Case Title: Industra/Matrix Joint Venture v. Pope & Talbot

Citation: 

Docket Number: S52674

State: oregon

Court: Oregon Supreme Court

Date: 2006-09-08T00:00:00Z

Document:
FILED: September 8, 2006
IN THE SUPREME COURT OF THE STATE OF OREGON
INDUSTRA/MATRIX JOINT VENTURE,
an Oregon joint venture,
a/b/n of MATRIX SERVICE, INC.
Respondent on Review,
v.
POPE & TALBOT, INC.,
an Oregon corporation,
Petitioner on Review.
(CC 0112-12723; CA A121936; SC S52674)
En Banc
On review from the Court of Appeals.*
Argued and submitted May 9, 2006.
Guy A. Randles, of Stoel Rives LLP, Portland, argued the
cause and filed the brief for petitioner on review.  With him on
the brief was Charles F. Adams.
Julia E. Markley, of Perkins Coie LLP, Portland, argued the
cause and filed the brief for respondent on review.  With her on
the brief were Michael H. Simon, of Perkins Coie LLP, and Rodney
R. Mills and Daniel Gragg, of Seifer Yeats Mills & Zwierzynski
LLP, Portland.
BALMER, J.
The decision of the Court of Appeals is affirmed.  The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings.
*Appeal from Multnomah County Circuit Court, Ronald E. Cinniger, Judge. 200 Or App 248, 113 P3d 961 (2005).
BALMER, J.
This case requires us to determine whether claims based
on breach of contract and quantum meruit must go to arbitration
under an agreement between the parties to arbitrate certain
matters.  Industra/Matrix Joint Venture (plaintiff) initiated
this action, seeking $2.6 million in damages from Pope & Talbot,
Inc. (defendant).  Plaintiff later filed a petition to compel
arbitration and to abate the action pending arbitration. 
Defendant opposed that petition and also filed a motion for
summary judgment asserting that plaintiff was statutorily
precluded from commencing either litigation or arbitration
because plaintiff was not properly licensed by the Oregon
Construction Contractors' Board (CCB).  The trial court denied
plaintiff's petition and granted defendant's motion.  On appeal,
the Court of Appeals reversed and remanded, holding that
plaintiff's claims were arbitrable and that legal issues related
to plaintiff's claims, including the CCB license issue, should be
decided by the arbitrator.  Industra/Matrix Joint Venture v. Pope
& Talbot, 200 Or App 248, 113 P3d 961 (2005).  We allowed
defendant's petition for review and now affirm the decision of
the Court of Appeals.  
I.  FACTS
We take the facts from the Court of Appeals opinion and
the record.  In March 2000, Matrix Service, Inc., (Matrix), an
Oklahoma corporation, and Industra Service Corporation
(Industra), a Washington corporation, signed a "Joint Venture
Partnership Agreement" to form plaintiff.  The joint venture's
limited purpose was to enter into two contracts with defendant
for the construction and installation of piping and mechanical
equipment at defendant's pulp mill in Halsey, Oregon.  At all
times during the performance of those contracts, Matrix and
Industra individually held licenses from the CCB; plaintiff,
however, did not.
