TANYA S. CHUTKAN, United States District Judge.
Plaintiff Western Surety Company brought this suit for declaratory and injunctive relief seeking to enjoin Defendant U.S. Engineering Company from compelling arbitration proceedings against Plaintiff and making a claim on a surety bond issued by Plaintiff. Defendant has filed a motion to dismiss under Rule 12(b)(6), arguing that the parties are contractually bound to arbitrate their dispute over the bond. Plaintiff responded by filing a motion for partial summary judgment solely on the issue of whether it must arbitrate its dispute with the Defendant. For the reasons stated herein, Defendant's motion will be
On January 25, 2012, Turner Construction and Defendant entered into a contract for Defendant to perform construction and renovation work at the South African Embassy in Washington, D.C. (ECF No. 16, Pl. Statement of Facts ("SOF") ¶ 1). Defendant then awarded a subcontract for sheet metal work on the project to United Sheet Metal, Inc. (Id. ¶ 2). The subcontract contains the following provisions that are pertinent for the pending motions:
(Pl. Ex. 1).
After entering into the subcontract with Defendant, United Sheet Metal negotiated
(Pl. Ex. 2, §§ 15, 1, 11.)
In early 2013, a dispute over the performance of the subcontract arose between Defendant and United Sheet Metal, which led to Defendant terminating the subcontract. (Pl. SOF ¶¶ 11-12). Defendant hired a replacement subcontractor to finish the sheet metal work, and United Sheet Metal sought to compel arbitration, seeking $331,242 in damages. (Id. ¶¶ 13-14). Defendant filed a counterclaim for $417,379 in damages. (Id. ¶ 14). The arbitration proceedings between Defendant and United Sheet Metal have not concluded. (Id. ¶ 15).
On June 9, 2014, Plaintiff received a letter from Defendant stating that it had terminated United Sheet Metal's performance of the subcontract, and that Defendant intended to make a claim under the surety bond. (Id. ¶ 16). On March 4, 2015, Defendant filed a request to join Plaintiff as a party in Defendant's arbitration proceedings with United Sheet Metal. (Id. ¶ 18). Plaintiff refused to consent to the joinder, and instead filed its Complaint in this court on March 6, 2015. (See id. ¶ 19).
Defendant argues that because the bond agreement incorporates the subcontract by reference, Plaintiff is bound by the arbitration clause in the subcontract to arbitrate its claim on the surety bond, as well as any issues of arbitrability. Plaintiff asserts that it never consented to arbitration, and that it is impossible to interpret the text of the bond or the subcontract to bind Plaintiff to the arbitration clause.
Though Defendant's motion is styled as a motion to dismiss, a motion that seeks to compel or preclude arbitration is evaluated under the summary judgment standard "as if it were a request for `summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.'" Aliron Int'l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008) (internal quotation marks omitted); see also W & T Travel Servs., LLC v. Priority One Servs., Inc., 69 F.Supp.3d 158, 164 (D.D.C. 2014) ("Both motions to stay and compel arbitration focus judicial scrutiny on the arbitrability of the dispute, rather than the dispute itself and, when both motions are made concurrently, they may be addressed together as cross-motions for summary judgment."), appeal dismissed, No. 14-7152, 2015 WL 7693578 (D.C. Cir. Nov. 2, 2015).
Summary judgment is appropriate where there is no disputed genuine issue of material fact, and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In determining whether a genuine issue of material fact exists, the court must view all facts in the light most favorable to the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio
The parties' motions turn on one issue — whether Plaintiff is bound by the arbitration clause in the subcontract. The Supreme Court has held that "arbitration is a matter of contract ... on an equal footing with other contracts" and courts must "enforce them according to their terms." Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) (internal citations omitted). Since "[a]rbitration is a matter of contract ... a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." BG Grp., PLC v. Republic of Argentina, ___ U.S. ___, 134 S.Ct. 1198, 1206, 188 L.Ed.2d 220 (2014) (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960)).
"When deciding whether the parties agreed to arbitrate a certain matter, courts generally should apply ordinary state-law principles that govern the formation of contracts." Aliron Int'l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008) (alterations omitted) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). The parties agree that District of Columbia law governs this dispute, since the surety bond's choice of law provision specifies that disputes will be governed by the law of the state where the construction took place, and "[t]he District of Columbia Court of Appeals has adopted the general rule `that parties to a contract may specify the law they wish to govern, as part of their freedom to contract, as long as there is some reasonable relationship with the state specified.'" Kroger v. Legalbill.com, 436 F.Supp.2d 97, 103 (D.D.C. 2006) (quoting Norris v. Norris, 419 A.2d 982, 984 (D.C. 1980)).
