Archer W. Contractors, LLC v. Holder Constr. Co.

• Decision Date: 22 November 2013
• Docket Number: No. A13A1331.,A13A1331.
• Citation: 325 Ga.App. 169,751 S.E.2d 908
• Parties: ARCHER WESTERN CONTRACTORS, LLC et al. v. HOLDER CONSTRUCTION COMPANY et al.
• Court: Georgia Court of Appeals

325 Ga.App. 169

751 S.E.2d 908

ARCHER WESTERN CONTRACTORS, LLC et al.

v.HOLDER CONSTRUCTION COMPANY et al.

No. A13A1331.

Court of Appeals of Georgia.

Nov. 22, 2013.

Hendrick, Phillips, Salzman & Flat, William David Flatt, Atlanta, Casey Fields, Robert P. White, for Appellant.

Carlton Fields, Christopher Bryan Freeman, Atlanta, Walter H. Bush, Jr., for Appellee.

BRANCH, Judge.

Appellants Archer Western Contractors and Capital Contracting Company (collectively, “AWC”) filed the instant suit against appellees Holder Construction Company, Manhattan Construction Company, C.D. Moody Construction Company, and Hunt Construction Group (collectively, “HMMH”) seeking a declaration that HMMH's assertion of its right to withhold payments to its subcontractor AWC was barred by res judicata. HMMH filed a motion to dismiss AWC's action and to compel arbitration, which the trial court granted. On appeal from this order, AWC argues that the trial court erred when it granted HMMH's motion to dismiss because the arbitration provision is unenforceable and because the trial court, rather than an arbitrator, was required to determine whether res judicata barred HMMH's assertion of its right to withhold payments. We disagree with these contentions and therefore affirm.

Whether a valid and enforceable arbitration agreement exists is “a question of law.” Miller v. GGNSC Atlanta, 323 Ga.App. 114, 117(1), 746 S.E.2d 680 (2013). We therefore review a trial court's order granting or denying a motion to compel arbitration de novo. Id.

Although this appeal is an outgrowth of litigation that has occupied our appellate courts since 2011, the relevant facts are not in dispute. In late 2004, the City of Atlanta

entered into a contract (“the Main Contract”) with a joint venture comprised of defendants [HMMH] regarding the construction project.¹ The General Contractor entered into a contract (“the Subcontract”) with a joint venture comprised of defendants [AWC] to perform work on the project. Pitts was employed by [AWC] to work on the project. [AWC] contracted with A & G Trucking for trucking and hauling work on the project.

Pursuant to the Main Contract, [HMMH] would serve as construction manager for the construction of the Atlanta airport's Maynard Holbrook Jackson, Jr., International Terminal, identified in the Main Contract as the “project.” The Main Contract authorized [HMMH] to enter into subcontracts with other entities. [HMMH] was obligated to require any subcontractors to be bound to it by the terms of the Main Contract and to assume to it all obligations and responsibilities which it assumed to the City under the Main Contract. The Main Contract also provided that, “where appropriate, [HMMH] shall require each Subcontractor to enter into similar agreements with its Sub–Subcontractor.”

The Main Contract specified that [HMMH], its subcontractors, and its sub-subcontractors were named insureds under the City's “Owner's Controlled Insurance Program,” which was made a part of the Main Contract. The stated purpose of the Owner's Controlled Insurance Program was “to provide one master insurance program that provides broad coverage with high limits that will benefit all participants involved in the project.” The Main Contract required that the named insureds comply with all requirements of the Owner's Controlled Insurance Program, which pertinently provided: “[HMMH] shall, at its own expense, purchase and maintain such insurance as will protect Contractor, Owner, Construction Manager, Design Consultant, and their Trustees, Directors, Officers, Partners, Agents, Representatives, and Employees from claims of the type set forth below: Automobile, Bodily Injury and Property Damage Liability Insurance covering all automobiles, whether owned, non-owned, leased or hired, with not less than the following limits: ... Bodily Injury—$10,000,000 per person and occurrence.”(Punctuation and emphasis omitted.) Estate of Mack Pitts v. City of Atlanta (“ Pitts I ”), 312 Ga.App. 599, 601–602, 719 S.E.2d 7 (2011).

HMMH hired AWC as one of its subcontractors on Phase 2 of the project.

Pursuant to the [Phase 2] Subcontract, [AWC] agreed to be bound by the terms of the Main Contract, to assume toward [HMMH] all duties and obligations that [HMMH] owed the City under the Main Contract, and to bind all lower tier subcontractors to the obligations set forth in the Main Contract and the Subcontract. The Subcontract expressly required [AWC] to maintain automobile liability insurance coverage for “owned, hired and non-owned vehicles with a $10,000,000 combined single limit for bodily injury and property damage.”

