Gemstone Builders, Inc. v. Stutz
261 P.3d 64
Or. Ct. App.2011Background
- Gemstone Builders, Inc. sued Jeff and Jennifer Stutz for breach of contract, unjust enrichment, and fraud.
- The contract contains multiple arbitration-related provisions governing dispute resolution.
- Paragraph 1 requires arbitration for bona fide disputes about repair or replacement before legal action.
- Paragraph 4 broadly provides arbitration for disputes, with prevailing party attorney’s fees and costs, and states arbitration decision is binding.
- The trial court denied the petition to compel arbitration after the parties offered little evidentiary material.
- The court of appeals held the contract requires binding arbitration and remanded to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the contract require binding arbitration of disputes? | Stutz argues provisions are ambiguous or nonbinding. | Stutz contends the contract unambiguously requires binding arbitration. | Yes; contract unambiguously requires binding arbitration. |
| Whether arbitration is binding or merely a precondition to litigation | Arbitration may be nonbinding or a precondition, not final. | Arbitration is binding under the contract's terms. | Ambiguity exists; but policy favors binding arbitration; interpret as binding. |
| Whether the court should compel arbitration | Ambiguity defeats enforcement of arbitration. | The contract should be enforced to arbitrate. | Court erred in not compelling arbitration; reversed and remanded. |
Key Cases Cited
- Rainwater v. National Home Ins. Co., 944 F.2d 190 (4th Cir. 1991) (favor arbitration; binding awards; arbitration as efficient resolution)
- Yogman v. Parrott, 325 Or. 358 (1997) (extrinsic evidence if contract ambiguous; apply maxims if still ambiguous)
- Livingston v. Metropolitan Pediatrics, LLC, 234 Or.App. 137 (2010) (presumption in favor of arbitrability; interpret contract as a whole)
- Madson v. Oregon Conf. of Seventh-Day Adventists, 209 Or.App. 380 (2006) (contract ambiguity; apply maxims of construction)
- Industra/Matrix Joint Venture v. Pope & Talbot, 341 Or. 321 (2006) (ambiguity resolved in favor of arbitrability)
- Greene v. Salomon Smith Barney, Inc., 228 Or.App. 379 (2009) (summary, expeditious decision on arbitrability issues)