Under District of Columbia law, the court relies on the plain language of the contract when examining parties' intent to be bound. See Am. Fed'n of Gov't Emps., Local 2924 v. FLRA, 470 F.3d 375, 381 (D.C. Cir. 2006); see also Tillery v. D.C. Contract Appeals Bd., 912 A.2d 1169, 1176 (D.C. 2006). "Under D.C. law, `the written language embodying the terms of an agreement will govern the rights and liabilities of the parties regardless of the intent of the parties at the time they entered in the contract, unless the written language is not susceptible of a clear and definite undertaking.'" Bazarian Int'l Fin.
There is "a liberal federal policy favoring arbitration agreements," and an attendant presumption in favor of arbitration. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983); see Data Mountain Sols., Inc. v. Giordano, Civil Action No. 06-1666 PLF, 2006 WL 6908604, at *1 (D.D.C. Nov. 21, 2006). Relying on this policy and presumption, Defendant argues that Plaintiff agreed to arbitrate the issue of arbitrability because the arbitration clause in the subcontract adopts the rules of the American Arbitration Association ("AAA"), which various courts have determined leave the question of the arbitrability of a dispute to an arbiter.
The Supreme Court has recognized that "parties can agree to arbitrate `gateway' questions of `arbitrability,' such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy." Rent-A-Ctr., 561 U.S. at 68-69, 130 S.Ct. 2772. "An agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other." Id. at 70, 130 S.Ct. 2772. However, "a heightened standard applies to the determination that the parties agreed to arbitrate arbitrability, requiring `clear and unmistakable evidence that they did so.'" W & T Travel Servs., 69 F.Supp.3d at 166 (quoting First Options of Chi., 514 U.S. at 944, 115 S.Ct. 1920).
As discussed below, the court finds that Plaintiff is not bound by the arbitration agreement in Defendant's subcontract. Accordingly, there is no "clear and unmistakable evidence" that Plaintiff intended to arbitrate the issue of arbitrability. Thus, the federal presumption in favor of arbitration does not guide the court's analysis here. See Booker v. Robert Half Int'l, Inc., 413 F.3d 77, 83 (D.C. Cir. 2005) ("[I]n deciding arbitrability, `courts generally should apply ordinary state-law principles that govern the formation of contracts.'") (alterations omitted) (quoting First Options of Chi., 514 U.S. at 944, 115 S.Ct. 1920)); Institut Pasteur v. Chiron Corp., No. CIV.A.03-0932(JDB), 2005 WL 366968, at *10 (D.D.C. Feb. 16, 2005) ("[T]his federal policy favoring arbitration does not apply to the determination of whether there is a valid agreement to arbitrate between the parties; instead ordinary contract principles determine who is bound.") (internal quotation marks and some citations omitted) (quoting Fleetwood Enters. Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002)).
Next, Defendant argues that Plaintiff must arbitrate its claims because
However, even though Plaintiff is bound by the subcontract as a whole, the court must consider the separate question of whether Plaintiff is also bound by the terms of the arbitration clause.
The arbitration clause in the subcontract provides:
(Pl. Ex. 1, § 26) (emphasis added). In order to get around what seems to be an agreement that controversies or claims involving only the
Defendant begins by pointing out that the word "or" is disjunctive, and therefore the sentence contains two clauses — one on each side of the disjunctive "or." Because of the disjunctive "or," Defendant argues, the sentence describes two separate categories of disputes that must be arbitrated. First, "any controversies ... shall be resolved by arbitration." Additionally, any "claim of
Defendant contends that reading the arbitration clause any other way would mean that it contains superfluous language. Specifically, Defendant argues that because the first phrase "any controversy," includes a "claim," then the latter word is redundant unless the word "claim" is limited to disputes between the contractor and subcontractor:
(Id. p. 12) (alterations and emphasis in original).
The court finds Defendant's argument unpersuasive. As an initial matter, Defendant is — or ought to be — well aware of lawyers' propensity for drafting legal documents using redundant or repetitive terminology. Thus, any potential redundancy between the use of "controversy" and "claim" does not require reading the clause the way Defendant proposes.
