Tribal Casino Gaming Enterprise v. W.G. Yates & Sons Construction Company et al

Filing 58

MEMORANDUM OF DECISION AND ORDER granting Pltf Tribal Casino Gaming Enterprise's 30 & 32 Motions to Stay Pending Arbitration And To Compel Arbitration; denying Defts. W.G. Yates & Sons Construction Company's and Rentenbach Constructors Incorporated's 47 Joint Motion to Stay Arbitration; denying Deft Metromont Corporation's 43 & 49 Motions to Stay, Deny and Enjoin Arbitration; granting Deft Metromont Corporation's 45 Motion to Expedit e consideration of Pltf's motions to stay this matter and compel arbitration. FURTHER ORDERED that this matter is stayed pending resolution of the parties' arbitration proceeding as ordered herein. Signed by District Judge Martin Reidinger on 7/1/16. (ejb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:16-cv-00030-MR-DLH

TRIBAL CASINO GAMING
ENTERPRISE,

)
)
)
Plaintiff,
)
)
vs.
)
)
W.G. YATES & SONS
)
CONSTRUCTION COMPANY,
)
RENTENBACK CONSTRUCTORS
)
INCORPORATED, and METROMONT )
CORPORATION,
)
)
Defendants.
)
_______________________________ )

MEMORANDUM OF
DECISION AND ORDER

THIS MATTER is before the Court on numerous motions filed by the
parties. The Plaintiff, Tribal Casino Gaming Enterprise (“TCGE”), has filed
motions to stay this matter pending arbitration, to compel arbitration, and to
stay all pending deadlines. [Docs. 30; 32]. Defendant W.G. Yates & Sons
Construction Company (“Yates”) and Defendant Rentenbach Constructors
Incorporated (“RCI”) jointly have filed a motion to stay the arbitration initiated
by TCGE. [Doc. 47]. Defendant Metromont Corporation (“Metromont”) has
filed motions to stay, deny, and enjoin the arbitration initiated by TCGE and

to expedite the consideration of TCGE’s motions to stay this matter and
compel arbitration. [Docs. 43; 45; 49].
BACKGROUND
On April 3, 2008, TCGE entered into a construction contract with Yates
and RCI (as joint general contractors), inter alia, to expand the facilities at
Harrah’s Cherokee Casino in Cherokee, North Carolina. [Doc. 3 at 3]. This
project included the construction of two separate parking decks. One parking
deck was an 8-level, 2,300+ space parking garage to be used by patrons,
guests, and employees of Harrah’s Cherokee Casino (the “Casino Deck”).
The other deck was a 6-level, 1,200 space parking garage connected to the
Harrah’s Cherokee Hotel and intended for use by hotel guests (the “Hotel
Deck”). [Doc. 40 at 2-3]. Yates/RCI, in turn, hired Metromont pursuant to a
subcontract to build the parking decks. [Doc. 3 at 3].
Following the construction of the parking decks, TCGE alleges that
certain components of them failed. [Id. at 5]. On February 19, 2015, TCGE
reported that a ramp in the smaller Hotel Deck had partially collapsed. [Doc.
40 at 3]. The partial collapse of the Hotel Deck is the subject of this lawsuit
filed by TCGE on February 9, 2016. [Id.].
TCGE brought this diversity action seeking damages due to the partial
collapse of the Hotel Deck based on claims for breach of contract, breach of
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warranty, negligence, gross negligence, and unfair and deceptive trade
practices. [Doc. 3 at 8-16]. Yates and RCI filed a joint Answer admitting that
they were the general contractors for TCGE’s parking decks but denying any
liability for the Hotel Deck’s collapse. [Doc. 27].

