Elzinga & Volkers, Inc. v. LSSC CORP., No. 1:93CV294.

• Court: United States District Courts. 7th Circuit. United States District Court of Northern District of Indiana
• Writing for the Court: WILLIAM C. LEE
• Citation: 852 F. Supp. 681
• Docket Number: No. 1:93CV294.
• Decision Date: 16 May 1994
• Parties: ELZINGA & VOLKERS, INC., Plaintiff, v. LSSC CORP. and Leggett & Platt, Inc., Defendants.

852 F. Supp. 681

ELZINGA & VOLKERS, INC., Plaintiff,
v.
LSSC CORP. and Leggett & Platt, Inc., Defendants.

No. 1:93CV294.

United States District Court, N.D. Indiana, Fort Wayne Division.

May 16, 1994.

852 F. Supp. 682

Dane L. Tubergen, Hunt Suedhoff Borror and Eilbacher, Fort Wayne, IN, Larry A. Hanson, Moore Costello and Hart, St. Paul, MN, for plaintiff.

R. Frederick Walters, Karen D. Wedel, Kansas City, MO, Frank J. Gray, Beckman Lawson Sandler Snyder and Federoff, Fort Wayne, IN, for defendants.

ORDER

WILLIAM C. LEE, District Judge.

This matter is before the court on Elzinga & Volkers' Motion for Summary Judgment to enjoin arbitration proceedings initiated by defendants and on defendants LSSC Corporation and Leggett & Platt's Motion to Compel Arbitration. In July, 1993 the defendants initiated arbitration proceedings against the plaintiffs. On December 8, 1993, this court denied the plaintiff's motion for preliminary injunction 838 F.Supp. 1306. Thereafter, on February 4, 1994, plaintiff filed a motion for summary judgment to enjoin arbitration proceedings. A hearing was held in this court on April 1, 1994 on the summary judgment motion and the motion to compel arbitration. For the following reasons, the plaintiff's motion for summary judgment to enjoin arbitration is DENIED in part and GRANTED in part. The defendants' motion to compel arbitration is DENIED.

Summary Judgment

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). However, Rule 56(c) is not a requirement that the

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moving party negate his opponent's claim. Fitzpatrick v. Catholic Bishop of Chicago, 916 F.2d 1254, 1256 (7th Cir.1990). Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery, against a party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and in which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). The standard for granting summary judgment mirrors the directed verdict standard under Rule 50(a), which requires the court to grant a directed verdict where there can be but one reasonable conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). A scintilla of evidence in support of the non-moving party's position is not sufficient to successfully oppose summary judgment; "there must be evidence on which the jury could reasonably find for the plaintiff." Id. 477 U.S. at 252, 106 S.Ct. at 2512; In Re Matter of Wildman, 859 F.2d 553, 557 (7th Cir.1988); Klein v. Ryan, 847 F.2d 368, 374 (7th Cir.1988); Valentine v. Joliet Township High School District No. 204, 802 F.2d 981, 986 (7th Cir.1986). No genuine issue for trial exists "where the record as a whole could not lead a rational trier of fact to find for the nonmoving party." Juarez v. Ameritech Mobile Communications, Inc., 957 F.2d 317, 322 (7th Cir.1992) (quoting Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986))

Initially, Rule 56 requires the moving party to inform the court of the basis for the motion, and to identify those portions of "the pleadings, depositions, answers to interrogatories, and admission on file, together with the affidavits, if any," which demonstrate the absence of a genuine issue of material fact, Celotex, 477 U.S. at 323, 106 S.Ct. at 2553. The non-moving party may oppose the motion with any of the evidentiary materials listed in Rule 56(c), but reliance on the pleadings alone is not sufficient to withstand summary judgment. Goka v. Bobbitt, 862 F.2d 646, 649 (7th Cir.1988); Guenin v. Sendra Corp., 700 F.Supp. 973, 974 (N.D.Ind.1988); Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.), cert. denied, 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). In ruling on a summary judgment motion the court accepts as true the non-moving party's evidence, draws all legitimate inferences in favor of the non-moving party, and does not weigh the evidence or the credibility of witnesses. Anderson, 477 U.S. at 249-251, 106 S.Ct. at 2511. However, "it is a gratuitous cruelty to parties and their witnesses to put them through the emotional ordeal of a trial when the outcome is foreordained" and in such cases summary judgment is appropriate. Mason v. Continental Illinois Nat'l Bank, 704 F.2d 361, 367 (7th Cir.1983).

