North Cent. Const. v. Siouxland Energy & Livestock
| Citation | 232 F.Supp.2d 959 |
| Decision Date | 12 November 2002 |
| Docket Number | No. C02-4041-MWB.,C02-4041-MWB. |
| Parties | NORTH CENTRAL CONSTRUCTION, INC., Plaintiff, v. SIOUXLAND ENERGY & LIVESTOCK COOPERATIVE, Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Jeffrey L. Poulson, Corbett, Anderson, Corbett, Poulson, Flom & Vellinga, Sioux City, IA, Patrick J. Lee-O'Halloran, Fabyanske, Svoboda, Westra & Hart, Minneapolis, MN, for Plaintiff.
James R. Quilty, Crawford Law Firm, Des Moines, IA, for Defendant.
TABLE OF CONTENTS
I. INTRODUCTION AND PROCEDURAL BACKGROUND ................................... 960
A. The Parties, The Arbitration Clauses, And The Underlying Disputes ..... 960
B. Procedural Background ................................................. 961
II. LEGAL ANALYSIS ........................................................... 962
A. North Central's Motion to Compel Arbitration and Stay Proceedings...... 962
B. Waiver ................................................................ 963
1. Inconsistent action ................................................ 964
2. Prejudice .......................................................... 966
C. Conclusion ............................................................ 969
The plaintiff North Central Construction, Inc. ("North Central"), is a North Dakota corporation maintaining its principal place of business in Fargo, North Dakota. Def.'s Answer and Counterclaim, at Ex. A. The defendant Siouxland Energy and Livestock Cooperative ("Siouxland"), is a cooperative organized under the laws of the state of Iowa and maintains its principal place of business in Sioux Center, Iowa. Def.'s Answer and Counterclaim. North Central is engaged in the construction business and subsequently entered into a written contract on December 28, 2000 with Siouxland to build the Siouxland Ethanol Facility ("The Facility") in Sioux Center, Iowa. Pl.'s Reply to Def.'s Answer and Counterclaim, at (# 6). In return for North Central's construction of the Ethanol Facility, Siouxland agreed to compensate North Central in the amount of $7,648,000. Def.'s Answer and Counterclaim, at Ex. A.
Several documents comprise the written contract between the parties. In particular, the parties direct the court's attention to the document entitled the "General Conditions of the Construction Contract" identified as Construction Management Association of America (CMAA) Document A-3. Def.'s Answer and Counterclaim, at Ex. A. According to Article 14.1.1 of the General Conditions, North Central and Siouxland were to initially address any unresolved disputes arising out of or relating to the contract through mediation in Des Moines, Iowa, before instituting against the other party a demand for arbitration "unless delay in initiating or prosecuting a proceeding in an arbitration or judicial forum would prejudice the Owner or Contractor." Def.'s Answer and Counterclaim, at Ex. A, 57. Further, Article 14.1.2 provides that "All unresolved disputes relating to this Contract or the breach thereof ("disputes") shall be decided by arbitration in Des Moines, Iowa." Additionally, the contract grants the owner and contractor with the power to select an arbitrator(s) and to determine the rules and procedures that will govern the arbitration. However, if the owner and contractor are unable to reach an agreement regarding the format of the arbitration, the contract identified the American Arbitration Association as the association providing the then current "Construction Industry Rules" to govern the arbitration proceeding. Def.'s Answer and Counterclaim, at Ex. A, 58.
Disputes regarding the performance of the contract apparently erupted causing North Central to file a mechanic's lien, which it perfected on May 6, 2002 by filing an amended mechanic's lien.
On May 17, 2002 North Central filed a petition in Iowa District Court to foreclose its perfected mechanic's lien in the amount of $2,708,293. In its petition, North Central alleged that it "performed all labor and furnished materials as provided in the contract," both having been actually used in the construction of The Facility. Pl.'s Pet., at 1. Furthermore, North Central's petition asserted that it had performed all of the conditions of the contract within the specified time. Pl.'s Pet., at 1. In response to North Central's attempt to foreclose on its mechanic's lien, Siouxland filed a Notice of Removal on June 12, 2002 and the case was subsequently assigned to Chief Judge Mark Bennett, United States District Court for the Northern District of Iowa (# 4). In its notice of removal, Siouxland admitted that aside from North Central's filing its petition, no further proceedings took place in Iowa District Court.
