Milliken v. C. Merrill Constr.

902 S.E.2d 669

MILLIKEN

v.C. MERRILL CONSTRUCTION, LLC.

A24A0348

Court of Appeals of Georgia.

May 29, 2024

James Edward Enoch Jr., Edward Jerome Tarver, for Appellant.

Benjamin Joseph Colson, Statesboro, Samuel Josiah Broucek, for Appellee.

Brown, Judge.

Jeff Milliken ("the owner") appeals from the trial court’s entry of a final money judgment of $100,827.96 in favor of C. Merrill Construction, LLC ("the contractor’’) following his confession of judgment. The owner contends that the trial court erred in denying his motion to compel arbitration and to dismiss, in granting the contractor’s motion to stay arbitration, in its rulings on discovery, and in granting attorney fees to the contractor. For the reasons explained below, we affirm the trial court’s denial of the owner’s motion to dismiss, reverse the trial court’s denial of the owner’s motion to compel arbitration and its grant of the contractor’s motion to stay arbitration, vacate the trial court's discovery orders and final judgment, and remand with direction for the trial court to order the parties to submit to arbitration.

The record shows that on January 6, 2021, the parties entered into a construction contract that included a dispute resolution provision. On October 7, 2022, the contractor filed suit alleging the owner breached the contract by failing to pay over $48,000 in outstanding invoices, $5,225.58 owed on an open account for repairs performed for the owner at a different restaurant location, $8,441 owed on an open account for HVAC repairs, and interest on these amounts. In addition to its breach of contract and open account claims, the contractor sought damages based upon unjust enrichment, quantum meruit, as well as a writ of attachment on restaurant equipment listed for sale and attorney fees, litigation expenses, and costs. The complaint was served on October 21, 2022, and the owner filed an answer on November 16, 2022, denying liability; the owner did not raise arbitration as a defense to the lawsuit.

On January 5, 2023, the owner moved the trial court to dismiss the lawsuit and compel arbitration. According to the owner’s motion, the contractor failed to make a demand for arbitration under the contract and brought litigation in violation of the contract terms. The contractor opposed the motion and requested a stay of arbitration under OCGA § 9-9-6 (b), arguing that the owner waived his right to arbitration, failed to comply with the agreement to arbitrate by ignoring the con- tractor’s pre-suit request for mediation and demand for arbitration, and that not all of the claims asserted in the complaint were subject to arbitration.

On February 6, 2023, the trial court scheduled a hearing for March 6, 2023, on the owner’s motion to dismiss and compel arbitration. The following day, however, the trial court issued a short order denying the motion based upon its consideration of the written submissions of both parties. It subsequently denied the owner’s request for a certificate of immediate review.

On March 17, 2023, the owner filed a verified "Confession of Judgment" in which he authorized "the clerk of the superior court" to enter "judgment for $69,009.55." The document recites that the owner "desires to confess judgment … to settle all claims made or that could have been made by [the contractor]" in the pending lawsuit. On April 6, 2023, the owner paid $69,009.55 into the registry of the clerk of court.

On May 8, 2023, the contractor filed a motion for attorney fees under OCGA § 9-15- 14 and OCGA § 13-6-11. Following the filing of an opposition brief by the owner and a hearing held on July 10, 2023, the trial court entered a judgment, as later amended to correct a minor mathematical error, in the total amount of $100,827.96, based upon the confessed judgment amount of $69,009.55, prejudgment interest of $11,317.74, and a $27,431.84 award of attorney fees and expenses under OCGA § 9-15-14 (b) and OCGA § 13-6-11.

1. The owner asserts that the trial court erred in denying his motion to dismiss and compel arbitration and in granting the contractor’s motion to stay arbitration, contending that he did not waive his right to arbitration after the contractor filed suit, did not fail to comply with conditions precedent for arbitration, and that all of the claims in the contractor’s complaint should be submitted to the arbitrator. As outlined below, the trial court should have ordered the parties to submit to arbitration.

