Town of Danvers v. Wexler Const. Co., Inc.

Citation12 Mass.App.Ct. 160,422 N.E.2d 782
PartiesTOWN OF DANVERS v. WEXLER CONSTRUCTION CO., INC. et al.; 1 United Electrical Contractors, Inc. et al., 2 third-party defendants.
Decision Date30 June 1981
CourtAppeals Court of Massachusetts
2

Peter J. McCue, West Falmouth, for United Electrical Contractors, Inc. and another.

Robert J. Sherer, Boston, for Wexler Construction Co., Inc.

Before GREANEY, CUTTER and KASS, JJ.

GREANEY, Justice.

This is an appeal from the Superior Court's refusal to stay proceedings on a third-party complaint pending arbitration. We conclude that a stay should have been granted.

The parties have agreed on the facts. The underlying dispute arose out of a construction contract for renovations and an addition to the Danvers High School. The town (the owner of the school) brought suit against Wexler, the general contractor, and seven other defendants, including certain subcontractors and material suppliers, on theories of breach of contract, negligence and product liability. Wexler served cross-claims on those of its subcontractors which were joined with it as defendants, and initially brought third-party actions against two subcontractors other than United Electrical, and against the surety of a third subcontractor which has been adjudicated a bankrupt.

During discovery, Wexler ascertained that one of the town's complaints concerned failure of the heating and air conditioning systems to function properly as the result of allegedly improper power wiring. Based on this discovery, Wexler served a third-party complaint upon United Electrical, the electrical subcontractor, and United Pacific, its bonding company, asserting that the power wiring of the heating and air conditioning systems was United Electrical's responsibility and seeking judgment against both third-party defendants "(i)n the amount of any judgment entered against (it) in favor of the (t)own by reason of deficiencies in the heating and air-conditioning system(s)."

The contract between the town and Wexler contains an agreement to submit "(a) ll claims, disputes and other matters in question arising out of, or relating to, this contract or the breach thereof to arbitration" under the Construction Industry Arbitration Rules of the American Arbitration Association. This arbitration provision was incorporated in Wexler's subcontract with United Electrical and in United Pacific's performance and payment bond. No other party to the action is a party to this arbitration agreement, or to the contract between these parties.

In their answer to Wexler's third-party complaint, United Electrical and United Pacific raised the arbitration agreement as an affirmative defense and requested a stay of the third-party action pending arbitration. Both third-party defendants then moved (see G.L. c. 251, §§ 2(a), 2(d ) and 15) for a stay of the third-party action pending arbitration of the issues raised by Wexler's complaint. A judge of the Superior Court denied the motion but permitted the moving parties to renew their motion to stay, to add thereto a motion for severance of severable issues, and to file a timely application for arbitration.

In keeping with that determination, United Electrical and United Pacific filed an application for arbitration with the American Arbitration Association and resubmitted their motion for a stay, accompanied by a motion for severance of severable issues. The judge then entered an order that the motion for a stay would be denied unless the town should agree to participate in the arbitration. The town declined, for reasons which do not appear in the record, and an order entered denying the requested stay. United Electrical and United Pacific now appeal. 3

The arbitration clause at issue is within the coverage of G.L. c. 251 which governs the arbitration of commercial disputes in this state. 4 Section 1 of that chapter provides that a written agreement to arbitrate "shall be valid, enforceable and irrevocable ...." Section 2(a) states that if the Superior Court finds, after summary proceedings, that a valid agreement to arbitrate exists, it "shall ... order arbitration." Section 2(d ) requires that "(a)ny action or proceeding involving an issue subject to arbitration shall be stayed if ... an application (for arbitration) has been made ... or, if the issue is severable, the stay may be with respect to such issue only ..." (emphasis supplied).

Our courts have consistently held that the foregoing statutory provisions express a strong public policy favoring arbitration as an expeditious alternative to litigation for settling commercial disputes. It has often been said, for example, that an agreement to arbitrate which is expressed in general terms "should be construed as broadly as it was intended" (Carter, Moore & Co. v. Donahue, 345 Mass. 672, 676, 189 N.E.2d 217 (1963); Glenn Acres, Inc. v. Cliffwood Corp., 353 Mass. 150, 154, 228 N.E.2d 835 (1967); Mendez v. Trustees of Boston Univ., 362 Mass. 353, 356, 285 N.E.2d 446 (1972)) and that, under such a clause, the parties are deemed to have consented in advance to arbitrate any dispute which they cannot settle between themselves (see Glenn Acres, Inc. v. Cliffwood Corp., supra, 353 Mass. at 154-155, 228 N.E.2d 835; Quirk v. Data Terminal Sys., Inc., --- Mass. ---, ---, a 400 N.E.2d 858), and to have assented to be bound by the arbitrator's honest judgment on the matter presented. See Trustees of the Boston & Maine Corp. v. Massachusetts Bay Transp. Authy., 363 Mass. 386, 390-391, 294 N.E.2d 340 (1973); Geller v. Temple B'nai Abraham, --- Mass.App. ---, ---, b 415 N.E.2d 246. The Supreme Judicial Court recently stated that "the arbitration procedure, when selected by the parties to a contract, should ... not (be) subject to delay and obstruction in the courts." Quirk v. Data Terminal Sys., Inc., supra --- Mass. at --- - ---, c 400 N.E.2d 858. Thus, once a dispute is determined to be arbitrable, it should, barring compelling reasons to the contrary, be remitted to the arbitral forum for consideration. Ibid.

