River House Dev., Inc. v. Integrus Architecture, P.S.

• Decision Date: 15 March 2012
• Docket Number: No. 29889–2–III.,29889–2–III.
• Citation: 272 P.3d 289,167 Wash.App. 221
• Parties: RIVER HOUSE DEVELOPMENT, INC., an Idaho corporation, Appellant, v. INTEGRUS ARCHITECTURE, P.S., a Washington Corporation, Respondent.
• Court: Washington Court of Appeals

167 Wash.App. 221

272 P.3d 289

RIVER HOUSE DEVELOPMENT, INC., an Idaho corporation, Appellant,

v.INTEGRUS ARCHITECTURE, P.S., a Washington Corporation, Respondent.

No. 29889–2–III.

Court of Appeals of Washington, Division 3.

March 15, 2012.

Timothy B. Fennessy, John Randall Layman, Nikalous O. Armitage, Layman Law Firm, PLLP, Spokane, WA, for Appellant.

William Douglas Hyslop, Lukins & Annis PS, Spokane, WA, for Respondent.

SIDDOWAY, J.

[167 Wash.App. 224] ¶ 1 A contractual right to mediate or arbitrate a dispute may be waived, including by pursuing litigation. River House Development Inc. appeals the trial court's determination that it waived its right to mediate and then arbitrate a construction dispute with its architect by filing what River House contends was a protective lawsuit, engaging in discovery and discovery motion practice, and participating in and complying with the court's scheduling procedures.

¶ 2 We hold that whether the right to arbitrate has been waived by litigation conduct is an issue to be resolved by the court, not the arbitrator, as urged by River House. While arbitration is favored under Washington law and River House clearly asserted its right to arbitrate in its complaint, it thereafter took too many steps down the path of litigation and too few down the path of arbitration to reasonably claim that its conduct was consistent with a continuing right to arbitrate. We affirm,

FACTS AND PROCEDURAL BACKGROUND

¶ 3 River House Development Inc. engaged Integrus Architecture PS to provide architectural services for a condominium project, using an American Institute of Architects (AIA) standard form agreement.¹ The contract included alternative dispute resolution (ADR) provisions providing for mediation, and then arbitration, of disputes arising out of or related to the agreement.

¶ 4 The project reached substantial completion in the summer and fall of 2008. River House took issue with the quality and timeliness of the construction. When its general contractor commenced arbitration against River House, it responded with a counterclaim against the general contractor for the asserted problems and deficiencies. It resolved its dispute with the general contractor through mediation. In the process of mediating that dispute, River House came to believe that many of the problems with construction were a result of Integrus's failure to meet its contractual obligations.

¶ 5 In February 2010, River House sent a six-page demand letter to Integrus, outlining its claims and an estimated $3.2 million in resulting damages, and stating its intent to pursue mediation and arbitration.² It followed up with correspondence to Integrus expressing concern that limitations periods for some claims might run shortly and requesting a tolling agreement, a draft of which it forwarded to Integrus in early March, On March 17, after Integrus refused to enter into the proposed agreement, River House served, but did not file, a complaint styled for filing in the Spokane County Superior Court. The complaint alleged that the parties' contract “provides that INTEGRUS and RHD [River House] agree to mediate and/or arbitrate disputes arising under the Contract prior to completing litigation.” Clerk's Papers (CP) at 11 (Complaint ¶ 3.6). It prayed for judgment in its favor awarding damages, costs, and fees, but at the same time “[f]or an order staying this litigation and compelling the parties to engage in alternative dispute resolution as provided in the Contract.” Id. at 13–14.

¶ 6 The parties corresponded frequently in the several months that followed. River House proposed an informal, agreed discovery process in early April. Integrus responded that it intended to serve formal interrogatories and requests for production. River House ultimately served formal discovery first, dispatching its first set of interrogatories and requests for production in late April. Integrus served its first set of interrogatories and requests for production in June.

¶ 7 On June 1, River House filed its complaint, apparently in light of the tolling statute at RCW 4.16.170 and a continuing concern about limitations issues. If arbitration was intended, filing suit in superior court was unnecessary and potentially insufficient; statutes of limitation apply to arbitration proceedings only if and as provided by the arbitration agreement. Broom v. Morgan Stanley DW Inc., 169 Wash.2d 231, 243, 236 P.3d 182 (2010); City of Auburn v. King County, 114 Wash.2d 447, 450, 788 P.2d 534 (1990). But River House argues that this was not entirely clear until our Supreme Court's decision in July 2010 in Broom. After the lawsuit was filed, both River House and Integrus continued to express a desire to mediate the dispute.

