Wise v. Tidal Const. Co., Inc.

• Decision Date: 23 May 2003
• Docket Number: No. A03A0859.,A03A0859.
• Citation: 261 Ga. App. 670,583 S.E.2d 466
• Parties: WISE et al. v. TIDAL CONSTRUCTION COMPANY, INC.
• Court: Georgia Court of Appeals

583 S.E.2d 466

261 Ga. App. 670

WISE et al. v. TIDAL CONSTRUCTION COMPANY, INC.

No. A03A0859.

Court of Appeals of Georgia.

May 23, 2003.

Reconsideration Denied June 16, 2003.

Eugene C. Brooks IV, Savannah, Christopher M. Kessinger, for appellants.

Misner, Scott & Martin, Allison M. Lawler, Royal & Vaughan, Jeffrey S. Vaughan, Savannah, for appellee.

ELDRIDGE, Judge.

This is an interlocutory appeal from the trial court's stay and order for mandatory arbitration under the Federal Arbitration Act, because Mary L. Rose Wise and Nell Lackman, plaintiffs, contend that Tidal Construction Company, Inc.'s inconsistent actions (proceeding with discovery, motion for summary judgment, entry of a pre-trial order, and jury selection) waived the right to arbitration.¹ Finding that Tidal Construction's inconsistent conduct constituted a waiver of the arbitration agreement, we reverse.

On October 16, 2000, the builder-sellers, Tidal Construction Company, Inc., C.L. Stafford Building Contractor, Inc., and C.L. Stafford were sued by the purchasers Mary L. Rose Wise and Nell Lackman for negligence, negligence per se, breach of implied warranty of good workmanship, and breach of contract as to the implied duty of good workmanship for estimated special damages of $199,000, because the new house, which was sold to them for $138,000, was built over a buried wood debris field. On December 5, 2000, Tidal Construction answered and stated "[t]his matter may be subject to mandatory binding arbitration pursuant to the contract or contracts between this [sic] parties and should be dismissed." The parties proceeded with litigation and went through extensive discovery, including some eight depositions. On October 24, 2001, Tidal Construction moved for summary judgment based upon the discovery. In November 2001, the case came on the trial calendar but was continued by agreement to complete discovery. On February 13, 2002, the parties entered into a consolidated pre-trial order without Tidal Construction again raising the issue of mandatory arbitration. On February 20, 2002, the trial court set the case for trial on the calendar for March 21-April 17, 2002. Finally, on March 7, 2002, Tidal Construction moved for a stay for mandatory arbitration and to amend the pre-trial order to assert such defense. The plaintiffs dismissed their warranty claims under the construction contract; also, they dismissed the claims against Stafford and his company to avoid the arbitration issue. On March 20, 2002, the parties struck a jury for the special trial set for April 21, 2002. On September 18, 2002, the trial court granted the stay and ordered arbitration, which earlier order had been misfiled and not sent to the parties. By March 7, 2002, when Tidal Construction filed its demand for arbitration, the plaintiffs' trial preparation expenses exceeded $11,000.

The basis for Tidal Construction's demand for mandatory arbitration was: on March 16, 1997, the parties entered into a sales contract, providing the special condition that the "SELLER TO FURNISH A 2/10 HOME WARRANTY." On March 26, 1997, Tidal Construction complied by issuing a "Workmanship/Systems and Structural Limited Warranty," which was administered by the Home Buyers Warranty Corporation and insured by National Home Insurance Company, foreign corporations; Mary L. Rose signed the application for this home enrollment under this express warranty. Attached to the application was the "Home Buyers Warranty Booklet," which included mandatory arbitration of all claims arising in warranty, contract, fraud, or tort under the FAA. The express written warranty was issued to the plaintiffs as part of the sale contract, which incorporated the warranty booklet with the mandatory arbitration clause under the FAA.

1. Plaintiffs contend that the trial court erred in compelling arbitration, because they did not allege a violation of the Home Buyers Warranty, causing the arbitration clause to be invoked. We do not agree.

The arbitration clause provided that the mandatory arbitration come under the FAA, 9 USC §§ 1-16, excluding any contrary provisions of state law. Issues as to the applicability of and the scope of arbitration were matters for arbitration under the arbitration clause. Plaintiffs agreed to such provisions for arbitration.