Instead, the court agrees with the Plaintiff's argument, which is that the "of Contractor against Subcontractor" language is actually a limiting clause that means only those two parties are bound by the arbitration agreement, and not outside parties. Reading the clause as Defendants propose would render the phrase "Contractor against Subcontractor or Subcontractor against Contractor" superfluous: if "any controversy" must be arbitrated, then there would be no reason to also provide that disputes between the contractor and subcontractor must be arbitrated. Defendants essentially ask the court to read the arbitration clause as providing that "all controversies or claims" are subject to arbitration or, similarly, that "all controversies or claims, including those between the contractor and subcontractor" are subject to arbitration. But the clause is not that broad and does not include punctuation suggesting such an interpretation.
The clause here is different from the broad arbitration clauses in the two cases upon which Defendant primarily relies. Exchange Mutual Insurance Company v. Haskell Company, 742 F.2d 274 (6th Cir. 1984), involved a claim by a prime contractor against a surety company. The prime contractor, Haskell, entered into a general contract that provided that
Id. at 275 (emphasis added). The subcontract incorporated by reference the prime contract and the surety contract incorporated by reference the subcontract. Id. at 276. When Haskell initiated arbitration proceedings against the surety company, the latter refused to arbitrate and sought protection from the court. Id. at 275. The district court rejected the surety's claims and directed the parties to proceed to arbitration.
Unlike the arbitration clause here, the arbitration clause in Exchange Mutual Insurance did not have any limiting language. See id. at 275. Rather, the clause stated "[a]ll claims, disputes and other matters in question arising out of, or relating to this contract or the breach thereof...." would go to arbitration, which is open-ended and different from "any controversy or claim of subcontractor against contractor" will proceed to arbitration. See id. at 275.
In J.S. & H. Construction Company v. Richmond County Hospital Authority, 473 F.2d 212, 213 (5th Cir. 1973), the prime contract between the general contractor and the property owner contained the following arbitration clause:
Id. at 213 n.2 (emphasis added). When the subcontractor brought an action in court against the property owner, the general contractor, and the surety company, the district court ordered the subcontractor to arbitration. Id. at 214. The Circuit affirmed, reasoning that the subcontract incorporated the terms of the prime contract and, therefore, the subcontractor was bound by the arbitration agreement in the prime contract. Id. at 214-15. Unlike the arbitration clause here, the clause in J.S. & H. Construction provided — without exception or limiting language — that "all disputes arising in connection with th[e] contract" were subject to arbitration. See id. at 213 n.2. Thus, neither J.S. & H. Construction nor Exchange Mutual Insurance is persuasive.
Not only are the cases cited by Defendant unpersuasive because they contained broad arbitration clauses, they are also unpersuasive because the parties objecting to arbitration in both cases only challenged whether their contracts incorporated by reference the terms of the contracts that contained the arbitration clauses. See Exch. Mut. Ins. 742 F.2d at 276; J.S. & H. Constr., 473 F.2d at 214-15. None of the parties who challenged arbitration contested whether the actual language of the arbitration clause was broad enough to include their particular type of dispute. Thus, neither of these two cases support Defendant's interpretation of the arbitration clause in this case.
Moreover, as Defendant concedes, the law is clear that "[w]hen a contract incorporates another writing, the two must be read together as the contract between the parties." Sheriff v. Medel Electric Co., 412 A.2d 38, 41 (D.C. 1980). In light of this principle of statutory interpretation, it would be impossible for the court to ignore the fact that the bond agreement includes a judicial resolution provision stating that "[a]ny proceeding, legal or equitable, under this Bond may be instituted in any court of competent jurisdiction...." (Pl. Ex. 2, § 11). While the judicial resolution clause in a vacuum could be construed as "merely declar[ing] `ground rules' under which any formal litigation in a judicial forum must proceed," Cianbro Corp. v. Empresa Nacional de Ingenieria y Technologia, S.A., 697 F.Supp. 15, 19 (D. Me. 1988), if the court is to give every provision
Finally, any ambiguity in the contract must interpreted against the drafter. Tower Ins. Co., 967 F.Supp.2d at 81. Thus, to the extent there is any uncertainty about the scope of the arbitration clause, in this case the clause must be interpreted against the Defendant.
For the foregoing reasons, Plaintiff's motion for partial summary judgment will be GRANTED and Defendant's motion will be DENIED. A corresponding order will issue separately.