding that questions about whether the estate’s claims fall within the scope of an arbitration agreement must be decided by an arbitrator, not the court.

The case stems from a business relationship dating back to 2009, when Maune and Raichle formed The Maune Raichle Law Firm (MR Law) as a general partnership. Around that time, MR Law purchased $10 million life insurance policies for each partner, naming the firm as both the owner and beneficiary of both policies.

In 2011, the two attorneys joined three others to form a second firm, Raichle Hartley French & Mudd LLC (MRHFM). Each signed the operating agreement twice, once as a manager and once as a member, which included an arbitration clause requiring disputes “arising from or related to” the agreement to be resolved through arbitration under the American Arbitration Association’s rules. Those rules contained a delegation provision specifying that any disputes about the scope or applicability of the arbitration agreement must be decided by the arbitrator.

After MRHFM was formed, it assumed payment of the life insurance premiums for both partners, though the beneficiary designation for Maune’s policy was never updated and continued to list MR Law. When Maune died in July 2023, the $10 million death benefit was paid to MR Law. The estate sued Raichle and MR Law in January 2024, alleging that the proceeds should have gone to MRHFM because it had been paying the premiums for more than a decade.

The circuit court denied the defendants’ motion to compel arbitration, ruling that MR Law was not a party to the operating agreement and therefore could not rely on it. Raichle and MR Law appealed, and the Missouri Supreme Court heard oral arguments in June.

The high court found the central issue was whether MR Law, a general partnership, could be bound by the arbitration agreement signed by Maune and Raichle. The justices said it could. Under Missouri’s “aggregate theory” of partnerships, a general partnership has no legal existence separate from its partners, meaning actions taken by all partners individually are actions of the partnership itself.

“Maune and Raichle had no corporate capacities separate and apart from their individual capacities such that they can act solely ‘on behalf of’ MR Law,” the opinion stated. “Instead, they were MR Law.”

Because Maune and Raichle were the only partners of MR Law when they signed the operating agreement, the court concluded their signatures bound the partnership as well. As a result, both the partners and MR Law were subject to the arbitration agreement, including the delegation clause giving the arbitrator, not the court, the authority to determine whether the estate’s claims fall within the scope of arbitration.

The Supreme Court based its decision in part on its earlier ruling this year in Karlin v. UATP Springfield, LLC., which held that when an arbitration agreement includes a valid delegation clause, courts must enforce that clause and refer any disputes about the scope or applicability of arbitration to the arbitrator unless there is a specific challenge to the clause itself.

“It is the scope of that arbitration agreement — and, more particularly, whether it encompasses the Estate’s claims — that lies at the heart of this matter,” the court wrote. “Under Karlin, however, this Court has no authority to resolve this central issue because the parties agreed in the (operating agreement) that disputes regarding the scope of the arbitration agreement must be decided by the arbitrator.”

The court found that no such challenge was raised here, so the circuit court lacked authority to decide whether the estate’s claims were arbitrable. The justices vacated the lower court’s order and remanded the case with instructions to sustain the motion to compel arbitration.

The case is Diana Maune, as personal Representative of the Estate of Neil J. Maune v. Marcus Raichle Jr. and The Maune Raichle Law Firm, Case No. SC100942.