Both construction contracts contain an identical set of
"General Conditions" (GC), three of which -- GC 5, GC 27, and GC
35 -- are relevant here.  Under GC 5, the contracts provide for
an "Engineer" to be "the interpreter of the requirements of the
Contract Documents and the judge of the performance thereunder by
both parties."  Accordingly, "[c]laims, disputes, and other
matters in question relating to the performance of the Work or
the interpretation of the Contract Documents shall be referred
initially to the Engineer in writing for a decision[.]" (1)
Under GC 27, respecting "Claims," plaintiff is required
to "immediately notify the Engineer in writing of any occurrence
which * * * has caused or might cause, a substantial delay in the
progress or completion of the Work."  Additionally, if plaintiff
"believes that the alleged delay was occasioned for reasons
beyond [its] control, [plaintiff] may also submit a claim to the
Engineer to compensate [it] for such delay."  The engineer is
then required to review the claim and if, in the engineer's
opinion, the claim is "justified," issue a work order to cover
the cost.  If either plaintiff or defendant disputes the
engineer's opinion, then "the validity of the claim will be
determined by arbitration."GC 35 relates to "Disputes and Arbitration."  It
provides, in part:
"Differences between the parties to the Contract
as to the interpretation, application, or
administration of this Contract or any failure to agree
where agreement between the parties is called for
(herein collectively called the 'Dispute') which are
not satisfactorily resolved in the first instance by a
decision of the Engineer pursuant to the provisions of
GC 5 - Engineer shall be settled in accordance with the
provisions of this General Condition."
GC 35 further provides that, if the party raising the "Dispute"
disagrees with the engineer's decision under GC 5, then that
party may give "written notice to the other party" within 30 days
of receiving the engineer's decision that the party "requires the
Dispute to be settled in accordance with [GC 35]."  After receipt
of that notice, the parties are required to "attempt to resolve
the Dispute by agreement[.]"  If they are unable to do so, either
party may "refer such matter to arbitration for resolution,"
provided that the dispute "is not excluded from the application
of arbitration by [six enumerated exceptions.]"  That arbitration
requirement and the only one of the six exceptions that the
parties assert is relevant here provide as follows:"Except for disputes between [the parties]
relating to:
"* * * * *
"35.5.6  The damages to which either [party] may
be entitled at law on account of a breach of the
Contract by the other of them;
"all disputes between [the parties] which are not
settled satisfactorily either by the Engineer or by the
agreement of [the parties] shall be resolved by
arbitration in accordance with the following
procedures[.]"
Finally, the "procedures" enumerated in GC 35 provide, among
other things, that "The Arbitration Act of Oregon, for the time
being in force, shall apply to any arbitration hearings."
Due to various problems encountered during
construction, plaintiff did not complete the project until after
the scheduled completion date, and both parties incurred
unanticipated expenses.  Each party contends that the other is
responsible for the delay and the resulting expenses. 
II.  PROCEEDINGS BELOW
In December 2001, plaintiff initiated this action for
breach of contract and quantum meruit.  Plaintiff alleged, among
other things, that it had "incurred additional costs and
expenses" due to "major delays and inefficiencies in performing
the work" caused by defendant's failure to perform under the
contracts.  Quoting GC 27, plaintiff also alleged in its
complaint that the construction agreement between the parties
provides that the validity of its claims "'will be determined by
arbitration.'"
Subsequently, the parties engaged in discovery in
preparation for trial.  On January 3, 2003, plaintiff filed a
second amended complaint, seeking $2.6 million in damages -- the
amount that plaintiff claimed that it had expended in labor,
materials, and equipment ($5 million) reduced by the amount that
defendant had paid to plaintiff ($2.4 million) -- and a petition
to compel arbitration and to abate the action pending
arbitration.  See former ORS 36.310 (2001) (providing procedure
for party to seek court order compelling arbitration); former ORS
36.315 (2001) (authorizing court to abate action of issue
referable to arbitration). (2)  On January 17, 2003, defendant
filed a motion for summary judgment on the grounds that
plaintiff's claims were barred by ORS 701.065(1) because
plaintiff did not have a valid CCB license at the time that it
had bid on or entered into the contracts or continuously while it
had performed the work. (3)
In support of its petition, plaintiff argued that its
claims were subject to arbitration under GC 35 and were not
excluded by the one relevant exception for "disputes * * *
relating to * * * damages to which either [party] may be entitled
at law on account of a breach of the Contract * * *."  Further,
according to plaintiff, because the parties' agreement involved
interstate commerce, the Federal Arbitration Act (FAA), 9 USC
sections 1 to 16, applied, which required the entire matter to go
to arbitration.  Plaintiff contended that the provision in the
contracts that referred to the Oregon Arbitration Act (OAA)
governed only the procedures for the arbitration hearing itself.  
