Mass. Highway Dep't v. Perini Corp.

• Decision Date: 17 January 2013
• Docket Number: No. 11–P–1666.,11–P–1666.
• Parties: MASSACHUSETTS HIGHWAY DEPARTMENT & another v. PERINI CORPORATION & others.
• Court: Appeals Court of Massachusetts

83 Mass.App.Ct. 96

981 N.E.2d 721

MASSACHUSETTS HIGHWAY DEPARTMENT & another ¹

v.PERINI CORPORATION & others.²

No. 11–P–1666.

Appeals Court of Massachusetts, Suffolk.

Argued May 4, 2012.

Decided Jan. 17, 2013.

J. Owen Todd & Joel Lewin, Boston, for the defendants.

Randall F. Hafer, of Georgia, & James A. Sweeney, Assistant Attorney General, for the plaintiffs.

Present: GRAHAM, KATZMANN, & CARHART, JJ.

GRAHAM, J.

The defendants, Perini Corporation, Kiewit Construction Co., Inc., and Jay Cashman, Inc. (collectively, PKC), doing business as Perini–Kiewit–Cashman Joint Venture, appeal from a Superior Court order vacating arbitral awards in PKC's favor and from orders on PKC's subsequent motions for clarification and reconsideration. See G.L. c. 251, § 18. The awards were made pursuant to a 1999 agreement between PKC and the plaintiffs, the public agencies overseeing the Central Artery/Tunnel Project (collectively, CA/T). The 1999 agreement provided that the parties submit a specific group of PKC's claims against CA/T, arising from PKC's work as a general contractor on the project, to binding arbitration before a disputes review board (DRB). Those claims were listed in exhibit 1 to the 1999 agreement and were related to events occurring prior to January 1, 1999.

In addition to the claims specifically listed in exhibit 1, PKC submitted other claims to the DRB, some of which PKC alleged were related to the exhibit 1 claims and subject to binding arbitration. The DRB issued binding determinations as to which of the submitted claims were subject to binding arbitration, assessed the merits of the claims, and issued awards.

CA/T brought suit in the Superior Court to vacate or modify the awards. ³ On cross motions for summary judgment, a judge allowed CA/T's motion, concluding that the court was required to vacate the awards because the DRB had exceeded its authority under the 1999 agreement when it decided which of the claims before it were arbitrable. In response, PKC filed motions for clarification and reconsideration. A second judge, acting on those motions, concluded that the awards were to be vacated in their entirety, that disputes concerning arbitrability were to be decided under the dispute resolution provisions of a 1995 contract between the parties, and that C/AT neither waived nor was judicially estopped from contesting the DRB's authority to make binding determinations as to arbitrability.

On appeal, PKC challenges these rulings and requests that the lower court orders be vacated and that summary judgment be entered in PKC's favor. We affirm the orders and remand for further proceedings.

1. Background. We summarize the undisputed facts. Pursuant to a 1995 contract,⁴ PKC served as one of the general contractors for portions of the Central Artery/Tunnel Project (project). Division 1, subsection 7.16 (subsection 7.16), of the 1995 contract set forth a process for the resolution of disputes between PKC and CA/T, arising out of, or relating to, that contract, the contract documents, or the work. Disputes were to be presented to a three-member DRB, which would issue findings and nonbinding recommendations for submission to the project director.⁵ The project director, in turn, could accept the DRB's nonbinding recommendations, revise them, or reject them. The project director's decisions could be appealed to the board of commissioners of the Massachusetts Highway Department or to the Superior Court, pursuant to G.L. c. 30, § 39J.

As work on the project progressed, hundreds of disputes arose involving additional costs incurred by PKC as a result of delays and problems with construction. In an effort to resolve those disputes more expediently, the parties entered into an agreement in 1999 (1999 agreement), which served to “supersede and/or supplement, where appropriate, the dispute resolution process set out in ... [s]ubsection 7.16” of the 1995 contract, and whereby the parties agreed to binding arbitration by the DRB on all claims that arose before January 1, 1999, as specifically enumerated in exhibit 1.

