Choctaw Nation of Okla. v. (1) Robins & Morton Corp.

• Decision Date: 30 September 2021
• Docket Number: Case No. 119,325
• Citation: 513 P.3d 563
• Parties: The CHOCTAW NATION OF OKLAHOMA, Plaintiff/Appellee, v. (1) ROBINS & MORTON CORPORATION, Defendant/Appellant, and (2) James Childers, Architect, Inc., (3) Building & Earth Sciences, Inc., (4) Barker & Associates, Inc., (5) Vilhauer Enterprises, LLC, (6) Allison Landscape and Pool, Ltd., (7) Chaves-Grieves Consulting Engineers, Inc., (8) Howard-Fairbain Site Design, Inc., (9) HP Engineering, Inc., (10) Bernhard MCC, LLC, (11) Airtech Corporation, (12) Northwest Controls System, Inc., (13) Climacool Corporation, (14) Empirical Energy Solutions, LLC, Defendants.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

513 P.3d 563

The CHOCTAW NATION OF OKLAHOMA, Plaintiff/Appellee,

v. (1) ROBINS & MORTON CORPORATION, Defendant/Appellant,and(2) James Childers, Architect, Inc., (3) Building & Earth Sciences, Inc., (4) Barker & Associates, Inc., (5) Vilhauer Enterprises, LLC, (6) Allison Landscape and Pool, Ltd., (7) Chaves-Grieves Consulting Engineers, Inc., (8) Howard-Fairbain Site Design, Inc., (9) HP Engineering, Inc., (10) Bernhard MCC, LLC, (11) Airtech Corporation, (12) Northwest Controls System, Inc., (13) Climacool Corporation, (14) Empirical Energy Solutions, LLC, Defendants.

Case No. 119,325

Court of Civil Appeals of Oklahoma, Division No. 3.

FILED SEPTEMBER 30, 2021

Mandate Issued: June 15, 2022

P. Scott Hathaway, M. Freeman-Burney, Chris Warzecha, CONNER & WINTERS, LLP, Tulsa, Oklahoma, Michael Burrage, John B. Norman, J. Renley Dennis, Austin R. Vance, WHITTEN BURRAGE, Oklahoma City, Oklahoma, For Plaintiff/Appellee.

Monty B. Bottom, Ashley M. Thul, FOLIART, HUFF, OTTAWAY & BOTTOM, Oklahoma City, Oklahoma, For Defendant/Appellant, Robins & Morton Corporation.

Opinion by Trevor S. Pemberton, Presiding Judge:

¶1 Robins & Morton Corporation (R&M) seeks review of the trial court's denial of a Motion to Compel Mediation and, if Necessary, Arbitration and Dismiss or, Alternatively, Stay Litigation. The dispositive issue is whether a mandatory arbitration provision in a construction management contract between The Choctaw Nation of Oklahoma (Nation) and R&M is void under 12 O.S. § 1855(D) because the construction management contract—the primary purpose of which was to engage R&M to oversee and coordinate the construction of a medical center—contains provisions regarding insurance. Because the construction management contract does not reference insurance in the manner intended by Section 1855(D), the arbitration provision is not void under Section 1855(D). Therefore, we reverse the trial court's denial of R&M's motion and remand for proceedings consistent with this Opinion.

BACKGROUND

¶2 In 2015, the Nation and R&M entered into a Construction Management Contract (Contract) pursuant to which R&M was to provide to the Nation construction management services associated with the construction of a medical center. The Contract had the following stated purposes:

ARTICLE 1 PURPOSE AND INTENT

The primary purpose and intent of [the construction manager's consultations services part] of this procurement is to secure the services of a Construction Manager to provide design consultation on the project; to monitor project costs and endeavor to keep costs within established limitations; to schedule the project efficiently for the construction phases so that the project will be ready for occupancy at the earliest possible date; and to review the design of the project with the intent that the most efficient use of materials and methods will be employed to provide quality construction at the least cost.

...

ARTICLE I PURPOSE AND INTENT

The primary purpose and intent of [the construction management services part] of this procurement is to secure the services of a Construction Manager to organize and direct the complete construction of the project and to assume all risks and responsibilities of constructing the project within a Guaranteed Maximum Price and Time.

¶3 The Contract further contained acute detail about R & M's several obligations to fulfill the purpose(s) and intent(s). Not unlike many, if not most, other construction management contracts, the Contract also contained deep within the document language regarding insurance and bonds to be procured. Also attached were a Tribal Controlled Insurance Program (TCIP) Contract Addendum and a corresponding TCIP Procedures Manual.

¶4 After completion of construction, the Nation raised issues about alleged design and construction defects negligently caused by R&M and the other named defendants. Although they dispute timeframes and each other's cooperation, the Nation and R&M then exchanged communications regarding means by which to resolve the dispute.

