REPORTED
IN THE COURT OF SPECIAL APPEALS

OF MARYLAND
No. 20 September Term, 20 15

______________________________________

SCHNEIDER ELECTRIC BUILDINGS CRITICAL SYSTEMS, INC.

v. WESTERN SURETY COMPANY

______________________________________ Krauser, C.J., Berger, Zarnoch, Robert A. (Senior Judge, Specially Assigned),

JJ.

______________________________________

Opinion by Krauser, C.J.

______________________________________ Filed : November 30, 2016* This is an unreported The issue before us is whether Western Surety Company, the appellee, is bound by

the ma n datory arbitration clause of an agreement between Schneider Electric Buildings Critical Systems, Inc. , the appellant, and National Control Services, Inc. (“NCS”), as that agreement was later incorporated by reference into a subcontract between Schneider Electric and NCS, which was th ereafter incorporated by reference into a performance bond issued by Western Surety on behalf of NCS for work it was to perform for Schneider
Electric

. The aforementioned agreement between Schneider Electric and NCS, containing
the arbitration clause at i ssue, in this appeal , was entitled the “ Master Subcontract Agreement

. ” Its purpose was to enable Schneider Electric , “from time to time,” to “engag e the services of [NCS] to provide labor, material, equipment and services

. . . in connect ion
with construction projects, ” and its terms were to cover all future subcontracts between
them. Of particular relevance to the issue before us, t h e Master Subcontract Agreement provided that a ny disputes that might arise between those two corporate entities , wh ich could not be resolved by “good faith negotiations,” must be submitted to arbitration. One year later, Schneider Electric was retained to assist in the building of a facility at Aberdeen Proving Ground, whereupon it entered into a subcontract agreement with
NCS , in accordance with the parties’ Master Subcontract Agreement, providing that NCS was to perform certain work at the construction site of that facility

. T h e s ubcontract required NCS to furnish a performance bond, which it did. The issuer of tha t bond was Western Surety

. And , significantly, t he bond incorporated by reference the s ubcontract2

between Schneider Electric and NCS, which had incorporated by reference the Master Subcontract Agreement between those two parties , with its mandatory arbitration clause

. When NCS thereafter declined to perform the construction required by th e

s ubcontract , as a result of a payment dispute, Schneider Electric filed, as provided by the parties’ Master Subcontract Agreement , a demand for arb itration. Although t hat demand , initial ly , named only NCS as a respondent , it was subsequently amended to include Western Surety , as a co - respondent, on the grounds that the performance bond , issued by Western Surety, incorporated by reference the s ubcont ract , which, in turn, had incorporated by reference the Master Subcontract Agreement , with its mandatory arbitration clause , and thereby purportedly bou nd Western Surety to that clause

. In response to its belated inclusion into Schneider Electric’s demand for arbitration, Western Surety filed a petition, in the Circuit Court for Howard County, to stay that arbitration and for a declaratory judgment , avowing , among other things, that it was not a party to Schneider Electric ’s and NCS’ agreement to arbitrate their disputes and therefore could not be compelled to participate in the arbitration proceeding pending between them ; it asserted, moreover , that Schneider Electric ha d breach ed the performance bond and that
that breach had reliev ed Western Surety of any liability under that instrument

. Then, following the transfer of this dispute from Howard County to Harford County , the Circuit Court for Harford County granted partial summary judgment in favor of Western Surety,
conclud ing that, under either federal or state law, Western Surety was not subject to the arbitration provision of the incorporated Master Subcontract Agreement and therefore3

could not be compelled to participate in the pending arbitration proceeding between
Schneider Electric and NCS.
In so ru ling, t he Harford County circuit court cited three grounds for its decision: first, the words of the performance bond evinced an intent by Western Surety to guarantee the performance of all construction work to be performed by NCS, but not all contractual obligations undertaken by NCS , pursuant to the s ubcontract ; second, the arbitration clause
of the Master Subcontract Agreement , even if ultimately incorporated by reference into the performance bond, mandat ed arbitration only as to disputes between Schneider Electric and NCS; and , third, to rule otherwise, would , in effect, read out of the performance bond language expressly providing for a judicial resolution of a ny dispute, involving the bond, that might arise

. Schneider Electric then noted this a ppeal, contending that the Harford County circuit court’s ruling was in error for two reasons: first, by agreeing , in the performance
bond , to “jointly and severally” b i nd themselves to the performance of the s ubcontract
between Schneider Electric and NCS , both Western Surety and NCS were thereby bound

to comply with the arbitration clause incorporated by reference into that s ubcontract; and, second, because the performance bond incorporated by reference th at s ubcontract, Western Surety was rendered subject to the arbitration clause. Finding no merit to either claim of

error , w e shall affirm the judgment of the circuit court

.4 I.
I n May 2009, Schneider Electric 1 and NCS entered into a “ Master Subcontract Agreement, ” in which the parties agreed , as noted, that NCS would “provide labor, material, equipment and services necessary to perform work in connection with construction projects, from time to time[.]” The Master Subcontract Agreement set forth , among other things, the terms and condi tions that would apply to all future subcontracts
between the two compan ies

. It also includ ed a provision , which is the crux of this appeal, that any dispute between them would be subject to arbitration, if they were unable to negotiate a resolution of that dispute