Defendant responded, first, that plaintiff had failed
to satisfy two conditions precedent to arbitration:  (1)
obtaining a CCB license as required by ORS 701.065(1), and (2)
submitting its claims to the engineer for initial review and
determination as required by the contracts.  Claiming that the
contractual reference to the OAA governed all arbitration
matters, defendant argued that Oregon law required the court to
determine whether plaintiff had fulfilled those conditions
precedent to arbitration.  For that proposition, defendant relied
on Moresi v. Nationwide Mutual, 96 Or App 61, 64, 771 P2d 301
(1989) (applying state law; "'conditions precedent' are matters
for judicial determination when they involve the conditions that
the parties agreed on about access to the arbitral forum"), rev'd
on other grounds, 309 Or 619, 789 P2d 667 (1990).  Second,
defendant argued that plaintiff was not a "party aggrieved by the
failure, neglect or refusal of another" to perform under an
arbitration clause, former ORS 36.310 (2001), because plaintiff
had not made a written demand for arbitration in accordance with
GC 35 of the contracts.  Third, defendant argued that plaintiff
had waived its right to demand arbitration by filing that request
more than one year after it had filed a civil action against
defendant and by taking advantage of judicial discovery
procedures not available in arbitration.
The trial court denied plaintiff's petition in a letter
opinion.  The trial court agreed with defendant's threshold
argument that the contractual reference to the OAA required the
application of Oregon law to all arbitration matters and not only
to the procedures for the arbitration hearing.  Turning to the
substantive issues, the trial court agreed with the first two of
defendant's arguments:  that plaintiff had not performed its
contractual conditions precedent because it had not submitted the
dispute to the project engineer or made a formal, written demand
for arbitration and that plaintiff had not met the statutory
condition precedent that it be properly licensed under ORS
701.065(1) before asserting its claim. (4)  Accordingly, the
trial court denied plaintiff's petition to compel arbitration. 
Thereafter, the trial court granted defendant's motion for
summary judgment pursuant to ORS 701.065(1), based on the fact
that plaintiff did not have a CCB license.
Plaintiff appealed, arguing, first, that the trial
court had erred in refusing to compel arbitration and, second,
that, even if the petition to compel arbitration properly had
been denied, the trial court had erred in granting defendant's
summary judgment motion because issues of material fact existed
as to whether plaintiff was exempt from the CCB license
requirement under ORS 701.065(2).
As noted, the Court of Appeals reversed.  The court
held that the trial court had erred in concluding that the
contractual reference to the OAA required the application of that
statute to prearbitration issues.  It determined instead that the
text and context of that provision unambiguously indicated that
the parties intended Oregon law to govern the conduct of the
arbitration hearing and that nothing in the agreement indicated
that they intended Oregon law to apply to prearbitration issues. 
Industra/Matrix, 200 Or App at 255.  In those circumstances, the
court held that prearbitration issues were to be decided under
the FAA.  Id.  Applying that statute, the court concluded that
the parties' dispute was arbitrable because it precisely framed
the kind of issue that fell within the scope of GC 35, that is,
plaintiff's claims involved "an unresolved dispute over the
application or administration of the contract and failure to
agree where agreement between the parties [was] called for," and
none of the exceptions identified in GC 35 applied.  Id. at 258,
259.
The Court of Appeals also held that, under the FAA, the
arbitrator should decide whether plaintiff met the statutory and
contractual preconditions to arbitration.  Id. at 261. 
Accordingly, the court concluded that the trial court had erred
in denying plaintiff's petition to compel arbitration and,
consequently, in considering the merits of defendant's summary
judgment motion.  Id. at 253.  We allowed defendant's petition
for review.