Similarly, Metromont

admitted in its Amended Answer that it entered into a subcontract with
Yates/RCI to provide precast concrete materials and construction services
for the construction of TCGE’s parking decks but denying any liability for the
Hotel Deck’s collapse. [Doc. 28].
The present dispute pertains to an arbitration clause contained in the
general contract1 executed by and between TCGE and Yates/RCI. This
arbitration clause, found at section 26.5.B of the general contract, provides
in full as follows:
Arbitration. Any controversy or claim arising out of or relating
to this Agreement shall, except to the extent modified by the
mutual agreement of the parties be settled by binding
arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and judgment
upon the award rendered by the arbitrators may be entered in a
court subject to the provisions of this Section and Section
26.4.2.(ii) above. Either party may specify and require that any
arbitrator selected shall be an attorney licensed to practice law
in the North Carolina or a United States District Court. If more
than one arbitrator is used, Owner shall select one, the
1

Article 1.0 of the subcontract executed by Metromont has an adoption clause which
provides, in pertinent part, that Metromont “shall assume toward [Yates/RCI] all the
obligations and responsibilities which [Yates/RCI], by the Prime Contract, assumes
toward [TCGE].” [Doc. 31-2 at 4].

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Contractor shall select one, and the two so selected shall select
a third. The party desiring to submit any matter to arbitration
under this Section shall do so by written notice to the other party
and said notice shall set forth the item(s) to be arbitrated, such
party's position as to such items and such party's choice of
arbitrator. The party receiving said arbitration notice shall have
fifteen (15) days after receipt of such notice to designate one of
the remaining two arbitrators by written notice to the first party
and to set forth in writing its position as to such terms. The two
chosen arbitrators, within fifteen (15) days after designation,
shall select the third arbitrator. The arbitration panel shall be
required to render a decision within thirty (30) days after
being notified of their selection. The fees and expenses of the
arbitration panel shall be paid by the non-prevailing party unless
the arbitrators determine there is no prevailing party, in which
case the parties shall each pay one-half (1/2) of such expenses.
In all arbitration proceedings submitted to the arbitration panel,
the panel shall be required to agree upon and approve the
substantive position advocated by either Owner or Contractor
with respect to each disputed item. Any decision rendered by the
panel that does not reflect a substantive position advocated by
either Owner or Contractor shall be beyond the scope of authority
granted to the panel and shall be void. The arbitrators shall be
persons familiar, by profession or experience, with the issue(s)
ln controversy. The awards of any arbitration shall be governed
by Title 9 of the United States Code except as may be changed
or limited by the provisions of this Agreement. The parties agree
that binding arbitration shall be the sole remedy as to financial
disputes arising out of this Agreement and that disputes requiring
injunctive or declaratory relief shall be pursued as provided in
this Agreement unless the parties mutually agree otherwise.
The parties agree that the only grounds for appeal of any
arbitration award procured pursuant to this Article 26 shall be:
A.
B.

where the award was procured by corruption, fraud or
undue means;
where there was evident partiality or corruption in the
arbitrators or any of them;
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C.

D.

E.

where the arbitrators were guilty of misconduct in
refusing to postpone the hearing, upon sufficient
cause shown, or in refusing to hear evidence pertinent
and material to the controversy, or any other
misbehavior by which the rights of any party have
been prejudiced;
where the arbitrators exceeded their powers or imperfectly
executed them that a mutual, final and definite award upon
the subject matter submitted was not made; and/or
where an award is vacated and the time within which this
Agreement required an award to be made has not expired,
the Court may, in its discretion direct a rehearing by the
arbitrators.

The parties agree that an arbitration award appealed pursuant to
this Article 26 shall not be subject to review or modification by
the Court, but shall be (i) affirmed strictly as rendered by the
arbitrators, or (ii) vacated. Notwithstanding any laws, rules or
ordinances that might allow for a longer time period for appeal
the parties agree that an arbitration award rendered pursuant to
this Article 26 shall be deemed final for enforcing and executing
an arbitration award as authorized herein if such appeal has not
been filed with the Court within thirty (30) calendar days of the
date of the arbitration panel's written order issuing an arbitration
award.
[Doc. 30-1 at 4-5] (emphasis added).
On February 9, 2016, TCGE invoked this arbitration clause by filing a
demand for arbitration with the American Arbitration Association (“AAA”) and
by asserting a claim based upon the partial collapse of the Hotel Deck. [Doc.
31-3]. On the same date it filed this action. On May 6, 2016, TCGE filed a
“Motion to Stay Pending Arbitration and to Compel Arbitration” in this matter.
[Doc. 30]. On May 17, 2016, TCGE filed an amended demand with the AAA
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which included the designation of Ray Owens as its arbitrator. [Doc. 50 at 78]. This set in motion the requirement under the arbitration clause that
Yates/RCI respond and designate a second arbitrator within 15 days. The
arbitration clause then directs “[t]he two chosen arbitrators, within fifteen (15)
days after designation, shall select the third arbitrator. The arbitration panel
shall be required to render a decision within thirty (30) days after being
notified of their selection.” [Doc. 30-1 at 4]. This very compressed schedule
having been initiated, the parties filed the motions at issue herein. The Court
thereupon conducted a hearing on June 21, 2016.
DISCUSSION
Succinctly stated, the parties take the following positions with regard
to the arbitration clause.

