Opinion
No. CV 05-5000279-S
June 20, 2006
RULING ON MOTION TO DISMISS
The cross-claim defendant, Diversified Residential Services, LLC (Diversified), moves to dismiss on the ground that the court lacks subject matter jurisdiction. Diversified claims that, pursuant to the terms of a contract between it and the cross-claim plaintiffs, Juan Colon-Collazo and Leslie Cox-Colon (collectively, "Collazo"), arbitration is a condition precedent to legal action. In reality, however, the contract provides that mediation rather than arbitration is a condition precedent to litigation, and the court holds that the absence of mediation does not deprive the court of subject matter jurisdiction. Accordingly, the court denies Diversified's motion.
I
The following facts provide the requisite background. The plaintiffs, Thomas and Jennifer Cafarelli, brought suit against Diversified and Collazo asserting claims of negligence, nuisance and loss of consortium. Plaintiff Thomas Cafarelli (plaintiff) alleges that, in the course of delivering a door to a home owned by Collazo and at which Diversified was a general contractor, he slipped on a patch of ice and sustained injuries. Plaintiff Jennifer Collazo seeks damages for loss of consortium.
As a result of the plaintiffs' lawsuit, Collazo brought a two-count cross-claim against Diversified seeking common-law and contractual indemnification. In the cross-claim, Collazo alleges that it entered into a contract with Diversified for remodeling services. According to the allegations, Collazo was not living on the premises during the performance of the contract and Diversified exclusively controlled the property as well as the conditions found thereon. Diversified allegedly failed to keep the premises safe and well-maintained, causing the plaintiff to fall and sustain injuries. Collazo claims that Diversified's actions amounted to active negligence and breach of contract, thereby obligating Diversified to indemnify Collazo.
The first count of the cross-complaint sounds in common-law indemnification. The second count, however, appears to set forth a breach of contract claim, not a claim for contractual indemnification.
In its motion to dismiss, Diversified argues that, in accordance with the terms of the parties' contract, all claims arising out of the contract, including an indemnification cross-claim, are subject to arbitration as a condition precedent to legal action. Because the parties have failed to arbitrate, Diversified contends that the court lacks subject matter jurisdiction over the cross-claim. In opposition, Collazo maintains that the first count of the cross-claim is a common-law indemnification claim that does not arise out of the contract and, therefore, is not subject to arbitration. Additionally, Collazo argues that neither count should be dismissed because the terms of the contract do not require arbitration as a condition precedent to litigation.
II
In ruling on the parties' dispute, the court is guided by the well-settled tenants of contract interpretation. "[W]here the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms . . . Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact . . . [w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Internal quotation marks omitted.) Electric Cable Compounds, Inc. v. Seymour, 95 Conn.App. 523, 528-29, 897 A.2d 146 (2006). "A contract is unambiguous when its language is clear and conveys a definite and precise intent . . . The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous." (Internal quotation marks omitted.) Id., 529.
The contract is an edited version of the American Institute of Architects (AIA) Document A107-1997. Section 9.10 of the contract, entitled "CLAIMS AND DISPUTES," contains three relevant subsections. The first subsection, § 9.10.1, states in pertinent part: "Claims, disputes and other matters in question arising out of or relating to this Contract . . . shall be referred initially to the Architect for decision. Such matters . . . shall, after initial decision by the Architect or 30 days after submission of the matter to the Architect, be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable proceedings by either party." (Emphasis added.)
Thereafter, § 9.10.3 states in relevant part: "The parties shall endeavor to resolve their disputes by mediation . . . Request for mediation shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The request may be made concurrently with the filing of a demand for arbitration but, in such event, mediation shall proceed in advance of arbitration or legal or equitable proceedings, which shall be stayed pending mediation for a period of 60 days from the date of filing, unless stayed for a longer period by agreement of the parties or court order."
Finally, § 9.10.4 states in part: "Claims, disputes and other matters in question arising out of or relating to the Contract that are not resolved by mediation . . . shall be decided by arbitration . . . The demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof . . . The agreement herein among the parties to the Agreement and any other written agreement to arbitrate referred to herein shall be specifically enforceable under applicable law in any court having jurisdiction."
Pursuant to this language, the court initially finds that both indemnification counts "[arise] out of or [relate] to [the] Contract." The indemnification counts are related to the contract for the basic reason that if the parties had not entered into a contractual agreement for remodeling services, the claims of common-law or contractual indemnification would simply not have arisen.
Furthermore, federal courts addressing "arising out of or relating to" arbitration clauses have interpreted them expansively. See Collins Aikman Products Co. v. Building Systems, 58 F.3d 16, 20 (2d Cir. 1995) ("clause . . . submitting to arbitration `[a]ny claim or controversy arising out of or relating to th[e] agreement,' is the paradigm of a broad clause."); Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress International, Ltd, 1 F.3d 639, 642 (7th Cir. Ill. 1993) ("`arising out of' reaches all disputes having their origin or genesis in the contract, whether or not they implicate interpretation or performance of the contract per se"). This interpretation is in accord with the United States Supreme Court's admonition that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration . . ." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1985). See also Ford v. Golenbock, 238 Conn. 183, 196, 680 A.2d 1243 (1996) (phrase `[a]ny disputes arising under . . . [employment agreement] shall be submitted to [arbitration]'" interpreted as "all-embracing, all-encompassing and broad.") (Emphasis deleted.)
Although the contract here provides that disputes should first be referred to the architect, then to mediation, and only then to arbitration, there is no reason not to apply the case law concerning the interpretation of arbitration clauses to the contractual language governing reference to these preliminary steps to arbitration, which are also alternative dispute resolution mechanisms.
Moreover, there is well-recognized authority that language such as "disputes . . . arising out of or related to" in an AIA contract "creates almost limitless jurisdiction, covering any dispute between owner and contractor relating to [a] transaction." I J. Sweet I Sweet, Sweet on Construction Industry Contracts: Major AIA Documents, p. 283 (4th Ed. 1999). According to this authority, this language would encompass all matters except "unrelated disputes between [a homeowner] and contractor, such as disputes from a previous job or other business dealing." Id., 701. In this case, however, the parties' dispute arises from their current business dealing. Accordingly, the court finds that the Collazo indemnification cross-claim arises out of or relates to the parties' contract.
III
The next issue is whether arbitration is a condition precedent to the court's subject matter jurisdiction. In Multi-Service Contractors, Inc. v. Vernon, 181 Conn. 445, 435 A.2d 983 (1980), our Supreme Court set the following standard:
Where a contract contains a stipulation that the decision of arbitrators on certain questions shall be a condition precedent to the right of action on the contract itself, such a stipulation will be enforced and, until arbitration has been pursued or some sufficient reason given for not pursuing it, no action can be brought on the contract . . . Whether an agreement makes arbitration a condition precedent to an action in court depends on the language of the arbitration clause. While it is true that in the absence of express language a provision for arbitration may be construed, by implication, to be a condition precedent to suit that implication must be so plain that a contrary intention cannot be supposed. It must be a necessary implication. The mere agreement to arbitrate, standing alone, does not give rise to the necessary implication that arbitration is a condition precedent to an action in court. For arbitration to be a condition precedent, the agreement to arbitrate must expressly so stipulate, or it must necessarily be implied from the language used.
(Citation omitted.) Id., 447-48.
The contract in question does not explicitly make arbitration a condition precedent to litigation. Section 9.10.1 provides that disputes between the parties arising out of the contract "shall, after initial decision by the Architect or 30 days after submission of the matter to the Architect, be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable proceedings by either party." Thus, the contract literally provides that mediation, rather than arbitration, is the condition precedent.
Nor does the other language concerning arbitration explicitly or implicitly make arbitration a condition precedent to legal proceedings. The critical language of § 9.10.4 provides that: "Claims, disputes and other matters in question arising out of or relating to the Contract that are not resolved by mediation . . . shall be decided by arbitration . . ." The language here is essentially the same as the language in Multi-Service that our Supreme Court found insufficient to constitute a condition precedent. See Multi-Service Contractors, Inc. v. Vernon, supra, 181 Conn. 446 ("all claims, disputes and other matters in question between the contractor and owner arising out of, or relating to, the Contract Documents or the breach thereof . . . shall be decided by arbitration . . ."). Here, as in Multi-Service, the arbitration language does not "require, either by express language or by necessary implication, arbitration as condition precedent to court action." Id., 449.
As stated, § 9.10.1 makes mediation a condition precedent to both "arbitration or the institution of legal or equitable proceedings by either party." Although mediation is thus a condition precedent to arbitration, arbitration itself is not a condition precedent to court action, as concluded above. Further, if the parties proceed to arbitration after an unsuccessful mediation, as § 9.10.4 requires them to do (without making it a condition precedent to litigation), then the parties become governed by additional language in § 9.10.4 that provides as follows: "The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof." Given this language, the only "legal or equitable proceedings" that a party could institute after an arbitrator renders an award are proceedings to enter a judgment upon that award.
Mediation has been defined as a "method of nonbinding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution." Black's Law Dictionary (7th Ed. 1999). One federal district court characterized mediation as "typically a structured but informal process that is conducted by one or more third parties who are neutral and who facilitate a resolution without utilizing any coercive power or authority." Bon Secours v. Aetna Health Management, Inc., United States District Court, Docket Nos. 3:99CV848, 3:99CV849, 3:99CV852 (E.D.Va. April 17, 2000). As one appellate judge has recognized: "Mediation is by definition a voluntary process which achieves a voluntary result and is meaningful in distinction to `arbitration' in its very voluntariness. Or, to put it with more bite — mediation is distinctive from arbitration in its inherent lack of consequences." Lindsay v. Lewandowski, No. G033173 (Cal.Ct.App. May 31, 2006) (Sills, J., concurring).
In contrast, arbitration is a "method of dispute resolution involving one or more neutral third parties who are [usually] agreed to by the disputing parties and whose decision is binding." Black's Law Dictionary (7th Ed. 1999). Arbitration "ultimately leads to a final decision by the arbitrator after hearing and evaluating the evidence presented by the parties." Bon Secours v. Aetna Health Management, Inc., supra, United States District Court, Docket Nos. 3:99CV848, 3:99CV849, 3:99CV852. In this regard, "arbitration is more analogous to the court litigation process: the decision-maker is a neutral disinterested third party, attorneys speak on behalf of clients and clients participate only as witnesses." Lynn v. General Electric Co., United States District Court, Docket No. 03-2662-GTV-DJW (D.Kan. January 20, 2005).
The distinctions between arbitration and mediation help resolve the ultimate issue of whether the failure to mediate, when made a condition precedent to litigation, can deprive a court of subject matter jurisdiction. It makes sense to conclude that the failure to arbitrate deprives the court of the power to hear a case because arbitration typically is a binding, trial-like procedure that fairly substitutes for court proceedings. A party should not have the right to bypass arbitration on the contradictory ground that it seeks a trial-like proceeding. It makes far less sense, however, to conclude that the failure to mediate deprives the court of the power to hear a case. Mediation is non-binding, does not involve a contested hearing, and, in general, does not duplicate proceedings in court. The court should retain the power to hear such a case even when the parties have failed to mediate, because no prior trial-like opportunity existed. Accordingly, the court concludes that, although mediation is a condition precedent to court action, the failure of the parties to take advantage of this opportunity does not deprive the court of subject matter jurisdiction.
V
The motion to dismiss is denied.
It is so ordered.