On June 14, 2002, Siouxland answered North Central's petition and counterclaimed against North Central, alleging in Count I that North Central failed to perform its obligations under the contract and was in breach. Consequently, Siouxland seeks compensatory damages for the costs of design alterations it undertook, as well as for repairs and replacement costs it incurred to cure North Central's defective work and equipment. In addition, Siouxland seeks consequential and incidental damages and requests that punitive damages be awarded.
Instead of moving to compel arbitration and stay proceedings, on June 24, 2002 North Central answered Siouxland's counterclaim but failed to assert affirmative defenses. However, on July 10, 2002 North Central amended its answer to include six affirmative defenses, the first of which alleged that Siouxland's counterclaim for breach is governed by the arbitration agreement between the parties. Pl.'s Am. Reply to Counterclaim, at 2. According to the record, Siouxland next filed a motion to consolidate the present action and Siouxland's lawsuit against Michael Gaylor and Gaylor Engineering, No. 02-4033, filed on August 19, 2002. North Central filed its resistance to Siouxland's motion on September 5, 2002. However, Siouxland's motion to consolidate is not presently before the court, thus the court will not address its merits.
Alongside filing its resistance to Siouxland's motion to consolidate, North Central filed a motion to compel arbitration and stay proceedings. North Central maintains that under the agreement, Siouxland is precluded from pursuing its claim in court and must instead submit its claim to arbitration. North Central asserts that the Federal Arbitration Act ("FAA") applies to this action and requests that this court stay proceedings pursuant to 9 U.S.C. §§ 3-4, which state in pertinent part that "[a] party aggrieved by the alleged failure of another to arbitrate under a written agreement for arbitration may petition any United States district court for an order directing that such arbitration proceed in the manner provided for in such agreement ...," 9 U.S.C. § 4, and that a court "upon being satisfied that the issue involved in [a] suit or proceeding is referable to arbitration under [an] agreement [between the parties], shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." 9 U.S.C. § 3.
Siouxland filed its resistance to North Central's motion on September 26, 2002. In support of its resistance, Siouxland advances that North Central acted inconsistently with its right to arbitrate when North Central filed a lawsuit in Iowa District Court to foreclose its mechanic's lien. As a result, Siouxland argues it was prejudiced because it had to "expend considerable effort and expense in participating in the litigation process NCC initiated." Def.'s Resistance to Pl.'s Mot. to Compel Arbitration and Stay Proceedings, at 7. Therefore, it is Siouxland's contention that North Central has waived its right to arbitrate any disputes arising out of or relating to the contract.
On October 3, 2002, North Central filed its reply to Siouxland's resistance. North Central maintains that it did not waive its right to arbitration when it filed a lawsuit to foreclose its mechanic's lien, and instead argues that such action was necessary to preserve North Central's statutory lien rights. North Central argues that Siouxland has not been prejudiced as a consequence and because all of Siouxland's disputes fall within the purview of the arbitration clause, this court should stay proceedings and compel arbitration.
North Central timely requested oral argument on the motion to stay proceedings and compel arbitration. The court granted that request and held oral arguments on North Central's motion on November 7, 2002. At the hearing, plaintiff North Central was represented by Jeffrey Poulson of Corbett, Anderson, Corbett, Poulson, Vellinga & Buckmeier of Sioux City, Iowa, and Patrick Lee-O'Halloran of Fabyanske, Westra & Hart of Minneapolis, Minnesota. Defendant Siouxland was represented by Jim Quilty of the Crawford Law Firm of Des Moines, Iowa. North Central's motion to stay proceedings and compel arbitration is now fully submitted.
Congress enacted the FAA, 9 U.S.C. §§ 1-16 (1994), "`to reverse the long-standing judicial hostility to arbitration agreements ... and to place arbitration agreements upon the same footing as other contracts.'" Gannon v. Circuit City Stores, Inc., 262 F.3d 677, 679 (8th Cir. 2001) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)). It follows then that the court apply ordinary contract principles to determine whether North Central and Siouxland agreed to arbitrate. ITT Hartford Life & Annuity Ins....
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