Dannelly Enters., LLC v. Palm Beach Grading, Inc.

• Decision Date: 29 January 2016
• Docket Number: 1140504.
• Citation: 200 So.3d 1157
• Parties: DANNELLY ENTERPRISES, LLC v. PALM BEACH GRADING, INC.
• Court: Alabama Supreme Court

200 So.3d 1157

DANNELLY ENTERPRISES, LLC

v.PALM BEACH GRADING, INC.

1140504.

Supreme Court of Alabama.

Jan. 29, 2016.

Leon A. Boyd V of Cobb, Boyd, White & Cobb, Dothan, for appellant.

H.C. Ireland III and Robert W. Heath of Porterfield, Harper, Mills, Motlow & Ireland, P.A., Birmingham, for appellee.

PARKER

, Justice.

Dannelly Enterprises, LLC (“Dannelly”), appeals the order of the Dale Circuit Court (“the circuit court”) granting a motion to compel arbitration filed by Palm Beach Grading, Inc. (“PBG”). We reverse the circuit court's order.

Facts and Procedural History

In the fall of 2006, PBG entered into negotiations with Corvias Military Living, LLC, f/k/a Picerne Military Housing LLC (“Corvias”); Picerne Construction/FRK, LLC; Rucker–Picerne Partners, LLC; and Rucker Communities, LLC (hereinafter collectively referred to as “the contractors”), to perform work on a project known as the Ft. Rucker RCI Family Housing, Munson Heights, Phase 1A, at Fort Rucker, Alabama (“the project”). Apparently, in preparing to bid on the project, PBG contacted various subcontractors, including Dannelly, to get bids for various aspects of the project that PBG would be responsible for if it entered into an agreement with the contractors to complete the project. PBG had not signed any agreement with the contractors at that time.

PBG requested that Dannelly submit a bid for the construction of four segmental retaining walls and an associated drainage system. On September 21, 2006, Dannelly submitted a bid to PBG. On or about September 26, 2006, PBG accepted Dannelly's bid by issuing a work order to Dannelly; the work order was signed by a representative of PBG and by David Dannelly, the managing member of Dannelly. Neither the bid submitted by Dannelly nor the work order issued by PBG contained an arbitration provision.

Although the work order issued by PBG stated that “[a] Sub-contract will be created by PBG for billing purposes,” neither party submitted into evidence such a contract between PBG and Dannelly. PBG did submit the affidavit testimony of Gene Eichelberger, the manager of PBG, in which Eichelberger stated that PBG and Dannelly had entered into PBG's “standard subcontract agreement”; PBG's standard subcontract agreement contains an arbitration agreement. However, PBG did not submit to the circuit court a copy of its standard subcontract agreement signed by PBG and Dannelly. In fact, Eichelberger's affidavit testimony states that “PBG has not at this time been able to locate signed copies of the PBG [s]ubcontract [a]greement” with Dannelly. In direct contradiction to Eichelberger's affidavit testimony, David Dannelly's affidavit testimony states that Dannelly “has not entered into or agreed to be bound by the terms and conditions [of PBG's standard subcontract agreement], including any arbitration provision, within [PBG's] standard [s]ubcontract [a]greement.”

On October 20, 2006, PBG, apparently having won the right to act as subcontractor for the project, entered into a “master subcontract agreement” with Corvias for the completion of the project (“the master subcontract agreement”). The master subcontract agreement contains the following arbitration provision:

“7.5. Disputes. If [PBG] is not satisfied with the decision on a Claim,¹ or in the event of any other dispute between [Corvias] and [PBG] arising under or relating to this Agreement, the dispute shall be settled pursuant to the following procedures.

“7.5.1. Any Claim arising out of or relating to the Agreement, but only at the election of [Corvias], may be subject to non-binding mediation in accordance with the Construction Industry Mediation Rules of the American Arbitration Association. If [Corvias] elects non-binding mediation, [PBG] agrees to mediate the disputed portions of its Claim, with the parties agreeing to share all mediator and filing fees equally. [PBG] shall not have the right to seek non-binding mediation of any Claim over the objection of [Corvias]. If mediation is elected by [Corvias], mediation shall be a condition precedent to any arbitration proceeding held pursuant to Paragraph 7.5.2.

“7.5.2. If [PBG] is not satisfied with [Corvias's] decision on a Claim, and that Claim is not resolved through non-binding mediation, if any, the dispute shall be settled pursuant to binding arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect, unless the parties agree otherwise. The parties agree that there will be no recourse to trial or appeal courts, except as may be allowed by law, and that their exclusive recourse and remedy is ARBITRATION. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law of the State of Rhode Island. An award of reasonable attorneys' fees and related arbitration costs shall be awarded to the party that prevails at the binding arbitration.

