Preview:

STURDY BUILT HOMES,                                                               *   NO. 2011-CA-0881
L.L.C.
                                                                                  *
VERSUS                                                                                COURT OF APPEAL
*
CARL E. WOODWARD L.L.C.,                                                              FOURTH CIRCUIT
D/B/A WOODWARD                                                                    *
DESIGN+BUILD; TRAVELERS                                                               STATE OF LOUISIANA
CASUALTY & SURETY                                                                 *
COMPANY OF AMERICA
N/K/A THE TRAVELERS
COMPANIES, INC.; ED
JORGENSEN; AND LANE
LOUQUE
APPEAL FROM
CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2010-8914, DIVISION ―D-16‖
Honorable Lloyd J. Medley, Judge
Judge Dennis R. Bagneris, Sr.
(Court composed of Judge Charles R. Jones, Judge Dennis R. Bagneris, Sr., Judge
Paul A. Bonin)
James M. Garner
Martha Y. Curtis
Ryan O. Luminais
Matthew C. Clark
SHER GARNER CAHILL RICHTER KLEIN & HILBERT, L.L.C.
909 Poydras Street
Suite 2800
New Orleans, LA 70112-1033
-AND-
Gladstone N. Jones, III
Lynn E. Swanson
H. S. Bartlett III
JONES SWANSON HUDDELL & GARRISON, L.L.C.
601 Poydras Street
2655 Pan American Life Center
New Orleans, LA 70130
COUNSEL FOR PLAINTIFF/APPELLANT STURDY BUILT
HOMES, LLC.




H. Bruce Shreves
Daniel J. Caruso
Denise C. Puente
Susan F. Clade
SIMON PERAGINE SMITH & REDFEARN, L.L.P.
1100 Poydras Street
30th Floor -  Energy Centre
New Orleans, LA 70163
-AND-
Kenneth M. Carter
KENNETH M. CARTER, APLC
547 Baronne Street, Suite 504
New Orleans, LA 70113
COUNSEL FOR DEFENDANTS/APPELLEES
DECEMBER 14, 2011
AFFIRMED




This is a suit arising out of a construction project involving the construction
of 460 apartments in New Orleans, Louisiana.  Plaintiff, Sturdy Built Homes, LLC,
(―Sturdy Built‖) entered into a subcontract agreement with defendant Carl E.
Woodward, LLC d/b/a/ Woodward Design + Build (―CEW‖) to provide labor,
materials to fabricate and install wall panels, beams and floor trusses.  Upon the
subcontract agreement being placed in default, Sturdy Built filed suit against
defendants CEW, Ed Jorgenson, Lane Louque, and Travelers Casualty & Surety
Company of America seeking damages for breach of the subcontract, unjust
enrichment, tortious interference with the contract, and bad faith breach of
contract.    Defendants filed an exception of prematurity based on an arbitration
provision contained in the subcontract agreement, which the trial court granted.
After review of the record in light of the applicable law and arguments of the
parties, we hereby affirm the ruling of the trial court.
FACTUAL AND PROCEDURAL BACKGROUND
On December 29, 2008, CEW, as general contractor, entered into a contract
with C.J. Peete I, LLC c/o McCormack Baron Salazar, Inc., as Owner, to construct
the 460 new apartments at the site of the former C.J. Peete Housing Project in New
Orleans.  Thereafter, on March 31, 2009, CEW entered into a contract entitled
―Subcontract Agreement‖ with Sturdy Built to provide labor, materials to fabricate
and install wall panels, beams and floor trusses on the project.  This Subcontract
Agreement contains a ―Disputes‖ section, which provides:
Any controversy or claim arising out of or related to this
Agreement or breach thereof shall be settled as follows:
1




