City of Morris v. Duininck Bros., Inc.

531 N.W.2d 208, 1995 Minn. App. LEXIS 636, 1995 WL 294174
CourtCourt of Appeals of Minnesota
DecidedMay 16, 1995
DocketC5-94-2028
StatusPublished
Cited by1 cases

This text of 531 N.W.2d 208 (City of Morris v. Duininck Bros., Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of Morris v. Duininck Bros., Inc., 531 N.W.2d 208, 1995 Minn. App. LEXIS 636, 1995 WL 294174 (Mich. Ct. App. 1995).

Opinion

OPINION

NORTON, Judge.

Appellant contractor contends the district court erroneously granted a temporary injunction preventing arbitration of a contract issue. The question of whether appellant waived its opportunity to arbitrate is a procedural question for the arbitrator, not the district court. We reverse.

FACTS

On July 8,1993, respondent City of Morris (City) entered a contract with appellant Duininck Brothers Construction Company (Contractor) for improvements to the Morris Wastewater Treatment Facility. The contract price was $1,699,608. In November 1993, the city’s engineer submitted a change order which requested additional work on the project at an estimated cost of $128,000. Contractor’s proposed cost for the additional work was $232,650.

During November and December 1993, the parties sent letters and held a meeting to negotiate an agreeable price for the additional work. After Contractor asked to suspend further talks until its chief engineer on the project, Verne Carlson, returned from a two-month vacation, Contractor alleges that it “was assured that this would be no problem.”

On December 29, 1993, City sent Contractor a letter with a final decision on the price for the additional work. This letter also included the following paragraph:

Article 16 of the Standard General Conditions (page 31) states that “All claims, disputes, and other matters in questions between the OWNER and CONTRACTOR arising out of, relating to the Contract Documents ... will be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining subject to the limitations of this Article 16.” As noted above, the Engineer has rendered a decision that the additional Common Excavation required to complete the project should be completed at the bid price of $1.60/CY as outlined in the draft Change Order No. 1. If the Contractor chooses to demand arbitration he is required to provide the Owner with such written demand within 30 days of receipt of this letter.

Contractor initially told City that it would be unable to respond to the letter until Carlson’s return. But after City told Contractor that it would “forfeit its right to demand arbitration” if it waited until Carlson returned, Contractor sent a letter to the city’s engineer requesting arbitration. The parties *210 contest now whether this letter complied ■with the arbitration procedural rules in the parties’ contract. The rules provided:

16.2 * * * No demand for arbitration of any such claim, dispute or other matter will be made later than thirty days after the date on which ENGINEER has rendered a written decision in respect thereof in accordance with paragraph 9.11; and the failure to demand arbitration within said thirty days’ period shall result in ENGINEER’S decision being final and binding upon OWNER and CONTRACTOR.
⅜ ⅜ ⅜ ⅜ ⅜ ⅜
16.3 Notice of the demand for arbitration will be filed in writing with the other party to the Agreement and with the American Arbitration Association, and a copy will be sent to ENGINEER for information. The demand for arbitration will be made within the thirty-day or ten-day period specified in paragraph 16.2 as applicable.

Contractor claims that, shortly after it sent the January 24 letter, City’s attorney told Roger Nybakke, one of Contractor’s employees, that negotiations would be more cost-effective than arbitration. As a result, Contractor ceased pursuing arbitration and waited for Carlson to return so they could resume negotiations. When Contractor attempted to reopen negotiations, however, City responded with a letter informing Contractor that its earlier request for arbitration had been defective because Contractor had failed to follow proper procedures in the rules.

When the issue came before the Morris City Council, the council decided to accept the change order at the city engineer’s price. On July 20,1994, Contractor filed a “Demand for Arbitration” with the American Arbitration Association for the amount of $232,-650.00. On August 11, 1994, City brought this action to enjoin Contractor from arbitrating this dispute. The district court issued a temporary injunction pursuant to Minn.Stat. § 572.09 (1994).

ISSUE

Is the district court the proper forum to determine whether Contractor waived its right to arbitration?

ANALYSIS

Contractor contends the district court’s decision to enjoin arbitration was improper because the issue of waiver rests with the arbitrator, not the court. We agree.

Minn.Stat. § 572.09(b) (1994) provides:

On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. Such an issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party. If found for the opposing party, the court shall order the parties to proceed to arbitration.

In such an action for injunctive relief, the “limited issue presented to the trial court is the existence and scope of the arbitration agreement.” 200 Levee Drive Assoc., Ltd. v. Bor-Son Bldg. Corp., 441 N.W.2d 560, 563 (Minn.App.1989) (citing United States Fidelity & Guar. Co. v. Fruchtman, 263 N.W.2d 66, 71 (Minn.1978)).

In seeking injunctive relief, City argued that Contractor had waived the right to arbitrate by failing to follow proper procedures when demanding arbitration. Whether or not Contractor waived its right to arbitration is a procedural issue. Millwrights Local 548, United Brotherhood of Carpenters & Joiners, AFL-CIO v. Robert J. Pugleasa Co., 419 N.W.2d 105, 107 (Minn.App.1988) (Pug leasa). “[Pjrocedural arbi-trability issues examine whether preliminary steps of the grievance procedure have been exhausted or excused.” Id.

As a general rule, issues of waiver and laches should be decided by the arbitrator rather than the court. Brothers Jurewicz, Inc. v. Atari, Inc., 296 N.W.2d 422, 427 (Minn.1980). We defer to the arbitrator because these procedural issues are often intertwined with the substantive dispute intended for arbitration; we do not want to try an issue in two different forums. Id.

The facts of this case do not fall into either of the two narrow exceptions the court has *211 created to the general rule. In Brothers Jurewicz, 296 N.W.2d at 427-28 & n. 7, the court allowed the trial court to rule on a laches defense only because litigation had already begun a year before the defendant requested arbitration.

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Bluebook (online)
531 N.W.2d 208, 1995 Minn. App. LEXIS 636, 1995 WL 294174, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-morris-v-duininck-bros-inc-minnctapp-1995.