“7.5.3. [PBG] agrees to include in any and all of its subcontracts and purchase orders the same provisions as are included in this Paragraph 7.5 and its subparts, modified only as to the appropriate identification of the parties.”

(Capitalization in original.)

On May 3, 2013, the contractors sued PBG. Neither party explains what took place between the time PBG and the contractors entered into the master subcontract agreement and the time the contractors sued PBG. In their complaint against PBG, the contractors allege that, “[o]n or about April 9, 2013, the collapse of one retaining wall on the [p]roject was discovered. In addition, it has been discovered that there is movement from vertical bulging in at least one other retaining wall on the project.” The contractors alleged that the problems with the retaining walls are evidence that PBG breached the master subcontract agreement. Accordingly, the contractors asserted claims of breach of contract and negligence against PBG.

The contractors and PBG filed a joint motion for the action to be held in abeyance “pending further analysis of the issues central to the [c]omplaint filed herein, and discussions between and among the [p]arties.” The circuit court granted the contractors and PBG's joint motion.

On August 14, 2014, the contractors filed a motion to stay the proceedings and to compel arbitration of their claims against PBG. The circuit court granted the contractors' motion to stay and to compel arbitration on the same day. On August 22, 2014, PBG filed a motion to reconsider the circuit court's order granting the contractors' motion to compel arbitration. On September 22, 2014, the circuit court entered an order indicating that the contractors and PBG had reached an agreement to partially lift the stay entered by the circuit court on August 14, 2014, “for the sole and limited purpose of allowing PBG to file and serve a third party complaint against its appropriate subcontractors.” The circuit court's order also stated that, “[o]nce service of the third party complaint has been effected upon PBG's subcontractors, PBG will file notice of service with the court and the court will issue an order applying the stay to the third party complaint and third party defendants.” Lastly, the circuit court's order states that the contractors and PBG “will jointly file with the American Arbitration Association (‘AAA’) a motion for joinder, pursuant to AAA Construction Industry Arbitration Rule 7, to join in the arbitration all claims asserted in this matter, all Plaintiffs, and PBG's subcontractors.”

On September 22, 2014, PBG filed a third-party complaint against Dannelly and Scott Miller Consulting Engineer, Inc. (“SMCE”),² alleging negligence, breach of contract, “third-party beneficiary,” “common-law indemnity,” and breach of implied warranty. Dannelly answered the third-party complaint filed against it on November 10, 2014.

On December 1, 2014, PBG filed a motion to compel arbitration of its third-party claims against Dannelly and SMCE. PBG argued that Dannelly and SMCE are bound by the arbitration provision in the master subcontract agreement. PBG also argued that Dannelly and SMCE “agreed to the arbitration provisions contained in the PBG [s]ubcontract [a]greement” and, thus, are bound by that arbitration provision.³ PBG acknowledged that neither Dannelly nor SMCE signed the master subcontract agreement or the PBG standard subcontract agreement but argues that Dannelly and SMCE performed work under those agreements, demanded payment under those agreements, and were paid for their work under those agreements; PBG submitted no evidence in support of these assertions. PBG argued that “[p]arties cannot avail themselves of the benefits of an agreement while at the same time avoiding the arbitration provisions contained in those agreements.”

On December 31, 2014, Dannelly filed a response in opposition to PBG's motion to compel arbitration. Dannelly argued that it is not a signatory to any agreement requiring arbitration, that it is not a third-party beneficiary under the master subcontract agreement, and that the arbitration provision in the master subcontract agreement is too narrow to encompass PBG's third-party claims against Dannelly.

On January 9, 2015, after holding a hearing on January 5, 2015, the circuit court granted PBG's motion to compel arbitration. Dannelly appeals.

Standard of Review

“ ‘[T]he standard of review of a trial court's ruling on a motion to compel arbitration at the instance of either party is a de novo determination of whether the trial judge erred on a factual or legal issue to the substantial prejudice of the party seeking review.’ Ex parte Roberson, 749 So.2d 441, 446 (Ala.1999)

. Furthermore:

“ ‘A motion to compel arbitration is analogous to a motion for summary judgment. TranSouth Fin. Corp. v. Bell, 739 So.2d 1110, 1114 (Ala.1999). The party seeking to compel arbitration has the burden of proving the existence of a contract calling for arbitration and proving that that contract evidences a transaction affecting interstate...