A. Mediation shall be tried, utilizing a mutual [sic]
agreeable mediator. Cost of the mediation shall be paid in
equal parts by Contractor and Subcontractor.  If the
dispute is not resolved within 45 days of initial request
for mediation then either party may proceed to file an
arbitration demand.
B. If mediation fails, then by arbitration in accordance
with the Construction Industry Arbitration Rules of the
American Arbitration Association. By agreement of both
parties, in lieu of arbitration, the parties may select the
judicial process. In such event suit shall be filed in State
of Louisiana in the Parish in which the Project is located.
On October 28, 2009, CEW notified Sturdy Built that it was terminating the
Subcontract Agreement with respect to a portion of the project, specifically Blocks
G and H, ―for cause.‖  Following an unsuccessful mediation, on August 25, 2010,
CEW filed an arbitration demand with the American Arbitration Association
against Sturdy Built, seeking damages as a result of Sturdy Built’s failure to
properly perform.  On August 26, 2010, Sturdy Built filed this lawsuit seeking
damages for breach of the subcontract, unjust enrichment, tortious interference
with the contract, and bad faith breach of contract.
On November 24, 2010, Defendants filed a dilatory exception of prematurity
and an alternative motion to stay Sturdy Built’s claims during the pendency of
arbitration between CEW and Sturdy Built, arguing that the subcontract agreement
mandates that any disputes are to be resolved by arbitration.  At the hearing, Sturdy
Built argued that the subcontract must be read together with the overall project
construction contract to permit litigation of its claims.  Specifically, Sturdy Built
argues that the construction contract, which was entered into by CEW and C.J.
Peete I, LLC c/o McCormack Baron Salazar, Inc., provides that, ―[n]o claim,
dispute, or other matter in question between the parties to this agreement arising
2




out of the Construction contract, or the breach thereof, shall be submitted to
arbitration.‖
Following a hearing, the trial court granted defendants’ exception of
prematurity and provided the following well-written reasons for judgment, in
pertinent part:
Although the disputes section of the Construction
Contract between CEW and the Project Owner provides
that no issue shall be submitted to arbitration, it states
that the parties further agree that no dispute between the
Owner and the Contractor may be litigated unless and
until the parties have first submitted the dispute to non-
binding mediation pursuant to the Construction Industry
Mediation Rules of the American Arbitration
Association.  Const. Cont. at Section 4.5.  Louisiana Law
provides that separate agreements as part of the same
transaction are to be construed together as consistently as
possible. See Neal v. Hardee 's Food, 918 F.2d 34, 37,
(5th Cir. 1990).  As such, if the court were to read the
Construction Contract together with the subcontract it is
clear that both the Construction Contract and the
subcontract seek to avoid litigation of matters. Even so,
these were separate agreements, executed by different
parties, entered into at different times, for different
purposes and were not part of the same transaction.  Id.
Holding, "Under principles of contract law, separate
agreements executed contemporaneously, by the same
parties, for the same purpose, and as part of the same
transaction, are to be construed together."  Thus, this
Court finds that Plaintiff was not a party nor a third party
beneficiary to the Construction Contract and cannot use
the Construction Contract to avoid the terms of the
subcontract that provide for arbitration.  Furthermore,
Louisiana Law provides that when the words of the
contract are clear and explicit and lead to no absurd
consequences, no further interpretation may be made in
search of the parties’ intent.  La. C.C. Art. 2046.  The
arbitration clause contained in the subcontract agreement
is clear and explicit. Sturdy Built had the opportunity to
and did in fact request numerous changes to the
subcontract agreement; however, they made no changes
to the arbitration provision contained therein.  Plaintiff
Sturdy Built did not attempt to modify or delete the
Arbitration Clause contained in the subcontract even
though they requested and received other changes to
3