¶ 8 The first step toward actually staying the litigation was suggested by River House in August. A status report was due to be filed with the court before September 10, the date set by the court for a status conference with the assigned judge. Among the information required by the court's report form was whether “the parties agree to go through mediation/alternative dispute resolution.” CP at 286. The form also asked whether there were any “unique issues requiring special preparation by the court.” Id. River House proposed to answer “yes” to the inquiry about mediation/alternative dispute resolution and to advise the court, with regard to “unique issues requiring special preparation,” that

[t]he parties' contract requires mediation and arbitration. The parties will be pursuing those dispute resolution methods precedent to continued litigation in this Court and may request that the Court stay the matter until such time as those methods have been exhausted.

Id. At the same time, however, River House proposed indicating a two-week estimated “length of trial” and that a 12–person jury would be demanded. Id. at 286–87.

[167 Wash.App. 227] ¶ 9 Integrus's response to the proposed joint case status report signaled that it remained committed to mediation but did not acknowledge any continuing duty to arbitrate. It struck River House's proposed language indicating that arbitration was required and would be pursued. A September 8 letter from Integrus's lawyer transmitting the revised report to River House stated;

In regard to paragraph 2.d., I recommend that your inserted language be deleted. There is no need for this inclusion at this time as it does not affect scheduling for the case. There is ample time for the parties to mediate, as we have all agreed to do, long before any trial date in this case. Likewise, the language is not accurate as RHD has not filed an arbitration claim. Finally, the question on paragraph 2.d. asks about special “issues requiring preparation by the court.” The issue of mediation does not require special court preparation or court intervention.

With regard to your proposed stipulation to stay the case, we do not agree to the same. We have always said that Integrus will mediate this dispute with River House Development, Inc. The sole issue has been the timing of mediation. We have always stated that Integrus will mediate when we know enough about RHD's claims for the mediation to be truly meaningful and in order that there might be the possibility of resolving this case during that mediation. There is no need for a stay of proceedings for that to occur.

Id. at 288.

¶ 10 Integrus's changes to the joint case status report were accepted by River House. As a result, the court's information at the time of the parties' in-person scheduling conference with the judge on September 10 was that the parties had agreed to mediate but, failing a mediated result, otherwise agreed on a two-week trial with a 12–member jury. The court entered a scheduling order that set a number of deadlines, including witness identification deadlines in December (plaintiff's) and February (defendant's), a discovery cutoff of May 9, 2011, and a trial date of July 11, 2011.

[167 Wash.App. 228] ¶ 11 The parties thereafter served and filed disclosure of their lay and expert witnesses in accordance with the deadlines set by the scheduling order. They exchanged their objections and responses to one another's discovery requests on January 26, 2011. Integrus was dissatisfied with River House's discovery responses and with additional information provided by River House after the lawyers conferred. On February 18, Integrus filed a motion to compel, which it set for hearing on March 18.

¶ 12 During the March 18 hearing on the discovery motion, Integrus represented in passing that it was readying for the July 11 trial date but intended to participate in mediation once discovery was complete. River House contested the motion to compel, but not on the basis of an assumed obligation to arbitrate. It argued instead that it had produced voluminous information, some of the discovery was objectionable, and it was continuing to supplement its production. It made no mention of arbitration. Its only reference to the manner in which the parties' dispute would be adjudicated was to argue:

Integrus has asked us to put on our full trial in our initial discovery responses. And under [ Weber v. Biddle, 72 Wash.2d 22, 431 P.2d 705 (1967) ], we're not required to outline each and every fact that we're going to present at trial. We do have a duty to make a good-faith effort to answer these questions, and we've done that.

Report of Proceedings at 9–10.

¶ 13 The trial court found River House's discovery responses inadequate and ordered it to provide sufficient responses within 10 days.

¶ 14 On March 28, the date on which River House's supplementation of its discovery responses was required, it filed a request for mediation with the American Arbitration Association, the mediation body identified in its contract with Integrus. It also filed, with the trial court, motions for reconsideration, for a protective order, and to stay its lawsuit and compel mediation and arbitration....