Arbitration is a common method of dispute resolution in the construction industry. Most construction industry professionals know that an arbitration clause must be in writing in order for it to be enforceable. However, the recent case of Bari Builders, Inc. v. Hovstone Props. Fla., LLC 39 Fla. L. Weekly D 1648 (August 6, 2014 Fla. 4th DCA) demonstrates how the wording of the remaining portions of the contract can affect an arbitration clause.
This case involved a construction defect lawsuit wherein Hovstone Properties filed a third party complaint against Bari Builders, Inc. and all of the subcontractors that worked on the project. In response, Bari Builders, Inc. filed a motion to compel arbitration based on the following provision in the subcontract:
The parties hereto agree to binding Arbitration of any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Arbitration panel will adhere to the requirements and terms contained in this Agreement.
Hovstone Properties opposed arbitration based on another clause in the subcontract that stated “IN ALL ACTIONS THE PARTIES WAIVE THE RIGHT TO JURY AND AGREE TO DETERMINATION OF ALL FACTS BY THE COURT.” Hovstone Properties argued the waiver jury waiver language made the scope of the arbitration provision ambiguous and unenforceable. The trial court agreed and denied Bari Builders’ motion to compel on arbitration.
The Fourth District Court of Appeal reversed the trial court’s ruling. The Court ruled that the jury waiver language in the subcontract did not render the arbitration provision ambiguous. The Court found “the provisions provide that the parties agree to submit any controversy or claim to arbitration and, thereafter, any award may be reduced to judgment in court without right to a jury trial.” The Court also found that if the parties choose to waive arbitration the subcontractor provided that any “action” in court would be held in a bench trial.
The Bari Builders case demonstrates how important it is to carefully draft the dispute resolution clause of a construction contract. The jury waiver language may not have been necessary where the parties agreed to resolve all claims through arbitration. Regardless, this litigation could have been avoided had the arbitration clause included a disclaimer that in the event the parties waived their right to arbitration any litigation would be conducted through a bench trial without any right to jury trial.