Plaintiffs sought to avoid arbitration by abandoning their warranty claims; however, both breach of contract and negligence claims come within the mandatory arbitration clause, as well as warranty claims, and do not violate Georgia public policy by requiring such issues to be arbitrated. Haynes v. Fincher, 241 Ga.App. 179, 180(1), 525 S.E.2d 405 (1999). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). In this case, the arbitration clause stated that it was to cover "[a]ny and all disputes and controversies arising under or relating to this Agreement," and therefore, was intended to be broad enough in scope to reach all disputes.

We believe that, as a matter of law, the arbitration clause in the 1990 Agreement is broad. The clause provides that arbitration is the exclusive remedy available to the parties to settle controversies or claims that not only arise from the 1990 Agreement but also those relating to the contract. The Second Circuit considered language nearly identical to the language here, calling it "the paradigm of a broad clause." Collins & Aikman Prods. Co. v. Building Sys., Inc., 58 F.3d 16, 20 (2d Cir.1995). Such a provision constitutes the broadest language the parties could reasonably use to subject their disputes to that form of settlement, including collateral disputes that relate to the agreement containing the clause.... Where a broad arbitration clause is in effect, even the question of whether the controversy relates to the agreement containing the clause is subject to arbitration.

(Citation, punctuation and footnote omitted.) Fleet Tire Svc. of North Little Rock v. Oliver Rubber Co., 118 F.3d 619, 621 (8th Cir.1997). A party may not avoid a contractual arbitration clause merely by "`casting its complaint in tort.'" (Citation omitted.) In re Oil Spill by the "Amoco Cadiz," 659 F.2d 789, 794 (7th Cir.1981).

Section 2 [of the FAA] is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.... The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.

(Citation omitted.) Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., supra at 24-25, 103 S.Ct. 927; accord DiMambro-Northend Assoc. v. Blanck-Alvarez, Inc., 251 Ga. 704, 707(1), 309 S.E.2d 364 (1983); Hilton Constr. Co. v. Martin Mechanical Contractors, 251 Ga. 701, 308 S.E.2d 830 (1983). "Where such a transaction involves commerce, within the meaning of the Federal Arbitration Statute, the state law and policy with respect thereto must yield to the paramount federal law." (Citation omitted.) West Point-Pepperell v. Multi-Line Indus., Inc., 231 Ga. 329, 331(1), 201 S.E.2d 452 (1973). Home construction generally involves interstate commerce, because most building materials pass in interstate commerce. Eure v. Cantrell Properties, 236 Ga. App. 427, 429, 512 S.E.2d 323 (1999), overruled on other grounds, Simmons Co. v. Deutsche Financial Svcs. Corp., 243 Ga.App. 85, 89, 532 S.E.2d 436 (2000).

Georgia appellate courts have followed federal cases when the FAA has preempted the field, because the federal act created a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the FAA. See Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., supra; Hilton Constr. Co. v. Martin Mechanical Contractors, supra at 702-703, 308 S.E.2d 830; Primerica Financial Svcs. v. Wise, 217 Ga. App. 36, 37(1), 456 S.E.2d 631 (1995); ADC Constr. Co. v. McDaniel Grading, 177 Ga. App. 223, 224(1), 338 S.E.2d 733 (1985). Accordingly, this action was subject to arbitration even though a violation of the buyers warranty is not alleged.

2. Plaintiffs contend that the trial court erred in compelling arbitration, because Tidal Construction's conduct throughout the litigation was inconsistent with arbitration, thereby waiving it. We agree.

Although Tidal Construction raised in its answer the possibility of mandatory arbitration, it did not immediately invoke such right but, instead, proceeded with litigation of the case up to actual trial, which consisted of protracted discovery over 16 months, and which, fundamentally, was inconsistent with its right to arbitration. It engaged in extensive discovery, in a motion for summary judgment, in pre-trial order, in trial calendar settings, and in a jury selection. Tidal Construction waited from December 5, 2000, when it answered, raising its arbitration rights, until March 7, 2002, when it had completed discovery, which was a limited right under Georgia arbitration and absent under the FAA, to demand a stay and to arbitrate. OCGA § 9-9-9. Arbitration is intended and designed to provide a quick and cost effective method of dispute resolution. However, after the plaintiffs expended over $11,000 for trial preparation and after Tidal Construction failed to obtain a ruling on its motion for summary judgment and faced a jury trial after jury selection, only then, at the eleventh hour, did Tidal Construction invoke its rights to arbitration to avoid such jury...