Court Opinion

ID: 4195782
Source: CourtListenerOpinion
Date Created: 2017-08-15 12:06:50.744277+00
Date Added: 2024-06-11T14:13:14.068696
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA16-1136

                               Filed: 15 August 2017

Halifax County, No. 15CVS1112

C. TERRY HUNT INDUSTRIES, INC., Plaintiff,

             v.

KLAUSNER LUMBER TWO, LLC, Defendant.

      Appeal by plaintiff from orders entered 31 May 2016 and 17 June 2016 by

Judge Alma L. Hinton in Halifax County Superior Court. Heard in the Court of

Appeals 19 April 2017.

      Hamilton Stephens Steele + Martin, PLLC, by Nancy S. Litwak and Erik M.
      Rosenwood, for plaintiff-appellant.

      Nexsen Pruet, PLLC, by David S. Pokela and Eric H. Biesecker, for defendant-
      appellee.

      BERGER, Judge.

      C. Terry Hunt Industries, Inc. (“Hunt”) appeals from the order filed on May 31,

2016 granting the motion to compel arbitration made by Klausner Lumber Two, LLC

(“Klausner”). Hunt also appeals from the order filed on June 17, 2016 denying both

the motion to reconsider the order granting the motion to compel arbitration, and the

motion to alter or amend the order. The interlocutory order compelled arbitration in

Hunt’s lawsuit claiming breach of a preliminary agreement for a construction project.
            C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                  Opinion of the Court

Hunt argues that interlocutory review is proper because the order affects a

substantial right. We disagree and dismiss the appeal.

                         Factual & Procedural Background

      On August 19, 2014, Hunt and Klausner entered into a Preliminary Contract

Agreement and Authorization to Proceed (the “Preliminary Agreement”). In the

Preliminary Agreement, Hunt agreed to provide the materials and labor necessary to

construct a sawmill on property owned by Klausner in Halifax County, North

Carolina (the “N.C. Project”). The Preliminary Agreement preceded the anticipated

execution of a contract (the “N.C. Contract”) that would set the terms and conditions

for the N.C. Project.

      The Preliminary Agreement incorporated the contract used by the parties for

a prior sawmill construction project completed in Live Oak, Florida (the “F.L.

Contract”). This agreement provided, in pertinent part:

             1.2    WHEREAS [Klausner] hereby intends to engage
             [Hunt] to undertake and perform all Work . . . in
             accordance with the [N.C.] Contract Documents for
             [Klausner’s] [N.C. Project], including the obligations and
             related liabilities as defined in the [N.C.] Contract, and
             [Hunt] has agreed to such engagement upon and subject to
             the terms and conditions of the [N.C]. Contract[.]

             ....

             2.1   In this Agreement, words and expressions shall have
             the same meanings as are respectively assigned to them in
             the [N.C.] Contract. The form and language of the [N.C.]
             Contract . . . shall be based on that used previously by the

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            C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                   Opinion of the Court

             Parties for the Sawmill Project located in Live Oak,
             Florida. References in this Agreement to specific Articles
             or language to be included in the [N.C.] Contract shall refer
             to those same Articles and language included in the [F.L.
             Contract].

Additionally, the parties agreed that work on the N.C. Project would commence once

the Preliminary Agreement was executed, prior to the completion of any other

documents pertaining to the N.C. Contract. However, pursuant to the Preliminary

Agreement, once the remaining N.C. Contract documents were agreed upon by the

two parties, “they shall, along with [the Preliminary Agreement], constitute the [N.C.

Contract] Documents.”

      The F.L. Contract, the form and language of which the parties agreed would

form the basis of the N.C. Contract, contained a three-step dispute resolution

procedure in Sections 13.11-13.13.      This procedure was enumerated in the F.L.