The parties appear to agree that a valid arbitration agreement exists, that its provisions are broad in scope, and that the issues raised by the third-party complaint fall within the agreement's coverage and are presently proper subjects for arbitration. The court's initial order with respect to the motion to stay implicitly acknowledged the existence and applicability of the arbitration agreement. These circumstances ordinarily would be sufficient to require granting the requested stay.

In denying the stay, however, the judge appears to have been concerned about two possibilities: first, that judicial economy might suffer by remitting one part of a multi-claim lawsuit to arbitration while retaining the rest of the action for trial; and second, that the town, Wexler, or some other party to the lawsuit might be prejudiced by a stay of this third-party action. We do not think that either of these concerns is sufficient to defeat a stay.

A court, of course, has the power, inherently and by rule, to control the efficient disposition of cases on its docket. See Landis v. North American Co., 299 U.S. 248, 254-255, 57 S.Ct. 163, 165-166, 81 L.Ed. 153 (1936); Cutler Associates, Inc. v. Merrill Trust Co., 395 A.2d 453, 456-457 (Me.1978); Mass.R.Civ.P. 13 and 14, 365 Mass. 758-761 (1974). Nevertheless, most courts that have dealt with the question of a stay in the context of strong arbitration statutes like the Uniform Arbitration Act, 5 have wherever possible, preferred enforcement of arbitration agreements between parties to a multi-party lawsuit. See Sam Reisfeld & Son Import Co. v. S.A. Eteco, 530 F.2d 679, 681 (5th Cir. 1976) (in multi-party, multi-claim action, the trial court properly ordered that the non-arbitrable claims proceed to trial while the remaining claims simultaneously proceed to arbitration); C. Itoh & Co. (America) Inc. v. Jordan Intl. Co., 552 F.2d 1228, 1231 (7th Cir. 1977); China Union Lines Ltd. v. American Marine Underwriters, Inc., 458 F.Supp. 132, 135-136 (S.D.N.Y.1978); Andrew Martin Marine Corp. v. Stork-Werkspoor Diesel B.V., 480 F.Supp. 1270, 1275 (E.D.La.1979); Madden v. Kaiser Foundation Hosp., 17 Cal.3d 699, 714, 131 Cal.Rptr. 882, 552 P.2d 1178 (1976); Farris v. Hedgepeth, 58 Ill.App.3d 1040, 1043-1044, 16 Ill.Dec. 311, 374 N.E.2d 1086 (1978). See also Eager, The Arbitration Contract and Proceedings § 82(7), at 228, and notes at 232-233 (1971). Contrast CARON V. BARKAN CONSTR. CO., --- MASS.APP. ---, 420 N.E.2D 18 (1981)D (proper to deny a defendant's motion for a stay of all proceedings pending arbitration of its cross-claim against a co-defendant). They have all done so on the express or implied basis that the strong policy in favor of arbitration usually necessitates a stay despite the fact that some judicial inefficiency might result. 6 The United States Court of Appeals for the First Circuit subscribes to this view, and held in Maldonado v. PPG Indus., Inc., 514 F.2d 614 (1st Cir. 1975), that a third-party action seeking contribution should be stayed for arbitration at the request of the third-party defendant rather than being tried with the principal action. "If a claim of right to arbitration could be foreclosed whenever a dispute between the parties to the contract derives from another person's claim against one of the parties, the utility of broad arbitration agreements would be undermined." Id. at 617. Cf. Hilti, Inc. v. Oldach, 392 F.2d 368, 369 n.2 (1st Cir. 1968) (stay required based on arbitration agreement between plaintiff and defendant even though second defendant was not a party to the arbitration agreement). So also do the New York courts, the decisions of which are looked upon with favor (see Stop & Shop Cos. v. Gilbane Bldg. Co., 364 Mass. 325, 329, 304 N.E.2d 429 (1973)) in interpreting G.L. c. 251. See Knolls Coop. Section No. 1, Inc. v. Hennessy, 3 Misc.2d 220, 223, 150 N.Y.S.2d...

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