{"id":895148,"date":"2018-10-31T12:10:42","date_gmt":"2018-10-31T18:10:42","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895148"},"modified":"2018-10-31T12:10:42","modified_gmt":"2018-10-31T18:10:42","slug":"decides-arbitrability-judge-arbitrator","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/decides-arbitrability-judge-arbitrator\/","title":{"rendered":"Who Decides Arbitrability? Judge Or Arbitrator? (Again)"},"content":{"rendered":"

Mack Sperling | North Carolina Business Litigation Report<\/a> | September 12, 2018<\/p>\n

Having a client required to arbitrate a case \u2014 even though that client never signed off on an arbitration provision \u2014 is nothing new.\u00a0 Judge Conrad dealt with that situation late last month in\u00a0Charlotte Student Housing DST v. Choate Construction Co<\/em>., 2018 NCBC 88,\u00a0where he said:<\/p>\n

Because arbitration is a matter of contract, the usual rule is that \u201ca party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.\u201d\u00a0United Steelworkers of Am. v. Warrior & Gulf Nav. Co<\/em>., 363 U.S. 574, 582 (1960). In an appropriate case, though, \u201ca nonsignatory can enforce, or be bound by, an arbitration provision within a contract executed by other parties.\u201d\u00a0\u00a0Int\u2019l Paper Co. v. Schwabedissen Maschinen & Anlagen GmbH<\/em>, 206 F.3d 411 , 415 (4th Cir. 2000).<\/p><\/blockquote>\n

Op. \u00b614.<\/p>\n

Plaintiffs, who had acquired a Charlotte apartment complex from its original owner, were suing the architect, general contractor and two subcontractors over design deficiencies in the construction.<\/p>\n

Plaintiffs had not signed the Construction Contract containing the arbitration provision, but Judge Conrad ruled that they were required to arbitrate their claims.<\/p>\n

He said that:<\/p>\n

estoppel is dispositive here. In short, \u201c[a] nonsignatory is estopped from refusing to comply with an arbitration clause when it receives a direct benefit from a contract containing an arbitration clause.\u201d\u00a0Int\u2019l Paper<\/em>, 206 F.3d at 418 (quotation marks omitted). It would be manifestly unfair to permit a party to take the benefit of the contract \u201cdespite [its] non-signatory status but then, during litigation, attempt to repudiate the arbitration clause in the contract.\u201d\u00a0Hellenic Inv. Fund, Inc. v. Det Norske Veritas<\/em>, 464 F.3d 514, 517\u201318 (5th Cir. 2006); see also Int\u2019l Paper, 206 F.3d at 418. That is what Plaintiffs seek to do here, and they are therefore estopped from refusing to arbitrate their claims against [the Defendants].<\/p><\/blockquote>\n

Op. Par. 23<\/p>\n

Since the Plaintiffs were claiming that the Defendants had not performed their work in accord with the \u201cContract Documents,\u201d they were bound by the terms of those documents, which contained the arbitration provision.<\/p>\n

But what about that tricky question: who decides whether a matter should be arbitrated: Judge or Arbitrator?\u00a0 Judge Conrad here seized the right to make that decision for the Business Court.\u00a0 I\u2019ve\u00a0written about a Business Court decision on that point once before.\u00a0 The short answer is that it has to be \u201cclear and unmistakeable\u201d that the parties intended for the arbitrator, not the Court, to decide the question of arbitrability.<\/p>\n

It was certainly clear and unmistakeable that the parties signing the contract containing the arbitration provision had delegated authority to determine arbitrability to the arbitrator.\u00a0 The arbitration clause invoked the AAA\u2019s Construction Industry Rules, expressly delegate to the arbitrator \u201cthe power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement.\u201d<\/p>\n

But that wasn\u2019t enough to bind the Plaintiffs, who were not signatories to the document referencing the Construction Industry Rules.<\/p>\n

Those of you who aren\u2019t at home hunkering down in fear of the impending hurricane are wondering why the Plaintiffs, who were found to beobligated to arbitrate, weren\u2019t also obligated to have the arbitrator (as opposed to the Business Court Judge) decide whether they had to\u00a0 arbitrate the case in the first place.<\/p>\n

Well, even though bound by the arbitration provision, there was nothing to show that the Plaintiffs shared the intent of the signatories to have the arbitrator decide the issue of arbitrability.\u00a0 As noted by Judge Conrad, \u201c[c]ourts have generally found that agreements that do not mention or reference a particular non-signatory do not clearly or unmistakeably evidence an agreement by that non-signatory to have an arbitrator determine whether the agreement is arbitrable.\u201d Op. \u00b619 (quoting\u00a0McKenna Long & Aldridge, LLP v. Ironshore Specialty Ins. Co<\/em>., 2015 U.S. Dist. LEXIS 3347 at *14-15 (S.D.N.Y. Jan. 12, 2015).<\/p>\n","protected":false},"excerpt":{"rendered":"

Mack Sperling | North Carolina Business Litigation Report | September 12, 2018 Having a client required to arbitrate a case \u2014 even though that client never signed off on an arbitration provision \u2014 is nothing new.\u00a0 Judge Conrad dealt with that situation late last month in\u00a0Charlotte Student Housing DST v. Choate Construction Co., 2018 NCBC… Continue reading Who Decides Arbitrability? Judge Or Arbitrator? (Again)<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[41,9],"tags":[9895,42,224],"class_list":["post-895148","post","type-post","status-publish","format-standard","hentry","category-arbitration","category-construction-contracts","tag-advise-consult","tag-arbitration-2","tag-construction-contract","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nWho Decides Arbitrability? 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