Associated Builders Corp. v. Ratcliff Const. Co., Inc.

• Decision Date: 13 August 1987
• Docket Number: No. 86-4767,86-4767
• Citation: 823 F.2d 904
• Parties: ASSOCIATED BUILDERS CORPORATION, Plaintiff-Appellee, v. RATCLIFF CONSTRUCTION COMPANY, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 904

823 F.2d 904

ASSOCIATED BUILDERS CORPORATION, Plaintiff-Appellee, v. RATCLIFF CONSTRUCTION COMPANY, INC., Defendant-Appellant.

No. 86-4767.

United States Court of Appeals Fifth Circuit.

Aug. 13, 1987.

Charles F. Seemann, Jr., Bobby M. Harges, Deutsh, Kerrigan, & Stiles, New Orleans, La., for defendant-appellant.

Robert G. Nida, Gold, Simon, Weems, Bruser, Sharp, Sues & Rundell, Alexandria, La., for plaintiff-appellee.

Appeals from the United States District Court for the Western District of Louisiana.

Before GOLDBERG, HILL and JONES, Circuit Judges:

EDITH H. JONES, Circuit Judge:

The issue in this case is whether the district court erred in refusing to stay its proceedings pending arbitration. ¹ Defendant-Appellant Ratcliff Construction Company ("Ratcliff") was the prime contractor of the Alien Detention Center in Oakdale, Louisiana. In October 1984, Ratcliff subcontracted with Associated Builders Corp. ("ABC") for certain roofing work on the project. The subcontract required ABC to procure surety bonds within a short time. In January 1985, Ratcliff terminated the subcontract on the grounds that ABC had failed to procure the requisite bonds. Thereafter, ABC filed this diversity action for wrongful termination. Ratcliff moved for a stay pending arbitration, citing the arbitration clause in the subcontract, and it now appeals from the district court's refusal to issue the stay. We reverse.

Ratcliff contends that the parties' subcontract requires this dispute to be submitted to arbitration. Before a stay order is appropriate, the district court must find that the contract between the parties authorizes arbitration of the dispute in question. Interpretation of contractual arbitration provisions is colored, however, by the strong national policy favoring arbitration, recently reaffirmed by the Supreme Court in Shearson/American Express, Inc. v. McMahon, --- U.S. ----, ----, 107 S.Ct. 2332, 2336, 96 L.Ed.2d 185 (1987). In our circuit, citing Supreme Court authority, it has been held that "[U]nless it can be said with positive assurance that an arbitration clause is not succeptible of an interpretation which would cover the dispute at issue, then a stay pending arbitration should be granted." Explo Inc. v. Southern Natural Gas Co., 788 F.2d 1096, 1098 (5th Cir.1986).

Two paragraphs of the parties' subcontract are largely determinative of this issue. Paragraph 36 provides as follows:

If at any time any controversy should arise between the Contractor and Subcontractor with respect to any matter or thing involved in this Subcontract or construction project, which controversy is not controlled or determined by the paragraph above [concerning disputes involving the Owner] or other provisions of this Subcontract, then said controversy shall be decided as follows:

[i] The Subcontractor shall conclusively be bound by and abide by the Contractor's decision respecting said controversy, unless the Subcontractor shall commence arbitration proceedings as hereinafter provided within thirty days following such decision.

[ii] If the Subcontractor decides to appeal from the decision of the Contractor, then the controversy shall be decided by arbitration in accordance with the then current rules of the Construction Industry Arbitration Rules of the American Arbitration Association, and the arbitration decision shall be final and binding on both parties; provided, however, that proceedings before the American Arbitration Association shall be commenced by Subcontractor not less than thirty days following Contractor's decision.

[iii] No dispute shall interfere with the progress of the general construction, and Subcontractor shall proceed with its work....

Paragraph 37 continues:

37. The Subcontractor does covenant and agree that if for any reason this Contract is not completed as contemplated herein and any dispute shall arise over the entitlement or rights of the Subcontractor, the Subcontractor's sole recourse shall be an action to enforce the several terms and provisions of this Contract, and no action shall lie in favor of the Subcontractor in the nature of quantum meruit, quantum valebant or quasi-contract.

Ratcliff contends that this is a broadly worded agreement committing "any controversy ... with respect to any matter or thing involved in this Subcontract" to arbitration unless otherwise provided by the contract. This proposition is difficult to challenge, but ABC makes the effort. ABC urges that paragraph 37 is such an "other provision", which dispenses with arbitration in the event the contract is not completed. ABC contends that paragraph 36 is a "disputes" clause that contemplates arbitration only when construction of the roof is underway, based on the language "no dispute shall interfere with the progress of the general construction...." Finally, ABC suggests a broad interpretation of paragraph 36 is inconsistent with paragraph 22, providing that the contractor's determination that the subcontractor has defaulted and that termination is necessary "shall be conclusive as to the contractor's right to proceed...." We find ABC's arguments unpersuasive.

Paragraph 37 does not expressly constitute an exception to the arbitration provision of the contract. It limits the remedies available to the subcontractor in the event of contract termination, for he agrees not to assert common extracontractual causes of action such as quantum meruit, quantum...