   III.  ANALYSIS
A.  Applicable Law:  The FAA or the OAA
As an initial matter, we must determine whether Oregon
law or federal law applies to the resolution of the arbitrability
issues this case presents.  Based on United States Supreme Court
decisions interpreting the scope of the FAA, we conclude that
that statute applies, for the reasons that we discuss below.
Section 2 of the FAA provides, in part:
"A written provision in any * * * contract
evidencing a transaction involving commerce to settle
by arbitration a controversy thereafter arising out of
such contract * * * shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or
in equity for the revocation of any contract."
9 USC § 2.  "The effect of [that] section is to create a body of
federal substantive law of arbitrability, applicable to any
arbitration agreement within the coverage of the [FAA]."  Moses
H. Cone Hospital v. Mercury Constr. Corp., 460 US 1, 24, 103 S Ct
927, 74 L Ed 2d 765 (1983).  And that substantive federal law of
arbitrability -- whether, under a contractual arbitration clause,
a particular dispute must be decided by arbitration rather than
in court -- applies "even in the context of state-law claims
brought in state court."  Buckeye Check Cashing v. Cardegna, 546
US ___, ___, 126 S Ct 1204, 1209, 163 L Ed 2d 1038 (2006).  The
Supreme Court summarized the FAA's "coverage" in Allied-Bruce
Terminix Cos. v. Dobson, 513 US 265, 270-81, 115 S Ct 834, 130 L
Ed 2d 753 (1995), holding that section 2 of the FAA applied to
arbitration agreements included in a transaction that involved
interstate commerce, regardless of whether the parties
contemplated an interstate commerce connection when drafting
their agreement.  See also Perry v. Thomas, 482 US 483, 490, 107
S Ct 2520, 96 L Ed 2d 426 (1987) (stating that FAA "embodies
Congress' intent to provide for the enforcement of arbitration
agreements within the full reach of the Commerce Clause").
The expansive reach of the FAA, however, does not
necessarily negate an agreement between contracting parties to
apply a particular state's substantive contract law to their
dispute or a state's procedural rules to their arbitration
hearing.  Under the FAA, the courts will "enforce privately
negotiated agreements to arbitrate, like other contracts, in
accordance with their terms."  Volt Info. Sciences v. Leland
Stanford Jr. U., 489 US 468, 478, 109 S Ct 1248, 103 L Ed 2d 488
(1989).  Hence, a contractual provision calling for the
application of a particular state's law to the parties' agreement
is valid, provided that it does not "undermine the goals and
policies of the FAA."  Id. at 478 (upholding choice of law
provision calling for application of California procedural rule
to arbitration agreement because it did not conflict with
substantive features of FAA). 
Here, neither party disputes the fact that their
contracts involve interstate commerce:  plaintiff itself is
multistate in nature -- Industra is a Washington corporation and
Matrix is an Oklahoma corporation -- and defendant is an Oregon
corporation.  As noted above, however, the parties disagree as to
the scope of the contractual reference to the OAA.  Plaintiff
argues that the Court of Appeals correctly held that the
provision demonstrates "that the parties intended the OAA to
govern the conduct of the hearing" but that "nothing indicates an
intention to choose Oregon law to govern resolution of the legal
issues involved in determining whether a hearing should occur." 
Industra/Matrix, 200 Or App at 255.  Defendant responds that the
parties intended Oregon law to apply to the question of whether a
particular dispute must be arbitrated and to questions of
substantive contract law.
We agree with plaintiff.  The contractual reference to
the OAA in the present case requires only that "any arbitration
hearings" be governed by the OAA.  (Emphasis added.)  That
provision says nothing about issues that might arise and require
resolution before a hearing.  And, ipso facto, it does not speak
to the source of law governing the way in which any such issues
should be resolved or by whom.  In contrast, the choice of law
provision upheld in Volt provided that "[t]he Contract shall be
governed by the law of the place where the Project is located." 
