Enterprise v. W.G. Yates & Sons Constr. Co.

TRIBAL CASINO GAMING ENTERPRISE, Plaintiff, v. W.G. YATES & SONS CONSTRUCTION COMPANY,RENTENBACK CONSTRUCTORS INCORPORATED, andMETROMONT CORPORATION, Defendants.

CIVIL CASE NO. 1:16-cv-00030-MR-DLH

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA ASHEVILLE DIVISION

July 1, 2016

MEMORANDUM OF DECISION AND ORDER

THIS MATTER is before the Court on numerous motions filed by the parties. The Plaintiff, Tribal Casino Gaming Enterprise ("TCGE"), has filed motions to stay this matter pending arbitration, to compel arbitration, and to stay all pending deadlines. [Docs. 30; 32]. Defendant W.G. Yates & Sons Construction Company ("Yates") and Defendant Rentenbach Constructors Incorporated ("RCI") jointly have filed a motion to stay the arbitration initiated by TCGE. [Doc. 47]. Defendant Metromont Corporation ("Metromont") has filed motions to stay, deny, and enjoin the arbitration initiated by TCGE and to expedite the consideration of TCGE's motions to stay this matter and compel arbitration. [Docs. 43; 45; 49].

BACKGROUND

On April 3, 2008, TCGE entered into a construction contract with Yates and RCI (as joint general contractors), inter alia, to expand the facilities at Harrah's Cherokee Casino in Cherokee, North Carolina. [Doc. 3 at 3]. This project included the construction of two separate parking decks. One parking deck was an 8-level, 2,300+ space parking garage to be used by patrons, guests, and employees of Harrah's Cherokee Casino (the "Casino Deck"). The other deck was a 6-level, 1,200 space parking garage connected to the Harrah's Cherokee Hotel and intended for use by hotel guests (the "Hotel Deck"). [Doc. 40 at 2-3]. Yates/RCI, in turn, hired Metromont pursuant to a subcontract to build the parking decks. [Doc. 3 at 3].

Following the construction of the parking decks, TCGE alleges that certain components of them failed. [Id. at 5]. On February 19, 2015, TCGE reported that a ramp in the smaller Hotel Deck had partially collapsed. [Doc. 40 at 3]. The partial collapse of the Hotel Deck is the subject of this lawsuit filed by TCGE on February 9, 2016. [Id.].

TCGE brought this diversity action seeking damages due to the partial collapse of the Hotel Deck based on claims for breach of contract, breach ofwarranty, negligence, gross negligence, and unfair and deceptive trade practices. [Doc. 3 at 8-16]. Yates and RCI filed a joint Answer admitting that they were the general contractors for TCGE's parking decks but denying any liability for the Hotel Deck's collapse. [Doc. 27]. Similarly, Metromont admitted in its Amended Answer that it entered into a subcontract with Yates/RCI to provide precast concrete materials and construction services for the construction of TCGE's parking decks but denying any liability for the Hotel Deck's collapse. [Doc. 28].

The present dispute pertains to an arbitration clause contained in the general contract¹ executed by and between TCGE and Yates/RCI. This arbitration clause, found at section 26.5.B of the general contract, provides in full as follows:

Arbitration. Any controversy or claim arising out of or relating to this Agreement shall, except to the extent modified by the mutual agreement of the parties be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrators may be entered in a court subject to the provisions of this Section and Section 26.4.2.(ii) above. Either party may specify and require that any arbitrator selected shall be an attorney licensed to practice law in the North Carolina or a United States District Court. If more than one arbitrator is used, Owner shall select one, theContractor shall select one, and the two so selected shall select a third. The party desiring to submit any matter to arbitration under this Section shall do so by written notice to the other party and said notice shall set forth the item(s) to be arbitrated, such party's position as to such items and such party's choice of arbitrator. The party receiving said arbitration notice shall have fifteen (15) days after receipt of such notice to designate one of the remaining two arbitrators by written notice to the first party and to set forth in writing its position as to such terms. The two chosen arbitrators, within fifteen (15) days after designation, shall select the third arbitrator. The arbitration panel shall be required to render a decision within thirty (30) days after being notified of their selection. The fees and expenses of the arbitration panel shall be paid by the non-prevailing party unless the arbitrators determine there is no prevailing party, in which case the parties shall each pay one-half (1/2) of such expenses. In all arbitration proceedings submitted to the arbitration panel, the panel shall be required to agree upon and approve the substantive position advocated by either Owner or Contractor with respect to each disputed item. Any decision rendered by the panel that does not reflect a substantive position advocated by either Owner or Contractor shall be beyond the scope of authority granted to the panel and shall be void. The arbitrators shall be persons familiar, by profession or experience, with the issue(s) ln controversy. The awards of any arbitration shall be governed by Title 9 of the United States Code except as may be changed or limited by the provisions of this Agreement. The parties agree that binding arbitration shall be the sole remedy as to financial disputes arising out of this Agreement and that disputes requiring injunctive or declaratory relief shall be pursued as provided in this Agreement unless the parties mutually agree otherwise.

