State v. Gratech Co., Ltd.

• Decision Date: 17 January 2003
• Docket Number: No. 20020211.,20020211.
• Citation: 2003 ND 7,655 N.W.2d 417
• Parties: STATE of North Dakota, the North Dakota Department of Transportation, and its Director David A. Sprynczynatyk, Plaintiffs, Appellants, and Petitioners, v. GRATECH COMPANY, LTD., Defendant, Appellee, and Respondent. American Arbitration Association, Defendant, and The Honorable Bruce B. Haskell, Judge of the District Court, South Central Judicial District, Respondent.
• Court: North Dakota Supreme Court

655 N.W.2d 417

2003 ND 7

STATE of North Dakota, the North Dakota Department of Transportation, and its Director David A. Sprynczynatyk, Plaintiffs, Appellants, and Petitioners, v. GRATECH COMPANY, LTD., Defendant, Appellee, and Respondent.

American Arbitration Association, Defendant, and

The Honorable Bruce B. Haskell, Judge of the District Court, South Central Judicial District, Respondent.

No. 20020211.

Supreme Court of North Dakota.

January 17, 2003.

Charles S. Miller, Jr., Fleck, Mather & Strutz, Bismarck, N.D., for appellants.

Ronald G. Schmidt (argued), Schmidt, Schroyer & Moreno, P.C., Rapid City, S.D., and Jack McDonald (appeared), Wheeler Wolf, Bismarck, N.D., for appellee.

MARING, Justice.

[¶ 1] The State of North Dakota, the North Dakota Department of Transportation, and David Sprynczynatyk, Director of the Department of Transportation (collectively "the State"), appealed from a district court order dismissing the State's action seeking a declaratory judgment that Gratech Company was not entitled to arbitrate its claim against the State and that the arbitrators lacked jurisdiction to arbitrate the claim. The State also sought a stay pending appeal and a supervisory writ directing the district court to vacate its order and to permanently enjoin the arbitration proceedings. We granted a temporary stay of the arbitration proceedings while this appeal is pending. We conclude the arbitrators had jurisdiction to determine whether Gratech had timely filed an administrative claim, and we therefore vacate the temporary stay, deny the application for a supervisory writ, and affirm the order of the district court.

I

[¶ 2] In 1997, the State awarded a contract to Gratech on a highway construction project. During construction Gratech encountered difficult soil conditions, and a dispute arose whether certain work was common excavation covered under the contract or was additional, unforeseen work entitling Gratech to extra compensation. The project was completed on November 23, 1999, and accepted by the State on December 28, 1999. On June 30, 2000, Gratech's president wrote to the project engineer requesting that the parties meet to discuss Gratech's claim that it was owed additional sums for unforeseen work on the project.

[¶ 3] The State sent a final estimate for the project to Gratech by certified mail on August 15, 2000. The cover letter enclosed with the final estimate stated final payment would be withheld until Gratech submitted certain haul road releases, pit releases, and "DBE Participation Certificates." The State withheld payment of over $83,000 until these documents were provided. The final estimate did not address payment for the alleged unforeseen work.

[¶ 4] On April 9, 2001, Gratech's president wrote to the State advising that all required releases had been provided and requesting a progress payment reducing the retainage to a nominal amount. Gratech also reiterated its request that the parties meet to discuss Gratech's claim that it was owed additional sums for unforeseen work on the project. In response to Gratech's letter, the State on April 12, 2001, advised Gratech it would process an "intermediate payment" to Gratech reducing the retainage to $5,000. The State also sent Gratech a supplemental final estimate dated April 17, 2001. The State claims that, before it sent the supplemental final estimate to Gratech, it orally advised Gratech it would release the additional funds "but that processing the paperwork to pay down the retention would not start any clocks running over again." Gratech denies this statement was ever made.

[¶ 5] On July 13, 2001, Gratech submitted an administrative claim to the State seeking payment for the additional work. Under N.D.C.C. § 24-02-26.1, before seeking arbitration on a highway construction contract the contractor must submit a written claim for compensation to the State "not later than ninety days after the department has submitted the final estimate to the contractor." The State denied Gratech's claim, determining the claim was untimely because it had not been filed within ninety days of the August 2000 final estimate.

[¶ 6] On January 25, 2002, Gratech filed an arbitration complaint with the American Arbitration Association seeking payment for the additional work. The State moved to dismiss the arbitration, arguing the arbitrators lacked jurisdiction because Gratech had failed to comply with the statutory requirements for arbitration by failing to file a timely administrative claim under N.D.C.C. § 24-02-26.1. Gratech argued that the April 2001 supplemental final estimate was the "final estimate" for purposes of N.D.C.C. § 24-02-26.1, and that its administrative claim was timely filed within ninety days. The arbitrators found that the April 2001 document was the relevant final estimate and denied the State's motion to dismiss.

