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FROHBERG ELEC. CO. v. GROSSENBURG IMPLEMENT

Cite as 297 Neb. 356

Frohberg Electric Company, Inc., a Nebraska corporation, 

appellee, v. Grossenburg Implement, Inc., a Nebraska

corporation, and Kiehm Construction, Inc., 

a Minnesota corporation, appellants.

___ N.W.2d ___

Filed July 28, 2017. No. S-16-987.

1. Contracts. The meaning of a contract and whether a contract is ambiguous are questions of law.

2. Arbitration and Award. Arbitrability presents a question of law.

3. Judgments: Appeal and Error. When reviewing questions of law, 

an appellate court resolves the questions independently of the lower 

court’s conclusions.

4. Arbitration and Award: Contracts: Appeal and Error. Where an 

issue concerns the formation or existence of an arbitration agreement 

and not its validity, enforceability, or scope, an appellate court applies 

state law.

5. Arbitration and Award: Federal Acts: Contracts. The Federal 

Arbitration Act’s application is triggered only if a contract involving 

interstate commerce actually contains an arbitration clause.

6. Arbitration and Award: Federal Acts: Contracts: States. In a contract involving interstate commerce, the equal-treatment principle of the 

Federal Arbitration Act applies in determining whether a valid arbitration agreement exists: States may not apply a state rule discriminating 

against arbitration and are required to place arbitration agreements on 

equal footing with all other contracts.

7. Contracts. In interpreting a contract, a court must first determine, as a 

matter of law, whether the contract is ambiguous.

8. ____. A contract written in clear and unambiguous language is not subject to interpretation or construction and must be enforced according to 

its terms.

9. Contracts: Words and Phrases. A contract is ambiguous when a word, 

phrase, or provision in the contract has, or is susceptible of, at least two 

reasonable but conflicting interpretations or meanings.

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

09/08/2017 01:11 AM CDT
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10. Arbitration and Award: Federal Acts: Contracts. If a contract containing an arbitration clause involves interstate commerce, the Federal 

Arbitration Act governs the contract.

11. Contracts: States: Words and Phrases. Contracts involving interstate 

commerce include contracts for services between parties of different states.

12. Appeal and Error. An appellate court is not obligated to engage in an 

analysis that is not necessary to adjudicate the case and controversy 

before it.

Appeal from the District Court for Wayne County: James G. 

Kube, Judge. Reversed and remanded with directions.

Timothy Engler, of Rembolt Ludtke, L.L.P., for appellants.

David E. Copple and Michelle M. Schlecht, of Copple, 

Rockey, McKeever & Schlecht, P.C., L.L.O., for appellee.

Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy, 

Kelch, and Funke, JJ.

Cassel, J.

INTRODUCTION

This is an appeal from an order denying a motion to compel 

arbitration of a construction dispute. A subcontractor sued the 

project’s owner and general contractor, which in turn sought to 

compel arbitration. The appeal turns on whether the subcontract effectively incorporated a mandatory arbitration clause 

from the general contract, thereby mandating the subcontractor 

to arbitrate. Because we conclude that it did, we reverse, and 

remand with directions.

BACKGROUND

Parties and Governing

Contracts

Grossenburg Implement, Inc. (Owner), a Nebraska corporation, executed a standard form contract (the general 
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FROHBERG ELEC. CO. v. GROSSENBURG IMPLEMENT

Cite as 297 Neb. 356

contract) with Kiehm Construction, Inc. (Contractor), a 

Minnesota corporation, for the construction of several structures on Owner’s property in Wayne County, Nebraska. The 

general contract included a mandatory arbitration clause for 

“any Claim . . . not resolved by mediation pursuant to [the 

general conditions].”

Contractor then subcontracted with Frohberg Electric 

Company, Inc. (Subcontractor), a Nebraska corporation, to 

provide electrical services and materials in constructing the 

structures. The subcontract referenced the existence of the 

general contract and stated, “Contractor has made available 

to . . . Subcontractor all of the above documents, and . . . the 

above have been carefully examined by . . . Subcontractor.”

The general contract was also referenced in several sections of the subcontract, including one (Section 11) in which 

Subcontractor agreed “[t]o be bound to . . . Contractor by 

the terms of the General Contract” and “to conform to and to 

comply with the provisions of the General Contract.” Another 

section (Section E), under the heading “The Contractor Agrees 

as Follows,” provided: “If arbitration of disputes is provided 

for in the General Contract, any dispute arising between 

. . . Contractor and . . . Subcontractor under this Subcontract, 

including the breach thereof, shall be settled by arbitration in 

the manner provided for in the General Contract.”