provisions of the subcontract.  Plaintiff knowingly and
voluntarily entered into the arbitration agreement.  As
such, this Court finds that a valid arbitration agreement
does exist.
After determining whether a valid arbitration
agreement exist, the court must next decide whether the
Plaintiff’s claims fall within the scope of that agreement.
The Arbitration clause contained in the subcontract
provides, "any controversy or claim arising out of or
related to this agreement or breach thereof shall be settled
as follows….‖  See Subcontract Agreement at Section
24.  This language is broad and Plaintiff’s claims fall
within the scope of the arbitration agreement.  Louisiana
courts have recognized a strong presumption in favor of
arbitration and any doubt as to whether a controversy is
arbitrable should be resolved in favor of arbitration.
Moore v. Automotive Protection Corp., 97-0623, p. 2
(La.App. 4 Cir. 5/21/97), 695 So.2d 550,551.  As such,
this Court finds that the broad language of this
Arbitration Clause encompasses the Plaintiff’s claims.
Finally, as to the exception of Prematurity, this
Court must address Plaintiff’s assertion that certain
parties to the litigation were non-signatories to the
arbitration agreement and as such cannot be made to
arbitrate their claims. Pursuant to the theory of equitable
estoppel, which would permit arbitration, a non-signatory
to a contract with an arbitration clause can compel
arbitration when the action is intertwined with, and
dependent upon, that contract.  Grigson v. Creative Artist
Agency, L.L.C., 210 F.3d 524, 528 (5th Cir. 2000) cert.
den., 531 US. 1013, 121S.Ct. 570 (2000). See also,
Regions Bank v. Weber _So. 3d_, 2010 WL 5121074 (La.
App. 4th Cir.), 2010-1169 (La. App. 4th Cir. 12/15/10).
Here, given the relatedness of the claims collectively
asserted against Defendants, the arbitration agreement
can be invoked by all Defendants, including the non-
signatory Defendants.  Id. at 527.  The claims against the
non-signatories are intertwined with and dependent upon
the subcontract, and therefore they must also be sent to
arbitration.
Sturdy Built now appeals the trial court’s judgment, which granted
defendants’ dilatory exception of prematurity as well as the trial court’s denial of
Sturdy Built’s motions for new trial.  On appeal, Sturdy Built assigns the following
4




assignments of error:   (1) the trial court erred when it failed to interpret the General
Contract as "trumping" the Subcontract; (2) the trial court erred in not first
determining whether the General Contract/Subcontract system could not be
interpreted on its face without resorting to secondary methods of interpretation; (3)
the trial court erred when it found the alleged arbitration agreement extended to
non-party Jorgensen; and (4) the trial court erred when it found that Sturdy Built’s
verified allegations of intentional torts against Jorgensen are subject to the alleged
arbitration agreement.
DISCUSSION
The determination as to whether to stay proceedings or to compel arbitration
is a question of law.  Saavedra v. Dealmaker Developments, LLC, 08-1239, p. 6
(La. App. 4 Cir. 3/18/09), 8 So.3d 758, 762.  The standard of appellate review on
questions of law is to determine whether the trial court was legally correct or
incorrect.  Id.  The threshold inquiry a court must decide is whether the parties
agreed to arbitrate their dispute, which is a two-fold inquiry: (1) whether there is a
valid arbitration agreement, and (2) whether the dispute in question falls within the
scope of that agreement.  Id. at p.7, 763 citing Lakeland Anesthesia, Inc. v. United
Healthcare of Louisiana, Inc., 03-1662, p. 9 (La. App. 4 Cir. 3/17/04), 871 So.2d
380, 388.  The question of whether the parties have submitted a particular dispute
to arbitration—arbitrability—is generally one for the court to decide and, under the
FAA, any doubt concerning the scope of which disputes are arbitrable should be
resolved in favor of arbitration.  Id.
The Louisiana statutory provisions for arbitration include La. R.S. 9:4201,
which states:
5




