Opinion ID: 1782236
Heading Depth: 2
Heading Rank: 1

Heading: Crane's Motion to Compel Arbitration and Mediation

Text: This Court has held that, when determining whether parties agreed to arbitrate a particular dispute, the court must apply `ordinary state-law principles that govern the formation of contracts.' AmSouth Bank v. Dees, 847 So.2d 923, 933 (Ala. 2002) (quoting Ex parte Messer, 797 So.2d 1079, 1082 (Ala. 2001), quoting in turn First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Because this contract is governed by the substantive law of Mississippi, we use Mississippi contract principles to construe the arbitration and mediation provisions. Under Mississippi law, a court must consider three factors when ruling on a motion to compel arbitration: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether any defense available under Mississippi contract law, such as fraud, duress, or unconscionability, applies to invalidate the arbitration agreement. East Ford v. Taylor, 826 So.2d 709, 713 (Miss. 2002). The parties agree that this appeal hinges on the first prong: whether the prime contract and the subcontract created an agreement requiring Malouf to arbitrate its claims against Crane. The parties disagree as to which clauses of which contract should apply. Crane argues that the requirement in the prime contract of mediation and arbitration applies to this dispute because the subcontract incorporates the provisions of the prime contract. Thus, it asserts, the mandatory, binding mediation and arbitration clauses in Paragraphs 4.5 and 4.6 of the Prime Contract control to the exclusion of the voluntary dispute resolution clauses in Paragraph 27.2 of the Subcontract. (Crane's brief, p. 23.) Malouf contends that the prime contract is irrelevant to the dispute between it and Crane because it governs only the relationship between Palm Beach and Malouf; Malouf argues that the subcontract governs the relationship between Malouf, the contractor, and Crane, the subcontractor. Thus, Malouf argues, this Court should look to the terms of the subcontract and under the subcontract it is very clear that arbitration and mediation are voluntary. (Malouf's brief, p. 17.) The subcontract provides that Malouf and Crane shall be bound . . . by all terms and conditions of [the] Subcontract and by all terms and conditions of the Prime Contract. Subcontract, paragraph 2. The ADR procedures in the prime contract purport to govern any claims arising out of or related to the [Prime] Contract. Prime contract, paragraph 4.5.1. [2] Although these provisions appear to conflict, they bind different parties and therefore create no ambiguity or conflict. Under Mississippi law, when a court is construing the terms of a contract, the cardinal rule of construction is to give effect to the mutual intentions of the parties. Lamb Constr. Co. v. Town of Renova, 573 So.2d 1378, 1383 (Miss.1990). In doing so, a court accepts the plain meaning of the terms as expressing the intent of the parties where no ambiguity exists. A & F Props., LLC v. Madison County Bd. of Supervisors, 933 So.2d 296 (Miss.2006). The subcontract and the prime contract do not conflict; the ADR provisions in the subcontract and the prime contract apply to different parties. The provisions of the subcontract apply directly to the relationship between the subcontractor and the contractor (here, Crane and Malouf). [3] The Resolution of Claims and Disputes section of the prime contract, on the other hand, applies expressly to disputes between the contractor and the owner (here, Malouf and Palm Beach). Specifically, the prime contract requires that all Claims between the Contractor and Owner be submitted to the architect as a condition precedent to mediation, arbitration or litigation. Further, both the Mediation and the Arbitration sections of the prime contract provide for mediation and arbitration after initial decision by the Architect or 30 days after submission of the Claim to the Architect. Prime contract, paragraphs 4.5-4.6. Because the prime contract states that [t]he Architect will not decide disputes between the Contractor and persons or entities other than the Owner, it is unmistakable that the ADR procedures in the prime contract are intended only to govern disputes between Malouf and Palm Beach. Crane argues that the prime contract governs this dispute because the subcontract incorporates the terms of the prime contract. That incorporation results in the adoption of the terms of the prime contract into the subcontract. Sorrells v. Alexander Bros., 165 Miss. 466, 144 So. 560, 562 (1932). However, it does not abolish the dispute-resolution scheme in place in the subcontract between Malouf and Crane. See Perry v. United States ex rel. Newell, 146 F.2d 398, 400 (5th Cir.1945) ([W]hile a reference in a subcontract to the provisions, plans and specifications of a general contract imports them into the subcontract where not inconsistent with its terms, it is quite well settled that such a reference is not effective beyond this, and that if the subcontract contains words of definite limitation, they will be given effect and the reference limited accordingly.). Nor does it create an ambiguity in the agreement because, as previously discussed, the provisions in the subcontract and the prime contract govern different disputes between different parties.