489 US at 470 (emphasis added).  In view of the limited scope of
the parties' contractual reference to the OAA, we cannot conclude
that the parties intended that the issue whether this dispute is
arbitrable should be decided under the OAA.  In such
circumstances, and in view of the interstate nature of this
transaction, it follows that the arbitration agreement in the
contracts at issue here falls within the coverage of the FAA and
that statute therefore applies.
B.  "Substantive" and "Procedural" Arbitrability Under the FAA
Having concluded that the FAA governs the parties'
arbitration agreement, we now turn to the federal cases applying
that statute to determine who decides whether plaintiff's claim
should be presented to an arbitrator or to a court.  As discussed
below, the FAA requires that questions of "substantive"
arbitrability be decided by the court and questions of
"procedural" arbitrability be decided by the arbitrator.
Arbitration under the FAA is based on contract.  "[A]
party cannot be required to submit to arbitration any dispute
which [it] has not agreed so to submit."  Steelworkers v. Warrior
& Gulf Co., 363 US 574, 582, 80 S Ct 1347, 4 L Ed 2d 1409 (1960). 
Accordingly, before a court may compel arbitration under the FAA,
it must determine (1) whether the parties are bound by a valid
arbitration agreement; and (2) if so, whether the particular type
of controversy between the parties is within the scope of that
agreement.  Howsam v. Dean Witter Reynolds, Inc., 537 US 79, 84,
123 S Ct 588, 154 L Ed 2d 491 (2002); see also AT&T Technologies
v. Communications Workers, 475 US 643, 649, 106 S Ct 1415, 89 L
Ed 2d 648 (1986) ("the question of whether the parties agreed to
arbitrate is to be decided by the court, not the arbitrator").
Thus, a court, in construing a valid arbitration
agreement within the coverage of the FAA, applies ordinary
principles of state contract law to determine whether the parties
have agreed to arbitrate a particular dispute.  First Options of
Chicago, Inc. v. Kaplan, 514 US 938, 944, 115 S Ct 1920, 131 L Ed
2d 985 (1995).  In doing so, however, "questions of arbitrability
must be addressed with a healthy regard for the federal policy
favoring arbitration," and "any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration[.]" 
Moses H. Cone, 460 US at 24-25; see also Mitsubishi Motors v.
Soler Chrysler-Plymouth, 473 US 614, 626, 105 S Ct 3346, 87 L Ed
2d 444 (1985) ("[A]s with any other contract, the parties'
intentions control, but those intentions are generously construed
as to issues of arbitrability.").
Decisions construing the FAA, however, distinguish the
issue of substantive arbitrability -- whether the parties
intended an arbitration clause to cover a particular type of
dispute -- from other "gateway" questions of arbitrability that
the "parties would likely expect that an arbitrator [will]
decide[.]"  Howsam, 537 US at 84.  Those issues include
"'procedural' questions which grow out of the dispute and bear on
its final disposition," John Wiley & Sons v. Livingston, 376 US
543, 557, 84 S Ct 909, 11 L Ed 2d 898 (1964), as well as
"allegation[s] of waiver, delay, or a like defense to
arbitrability," Moses H. Cone, 460 US at 25.  With that
background in mind, we turn to the merits of the present dispute.
C.  Scope of the Parties' Arbitration Agreement
Here, the parties do not dispute that a valid, binding
arbitration agreement exists between them.  At issue is the scope
of that agreement -- i.e., whether plaintiff's claims fall within
its ambit and, therefore, must be arbitrated.  Accordingly, we
must determine whether the parties intended their arbitration
agreement to include the present controversy by examining the
text and context of the provision.  Yogman v. Parrott, 325 Or
358, 361, 937 P2d 1019 (1997).  If the provision proves to be
unambiguous, then our analysis is complete and we give the
appropriate effect to the parties' intentions.  Id.  "In the
absence of an ambiguity, the court construes the words of a
contract as a matter of law."  Eagle Industries, Inc. v.
