State v. P.G. Miron Const. Co., Inc.

• Decision Date: 08 March 1994
• Docket Number: No. 92-0841,92-0841
• Citation: 181 Wis.2d 1045,512 N.W.2d 499
• Parties: , 89 Ed. Law Rep. 618 STATE of Wisconsin, Plaintiff-Appellant, v. P.G. MIRON CONSTRUCTION COMPANY, INC., Defendant-Respondent-Petitioner. d ]
• Court: Wisconsin Supreme Court

Page 499

512 N.W.2d 499

181 Wis.2d 1045, 89 Ed. Law Rep. 618

STATE of Wisconsin, Plaintiff-Appellant, v. P.G. MIRON CONSTRUCTION COMPANY, INC. Defendant-Respondent-Petitioner. ^d]

No. 92-0841.

Supreme Court of Wisconsin.

Argued Jan. 7, 1994.

Decided March 8, 1994.

For the plaintiff-appellant the cause was argued by Alan Lee, Asst. Atty. Gen. with whom on the brief was James E. Doyle, Atty. Gen.

Amicus curiae brief was filed by Lynn E. LeGault, Executive Director, Madison for The Wisconsin Chapter, The Associated General Contractors of America, Inc.

GESKE, Justice.

This is a review of a published decision of the court of appeals, State v. P.G. Miron Const. Co., Inc., 175 Wis.2d 476, 498 N.W.2d 889 (Ct.App.1993), which held that the doctrine of sovereign immunity in art. IV, sec. 27 of the Wisconsin Constitution, restricting suits against the state, applies to arbitration procedures in state contracts. The decision of the court of appeals reversed a decision of the circuit court for Dane County, Daniel R. Moeser, Circuit Judge. The circuit court found that the doctrine of sovereign immunity applies to suits at law, not to arbitration. As a result, the dispute between the P.G. Miron Construction Company, Inc. (Miron) and the Wisconsin Department of Administration (DOA) could be resolved by means of arbitration under ch. 788, Stats., pursuant to the arbitration clause agreed to in the contract.

The issues before this court are:

(1) Whether the doctrine of sovereign immunity in art. IV, sec. 27 of the Wisconsin Constitution, which restricts suits against the state, applies to arbitration procedures in state contracts; and

(2) whether the state has authorized or consented to the use of arbitration in the construction contract executed between Miron and the DOA.

We hold that the use of arbitration under the contract between Miron and the state does not violate the doctrine of sovereign immunity because arbitration does not subject the state to suit. Further, we hold that the claims procedure articulated in secs. 16.007 ¹ and 775.01, STATS²., does not provide the exclusive means for processing and resolving claims against the state. Rather, the arbitration clause in the contract executed between Miron and the DOA provides a means of conflict resolution under ch. 788, consistent with the state policy to encourage arbitration as an alternative to costly and protracted litigation. However, we note that any award granted at the conclusion of the arbitration process may become the substance of a suit. Therefore, we also hold that Miron must submit any claim it may want to assert against the state to the claims board for processing, pursuant to secs. 16.007 and 775.01, Stats. Enforcement of an arbitration award under ch. 788 is not appropriate because it is contrary to the statutory process required for claims against the state.

The facts of this case are as follows. In April of 1987, the DOA entered into a contract with Flad & Associates of Wisconsin, Inc. ³ Flad was to provide architectural and engineering services for an addition to the Clinical Science Center at the University of Wisconsin, Madison. In November of the same year, the DOA executed a second contract with Miron, valued at $6.5 million, pursuant to which Miron was to provide all general contracting for the building project. In addition to all the other elements of the contract with Miron, including costs, plans, and other conditions, an arbitration clause was added by the state. The arbitration clause specifically invoked the provisions of ch. 788, Stats. ⁴

During the summer of 1988, a dispute arose among the parties regarding allegedly faulty structural steel connections. Flad and Associates believed that one of Miron's subcontractors, Phoenix Steel, Inc. (Phoenix), should have been responsible for the design of the connections. Phoenix, however, countered that it was not responsible for the design. So as to not interrupt progress on the project, the parties agreed to determine responsibility for additional costs once all work was completed. The project was completed in 1989, and Miron subsequently sought reimbursement from the state for the additional costs arising out of the dispute with Phoenix.

The arbitration clause of the contract between Miron and the DOA established a two-step dispute resolution procedure. First, Miron was to file a claim with Flad, the architect/engineer, in order to review the request. That was done in May, 1989. In November, 1989, DOA accepted Flad's recommendation that it deny the Miron claim.

