Arbitration by Estoppel: North Carolina Court Holds That Arbitration Clauses Bind Nonsignatories Who Seek to Enforce the Contracts in Which the Clauses Appear

Charlotte Student Hous. DST v. Choate Constr. Co., 2018 NCBC LEXIS 88 (N.C. Super. Ct. Aug. 24, 2018).

This case arose from the construction of a student apartment complex known as Arcadia.  The plaintiffs, Arcadia’s current owner and landlord, asserted breach of warranty, negligence, and fraud claims against Arcadia’s original owner, the architect, the general contractor, and two subcontractors, alleging that defects in Arcadia’s design and construction caused millions of dollars in repairs and lost rent.

The general contractor, Choate Construction Company, and its geotechnical engineering subcontractor, Geoscience Group, moved to dismiss all claims asserted against them on the ground that they were subject to arbitration.  Choate and Geoscience pointed to arbitration clauses in their contracts with the original owner, both of which required all claims “arising out of or related to” those contracts to be arbitrated before the AAA in accordance with its Construction Industry Arbitration Rules.

The plaintiffs argued that the arbitration clauses were not binding on them because the contracts that contained them were not assigned to plaintiffs when they purchased Arcadia. They also argued that their tort claims were not subject to the arbitration clauses. Continue reading “Arbitration by Estoppel: North Carolina Court Holds That Arbitration Clauses Bind Nonsignatories Who Seek to Enforce the Contracts in Which the Clauses Appear”

New York Appellate Division Holds That Contractor’s Assertion That No Payments Were Due to Subcontractor Until a Separate Prevailing Wage Action Was Resolved Precludes Application of Contractual Limitations Period

AWI Sec. & Investigations, Inc. v. Whitestone Constr. Corp., 2018 N.Y. App. Div. LEXIS 5867 (August 23, 2018)

A subcontractor, AWI Security and Investigations, Inc. (“AWI”), sued a general contractor, Whitestone Construction Corp. (“Whitestone”), for unpaid contract payments for providing security services on four separate construction projects.  A separate prevailing wage action (“Wage Action”) was also filed by AWI employees who worked on the projects, against both AWI and Whitestone.  Whitestone notified AWI that it was invoking the subcontract indemnity provision to withhold funds from AWI pending the outcome of the Wage Action.

Whitestone moved to dismiss AWI’s suit for payment based on a contractual limitations period requiring the suit to be brought within 6 months of: the cause of action accruing; the termination or conclusion of the contract; or the last day AWI performed work at the site, which Whitestone alleged had all occurred.  The court granted Whitestone’s motion to dismiss, finding that AWI had completed its work more than six months prior to filing its lawsuit and that AWI’s suit was barred by the contractual limitations period.  AWI appealed. Continue reading “New York Appellate Division Holds That Contractor’s Assertion That No Payments Were Due to Subcontractor Until a Separate Prevailing Wage Action Was Resolved Precludes Application of Contractual Limitations Period”

General Contractor’s Unjustified Threats to Assess Delay Damages Against Subcontractor Are a Material Breach of Contract

Randy Kinder Excavating, Inc. v. JA Manning Constr. Co. 2018 U.S. App. LEXIS 21878 (8th Cir. Aug. 7, 2018)

This article was published in the February 2019 issue of ConsensusDocs Construction Law Newsletter (Vol. 5, Issue 1).

This dispute arose from a contract to build a pumping station in Arkansas (the “Project”).  In June of 2010, the U.S. Army Corps of Engineers (“COE”) awarded a contract to Randy Kinder Excavating, Inc. (“Kinder”) to serve as the general contractor on the Project.  Kinder entered into a subcontract with J.A. Manning Construction Co. (“Manning”) to engineer, furnish and install a mechanically stabilized earth (“MSE”) wall at the Project.

The Project experienced significant delays which affected the Manning’s initial start date.  By the time Manning could begin constructing the MSE wall, only six days remained until the original completion date of the entire Project.  Unknown to Manning, however, Kinder was telling the COE that weather and other issues were delaying the Project and Kinder represented to the COE that its projected completion date for MSE wall was in the summer of 2012.  At the same time, Kinder was telling Manning that the MSE wall needed to be completed by November of 2011 and repeatedly threatened to assess delay damages against Manning if this did not occur.  In addition, during the construction of the MSE wall, Kinder and/or the COE demanded that Manning install the wall panels 0.75 inches apart with absolutely no variance, despite industry standard allowing a 0.25 inch variance.  On March 7, 2012, Kinder terminated Manning, at which point Manning had constructed 27.5 feet of the 40-foot MSE wall.  The MSE wall was later completed by a replacement contractor, although the wall as-accepted by the COE contained a number of defects that Kinder and the COE told Manning were unacceptable.  Continue reading “General Contractor’s Unjustified Threats to Assess Delay Damages Against Subcontractor Are a Material Breach of Contract”