TCGE contends that the arbitration clause is

enforceable against Yates/RCI, and that based thereon the Federal
Arbitration Act and corresponding North Carolina Revised Uniform
Arbitration Act require that the Court compel arbitration and stay this action
pending the completion thereof. Further, TCGE contends that Metromont
may be compelled to arbitrate the claims against it because Metromont’s
subcontract with Yates/RCI contains the adoption clause subjecting
Metromont to any obligations Yates/RCI has to TCGE pursuant to the
general contract. [Doc. 31 at 4]. Yates/RCI, while not challenging the validity
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of the general contract, contend that TCGE’s claim falls outside the scope of
the arbitration clause, or alternatively, that the arbitration clause itself is
unenforceable due to its unreasonably short time period within which the
arbitration panel must render a decision. [Doc. 40 at 5-6]. Metromont, in
turn, argues that the arbitration clause is unenforceable as its timeframe for
resolving this dispute, together with its other mandatory provisions, violates
the constitutional guarantees of due process and fundamental fairness.
Further, Metromont argues that the subcontract’s adoption clause provides
TCGE no legal basis to bring Metromont into any arbitration proceeding
commenced against Yates/RCI. [Doc. 42 at 7-8].
“Arbitration is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed to submit.” Bailey
v. Ford Motor Co., 780 S.E.2d 920, 924 (N.C. App. 2015) (quoting Peabody
Holding v. United Mine Workers of America, 665 F.3d 96, 103 (4th Cir. 2012)).
See also, Epic Games, Inc. v. Murphy-Johnson, 785 S.E.2d 137, 142 (N.C.
App. 2016); Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford
Junior Univ., 489 U.S. 468, 478 (1989); Rodgers Builders, Inc. v. McQueen,
76 N.C. App. 16, 23, 331 S.E.2d 726, 731 (1985). The threshold matters of
whether a dispute is to be resolved in arbitration, what is to be so resolved,
and how it is to be resolved, constitute the question of “arbitrability.”
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Arbitrability is further divided into “substantive arbitrability,” which pertains to
the questions of whether the dispute is to be arbitrated and what such
arbitration shall encompass; and “procedural arbitrability,” which pertains to
the manner by which the dispute will be resolved. Both substantive and
procedural arbitrability are governed by the agreement of the parties. The
parties agreed that their contract should be construed in accord with North
Carolina law. [Doc. 40-2 at 59 ¶ 26.4.1].
[I]t is up to the parties to determine whether a particular matter is
primarily for arbitrators or for courts to decide. If the contract is
silent on the matter of who primarily is to decide “threshold”
questions about arbitration, courts determine the parties’ intent
with the help of presumptions. . . . [C]ourts presume that the
parties intend courts, not arbitrators, to decide what we have
called disputes about “arbitrability.”
Bailey, 780 S.E.2d at 924-25 (quoting BG Group, PLC v. Republic of
Argentina, 134 S.Ct. 1198, 1206-07 (2014)). As observed by the Supreme
Court in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995),
one can understand why courts might hesitate to interpret silence
or ambiguity on the “who should decide arbitrability” point as
giving the arbitrators that power, for doing so might too often
force unwilling parties to arbitrate a matter they reasonably would
have thought a judge, not an arbitrator, would decide.
Id. at 945.

