Browne v. Larlee Construction, LLC
1:19-cv-02862
| D.S.C. | Mar 24, 2022Background
- Dr. Cynthia Browne (Illinois) contracted with Larlee Construction, LLC (South Carolina) to build a horse barn; their owner–contractor agreement contains an arbitration clause referencing the S.C. Arbitration Statute and a three-arbitrator selection process.
- Larlee executed identical Master Subcontractor Agreements with Quality Concrete and B&K Grading that state “certain provisions” are subject to binding arbitration and make arbitration contingent on execution of a project-specific Work Order (Exhibit A). No Work Order for the Browne project was attached or executed.
- Browne filed an arbitration against Larlee; Larlee joined the subcontractors as third-party respondents. A three‑arbitrator panel convened but declined to resolve (1) whether the subcontractors must participate and (2) whether any award would be binding.
- Browne petitioned the federal district court under the FAA to compel arbitration as to Larlee and the subcontractors; Larlee sought non‑binding arbitration with Browne and binding arbitration with subcontractors (or summary judgment); Quality Concrete moved for summary judgment opposing arbitration. B&K consented to arbitration with the agreed panel.
- The Court (diversity jurisdiction) granted the petitions to compel arbitration between Browne and Larlee, but held it was premature to decide whether any award would be binding and declined, without prejudice, to compel the subcontractors pending further briefing on nonsignatory doctrines. Quality Concrete’s summary‑judgment motion was deemed moot.
Issues
| Issue | Browne's Argument | Larlee's Argument | Held |
|---|---|---|---|
| Whether the Browne–Larlee arbitration is binding or non‑binding | Contract language requires binding arbitration | Arbitration clause is non‑binding; thus arbitration should be non‑binding | Court: premature to decide; granted motions to compel arbitration but dismissed without prejudice the binding vs non‑binding question (to be raised at confirm/vacate stage) |
| Whether the Court should compel arbitration between Browne and Larlee | Compel binding arbitration under the contract | Agreed arbitration exists (dispute only about binding nature) | Court: granted — parties must arbitrate their dispute (status of award deferred) |
| Whether Master Subcontract Agreements ("certain provisions") compel subcontractors to arbitrate | Master Agreements incorporate contractor’s arbitration rights/obligations and therefore subcontractors must arbitrate | Master Agreements require a Work Order (Exhibit A) for arbitration to apply; no Work Order for this project, so subcontractors not bound | Court: denied as to immediate enforcement — clause language and absence of a Work Order make compulsion on that basis improper; issue dismissed without prejudice |
| Whether nonsignatory doctrines (direct‑benefits estoppel, agency, etc.) bind subcontractors | Subcontractors received direct benefits and should be estopped or bound under agency/other theories | Subcontractors deny knowledge/agency; record lacks proof; these theories are undeveloped | Court: undecided — allowed further briefing/evidence on direct‑benefits estoppel and agency; set deadlines; did not compel subcontractors now |
Key Cases Cited
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy strongly favors arbitration).
- AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643 (1986) (presumption of arbitrability; doubts resolved in favor of arbitration).
- Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002) (district court must grant motion to compel when a valid arbitration agreement exists covering the dispute).
- United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574 (1960) (only strong evidence excludes a grievance from arbitration; arbitration clauses broadly construed).
- United States v. Bankers Ins. Co., 245 F.3d 315 (4th Cir. 2001) (non‑binding arbitration agreements may be enforced).
- Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411 (4th Cir. 2000) (recognizing common‑law bases to bind nonsignatories to arbitration agreements).
- Thomson–CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 773 (2d Cir. 1995) (identifies five theories for binding nonsignatories: incorporation, assumption, agency, alter ego, estoppel).
- Noble Drilling Servs., Inc. v. Certex USA, Inc., 620 F.3d 469 (5th Cir. 2010) (direct‑benefits‑estoppel requires actual knowledge of the contract containing the arbitration clause).