Gratech Co. v. NORTH DAKOTA DOT
| Decision Date | 23 March 2004 |
| Docket Number | No. 20030203.,20030203. |
| Citation | 676 N.W.2d 781,2004 ND 61 |
| Parties | GRATECH COMPANY, LTD., Claimant and Appellant, and Flickertail Paving and Supply, LLC, Claimant, v. NORTH DAKOTA DEPARTMENT OF TRANSPORTATION, Respondent and Appellee. |
| Court | North Dakota Supreme Court |
Ronald G. Schmidt (argued), Schmidt, Schroyer, Moreno & Lee, P.C., Rapid City, S.D., and Jack McDonald (on brief), Wheeler Wolf, Bismarck, N.D., for claimant and appellant.
Charles S. Miller, Jr., Special Assistant Attorney General, Bismarck, N.D., for respondent and appellee.
[¶ 1] Gratech Company, Ltd. appeals from a judgment dismissing its application to vacate the decision of the arbitration panel in Gratech's arbitration action against the North Dakota Department of Transportation ("DOT"). We affirm, concluding the arbitration panel did not err in concluding that Gratech's failure to file a written notice of claim precluded arbitration of all but one of Gratech's claims against DOT.
[¶ 2] In the fall of 1998, DOT awarded two separate road construction contracts to Flickertail Paving and Supply, LLC ("Flickertail") to tear out, regrade, and repave portions of U.S. Highway 281. The projects were labeled the Belcourt project and the Rolla project. Flickertail subcontracted the grading portions of the projects to Gratech. [¶ 3] Gratech encountered poor soil conditions on both projects, resulting in additional subcutting, plowing, discing, and drying of the soil. The parties dispute the extent of the poor soil conditions and its impact upon the projects.
[¶ 4] Gratech concedes it did not give a contemporaneous notice of intent to seek additional compensation under N.D.C.C. § 24-02-26.1 or under the contract provisions requiring such notice. Flickertail, however, did give a contemporaneous written notice of claim for alleged increased compensation it claimed it was owed.
[¶ 5] Upon completion of the projects, Flickertail requested additional compensation on the Rolla project and Gratech sought additional compensation on both projects from DOT. DOT denied these claims, and Flickertail and Gratech filed separate demands for arbitration. DOT counterclaimed for indemnity against Flickertail, and all claims of the parties were consolidated into a single arbitration proceeding.
[¶ 6] A hearing was conducted, and the arbitrators issued a written decision. Flickertail was awarded $411,408 on its claim for additional compensation on the Rolla project. That claim is not before this Court on appeal.
[¶ 7] On Gratech's claims, the arbitrators initially determined that Gratech's failure to file a notice of claim under N.D.C.C. § 24-02-26.1 and the provisions of the contract precluded arbitration of all but one of Gratech's claims. The arbitrators also, in the alternative, concluded that on the merits Gratech was not entitled to additional compensation on the barred claims. On the one claim properly before the arbitrators, they awarded Gratech an additional $55,651 for "muck excavation" on the Belcourt project.
[¶ 8] Gratech filed an application in district court to vacate the arbitration award. The district court affirmed the arbitration award and dismissed Gratech's application to vacate the award. Gratech appealed to this Court.
[¶ 9] The dispositive issue on appeal is whether Gratech was required to file a written notice of claim as a prerequisite to arbitrating its claims against DOT.
[¶ 10] Gratech initially asks this Court to adopt a heightened standard of review for questions of law in a statutorily mandated arbitration.
[¶ 11] We have generally held that arbitrators are the judges of both the law and the facts, and a court will vacate an arbitration award on its merits only if the award is completely irrational. See, e.g., John T. Jones Constr. Co. v. City of Grand Forks, 2003 ND 109, ¶¶ 9-10, 665 N.W.2d 698; Superpumper, Inc. v. Nerland Oil, Inc., 2003 ND 33, ¶ 13, 657 N.W.2d 250; State v. Gratech Co., 2003 ND 7, ¶ 12, 655 N.W.2d 417. Under the completely irrational standard, an arbitrator's mistake in determining the facts or interpreting the law is not a sufficient ground for overturning the award. John T. Jones, at ¶ 9; Superpumper, at ¶ ¶ 13-14.
