Web IV, LLC v. Samples Construction, LLC
Web IV, LLC v. Samples Construction, LLC
Opinion
Web IV, LLC and William E. Brown, defendants and counterclaim plaintiffs in the breach of contract action below, appeal from the trial court's order staying litigation and compelling arbitration. Web IV argues that the trial court erred by referring to the arbitrator the threshold question of whether Samples Construction, the plaintiff below, waived its right to compel arbitration. Web IV also contends that the trial court erred by compelling arbitration as to other parties, with whom Web IV had not signed an arbitration agreement. Upon careful consideration, we affirm the trial court's order.
We review a trial court's order granting or denying a motion to compel arbitration de
*109
novo.
Miller v. GGNSC Atlanta, LLC
,
The record shows the following relevant facts. On August 5, 2016, Samples Construction, LLC entered into a standard form cost-plus fee agreement (the "Agreement") with Web IV for the construction of the Governors Gun Club in Kennesaw, Georgia. The Agreement identified the Design-Build Institute of America's Standard Form of General Conditions of Contract between Owner and Design-Builder (the "General Conditions") as part of the contract documents. Article 10 of the General Conditions, titled "Contract Adjustments and Disputes," outlines a dispute resolution process. Pursuant to Section 10.2, in the event of any disagreement, the parties would first attempt to resolve the dispute through their respective field level representatives, and then through their respective senior representatives. If those efforts proved unsuccessful, the parties would submit to non-binding mediation. Section 10.3.1 provides for arbitration:
Any claims, disputes or controversies between the parties arising out of or relating to the Agreement, or the breach thereof, which have not been resolved in accordance with the procedures set forth in Section 10.2 above shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the AAA then in effect, unless the parties mutually agree otherwise.
The parties further agreed, under Section 12.3.1, that the contract "shall be governed by the laws of the place of the Project, without giving effect to its conflict of law principles."
The contract was signed by Bert Brown, managing member of Web IV, and Michael Samples, owner of Samples Construction. Work proceeded under the contract until April 18, 2017, when Brown sent an e-mail to Samples terminating the Agreement effective immediately. Samples Construction filed a materialman's and mechanic's lien against the property on June 9, 2017, seeking $526,960.34 in payment for work that had already been performed. Then, two subcontractors filed liens against the property as well. Web IV responded by filing a Notice of Contest of Lien, demanding that Samples Construction and subcontractors file suit within 60 days or their liens would be cancelled.
On August 10, 2017, Samples Construction filed suit against Web IV and Brown, raising claims for breach of contract, quantum meruit, foreclosure on mechanic's lien bond, and attorney fees. Samples Construction expressly reserved the right to arbitrate the suit, demanded arbitration in accordance with the General Conditions, and requested that the suit be stayed pending the outcome of arbitration. Web IV filed an answer and counterclaims, asserting claims of breach of contract, negligent construction, slander of title, and attorney fees against Michael Samples, Pride Electric, Inc., and Devotie Construction Company (the "third-party defendants").
Samples Construction subsequently filed a motion to stay litigation and compel arbitration under the Georgia Arbitration Code, OCGA § 9-9-6. Web IV objected, arguing in pertinent part that Samples Construction waived any right to compel arbitration because the parties never completed the dispute resolution process outlined in Section 10.2 of the General Conditions which, according to Web IV, was a condition precedent to demanding arbitration. Web IV also argued that it had no contractual obligation to arbitrate with Brown or the subcontractors. The trial court ruled in favor of Samples Construction and entered an order staying the lawsuit and compelling arbitration. The trial court then certified its order for immediate review and we granted Web IV's application for interlocutory appeal. This timely appeal followed.
1. In two related enumerations of error, Web IV contends that the trial court erred in concluding that the threshold question of arbitrability should be decided by the arbitrator rather than by the court. We disagree and conclude that the trial court properly referred this issue to the arbitrator.
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The parties' agreement includes a provision that the contract "shall be governed by the laws of the place of the Project"-Georgia-and the motion to compel arbitration was filed pursuant to OCGA § 9-9-6 of the Georgia Arbitration Code ("GAC"). Although the Federal Arbitration Act ("FAA") applies to cases involving interstate commerce, "[s]tate law may apply where parties agree to be bound by state arbitration law, so long as that law does not conflict with the FAA."
North Augusta Assocs. Partnership v. 1815 Exchange
,
(a) Web IV asserts that this case presents a threshold question of substantive arbitrability and contends that, consistent with the general rule, this matter must be resolved by the trial court rather than the arbitrator.
