Kingery Constr. Co. v. 6135 O St. Car Wash
| Decision Date | 23 September 2022 |
| Docket Number | S-21-797,S-21-797. |
| Citation | 312 Neb. 502 |
| Court | Nebraska Supreme Court |
| Parties | Kingery Construction Co., appellee. v. 6135 O Street Car Wash, LLC, a Nebraska limited liability company, appellant. |
1. Arbitration and Award. Whether a stay of proceedings should be granted and arbitration required is a question of law.
2. Judgments: Appeal and Error. When reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion reached by the trial court.
3. Jurisdiction: Appeal and Error. Before reaching the legal issues presented for review, it is the duty of an appellate court to determine whether it has jurisdiction over the matter before it, and this is so even where neither party has raised the issue.
4. Arbitration and Award: Final Orders: Appeal and Error. A court order staying an action pending arbitration is a final, appealable order because it affects a substantial right and is made in a special proceeding.
5. Federal Acts: Arbitration and Award Contracts. If arbitration arises from a contract involving interstate commerce, it is governed by the Federal Arbitration Act.
6. ___:___:___. The Federal Arbitration Act, 9 U.S.C. § 2 (2018), preempts inconsistent state laws that apply solely to the enforceability of arbitration provisions in contracts evidencing a transaction involving interstate commerce.
7.___:___:___. Under the Federal Arbitration Act, 9 U.S.C. § 3 (2018) the court in which a suit or proceeding is pending, upon being satisfied that the issue involved in the suit or proceeding is referable to arbitration under an agreement in writing for arbitration, shall on application of one of the parties stay the trial of the action until arbitration has been had in accordance with the terms of the agreement, provided the applicant for the stay is not in default in proceeding with arbitration.
8. Arbitration and Award. Under the Federal Arbitration Act, 9 U.S.C. § 4 (2018), the court shall hear the parties and, upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.
9. Judgments: Intent: Words and Phrases. While the doctrine of stare decisis is entitled to great weight, it was never intended to indefinitely perpetuate erroneous decisions.
10. Waiver: Words and Phrases. "Waiver" of a right is voluntary and intentional relinquishment of a known right, privilege, or claim, and may be demonstrated by or inferred from a person's conduct.
Appeal from the District Court for Lancaster County: Lori A. Maret Judge. Reversed and remanded for further proceedings.
Jordan W. Adam, of Fraser Stryker, P.C., L.L.O., for appellant.
Brian S. Koerwitz, of Endacott, Peetz, Timmer & Koerwitz, P.C., L.L.O., for appellee.
Kingery Construction Co. (Kingery) sued 6135 O Street Car Wash, LLC (OSCW), for breach of contract and later moved to stay the case for arbitration under 9 U.S.C. § 3 (2018) of the Federal Arbitration Act (FAA). OSCW opposed Kingery's motion, arguing that Kingery waived its right to arbitration by its litigation-related conduct. The district court found that there was no waiver because OSCW was not prejudiced by Kingery's conduct. In so finding, the district court relied on our decision in Good Samaritan Coffee Co. v. LaRue Distributing, [1] which adopted a three-part test of waiver based on litigation-related conduct used by the U.S. Court of Appeals for the Eighth Circuit. OSCW appealed. While the appeal was pending, the U.S. Supreme Court ruled in Morgan v. Sundance, Inc., [2] that the Eighth Circuit erred in conditioning a waiver of the right to arbitration on a showing of prejudice. In light of Morgan, we reverse, and remand for further proceedings.
OSCW and Kingery entered a $2,087,092 agreement for the construction of a carwash in Lincoln, Nebraska, on March 30 2020. They based their agreement on the 2017 version of the American Institute of Architects' "Standard Abbreviated Form of Agreement Between Owner and Contractor.''
Section 5.1 of the agreement provides, "Arbitration pursuant to Section 21.6 of this Agreement" shall be the method of binding dispute resolution "[f]or any claim subject to, but not resolved by, mediation pursuant to Section 21.5."
Section 21.6, in turn, requires that arbitration be administered by the American Arbitration Association (AAA) in accordance with the "Construction Industry Arbitration Rules" in effect on the date of the agreement, unless the parties agree otherwise. Section 19.2 further prescribes that the FAA "shall govern Section 21.6" if the parties select arbitration as their method of binding dispute resolution.
