440 P.3d 210
Alaska2019Background
- Jet (contractor) and SMJ (subcontractor) had a May 2016 subcontract with an express dispute-resolution clause: mediation then AAA arbitration; forum and choice-of-law provisions designated Oklahoma law and courts.
- Parties mediated disputes in Jan 2017 and signed a short, handwritten settlement memorandum stating: each party "absolutely releases the other of and from any and all claims, demands and obligations of any kind arising from" the subcontract; Jet agreed to pay $150,000 conditioned on SMJ obtaining notarized releases from its sub‑subcontractor.
- SMJ later alleged Jet had concealed or fabricated facts that made SMJ unable to obtain the required sub‑contractor release and filed suit in Alaska superior court seeking damages and to void the settlement.
- Jet moved to dismiss, arguing the subcontract’s dispute-resolution and forum-selection clauses required mediation/arbitration in Oklahoma; the superior court granted dismissal and awarded attorney’s fees.
- On appeal, SMJ argued the settlement superseded the subcontract and thus released the parties from any obligation to arbitrate; the Alaska Supreme Court considered whether the settlement nullified the subcontract’s arbitration and venue clauses.
Issues
| Issue | Plaintiff's Argument (SMJ) | Defendant's Argument (Jet) | Held |
|---|---|---|---|
| Does the settlement agreement bar invocation of the subcontract's dispute‑resolution/forum clauses? | Settlement expressly released "any and all claims, demands and obligations" arising from the subcontract, thereby superseding the subcontract and eliminating arbitration/forum obligations. | The subcontract's mediation/arbitration and Oklahoma venue provisions remain binding; SMJ must pursue arbitration or litigate in Oklahoma. | Held for SMJ: the settlement’s broad release unambiguously discharged obligations under the subcontract, so arbitration/forum clauses no longer apply. |
| Who decides arbitrability here — court or arbitrator? | N/A (argued settlement removed arbitration question). | If arbitration survives, arbitrability could be for arbitrator because subcontract incorporates AAA rules. | Court decides arbitrability by default, but parties can clearly delegate arbitrability to an arbitrator; here no effective delegation because the settlement eliminated the underlying arbitration obligation. |
| Did the superior court properly dismiss the case and award fees? | Dismissal improper because settlement released arbitration requirement; fees award therefore improper. | Dismissal proper under subcontract clauses, fees appropriate. | Reversed dismissal; attorney’s fees award vacated. |
| May extrinsic evidence alter the settlement’s plain meaning or revive subcontract terms if settlement is voided? | SMJ reserved claim that settlement was procured by Jet’s fraud (could void settlement). | Jet argued courts or arbitrator could later decide questions if needed. | Court remanded; left open consideration of extrinsic evidence on remand and whether vacatur of the settlement would restore subcontract obligations. |
Key Cases Cited
- Cornelison v. TIG Ins., 376 P.3d 1255 (Alaska 2016) (standard for reviewing motions to dismiss and contract interpretation)
- Geotek Alaska, Inc. v. Jacobs Eng'g Grp., Inc., 354 P.3d 368 (Alaska 2015) (arbitrability is generally a question for the court)
- Borough of Atlantic Highlands v. Eagle Enters., Inc., 711 A.2d 407 (N.J. Super. Ct. 1998) (settlement language can extinguish original contract and its arbitration clause)
- Shawnee Hosp. Auth. v. Dow Constr., Inc., 812 P.2d 1351 (Okla. 1990) (settlement can discharge rights and liabilities under original construction contract, waiving arbitration)
- BG Grp., PLC v. Republic of Argentina, 572 U.S. 25 (U.S. 2014) (presumption that courts decide arbitrability absent clear and unmistakable delegation to arbitrator)