Contract as follows:

             13.11 Direct Discussions. If the Parties cannot reach
             resolution on a matter relating to or arising out of the
             Agreement, the Parties shall endeavor to reach resolution
             through good faith direct discussions between the Parties’
             representatives . . . . If the Parties’ representatives are not
             able to resolve such matter . . . senior executives of the
             Parties shall meet . . . to endeavor to reach resolution. If
             the dispute remains unresolved . . . the Parties shall submit
             such matter to the dispute mitigation and dispute
             resolution procedures . . . herein.

             13.12 Mediation. If direct discussions . . . do not result in
             resolution of the matter, the Parties shall endeavor to
             resolve the matter by mediation through the current

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            C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                  Opinion of the Court

             Construction Industry Mediation Rules of the American
             Arbitration Association . . . .

             13.13 Binding Dispute Resolution. If the matter is
             unresolved after submission of the matter to a mitigation
             procedure or to mediation, the Parties shall submit the
             matter to the binding dispute resolution procedure
             designated herein[,] Arbitration[,] using the current
             Construction Industry Arbitration Rules of the American
             Arbitration Association . . . .

      From approximately October 27, 2014 until February 10, 2015, Hunt and

Klausner attempted to negotiate the remaining terms of the N.C. Contract. However,

negotiations stalled and no additional terms or documents were agreed upon by the

parties. Instead of submitting the dispute to mediation, and then, if still unresolved,

to arbitration, the parties moved toward litigating their dispute.

      On November 24, 2015, Hunt filed a complaint against Klausner alleging

breach of contract, quantum meruit, and enforcement of lien on property. In response

to Hunt’s complaint, Klausner filed a motion to dismiss, and an alternative motion to

stay litigation and compel arbitration.

      Following a hearing, the trial court filed an order on May 31, 2016 that granted

Klausner’s motion to stay litigation and compel arbitration. The trial court not only

concluded that the parties had a valid and applicable arbitration agreement, but it

also found that the “Preliminary Agreement incorporates by reference all the terms

and conditions of the Florida Contract.”

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            C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                   Opinion of the Court

      Hunt filed a motion to reconsider the order granting the motion to stay

litigation and compel arbitration, and an alternative motion to alter or amend the

order compelling arbitration. Both motions were denied by the trial court in an order

filed June 17, 2016. It is from the May 31 and June 17 orders that Hunt appeals.

                                       Analysis

      Pursuant to N.C. Gen. Stat. § 1-569.6(b), in order to determine the validity of

an arbitration agreement, “[t]he court shall decide whether an agreement to arbitrate

exists or a controversy is subject to an agreement to arbitrate.” N.C.G.S. § 1-569.6(b)

(2015). “Once a court has determined that a claim is subject to arbitration, then the

merits of that claim . . . must be decided by the arbitrator.” State v. Philip Morris

USA, Inc., 193 N.C. App. 1, 18, 666 S.E.2d 783, 794 (2008), writ denied, review

denied, 676 S.E.2d 54 (2009) (citing Republic of Nicaragua v. Standard Fruit Co., 937
F.2d 469, 478 (9th Cir. 1991) (“Courts must be careful not to overreach and decide the

merits of an arbitrable claim. Our role is strictly limited to determining arbitrability

and enforcing agreements to arbitrate, leaving the merits of the claim and any

defenses to the arbitrator.” (brackets and quotation marks omitted)), cert denied, 503
U.S. 919, 117 L. Ed. 2d 516 (1992)).

      As a general principal, “there is no right to appeal from an interlocutory order.”

Darroch v. Lea, 150 N.C. App. 156, 158, 563 S.E.2d 219, 221 (2002) (citation omitted).

“An interlocutory order is one made during the pendency of an action, which does not

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             C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                    Opinion of the Court

dispose of the case, but leaves it for further action by the trial court in order to settle

and determine the entire controversy.” Hamilton v. Mortg. Info. Servs., Inc., 212 N.C.

App. 73, 76, 711 S.E.2d 185, 188 (2011) (citation and quotation marks omitted). While

an interlocutory appeal may be allowed in “exceptional cases,” this Court must

dismiss an interlocutory appeal for lack of subject-matter jurisdiction, unless the

appellant is able to carry its “burden of demonstrating that the order from which he

or she seeks to appeal is appealable despite its interlocutory nature.” Id. at 77, 711

S.E.2d at 188-89 (citation omitted).

