Highland HC, LLC v. Scott
113 A.D.3d 590
| N.Y. App. Div. | 2014Background
- Highland HC, LLC (Delaware LLC, CT address) hired PW Scott Engineering & Architecture, PC to provide architectural/engineering services for CT renovation and two new buildings.
- Peder Scott and Melanie Ancin Scott are principals/officers of PW Scott and acted for the firm.
- Three primary contracts dated Sept 12, 2006; July 8, 2007; Dec 20, 2007 governed the scope of services.
- General Conditions page containing an arbitration clause was attached to the contracts; Highland did not sign the General Conditions.
- The second contract incorporated the General Conditions; numerous Purchase Orders and Change Orders referenced the General Conditions to varying degrees; most did not reference arbitration.
- The parties’ relationship soured; Highland sued for malpractice, fraud, and breach; PW Scott moved to compel arbitration; Supreme Court denied arbitration due to lack of mutual agreement; FAA governs arbitration agreements between parties engaged in interstate commerce.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether there is a binding arbitration agreement. | Highland contends no mutual arbitration due to unsigned General Conditions. | PW Scott argues the primary contracts incorporating General Conditions created the arbitration agreement. | Yes, arbitration agreement is binding. |
| Whether individual officers can enforce arbitration. | Highland contests enforcement by officers. | Officers can enforce arbitration as agents of PW Scott. | Yes, individuals may enforce the arbitration clause. |
| Which law governs formation of the arbitration agreement under FAA. | FAA applies; state contract formation rules apply per norms. | FAA governs; state-law formation governs. | FAA applies; state-law formation governs the agreement. |
| Should the court compel arbitration and stay proceedings. | No arbitration due to lack of mutual agreement. | Arbitration should be compelled given the agreement. | Court should have compelled arbitration and stayed proceedings. |
Key Cases Cited
- Citizens Bank v Alafabco, Inc., 539 U.S. 52 (U.S. 2003) (arbitration policy favors arbitration in interstate commerce matters)
- Allied-Bruce Terminix Cos. v Dobson, 513 U.S. 265 (U.S. 1995) (arbitration disputes require voluntary agreement; broad FAA scope)
- N.J.R. Assoc. v Tausend, 19 N.Y.3d 597 (N.Y. 2012) (states’ contract formation rules apply under FAA to arbitrate agreements)
- Moses H. Cone Mem’l Hosp. v Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (doubts about arbitrability resolved in favor of arbitrability)
- JLM Indus., Inc. v Stolt-Nielsen SA, 387 F.3d 163 (2d Cir. 2004) (arbitration requires consent of the parties; cannot compel where no agreement)
- Flores v Lower East Side Serv. Ctr., Inc., 4 N.Y.3d 363 (N.Y. 2005) (arbitration clause may be enforceable even without signed agreement if parties manifest intent)
- Matter of Level Export Corp. [Wolz, Aiken & Co.], 305 N.Y. 82 (N.Y. 1953) (arbitration agreements may be inferred from conduct and documents joined in transaction)
- Shah v Monpat Constr., Inc., 65 A.D.3d 541 (N.Y. App. Div. 2009) (appellate guidance on incorporation of arbitration clauses)
- Oldroyd v Elmira Savings Bank, FSB, 134 F.3d 72 (2d Cir. 1998) (federal policy favoring arbitration applies to inter-state contracts)
- Rodriguez de Quijas v Shearson/American Express, Inc., 490 U.S. 477 (U.S. 1989) (FAA policy favoring arbitration persists across transactions involving commerce)