United States v. B.L. Harbert Int'l
| Decision Date | 23 July 2020 |
| Docket Number | CV 119-173 |
| Parties | UNITED STATES OF AMERICA for the use and benefit of SUPERIOR STEEL, INC., Plaintiff, v. B.L. HARBERT INTERNATIONAL, LLC; TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA; FIDELITY AND DEPOSIT COMPANY OF MARYLAND; and ZURICH AMERICAN INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — Southern District of Georgia |
Before the Court is Defendant B.L. Harbert International, LLC's ("Harbert") motion to compel arbitration and stay pending arbitration. (Doc. 13.) For the following reasons, the motion is GRANTED.
Defendant Harbert is the prime contractor constructing improvements to the United States Army Corps of Engineers' Cyber Command Headquarters in Fort Gordon, Georgia ("Project").(Compl., Doc. 1, ¶ 8; Lalor2 Aff., ¶ 4.) Defendant Harbert and Plaintiff Superior Steel, Inc. ("Plaintiff") entered into a subcontract ("Subcontract") on October 17, 2016, under which Plaintiff was to complete structural steel work for the Project. (Compl., ¶ 9; Lalor Aff., ¶ 5; see Subcontract, Doc. 1-1.) As required under the Miller Act, 40 U.S.C. §§ 3131 et seq., Defendant Harbert took out payment bonds for the Project with Defendants Travelers Casualty and Surety Company of America, Fidelity and Deposit Company of Maryland, and Zurich American Insurance Company (collectively, "Sureties"). (Compl., ¶ 10; Payment Bonds, Compl. Ex. B, Doc. 1-2.)
During construction — and for disputed reasons unnecessary to presently detail - issues arose with Plaintiff's performance under the Subcontract and Defendant Harbert incurred additional costs. (Compl, ¶¶ 11-13; Lalor Aff., ¶¶ 6-8, 10.) Defendant Harbert deducted costs from amounts otherwise owed to Plaintiff, and Plaintiff demanded payment of the deducted amount. (Compl., ¶ 16; Lalor Aff., ¶ 8.) No payment was made. (Compl., ¶ 17.) To recover, Plaintiff filed the present suit raising four counts: (I) a breach of contract claim against Defendant Harbert, (II) an unjust enrichment claim against Defendant Harbert, (III) a MillerAct bond claim against Defendants Harbert and Sureties, and (IV) a Georgia Prompt Pay Act claim against Defendant Harbert. (Id. ¶¶ 20-33.)
Paragraph 29 of the Subcontract contains the dispute resolution provision, providing: "All disputes between [Defendant Harbert] and [Plaintiff] related in any way to this Subcontract, the Work[,] or the Project shall be resolved in accordance with this [Paragraph] 29." (Subcontract, ¶ 29, at 12-13.3) To resolve a dispute, the parties must engage in "direct discussions" and, if necessary, mediation. (Id. ¶ 29(a), (b), at 12.) If the disagreement nonetheless endures, section (c) provides:
Unless suit is brought under the Miller Act , . . . at [Defendant Harbert]'s sole election, the parties shall submit the disputes to either binding arbitration or to litigation, as further detailed below.
(Id. ¶ 29(c), at 12.) If Defendant Harbert chooses litigation in lieu of arbitration, section (c) dictates that the claims "shall be resolved by bench trial, without a jury, in the United States District Court for the Northern District of Alabama."4 (Id.)
"Should [Defendant Harbert] elect arbitration," section (f) of paragraph 29 applies, requiring a three-arbitrator panel held under the American Arbitration Act's ("AAA") Construction Industry Arbitration Rules ("AAA Construction Rules"). (Id. ¶ 29(f), at 12-13.) In addition, "[Plaintiff] agrees that should it initiate litigation or arbitration without first obtaining [Defendant Harbert]'s authorization as to choice of forum, [Defendant Harbert] shall have the absolute and sole right to transfer the disputes to the other forum." (Id. ¶ 29(e), at 12.)
On September 16, 2019, the parties mediated the disputes, but the mediation proved unsuccessful. (Lalor Aff., ¶¶ 16-17.) Plaintiff filed the present suit on September 26, 2019. (See Compl.) Defendant Harbert then filed the present motion to compel arbitration and stay pending arbitration. (Def. Harbert's Mot. to Compel Arbitration, Doc. 13.) Plaintiff responded (Pl.'s Resp. Opp'n Mot. to Compel Arbitration, Doc. 14), Defendant Harbert replied (Def. Harbert's Reply Supp. Mot. to Compel Arbitration, Doc. 17), and Plaintiff sur-replied (Pl.'s Sur-Reply Opp'n Mot. to Compel Arbitration, Doc. 19). Defendant Harbert's motion is now ripe for review.