      There are two instances in which an interlocutory appeal may be allowed:

             First, a party is permitted to appeal from an interlocutory
             order when the trial court enters a final judgment as to one
             or more but fewer than all of the claims or parties and the
             trial court certifies in the judgment that there is no just
             reason to delay the appeal. Second, a party is permitted to
             appeal from an interlocutory order when the order deprives
             the appellant of a substantial right which would be
             jeopardized absent a review prior to a final determination
             on the merits.

Jeffreys v. Raleigh Oaks Joint Venture, 115 N.C. App. 377, 379, 444 S.E.2d 252, 253

(1994) (internal citations and quotation marks omitted). In the instant case, Hunt

argues that this appeal from the order compelling arbitration is proper because it

affects a substantial right. We disagree.

      This Court has held that an order compelling arbitration affects no substantial

right that would warrant immediate appellate review under N.C. Gen. Stat. § 1-277.

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            C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                   Opinion of the Court

See N.C. Electric Membership Corp. v. Duke Power Co., 95 N.C. App. 123, 127-29, 381
S.E.2d 896, 898-99, disc. review denied, 325 N.C. 709, 388 S.E.2d 461 (1989); The

Bluffs v. Wysocki, 68 N.C. App. 284, 285, 314 S.E.2d 291, 293 (1984). Although Hunt

argues that its appeal concerns the scope of the trial court’s order, rather than merely

the grant of the order, this minor difference in degree does not affect our review of an

order compelling arbitration.

      “A substantial right is one which will clearly be lost or irremediably adversely

affected if the order is not reviewable before final judgment.” Turner v. Norfolk S.

Corp., 137 N.C. App. 138, 142, 526 S.E.2d 666, 670 (2000) (citation and quotation

marks omitted). No substantial rights are affected by an order compelling arbitration

because the parties have not been barred access to the courts. Darroch, 150 N.C.

App. at 162, 563 S.E.2d at 223 (citation omitted). The applicable statutory scheme,

our Revised Uniform Arbitration Act (the “Act”), N.C. Gen. Stat. § 1-569.1 to .31

(2015), provides in Subsections .23 and .24 procedures by which a party to an

arbitration may move the trial court to vacate, modify, or correct an arbitration

award. One such ground for vacating an arbitration award is that there was no

agreement to arbitrate. N.C.G.S. § 1-569.23(5) (2015). Accordingly, Plaintiff can

obtain judicial review of the award resulting from arbitrating this matter.

      Furthermore, Subsection .28 of the Act provides an enumerated list of the

grounds from which an appeal may be taken:

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            C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                     Opinion of the Court

             (a)     An appeal may be taken from:

                   (1)   An order denying a motion to compel arbitration;

                   (2)   An order granting a motion to stay arbitration;

                   (3)   An order confirming or denying confirmation of an
                         award;

                   (4)   An order modifying or correcting an award;

                   (5)   An order vacating an award without directing a
                         rehearing; or

                   (6)   A final judgment entered pursuant to this Article.

N.C.G.S. § 1-569.28 (2015). In analyzing the relevant portions of this Act, this Court

has noted the six situations listed above and the “conspicuous absence from the list

of an appeal from an order compelling arbitration. Such an order, [we have] held, is

interlocutory and not immediately appealable.” N.C. Electric Membership Corp., 95
N.C. App. at 127, 381 S.E.2d at 899 (citing The Bluffs, 68 N.C. App. at 285, 314 S.E.2d

at 293).

      “To [further] aid in statutory construction, the doctrine of expressio unius est

exclusio alterius provides that the mention of such specific exceptions implies the

exclusion of others.” Morrison v. Sears, Roebuck & Co., 319 N.C. 298, 303, 354 S.E.2d
495, 498 (1987) (citations omitted). Under this doctrine, by specifically enumerating

the permissible grounds for appeal, we can infer that the Legislature purposely

excluded any other grounds for appeal not included in the statutory text. See Patmore

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            C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                   Opinion of the Court

v. Town of Chapel Hill, 233 N.C. App. 133, 141, 757 S.E.2d 302, 307 (2014).