The parties' breach of contract and related claims clearly fall within the scope of the arbitration clause incorporated into the agreement between Samples Construction and Web IV, as that clause provides either party may insist on arbitration to resolve "[a]ny claims, disputes or controversies between the parties arising out of or relating to the Agreement, or the breach thereof[.]" The question, then, is whether the trial court or the arbitrator should decide whether Samples Construction waived its right to compel arbitration by allegedly failing to comply with the dispute resolution procedures listed in Section 10.2 of the General Conditions. We agree with Web IV that this is a "threshold question," but we conclude that it is one of procedural, rather than substantive, arbitrability.
Web IV is correct that gateway issues of substantive arbitrability, such as allegations of " 'conduct-based' waiver of arbitration rights," are generally decided by the trial court.
Brown v. RAC Acceptance East, LLC
,
Although Web IV characterizes the question of whether Samples Construction waived its right to arbitration by failing to comply with the dispute resolution procedures set forth in the parties' agreement as a question of conduct-based waiver, it is more accurately described as a procedural question that grows out of the agreement itself. The present case is clearly distinguishable from those that have been described as posing questions of conduct-based waiver. For example, in
Brown
, the plaintiff rented furniture from the defendant. The rental store swore out a warrant for the plaintiff's arrest, alleging that she had failed to make payments as required, and the plaintiff subsequently filed a tort action against the store, raising claims of malicious prosecution, libel, and slander.
Additionally, in light of the broad language of the parties' arbitration agreement-that all claims "arising out of or relating to the agreement" will be subject to arbitration-the parties would likely expect an arbitrator to resolve the threshold matter at issue here. See
Howsam
,
when the parties to a contract have agreed to submit all questions of contract interpretation to the arbitrator, the function of the court is very limited; it is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract.... Any dispute between the parties to the contract as to the meaning, interpretation and application of the agreement is for the arbitrators.
(Citations and punctuation omitted).
ADC Constr. Co. v. McDaniel Grading
,
Further, we note that the U. S. Court of Appeals for the First Circuit has considered precisely the issue presented in this case, and it determined that the matter must be resolved by the arbitrator. See
Dialysis Access Center v. RMS Lifeline, Inc.
,
Finally, we note that the parties' arbitration clause provides that arbitration shall be conducted "in accordance with the Construction Industry Arbitration Rules of the AAA then in effect," and those rules give the arbitrator "the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement." See
Construction Industry Arbitration Rules and Mediation Procedures
, Rule 9 (a) (American Arb. Assn. 2018) (available at https://www.adr.org/sites/default/files/Construction_Arbitration_Rules_7May2018.pdf); see also
Doman v. Stapleton
,
(b) Next, Web IV contends that under
North Augusta
,
The arbitration clause in
North Augusta
is similar to the one at issue here: it provided that "[a]ny controversy or claim arising out of or related to the contract, or the breach thereof, shall be settled by arbitration[.]"
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As to
Tillman Park
, the agreement in that case, like in
North Augusta
, provided that claims must be submitted
first
to an architect, and
then
, after that condition precedent was satisfied, the architect's decision could be reviewed through arbitration or litigation.
Ultimately, for the foregoing reasons, the question of whether Samples Construction waived its right to compel arbitration by failing to follow the dispute resolution procedures listed in the parties' agreement is a threshold question of procedural arbitrability that "aris[es] out of or relat[es] to" that agreement. See
Howsam
,
2. Web IV contends that the trial court erroneously granted the motion to compel arbitration as to parties other than Samples Construction because Web IV did not sign an arbitration agreement with those parties and, moreover, because those parties waived any right to compel arbitration by engaging in inconsistent conduct, including discovery. In response to this enumeration of error, Samples Construction argues that Web IV has misconstrued the trial court's order. According to Samples Construction, only Web IV and Samples Construction have been ordered to arbitrate. We find no reversible error.
A careful review of the trial court's order reveals that it does not compel the subcontractors, Mr. Brown, or Mr. Samples to engage in arbitration. Although the order identifies Brown as a defendant and the subcontractors as third-party defendants, the text of the order recites that "Plaintiff [Samples Construction] and Defendant, WEB IV, LLC entered into a cost-plus contract" which contained provisions as to termination, dispute avoidance, and arbitration.
Judgment affirmed.
McFadden, P. J., and Rickman, J., concur.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.