Higgins Dev. Partners v. Skanska U.S.A.

• Citation: 216 P.3d 199,2009 MT 287,352 Mont. 243
• Decision Date: 25 August 2009
• Docket Number: No. DA 08-0360.,DA 08-0360.
• Parties: HIGGINS DEVELOPMENT PARTNERS, LLC, Counterclaim Plaintiff and Appellee, v. SKANSKA U.S.A. BUILDING, INC., Counterclaim Defendant and Appellant.
• Court: United States State Supreme Court of Montana

216 P.3d 199

2009 MT 287

352 Mont. 243

HIGGINS DEVELOPMENT PARTNERS, LLC, Counterclaim Plaintiff and Appellee, v. SKANSKA U.S.A. BUILDING, INC., Counterclaim Defendant and Appellant.

No. DA 08-0360.

Supreme Court of Montana.

Submitted on Briefs May 6, 2009.

Decided August 25, 2009.

For Appellant: Michael G. Black; Black Law Office; Missoula, Montana (Counsel for Skanska, U.S.A. Building, Inc.), Jonathan J. Kudrna; Jardine, Stephenson, Blewett & Weaver, P.C.; Great Falls, Montana (Counsel for Employers Mutual Casualty Co.).

For Appellee: Timothy D. Geiszler; Geiszler & Froines, P.C.; Missoula, Montana (Counsel for Higgins Development Partners, LLC), Scott M. Stearns; Boone Karlberg, P.C.; Missoula, Montana, Cory R. Gangle; Milodragovich, Dale, Steinbrenner & Nygren, P.C.; Missoula Montana, (Counsel for Metal Works of Montana, Inc. d/b/a Missoula Sheet Metal and Roofing, Inc.).

Justice W. WILLIAM LEAPHARTdelivered the Opinion of the Court.

¶ 1 Skanska U.S.A. Building, Inc., (Skanska) appeals from an order entered by the Twenty-First Judicial District Court, Ravalli County, granting Higgins Development Partners, LLC's (Higgins) Motion for Injunction enjoining Skanska from pursuing a demand for arbitration filed with the American Arbitration Association. We affirm.

¶ 2 We restate the issue on appeal as follows:

¶ 3 Did the District Court err in enjoining Skanska from pursuing a demand for arbitration filed with the American Arbitration Association?

BACKGROUND

¶ 4 The underlying claim in this matter arose out of the construction of an addition at the Rocky Mountain Lab in Hamilton, Montana. The National Institutes of Health (NIH) owns and operates the lab. NIH and Higgins entered into an agreement for the construction of an addition at the Rocky Mountain Lab known as the Integrative Research Facility. This facility is the first NIH facility to simultaneously house biosafety level 2, 3, and 4 laboratories.

¶ 5 On September 30, 2004, Higgins entered into a Construction Management Agreement (the "Agreement") with Skanska. The Agreement designated Higgins as the development manager and Skanska as the construction manager for the Integrative Research Facility. This Agreement is the subject of the present dispute between Higgins and Skanska. Under the Agreement, Skanska was charged with administering subcontracts for the addition. Metal Works of Montana, Inc., d/b/a Missoula Sheet Metal and Roofing, Inc., (Missoula Sheet Metal) received a subcontract from Skanska for construction of the roof on the new addition. The subcontract between Skanska and Missoula Sheet Metal expressly incorporated by reference Skanska's contract with Higgins.

¶ 6 At some point after Missoula Sheet Metal installed the roof, a dispute arose over the quality of Missoula Sheet Metal's work. Higgins alleged that Missoula Sheet Metal's work on a section of the roof (Roof A) was defective. Higgins partially withheld payment to Skanska for that work. Missoula Sheet Metal, in turn, did not receive full payment from Skanska. Missoula Sheet Metal subsequently commenced an action against Skanska to recover approximately $50,000 under the subcontract. The subcontract contained a "pay-if-paid" clause that conditioned Skanska's obligation to pay Missoula Sheet Metal on Skanska receiving payment from Higgins.

¶ 7 On January 10, 2008, Skanska filed an answer, counterclaim, and third-party complaint against Missoula Sheet Metal's surety and Higgins. With respect to Higgins, Skanska alleged that Higgins failed to pay Skanska for the sums demanded by Missoula Sheet Metal and that, accordingly, Higgins was liable to Skanska to the extent it was deemed liable to Missoula Sheet Metal. Separately, Skanska also filed a demand for arbitration with the American Arbitration Association. Skanska's attorney described the nature of its dispute in the demand for arbitration as follows:

Respondent Higgins Development Partners ("HDP") contracted with Claimant Skanska USA Building, Inc. ("Skanska") to serve as Construction Manager at Risk for a government project owned by the National Institute[s] of Health ("NIH"). HDP was the Development Manager for the project pursuant to its contract with NIH. Skanska performed work on the project for which it has not been paid by HDP. Skanska seeks damages for breach of contract against Higgins for the unpaid amounts. The Claims against Higgins include the following, but Skanska's Demand may be amended to add additional claims.

