Mercury Const. Corp., In re, Nos. 81-1009

CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)
Writing for the CourtBefore WINTER, Chief Judge, and BUTZNER, RUSSELL, WIDENER, HALL, PHILLIPS, MURNAGHAN, SPROUSE and ERVIN; DONALD RUSSELL; WIDENER; K. K. HALL
Citation656 F.2d 933
PartiesIn re MERCURY CONSTRUCTION CORPORATION, Petitioner. MERCURY CONSTRUCTION CORPORATION, Appellant, v. The MOSES H. CONE MEMORIAL HOSPITAL, Appellee. . Heard En Banc
Decision Date01 June 1981
Docket NumberNos. 81-1009,81-1042

Page 933

656 F.2d 933
In re MERCURY CONSTRUCTION CORPORATION, Petitioner.
MERCURY CONSTRUCTION CORPORATION, Appellant,
v.
The MOSES H. CONE MEMORIAL HOSPITAL, Appellee.
Nos. 81-1009, 81-1042.
United States Court of Appeals,
Fourth Circuit.
Heard En Banc June 1, 1981.
Decided Aug. 12, 1981.

Page 935

Stanley D. Bynum, Joseph B. Mays, Jr., Birmingham, Ala. (Bradley, Arant, Rose & White, Charles E. Nichols, Lindsay R. Davis, Jr., Nichols, Caffrey, Hill, Evans & Murrelle, Greensboro, N.C., on brief), for Mercury Const. Corp.

Jack W. Floyd, Greensboro, N.C. (Stephen P. Millikin, Douglas W. Ey, Jr., Smith, Moore, Smith, Schell & Hunter, Greensboro, N.C., on brief), for The Moses H. Cone Memorial Hospital.

Before WINTER, Chief Judge, and BUTZNER, RUSSELL, WIDENER, HALL, PHILLIPS, MURNAGHAN, SPROUSE and ERVIN, Circuit Judges, sitting en banc.

DONALD RUSSELL, Circuit Judge:

The appellant Mercury Construction Company (hereafter Mercury) 1 sought in this action arbitration under the Federal Arbitration Act 2 of certain disputes between it and the Moses H. Cone Memorial Hospital (hereafter Hospital), 3 under a construction contract between Mercury and the Hospital. Federal jurisdiction was properly premised on diversity. The district court denied arbitration, pending disposition of a state action by the Hospital against Mercury and J.N. Pease Associates, (hereafter Architect), 4 for declaratory judgment denying arbitration. Mercury seeks relief both by way of a petition for mandamus and by appeal. We reverse.

A summary of the facts leading up to the two actions is necessary to an understanding of the issues. In stating these facts, we have followed the allegations of the parties in their respective pleadings or presentations to the Court. On July 15, 1975, Mercury and the Hospital entered into a construction contract for Hospital additions. The agreed contract price was several million dollars. The contract, concededly drafted by the attorneys, or agents for the Hospital, includes a very broad arbitration clause covering "(a)ll claims, disputes and other matters in question arising out of, or relating to, this Contract or the breach thereof," subject to the requirement that any such claim shall first be submitted to the "Architect," as defined in the contract, and that no demand for arbitration shall be made "until the earlier" of the Architect's written decision on the claim or "the tenth day after the parties have presented their evidence to the Architect or have been given a reasonable opportunity to do so, if the Architect has not rendered his written decision by that date." The time for filing any claim is declared to be "within a reasonable time after the claim, dispute or other matter in question has arisen, and in no event shall be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations."

The Architect for the project is designated and identified in the contract. He was selected by the Hospital and was declared in the contract to be "the Owner's representative during construction and until final payment," to whom, as the "interpreter of the contract" "(a)ll papers required to be delivered to the Owner" should be delivered, to whom "(a)ny notice to or demand upon the Owner (should) be ... given," and to whom any "(c)laims, disputes and other matters in question (should) be referred initially ... for decision."

Construction under the contract began in July, 1975 and was to be completed within 1200 consecutive calendar days (or approximately 40 months). Because of change orders and other problems work time extension of 334 days was agreed upon. This meant that the contract time for completion was fixed at October 14, 1979. In October, 1977, as work under the contract was proceeding,

Page 936

Mercury asserts in an affidavit of its Senior Construction Manager, not contested in the record by the Hospital, that "at a meeting with the Architect and the Owner, Mercury was requested to hold its claim for delay and impact costs until after the work was completed. Mercury agreed to do this." There was substantial completion of the project on February 12, 1979 and final inspections were had on June 12, 1979. Various "punch list items," however, continued to be worked on thereafter. The record does not indicate when these "punch list items" were finally completed.