Lower Court Proceedings

After Subcontractor provided services pursuant to the subcontract, a dispute arose concerning the payment owed to 

Subcontractor. Subcontractor then obtained a construction lien 

against Owner’s property and later filed a complaint against 

Owner and Contractor to obtain a judgment and foreclose on 

the construction lien.

Owner and Contractor jointly moved to dismiss the complaint or, in the alternative, to compel arbitration pursuant to 

the terms of the subcontract and the general contract. They 
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alleged that the subcontract included specific provisions in 

Section 11 and Section E which incorporated the alternative 

dispute resolution clauses from the general contract and general conditions signed by Owner and Contractor. Thus, they 

argued that the matter should be settled by arbitration as provided in those documents.

The district court overruled the motion and specifically held 

that the terms of the subcontract did not bind Subcontractor to 

the dispute resolution provisions of the general contract or general conditions. The court noted that the only provision specifically purporting to bind the parties to alternative dispute resolution was under the subcontract section titled “The Contractor 

Agrees as Follows” and not contained within the other sections, 

“The Subcontractor Agrees as Follows” or “The Contractors 

and Subcontractors Agree as Follows.” Accordingly, the court 

found that Subcontractor did not agree to that provision by the 

express terms of the subcontract.

The court also found that the provision of Section 11 in 

which Subcontractor agreed “[t]o be bound to . . . Contractor 

by the terms of the General Contract” was vague as to whether 

it applied to disputes between Subcontractor and Owner or 

between Subcontractor and Contractor. Since the general contract spoke only to disputes between Owner and Contractor, 

the court found that the general contract language was inconsistent with the subcontract and that the language of the 

subcontract should govern. Because it had already determined that the express terms of the subcontract did not bind 

Subcontractor to the dispute resolution process within the 

general contract, the court concluded that there was no arbitration agreement.

Owner and Contractor appealed, and we moved the case to 

our docket.1

1 See Neb. Rev. Stat. § 24-1106(3) (Reissue 2016).
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ASSIGNMENTS OF ERROR

Owner and Contractor assign, reordered, restated, and combined, that the district court erred in (1) construing the subcontract and the general contract incorporated by reference and (2) 

denying their motion to compel arbitration and stay the action 

pending arbitration.

STANDARD OF REVIEW

[1-3] The meaning of a contract and whether a contract is 

ambiguous are questions of law.2 Likewise, arbitrability presents a question of law.3

 When reviewing questions of law, 

an appellate court resolves the questions independently of the 

lower court’s conclusions.4

ANALYSIS

Owner and Contractor advance two main arguments on 

appeal. They argue that the subcontract incorporated the dispute resolution process outlined in the general contract and 

general conditions with clear and unambiguous language set 

forth in both Section E and Section 11 of the subcontract. They 

also argue that the Federal Arbitration Act (FAA)5 applied to 

the subcontract and general contract and that under the express 

provisions of the FAA, their motion to compel arbitration 

should have been sustained.

[4-6] We first address whether the subcontract unambiguously incorporated the terms of the general contract such 

that the claims in the instant case were subject to a binding 

arbitration clause. Because this issue concerns the formation 

2 Facilities Cost Mgmt. Group v. Otoe Cty. Sch. Dist., 291 Neb. 642, 868 

N.W.2d 67 (2015).

3 Wilczewski v. Charter West Nat. Bank, 295 Neb. 254, 889 N.W.2d 63 

(2016).

4 Id.

5 9 U.S.C. § 1 et seq. (2012).
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or existence of an arbitration agreement and not its validity, enforceability, or scope, we apply state law.6

 The FAA’s 

application is triggered only if a contract involving interstate commerce actually contains an arbitration clause.7

 But, 

the FAA’s equal-treatment principle applies in determining 

whether a valid arbitration agreement exists: States may not 

apply a state rule discriminating against arbitration and are 

required to place arbitration agreements on equal footing with 

all other contracts.8

6 See David Fiala, Ltd. v. Harrison, 290 Neb. 418, 860 N.W.2d 391 (2015). 

See, also, Southland Corp. v. Keating, 465 U.S. 1, 19-20, 104 S. Ct. 852, 

79 L. Ed. 2d 1 (1984) (noting “lower courts generally look to state law 

regarding questions of formation of the arbitration agreement under [9 

U.S.C.] § 2 [(1976)], . . . which is entirely appropriate so long as the 

state rule does not conflict with the policy of § 2”) (citations omitted); 

Washington Mut. Finance Group, LLC v. Bailey, 364 F.3d 260, 264 (5th 

Cir. 2004) (holding “in determining whether the parties agreed to arbitrate 

a certain matter, courts apply the contract law of the particular state that 

governs the agreement”); ISC Holding AG v. Nobel Biocare Investments 

N.V., 351 Fed. Appx. 480 (2d Cir. 2009) (applying state contract law 

where contract was ambiguous as to whether agreement to arbitrate 

existed).