. Several months later, o n August 14, 2009, Clark Construction Group, LLC, which is not a party to this matter, entered into a contract with the United States Army Corps of Engineers to build a r eplacement f acilit y for medical research at Aberdeen Proving Ground in Harford County , Maryland

. The following October, Clark Construction, now the general contractor for that construction project, contractually retained the services of Schneider
Electric to assist in the construction of that facility.
S even months after Schneider Electric was engag ed , by Clark Construction , as a subcontractor for the construction project , Schneider Electric, pursuant to its Master Subcontract Agreement with NCS , entered into a s ubcontract with NCS , to perform work

1 When the parties entered into the Master Subcontract Agreement, Schneider Electric was known as TAC Critical Systems, Inc. In July 2011, more than two years after the execution of the Master Subcontract Agreement , TAC Critical Systems changed its name to Schneider Electric Buildings Critical Systems, Inc.5

for that project

. The s ubcontract incorporated by reference the Master Subcontract Agreement , which contained the arbitration clause at issue

. Specifically, t he s ubcontract provided that NCS would perform “electrical and pneumatic installation” work at the Aberdeen facility. For that work, NCS was to be paid $2,050,000, “ in installments as the Work progresses .”
T he subcontract also require d NCS to furnish a performance bond , designat ing Schneider Electric as the obligee , for 100 per cent of the “Sub contract value , ” that is, $2,050,000

. 2 NCS subsequently obtained that bond from Western Surety. The performance bond , issued by Western Surety , at NCS’ request, was an American Institute
of Architects (“AIA”) form A312 3 and boun d Western Surety and NCS to Schneider
Electric “ for the performance of the C onstruction C ontract, ” which was incorporated by
reference into the performance bond

. The term “Construction Contract , ” as defined by the performance bond , include d the s ubcon tract , between Schneider Electric and NCS , and thereby the Master Subcontract Agreement between those two entities , with its mandatory arbitration clause, which had been incorporated by reference into the subcontract.

2 Although the court below stated, in its opinion, that the bond amount was $2,600,000, th e bond and pleadings below indicate the amount was $2,050,000.

3 The American Institute of Architects is an organization which, among other things, “[s] ets the industry standard in contract documents with more than 100 forms and contracts used in the desi gn and construction industry .” See “About the AIA,” available at http://www.aia.org/about/index.htm (last visited Nov

. 7 , 2016).6

Th e s ubcontract specified that NCS’ work would begin on May 25, 2010 and
conclude by May 31, 2013. As the work progressed, numerous change orders eventual ly increased the amount to be paid NCS, by Schneider Electric , from $2,050,000 to $2,309,883, and extended the date that NCS was to comp lete its work from May 31, 2013

to February 28, 2014. 4 In the summer of 2013, a dispute arose between Schneider Electric and NCS concerning payment for work NCS had purportedly performed. NCS claimed it was owed approximately $410,000 , by Schneider Elect ric, for various progress payments, claims, and change orders. When Schneider Electric rejected NCS’ demand for payment, the parties attempted, as required by the ir Master Subcontract Agreement , which had been incorporated by reference into their s ubcontr act , to resolve their dispute “through good faith negotiations and settlement

. ” When those efforts proved unavailing , NCS, on August 30, 2013, abandoned the job site, notwithstanding a provision in the Master Subcontract Agreement requiring it to “continue to diligently perform the Work and maintain the progress schedule (without waiving its claims) despite the pendency of any dispute or any arbitration or litigation proceeding [.] ” Upon learning of NCS’ cessation of work, Schneide r Electric promptly sent an initial notice of default to both NCS and Western Surety , advising them of what Schneider
Electric believed to be a breach of contract by NCS

. After t wo months had passed and

4 There were fourteen change orders issued by Schneider Electric to NCS, as well as a promise to issue an additional change o rder, extending the date for completion of the work from September 19, 2013 to February 28, 2014, pending the conclusion of negotiations between Schneider Electric and Clark Construction.7

NCS had still not resumed its work at the job site , Schneider Electric , on October 25, 2013,

sent a final notice of default to both NCS and Western Surety, declaring that Schneider Electric intended to “terminate for cause” the s ubcontract between it and NCS, that Schneider Electric would “proceed to comple te NCS’ work in an expeditious manner using manpower supplied by other electrical subcontractors,” and that NCS and Western Surety would “remain liable for all costs and expenses incurred” by Schneider Electric to complete NCS’ work. Schneider Electric th en , on November 12, 2013, notified both NCS and Western Surety that the NCS s ubcontract had “been terminated for cause pursuant to Section 18.3” of the Master Subcontract Agreement , which permitted it to do so if NCS
abandoned the work it was contractually required to perform. Because NCS, as of August 30, 2013 ( the date it left the job site ) , had performed only 70 per cent of the work required under the s ubcontract, Schneider Electric hired other electrical subcontractors to complete the remaining work

. It , ultimately , paid those subcontractors approximately $2,000,000 to fulfil NCS’ contractual obligations , which
further fueled the dispute between the parties, as th at amount substantially exceeded the

amount that NCS was to be paid upon the completion of the work it had not yet performed,
when it ceased any further activity at the construction site

