Welty Building Company, LTD. and Ohio Farmers Insurance Company v. Indy Fedreau Company, LLC
985 N.E.2d 792
Ind. Ct. App.2013Background
- Welty Building Company (Ohio general contractor) on FBI headquarters project in Indianapolis; Indy Fedreau Company (Ohio owner) leased building to FBI.
- OFIC provided a performance bond for Welty; Welty subbed to 21 subcontractors including AGM, Barth Electric, Gate, Elbrecht, E.P.I., and others.
- Article 37 of each subcontract required mediation before arbitration; Contractor could elect arbitration and appoint a private arbitrator if chosen.
- Fedreau sued Welty for breach, bond breach, fraud, and bad faith; liens by subcontractors followed for unpaid work.
- Welty counterclaimed for mechanic’s lien foreclosure, joining subcontractors as necessary parties; Welty reserved mediation/arbitration rights.
- Trial court denied Welty/OFIC’s stay and arbitration motions; Welty and OFIC appealed seeking enforcement of arbitration under Article 37.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of right to arbitrate with subcontractors | Welty did not waive arbitration rights by litigation | Subcontractors claim Welty waived by filing counterclaims and participation in litigation | Welty did not waive; arbitration should proceed |
| Whether Welty's counterclaims amounted to an election to forego arbitration | Counterclaims were necessary, not an election to abandon arbitration | Counterclaims constituted election to bypass mediation/arbitration | Counterclaims did not constitute a waiver or election against arbitration |
| Appropriate scope and relief following waiver determination | Arbitration should be enforced between Welty and subcontractors; stay of related proceedings warranted | Trial court should retain litigation and limit arbitration to specific disputes | Arbitration ordered between Welty and subcontractors; litigation stayed; remand on OFIC issue |
Key Cases Cited
- Capitol Constr. Servs., Inc. v. Farah, LLC, 946 N.E.2d 624 (Ind. Ct. App. 2011) (public policy favors arbitration; waiver analysis applies when appropriate)
- MPACT Constr. Group, LLC v. Superior Concrete Constructors, Inc., 802 N.E.2d 901 (Ind. 2004) (waiver of arbitration evaluated; counterclaims may preserve arbitration rights)
- Safety Nat’l Cas. Co. v. Cinergy Corp., 829 N.E.2d 986 (Ind. Ct. App. 2005) (silence does not constitute waiver of arbitration rights)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (Supreme Court 1983) (any doubts about arbitrability should be resolved in favor of arbitration)
- Northern Indiana Commuter Transp. Dist. v. Chicago SouthShore and South Bend R.R., 685 N.E.2d 680 (Ind. 1997) (waiver of rights analyzed by case-specific factors)
- GKN Co. v. Magness, 744 N.E.2d 397 (Ind. 2001) (deferential review of factual findings in waiver context where applicable)
- St. Mary’s Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co., 969 F.2d 585 (7th Cir. 1992) (example of waiver analysis in arbitration context)
- Tamko Roofing Prods., Inc. v. Dilloway, 865 N.E.2d 1074 (Ind. Ct. App. 2007) (waiver considerations in arbitration context)
- JK Harris & Co., LLC v. Sandlin, 942 N.E.2d 875 (Ind. Ct. App. 2011) (waiver analyses in arbitration contexts)