[¶ 12] Gratech invites us to modify that standard and to apply a de novo standard allowing full review by a reviewing court of questions of law in statutorily mandated arbitrations. In support of its argument, Gratech relies upon this Court's comments in a footnote in Allstate Ins. Co. v. Nodak Mut. Ins. Co., 540 N.W.2d 614 (N.D.1995). In Allstate, the Court noted that some courts had adopted a minority view and applied a heightened standard of review to questions of law when the arbitration is compelled by statute. Id. at 620 n. 2; see American Universal Ins. Co. v. DelGreco, 205 Conn. 178, 530 A.2d 171, 179 (1987); Allstate Ins. Co. v. Caltabiano, 74 Conn. App. 49, 809 A.2d 1153, 1156 (2002); Detroit Auto. Inter-Ins. Exch. v. Gavin, 416 Mich. 407, 331 N.W.2d 418, 434-35 (1982); Johnson v. American Family Mut. Ins. Co., 426 N.W.2d 419, 421 (Minn.1988) (automobile no-fault arbitration); Gilder v. Auto-Owners Ins. Co., 659 N.W.2d 804, 807 (Minn.Ct.App.2003) (same); Racine v. AMCO Ins. Co., 605 N.W.2d 773, 775 (Minn.Ct.App.2000) (same).
[¶ 13] We find it unnecessary to resolve this issue in this case because we conclude that, applying either standard, the arbitrators correctly determined that Gratech waived its right to arbitrate its claims by failing to file a notice of claim in compliance with N.D.C.C. § 24-02-26.1 and the provisions of the contract.
[¶ 14] All disputes arising out of any contract entered into by DOT for the construction or repair of highways must be submitted to arbitration. N.D.C.C. § 24-02-26; Gratech Co. v. Wold Eng'g, P.C., 2003 ND 200, ¶ 16, 672 N.W.2d 672; State v. Gratech Co., 2003 ND 7, ¶¶ 10, 19, 655 N.W.2d 417. By voluntarily entering into a highway construction contract, the parties are deemed to have agreed to arbitration of all disputes arising out of the contract. N.D.C.C. § 24-02-26; Gratech, 2003 ND 7, ¶ 19, 655 N.W.2d 417.
[¶ 15] Section 24-02-26.1, N.D.C.C., provides that, as a condition precedent to arbitration, any person seeking additional compensation for work not covered in the contract must file a written notice of claim:
Condition precedent to contractor demand for arbitration—Claims for extra compensation. In addition to the provisions of section 24-02-30, full compliance by a contractor with the provisions of this section is a condition precedent to the contractor's right to demand arbitration. If the contractor believes the contractor is entitled to additional compensation for work or materials not covered in the contract or not ordered by the engineer as extra work or force account work in accordance with the contract specifications, the contractor shall, prior to beginning the work which the claim will be based upon, notify the engineer in writing of the intent to make claim for additional compensation. If the basis for the claim does not become apparent until the contractor has commenced work on the project and it is not feasible to stop the work, the contractor shall immediately notify the engineer that the work is continuing and that written notification of the intent to make claim will be submitted within ten calendar days. Failure of the contractor to give the notification required and to afford the engineer facilities and assistance in keeping strict account of actual costs will constitute a waiver of claim for additional compensation in connection with the work already performed. Notification of a claim, and the fact that the engineer has kept account of the costs involved, may not be construed as proving or substantiating the validity or actual value of the claim.
Any person submitting a claim for compensation under this section, personally or on behalf of another person or entity, must do so in writing, not later than ninety days after the department has submitted the final estimate to the contractor. The claim must state the monetary amount of the claim, the reason for the claim, when the loss was incurred, and a short statement of the factual situation under which the claim arose. The claim must be made under oath or equivalent affirmation. The director shall provide claim forms to persons requesting or indicating a need for them.
See also Gratech, 2003 ND 7, ¶ 11, 655 N.W.2d 417.
[¶ 16] In addition, § 104.06 of the contract requires that the contractor file a written notice of claim for additional compensation for work "not clearly covered in the Contract" and further provides:
[¶ 17] Section 104.04 of the contract expressly requires written notice by the contractor for additional compensation claimed as a result of unanticipated site conditions:
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Gratech Co., Ltd. v. Wold Engineering, P.C.
...notice of claim precluded arbitration of all but one of Gratech's claims against the NDDOT. This Court, in Gratech Co. v. North Dakota Dep't of Transp., 2004 ND 61, 676 N.W.2d 781, affirmed a judgment dismissing Gratech's application to vacate the arbitration panel's decision. In Gratech Co......