. In fact , according to Schneider Electric, NCS ’ breach of the s ubcontract ha d caused it to suffer nearly $1,500,000 in damages , which was the difference betwe en the approximately $2,000,000 it paid others to complet e the work NCS was to perform under the s ubcontract and the approximately $500,000 NCS was to be paid had it fulfilled its contractual obligations

.8

In February 2014, Schneider Electric fil ed a deman d for arbitration, with the American Arbitration Association, naming NCS as the sole respondent and claiming damages in the amount of $1,473,100 as well as attorneys’ fees, interest, and costs . T hen,

t wo months later, it amended that demand, to include Western Surety as a co - respondent. Finding , itself , now a party to the arbitration demanded by Schneider Electric , Western Surety filed , in response to that demand , a petition , in the Circuit Court for Howard County , seek ing both a stay of arbitration an d a declaratory judgment. Specifically , Western Surety requested , invoking Courts and Judicial Proceedings Article (“CJ”), § 3

- 208, 5 that the circuit court stay arbitration “with respect to any claims asserted by” Schneider Electric against it because it was not, it averred, a party to any arbitration agreement with Schneider Electric or NCS or to any agreement between them

. Western

5 Maryland Code (1974, 2013 Repl. Vol.), Courts and Judicial Proceedings Article (“CJ”), § 3

- 208 provides:

(a) If a party denies existence of the arbitration agreement, he may petition a court to stay commenced or threatened arbitration proceedings. (b)(1) A petition to stay arbitration shall be filed with the court where a petition to order arbitration has been filed. (2) If a petition for order to arbitrate has not been filed, the petition to stay arbitration may be filed in any court subject to v enue provisions of Title 6 of this article. (c) If the court determines that existence of the arbitration agreement is in substantial and bona fide dispute, it shall try this issue promptly and order a stay if it finds for the petitioner. If the court f

inds for the adverse party, it shall order the parties to proceed with arbitration.9

Surety further requested that the court “ issue a declaratory judgment with respect to the legal relations between ” it and Sc hneider Electric and, in so doing, to specify the reasons
that it , Western Surety, could not be required to participate in the arbitration currently pending between Schneider Electric and NCS , as well as to specify any “suretyship defenses” Western Surety could invoke, were Schneider Electric to bring a claim against it under the performance bond , should it prevail in the pending arbitration proceeding with
NCS.
In reply , Schneider Electric filed a motion to dismiss the state court action, brought by Weste rn Surety, on the grounds of improper venue. Although Western Surety opposed
th at motion, it did agree to Schneider Electric ’s request for a change of venue , which led the Howard County court to subsequently transfer this matter to the Circuit Court for
H arford County. See Md. Rule 2

- 327(b) ( authori zing a circuit court, upon sustaining defense of improper ven ue but determining that “ in the interest of justice the action should
not be di smissed, ” to transfer that action ” to any county in which it c ould have be e n brought ” )

. At the same time that Schneider Electric moved to dismiss the state court proceedings , it filed a petition, in the United States District Court for the District of Maryland, seeking to compel Western Surety to arbitrate their dispute. The federal district
court dismissed that petition, citi ng the “ abstention doctrine ,” promulgated by the Supre me Court, in Colorado River Water Conservation District v. United States , 424 U.S. 800 (1976) , which permit s a federal district court to dismiss a federal action, when “the parallel

state

- court litigation will be an adequate vehicle for the complete and pr ompt resolution of10

the issues between the parties.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 28 (1983). Later that year, following the transfer of the case to the Harford County circuit court, Western Surety , i n September 2014, fil ed, in th at court, a motion for partial summary judgment, asserting that, because there was no agreement to arbitrate between it and Schneider Electric, it was entitled to judgment as a matter of law as to its request for a stay
of arbitration . The granti ng of that motion by the Harford County circuit court pr omp ted the filing of this interlocutory appeal 6 by Schneider Electric

.

II. Having not been stayed during the pendency of this appeal , a rbitration proceedings , to which only Schneider Electric and NCS were parties , continued without interruption. In fact, shortly after the parties’ presentation of oral argument , before this Court, those proceedings concluded with a determination , by the arbitrator , that NCS had breached its

s ubcontract with Schneider Electric , whereupon Schneider Electric was award ed , by the arbitrator, a total of $1,653,924.21 in damages, attorneys’ fees, arbitrator’s fees, and costs
that Schneider Electric had incurred

. Following that decision , Western Sur ety promptly
filed a motion to dismiss this appeal , contending that, because the dispute between Schneider Electric and Western Surety was , principally , whether Western Surety was

6 This appeal was filed, pursuant to Courts and Judicial Proceedings Article (“CJ”), § 12

- 303(3)(ix), which permits an interlocutory appeal from an order “[g]ranting a peti tion to stay arbitration pursuant to § 3

- 208.”11

contractually obligated to submit to arbitration and , as that arbitration ha d concluded, the instant appeal is now moot and warrants dismiss al

. “A question is moot if, at the time it is before the court, there is no longer an existing controversy between the parties, so that there is no longer any effective remedy which the

court can provide.” Falik v. Hornage , 413 Md. 163, 186 (2010) (citation and quotation omitted). Although the arbitration between Schneider Electric and NCS has, indeed,

en ded, the issue of whether Schneider Electric may seek payment of that award from Western Surety via arbitration is still before us

. T hat issue was understandab ly neither addressed nor resolved during the arbitration proceeding s between Schneider Electric and
NCS. It ther efore remains an “existing controversy” between the parties and , in fact, lies at the heart of this appeal. Accordingly, we shall deny Western Surety’s motion to dismiss and proceed to the merits of th e issue presently before us

.

