The Beyt, Rish, Robbins Group, Architects v. Appalachian Regional Healthcare, Inc.

• Decision Date: 23 April 1993
• Docket Number: Nos. 90-CA-2633-M,90-CA-2731-MR,s. 90-CA-2633-M
• Citation: 854 S.W.2d 784
• Parties: THE BEYT, RISH, ROBBINS GROUP, ARCHITECTS, Appellant, v. APPALACHIAN REGIONAL HEALTHCARE, INC., Appellee. APPALACHIAN REGIONAL HEALTHCARE, INC., Cross-Appellant, v. THE BEYT, RISH, ROBBINS GROUP, ARCHITECTS, Cross-Appellee.
• Court: Kentucky Court of Appeals

Page 784

854 S.W.2d 784

THE BEYT, RISH, ROBBINS GROUP, ARCHITECTS, Appellant, v. APPALACHIAN REGIONAL HEALTHCARE, INC., Appellee.

APPALACHIAN REGIONAL HEALTHCARE, INC., Cross-Appellant, v. THE BEYT, RISH, ROBBINS GROUP, ARCHITECTS, Cross-Appellee.

Nos. 90-CA-2633-MR, 90-CA-2731-MR.

Court of Appeals of Kentucky.

April 23, 1993.

Reconsideration Denied June 14, 1993.

Buckner Hinkle, Jr., Gregory P. Parsons, Cheryl U. Lewis, Anne E. Gorham, Stites & Harbison, Lexington, for appellant/cross-appellee.

David T. Enlow, Lynn R. Schrader, Murphy & Enlow, Lexington, for appellee/cross-appellant.

Before DYCHE, MILLER, ¹ and SCHRODER, JJ.

DYCHE, Judge.

At issue in this appeal is whether the timeliness of a demand for arbitration is for the courts or the arbitrators to decide; on cross-appeal, the question is whether it was error for the trial court to refuse to consolidate arbitration proceedings between the owner, architect and construction manager involved in the erection of a hospital building. Finding that the trial court was correct in its ruling on the first issue, we affirm; we dismiss the cross-appeal.

This dispute arose following the completion of Appalachian Regional Healthcare's ["ARH"] new facility in Hazard. The Beyt Rish Robbins Group Architects ["Beyt Rish"] were retained by ARH to assist in the construction of the building; McCarthy Brothers Company was construction manager for the project.

Certain defects in the building became apparent as its completion neared. ARH, Beyt Rish and McCarthy Brothers conducted a thorough investigation and had numerous discussions in an attempt to ascertain the cause of the problems, to remedy same, and to determine who would ultimately bear the cost of repairs. These negotiations reached an impasse, and on March 29, 1990, ARH demanded arbitration pursuant to Article 8 of its contract with Beyt Rish, and Article 13 of its agreement with McCarthy Brothers. Article 8 of the ARH/Beyt Rish contract reads as follows:

8.1 All claims, disputes and other matters in question between the parties to this Agreement arising out of or relating to this Agreement or the breach thereof shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise. No arbitration arising out of or relating to this Agreement shall include, by consolidation, joinder or in any other manner, any additional person not a party to this Agreement except by written consent containing a specific reference to this Agreement and signed by the Architect, the Owner and any other person sought to be joined. Any consent to arbitration involving an additional person or persons shall not constitute consent to arbitration of any dispute not described therein or with any person not named or described therein. This agreement to arbitrate and any agreement to arbitrate with an additional person or persons duly consented to by the parties to this Agreement shall be specifically enforceable under the prevailing arbitration law.

8.2 Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand shall be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall the demand for arbitration 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.

8.3 The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.

On April 24, 1990, ARH initiated this action in the Fayette Circuit Court seeking an order enjoining Beyt Rish and McCarthy Brothers to "(a) participate in a joint or consolidated arbitration, or (b) participate separately in an arbitration utilizing the same arbitration panel."

The initial difficulty in deciding this case comes from the procedural posture with which we are presented. Beyt Rish did not file a counterclaim asking for a stay of the arbitration on the ground that the demand for arbitration was untimely or due to a waiver by ARH; instead, Beyt Rish defended the consolidation action with, among other things, an affirmative defense of limitations.

The issue of whether the demand for arbitration was time-barred was not placed squarely before the court until Beyt Rish moved the court to amend its original judgment, which denied consolidation and dismissed the action. At that time, both Beyt Rish and ARH filed memoranda on the issue, and the court conducted a hearing on the motion to declare the demand untimely and to stay the arbitration. It is from the denial of this motion that Beyt Rish now appeals; ARH cross-appeals from the denial of consolidation.

The direct appeal presents an issue of first impression in the Commonwealth: Is the timeliness of a demand for arbitration an issue for the arbitration panel to decide, or should our courts intervene in an arbitration proceeding and decide this issue?

Although Kentucky courts have not heretofore been confronted with this question, state and federal courts in other jurisdictions have published many decisions on the issue. ARH argues that we should adopt the majority rule: Procedural matters, such as the present issue, are to be decided by the arbitrators. Beyt Rish urges adoption of the minority rule: Such decisions are the province of the courts.

We will not engage in a survey of cases from other jurisdictions; suffice it to say that we have examined several, and find that the majority rule is more appropriate. City of Lenexa v. C.L. Fairley Construction Company, Inc., 15 Kan.App.2d 207, 805 P.2d 507 (1991); Executive Life Insurance Company v. John Hammer & Associates, Inc., 569 So.2d 855 (Fla.App. 2 Dist., (1990); Nielsen v. Butterworth Hospital, 182 Mich.App. 507, 452 N.W.2d 848 (1990), rev'd sub nom Neilsen v. Barnett, 440 Mich. 1, 485 N.W.2d 666 (1992); USX Corporation v. West, 781 S.W.2d 453 (Tex.App.1989); Matter of Village of Saranac Lake, Inc. (H. Schickel General Contracting, Inc.), 154 A.D.2d 855, 546 N.Y.S.2d 713 (1989); Emcon Corporation v. Pegnataro, 212 Conn. 587, 562 A.2d 521 (1989); Matter of McGreevy (Civil Services Employees Association, Inc. on Behalf of Moore), 150 A.D.2d 891, 540 N.Y.S.2d 914 (1989); Moresi v. Nationwide Mutual, 96 Or.App. 61, 771 P.2d 301 (1989), rev'd, 309 Or. 619, 789 P.2d 667 (1990); and Bennett v. Shearson Lehman-American Express, Inc., 168 Mich.App. 80, 423 N.W.2d 911 (1987).

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