Arbitration – Motion to Compel – Unwritten Contract – Construction Project – Fourth Building – Unsigned Contract — Prior Contracts – Exceptions to Arbitrability

Listen to this article

Miller & Long, Inc. v. Intracoastal Living, LLC (Lawyers Weekly No. 11-15-0660, 13 pp.) (John R. Jolly Jr., Ch.J.) N.C. Bus. Ct.

Holding: Even though the parties’ written subcontracts included an arbitration clause, and even though the parties had already built three buildings in the project at issue, since the parties never reduced their subcontract to writing with respect to a fourth building, the plaintiff-subcontractor’s claims with regard to the fourth building are not subject to arbitration.

However, even though the parties never signed the subcontract pertaining to the third building, its arbitration clause is enforceable.

Finally, the defendant-general contractor’s failure to arbitrate its claims against the defendant-project owner is the situation contemplated by an exception to the subcontracts’ arbitration clause.

Defendants’ motion to stay and compel arbitration is denied.

Third Building

While the subcontract for the third building was never signed, the subcontractor undertook to perform the contract in accordance with the terms of the unsigned subcontract. The facts and circumstances of the dealings between the parties clearly demonstrate that the third subcontract was intended by the parties to be binding. The fact that this subcontract was not signed does not change this result.

The subcontractor has not presented a genuine issue of material fact as to the existence of an agreement to arbitrate disputes with respect to its claims on the third building. As such, it is not entitled to a determination of this matter by a jury.

Fourth Building

An unwritten contract, notwithstanding inferred intent based on the parties’ actions, does not fulfill the writing requirement of G.S. ¤ 1-569.6(a). To extend the scope of the arbitration clause to include the fourth building subcontract would stretch too thinly the statutory requirement for a written agreement.

As such, the court cannot force the parties to submit to arbitration with respect to the fourth building agreement.

Exceptions to Arbitrability

Article 14.7 of each written subcontract excepts from the agreement to arbitrate any claim “asserted by the Subcontractor against the Contractor if the

Contractor asserts said claim, either in whole or in part, against the Owner and the contract between the Contractor and Owner does not provide for binding arbitration, or does so provide but the two arbitration proceedings are not consolidated, or the Contractor and Owner have not subsequently agreed to arbitrate said claim….”

In a separate action, the general contractor has asserted related claims against the project owner.

Further, the contract between the contractor and the owner provides for binding arbitration.

To the court’s knowledge, there is no current arbitration proceeding between the contractor and the owner. Accordingly, there can be no consolidation.

Moreover, to the court’s knowledge, the contractor and the owner have not subsequently agreed to arbitrate the related claims.

Accordingly, the exclusionary provisions of Article 14.7 are satisfied, and, notwithstanding any contrary agreements between the subcontractor and the contractor, the subcontractor’s claims against the general contractor are not subject to arbitration.

Motion denied.