The unpaid amounts referenced by Skanska in the demand for arbitration involved two Change Order Requests (Change Orders), which Skanska had submitted to Higgins for payment. The Change Orders at issue related to increased cooling work and ceiling grid adjustments that were performed on the addition. Specifically, Change Order 160, in the amount of $27,999, related to revisions in the acoustical ceiling grid layout after it was 90 percent complete. Change Order 260, in the amount of $196,397, related to increased cooling costs in a mechanical room. Through Higgins, NIH approved partial payment of these requests. Skanska did not reference the dispute over Sheet Metal's work on Roof A in its demand for arbitration.

¶ 8 Higgins responded to Skanska's request for arbitration by filing a Motion for Injunction with the District Court. Higgins argued that the Agreement did not allow dispute resolution through arbitration with the American Arbitration Association. Rather, Higgins claimed that any alternative dispute resolution would have to take place under the Federal Acquisition Regulations (FAR) or the Federal Contracts Disputes Act (CDA) and include NIH as a party. In support of its position, Higgins cited section 9.2.1. of the Agreement, titled "Dispute Resolution for the Construction Phase." Section 9.2.1. stated the following:

Any other claim, dispute or other matter in question arising out of or related to this Agreement or breach thereof that is determined to relate solely to the Development Manager's obligations during the construction phase shall be settled in accordance with Article 4 of [American Institute of Architects] Document A201 ... unless the parties mutually agree otherwise.¹

Section 9.2.1. of the Agreement also stated that:

Claims, disputes or other matters in question between the parties that do not relate solely to Development Manager's obligations, and involve the interests of the National Institutes of Health shall be resolved per the requirements of the FAR, as outlined in the Development Manager's Agreement....

¶ 9 Higgins argued that the dispute over the Change Orders (the only claims specifically noted in Skanska's demand for arbitration) did not relate solely to Higgins's obligations under the Agreement because the federal government (through NIH) owned the facility and was ultimately responsible for paying its construction costs. Further, Higgins stated that the "present litigation arose from the NIH rejection of Roof A and its refusal to pay [Higgins] for that roof." Because NIH, through Higgins, rejected the work on Roof A, Higgins reasoned that Section 9.2.1. of the Agreement required Skanska's dispute to be resolved under the FAR and CDA.

¶ 10 In response, Skanska argued that arbitration with the American Arbitration Association was proper because the claim generally arose "out of [Higgins's] non-payment of Skanska and its subcontractors for work performed at the [Rocky Mountain Lab]...." Skanska drew a distinction between the underlying claim regarding the alleged defectiveness of Roof A and payment of the Change Orders and argued that the Change Orders related solely to Higgins's obligations (Skanska did not address directly whether the dispute over Roof A involved NIH's interests). As a jurisdictional matter, Skanska also argued that any question over whether dispute resolution would occur through arbitration or under the FAR requirements was a decision for the arbitrator, not the District Court. Finally, Skanska alleged that Higgins failed to properly certify the Change Order claims for resolution under the FAR and CDA. According to Skanska, Higgins was the only party that could initiate the FAR process, and Skanska maintained that Higgins refused or failed to do so.

¶ 11 The District Court granted Higgins's Motion for Injunction and enjoined Skanska from pursuing its demand for arbitration with the American Arbitration Association. The District Court concluded that NIH "was involved with [Higgins] in approving a reduced [Change Order] payment to Skanska" and that "[t]he disputes over payment of the [Change Orders did] not relate solely to Development Manager [Higgins's] obligations during the construction phase." On a separate matter, the District Court also concluded that there was no evidence that Higgins had refused or failed to properly process Skanska's Change Orders or "timely engage" the FAR or CDA dispute resolution procedures. Skanska appeals.

STANDARD OF REVIEW

¶ 12 We review a district court's conclusions of law regarding arbitrability for correctness. Ratchye v. Lucas, 1998 MT 87, ¶ 14, 288 Mont. 345, 957 P.2d 1128. See also Hubner v. Cutthroat Communs., Inc., 2003 MT 333, ¶ 4, 318 Mont. 421, 80 P.3d 1256.

DISCUSSION

¶ 13 Did the District Court err in enjoining Skanska from pursuing a demand for arbitration filed with the American Arbitration Association?

¶ 14 The parties in this matter do not dispute the existence of an arbitration provision or challenge its validity. Each party recognizes that Section 9.2.1. of the Agreement provided two alternate dispute resolution methods—binding arbitration with the American Arbitration Association or resolution under the FAR or CDA dispute resolution procedures. Further, each party agrees that the determinative question is whether the claim or dispute in the present matter relates solely to Higgins's obligations as the development manager or whether it involves the interests of the NIH. If the claim or...