What follows from this observation is that litigants enjoy a

substantial right in having courts of law construe disputed contractual
provisions, unless the parties explicitly agree otherwise. “[A] party who has
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not agreed to arbitrate will normally have a right to a court’s decision about
the merits of its dispute (say, as here, its obligation under a contract).” Id. at
942. Therefore, courts should not presume that the parties agreed to
arbitrate the issue of arbitrability unless there is “clear and unmistakable
evidence” that they did so. Id. at 944; Fontana v. S.E. Anesthesiology
Consultants, P.A., 221 N.C. App. 582, 589, 729 S.E.2d 80, 86 (2012) (“To
determine if a particular dispute is subject to arbitration, this Court must
examine the language of the agreement, including the arbitration clause in
particular, and determine if the dispute falls within its scope.”).
While the contract at issue in this case has an extensive and detailed
provision regarding the resolution of disputes in arbitration, it is silent on the
question of who (court or arbitrator) shall decide matters of substantive
arbitrability. Plaintiff points to the sentence in the arbitration provision of the
contract that says: “Any controversy or claim arising out of or relating to this
Agreement shall . . . be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. . . “
[Doc. 40-2 at 61]. At the time the parties executed their contracts in 2008,
the following AAA rule was in place: “The arbitrator shall have the power to
rule on his or her own jurisdiction, including any objections with respect to
the existence, scope or validity of the arbitration agreement.” A.A.A. Comm.
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Arb. R-7(a) (2007). [Doc. 55-1 at 12-13]. As such, the parties agreed, by
incorporation of these Rules, that certain aspects of substantive arbitrability
would be decided by the arbitration panel rather than the Court. They,
therefore, rebutted the presumption that the Court would decide issues as to
existence, scope and validity of the arbitration agreement.
In resisting that this matter be referred to arbitration, the Defendants
do not challenge the existence or validity of the arbitration provision. They
argue that it is unenforceable as applied to the circumstances at hand. The
Rules, as incorporated into the 2008 contract, do not delegate all matters of
substantive arbitrability to the arbitration panel. This is clearly illustrated by
the 2013 amendments to the Rules, which broadened the arbitration panel’s
authority. The 2013 version of Rule 7(a) states: “The arbitrator shall have
the power to rule on his or her own jurisdiction, including any objections with
respect to the existence, scope, or validity of the arbitration agreement or to
the arbitrability of any claim or counterclaim.” A.A.A. Comm. Arb. R-7(a)
(2013) (emphasis added). [Doc. 55-2 at 13].

As explained by the AAA,

beginning in 2013 and henceforth, “Paragraph (a) clarifies that the arbitrator
has the power to rule on the arbitrability of any claim or counterclaim.” [Doc.
56-1 at 4]. If the parties had incorporated this language into their agreement,
it would be clear that all matters of arbitrability, substantive and procedural,
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were delegated to the arbitration panel for disposition. The language that the
parties actually incorporated into their agreement, however, only delegated
the substantive arbitrability issues of existence, scope and validity. As to all
other issues of substantive arbitrability, including enforceability, the
presumption is not rebutted, and these issues are left for the Court. For
these reasons, the Court concludes as a matter of law that the parties agreed
that the Court would decide the issue of whether the arbitration provision is
enforceable under the circumstances present here.
The Court thus having decided that it possesses the power to
determine arbitrability, the Defendants ask the Court to declare the
arbitration clause unenforceable, and thus not refer this matter to arbitration.
As a broad proposition, questions about which claims fall within the ambit of
an arbitration clause should be resolved in favor of arbitration. Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985).
See also, Epic Games, 785 S.E.2d at 143; Johnston County v. R.N. Rouse
& Co., 331 N.C. 88, 91,414 S.E.2d 30, 32 (1992). Should any doubts exist,
therefore, the arbitration provision should be read to be enforceable and the
dispute should be referred to arbitration, unless the provision cannot be
reconciled to either the agreement as expressed by the parties or the broad