III. Under Maryland Rul e 2

- 501(f), a circuit court may grant summary judgment , if there is “no genuine dispute as to any material fact,” and “the party in whose favor judgment is entered is entitled to judgment as a matter of law.” “Because a grant of summary judgment is predic ated upon a ruling on a question of law and not a dispute of fact, our review is de novo.” Stein v. Pfizer Inc. , 228 Md. App. 72, 85 (2016) (citation omitted) , cert. denied , __ Md. __, 2016 WL 5724833 (Sept. 29, 2016)

. Keeping that
standard of review in mind, we turn now to t he first issue we have been asked to decide
and , that is , whether we must apply federal law, specifically, the Federal Arbitration Act12

and its attendant presumption in favor of arbitration , in determining whether Western Surety is bound contractually to arbitrate , as Schneider Electric contends, or state contract law, as Western Surety claims

. P reliminar il y, we note that the court below did not address whether the contrac ts at issue , in this appeal , involve d interstate commerce and , consequently, it never determined
whether the Federal Arbitration Act appl ied to the insta nt controversy

. S ee 9 U.S.C. § 1 (defining “commerce,” for purposes of the Federal Arbitration Act, as including
“comm erce among the several States”)

. N or was it necessary that it d o so, given that it
found that , under either federal or state law, Western Surety was not contractually bound to arbitrate any disputes arising from the performance bond it had issued because , regardless of wh ich Act, federal or state, applies, state law governs the issue of contract
formation . We agree.
T he Supreme Court first annunciated this principle in Perry v. Thomas , 482 U.S. 483 (1987), and then later reiterated it , in Arthur Andersen LLP v. Carlisle , 556 U.S. 624 (2009) , to clear up an apparent misreading of Section 2 of the Federal Arbitration Act by a
number of federal and state courts

. S ection 2 of that federal Act states that a written arbitration provision “ in any

. . . contract evidencing a transaction involving commerce

. . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract , ” 9 U.S.C. § 2 (emphasis added) , an ambiguous clause, to be sure. Then , i n Perry v. Thomas , 482 U.S. 483, the Supreme Court indicat ed , apparently not plainly enough, that, while the former clause

— “ in any

. . . contract evidencing a transaction13

involving commerce

. . . shall be valid, irrevocable, and enforceable ”

— generall y provid es that “[a]n agreement to arbitrate is valid, irrevocable, and enforceable, as a matter of federal law , ” the language that follows

— “ save upon such grounds as exist at law or in equity for the revocation of any contract ”

— provid es that “ state la w, whether of legislative or judicial origin, is applicable if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally. ” Id. at 492

- 93 n.9.
Nonetheless , a significant number of federal and state courts, in addressing whether

non - signatories to contracts containing arbitration clauses may either compel a signatory or be compelled by a signatory to arbitrate disputes arising under those contracts, have
misconstrued Secti on 2 and mistakenly conclud ed that it provide s that enforceability of an arbitration clause by or against a non - signator y is to be resolved , in accordance with federal
common law

. S ee , e.g. , R.J. Griffin & Co. v. Beach Club II Homeowners Assoc. , 384 F.3d 157, 160 n.1 (4th Cir. 2004); Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen
GMBH , 206 F.3d 411, 417 n.4 (4th Cir. 2000); MS Dealer Service Corp. v. Franklin , 177 F.3d 942, 947

- 48 (11th Cir. 1999); Grundstad v. Ritt , 106 F.3d 201, 204

- 05 (7th Cir. 1997); Commercial Union Ins. Co. v. Gilbane Building Co. , 992 F.2d 386, 388

- 89 (1st Cir. 1993); United States Fidelity & Guaranty Co. v. West Point Constr. Co. , 837 F.2d 1507, 1508 (11th Cir. 1988) (per curiam); Exchange Mut. Ins. Co. v. Haske ll Co. , 742 F.2d 274, 275

- 76 (6th Cir. 1984) (per curiam); Rashid v. Schenck Const. Co., Inc. , 438 S.E.2d 543, 547 (W. Va. 1993); St. Paul Fire & Marine Ins. Co. v. Woolley/Sweeney Hotel No. 5 , 545 So. 2d 958 (Fla. Dist. Ct. App. 1989) (per curiam)

.14

This misreading of Section 2 has engender ed much confusion among many state courts, including Maryland’s Court of Special Appeals. See , e.g. , Thompson v. Witherspoon , 197 Md. App. 69, 81 (2011) (“Under the [Federal Arbitration Act], courts
look to substantive provisions of state law regarding threshold issues of the validity, revocability, or enforceability of contracts, but to federal law to resolve issues as to whether

a non - signatory to a contract can enforce, or be bound by, an arbitration provision in a

co ntract signed by other parties.”) (citation omitted) ; Case Handyman and Remodeling Servs., LLC v. Schuele , 183 Md. App. 44, 57 (2008) (“To resolve the issue whether a non

signatory can enforce a contract’s arbitration provision under the doctrine of equita ble estoppel, courts look to the federal substantive law of arbitrability.”), vacated on other grounds , 412 Md. 555 (2010).
In 2009, the Supreme Court laid to rest this mis interpreta tion of that section of the
Federal Arbitration Act , in Arthur Andersen L LP v. Carlisle , supra , 556 U.S. 624 . There , it explain ed that when, as in this case, a question arises as to whether an arbitration clause may be enforced by or against non