There is an "emphatic federal policy in favor of arbitral dispute resolution." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985). The Federal Arbitration Act ("FAA") requires courts to "rigorously enforce agreements to arbitrate." Davis v. Prudential Sec., Inc., 59 F.3d 1186, 1192 (11th Cir. 1995) (quoting Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987)). "[T]he party seeking to compel arbitration has the initial burden of producing the arbitration agreement and establishing the contractual relationship necessary to implicate the FAA and its provisions granting th[e] [c]ourt authority to dismiss or stay [the] [p]laintiff's cause of action and to compel arbitration." Compere v. Nusret Miami, LLC, 396 F. Supp. 3d 1194, 1199 (S.D. Fla. 2019) (citation and internal quotation marks omitted). If the party for arbitration meets its burden of production, the burden shifts to the party opposing arbitration to show why the court should not compel arbitration. Bhim v. Rent-A-Ctr., Inc., 655 F. Supp. 2d 1307, 1311 (S.D. Fla. 2009).
As an initial matter, the Court has subject matter jurisdiction over this dispute because Plaintiff brings a claimarising under federal law.5 28 U.S.C. § 1331; (see also Compl. ¶ 6.) It also appears to the Court that diversity jurisdiction exists given that there is complete diversity and the amount in controversy exceeds $75,000.00. 28 U.S.C. § 1332; (see Compl., ¶¶ 1-5, 21.) Defendant Harbert moves the Court to compel Plaintiff to arbitrate Counts I, II, and IV of the Complaint as against Defendant Harbert. The Court analyzes whether (A) the FAA governs the agreement to arbitrate, (B) the agreement to arbitrate is valid, (C) Defendant Harbert may elect to arbitrate the relevant claims, and (D) the Court should stay this action pending arbitration.
The FAA applies to agreements "evidencing a transaction involving commerce." 9 U.S.C. § 2. The Supreme Court has construed this language broadly, holding that Section 2's "involving commerce" language must be read to extend the Act's reach to the limits of Congress's Commerce Clause power. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 268, 277 (1995).
Here, the overall Project was commissioned by the United States government through the United States Army Corps ofEngineers. Plaintiff and Defendant Harbert entered into the Subcontract in furtherance of the Contract. Plaintiff is a Tennessee corporation with its principal place of business in Tennessee. (Compl., ¶ 1.) Defendant Harbert is a Delaware corporation with its principal place of business in Alabama. (Compl., ¶ 2.) The Subcontract was "negotiated, formulated, drafted, agreed upon, executed, and at least in part performed [i]n . . . Alabama." Finally, the work was to be completed for the Project in Georgia. The Court finds the Subcontract is a transaction affecting interstate commerce, and the FAA governs. Cf. W.G. Yates & Sons Constr. Co. v. Ard Contracting, Inc., No. 2:04-CV-00664-WKW, 2008 WL 942027, at *2 (M.D. Ala. Apr. 7, 2008) ().
The Court addresses whether the arbitration provision is (1) initially valid under Alabama law and (2), if so, unconscionable.
"Whether an arbitration agreement exists is settled by state-law principles of contract law." Hefter v. Charlie, Inc., No.2:16-cv-01805-RDP, 2017 WL 4155101, at *5 (N.D. Ala. Sept. 19, 2017) (quoting Hanover Ins. Co. v. Atlantis Drywall & Framing LLC, 611 F. App'x 585, 588 (11th Cir. 2015)); see also Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1368 (11th Cir. 2005). Where jurisdiction is based on federal question and diversity, the choice of law rules of the state in which the action was filed provide the applicable law. United States ex rel. Duncan Pipeline, Inc. v. Walbridge Aldinqer Co., No. CV411-092, 2013 WL 1338392, *10 (S.D. Ga. Mar. 29, 2013) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Because this case was filed in Georgia, the Court looks to Georgia's choice of law requirements. "Absent a contrary public policy, this court will normally enforce a contractual choice of law clause." Carr v. Kupfer, 296 S.E.2d 560, 562 (Ga. 1982). Here, Alabama law applies because the Subcontract contains the following choice of law provision: "This Subcontract shall be governed by, and all matters relating to the validity, performance, or interpretation of this Subcontract[,] shall be determined in accordance with[] the laws of the State of Alabama." (Subcontract, ¶ 34(a), at 13; see also Pl.'s Resp. Opp'n Mot. to Compel Arbitration, at 7 (applying Alabama law); Def. Harbert's Reply Supp. Mot. to Compel Arbitration, at 6-9 (applying Alabama law).)
Under Alabama law, "[t]he basic elements of a contract are an offer and an acceptance, consideration, and mutual assent to theessential terms of the agreement." Halbert v. Credit Suisse AG, 402 F. Supp. 3d 1288, 1322 (N.D. Ala. 2019) (quoting Armstrong Bus. Servs., Inc. v. AmSouth Bank, 817 So. 2d 665, 673 (Ala. 2001)).
Defendant Harbert shows that Plaintiff and Defendant Harbert signed the arbitration provision as within the Subcontract — a transaction...
To continue reading
Request your trial