Town of Belville v. Urban Smart Growth, LLC
252 N.C. App. 72
| N.C. Ct. App. | 2017Background
- In 2007 Belville (Plaintiff) and Urban Smart Growth, LLC (Defendant) executed a 20-year redevelopment agreement containing Section 8.05 requiring negotiation then binding arbitration for disputes.
- In May 2013 Belville sent a default notice to Defendant seeking renegotiation or termination but did not pursue negotiation or arbitration at that time.
- Belville filed suit in July 2015 asserting breach, repudiation, and related claims and demanded a jury trial; Defendant answered and counterclaimed seeking specific performance.
- The parties jointly sought and obtained an "exceptional case" designation under Rule 2.1; a special judge was assigned and the case proceeded with discovery and pretrial activity.
- Over a year after filing suit (Feb 2016) Belville requested negotiations under Section 8.05 and immediately moved to compel arbitration and stay proceedings; Defendant opposed, submitting affidavits showing litigation costs (>$34,600).
- The trial court denied the motion to compel arbitration, finding Belville waived its arbitration right by delay and actions inconsistent with arbitration and that Defendant would be prejudiced; the Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Plaintiff waived its contractual right to arbitrate | Belville argued trial court lacked sufficient evidence that it waived arbitration and that Defendant’s claimed fees do not establish prejudice | Defendant argued Belville delayed and took litigation steps (jury demand, Rule 2.1 designation, discovery), causing significant litigation expenditures and prejudice | Court held Belville impliedly waived arbitration due to delay and actions inconsistent with arbitration and prejudice to Defendant |
| Whether affidavits of attorney fees/supporting facts were sufficient | Belville contended affidavits were insufficient to prove prejudice | Defendant produced affidavits detailing >$34,600 in fees and litigation activities incurred because of Belville’s delay | Court found affidavits provided evidence supporting findings of prejudice and were sufficient |
| Whether North Carolina policy favors arbitration requires stricter scrutiny of waiver | Belville argued strong public policy favors arbitration, so waiver should be narrowly found | Defendant acknowledged policy but maintained waiver may be found where opposing party is prejudiced by delay | Court applied close scrutiny but affirmed waiver where evidence showed prejudice from delay and inconsistent actions |
| Whether interlocutory denial of motion to compel arbitration was appealable | Belville challenged the order on appeal | Defendant maintained denial is immediately appealable where a substantial right may be lost | Court treated the denial as immediately appealable and resolved the waiver issue on the merits |
Key Cases Cited
- Prime South Homes, Inc. v. Byrd, 102 N.C. App. 255, 401 S.E.2d 822 (N.C. Ct. App. 1991) (waiver may be found where delay causes prejudice and costs incurred would not have been incurred with timely demand)
- Cyclone Roofing Co. v. Lafave Co., 312 N.C. 224, 321 S.E.2d 872 (N.C. 1984) (courts must closely scrutinize waiver of arbitration; prejudice standard for implied waiver)
- Hlasnick v. Federated Mut. Ins. Co., 353 N.C. 240, 539 S.E.2d 274 (N.C. 2000) (parties may contract freely absent public policy or statute)
- Fairchild Realty Co. v. Spiegel, Inc., 246 N.C. 458, 98 S.E.2d 871 (N.C. 1957) (findings of fact supported by any evidence are conclusive on appeal)
- Humphries v. City of Jacksonville, 300 N.C. 186, 265 S.E.2d 189 (N.C. 1980) (trial court fact findings binding when supported by evidence)
- Sims v. Ritter Constr., Inc., 62 N.C. App. 52, 302 S.E.2d 293 (N.C. Ct. App. 1983) (interlocutory orders affecting substantial rights may be immediately appealable)