At any rate, in January, 1980, Mercury submitted to the Architect its claim for additional payment on account of "delays and impact inefficiencies," etc., which Mercury contends under the agreement of October, 1977 with the Architect, was to be submitted only after the work had been completed. According to the Hospital's claims, the Architect reviewed this claim with Mercury over a period of several months and apparently succeeded in inducing Mercury to reduce its claim substantially. The Hospital claims it was completely ignorant of all this, however, until April 17, 1980, at which time, according to its allegations, its Architect "furnished to Cone Hospital various written materials by way of information, including a copy of a narrative statement of the Mercury claims." 5 However, the Hospital avers that its counsel took over the discussions of the claims with Mercury in May, 1980. Hospital's counsel stated to Mercury's representative, according to Mercury's affidavits, that the businessmen who ran the Hospital "would need additional information regarding the claim before undertaking negotiations in earnest." In order to provide this information, a meeting was held in Birmingham, Alabama, on August 12, 1980. Present were counsel for the Hospital, one of its trustees, representatives of the Architect, and representatives of Mercury, including its counsel. At that conference, Mercury went over its claim in detail with the parties and offered the Hospital access to its files. The Hospital asked that copies of the files be mailed to its expert who had been employed to assist it in assessing the claim but who was unable to attend that meeting because of a schedule conflict. It was further agreed at this meeting that, provided the Hospital's expert had completed his review of the claims, another meeting on the claim would be held on October 13.

On October 6, Mercury's counsel telephoned the Hospital's counsel to inquire whether the Hospital's expert had completed his review of the claims and thus would be prepared to meet as tentatively agreed on October 13. The Hospital's counsel advised Mercury's counsel that he would advise Mercury's counsel on October 7 if the meeting date would be satisfactory. On the afternoon of October 7, Hospital counsel advised Mercury's counsel by telephone that the Hospital intended to offer no money to settle Mercury's claim and was filing immediately in state court a complaint for a declaratory judgment "that it did not have to arbitrate and that it owed Mercury nothing (but that if it did owe Mercury money, the Architect in turn owed that money to the Hospital)." Mercury's counsel advised Mercury of this conversation and Mercury instructed its counsel to file an arbitration demand. Counsel mailed such demand on the morning of October 9, 1980.

The Hospital did file its action in the state court on the morning of October 8, 1980, naming as defendants Mercury and the Hospital's Architect. Service of the action was made on Mercury on October 9, 1980. In its complaint, the Hospital alleges essentially, so far as Mercury is concerned, that there is no "factual or legal basis" for Mercury's claim and that such claim is barred "by the applicable statute of limitations." It also alleges that "Mercury has not demanded arbitration and has no right under the contract to have these claims or disputes submitted to arbitration," adding that Mercury has lost its right to arbitration

Page 937

by "failure to make timely demand for arbitration" and has "waived its right to arbitrate and is barred from submitting these claims to arbitration by laches and estoppel," all resulting "in substantial prejudice to Cone Hospital."

In its charges against the Architect as defendant in its state court action, the Hospital asserted various delinquencies in the performance of its duties, including premature acceptance of parts of the structure before such parts were properly usable and delays in making decisions and in "preparing and forwarding requests for proposals, revised drawings, instructions and other information to the contractor." With particular reference to the claim of Mercury, the Hospital charged in its complaint that the Architect had been negligent in connection therewith in not "requiring disposition of claims and disputes during the course of the work as required by the contract provisions," by procrastinating and failing "to rule on matters in dispute during the course of the work; by failing adequately to represent the interests of Cone Hospital; by not advising Cone Hospital promptly of the claims being asserted by Mercury; by breaching the fiduciary duty which Pease (the Architect) owed to Cone Hospital; and by other ways not specifically set forth hereinabove." Significantly, there is no charge of any conspiracy, or illegal combination on the part of Mercury and the Architect. By way of relief it sought judgment "that there is no right to arbitration, and that arbitration be stayed; ..., that there is no liability on the part of Cone Hospital to Mercury ...; " and "that should it be determined that any amount (if there is any) as owed by Cone Hospital to Mercury, that it be determined and declared that Cone Hospital is entitled to be fully indemnified and reimbursed...." It demanded a jury trial on all issues.

