Albert M. Higley Company v. N/S Corp.

• Decision Date: 17 April 2006
• Docket Number: No. 05-3393.,05-3393.
• Parties: ALBERT M. HIGLEY COMPANY, Plaintiff-Appellee, v. N/S CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

445 F.3d 861

ALBERT M. HIGLEY COMPANY, Plaintiff-Appellee, v. N/S CORPORATION, Defendant-Appellant.

No. 05-3393.

United States Court of Appeals, Sixth Circuit.

Argued: March 16, 2006.

Decided and Filed: April 17, 2006.

ARGUED: Roy J. Schechter, Lichko & Schechter, Cleveland, Ohio, for Appellant. William B. Leahy, Buckingham, Doolittle & Burroughs, Cleveland, Ohio, for Appellee. ON BRIEF: Roy J. Schechter, Lichko & Schechter, Cleveland, Ohio, for Appellant. William B. Leahy, Mark F. Craig, Buckingham, Doolittle & Burroughs, Cleveland, Ohio, for Appellee.

Before: MARTIN, NELSON, and COLE, Circuit Judges.

OPINION

BOYCE F. MARTIN, JR., Circuit Judge.

N/S Corporation appeals the district court's denial of its motion to stay litigation and compel arbitration in a diversity action between itself and the Albert M. Higley Company. The issue before this Court is the interpretation of the arbitration clause in a contract between these two companies. For the foregoing reasons, we AFFIRM the district court's decision denying N/S's motion to stay the litigation and compel arbitration.

I.

Higley is a primary contractor on a project with the Greater Cleveland Regional Transit Authority. Higley hired N/S as a subcontractor to perform work on the project. The two parties entered into a written agreement (herein referred to as "Subcontract"), authored by Higley. During the course of performance of the Subcontract, N/S notified Higley that it would be unable to comply with the "Buy America" provisions of the Subcontract. These provisions of the Subcontract were of particular importance to Higley because it affected the use and availability of Federal Transit Administration funds. After pursuing negotiation and mediation procedures in the hope of resolution of this conflict, Higley sued N/S in October 2004 for material breach of the terms of the Subcontract in federal district court, under diversity jurisdiction. N/S filed a motion to stay the litigation and compel arbitration, arguing that to be the appropriate action according to the terms of the Subcontract. The district court denied N/S's motion to compel arbitration on March 7, 2005. N/S has brought a timely appeal of that decision before this Court.

II.

We have jurisdiction over this interlocutory appeal based on 9 U.S.C. § 16(a)(1), which states that an appeal may be taken from an order refusing to compel arbitration or refusing to stay an action pending arbitration. We review de novo a district court's denial of such a motion. Fazio v. Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir.2003).

This Court examines arbitration language in a contract in light of the strong federal policy in favor of arbitration, resolving any doubts as to the parties' intentions in favor of arbitration. Great Earth Cos., Inc. v. Simons, 288 F.3d 878 (6th Cir.2002). Additionally, we have previously noted the large number of cases from the Supreme Court encouraging arbitration in a wide variety of contexts and emphasizing the federal policy in favor of arbitration. Wilson Elec. Contractors, Inc. v. Minnotte Contracting Corp., 878 F.2d 167, 169 (6th Cir.1989). The Supreme Court has "interpreted the Federal Arbitration Act as establishing that, `as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.'" Id. (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).

However, the federal policy in favor of arbitration is not an absolute one. Arbitration under the Federal Arbitration Act is "a matter of consent, not coercion." Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). "While ambiguities in the language of the agreement should be resolved in favor of arbitration, we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated." E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002) (internal citation omitted). This Court has recently stated that "no matter how strong the federal policy favors arbitration, arbitration is a matter of contract between the parties, and one cannot be required to submit to arbitration a dispute which it has not agreed to submit to arbitration." Simon v. Pfizer Inc., 398 F.3d 765, 775 (6th Cir.2005) (internal citations omitted).

The arbitration clause in the Subcontract of this case reads as follows: "Should [N/S] and [Higley] be unable to resolve said dispute(s) through mediation, any and all dispute(s), at the sole discretion of [Higley], shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association." The dispute between the two parties in this case rests on differing interpretations of the "at the sole discretion of [Higley]" clause. Higley interprets this clause to mean that they retain discretion over when to decide an issue through arbitration. This would result in a choice for Higley, after mediation, to decide whether to continue the dispute resolution through either arbitration or litigation. In support of their interpretation, Higley points to later language in the Subcontract reading "[a]ll disputes not resolved by arbitration pursuant to the terms of [the arbitration clause] will be resolved by litigation in any court having jurisdiction thereof, after compliance with [the negotiation and mediation subsections] hereof." N/S, conversely, argues that the clause means Higley has sole discretion of whether a dispute continues to exist after mediation. This interpretation would result in Higley's choice, after mediation, to decide either that no dispute exists between the two or that the dispute must go to arbitration. N/S explains the litigation clause as pertaining only to disputes which were not covered by the arbitration clause.

Higley relies on Wilson Elec. Contractors in support of its interpretation of the arbitration clause. 878 F.2d 167. In that case, this Court upheld a clause giving one party sole discretion over whether to pursue arbitration.¹ The primary issue in Wilson was not the meaning of the clause, but whether separate consideration was required to support the uneven terms of the arbitration provisions. In upholding the clause as enforceable, we noted that Wilson (like N/S, in this case) "made no claim of fraud or that it was coerced into signing the contract or that the contract was unconscionable" and "the contract as a whole did not lack consideration." Id. at 169. However, Wilson is distinguishable from this case, as the final result — enforcement of the arbitration clause — resulted in a stay of the litigation and a promotion of the federal policy favoring arbitration.

N/S relies on an...