New York District Court Holds That Suit Must Be Stayed Pending Submission Of Claim To Dispute Resolution Board

BAE Automated Sys., Inc. v. Morse Diesel Int’l, Inc.
01 Civ. 0217 (SAS), 2001 U.S. Dist. Lexis 6682 (S.D.N.Y. May 22, 2001)

The United States District Court for the Southern District of New York granted an order staying all proceedings in a construction dispute pending resolution by a dispute resolution board (“DRB”) in this case. This case involved a breach of contract claim brought by BAE Automated Systems, Inc. (“BAE”), a baggage handling subcontractor, against AMEC Construction Management, Inc. (“AMEC”), the construction manager of a project to build a new terminal at John F. Kennedy International Airport (the “Project”). AMEC then brought a third-party claim against the owner of the Project, Terminal One Group Association (“TOGA”).

AMEC moved to stay proceedings in the case pending resolution by the DRB established in the Prime Contract. In assessing the motion, the court employed three-prong test: 1) whether the parties had entered into a valid alternative dispute resolution agreement; 2) whether the dispute falls within the scope of that agreement; and 3) whether any conditions precedent have been met. Finding all three factors satisfied, the court ordered a stay.

Central to the district court’s decision was whether all parties had entered a valid dispute resolution agreement. The Prime Contract between TOGA and AMEC specifically described the DRB, comprising three members chosen by TOGA, AMEC, and the architect. In contrast, the Subcontract between BAE and AMEC simply incorporated the dispute resolution procedure of the Prime Contract into the Subcontract without expressly detailing the DRB. The district court found no ambiguity in the language of the Subcontract, however, determining that the Subcontract specifically incorporated the DRB. Having determined that the Subcontract specifically required submission of all claims to a DRB, the district court stayed the proceedings before it pending resolution by the DRB.

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