Missouri Court of Appeals Holds that Numerous Small Claims Aggregated into a Single Large Claim Were Still Subject to Contract Provision for Arbitration of Small Claims

Fru-Con Constr. Co. v. Southwestern Redevelopment Corp. II,
1995 Mo. App. LEXIS 1443 (Mo. Ct. App. Aug. 15, 1995)

Arbitration Claims Limit – The Contractor submitted a $20 million claim and then commenced lawsuit against the Owner. After nearly two years of litigation, the Owner requested the architect to evaluate claim and the architect determined that the claim was actually a group of small claims, all of which (except one) were less that $200,000 and, therefore, subject to arbitration provision in contract.

Fru-Con (“Contractor”) and Southwestern Redevelopment (“Owner”) entered into a contract in excess of $100 million for the construction of a new data center in St. Louis. Pursuant to the contract, claims or disputes between the Contractor and the Owner were to be submitted initially to the architect. The contract also contained an arbitration provision as follows:

All claims, disputes and other matters in question between the Contractor and the Owner arising out of or relating to the Contract Documents or the breach thereof . . . shall be decided by arbitration . . . , if the total amount of damages arising from the claim or dispute, as estimated by the Architect, are less than $200,000. Any claim, dispute or other matter in question for which the amount of damages is estimated by the Architect to be greater than $200,000 is not subject to arbitration unless the parties mutually agree otherwise.

During the construction of the project, the Contractor submitted numerous Contractor Change Proposals (“CCPs”) evaluation of CCP 297 and found that the claim “was comprised of multiple events giving rise to a series of different claims, only one of which exceeded $200,000 and was, therefore, outside the arbitration requirement.” After receiving the architect’s evaluation, the Owner served its demand for arbitration on the Contractor and filed a motion to stay the present proceedings. The trial court denied the motion to stay, finding the Contractor’s “claim” exceeded $200,000 as the term “claim” is used in the contract. The Owner appealed.

The appellate court reversed finding that the Federal Arbitration Act, 9 U.S.C.A. 1-16, applied to this matter and relying heavily on the strong federal policy in favor of arbitration. The court found it significant that the parties gave the architect the power to determine initially all claims, disputes and other matters in question between the Owner and the Contractor. The architect determined that CCP 297 was actually an accumulation or amalgamation of claims encompassing different phases of the work and requiring different elements of proof. The Contractor claimed that all of its cause of action was premised upon bad plans and poor supervision and administration. The court, however, was “unable to conclude that the strong presumption in favor of arbitration can be overcome by combining a series of claims into one grand claim tied together by amorphous generalized allegations of bad plans and poor supervision and administration.” The court also rejected the Contractor’s argument that it should not be forced to litigate and arbitrate simultaneously these related contract claims, citing several federal cases requiring a similar result.

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