[1–3] "This Court reviews the grant or denial of a motion to compel arbitration de novo to see if the trial court’s decision is correct as a matter of law; but we defer to the trial court’s factual findings unless they are clearly erroneous." Emory Healthcare v. Farrell, 359 Ga. App. 621, 622, 859 S.E.2d 576 (2021). "The Federal Arbitration Act ("FAA") applies in state and federal courts to all contracts containing an arbitration clause that involves or affects interstate commerce. When the FAA applies, as it does here, it must be applied using federal substantive law." (Citations and punctuation omitted.) SunTrust Bank v. Lilliston, 302 Ga. 840, 842, 809 S.E.2d 819 (2018). As a preliminary matter, we must determine whether the trial court or the arbitrator should have determined the issues of waiver, compliance with conditions precedent, and whether all of the claims asserted in the complaint are subject to arbitration. See generally Brown v. RAC Acceptance East, 303 Ga. 172, 174-177 (2) (a)- (b), 809 S.E.2d 801 (2018).

[4] (a) Conduct-based waiver. In general, "courts decide issues of alleged conduct-based waiver of arbitration rights[,] … but … where there is clear and unmistakable evidence that the parties wanted an arbitrator to resolve the dispute about arbitrability, courts must give effect to the parties’ agreement." (Citations and punctuation omitted.) Brown, 303 Ga. at 175 (2) (a), 809 S.E.2d 801. Accordingly, the Supreme Court of Georgia has previously held that contract language assigning the "responsibility for resolving ‘disputes about the validity, enforceability, arbitrability or scope of this Arbitration Agreement’ to the arbitrator" provides clear and unmistakable evidence that the arbitrator should decide the issue of conduct-based waiver. Id. at 175-176 (2) (a), 809 S.E.2d 801. More specifically, the Supreme Court concluded that the appellant’s "conduct-based waiver argument is a direct challenge to the enforceability of the arbitration agreement." (Emphasis supplied.) Id. at 176 (2) (a), 809 S.E.2d 801.

In this case, the parties’ arbitration agreement does not assign responsibility for resolving disputes involving enforceability to the arbitrator; we must therefore examine the particular contract language before us for any clear and unmistakable intent for the arbitrator to decide the issue of conduct- based waiver. The front page of the contract states that "AIA Document A201-2017, General Conditions of the Contract for Construction, is adopted in this document by reference." The contract further provides:

ARTICLE 6 DISPUTE RESOLUTION

§ 6.1 Initial Decision Maker

The Architect will serve as the Initial Decision Maker pursuant to Article 15 of AIA Document A201-2017, unless the parties appoint below another individual not a party to the Agreement to serve as the Initial Decision Maker ….¹

§ 6.2 Binding Dispute Resolution

For any Claim subject to, but not resolved by mediation pursuant to Article 15 of AIA Document A201-2017, the method of binding dispute resolution shall be … Arbitration pursuant to Section 15.4 of AIA Document A201-2017.²

Section 15.4.1 of the AIA Document A201- 2017 provides:

If the parties have selected arbitration as the method for binding dispute resolution in the Agreement, any Claim subject to, but not resolved by, mediation shall be subject to arbitration which, unless the parties mutually agree otherwise, shall be administered by the American Arbitration Association ["AAA"] in accordance with its Construction Industry Arbitration Rules in effect on the date of the Agreement.

While these rules do not appear in the record before us, we may take judicial notice of them. See Miller v. GGNSC Atlanta, 323 Ga. App. 114,120 (2), n.11, 746 S.E.2d 680 (2013). The AAA’s Construction Industry Arbitration Rules and Mediation Procedures, effective July 1, 2015,³ contain the following relevant provisions:

R-1. Agreement of Parties and Designation of Applicable AAA Rules

(a) The parties shall be deemed to have made these Rules a part of their arbitration agreement whenever they have provided for arbitration by the [AAA] under its Construction Industry Arbitration Rules….

R-8. Interpretation and Application of Rules

The arbitrator shall interpret and apply these Rules insofar as they relate to the arbitrator’s powers and duties….

R-9. Jurisdiction

(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement.

(b) The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part.

R-54. Applications to Court and Exclusion of Liability

(a) No judicial proceeding by a party relating to the subject matter of the arbitration shall be deemed a waiver of the party’s right to arbitrate.

[5, 6] (i) While no Georgia courts have decided whether these provisions of the AAA Construction Industry Arbitration Rules and Mediation Procedures provide evidence of a clear and unmistakable intent for the arbitrator to decide the issue of whether a party has waived the right to arbitration through its conduct, other jurisdictions considering the language at issue have concluded that it does not. See, e.g., Plaintiffs’ Shareholders Corp. v. Southern Farm Bureau Life Ins. Co., 486 Fed. Appx. 786, 789-790 (II) (A) (11th Cir. 2012) (rejecting argument that arbitrator should decide issue of conduct-based waiver based on AAA rule stating that the "arbitrator...