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concepts of due process. See generally, Hill v. Peoplesoft USA, Inc., 412
F.3d 540, 543 (4th Cir. 2005).
Whether couched in terms of contractual impossibility due to
unreasonable time constraints, or constitutional invalidity based upon due
process and fundamental fairness concerns, Defendants’ unenforceability
arguments center upon the 30-day decision requirement contained in the
arbitration clause. Pursuant to that clause, the arbitration panel “shall be
required to render a decision within thirty (30) days after being notified of
their selection.” [Doc. 30-1 at 4]. The Defendants rightly point out that
allowing an arbitration panel only 30 days to sort out the liability for the postconstruction, partial collapse of two parking garages would be a Herculean
feat, if not utterly impossible. The Defendants, however, fail to read the 30day provision in pari materia with the rest of the arbitration clause.
The arbitration clause specifies that any financial controversy or claim
arising out of or relating to the parties’ contract, of which this dispute most
certainly is one, must be resolved by binding arbitration within 30 days. This
is understandable given that, during any significant construction project,
billing claims and disputes often arise which require immediate attention and
resolution lest the project grind to a halt. In this case, however, since
construction has long since been completed, the arbitration clause
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anticipates claims or controversies that might require more than 30 days to
resolve.

Section 26.5.B.C. of the arbitration clause provides that an

arbitration award may be vacated for misconduct of the arbitration panel if
the panel, upon sufficient cause, (1) refuses to postpone the hearing, or (2)
refuses to hear evidence pertinent and material to the controversy. [Doc. 301 at 4]. Given the complexity of the issues underlying the claims in this
arbitration, and the discovery necessary to present the evidence pertinent to
such claims, it is evident that the parties would not be able to present their
respective cases, and the panel would not be able to render a decision in the
30 days so allotted. The arbitration panel, however, possesses the power
under the Commercial Arbitration Rules of the AAA to extend the date for the
final disposition hearing and to set discovery deadlines within that timeframe.
For this reason,2 the 30-day decision period set forth in the arbitration clause
is not unconscionable, illegal, or unconstitutional. It does not render the
arbitration provision unenforceable. The Defendants’ motions requesting the
Court to hold the arbitration clause unenforceable or enjoin the arbitration
proceeding already begun will be denied.

2

It is for this reason, too, that TCGE did not waive arbitration. TCGE sought to enforce
the arbitration clause as written by filing this action. TCGE acknowledges, however, that
any failure on the part of the arbitration panel to extend the date for the final disposition
hearing or otherwise allow for discovery would constitute sufficient cause for the vacatur
of any final award.

13

Lastly, Metromont raises the issue of whether TCGE can compel it into
arbitration with Yates/RCI. In short, despite the language of the adoption
clause contained in the subcontract between Yates/RCI and Metromont,
Metromont argues TCGE lacks contractual privity with it that would enable
TCGE to bring it into binding arbitration along with Yates/RCI. [Doc. 42 at 78].

Metromont’s privity argument is foreclosed by the Fourth Circuit’s

decision in Maxum Foundations, Inc. v. Salus Corp., 779 F.2d 974, 979 (4th
Cir. 1985) (holding subcontract language that “Subcontractor shall be bound
by, and expressly assumes for the benefit of the Contractor, all obligations
and liabilities which the Contract Documents impose upon the Contractor”
manifested the parties’ intent that the arbitration clause contained in the
general contract had been incorporated by reference into the subcontract).
Accordingly, Metromont’s motion in this regard will be denied.
ORDER
IT IS, THEREFORE, ORDERED that the motions filed by Plaintiff
Tribal Casino Gaming Enterprise to stay all pending deadlines, to stay this
matter pending arbitration, and to compel arbitration as to Defendant W.G.
Yates & Sons Construction Company, Defendant Rentenbach Constructors
Incorporated, and Defendant Metromont Corporation [Docs. 30; 32], are
hereby GRANTED. The motion to stay arbitration filed jointly by Defendant
14

W.G. Yates & Sons Construction Company and Defendant Rentenbach
Constructors Incorporated [Doc. 47] is hereby DENIED. The motions to stay,
deny, and enjoin the arbitration filed by Defendant Metromont Corporation
[Docs. 43; 49] are hereby DENIED. The motion to expedite the consideration
of Plaintiff’s motions to stay this matter and compel arbitration filed by
Defendant Metromont Corporation is hereby GRANTED. [Doc. 45].
IT IS FURTHER ORDERED that this matter is stayed pending the
resolution of the parties’ arbitration proceeding as ordered herein.
IT IS SO ORDERED.
Signed: July 1, 2016

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