251 F.3d 1316 (11th Cir. 2001), 98-5404, Employers Ins. of Wausau v Bright Metal Specialties

Docket Nº:98-5404 and 98-5405.
Citation:251 F.3d 1316
Party Name:EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Plaintiff-Counter-Defendant-Appellant, v. BRIGHT METAL SPECIALTIES, INC., Defendant-Counter-Claimant, Cross-Claimant-Cross-Defendant-Appellee, ROGERS CONSTRUCTION COMPANY, Defendant-Cross-Defendant-Cross-Claimant-Third-Party Plaintiff-Appellee. BRIGHT METAL SPECIALTIES, INC., Plaintiff-Cross-Defendan
Case Date:May 22, 2001
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1316

251 F.3d 1316 (11th Cir. 2001)

EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Plaintiff-Counter-Defendant-Appellant,

v.

BRIGHT METAL SPECIALTIES, INC., Defendant-Counter-Claimant, Cross-Claimant-Cross-Defendant-Appellee,

ROGERS CONSTRUCTION COMPANY, Defendant-Cross-Defendant-Cross-Claimant-Third-Party Plaintiff-Appellee.

BRIGHT METAL SPECIALTIES, INC., Plaintiff-Cross-Defendant-Appellee,

v.

EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Defendant-Cross-Defendant-Appellant,

ROGERS CONSTRUCTION COMPANY, Defendant-Cross-Claimant.

EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Plaintiff-Counter-Defendant-Appellee,

v.

BRIGHT METAL SPECIALTIES, INC., Defendant-Counter-Claimant-Cross-Claimant-Cross-Defendant-Appellee,

ROGERS CONSTRUCTION COMPANY, Defendant-Cross-Defendant-Cross-Claimant-Third-Party Plaintiff-Appellant.

Page 1317

BRIGHT METAL SPECIALTIES, INC., Plaintiff-Cross-Defendant-Appellee,

v.

EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Defendant-Cross-Defendant-Appellee,

ROGERS CONSTRUCTION COMPANY, Defendant-Cross-Claimant-Appellant.

Nos. 98-5404 and 98-5405.

IN THE UNITED STATES COURT OF Appeals, FOR THE ELEVENTH CIRCUIT.

May 22, 2001

Page 1318

Appeals from the United States District Court for the Southern District of Florida. D. C. Docket No. 97-00410 CV-UUB

Before EDMONDSON, FAY and GARWOOD[*], Circuit Judges.

FAY, Circuit Judge:

Appellants Employers Insurance of Wausau ("Wausau") and Rogers Construction

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Company ("Rogers") appeal the district court's order compelling arbitration of a claim asserted by Appellee Bright Metal Specialties, Inc. ("Bright") arising from a dispute on a Government construction project in Everglades National Park. The district court held that Wausau, a Miller Act surety, became a party to Bright's subcontract and the arbitration provision therein by virtue of Wausau's Takeover Agreement with the Government, Wausau's Completion Contract with its completion general contractor, Rogers Construction Co. ("Rogers"), and the Ratification Agreement with Bright. Wausau argues that it did not contractually agree to arbitrate with Bright, that it is not bound by the arbitration provision in Bright's subcontract, and that the Miller Act precludes arbitration of a claim against a Miller Act surety such as Wausau. Rogers concedes that it is bound by Bright's subcontract, but contends that Bright's claim is excluded from arbitration pursuant to an arbitration exception in the subcontract. Moreover, Bright contests our jurisdiction to hear this appeal. We conclude that the district court's order was an appealable "final decision" and affirm the arbitration order with respect to both Wausau and Rogers.

I. Background

The parties agree to the following facts, most of which are established by contract. On or about July 16, 1993, the National Park Service ("Government") contracted with A-1 Construction/BellincCo. ("A-1") for the repair of roofs to certain buildings located in the Everglades National Park (the "Project"). Wausau, as contract surety, provided performance and payment bonds for the Project on behalf of A-1, its principal, in favor of the Government, as required by the Miller Act, 40 U.S.C. § 270, et seq. In September 1993, A-1 subcontracted a portion of the Project work to Bright pursuant to a written agreement (the "Subcontract" or "Bright/A-1 Subcontract") that included an arbitration clause.

The Government subsequently terminated A-1 for its default on the Project, and called upon Wausau to complete the work pursuant to the performance bond. On or about May 20, 1994, the Government and Wausau entered into a Takeover Agreement by which Wausau agreed to complete the prime contract for A-1. On or about May 26, 1994, Wausau entered into a Contract for Completion and Construction (the "Completion Contract") with Rogers whereby Rogers became the completing contractor for all remaining work under the prime contract. Pursuant to the Completion Contract, Wausau agreed to assign to Rogers all of Wausau's right, title and interest in and to A-1's executory subcontracts for the performance of Project work.