As a result of the interplay between the 1999 agreement and subsection 7.16 of the 1995 contract, the DRB functioned in a hybrid manner, simultaneously adjudicating both exhibit 1 claims and other claims between the parties. Because of that arrangement,the DRB issued both nonbinding recommendations and binding awards.⁶

In the present dispute, PKC submitted exhibit 1 claims, along with other claims that it characterized as related to the exhibit 1 claims, to the DRB for binding arbitration. CA/T countered that those additional claims were not subject to binding arbitration under the 1999 agreement, and that any claims not listed in exhibit 1 were subject to nonbinding resolution by the DRB. As that process unfolded, PKC sent letters to CA/T requesting clarification of its position on the DRB's authority to decide disputes over arbitrability, to which CA/T did not respond. In prior dispute resolution proceedings before earlier DRB panels, CA/T had maintained that disputes between the parties over arbitrability should be decided by the courts. In a June, 2007, electronic mail message to the parties, the DRB chairman explained that the DRB would decide all issues put before it by either recommendation or binding award, and that, while the parties could expressly agree that the arbitrators decide arbitrability, he was not aware whether the parties had such an express agreement. At the hearings before the DRB on the merits of the claims, CA/T continued to argue that claims not listed in exhibit 1 were not subject to binding arbitration under the 1999 agreement, but did not specifically contest the DRB's authority to decide arbitrability.

The DRB issued decisions identifying which claims were within its jurisdiction as a binding arbitral panel and deemed those decisions binding. The DRB awarded PKC the amount of $56,535,035, of which $44,429,716 was designated as binding awards, and $12,105,319 designated as recommendations.

CA/T appealed the DRB's awards to the Superior Court, arguing that CA/T never agreed to binding arbitration on the issue of arbitrability. On cross motions for summary judgment, a judge allowed CA/T's motion, concluding that the DRB had exceeded its authority when it made binding determinations as to which claims before it were arbitrable under the 1999 agreement. PKC filed motions for clarification and for reconsiderationbefore a second judge, ⁷ arguing that the awards need not be vacated in their entirety and that CA/T had waived or was estopped from contesting the validity of the DRB's decisions regarding arbitrability. The judge rejected those arguments and concluded that in accordance with subsection 7.16 of the 1995 contract, the parties were free to present their disputes concerning the arbitrability of PKC's various claims to the DRB for nonbinding recommendations. Under subsection 7.16, the judge reasoned, the DRB's nonbinding recommendations as to arbitrability would be submitted to the project director, who would render a final decision that was appealable to the Massachusetts Highway Department's board of commissioners or to the Superior Court.

2. Discussion. Our review of summary judgment is de novo. See Miller v. Cotter, 448 Mass. 671, 676, 863 N.E.2d 537 (2007) (“We review a grant of summary judgment de novo, construing all facts in favor of the nonmoving party”).

a. Whether the parties agreed to arbitrate arbitrability. PKC maintains that, in entering into the 1999 agreement, the parties agreed to have the DRB make binding determinations as to the arbitrability of the claims.⁸ PKC asserts that the language of the 1999 agreement, read in accord with the parties' intentions and in the context of their ongoing business relationship, provides the requisite evidence that they agreed to binding arbitration on disputes as to arbitrability. We disagree.

The United States Supreme Court set out the standard in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)( First Options ), and we apply it here. See Weston Sec. Corp. v. Aykanian, 46 Mass.App.Ct. 72, 78–79, 703 N.E.2d 1185 (1998). “Courts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clea[r] and unmistakabl[e]’ evidence that they did so.” First Options, supra, quoting from AT & T Technologies, Inc. v. Communications Wkrs. of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)( AT & T Technologies ). Because we require clear and unmistakable evidence in determining whether the parties agreed on who should decide arbitrability, “the law treats silence or ambiguity about the question ... differently from the way it treats silence or ambiguity about the question ‘ whether a particular merits-related dispute is arbitrable because it is within the scope of a valid arbitration agreement.’ ” First Options, supra at 944–945, 115 S.Ct. 1920. In this respect, the usual presumption in favor of arbitration is reversed. See, e.g., Falmouth Police Superior Officers Assn.v. Falmouth, 80 Mass.App.Ct. 833, 838–839, 957 N.E.2d 1107 (2011), quoting from AT & T Technologies, supra at 650, 106 S.Ct. 1415 (“where the contract contains an arbitration clause, there is a presumption of arbitrability”). Thus a party's silence or ambiguity in regard to who decides arbitrability does not create a presumption that issue is subject to arbitration.⁹

Nowhere in the 1999 agreement is there language indicating that the DRB should act as a binding arbitrator on disputes between the parties over arbitrability, and PKC concedes as much. Indeed, the agreement never specifically addresses arbitrability at all. Nor does the broad language empowering the DRB to issue binding awards on all disputes pertaining to the exhibit 1 claims suffice to establish its authority to decide issues of arbitrability under the stringent requirements of First Options, supra at 944, ...