Erdman, a Wisconsin-based contractor specializing in health care facilities, entered into a Design-Build Contract with Phoenix Land as Owner to design and build a one-story addition to a surgical center in Fort Smith, Arkansas. Section 12.2 of the Contract provided that “[a]ny controversy or claim arising out of or relating to this Contract or its breach not resolved by mediation, except for claims relating to Design- Builder’s lien rights . . . shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect.” The Contract identified EAEC as a wholly-owned subsidiary of Erdman that would perform Erdman’s obligations to provide Design Services for the project. The Contract was signed by Erdman’s Executive Vice President on behalf of both Erdman and EAEC. Phoenix Health has an unexplained ownership interest in the project site but was not named or referred to in the Contract.
After work on the project began, Phoenix Land signed a series of change orders that altered the plans by adding a second floor “dead shell space” for future expansion and by allowing for the addition of a third floor at a later date. Excavation for the elevator included in the new plans went below the area covered by a geotechnical report prepared for the project and penetrated an abandoned mineshaft. A sinkhole developed, damaging completed work and delaying the project. Erdman demanded time and extra monies to remediate this allegedly unforeseen condition. Phoenix Land investigated, concluded Erdman was responsible for the sinkhole, and refused to make progress payments when Erdman would not complete the project without additional funding. Erdman halted construction with the project not completed.
Erdman and EAEC then filed this action to foreclose their respective liens for amounts unpaid under the Contract. The Complaint also alleged a breach of contract claim against Phoenix Land, and unjust enrichment claims against Phoenix Land and Phoenix Health. Their answer denied the lien claims, asserting numerous affirmative defenses, and pleaded Phoenix Land’s counterclaim. After obtaining a three-week extension, Erdman and EAEC filed their reply to the counterclaim, and Erdman moved to dismiss Phoenix Land’s fraudulent misrepresentation claim or, in the alternative, for a more definite statement of that claim. On the same day, Erdman and EAEC moved to compel arbitration of the counterclaim and to stay adjudication of the counterclaim but permit adjudication of the lien claims pending the arbitration. Though they argued that there was nothing to arbitrate until Phoenix Land asserted its counterclaim, footnote 9 to their lengthy Motion to Compel acknowledged that their initial claims for breach of contract and unjust enrichment “are also covered by the agreement to arbitrate and . . . should also be referred to mediation and arbitration.” Two weeks later, Erdman and EAEC also filed a third party complaint against the geotechnical consultant and two Erdman subcontractors.
Judge(s): James Loken
Jurisdiction: U.S. Court of Appeals, Eighth Circuit
Related Categories: Civil Remedies , Construction , Contracts , Property , Torts
|Circuit Court Judge(s)|
|Trial Court Judge(s)|
|Appellant Lawyer(s)||Appellant Law Firm(s)|
|Russell Atchley||Kutak Rock LLP|
|Erin Thompson||Kutak Rock LLP|
|John Trice||Kutak Rock LLP|
|Appellee Lawyer(s)||Appellee Law Firm(s)|
|Craig Dirrim||Woods & Aitken LLP|
|Edward Tricker||Woods & Aitken LLP|