Rorick's, Inc. v. Corporex Dev. & Constr. Mgt., L.L.C.
2017 Ohio 8694
Ohio Ct. App.2017Background
- Corporex contracted with BCM as prime contractor for an Embassy Suites project; BCM presented a Subcontract to Rorick’s (drywall/subceilings) in April 2015, which Rorick’s refused to sign because of an arbitration clause but began work anyway.
- BCM later abandoned the project; Corporex took over project management, asked Rorick’s to continue, and sought execution of an Assignment and Assumption agreement to substitute Corporex for BCM.
- Rorick’s delayed payments accumulated; on August 26, 2015 Rorick’s signed the Assignment, which incorporated the previously unsigned Subcontract and its Standard Conditions (including an expansive arbitration clause), and Corporex thereafter paid overdue amounts.
- Corporex removed first-floor work from Rorick’s scope by written change order after some negotiations; Rorick’s refused to sign the change order and later sought mediation (unsuccessful).
- Rorick’s sued Corporex in December 2016 for fraud, breach, prompt-pay violations, etc.; Corporex moved to stay litigation pending arbitration; trial court denied the stay, and Corporex appealed.
Issues
| Issue | Rorick’s Argument | Corporex Argument | Held |
|---|---|---|---|
| Whether Rorick’s agreed to arbitrate the dispute with Corporex | Rorick’s: the Assignment did not bind it to the Prime Contract’s limited arbitration clause; it did not assent to unlimited arbitration for disputes over >$100,000 | Corporex: Rorick’s signed the Assignment which incorporated the Subcontract and its Standard Conditions containing a broad arbitration clause; therefore disputes are arbitrable | Held: Rorick’s is bound to arbitrate; the Assignment incorporated the Subcontract/Standard Conditions and paragraph 7 (broad arbitration) governs |
| Whether the Prime Contract’s Article 12 (limiting arbitration for >$100,000) governs Rorick’s dispute | Rorick’s: scope-reduction falls under Article 8/12 of the Prime Contract, which limits arbitration for controversies over $100,000 so this dispute is not arbitrable | Corporex: Article 12 applies only to Corporex and the Prime Contractor (BCM); Rorick’s never signed the Prime Contract and was not the prime contractor | Held: Article 12 does not apply to Rorick’s; it applies to Corporex and BCM only, so the Prime Contract’s limited arbitration provision is inapplicable |
Key Cases Cited
- Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 884 N.E.2d 12 (recognizing Ohio’s strong public policy favoring arbitration)
- Council of Smaller Ents. v. Gates, McDonald & Co., 80 Ohio St.3d 661, 687 N.E.2d 1352 (party cannot be compelled to arbitrate disputes to which it did not agree)
- Shifrin v. Forest City Ents., 64 Ohio St.3d 635, 597 N.E.2d 499 (contract language presumed to reflect parties’ intent)
- Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146 (common words given ordinary meaning unless the instrument shows otherwise)
- Children’s Med. Ctr. v. Ward, 87 Ohio App.3d 504, 622 N.E.2d 692 (appellate court may interpret contract language de novo)