Thompson, 321 Or 398, 405, 900 P2d 475 (1995).  If an examination
of the text and context reveals an ambiguity, we resolve any
doubts concerning the scope of arbitrable issues in favor of
arbitration.  Moses H. Cone, 460 US at 24-25; see also Volt, 489
US at 475-76 ("[I]n applying general state-law principles of
contract interpretation to the interpretation of an arbitration
agreement within the scope of the [FAA], due regard must be given
to the federal policy favoring arbitration, and ambiguities as to
the scope of the arbitration clause itself resolved in favor of
arbitration." (Internal citations omitted.)).
Applying the principles outlined above, we agree with
the Court of Appeals that plaintiff's claims must go to
arbitration.  We begin our analysis with the text and context of
the arbitration clause contained in GC 35 to determine whether
that clause encompasses plaintiff's claims.  As quoted above, GC
35 first sets out a broad definition of "Dispute" as
"[d]ifferences between the parties to the Contract as to the
interpretation, application, or administration of this Contract
or any failure to agree where agreement between the parties is
called for[.]"  If the prearbitration measures discussed earlier
do not resolve the dispute, then either party may refer the
dispute to arbitration, provided that it is not excluded by one
of the six enumerated exceptions.  As noted, of those six
exceptions, the parties identify only one as relevant here, viz.,
the exception excluding from arbitration "disputes between [the
parties] relating to * * * [t]he damages to which either [party]
may be entitled at law on account of a breach of the Contract by
the other of them[.]"
We next analyze plaintiff's two claims to determine
whether they are "disputes" that fall within the overall scope of
the arbitration provision of GC 35, and, if so, whether those
claims nevertheless are excluded from arbitration because of the
exception set out in GC 35.5.6.
Plaintiff's breach of contract claim alleges that
plaintiff "has performed all conditions and conditions precedent
it is required to perform under the provisions of its agreement
with [defendant]" and has "incurred additional costs and
expenses" as a result of various specified "contract breaches and
violations of implied and express warranties" on the part of
defendant.  Those allegations clearly describe a dispute relating
to the "interpretation, application, or administration" of the
contract.  As such, plaintiff's breach of contract claim falls
within the scope of the parties' arbitration agreement.
With respect to plaintiff's quantum meruit claim,
defendant argues that such an equitable claim "inherently" is not
arbitrable because it is dependent on the absence of an
enforceable contract, whereas the agreement to arbitrate is
itself dependent on the existence of the contract.  Therefore,
defendant contends, plaintiff's quantum meruit claim cannot be
determined on the basis of contract interpretation.  Plaintiff
argues, however, that its quantum meruit claim falls within the
second part of the definition of "Dispute" as "any failure to
agree where agreement between the parties is called for" because
that phrase does not require a dispute to arise out of the
parties' express contract for that dispute to be subject to the
arbitration clause.  Specifically, plaintiff asserts that,
because it and defendant could not agree on the amount of payment
to which plaintiff was entitled as a result of the construction
work that it performed, its quantum meruit claim meets the
definition of "Dispute" and is therefore arbitrable.
Contrary to defendant's argument, whether a quantum
meruit claim is arbitrable per se is not the appropriate inquiry. 
Rather, the question for the court is "whether an arbitration
clause in a concededly binding contract applies to a particular
type of controversy[.]"  Howsam, 537 US at 84.  Here, plaintiff's
quantum meruit claim simply incorporates by reference the
allegations set forth in the breach of contract claim, with the
additional allegation that defendant would be unjustly enriched
by $2.6 million "were it permitted to retain the goods and
services provided to it by [plaintiff] without payment."  In that
respect, it "touch[es] matters" that undoubtedly are covered by
the arbitration agreement, Mitsubishi Motors, 473 US at 624 n 13
-- the performance of the parties under the contract and the
payment for plaintiff's work -- and, thus, must be arbitrated,
regardless of how the claim is labeled.
We therefore conclude that plaintiff's claims fall
within the scope of matters that GC 35 requires to be arbitrated,
unless they also fall within its explicit exception.  As noted,
GC 35 excepts from arbitration disputes relating to "[t]he
damages to which either [party] may be entitled at law on account
of a breach of the Contract by the other of them[.]"  Defendant
argues that a determination of plaintiff's breach of contract
claim is certainly "related to" and, in fact, "necessary" to any
award of damages.  In other words, defendant reads the exception
to exclude from arbitration not only disputes "relating to" the
amount of damages, but also disputes "relating to" their
existence as well.  Accordingly, defendant contends that
plaintiff's breach of contract claim is thereby excluded from
arbitration under the exception.
In our view, defendant's interpretation of the
exception conflates two separate issues that may arise in a
dispute between the parties:  (1) breach, and (2) the amount of
damages flowing from that breach.  The text of the exception,
however, does not conflate those issues but, rather, exempts
disputes "relating to * * * damages" and then simply describes
the type of damages so exempted as those to which either party
may be entitled to "on account of a breach."  Therefore, disputes
relating to the amount of damages on account of a contractual
breach are excluded from arbitration, but, contrary to
defendant's position, liability disputes that may entitle either
party to such damages are not.  That construction of the
exception gives effect to all provisions of GC 35.  See ORS
42.230 ("where there are several provisions or particulars, such
construction is, if possible, to be adopted as will give effect
to all").
In any event, we note that, were we to agree that
defendant's interpretation of the exception in GC 35 is
reasonable and, therefore, demonstrates an ambiguity in the
exception, (5) we nevertheless would be required to resolve
that ambiguity in favor of arbitration.  That is so because, when
the scope of an arbitration provision within the coverage of the
FAA is at issue, any ambiguity must be resolved in favor of
arbitration.  Volt, 489 US at 475-76.  Consequently, we hold that
the liability portion of plaintiff's breach of contract claim and
the entirety of its quantum meruit claim are not exempt from
arbitration under the language of the exception.
D.  Defendant's CCB License Argument
Finally, defendant argues that, even if plaintiff's
claims are subject to arbitration under the contracts, the
threshold issue of whether plaintiff is barred from seeking
compensation by ORS 701.065(1) is one for the court, rather than
the arbitrator.  Defendant contends that whether an unlicensed
contractor, like plaintiff, "lawfully may commence arbitration is
-- as a matter of law -- a question of substantive arbitrability
solely for the court to decide, * * * absent clear and
unmistakable evidence that the parties intended otherwise." 
Quoting Howsam, defendant asserts that a dispute over whether a
contractor was licensed, or is entitled to invoke one of the
exceptions in ORS 701.065(2), is "'a gateway dispute about
whether the parties are bound by a given arbitration clause.'" 
537 US at 84.  As defendant recognizes, ORS 701.065(2)
specifically refers to an "arbitrator," indicating that the
legislature assumed that, at least in some circumstances, the
issue whether an unlicensed contractor could bring a claim for
compensation would be presented to an arbitrator rather than a
court.  Defendant argues, however, that those circumstances are
limited to when the agreement demonstrates "clear and
unmistakable evidence" that the parties agreed to arbitrate the
issue of arbitrability.  Here, defendant continues, there is no
such evidence in the parties' agreement of an intent to empower
the arbitrator to decide whether defendant was obligated to
arbitrate with an unlicensed contractor.  Plaintiff counters that
ORS 701.065(1) provides a "defense to arbitrability," Moses H.
Cone, 460 US at 25, and, as such, presents a question of
procedural arbitrability for the arbitrator to decide.