On or about June 14, 1994, Bright and Wausau entered into a Ratification Agreement which resolved Bright's payment bond claim and ratified the Bright/A-1Subcontract. First, Wausau and Bright resolved claims relating to monies due Bright for work performed prior to A-1's termination. Second, Bright agreed to complete the Subcontract and agreed to start work on the Project within seven (7) days after request by Wausau, its agent, "or assigns, including any completion contractor engaged by [Wausau]." Third, the Ratification Agreement provided that Wausau could "assign its rights under the [A-1] subcontract and this agreement" to a completion contractor. Finally, the parties agreed that Wausau would pay Bright the remaining retainage, as fulfillment of its

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obligations to Bright, if work did not begin within a specified period. Thereafter, Wausau required Bright to complete the Subcontract with Rogers as the completion contractor. Bright resumed work on the Project in June 1994.

In December 1994, Bright and Wausau settled a payment bond claim previously submitted by Bright for work, labor and/or materials performed and/or furnished under its Subcontract with A-1.1

Near completion of the Project, Bright sought additional compensation for delays and damages caused by the Government. Ultimately, Bright submitted to Rogers a request for "equitable adjustment" ("REA") under the Subcontract. As required by the contract documents, Rogers submitted the request to Wausau for presentation by Wausau to the Government. Bright, Rogers, Wausau and the Government met in Denver, Colorado in February 1996 to address Project claims, including Bright's REA. At the meeting, the Government offered to settle Bright's REA for approximately $10,000, less than two percent (2%) of the amount sought by Bright. Bright declined the settlement offer and left the meeting. After Bright left the meeting, Wausau accepted the Government's settlement offer without Bright's approval or consent. Bright did not submit any further claims against the Government, directly or through Rogers or Wausau, regarding the amounts sought in the REA.

In January 1997, Bright filed a Demand for Arbitration with the American Arbitration Association ("AAA") for alleged breach of contract by Rogers and Wausau. Bright claimed losses in the amount of $944,000 plus interest, attorney's fees and costs.

In February 1997, Wausau filed a complaint in the District Court for the Southern District of Florida against Rogers and Bright seeking declaratory and injunctive relief against the arbitration (Case No. 97-410-Civ-Marcus). In a separate action against Wausau and Rogers, Bright filed a Motion to Compel Arbitration, pursuant to the Federal Arbitration Act, 9 U.S.C. § 4, and based on an arbitration clause in the Subcontract between Bright and A-1 (Case No. 97-433-Civ-Marcus). Wausau and Rogers filed claims for declaratory and injunctive relief seeking to stay the arbitration.2

The two actions were consolidated and referred to Magistrate Judge Ted E. Bandstra. On December 22, 1997, Magistrate Judge Bandstra issued an Amended Report and Recommendation that Wausau and Rogers be compelled to arbitrate Bright's claim. The district court, Judge Ungaro-Benages presiding,3 conducted a de novo review and by order entered September 22, 1998, affirmed the Magistrate's Amended Report and Recommendation granting Bright's Motion to Compel Arbitration, denying Wausau's and Roger's Motions for Injunctive Relief, and denying

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all remaining motions as moot. In addition, the district court dismissed each of the underlying consolidated actions in deference to arbitration, and denied Roger's request for reconsideration.

Wausau and Rogers appeal from the district court's decision. Bright challenges our jurisdiction to hear this appeal asserting that the district court's order was not a final decision with respect to arbitration under 9 U.S.C. § 16(a)(3) of the Federal Arbitration Act ("FAA").

II. Standard of Review

The jurisdictional issue is a question of law, which we review de novo. See Randolph v. Green Tree Fin. Corp.-Alabama, 178 F.3d 1149, 1152 (11th Cir. 1999). We review de novo the district court's order compelling arbitration. See Randolph, 178 F.3d at 1152.

III Analysis

A. "Final Decision" under the Federal Arbitration Act

As a threshold matter, we decide whether we have jurisdiction over this appeal. Special rules govern appeals from a district court's arbitration order as set forth in section 16 of the FAA. See 9 U.S.C. § 16; see also American Express Fin. Advisors, Inc. v. Makarewicz, 122 F.3d 936 (11th Cir. 1997). The question here is whether the district court's order compelling arbitration of Bright's claim and dismissing the underlying actions is a "final decision with respect to an arbitration" within the meaning of the statute. 9 U.S.C. § 16(a)(3).

In arguing that we lack jurisdiction, Bright distinguishes between "embedded" and "independent" proceedings, a distinction this Court has recognized, albeit without using those labels.4 See Thomson McKinnon Sec., Inc. v. Salter, 873 F.2d 1397, 1399 (11th Cir. 1989) (cited in Randolph, 178 F.3d...

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