Court Opinion

ID: 4242491
Source: CourtListenerOpinion
Date Created: 2018-02-06 13:13:00.625642+00
Date Added: 2024-06-11T07:48:03.805420
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA17-761

                              Filed: 6 February 2018

Forsyth County, No. 16 CVS 2136

SMITH JAMISON CONSTRUCTION, Plaintiff,

            v.

APAC-ATLANTIC, INC., YATES CONSTRUCTION CO., INC., Defendants.

      Appeal by defendant from order entered 13 April 2017 by Judge Susan E. Bray

in Forsyth County Superior Court. Heard in the Court of Appeals 8 January 2018.

      Spilman Thomas & Battle, PLLC, by Bryan G. Scott, Matthew W. Georgitis and
      Steven C. Hemric, for plaintiff-appellee.

      Tuggle Duggins, P.A., by J. Nathan Duggins III, Alan B. Felts, Benjamin P.
      Hintze and Jaye E. Bingham-Hinch, for defendant-appellant.

      TYSON, Judge.

      Yates Construction Company, Inc. (“Yates”) appeals the superior court’s order,

which denied Yates’ motion to compel Smith Jamison Construction to submit to

binding arbitration and to stay all other proceedings in the dispute between these

parties. We affirm the trial court’s denial of Yates’ motion asserting a right to

demand arbitration.

                                  I. Background
                     SMITH JAMISON CONSTR. V. APAC-ATL., INC.

                                  Opinion of the Court

       Smith Jamison Construction (“Jamison”) is a concrete contractor based in

Winston-Salem, North Carolina. In October 2012, Jamison entered into a contract

(the "Subcontract") with APAC-Atlantic, Inc. (“APAC”), a general contractor, to

construct catch basins, drop inlets, concrete curbs, gutters, sidewalks, curb ramps,

driveways, and concrete paved ditches along the Interstate 73 highway corridor.

      Contained within section 22 of the Subcontract was a mandatory arbitration

provision in which Jamison and APAC agreed to arbitrate claims arising out of or

relating to the Subcontract as follows:

             All claims or controversies arising out of or related to this
             Subcontract shall be submitted to and resolved by binding
             arbitration by a single arbitrator in any County and State
             where the project is located. The American Arbitration
             Association (“AAA”) shall conduct the arbitration unless
             the parties mutually agree to use an alternative arbitration
             service. Judgment upon any award made by the arbitrator
             may be entered in any court having jurisdiction thereof, if
             necessary.

      Yates is a separate North Carolina corporation, which has engaged in

construction work with APAC and Jamison on past projects. Yates is neither a party

to nor a signatory of the Subcontract between Jamison and APAC.

      Jamison alleges, although it was awarded the Subcontract for the concrete

work on Interstate 73, the APAC Project Manager exchanged emails with Yates’ vice

president on multiple times concerning a subcontract approval form, under which

Jamison would further subcontract to Yates the curb work previously assigned to

Jamison’s scope of work under the Subcontract. Jamison further alleges it did not

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                                   Opinion of the Court

request nor authorize Yates to be added to the project as a sub-subcontractor, but

that, “Yates was expecting to perform [Jamison’s] work as early as July 2013, due to

such representations from APAC.”          Jamison further alleges APAC expressly

requested Jamison to allow Yates to subcontract the curb and gutter scope of work,

but Jamison refused. Jamison asserts that after it refused, APAC started sending it

daily complaint emails. On 20 December 2013, the Department of Transportation

approved APAC’s request to terminate Jamison and replace them with Yates.

Jamison was informed that the Subcontract had been terminated.

      Jamison filed a complaint against APAC and Yates on 13 April 2016, alleging

that APAC had terminated Jamison and replaced it with Yates.            Jamison also

asserted claims against Yates for: (1) fraudulent misrepresentation; (2) tortious

interference with a contract; (3) civil conspiracy; and (4) unfair and deceptive trade

practices in violation of N.C. Gen. Stat. § 75-1.1.

      Yates filed an answer on 14 June 2016, denied all allegations of wrongdoing

and asserted, in part, “the presence of a mandatory and binding arbitration clause in

the subcontract between [Jamison] and Defendant APAC[.]”

      The trial court entered a consent order compelling arbitration between

Jamison and APAC and staying the claims against APAC on 30 December 2016. In

the consent order, Jamison and APAC agreed to stay the action with respect to their

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                     SMITH JAMISON CONSTR. V. APAC-ATL., INC.

                                    Opinion of the Court

claims and to submit those claims to binding arbitration, based upon the arbitration

provision contained in the Subcontract between Jamison and APAC.

      Yates filed a motion to compel arbitration and stay court proceedings on 24

March 2017. Yates sought the court to order Jamison to arbitrate its claims against

it. The trial court denied Yates’ motions by an order entered 13 April 2017. Yates

filed timely notice of appeal.

                                      II. Jurisdiction

      Although an order denying a party’s motion to compel arbitration is

interlocutory, this Court has repeatedly held that “[it] is immediately appealable

because it involves a substantial right which might be lost if appeal is delayed.” Prime

South Homes, Inc. v. Byrd, 102 N.C. App. 255, 258, 401 S.E.2d 822, 825 (1991) (citing

Sims v. Ritter Constr., Inc., 62 N.C. App. 52, 302 S.E.2d 293 (1983)); N.C. Gen. Stat.

§§ 1-277(a), 7A-27(d)(1) (2017). Yates’ interlocutory appeal is properly before us.

                                 III. Standard of Review

      “[The] trial court’s conclusion as to whether a particular dispute is subject to

arbitration is a conclusion of law, reviewable de novo by the appellate court.” Raspet

v. Buck, 147 N.C. App. 133, 136, 554 S.E.2d 676, 678 (2001). “Under de novo review,

[this Court] consider[s] the matter anew and [is] free to substitute [its] judgment for

that of the trial court.” Westmoreland v. High Point Healthcare Inc., 218 N.C. App.

76, 79, 721 S.E.2d 712, 716 (2012).

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                      SMITH JAMISON CONSTR. V. APAC-ATL., INC.

                                   Opinion of the Court

                                      IV. Analysis

      Yates argues the trial court erred in denying its motion to compel arbitration

and stay the action. Yates asserts Jamison is equitably estopped from asserting

Yates, a nonsignatory, was not covered by the arbitration clause contained within the

Subcontract between Jamison and APAC.

                                 A. Duty to Arbitrate

      This Court applies a two-pronged analysis to determine whether a dispute is

subject to arbitration. Sloan Fin. Grp., Inc. v. Beckett, 159 N.C. App. 470, 478, 583

S.E.2d 325, 330 (2003), aff’d per curiam, 358 N.C. 146, 593 S.E.2d 583 (2004). We

must determine whether the specific dispute is covered by the “substantive scope of

th[e] agreement[,]” and “whether the parties had a valid agreement to arbitrate[.]”

Id. (citation omitted).

      In the consent order compelling arbitration between Jamison and APAC, both

parties to the Subcontract stipulated that the arbitration clause was valid,

enforceable, and governed at least some of Jamison’s claims against APAC. Because

the applicability of the arbitration clause in the Subcontract is stipulated to cover the

claims between Jamison and APAC, we must determine whether the arbitration

clause also obligates Jamison to arbitrate its claims against Yates.

      “The obligation and entitlement to arbitrate ‘does not attach only to one who

has personally signed the written arbitration provision.’ Rather, ‘[w]ell-established

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                                   Opinion of the Court

common law principles dictate that in an appropriate case a nonsignatory can enforce,

or be bound by, an arbitration provision within a contract executed by other parties.’”

Washington Square Sec., Inc. v. Aune, 385 F.3d 432, 435 (4th Cir. 2004) (quoting Int’l.

Paper v. Schwabedissen Maschinen & Anlagen, 206 F.3d 411, 416-17 (4th Cir. 2000))

(alteration in original).

                                B. Equitable Estoppel

       “[A] nonsignatory to an arbitration clause may, in certain situations, compel a

signatory to the clause to arbitrate the signatory’s claims against the nonsignatory

despite the fact that the signatory and nonsignatory lack an agreement to arbitrate.”

Am. Bankers Ins. Group, Inc. v. Long, 453 F.3d 623, 627 (4th Cir. 2006). “One such

situation exists when the signatory is equitably estopped from arguing that a

nonsignatory is not a party to the arbitration clause.” Id. “[E]stoppel is appropriate if

in substance the signatory’s underlying complaint is based on the nonsignatory’s

alleged breach of the obligations and duties assigned to it in the agreement.” Id. at

628 (citation, internal quotation marks and brackets omitted).

       “[E]quitable estoppel applies when the signatory to a written agreement

containing an arbitration clause must rely upon the terms of the . . . agreement in

asserting its claims against the nonsignatory.” Id. at 626-27 (citations omitted). We

examine Jamison’s underlying claims in the complaint to determine whether

equitable estoppel should apply. See id.

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                     SMITH JAMISON CONSTR. V. APAC-ATL., INC.

                                  Opinion of the Court

             Where the issue is whether the underlying claims are such
             that the party asserting them should be estopped from
             denying the application of the arbitration clause, a court
             should examine whether the plaintiff has asserted claims
             in the underlying suit that, either literally or obliquely,
             assert a breach of a duty created by the contract containing
             the arbitration clause.

Carter v. TD Ameritrade Holding Corp., 218 N.C. App. 222, 231, 721 S.E.2d 256, 263

(2012) (emphasis supplied) (internal quotation marks and citation omitted).

                     C. Ellen v. A.C. Schultes of Maryland, Inc.

      In analyzing Yates’ equitable estoppel argument, we find this Court’s analysis

in Ellen v. A.C. Schultes of Maryland, Inc., 172 N.C. App. 317, 320, 615 S.E.2d 729,

732 (2005), is instructive. This Court in Ellen affirmed the trial court’s denial of a

motion to compel arbitration, which was based upon the defendants’ contention that

the plaintiffs were equitably estopped from refusing to arbitrate their claims. Id. at

320-23, 615 S.E.2d at 731-33.

      As is analogous here, the plaintiffs in Ellen had brought claims for unfair and

deceptive trade practices and tortious interference with prospective business

advantages against the defendants. Id. at 322, 615 S.E.2d at 733. The plaintiffs had

not asserted the defendants in Ellen breached or owed them any duties arising from

the contract containing the arbitration clause. Id.

      In affirming the denial of the motion to compel arbitration, this Court reasoned

that while the contract containing the arbitration clause “[p]rovided part of the

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                                     Opinion of the Court

factual foundation for plaintiffs’ complaint,” the plaintiffs’ claims were “dependent

upon legal duties imposed by North Carolina statutory or common law rather than

contract law.” Id. at 322, 615 S.E.2d at 732-33.

      Here,    Jamison’s    claims     against     Yates    consist   of:   (1)   fraudulent

misrepresentation; (2) tortious interference with a contract; (3) civil conspiracy; and

(4) unfair and deceptive trade practices in violation of N.C. Gen. Stat. § 75-1.1.

Jamison’s claims, like the plaintiffs’ claims in Ellen, are dependent upon legal duties

imposed by North Carolina statutory and common law, rather than alleged breaches

of duties arising from the terms of the Jamison and APAC Subcontract. See id.

      Jamison’s fraudulent misrepresentation claim arises from a common law duty

not to intentionally harm others through deception. See Marshall v. Keaveny, 38 N.C.

App. 644, 647, 248 S.E.2d 750, 753 (1978) (recognizing “that an action for fraudulent

misrepresentations inducing the plaintiff to enter into a contract is an action in tort

and not an action in contract”).

      Jamison’s civil conspiracy claim is premised upon allegations that Yates

conspired with APAC to defraud Jamison and is not a separate cause of action, in and

of itself. Dove v. Harvey, 168 N.C. App. 687, 690, 608 S.E.2d 798, 800 (2005) (noting

“that there is not a separate civil action for civil conspiracy in North Carolina”).

      Jamison’s tortious interference with a contract claim arises from a common

law duty of a third party not to interfere with another’s right to freedom of contract

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                                   Opinion of the Court

or to enjoy the benefits thereof. See Coleman v. Whisnant, 225 N.C. 494, 506, 35

S.E.2d 647, 656 (1945) (“[U]nlawful interference with the freedom of contract is

actionable, whether it consists in maliciously procuring breach of a contract, or in

preventing the making of a contract when this is done, not in the legitimate exercise

of the defendant’s own rights, but with design to injure the plaintiff, or gaining some

advantage at his expense.”); see also, United Labs., Inc. v. Kuykendall, 335 N.C. 183,

189-90, 437 S.E.2d 374, 378-79 (1993) (labelling tortious interference with a contract

as a common law claim).

      Jamison asserts its unfair and deceptive trade practices claim against Yates

pursuant to N.C. Gen. Stat. § 75-1.1, which establishes a statutory, and not

contractual, basis for the action. See Ellen, 172 N.C. App at 322, 615 S.E.2d at 732

(treating an unfair and deceptive trade practices claim as a statutory-based claim);

see also United Virginia Bank v. Air-Lift Associates, 79 N.C. App. 315, 320, 339 S.E.2d

90, 93 (1986) (“[A]n action for unfair and deceptive trade practices is a distinct action

separate from fraud, breach of contract, and breach of warranty.”).

      Jamison’s claims against Yates are not premised upon any alleged breaches of

duties created by the Jamison and APAC Subcontract, but rather upon alleged

breaches of duties established by North Carolina common law or statutes. See Carter,

218 N.C. App. 222, 231, 721 S.E.2d 256, 263 (“[A] court should examine whether the

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                                    Opinion of the Court

plaintiff has asserted claims in the underlying suit that, either literally or obliquely,

assert a breach of a duty created by the contract containing the arbitration clause.”).

       Yates asserts the case of Carter v. TD Ameritrade Holding Corp. is

indistinguishable from the matter at bar. In Carter, the plaintiffs were investors who

alleged their IRA investment accounts were transferred without their assent to the

defendants via contracts bearing their allegedly forged signatures. Carter, 218 N.C.

App. at 223-24, 721 S.E.2d at 258-59. This Court held, inter alia, the plaintiffs had

ratified the contracts by manifesting their approval of the transfer by accepting tax

benefits and administrative services provided by the defendants under their

investment contracts, and by failing to repudiate their accounts after they became

aware of the transfer. Id. at 230, 721 S.E.2d at 262.

       The contracts contained binding arbitration clauses, which named the

defendants’ predecessor-in-interest. Id. at         224, 721 S.E.2d at 259.   This Court

presumed, arguendo, the plaintiffs had not signed the investment contracts, and held

the plaintiffs were estopped from arguing they were not subject to arbitration against

the defendants, because the plaintiffs’ claims were premised on enforcing duties

arising from the contracts. Id. at 230-33, 721 S.E.2d at 262-63. The claims brought

by the plaintiffs included, inter alia:

              [B]reach of contract, alleging defendants breached their
              respective investment contracts with the plaintiffs; breach
              of fiduciary duty, alleging [] defendants were plaintiffs’
              broker-dealers with whom plaintiffs had a special

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             relationship of trust who, by [t]he above-described conduct,
             breached their fiduciary duties; gross negligence, alleging
             [] defendants had a duty to properly supervise [plaintiff’s
             investment representative] and that [t]he failure of these
             defendants to properly supervise [plaintiff’s investment
             representative]       constitutes      gross     negligence.

Id. at 233, 721 S.E.2d at 264 (internal quotation marks omitted).

      The plaintiffs in Carter were attempting to assert the contracts containing

arbitration clauses and naming the defendants’ predecessor-in-interest were not

binding upon them, because their signatures were allegedly forged, while at the same

time asserting the defendants had breached the duties established by those same

contracts. Id.

       Here, unlike Carter, Jamison is not attempting to assert claims against Yates

that are premised upon any contractual and fiduciary duties created by the contract

containing the arbitration clause. The Subcontract between Jamison and APAC does

not contemplate, name, or refer to Yates as a party to the agreement or in any other

manner. We reject Yates’ assertion that Carter is indistinguishable from the case at

hand or compels a reversal of the trial court’s order.

      Although the existence of the Subcontract between Jamison and APAC

“[p]rovide[s] part of the factual foundation for [Jamison’s] complaint,” Jamison’s

claims against Yates are “dependent upon legal duties imposed by North Carolina

statutory or common law rather than contract law.” Ellen, 172 N.C. at 320, 615 S.E.2d

at 732. We conclude that the doctrine of equitable estoppel does not require the

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                                   Opinion of the Court

Court, under these facts and allegations, to compel Jamison to arbitrate its asserted

claims against Yates. See id. Yates’ arguments are overruled.

                                     V. Conclusion

       Jamison’s claims against Yates are premised upon duties created by North

Carolina common law or statutes, and are not based upon the Subcontract duties or

provisions between Jamison and APAC. Equitable estoppel does not apply to these

claims to require the trial court to stay the action and compel Jamison to submit its

claims against Yates to arbitration. The order denying Yates’ motion to compel

arbitration and to stay the action is affirmed. It is so ordered.

      AFFIRMED.

      Chief Judge McGEE and Judge DAVIS concur.

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