[¶ 7] The State then brought this action in district court seeking a stay of the arbitration proceedings and a declaratory judgment determining that the arbitrators lacked jurisdiction over Gratech's claim. The district court granted a temporary stay. By written order dated July 31, 2002, the court determined the arbitrators had jurisdiction to determine whether Gratech had timely filed its claim. Accordingly, the district court vacated the temporary stay and dismissed the declaratory judgment action.

[¶ 8] The State appealed from the district court order dismissing its action. The State also sought a stay pending appeal and a supervisory writ directing the district court to vacate its order and to permanently enjoin the arbitration proceedings. On August 21, 2002, we ordered that the arbitration proceedings be stayed pending further order of this Court.

II

[¶ 9] The sole question on appeal is whether the arbitrators had the authority to determine whether Gratech had timely submitted its administrative claim and was therefore entitled to demand arbitration.

[¶ 10] Under N.D.C.C. § 24-02-26, all disputes arising out of a highway construction contract must be submitted to arbitration:

All controversies arising out of any contract for the construction or repair of highways entered into by the director must be submitted to arbitration as provided in this chapter and chapter 32-29.2. Any person who voluntarily enters into a contract for the construction or repair of highways must be considered as having agreed to arbitration of all controversies arising out of that contract.

Section 24-02-31, N.D.C.C., specifies that "[t]he arbitrators shall determine all controversies between the parties growing out of the contract." [¶ 11] Section 24-02-26.1, N.D.C.C., provides certain conditions precedent before a contractor may demand arbitration:

In addition to the provisions of section 24-02-30, full compliance by a contractor with the provisions of this section is a condition precedent to the contractor's right to demand arbitration....

Any person submitting a claim for compensation under this section, personally or on behalf of another person or entity, must do so in writing, not later than ninety days after the department has submitted the final estimate to the contractor....

The director shall act on the claim within sixty days after the claim is served upon the director. The contractor and the director may negotiate a supplemental agreement for the claim items that are accepted by the director, and the director shall immediately pay the contractor for any additional compensation resulting from the supplemental agreement. The contractor may demand arbitration on the remaining claim items within ninety days after the contractor has been notified of the director's action on the claim.

Although the statute specifies a claim must be filed within ninety days of submission of the final estimate, the term "final estimate" is not defined in our statutory scheme.

[¶ 12] As a matter of public policy, the arbitration process is strongly favored in this state. See, e.g., O & K Glass Co. v. Innes Constr. Co., 2000 ND 56, ¶ 7, 608 N.W.2d 236; Superpumper, Inc. v. Nerland Oil, Inc., 1998 ND 144, ¶ 9, 582 N.W.2d 647; Allstate Ins. Co. v. Nodak Mut. Ins. Co., 540 N.W.2d 614, 619 (N.D.1995); Carlson v. Farmers Ins. Group, 492 N.W.2d 579, 582 (N.D.1992); State v. Stremick Constr. Co., 370 N.W.2d 730, 732 (N.D.1985). In light of this strong public policy, we have concluded that, where there is a broad arbitration clause and no exclusion clause, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. Allstate, at 619. Arbitrators, acting under the authority granted to them by a contract or statute, unless expressly limited by the terms of the contract or statute, are the judges of both the law and the facts. Id. at 617; McKibben v. Grigg, 1998 ND App 5, ¶ 20, 582 N.W.2d 669. When the parties have agreed or are bound by statute to submit contractual disputes to arbitration, the role of the court is very limited. Stremick, at 734; West Fargo Pub. Sch. Dist. v. West Fargo Educ. Ass'n, 259 N.W.2d 612, 619 (N.D.1977); McKibben, at ¶ 6. The question whether the dispute is arbitrable is for the arbitrators, not the district court, to determine. See Superpumper, at ¶ 9; Stremick, at 735.

[¶ 13] In this case, the arbitrators were faced with determining the effect of multiple final estimates¹ upon the contractor's duty to file an administrative claim. The question whether Gratech had timely filed its administrative claim with the State turned upon disputed facts and interpretation of the construction contract.

[¶ 14] The State claims the August 2000 document was the "final estimate," and argues that Cal Gendreau, the Construction Services Engineer for the Department of Transportation, orally advised Gratech's president that issuance of the supplemental final estimate in April 2001 "would not start any clocks running over again." Gratech's president in an affidavit specifically denied Gendreau had made any...