¶5 With the dispute unresolved, the Nation later filed the underlying lawsuit, after which the Nation and R&M participated in an unsuccessful dispute resolution conference—a mechanism outlined in the provision of the Contract at issue. Once served with the lawsuit, R&M filed a motion to compel mediation/arbitration, praying for enforcement of the following contractual provision requiring that the dispute be submitted to mediation/arbitration:

4. DISPUTES

All disputes arising under this Construction Management Services contract that remain unresolved after good faith negotiations between the parties first shall be the subject of a dispute resolution conference. Either party may initiate a dispute resolution conference ("DRC") by providing written notice (the "Dispute Notice") to the other party. The written notice shall contain a short summary of the facts. Within five (5) days of receiving the Dispute Notice, a dispute resolution conference between Contracting Official, Project Director and the Construction Manager's representative(s) shall occur. If the parties are unable to resolve the dispute at the DRC, the parties will have an additional five (5) days from the date of the DRC to resolve the dispute. If either party fails to participate in the DRC or if no resolution is achieved by the DRC process, then the dispute shall be submitted to the American Arbitration Association as agreed to below.

If no resolution is achieved by the DRC process, the parties agree that unresolved dispute shall be submitted to the American Arbitration Association pursuant to the Construction Arbitration Rules and Mediation Procedures. The parties further agree that the mediation and arbitration procedures selected herein shall be the exclusive manner by which disputes that are still unresolved at the DRC stage are to be resolved.

...

(Disputes Clause).

The Contract also contained a fully executed attachment titled Dispute Resolution Fund Agreement, pursuant to which the Nation agreed to deposit with an escrow agent a certain sum to be held and disbursed in the event "an arbitration award (the "Award") is issued in favor of [R & M][.]"

¶6 The Nation argued in response to the motion to compel, that the arbitration mandate in the Disputes Clause was void under 12 O.S. § 1855(D), which provides in pertinent part:

The Uniform Arbitration Act shall not apply to ... contracts which reference insurance, except for those contracts between insurance companies.

According to the Nation, the insurance provisions and related attachments were essential to the Contract, and the Nation would not have contracted with R & M but for its agreement to comply with the insurance terms. Notably, however, consummation of the Contract was not specifically tied to insurance provisions. The Contract provided:

L-10 ACCEPTANCE OF OFFER

If the offer is accepted, the offeror will receive a notice of award of the Construction Management Contract for the work included under PART A. The notice of award will consummate the contract which will consist of the documents listed in the request for proposal.

¶7 The trial court denied the motion to compel mediation/arbitration, finding "that the arbitration clause that is the subject of the motion ... is unenforceable" under 12 O.S. § 1855(D). R&M's appellate argument material to our analysis is that the arbitration provision is not void under Section 1855(D) because the Contract is not one that references insurance for purposes of Section 1855(D). The Nation stands by the position articulated by the trial court and continues to oppose enforcement of the mandatory arbitration provisions in the Contract as being void or waived.

STANDARD OF REVIEW

¶8 "As the party opposing the motion for arbitration, the [Nation] had the burden to ‘show that Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue; an intention discernible from the statute's text or legislative history or an inherent conflict between arbitration and the statute's underlying purpose.’ " Sparks v. Old Republic Home Protection Co. Inc. , 2020 OK 42, ¶ 14, 467 P.3d 680, 865 (quoting Thompson v. Bar-S Foods Co. , 2007 OK 75, ¶ 8, 174 P.3d 567, 572 ). A trial court's denial of a motion to compel arbitration is reviewed de novo . Id .

ANALYSIS

¶9 The overarching issue to be dissected is whether the mandatory arbitration clause in the Contract is void under 12 O.S. § 1855(D), which provides:

The Uniform Arbitration Act shall not apply to ... contracts which reference insurance, except for those contracts between insurance companies.

To determine whether Section 1855(D) renders void the arbitration provision at issue, we must contemplate how the Federal Arbitration Act (FAA) and the McCarran-Ferguson Act affect the interpretation and application of Section 1855(D) in this context.

¶10 The FAA is the embodiment of policy favoring arbitration and provides in relevant part:

A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. Oklahoma has adopted this similar language:

An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.

12 O.S. § 1857 (A).

¶11 "Generally speaking, the [FAA] preempts any state law limiting the enforcement of arbitration." Sparks , 2020 OK 42, ¶ 15, 467 P.3d 680 (citing Preston v. Ferrer , 552 U.S. 346, 352-53, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) ). The United States Supreme Court, underscoring the clear policy favoring arbitration, has stated, "courts must place arbitration agreements on...