Accordingly, under Subsection .28, there is no right to interlocutory review of an order

compelling arbitration. Laws v. Horizon Housing, Inc., 137 N.C. App. 770, 771, 529
S.E.2d 695, 696 (2000) (citation omitted).

      Hunt is unable to demonstrate that the order compelling arbitration affects a

substantial right because Hunt is not barred from seeking relief from the trial court,

and ultimately from petitioning this Court following arbitration. Additionally, under

Subsection .28 of the Act, an order compelling arbitration is not an enumerated

ground for appellate review of arbitration orders. For these reasons, we are unable

to reach the merits of this appeal for lack of subject-matter jurisdiction.

                                      Conclusion

      Because an order compelling arbitration is interlocutory, and neither affects a

substantial right that would be lost without our review, nor falls within the

enumerated grant of appellate review of N.C. Gen. Stat. § 1-569.28, this appeal must

be dismissed for lack of subject-matter jurisdiction.

      DISMISSED.

      Judge ELMORE concurs.

      Judge INMAN concurs with separate opinion.

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 No. COA16-1136 – C. Terry Hunt Indus., Inc. v. Klausner Lumber Two, LLC

      INMAN, Judge, concurring.

      I concur with the majority’s decision dismissing this interlocutory appeal. I

write separately to note that I do not construe N.C. Gen. Stat. § 1-569.28 or

longstanding precedent to prohibit per se all interlocutory appeals from orders

compelling arbitration.

      Section 1-277(a) of the North Carolina General Statutes provides that

             [a]n appeal may be taken from every judicial order or
             determination of a judge of a superior or district court,
             upon or involving a matter of law or legal inference,
             whether made in or out of session, which affects a
             substantial right claimed in any action or proceeding; or
             which in effect determines the action, and prevents a
             judgment from which an appeal might be taken; or
             discontinues the action, or grants or refuses a new trial.

N.C. Gen. Stat. § 1-277(a) (2015). Although this Court and the North Carolina

Supreme Court have consistently held that orders compelling arbitration do not fall

within the criteria of Section 1-277(a), if an appellant asserts that an order compelling

arbitration affects a substantial right, some consideration of the nature of the case at

issue is necessary before rejecting the argument.

      The majority’s analysis regarding why appellant here has not shown that the

order compelling arbitration affects a substantial right is sound but, in my view,

incomplete. I would hold that in addition to the generic reasons that an order to

compel arbitration generally does not affect a substantial right, appellant here has

not demonstrated any factual or procedural characteristic of this case that
             C. TERRY HUNT INDUS., INC. V. KLAUSNER LUMBER TWO, LLC

                                 INMAN, J., concurring

distinguishes it from other appeals from orders compelling arbitration that have been

held not to affect a substantial right. See, e.g., N.C. Electric Membership Corp. v.

Duke Power Co., 95 N.C. App. 123, 128-29, 381, S.E.2d 896, 898-99 (1989)(holding

that an order compelling arbitration did not affect a substantial right, based on

analysis addressing specific contractual provisions disputed by the parties).

       The majority’s interpretation of our statutes and precedent as prohibiting an

appeal from any order compelling arbitration provides a simple, bright line rule at

the expense of an appeal of right in the rare case which meets Section 1-277’s

substantial right criteria. This expense may be more theoretical than practical,

because an appellant who cannot establish a right to appeal can petition for certiorari

review. See State v. Phillip Morris USA, Inc., 193 N.C. App. 1, 6, 666 S.E.2d 783, 787

(2008)(holding based on the contract in dispute that the appellant had not shown an

order compelling arbitration affected a substantial right, but granting a petition for

a writ of certiorari to review the interlocutory order). Nevertheless, I see no need to

completely foreclose all such appeals where facts may arise in which a substantial

right is affected.

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