The parties agree that the only grounds for appeal of any arbitration award procured pursuant to this Article 26 shall be:

A. where the award was procured by corruption, fraud or undue means;

B. where there was evident partiality or corruption in the arbitrators or any of them;C. where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy, or any other misbehavior by which the rights of any party have been prejudiced;

D. where the arbitrators exceeded their powers or imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made; and/or

E. where an award is vacated and the time within which this Agreement required an award to be made has not expired, the Court may, in its discretion direct a rehearing by the arbitrators.

The parties agree that an arbitration award appealed pursuant to this Article 26 shall not be subject to review or modification by the Court, but shall be (i) affirmed strictly as rendered by the arbitrators, or (ii) vacated. Notwithstanding any laws, rules or ordinances that might allow for a longer time period for appeal the parties agree that an arbitration award rendered pursuant to this Article 26 shall be deemed final for enforcing and executing an arbitration award as authorized herein if such appeal has not been filed with the Court within thirty (30) calendar days of the date of the arbitration panel's written order issuing an arbitration award.

[Doc. 30-1 at 4-5] (emphasis added).

On February 9, 2016, TCGE invoked this arbitration clause by filing a demand for arbitration with the American Arbitration Association ("AAA") and by asserting a claim based upon the partial collapse of the Hotel Deck. [Doc. 31-3]. On the same date it filed this action. On May 6, 2016, TCGE filed a "Motion to Stay Pending Arbitration and to Compel Arbitration" in this matter. [Doc. 30]. On May 17, 2016, TCGE filed an amended demand with the AAAwhich included the designation of Ray Owens as its arbitrator. [Doc. 50 at 7-8]. This set in motion the requirement under the arbitration clause that Yates/RCI respond and designate a second arbitrator within 15 days. The arbitration clause then directs "[t]he two chosen arbitrators, within fifteen (15) days after designation, shall select the third arbitrator. The arbitration panel shall be required to render a decision within thirty (30) days after being notified of their selection." [Doc. 30-1 at 4]. This very compressed schedule having been initiated, the parties filed the motions at issue herein. The Court thereupon conducted a hearing on June 21, 2016.

DISCUSSION

Succinctly stated, the parties take the following positions with regard to the arbitration clause. TCGE contends that the arbitration clause is enforceable against Yates/RCI, and that based thereon the Federal Arbitration Act and corresponding North Carolina Revised Uniform Arbitration Act require that the Court compel arbitration and stay this action pending the completion thereof. Further, TCGE contends that Metromont may be compelled to arbitrate the claims against it because Metromont's subcontract with Yates/RCI contains the adoption clause subjecting Metromont to any obligations Yates/RCI has to TCGE pursuant to the general contract. [Doc. 31 at 4]. Yates/RCI, while not challenging the validityof the general contract, contend that TCGE's claim falls outside the scope of the arbitration clause, or alternatively, that the arbitration clause itself is unenforceable due to its unreasonably short time period within which the arbitration panel must render a decision. [Doc. 40 at 5-6]. Metromont, in turn, argues that the arbitration clause is unenforceable as its timeframe for resolving this dispute, together with its other mandatory provisions, violates the constitutional guarantees of due process and fundamental fairness. Further, Metromont argues that the subcontract's adoption clause provides TCGE no legal basis to bring Metromont into any arbitration proceeding commenced against Yates/RCI. [Doc. 42 at 7-8].

"Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute...