260 N.C. App. 459
N.C. Ct. App.2018Background
- AVR Davis Raleigh, LLC hired Triangle Construction in 2013 to build multi-building apartments under a modified AIA contract with a binding dispute resolution clause.
- Contract provided: arbitration for claims under $500,000; litigation for claims over $500,000; and if several claims each under $500,000 aggregate over $500,000, then all claims shall be arbitrated.
- Plaintiff sued in Wake County Superior Court alleging contractor delays and unpaid subcontractors and sought ~$2.7M; defendant counterclaimed for withheld change orders, unpaid applications, and retainage totaling several amounts including claims argued to be under $500,000 each but >$500,000 aggregate.
- Defendant moved to compel arbitration; case was briefly removed to federal court then remanded for lack of diversity; defendant renewed motion in state court.
- Trial court denied the motion, finding the dispute-resolution clause ambiguous and concluding that the parties had not selected a binding method other than litigation given at least one claim indisputably exceeded $500,000.
- On interlocutory appeal the Court of Appeals reversed, holding doubts about scope should be resolved in favor of arbitration and remanded with instructions to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper interpretation of the hybrid dispute-resolution clause (arbitration vs litigation) | Clause creates a $500,000 threshold: if any single claim > $500,000 the dispute is for litigation; only when no single claim exceeds $500,000 do claims proceed to arbitration | Clause requires arbitration when there are several individual claims each under $500,000 that aggregate over $500,000; such grouped claims must be arbitrated | Court held ambiguities must be resolved in favor of arbitration; reversed trial court and remanded to compel arbitration |
| Appealability of denial to compel arbitration | (not disputed) | (not disputed) | Denial of arbitration is immediately appealable because it affects a substantial right; appeal properly before court |
Key Cases Cited
- Raspet v. Buck, 147 N.C. App. 133 (2001) (denial of arbitration is immediately appealable; two-step inquiry for arbitrability)
- Johnston Cty. v. R.N. Rouse & Co., 331 N.C. 88 (1992) (North Carolina policy favors arbitration; resolve doubts in favor of arbitration)
- Sloan Fin. Grp., Inc. v. Beckett, 159 N.C. App. 470 (2003) (presumption in favor of arbitration applies to scope question)
- Ellison v. Alexander, 207 N.C. App. 401 (2010) (compelling arbitration where clause ambiguous and policy favors arbitration)
- Kiser v. Kiser, 325 N.C. 502 (1989) (historical scope of jury-trial right under state constitution)
- Mathias v. Brumsey, 27 N.C. App. 558 (1975) (waivers of jury-trial right strictly construed)