- parties to a contract containing such a clause, “‘traditional principles’ of state law,” which “allow a contract to be enforced by or against non[

- ]parties . . . through ‘assumption, piercing the corporate veil, alter ego, incorporation by reference, third

- party beneficiary theories, waiver and estoppel,’” provide the answer to15

that question. Id. at 631 (quoting 21 R. Lord, Williston on Contracts § 57:19, at 183 (4th ed. 2001)). 7 Moreover, i n the past few years, several federal courts of appeals, consistent with
the Carlisle Court ’s relatively recent admonition , have candidly conceded their mistaken impression that federal common law controls in such situations. See , e.g. , Crawford Prof. Drugs, Inc. v. CVS Caremark Corp. , 748 F.3d 249, 255 (5th Cir. 2014) (recognizing that “prior decisions app lying federal common law, rather than state contract law, to decide” whether an arbitration clause may be enforced by or against nonparties to the contract were in error); Lawson v. Life of the South Ins. Co. , 648 F.3d 1166, 1170

- 71 (11th Cir. 2011) (decla ring that many of that circuit’s prior “decisions involving the question of whether a

non - party can enforce an arbitration clause against a party have not made clear that the applicable state law provides the rule of decision for that question”). We now j oin th ose
courts in stressing that, under the Federal Arbitration Act, as interpreted by the Supreme Court, the question of whether an agreement to arbitrate binds a non

- signatory is a question
of state contract law. Arthur Andersen LLP v. Carlisle , 556 U .S. at 631; First Options of

7 The question at issue in Arthur Andersen was whether a non

- signatory to a contract, containing an arbitration clause, could, nonetheless, invoke provisions, in the Federal Arbitration Act, entitling “ litiga nts in federal court to a stay of any action that is

‘ referable to arbitration under an agreement in writing ’” as well as to seek an appeal from a district court’s order denying such a stay. Arthur Andersen , 556 U.S. at 625 (quoting 9 U.S.C. § 3) (citing 9 U.S.C. § 16). The Supreme Court held that, “if the relevant state contract law” permits a non - signatory to enforce such an arbitration agreement, that non

signatory is entitled to seek a stay, under 9 U.S.C. § 3, as well as to appeal, under 9 U.S.C. § 16, from the denial of such a stay. Id. at 632.16

Chicago, Inc. v. Kaplan , 514 U.S. 938, 944 (1995); Perry v. Thomas , 482 U.S. at 492

- 93
n.9. Finally , if the Maryland Uniform Arbitration Act, rather than the Federal Arbitration Act, applies in this case, we , of course, reach the same conclu sion, that is, state contract law, not federal law, governs whether an agreement to arbitrate binds a non

- signatory

. 8 See Cheek v. United Healthcare of the Mid

- Atlantic, Inc. , 378 Md. 139, 147 (2003) (observing that, under the Maryland Uniform Arbitration Act, 9 the “ determination of whether there is an agreement to arbitrate

. . . depends on contract principles since arbitration is a matter of

contract ”).

8 Western Surety is domiciled in South Dakota, as stated on the website of its corporate parents, CNA Surety and CNA Financial Corporation. Furthermore, Schneider Electric is a Delaware corporation, with its principal place of business in Maryland. Moreove r, the work to be performed by NCS, under its subcontract with Schneider Electric, was to be done at a federal military installation, Aberdeen Proving Ground. For all of these reasons, we would conclude that, were it necessary for our decision, the Federa l Arbitration Act applies in this case.

9 Courts and Judicial Proceedings Article, § 3

- 206(a), part of the Maryland Uniform Arbitration Act, provides :

Except as otherwise provided in this subtitle, a written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy arising between the parties in the future is valid and enforceable, and is irrevocable, except upon grounds that exist at law or in equity for the revocation of a co ntract. (Emphasis added.) The bolded language in the Maryland Act is virtually identical to the corresponding language in the Federal Arbitration Act.17 IV. We now turn to the issue, which is the fulcrum of this case: whether, under Maryland contract law, Western Surety, in effect, agree d to arbitrate any disputes between
it and Schneider Electric , because the performance bond , issued by Western Surety , on behalf of NCS , incorporate d by reference the s ubcontract , which, in turn, incorporate d by
reference the Master Subcontract Agreement , with its arbitration clause , to which only Schneider Electric and NCS were parties

. “Maryland follows the objective theory of contract interpretation,” Nationwide Mut. Ins. Co. v. Regency Furnitu re, Inc. , 183 Md. App. 710, 722 (2009), according to which a “court must, as its first step, determine from the language of the agreement what a reasonable person in the position of the parties would have meant at the time the agreement was effectuated.” Hartford Accident and Indemnity Co. v. Scarlett Harbor Associates Ltd. Partnership , 109 Md. App. 217, 291 (1996) (“ Scarlett Harbor I ”), aff’d , 346 Md. 122 (1997) (“ Scarlett Harbor II ”). Moreover, “[w]here the contract comprises two or more documents, the documents are to be construed together, harmoniously, so that, to the extent possible, all of the provisions can be given effect.” Regency Furniture , 183 Md. App. at
722

- 23 (quoting Rourke v. Amchem Prods., Inc. , 384 Md. 329, 354 (2004)). The latter prin ciple of contract interpretation bears particular relevance to the issue
before us , because the agreement between Western Surety and Schneider Electric is the product of principally t hree documents: the performance bond together with the

s ubcontract and t he Master Subcontract Agreement , with its arbitration clause, the former of which incorporates the latter two

.18

Paragraph 1 of the performance bond states: [NCS] and [Western Surety], jointly and severally, bind themselves, their heirs, executors, administ rators, successors and assigns to [Schneider Electric] for the performance of the Construction Contract [ which includes both the S ubcontract and the Master Subcontract Agreement ] , which is incorporated herein by reference. According to Schneider Electric, p aragraph 1 of the bond binds Western Surety to
submit to arbitration all disputes , arising under what is referred to above as the “Construction Contract , ” first, because it “jointly and severally” binds Western Surety to

e nsure “the performance of the Construction Contract,” which includ es , insists Schneider Electric, compliance with the arbitration clause , if invoked, and, second , because p aragraph 1 of the bond incorporates by reference the s ubcontract , which, in turn, in corporate s by
reference the Master Subcontract Agreement and thus its arbitration clause.
A. Schneider Electric’s assertion that Western Surety, by “jointly and severally” binding itself to “the performance of the Construction Contract,” as stated in p aragraph 1 of the performance bond, also bound itself to the incorporated Master Subcontract Agreement ’s arbitration clause, ignores the context of those words as well as misconstrues the term “performance.” The Master Subcontract Agreement states that Sc hneider Electric “desires to engage the services of [NCS] to provide labor, material, equipment and services necessary to perform work in connection with construction projects, from time to time, in accordance with the terms and conditions set forth in” th e Master Subcontract Agreement

. (Emphasis added.) As the purpose of the Master Subcontract Agreement (and the19

s ubcontract, which incorporate d that agreement by reference ) was to ensure that NCS

w ould “perform work,” prescribed by that agreement, it is wi th that purpose in mind that the term “perform ance ” should be construed. Ocean Petroleum Co. v. Yanek , 416 Md. 74, 88 (2010) (citation and quotation omitted). T he arbitration clause , on the other hand, is nothing more than an enforcement mechanism, which may never come into play , if all parties proceed as agreed

. Moreover, the paragraphs of the bond, which immediately follow p aragraph 1 and employ the verb “perform,” confirm that the term “performance,” contrary to Schneider Electric’s contention, extend s only to the tasks that NCS was to complete . Paragraph 2 of
the bond states:

If [NCS] performs the Construction Contract , [Western Surety] and [NCS] shall have no obligation under this Bond, except to participate in conferences as provided in Subparagrap h 3.1. (Emphasis added.) Subparagraph 3.1 of the bond, in turn, provides: If there is no [default by Schneider Electric], [Western Surety’s] obligation under this Bond shall arise after . . . [Schneider Electric] has notified [NCS] and [Western Surety] . . . that [Schneider Electric] is considering declaring a [default by NCS] a nd has requested and attempted to arrange a conference with [NCS] and [Western Surety] to be held not later than fifteen days after receipt of such notice to discuss methods of performing the Construction Contract . If [Schneider Electric], [NCS] and [Western Surety] agree, [NCS] shall be allowed a reasonable time to perform the Construction Contract , waive [Schneider Electric’s] right, if20 any, subsequently to declare but such an agreement shall not a [default by NCS.] (Emphasis added.) In sum, NCS’ obligation to “perform,” as set forth in p aragraph 2 and s ubparagraph 3.1 of the bond, refers to the performance of the work it agreed to complete and not to
every contractual provision in the incorporat ion

- by

- referen ce chain, which runs from the Master Subcontract Agreement , between Schneider Electric and NCS, to the s ubcontract between those two parties, to the performance bond, issued by Western Surety

. W e therefore conclude that the “joint and several” obligation clause in p aragraph 1 of the performance bond does not evince Western Surety’s assent to be bound by the arbitration
clause in the incorporated

- by

- reference chain of documents, particularly as it was not a party to either of the two earlier contractual lin ks in that chain, namely, the Master Subcontract Agreement and the s ubcontract that followed

. B.
We turn n ow to consider whether the language in p aragraph 1 of the bond, providing that the “Construction Contract [which, as noted earlier, includes the Master Subcontract Agreement , with its arbitration clause ] . . . is incorporated herein by reference , ” compel s Western Surety to submit to the arbitration clause of that Agreement. In Scarlett Harbor
I , supra , 109 Md. App. 217, this Court specifically add ressed the question whether a

non - signatory surety on a performance bond, which incorporated by reference a construction contract (containing an arbitration clause) between a developer of a21

condominium project and one of its subcontractors, could compel th e developer to arbitrate its dispute with the surety. That case arose from complaints by unit owners alleging defective design and construction of a high