(Punctuation omitted.) Pitts I, 312 Ga.App. at 602, 719 S.E.2d 7.

In June 2007, a truck operated by A & G Trucking, a subcontractor hired by AWC, killed Mack Pitts, a worker at the site. After Pitts's estate was unable to collect the judgment of $5.57 million it obtained against A & G, the estate sued the City, HMMH, and AWC, asserting inter alia that Pitts had been a third-party beneficiary of the Subcontract's provisions requiring defendants' lower tier subcontractors, including A & G, to obtain $10 million of automobile liability coverage. In the course of the estate's action, HMMH asserted a cross-claim against AWC that AWC had breached its duty under the Phase 2 subcontract to indemnify HMMH as to the estate's claims.

In December 2010, the trial court granted the Pitts defendants' motions for summary judgment on the ground that Pitts had not been a third-party beneficiary of the Phase 2 subcontracts. The estate appealed this ruling to this Court, which concluded that Pitts had indeed been a third-party beneficiary of the Phase 2 subcontracts. See Pitts I, 312 Ga.App. at 603–604(1)(a)(i), 719 S.E.2d 7. The City appealed this Court's ruling to the Supreme Court of Georgia, which vacated this Court's decision in Pitts I and remanded for further consideration of the third-party beneficiary question. See Archer Western Contractors v. Estate of Mack Pitts (“ Pitts II ”), 292 Ga. 219, 230(4), 735 S.E.2d 772 (2012). On remand, this Court once again concluded that Pitts had been a third-party beneficiary of the Phase 2 subcontracts. Estate of Mack Pitts v. City of Atlanta (“ Pitts III ”), 323 Ga.App. 70, 746 S.E.2d 698, 2013 Ga.App. LEXIS 654 (2013). We therefore reversed the trial court's grant of summary judgment to the construction companies as well as its denial of summary judgment to the estate. Id.

In the same December 2010 order that granted summary judgment to the Pitts defendants and formed the basis of the Pitts I,II, and III appeals, the trial court also denied HMMH's cross-motion for summary judgment and granted AWC's cross-motion for the same, holding that AWC had no duty to defend or indemnify HMMH from any losses incurred in the course of operations at the construction site under the Phase 2 subcontract. HMMH did not appeal this portion of the December 2010 order. In December 2011, however, HMMH notified AWC that it would not make any additional payments to AWC under these two parties' Phase 3 subcontract until the conclusion of the Pitts litigation.

AWC brought this action seeking a declaration that it was owed money under Phase 3 of the project and that the trial court's order in the Phase 2 litigation precluded HMMH from withholding payments due under the Phase 3 subcontract when such withholding was premised on AWC's alleged breach of the Phase 2 subcontract. In its answer and counterclaim, HMMH justified its refusal to make additional payments on the ground that AWC had “breached its contractual obligations to HMMH” in the Phase 2 subcontract, in that AWC had failed to “ensur[e] that A & G carried the requisite insurance,” resulting in damage to HMMH. HMMH then notified AWC of its decision to arbitrate this dispute under Article 14.3.2 of the Phase 3 subcontract, which provided that disputes “arising out of or related to the Work or the [Phase 3] Subcontract or any breach thereof ... shall be decided, at the sole option of [HMMH], by binding arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect.” AWC responded that a forum selection clause in a supplemental provision of the Phase 3 subcontract placed “venue and jurisdiction” for any “legal action or proceeding ... exclusively in the Federal District Court for the Northern District of Georgia or the State Courts in Fulton County, Georgia.” AWC also asserted that because HMMH had not appealed the trial court's 2010 ruling that AWC had no duty to defend or indemnify HMMH from losses arising from the construction project, HMMH could no longer argue that it did not owe AWC money under the Phase 3 subcontract.

After a hearing, the trial court found that the instant dispute was within the scope of the Phase 3 subcontract's arbitration clause, which was not supplanted by the supplemental provision, and that because the arbitration agreement was governed by the Federal Arbitration Act and applicable federal law, the res judicata effect of the trial court's 2010 judgment was for the arbitrator, not a court, to decide.

1. We first consider the law applicable to the Phase 3 subcontract at issue, including its arbitration provisions.

AWC has not disputed the trial court's holding that the Federal Arbitration Act (“FAA”) applies here.² However, the Phase 3 subcontract, which includes the arbitration provisions at issue, also includes a general provision that “[a]ll matters relating to the validity, performance, or interpretation of this Subcontract shall be governed by the laws of the state where the Project is located”—here, Georgia. However, when a Georgia court rules on the issue whether parties agreed to arbitrate a claim under the FAA, it is “required to apply ordinary state law principles governing the formation of contracts.” Simmons Co. v. Deutsche Financial Svcs. Corp., 243 Ga.App. 85, 89(2), 532 S.E.2d 436 (...