We agree with plaintiff that the license issue is one
of procedural arbitrability that should be decided by the
arbitrator.  Certainly, the issue does not present a "gateway
dispute" about whether the parties are bound by the arbitration
provision.  As noted above, that threshold matter involves a two-pronged inquiry:  (1) whether the parties are bound by a valid
arbitration agreement; and (2) if so, whether the particular type
of controversy between the parties falls within the scope of that
agreement.   Whether plaintiff is barred from "commenc[ing] a
claim" under ORS 701.065(1), on the other hand, is a question
that bears on the final disposition of the parties' dispute and,
as such, presents an issue of procedural arbitrability. 
Accordingly, we hold that the issue is "presumptively not for the
judge, but for an arbitrator, to decide."  Howsam, 537 US at 84
(emphasis in original). (6)
Likewise, defendant's assertion that plaintiff failed
to meet the contractual conditions precedent to arbitration --
submitting the dispute to the engineer, providing written notice
to defendant of its request for arbitration, and attempting to
resolve the dispute by agreement -- presents a "'procedural'
question[] which grow[s] out of the dispute" and therefore must
be decided by the arbitrator.  John Wiley, 376 US at 557 (holding
that arbitrator should decide whether first two steps of
grievance procedure were completed, where those steps were
prerequisites to arbitration). 
For the reasons set forth above, we agree with the
Court of Appeals that the trial court erred in denying
plaintiff's petition to compel arbitration and in considering the
merits of defendant's summary judgment motion.
The decision of the Court of Appeals is affirmed.  The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings.
1. We note that the record does not contain the full agreement
between the parties, including certain provisions of GC 5 that
apparently relate to the responsibilities of the project
engineer.  However, the provisions of GC 5 that are in the record
provide that the "duties, responsibilities, and limitations of
authority of the Engineer * * * will not be modified or extended
without the written consent of [defendant]," and neither party
asserts that those duties were modified by any subsequent
agreement.
2. When this action was filed, the 2001 version of the Oregon
Arbitration Act (OAA), ORS 36.300 to 36.365, was in effect.  In
2003, the legislature repealed the OAA, Or Laws 2003, ch 598, §
57, and enacted a version of the Uniform Arbitration Act (UAA). 
Id. §§ 1-30.  Because this action was commenced before the
effective date of that act, former ORS 36.300 to 36.365 (2001)
continues to apply to this case.  Or Laws 2003, ch 598, § 31. 
Former ORS 36.310 (2001) provided, in part:
"A party aggrieved by the failure, neglect or
refusal of another to perform under a contract or
submission providing for arbitration * * * shall
petition the circuit court, or a judge thereof, for an
order directing that the arbitration proceed in the
manner provided for in the contract or submission.
* * * The court or judge shall hear the parties, and if
satisfied that the making of the contract or submission
or the failure to comply therewith is not an issue,
shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the
contract or submission."
3. ORS 701.065(1) provides:
"Except as provided in subsection (2) of this
section, a contractor may not perfect a claim of a
construction lien, or commence a claim with the
Construction Contractors Board, in arbitration or in
any court of this state for compensation for the
performance of any work or for the breach of any
contract for work that is subject to this chapter,
unless the contractor had a valid license issued by the
board:
"(a) At the time the contractor bid or entered
into the contract for performance of the work; and
"(b) Continuously while performing the work for
which compensation is sought."
ORS 701.065(2) provides a series of exceptions and directs
that, when they apply, the "board, arbitrator or court shall
not apply the provisions of [ORS 701.065(1)] to a lien or
claim[.]"  Our disposition of this case does not require us
to consider any of those exceptions.
4. Based on the record before it, the trial court
rejected defendant's third argument, finding that plaintiff
had not waived its right to arbitration.
5. See Pacific First Bank v. New Morgan Park Corp., 319
Or 342, 348, 876 P2d 761 (1994) ("Words or terms of a
contract are ambiguous when they reasonably can, in context,
be given more than one meaning.").
6. Our holding on this issue is limited to the conclusion
that the licensing issue must go to the arbitrator rather
than the court.  In so holding, we express no opinion on the
merits of defendant's argument.