- rise condominium development, Scarlett Place Residential
Condominium. Id. at 229. Those complaints l ed the council of unit owners of the
condominium to file a civil action , in the Circuit Court for Baltimore County, against the project developer, Scarlett Harbor Associates Limited Partnership (“SHALP”), its general partners, and its former general partn ers, “asserting breach of the statutory implied warranty, breach of express warranty, breach of contract, and violation of the Maryland Consumer Protection Act.” Id. The defendants , in turn , impleaded several other entities, including a subcontractor, Le onard A. Kraus, Inc., and Hartford Accident and Indemnity Company, which had issu ed Kraus ’s performance bond. Id. Because the subcontract between SHALP and Kraus contained a broadly worded arbitration clause, 10 which, as th is Court explained, “entitled Kr aus to require arbitration to

10 The arbitration clause at issue in Hartford Accident and Indemnity Co. v. Scarlett Harbor Associates Ltd. Partnership , 109 Md. App. 217 (1996) ( Scarlett Harbor I ) , aff’d , 346 Md. 122 (1997) ( Scarlett Harbor I I ), provided: All claims, disputes and other matters in question between the Contractor [Kraus] and the Owner [SHALP] arising out of or relating to the Contract Documents or the breach thereof . . . shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise. . . . No arbitration shall include by consolidation, joinder, or in any other manner, parties other than the Owner, the Contractor and any other persons22

resolve any ‘claims, disputes, [or] other matters . . . arising out of or relating to the Contract Documents or breach thereof,’” Kraus filed a petition , in the Baltimore County circuit
court, to compel the SHALP defendants to submit to arbitration. Id. at 289. T hough Hartford was not a party to the subcontract between SHALP and Kraus, Hartford also filed a petition , in the same court, to compel arbitration, asserting it s right to invoke th e subcontract’s arbitration clause , because the performance bond it had issued incorporated the subcontract by reference. 11 Id. at 292. The circuit court granted Kraus’s petition but denied Hartford’s, “ruling that the performance bond contract did not contain an arbitration agreement” for Hartford to invoke and that Hartford was not a party to the subcontract,
which did. Id. at 289. In affirming that ruling, this Court observed that “[w]hen an earlier document is ‘incorporated by reference’ into a subsequent contract, it simply mean s that the earlier

substantially involved in a common question of fact or law, whose presence is required if complete relief is to be accorded in the arbitration.
Id. at 288.

11 The performance bond contained the following provision: Whereas, Principal [Kraus] has by written agreement dated 8/12/86 entered into a subcontract with Obligee [SHALP] for Renovation and addition to Scarle tt Seed Building

— Light Gauge Metal Framing (Scarlett Place Phase II & III) in accordance with drawings and specifications prepared by Meyers & D’Aleo which subcontract is by reference made a part hereof, and is hereinafter referred to as the subcontract.
Scarlett Harbor I , 109 Md. App. at 289.23

document is made a part of the second document, as if the earlier document were fully set forth therein.” Id. at 292 (citations omitted). But, we then stressed that t he mere “incorporation of one contract into another contract involvin g different parties does not automatically transform the incorporated document into an agreement between the parties to the second contract,” unless there is “an indication of a contrary intention ” to do so

. Id. We therefore rejected Hartford’s contentio n that such “ an indica tion ” was evident, noting that the purpose of the incorporation

- by

- reference bond language was “simply to establish the primary obligation on which Hartford’s secondary obligation would depend.” Id. And, then, w e not ed that, even if the arbitration clause were incorporated into the bond, that clause “only require[d] arbitration of disputes between Kraus and SHALP, not Hartford and SHALP,” id. , much like, as we shall see, the arbitration clause at issue here , which expressly requires the arbitration of disputes between Schneider Electric and NCS but not disputes between Schneider Electric and Western Surety. Moreover, the bond in Scarlett Harbor , like the bond in the instant case, contained a clause that, in the Court’s words, “indica te[d] an intention to litigate disputes.” Id. at 293. That clause stat ed: “Any suit under the bond must be instituted before the expiration of two years from the date on which final payment under the subcontract falls due.” Id. Because Hartford’s inte rpretation of its bond would have read those words out of the contract, the Scarlett Harbor I Court rejected that construction , on the ground s that “a contract should not be interpreted in a manner in which a meaningful part of the agreement is disregarded .” Id. (citations omitted).24

It is true, as Schneider Electric points out, that the Court of Appeals, in affirming this Court’s decision in Scarlett Harbor I , expressly declined to say whether its holding would apply to the specific question presented in this case, namely, whether a surety could be compelled to arbitrate, on the grounds that, in issuing a bond that incorporated by reference a contract, with an arbitration clause, it had agreed “to arbitrate claims on the bond.” Scarlett Harbor II , 346 Md. at 129 n.7. Nonetheless, when the same principles of Maryland contract law that were invok ed by this Court , in Scarlett Harbor I , are applied to the bond and other contractual documents at issue here, we are compelled to reach a conclusion that lo gically follows the holding of the Court of Appeals in Scarlett Harbor II

— that is , that Western Surety is not compelled to arbitrate any dispute involving the performance bond it issued , simply because that bond incorporated by reference an

a greement, to which it was not a party, containing a mandatory arbitration clause