In May, 1990, Miron undertook the second step of the procedure when it filed a demand for arbitration with the American Arbitration Association (AAA). Listing the State of Wisconsin as the defendant, Miron stated that the claim was for extra project costs resulting from defective contract documents, defective contract administration, and field charges. By June of 1990, the AAA informed the concerned parties that there was indeed an issue as to arbitrability and a panel of arbitrators was chosen. ⁵ However, in December of that year, counsel for the state informed the panel that it would challenge the arbitrators' jurisdiction.

In a declaratory judgment action filed on February 12, 1991, the state requested the circuit court for Dane County to declare the following: (1) the arbitration agreement between the state and Miron does not apply to claims brought by Miron; (2) Miron's claims are barred by sec. 16.855, Stats.; ⁶ and (3) the claims made by Miron are barred by sovereign immunity as articulated in art. IV, sec. 27 of the Wisconsin Constitution.

The circuit court granted summary judgment to Miron and upheld the jurisdiction of the arbitration panel. Specifically, the court stated that the state had attempted to blur the distinction between arbitration and litigation. According to the court, arbitration is not tantamount to a lawsuit. Therefore, since sovereign immunity is applicable only to suits at law, it is inapplicable to arbitration.

In March, 1993, the court of appeals reversed the decision of the circuit court and held that sovereign immunity did apply to arbitration, thereby denying the arbitrators personal jurisdiction over the state. Furthermore, it held that the state had not specifically consented to the use of arbitration. Chapter 788, Stats., could not be applied to the state because there is no express language in the act which would bring the state within its terms.

When reviewing a summary judgment decision, this court is required to apply the standards set forth in sec. 802.08, Stats., in the same manner as the trial court. Maas v. Ziegler, 172 Wis.2d 70, 78, 492 N.W.2d 621 (1992). We are also asked to interpret state constitutional and statutory provisions, which are questions of law. This court decides questions of law without deference to the lower courts. Elliott v. Donahue, 169 Wis.2d 310, 316, 485 N.W.2d 403 (1992).

Miron argues that the sovereign immunity clause does not apply to arbitration. We agree. Article IV, sec. 27 of the Wisconsin Constitution reads as follows:

The legislature shall direct by law in what manner and in what courts suits may be brought against the state.

This language has been construed repeatedly to mean that the legislature has the exclusive right to consent to a suit against the state. State ex rel. Teach. Assts. v. Wis.-Madison Univ., 96 Wis.2d 492, 509, 292 N.W.2d 657 (Ct.App.1980) (citing Fiala v. Voight, 93 Wis.2d 337, 342, 286 N.W.2d 824 (1980)). See also Lister v. Board of Regents, 72 Wis.2d 282, 291, 240 N.W.2d 610 (1976). Additionally, such legislative consent must be clear and express. Fiala, 93 Wis.2d at 342-43, 286 N.W.2d 824. In secs. 16.007 and 775.01, Stats., the state has "consented" to suit with the establishment of a specific claims procedure. Under sec. 16.007, a party may present a claim to the state claims board, which first holds a hearing and then makes a recommendation to the legislature to grant or deny the claim. If the legislature refuses to allow a claim against the state, the claimant may then, under sec. 775.01, bring an action against the state.

We conclude, however, that the statutory claims procedure is not applicable in this case because no suit was initiated against the state when Miron invoked its right to arbitration of the dispute, according to the contract. The doctrine of sovereign immunity was not violated, and there is no need for this court to determine whether the legislature expressly consented to arbitration.

"Suit" may be defined as

any proceeding by one person or persons against another or others in a court of law in which the plaintiff pursues, in such court, the remedy which the law affords him for the redress of an injury or the enforcement of a right, whether at law or equity.

See Black's Law Dictionary 1434 (6th ed. 1990) (emphasis added). This court has consistently used the term "suit" in sovereign immunity cases as a reference to legal actions which seek resolution in a court of law. Zinn v. State, 112 Wis.2d 417, 434-35, 334 N.W.2d 67 (1983) (the state cannot be sued without its consent and if immunity is properly raised, it deprives the court of personal jurisdiction); Kenosha v. State, 35 Wis.2d 317, 322, 151 N.W.2d 36 (1967); Schlesinger v. State, 195 Wis. 366, 369, 218 N.W. 440 (1928) (a state cannot be sued in its own courts without its consent); Milwaukee Light, Heat & Traction Co. v. Ela Co., 142 Wis. 424, 428, 125 N.W. 903 (1910) (a suit from its initiation must continue as a judicial proceeding in the nature of a suit in court until its termination).

Resolution of issues raised in a suit which require litigation typically involves formalized procedural and evidentiary rules. Elements of the process, such as discovery, pretrial motions, and preparation of exhibits and witness lists culminate with the trial itself. See Commercial Arbitration for the 1990's 41 (Richard S. Medalie, ed.,...