After filing its complaint, the Hospital secured on October 15, 1980, ex parte, without any notice to Mercury, an injunction from the state court barring Mercury "from taking any action...

To continue reading

Request your trial
97 practice notes
  • Keating v. Superior Court, S.F. 24242
    • United States
    • United States State Supreme Court (California)
    • June 10, 1982
    ...law" which must be applied, regardless of forum, where federal jurisdiction exists. (E.g., In re Mercury Const. Corp. (4th Cir. 1981) 656 F.2d 933, 938; E. C. Ernst, Inc. v. Manhattan Const. Co. of Texas (5th Cir. 1977) 551 F.2d 1026, 1040; Pathman Const. Co. v. Knox County Hospital As......
  • Dell Webb Cmtys., Inc. v. Carlson, No. 15–1385.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • March 28, 2016
    ...811 (4th Cir.1984) (limitations period expressed in arbitration agreement raised as defense to arbitration); In re Mercury Constr. Corp., 656 F.2d 933 (4th Cir.1981) (en banc) (whether untimeliness, waiver, or laches were for the arbitrator or court's determination), aff'd sub nom. Moses H.......
  • Moses Cone Memorial Hospital v. Mercury Construction Corporation, No. 81-1203
    • United States
    • United States Supreme Court
    • February 23, 1983
    ...Act and the contract, where the court had briefs and evidentiary submissions from both parties on the merits of arbitrability. P.29 656 F.2d 933 (CA4 1981), affirmed. Page 4 Jack W. Floyd, Greensboro, N.C., for petitioner. A.H. Gaede, Jr., Birmingham, Ala., for respondent. Justice BRENNAN d......
  • Northern Illinois Gas Co. v. Airco Indus. Gases, a Division of Airco, Inc., No. 81-1743
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • April 16, 1982
    ...commerce. Commonwealth Edison Co. v. Gulf Oil Corp., 541 F.2d 1263, 1268-71 (7th Cir. 1976). Accord, In Re Mercury Construction Corp., 656 F.2d 933, 938 (4th Cir. 1981) (en banc). See generally Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 637 F.2d 391 (5th Cir. 1981); Ultracash......
  • Request a trial to view additional results
97 cases
  • Keating v. Superior Court, S.F. 24242
    • United States
    • United States State Supreme Court (California)
    • June 10, 1982
    ...law" which must be applied, regardless of forum, where federal jurisdiction exists. (E.g., In re Mercury Const. Corp. (4th Cir. 1981) 656 F.2d 933, 938; E. C. Ernst, Inc. v. Manhattan Const. Co. of Texas (5th Cir. 1977) 551 F.2d 1026, 1040; Pathman Const. Co. v. Knox County Hospital As......
  • Dell Webb Cmtys., Inc. v. Carlson, No. 15–1385.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • March 28, 2016
    ...811 (4th Cir.1984) (limitations period expressed in arbitration agreement raised as defense to arbitration); In re Mercury Constr. Corp., 656 F.2d 933 (4th Cir.1981) (en banc) (whether untimeliness, waiver, or laches were for the arbitrator or court's determination), aff'd sub nom. Moses H.......
  • Moses Cone Memorial Hospital v. Mercury Construction Corporation, No. 81-1203
    • United States
    • United States Supreme Court
    • February 23, 1983
    ...Act and the contract, where the court had briefs and evidentiary submissions from both parties on the merits of arbitrability. P.29 656 F.2d 933 (CA4 1981), affirmed. Page 4 Jack W. Floyd, Greensboro, N.C., for petitioner. A.H. Gaede, Jr., Birmingham, Ala., for respondent. Justice BRENNAN d......
  • Northern Illinois Gas Co. v. Airco Indus. Gases, a Division of Airco, Inc., No. 81-1743
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • April 16, 1982
    ...commerce. Commonwealth Edison Co. v. Gulf Oil Corp., 541 F.2d 1263, 1268-71 (7th Cir. 1976). Accord, In Re Mercury Construction Corp., 656 F.2d 933, 938 (4th Cir. 1981) (en banc). See generally Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 637 F.2d 391 (5th Cir. 1981); Ultracash......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT