Court Opinion

ID: 2722116
Source: CourtListenerOpinion
Date Created: 2014-08-29 14:00:38.194974+00
Date Added: 2024-06-11T10:02:49.499931
License: Public Domain

Case: 13-14482   Date Filed: 08/29/2014   Page: 1 of 10

                                                       [DO NOT PUBLISH]

           IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT
                      ________________________

                            No. 13-14482
                        Non-Argument Calendar
                      ________________________

                  D.C. Docket No. 7:13-cv-00506-LSC

HANOVER INSURANCE COMPANY, THE,

                                                       Plaintiff-Appellee,

                                  versus

ATLANTIS DRYWALL & FRAMING LLC, et al.,

                                                       Defendants,

BAY MEADOWS CONSULTING LLC,
MARILOURDES DEYO,
LAURENCE LAMPHERE,
CHRISTIN M. LAMPHERE,

                                                      Defendants-Appellants.

                      ________________________

               Appeal from the United States District Court
                  for the Northern District of Alabama
                      ________________________

                            (August 29, 2014)
               Case: 13-14482      Date Filed: 08/29/2014   Page: 2 of 10

Before HULL, MARCUS and KRAVITCH, Circuit Judges.

PER CURIAM:

       In this interlocutory appeal, we must determine whether the district court

properly denied Bay Meadows Consulting (Bay Meadows), Marilourdes Deyo, and

Laurence and Christin Lampheres’ motions to compel arbitration. For the reasons

that follow, we vacate and remand.

                                          I.

       In 2010, the University of Alabama North Bluff Residential Community

Project hired Brice Building Company (Brice) as the general contractor for

development of a student housing complex. In March 2011, Brice subcontracted

with Atlantis Drywall and Framing (Atlantis) for work on the North Bluff project.

The subcontract contained an arbitration clause requiring arbitration over any

dispute or claim “between the parties (i) arising out of or related or collateral to the

provisions and/or subject matter of this Subcontract or the breach thereof . . . .”

The clause further provided that “[t]he parties intend that the scope of this

arbitration clause shall be construed as broadly as possible so as to include, but not

be limited to, the enforcement of this arbitration provision, the arbitrability of a

particular claim or dispute . . . .”

       In order to work on State of Alabama projects like the North Bluff complex,

Atlantis was required to obtain payment and performance bonds, which they

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secured from Hanover Insurance Company (Hanover). Before Hanover would

issue any bonds, however, it required indemnification by Atlantis, Bay Meadows,

Deyo, and the Lampheres.1 The Indemnification Agreement did not contain an

arbitration clause, nor did it expressly incorporate by reference any other

document. All parties entered into the Indemnification Agreement in May 2011.

On June 30, 2011, Hanover issued the payment and performance bonds. The

bonds specifically referenced and incorporated the subcontract between Brice and

Atlantis.

       Atlantis later defaulted on the work, and Hanover made payments under the

bonds. Hanover then sought indemnification. When the parties failed to comply,

Hanover filed a complaint in the district court naming as defendants Bay

Meadows, Marilourdes Deyo, and Laurence and Christin Lamphere (collectively,

“the indemnitors”).2 Hanover sought indemnification, exoneration and quia timet,

specific performance, and damages for breach of contract. The indemnitors

moved to compel arbitration under the Federal Arbitration Act (FAA), 9 U.S.C. §

1, et seq.3

       In the motions to compel, the indemnitors argued that Hanover was required

to arbitrate its claims under the arbitration clause in the subcontract. They further

1
  Deyo and Laurence Lamphere are members of Atlantis and Bay Meadows.
2
  The complaint also named Atlantis and Jeffrey Deyo, who are not parties to the appeal.
3
  Laurence and Christin Lamphere filed a joint motion to compel. Although the remaining
defendants each filed separate motions, they adopted the Lampheres’ motion.
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argued that Hanover was bound by the arbitration clause because the

Indemnification Agreement incorporated the subcontract between Brice and

Atlantis.

       The district court denied the motions to compel, finding that Hanover did not

agree to arbitrate, the Indemnification Agreement did not explicitly incorporate any

other contract because it did not “expressly refer to and sufficiently describe” the

bonds or subcontract, and the court could not view the three documents as a single

transaction because the parties differed. 4 Finally, the court explained that Hanover

could not be compelled to arbitrate because Hanover’s claims did not arise out of

the subcontract, as Hanover was not claiming a direct right or benefit under the

subcontract but was seeking only to enforce the terms of the Indemnification

Agreement. This interlocutory appeal under 9 U.S.C. § 16(a) followed.

                                               II.

       Indemnitors Bay Meadows, Deyo, and the Lampheres argue on appeal that

the district court erred by concluding that they could not enforce against Hanover

an arbitration clause contained in the subcontract between Brice and Atlantis. The

parties do not dispute that the payment and performance bonds Hanover issued to

4
    In a separate action, the district court found that Hanover was required to arbitrate its claims
against Brice because Hanover was subject to the arbitration agreement after incorporating the
subcontract into the bonds. See Hanover Ins. Co. v. Brice, 7:13-cv-00547-LSC, doc. 21 (N.D.
Ala. May 31, 2013). The district court also granted a motion to compel Hanover to arbitrate its
claims against Atlantis. See Hanover Ins. Co. v. Lamphere, 7:13-cv-00506-LSC, doc. 41 (N.D.
Ala. Oct. 7, 2013).
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Atlantis and Brice incorporated by reference the subcontract. The indemnitors

contend that the subcontract was sufficiently incorporated by reference into the

Indemnification Agreement to require arbitration of Hanover’s claims against the

indemnitors.

      “We review de novo the district court’s denial of a motion to compel

arbitration.” Lawson v. Life of the South Ins. Co., 648 F.3d 1166, 1170 (11th Cir.

2011) (citation omitted). The FAA establishes a “liberal federal policy favoring

arbitration agreements.” CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 668-69

(2012) (citations and internal quotations omitted). And “[c]ourts must rigorously

enforce agreements to arbitrate, even if doing so means piecemeal litigation.”

Nobles v. Rural Cmty. Ins. Servs., 122 F. Supp. 2d 1290, 1295 (M.D. Ala. 2000)

(citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218-20 (1985)).

“Because arbitration is a matter of contract, however, the FAA’s strong

proarbitration policy only applies to disputes that the parties have agreed to

arbitrate.” Klay v. All Defendants, 389 F.3d 1191, 1200 (11th Cir. 2004) (citation

omitted). Thus, where the parties have not agreed to arbitrate, a court cannot

compel them to arbitration. See id. An exception to this rule allows a nonparty to

“force arbitration ‘if the relevant state contract law allows him to enforce the

agreement’ to arbitrate.” See Lawson, 648 F.3d at 1170 (quoting Arthur Andersen

LLP v. Carlisle, 556 U.S. 624, 632 (2009)); see also McDougle v. Silvernell, 738

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So. 2d 806, 808 (Ala. 1999) (“Whether a contract to arbitrate exists must be

determined under general state-law contract principles”).

      As an initial matter, there is little dispute that Hanover consented to arbitrate

claims arising out of the subcontract between Brice and Atlantis; the performance

and payment bonds incorporated by reference the subcontract, and the subcontract

contained the arbitration clause. See U. S. Fid.& Guar. Co. v. West Point Constr.

Co., 837 F.2d 1507, 1508 (11th Cir. 1988). At issue, is whether the indemnitors

can force Hanover to arbitrate Hanover’s claims against them under the arbitration

clause in the subcontract between Brice and Atlantis. Because the indemnitors

were not signatories on the subcontract, and the Indemnification Agreement does

not expressly contain an arbitration clause, the indemnitors can compel arbitration

in only limited circumstances.

      First, the indemnitors can compel arbitration if the Indemnification

Agreement incorporated the subcontract. McDougle, 738 So. 2d at 808 (explaining

that a party may incorporate by reference another document containing an

arbitration provision). To incorporate another document, the writing must

“expressly refer[] to and sufficiently describe[]” the other document. Fid. &

Deposit Co. of Maryland v. Jefferson Cnty. Comm’n, 756 F. Supp. 2d 1329, 1337

(N.D. Ala. 2010).

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      Alternatively, the subcontract may be incorporated by reference if it is part

of the same transaction, that is, if the bonds, Indemnification Agreement, and

subcontract are all part of a single transaction. Dan Wachtel Ford, Lincoln,

Mercury, Inc. v. Modas, 891 So. 2d 287, 290 (Ala. 2004). Generally, this involves

documents signed by the same parties at or near the same time. See, e.g., Lloyd

Noland Found., Inc. v. City of Fairfield Healthcare Auth., 837 So. 2d 253, 267

(Ala. 2002) (“two or more instruments executed contemporaneously by the same

parties in reference to the same subject matter constitute one contract and should

be read together in construing the contract” (internal citation omitted)); cf. Bailey

v. Hannibal & St. J.R. Co., 84 U.S. 96, 108 (1872) (“[I]t is well-settled law that

several writings executed between the same parties substantially at the same time

and relating to the same subject-matter may be read together as forming parts of

one transaction, nor is it necessary that the instruments should in terms refer to

each other if in point of fact they are parts of a single transaction”). But Alabama

law has never held that the parties must be the same. See Ex parte Harris, 837
So. 2d 283, 288 (Ala. 2002) (accepting that “two or more agreements may be

construed as one contract even though the parties to the agreements are not all the

same, such as where some of the documents are executed by parties who have no

part in executing the others, provided that the agreements in question relate to the

same subject matter”); see also Haddox v. First Ala. Bank of Montgomery, 449

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So. 2d 1226, 1229-30 (Ala. 1984) (reading as a single contract several documents

concerning the same subject matter but signed by different parties).

      Lastly, under Alabama law, a nonsignatory can seek arbitration if (1) the

nonsignatory is a third-party beneficiary of the contract containing an arbitration

provision, and (2) the nonsignatory’s claims are “intertwined with” and “related

to” the contract. Cook’s Pest Control, Inc. v. Boykin, 807 So. 2d 524, 526-27 (Ala.

2001). Where the specific language of the arbitration clause limits its scope to

claims involving the parties, courts have been reluctant to compel nonsignators

into arbitration. See id. at 527.

      The district court found none of these circumstances present here. We

disagree because we conclude that the Indemnification Agreement, bonds, and

subcontract should be viewed as a single transaction. Although the parties

involved in signing each document differed, and the documents were signed on

three separate occasions between March and June 2011, the contracts relate to the

same subject matter. See Ex parte Harris, 837 So. 2d at 288; see also Love v.

Fleetway Air Freight & Delivery Serv.,875 So.2d 285, 289 (Ala. 2003) (explaining

that the court would construe documents together even though they were not

executed contemporaneously, as long as the documents refer to one another);

K&C Dev. Corp. v. AmSouth Bank, 597 So. 2d 671, 674 (Ala. 1992) (considering

together documents that were signed more than six months apart). Moreover, the

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parties were aware that Hanover required the Indemnification Agreement before it

would issue the bonds, and thus the issuance of the bonds depended on the

indemnification. And Atlantis could not perform its work under the subcontract

without the bonds. See, e.g., Kandlis v. Houtari, 678 A.2d 41, 43 (Me. 1996)

(construing guaranties signed by different shareholders as one agreement because

the guaranties concerned the same subject matter and were signed “for the same

purpose”) (cited with approval in Ex parte Harris, 837 So. 2d at 287). The

Indemnification Agreement refers to bonds that Hanover may enter into, even

though it does not specifically identify the bonds at issue. And although the

Indemnification Agreement is not limited to the Atlantis-Brice subcontract and

bonds, there is no dispute that the parties entered into the Indemnification

Agreement with the Brice-Atlantis subcontract and the specific payment and

performance bonds in mind.

      The district court’s conclusion that the documents were not related because

“at any of these stages the parties could have contracted with someone else without

destroying the contract” misses the point. The parties were interconnected and the

documents concerned the same subject matter. Thus, we cannot conclude that the

Indemnification Agreement pertains to a different subject matter than the

subcontract and bonds, and the district court erred when it declined to read the

three documents as a single transaction. See Ex parte Harris, 837 So. 2d at 288.

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      We thus vacate and remand with instructions to the district court to compel

arbitration.

      VACATED and REMANDED.

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