In addition, § 21.3, captioned "Time Limits on Claims," requires that the parties commence all claims and causes of action against each other arising out of or related to the agreement "in accordance with the requirements of the final dispute resolution method selected in this Agreement . . . within the period specified by applicable law, but in any case not more than 10 years after the date of Substantial Completion of the Work." Section 21.3 also provides that the parties "waive all claims and causes of action not commenced in accordance with [the agreement's] Section 21.3.''
Kingery sued OSCW for breach of contract on April 16. 2021, seeking recovery of $41,698.57 allegedly owed to Kingery for work performed under the agreement, as well as attorney fees and interest under the Nebraska Construction Prompt Payment Act, codified at Neb. Rev. Stat. § 45-1201 et seq. (Reissue 2021).
OSCW moved to dismiss Kingery's complaint with prejudice on May 19, 2021, arguing that Kingery waived its breach of contract claim under § 21.3 of the agreement by filing suit on the claim, rather than commencing it in arbitration. Kingery responded by filing a demand for arbitration with the AAA on June 8 and a motion to stay the case for arbitration with the district court on June 9.
The AAA contacted OSCW and Kingery on June 23, 2021, to inform them that the matter was being administered under the "Fast Track Procedures" of the Construction Industry Arbitration Rules and that OSCW had until June 30 to make any answer or counterclaim.
The district court held a hearing on June 29, 2021, to consider Kingery's motion to stay and motion to compel arbitration, as well as OSCW's motion to dismiss. At the hearing, OSCW reiterated its argument that Kingery waived its breach of contract claim under § 21.3 of the parties' agreement. OSCW also argued that Kingery waived its right to stay the case for arbitration under § 3 of the FAA by its litigation-related conduct based on the three-part test of waiver set forth in LaRue Distributing[3] Specifically, OSCW asserted that Kingery's knowledge of its right to arbitration cannot be disputed, given that "it's now trying to initiate an arbitration action"; that Kingery acted inconsistently with this right by filing suit; and that Kingery's litigation-related conduct prejudiced OSCW because there have been "hearing[s] on ... a couple motions, travel time, time, and [the] expense of briefing this and so forth." OSCW further maintained that the motion to arbitrate was "prejudicial in and of itself because Kingery filed it to avoid a court ruling "here, now at this time" dismissing its claim with prejudice. OSCW also asked the district court to stay the AAA arbitration case pending the court's decision.
Kingery disputed OSCW's interpretation of § 21.3 of the parties' agreement, arguing that it provides for waiver only of claims not brought within the prescribed time, rather than claims not commenced in arbitration. As to waiver under the FAA, Kingery did not dispute its awareness of its right to arbitration, but asserted "[n]o Court has ever held" that filing a lawsuit is inconsistent with the right to arbitration. Kingery also disputed OSCW's claim of prejudice because less than 2 months passed between when Kingery filed suit and when it moved for a stay and because OSCW had not yet briefed the issue. Kingery asserted this fell short of the litigation-related conduct seen in LaRue Distributing.
On June 30, 2021, 1 day after the hearing and the day OSCW's answer and counterclaim were due to the AAA, the district court granted OSCW's motion to stay the arbitration case.
Subsequently, on September 1, 2001, the district court reversed that order and granted Kingery's motion to stay the district court case under § 3 of the FAA. In so doing, the court adopted OSCW's arguments regarding Kingery's knowledge of its right to arbitration and action inconsistent with that right. However, the court agreed with Kingery that OSCW suffered no prejudice because of Kingery's litigation-related conduct. In so finding, it noted that it had not decided any substantive issue, that "less than 2 months" had passed between the lawsuit's filing and the motion for a stay, and that "minimal litigation . . . ha[d] occurred to this point." The district court also noted that it did not reach the merits of OSCW's motion to dismiss with prejudice due to Kingery's alleged waiver of its claim under § 21.3 of the parties' agreement.
OSCW appealed to the Nebraska Court of Appeals, and we moved the matter to our docket. After oral argument in this court, we requested supplemental briefing by the parties addressing what constitutes default in proceeding with arbitration under § 3 of the FAA after the U.S. Supreme Court's decision in Morgan.[4] The parties promptly submitted supplemental briefs,...
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