Substantive law determines which facts are material; that is, which facts might affect the outcome of the suit under the governing law. Id. 477 U.S. at 248, 106 S.Ct. at 2510. Irrelevant or unnecessary facts do not preclude summary judgment even when they are in dispute. Id. The issue of fact must be genuine. Fed.R.Civ.P. 56(c), (e). To establish a genuine issue of fact, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. at 1356; First National Bank of Cicero v. Lewco Securities Corp., 860 F.2d 1407, 1411 (7th Cir.1988). The non-moving party must come forward with specific facts showing that there is a genuine issue for trial. Id. A summary judgment determination is essentially an inquiry as to "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-252, 106 S.Ct. at 2512.

Standard to Compel Arbitration

Directly mirroring the plaintiff's summary judgment motion to enjoin arbitration is the defendants' request for an order compelling arbitration. The Federal Arbitration Act, 9 U.S.C. § 4, provides that a party aggrieved by the failure of another to arbitrate under a written agreement for arbitration may petition a district court for an order compelling arbitration under the agreement. In considering the motion to compel arbitration the court is to decide two limited issues: 1) does

852 F. Supp. 684

a valid agreement to arbitrate exist between the parties, and 2) does the agreement to arbitrate cover the underlying dispute. See AT & T Technologies, Inc. v. Communication Workers of America, 475 U.S. 643, 648-650, 106 S.Ct. 1415, 1418-1419, 89 L.Ed.2d 648 (1986); S+L+H S.P.A. v. Miller-St. Nazianz, Inc., 988 F.2d 1518, 1523 (7th Cir. 1993); Chicago Typographical Union v. Chicago Sun-Times, 860 F.2d 1420, 1423 (7th Cir.1988). Once a court answers these questions in the affirmative, the parties must take up all additional concerns with the arbitrator

FACTUAL BACKGROUND

Elzinga & Volkers, Inc. ("E & V") entered into a contract with No-Sag Products to construct a factory for No-Sag in Kendallville, Indiana ("E & V contract"). Under the contract, E & V's responsibilities included acting as the general contractor for the construction of the factory. E & V obtained bids from subcontractors for the required work and No-Sag and E & V decided which bids to accept. Under the terms of the contract, No-Sag assumed the risk of defective work by the subcontractors, if not due to the fault of E & V and if these amounts were not recoverable from the subcontractor. See Standard Form of Agreement Between Owner and Contractor ("Standard Contract") Article 7.2.4. The contract also contained an arbitration clause which read as follows:

Any controversy or claim arising out of or related to the Contract, or breach thereof, shall be settled by arbitration in accordance with the construction industry Arbitration Rule of the American Arbitration Association, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof, except controversies or Claims relating to aesthetic effect and except those waived as provided for in Subparagraph 4.3.5. Such controversies or Claims upon which the Architect has given notice and rendered a decision as provided in Subparagraph 4.4.4 shall be subject to arbitration upon written demand of either party. Arbitration may be commenced when 45 days have passed after a claim has been referred to the Architect as provided in paragraph 4.3 and no decision has been rendered.

Standard Contract, Article 4.51. The factory was completed on September 1, 1988.

In June 1989, No-Sag merged with Lear Siegler Seymour Corporation. In 1993 the corporation's name was changed to LSSC Corporation ("LSSC"). In June 1990, LSSC (formerly No-Sag) sold all of its right, title and interest in its assets of the No-Sag Division, including the Kendallville factory, to Leggett & Platt ("L & P"). The new owners advised E & V of the sale.

Problems with the construction of the Kendallville factory arose in 1989. LSSC, and later L & P, communicated with E & V about the problems. In a letter dated March 4, 1991, E & V was advised that L & P, the new owners of the factory, would now be pursuing resolution of the construction problems. Negotiations continued between L & P and E & V regarding the various construction problems. E & V resolved a minor problem with the loading dock in 1992, although in its communications it contested L & P's authority to pursue defect claims with E & V.

On March 2, 1993 E & V was asked to consent to the assignment of the No-Sag construction contract to L & P. E & V did not consent. On July 28, 1993, defendants LSSC and L & P mailed E & V a "Demand for Arbitration". The claim in arbitration, which was instituted by both defendants as claimants, asserts that the subcontractors did not properly construct the factory. Also on July 28, 1993, defendants filed suit in state court against the subcontractors.

Obligation to Arbitrate

E & V does not dispute that it agreed to...