. A s we noted in Scarlett Harbor I , the “incorporation of one contract into another contract involving different parties does not automatically transform the incorporated
document into an agreement between the parties to the second contract,” unless there is “an indication of a contrary intention” to do so. Scarlett Harbor I , 109 Md. App. at 292. In the instant case, there is no indication of such a “contrary intention.”
Moreover , as in Scarlett Harbor I , the performance bond, in the instant case, “actually indicates an intention to litigate disputes.” 109 Md. App. at 293. Paragraph 9 of
the bond states:

Any proceeding, legal or equitable, under this Bond may be instituted in an y court of competent jurisdiction in the location in which the work or part of the work is located and25 shall be instituted within two years after Contractor default or within two years after the Contractor ceased working or within two years after the Suret y refuses or fails to perform its obligations under this Bond, whichever occurs first. If the provisions of this Paragraph are void or prohibited by law, the minimum period of limitation available to sureties as a defense in the jurisdiction of the suit s hall be applicable. (Emphasis added.) In rejecting the argument made, in Scarlett Harbor I , that an incorporation

- by

- reference clause in a performance bond must be construed as providing that the surety and the parties to the construction contract all a greed to be bound to an arbitration clause in that construction contract, we declared that such a reading of the bond would, in effect, read out of it a provision, which provided that “[a]ny suit under the bond must be instituted before the expiration of t wo years from the date on which final payment under the subcontract falls due.” Scarlett Harbor I , 109 Md. App. at 293. And, that is precisely what would occur here were we to hold that, notwithstanding p aragraph 9’s
exp ress direction that relief must be sought in the courts of this State, mandatory arbitration of disputes arising under the performance bond was required

. Finally, we note that Schneider Electric’s contention that we should follow the majority of courts in other jurisdictions, holding that a surety, which has agreed to the incorporation by reference of a prior contract, containing an arbitration clause, into a bond at issue is thereby bound to arbitrate any disputes with the bond’s obligee, is unpersuasive. First of all, the analysis in th ose cases, as the Court of Appeals observed in Scarlett Harbor
II , “does not go beyond the fact that the contract containing an arbitration provision has been incorporated into the bond.” Scarlett Harbor II , 346 Md. at 129 n.7. Indeed, the first26

two of t he cases, cited by the Court of Appeals as lacking any substantive analysis under the law of contracts, United States Fidelity & Guar. Co. v. West Point Constr. Co. , supra , 837 F.2d 1507 (11th Cir.1988) (per curiam), and Exchange Mut. Ins. Co. v. Haskell C o. , supra , 742 F.2d 274, 275

- 76 (6th Cir.1984) (per curiam), are two of the principal cases
upon which Schneider Electric relies in this appeal

. T hose and the other cases , 12 cited by
Schneider Electric , are not only short on substance, but shy of analysis. Indeed, had we not been provided , by Scarlett Harbor I , with the analytic framework we now employ and , consequently , forced to look outside of Maryland for persuasive authority, we would rel y upon the decisions of the United States Court of Appeals for t he Eighth Circuit, in AgGrow Oils, LLC v. Nat. Union Fire Ins. Co. , 242 F.3d 777 (8th Cir 2001), and Liberty Mut. Ins.
Co. v. Mandaree Pub. Sch. Dist. #36 , 503 F.3d 709 (8th Cir 2007) , 13 which are the only
federal decisions ( out of all of the cases cited by the parties ) to correctly apply state contract law to the question of whether an agreement to arbitrate exists and also, in our view, correctly held that, under the circumstances, a bond’s mere incorporation by reference of a

12 Commercial Union Ins. Co. v. Gilbane Building Co. , 992 F.2d 386, 388

- 89 (1st Cir. 1993) ; Tower Ins. Co. of N.Y. v. Davis/Gilford , 967 F. Supp. 2d 72 (D.D

. C

. 2013) ; Developers Sur. and Indem. Co. v. Resurrection Baptist Church , 759 F. Supp. 2d 665 (D.Md 2010); U.S. Surety Co. v. Hanover R.S. Ltd. P’ship , 543 F. Supp. 2d 492 (W.D.N.C. 2008) ; Transamerica Premier Ins. Co. v. Collins & Co., Gen. Contractors, Inc. , 735 F. Supp. 1050 (N.D.Ga. 1990) ; Hoffman v. Fid. and Deposit Co. of Md. , 734 F

. Supp. 192 ( D

. N.J. 19 90) ; Cianbro Corp. v. Empresa Nacional de Ingenieria y Technologia, S.A. , 697 F

. Supp. 15 ( D

. Me . 19 88 )

.

13 The performance bond at issue in Liberty Mut. Ins. Co. v. Mandaree Pub. Sch. Dist. #36 , 503 F.3d 709 (8th Cir 2007) , like the one at issue here, was an AIA form A312 bond

. See Liberty Mut. Ins. Co. v. Mandaree Pub. Sch. Dist. #36 , 459 F. Supp. 2d 866 , 868 (D.N.D. 2006), aff’d , 503 F.3d 709

.27

contract, containing an arbit ration clause, did not obligate the issuer of that bond to arbitrate.
MOTION TO DISMISS DENIED. JUDGMENT OF THE CIRCUIT COURT FOR HARFORD COUNTY AFFIRMED. CASE REMANDED TO THAT COURT FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY APPELLANT.