7 See id. See, also, CardioNet, Inc. v. CIGNA Health Corp., 751 F.3d 165, 

173 (3d Cir. 2014) (“while the FAA ‘embodies a strong federal policy 

in favor of arbitration, . . . the duty to arbitrate remains one assumed by 

contract.’ . . . Thus, the presumption of arbitrability applies only where 

an arbitration agreement is ambiguous about whether it covers the dispute 

at hand. . . . Otherwise, the plain language of the contract controls”) 

(citations omitted); Dasher v. RBC Bank (USA), 745 F.3d 1111, 1116 (11th 

Cir. 2014) (determining that presumption of arbitrability does not apply 

“before it is determined whether there is a ‘validly formed and enforceable 

arbitration agreement’”); Paul Revere Variable Annuity Ins. v. Kirschhofer, 

226 F.3d 15 (1st Cir. 2000) (determining that federal preference for 

arbitration does not come into play where right to arbitrate is unclear or 

ambiguous).

8 See Kindred Nursing Centers Ltd. v. Clark, ___ U.S. ___, 137 S. Ct. 1421, 

197 L. Ed. 2d 806 (2017).
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[7,8] In interpreting a contract, a court must first determine, as a matter of law, whether the contract is ambiguous.9

A contract written in clear and unambiguous language is not 

subject to interpretation or construction and must be enforced 

according to its terms.10

Section E

Owner and Contractor argue that the district court improperly focused on the assigned headings of the subcontract when 

it construed Section E as agreed to only by Contractor. Owner 

and Contractor allege that Section E unambiguously incorporated the dispute resolution process provided for in the general 

contract and that it was binding upon both Contractor and 

Subcontractor. We agree.

As stated above, Section E provided, “If arbitration of 

disputes is provided for in the General Contract, any dispute 

arising between . . . Contractor and . . . Subcontractor under 

this Subcontract, including the breach thereof, shall be settled 

by arbitration in the manner provided for in the General 

Contract.” But, because the provision was included under 

the section heading “The Contractor Agrees as Follows” and 

not under either the heading “The Subcontractor Agrees as 

Follows” or the heading “The Contractors and Subcontractors 

Agree as Follows,” the district court determined that 

Subcontractor’s claims were not subject to arbitration. By 

purportedly enforcing the express terms of the contract, the 

court concluded that Section E was binding on Contractor 

only. In doing so, the district court adopted a restrictive interpretation of the section.

[9] While two conflicting interpretations of Section E can 

be advanced, only one of them is reasonable. The district 

court’s restrictive interpretation disregards Section E’s broad 

language and effectively rewrites the section by limiting its 

9 Facilities Cost Mgmt. Group v. Otoe Cty. Sch. Dist., supra note 2.

10 Id.
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applicability to those disputes complained of by Contractor 

and not Subcontractor. A contract is ambiguous when a word, 

phrase, or provision in the contract has, or is susceptible of, at 

least two reasonable but conflicting interpretations or meanings.11 Because the restrictive interpretation of Section E was 

unreasonable, Section E was unambiguous and should have 

been enforced by its express terms.

Consequently, both Contractor and Subcontractor agreed 

to Section E despite the section heading. For two reasons, 

we read that heading as suggesting a mutual promise rather 

than a unilateral commitment. First, the plain meaning of 

the term “agrees” contemplates a mutual understanding with 

another.12 And because Subcontractor was the only other party 

to the subcontract, it was the only one with which Contractor 

could agree. Second, because other provisions under the same 

heading, including an integration clause, are ones that are 

clearly intended to apply to both parties, the heading implicitly 

declares that “Contractor Agrees” with Subcontractor.

Even under the heading “The Contractor Agrees as 

Follows,” the express terms of Section E included a reciprocal agreement to arbitrate all disputes between Contractor 

and Subcontractor arising from the subcontract pursuant to 

the terms of the general contract. Because Subcontractor’s 

claims arose from the subcontract, they were subject to this 

agreement.