A provision in any written contract to settle by
arbitration a controversy thereafter arising out of the
contract, or out of the refusal to perform the whole or any
part thereof, or an agreement in writing between two or
more persons to submit to arbitration any controversy
existing between them at the time of the agreement to
submit, shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the
revocation of any contract.
La. R.S. 9:4202 provides:
If any suit or proceedings be brought upon any
issue referable to arbitration under an agreement in
writing for arbitration, the court in which suit is pending,
upon being satisfied that the issue involved in the suit or
proceedings is referable to arbitration under such an
agreement, shall on application of one of the parties stay
the trial of the action until an arbitration has been had in
accordance with the terms of the agreement, providing
the applicant for the stay is not in default in proceeding
with the arbitration.
In this case, Section 24 of the Subcontract Agreement between CEW and
Sturdy Built clearly and unambiguously requires mediation and then arbitration of
all disputes between CEW and Sturdy Built.  As previously noted, Section 24
states:
Any controversy or claim arising out of or related to this
Agreement or breach thereof shall be settled as follows:
A. Mediation shall be tried, utilizing a mutual [sic]
agreeable mediator. Cost of the mediation shall be paid in
equal parts by Contractor and Subcontractor.  If the
dispute is not resolved within 45 days of initial request
for mediation then either party may proceed to file an
arbitration demand.
B. If mediation fails, then by arbitration in accordance
with the Construction Industry Arbitration Rules of the
American Arbitration Association. By agreement of both
parties, in lieu of arbitration, the parties may select the
judicial process. In such event suit shall be filed in State
of Louisiana in the Parish in which the Project is located.
6




We, like the trial court, find no merit in Sturdy Built’s argument that the
subcontract must be read together with the overall project construction contract.
Not only was the overall project construction contract a separate agreement,
executed by different parties, but Sturdy Built was neither a party nor a third party
beneficiary to that contract.  Under the clear language of the subcontract and under
applicable Louisiana law, the trial court correctly ruled that Sturdy Built and CEW
must proceed to arbitration.
The next issue to address is whether the trial court correctly ruled that Sturdy
Built’s claims are subject to arbitration.    On appeal, Sturdy Built claims that
defendant Jorgensen cannot be compelled to arbitrate since he was not a party to
the arbitration agreement and because its claims against him are based in tort.
Sturdy Built cites to an Alabama Supreme Court case, Ex parte Discount Foods,
Inc., 711 So.2d 992 (Ala. 1998) for the proposition that arbitration agreements
between companies, no matter how broad, cannot be construed so broadly as to
encompass intentional torts; however, as defendants correctly point out, this case is
not binding on this Court and there is a substantial body of law holding otherwise.
Specifically, defendants cite to a Fifth Circuit case, Grigson v. Creative
Artists Agency, LLC, for the proposition that a non-signatory to a contract with an
arbitration clause can be compelled to arbitrate under an equitable estoppel theory,
including when the action is intertwined with, and dependent upon, that contract.
210 F.3d 524 (5th Cir. 2000).  In Grigson, the issue is whether the trial court had
abused its discretion by applying the doctrine of equitable estoppel to compel the
arbitration of an action centered on a claim of tortious interference with a contract,
where the contract contained an arbitration clause. The action was brought by
signatories to the contract against non-signatories. The Fifth Circuit affirmed the
7




trial court's ruling and held ―because this action is intertwined with, and dependent
upon, that contract, its arbitration agreement should be given effect.‖  Grigson, 210
F.3d at 525.  This Court has also applied the doctrine of equitable estoppel to
compel a non-signatory defendant to an arbitration agreement to arbitrate with a
signatory plaintiff.  See Regions Bank v. Weber, 2010-1169, p.11 (La. App. 4 Cir.
12/15/2010, 53 So.3d 1284, 1291.  As stated in Grigson, ―[t]he linchpin for
equitable estoppel is equity-fairness.  For the case at hand, to not apply this
intertwined-claim basis to compel arbitration would fly in the face of fairness.‖
210 F.3d 528.  We, like the Court in Grigson, do not find that the trial court abused
its discretion in applying the equitable estoppel doctrine to find that the claims
against defendants are so intertwined with and dependent upon the subcontract that
they must be sent to arbitration as well.
Accordingly, we hereby affirm the judgment of the trial court.
AFFIRMED
8

Download 292733.pdf

Louisiana Law