Incorporated Arbitration

Agreement

Section E expressly provided for the settlement of disputes 

between Contractor and Subcontractor by “arbitration in the 

11 Id.

12 “Agree,” Oxford English Dictionary Online, http://www.oed.com/view/

Entry/4146 (last visited July 20, 2017) (defining term as “[t]o accede, 

consent; to come to an agreement with another”).
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manner provided for in the General Contract.” Therefore, we 

must clarify what the general contract provides regarding the 

“manner” of arbitration.

The general contract provides, “For any Claim subject to, 

but not resolved by mediation pursuant to Section 15.3 of [the 

general conditions], the method of binding dispute resolution 

shall be . . . Arbitration pursuant to Section 15.4 of [the general 

conditions].” And, § 15.3.1 of the general conditions provides, 

“Claims, disputes, or other matters in controversy arising out of 

or related to the Contract except those waived as provided for 

in Sections 9.10.4, 9.10.5, and 15.1.6 shall be subject to mediation as a condition precedent to binding dispute resolution.” 

Thus, a claim must be subject to mediation and the mediation 

of the dispute must be unsuccessful before the claim is subject 

to binding arbitration.

The sweeping language of § 15.3.1 subjects all claims 

arising out of the contract, except those waived pursuant to 

the general conditions, to mediation as a condition precedent 

to binding dispute resolution. Section 9.10.4 waived certain 

claims by Owner after it made final payment. Section 9.10.5 

similarly waived those claims by Contractor and subcontractors 

after their acceptance of final payment. Finally, Section 15.1.6 

waived all claims for consequential damages.

Here, Owner did not make a final payment and, necessarily, 

Subcontractor did not accept a final payment. Subcontractor’s 

claims arose out of a perceived breach of the contract, and 

Subcontractor did not seek consequential damages. Therefore, 

Subcontractor’s claims did not fall within one of the categories 

of claims waiving mediation pursuant to the general conditions. 

Because Subcontractor’s claims all arose out of the contract, 

the claims were subject to the dispute resolution process mandated by § 15.3.1.
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Applicability of FAA

[10] If a contract containing an arbitration clause involves 

interstate commerce, the FAA governs the contract.13 We have 

already determined that the subcontract unambiguously incorporated the arbitration agreement, with its requirement for 

mediation as a condition precedent, from the general contract 

and general conditions. Accordingly, we now consider whether 

the subcontract involved interstate commerce, thereby triggering the applicability of the FAA.

[11] Contracts involving interstate commerce include contracts for services between parties of different states.14 Here, 

the subcontract undeniably met this definition. The subcontract 

was for the provision and installation of electrical services and 

materials in the buildings constructed pursuant to the general 

contract. Thus, it was a contract for services. And it was clearly 

between parties of different states: Contractor is a Minnesota 

corporation, and Subcontractor is a Nebraska corporation. 

Therefore, the FAA applied and the agreement is presumed 

valid, irrevocable, and enforceable.15

Because the subcontract’s arbitration clause is governed 

by the FAA, the action should have been stayed until arbitration was had in accordance with the terms of the agreement.16

Section 15.3.1 mandated mediation as a condition precedent 

to binding arbitration. At oral argument, it was conceded that 

mediation had not been attempted. Therefore, we must reverse 

the district court’s decision and remand the cause with directions that the court enter an order compelling arbitration in the 

manner provided for in the general contract. That is, the parties 

must attempt to resolve their dispute in mediation and then 

13 David Fiala, Ltd. v. Harrison, supra note 6.

14 Id.

15 See 9 U.S.C. § 2 (2012).

16 See 9 U.S.C. § 3 (2012).
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submit their dispute to arbitration in the event that mediation 

is unsuccessful.

[12] Having found reversible error, we do not address Owner 

and Contractor’s remaining arguments. An appellate court is 

not obligated to engage in an analysis that is not necessary to 

adjudicate the case and controversy before it.17

CONCLUSION

Because the subcontract included a mutually agreed-to 

arbitration clause governed by the FAA and Subcontractor’s 

claims were subject to the clause, we conclude that the motion 

to compel arbitration in the manner provided for in the general contract should have been sustained. In other words, the 

parties should have been required to attempt mediation and, 

if that failed, to proceed to arbitration. We reverse the district 

court’s order and remand the cause with directions that the 

court enter an order staying the action and compelling arbitration pursuant to the agreement.

Reversed and remanded with directions.

17 Flores v. Flores-Guerrero, 290 Neb. 248, 859 N.W.2d 578 (2015).