State Farm Mutual Automobile Insurance v. George Hyman Construction Co.

715 N.E.2d 749, 306 Ill. App. 3d 874, 240 Ill. Dec. 62
CourtAppellate Court of Illinois
DecidedAugust 3, 1999
Docket4-98-0570
StatusPublished
Cited by24 cases

This text of 715 N.E.2d 749 (State Farm Mutual Automobile Insurance v. George Hyman Construction Co.) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State Farm Mutual Automobile Insurance v. George Hyman Construction Co., 715 N.E.2d 749, 306 Ill. App. 3d 874, 240 Ill. Dec. 62 (Ill. Ct. App. 1999).

Opinion

JUSTICE McCULLOUGH

delivered the opinion of the court:

On November 13, 1995, State Farm Mutual Automobile Insurance Company (State Farm) filed suit against Clark Construction Group, Inc. (Clark) (then known as George Hyman Construction Company (Hyman)), Clark’s subcontractors, and their respective sureties for breach of a contract to construct a large office building. Clark and its subcontractors filed cross-claims against each other. Now Clark has settled with State Farm and seeks to have the remaining cross-claims between it and the subcontractors arbitrated. The primary issues on appeal are whether the remaining cross-claims fall within the scope of the subcontracts’ arbitration clause and whether Clark is procedurally barred from seeking arbitration. The trial court denied arbitration, and Clark is before this court on interlocutory appeal. We affirm.

I. BACKGROUND

On March 10, 1992, Hyman entered into a contract (prime contract) with State Farm to act as a general contractor for the construction of the State Farm Corporate South project, which consisted of seven new multistory office buildings, related support structures, and site improvements. The construction contract was detailed in a series of “Contract Documents.” A second phase of construction, providing for three additional buildings, was later added.

Hyman eventually restructured and became Clark. Clark subcontracted various portions of the work to Associated Contractors Company, Inc.; Marley Cooling Tower Company (Marley); F.E. Moran, Inc., Fire Protection (Moran); Thrall Distribution, Inc., f/k/a Wilkins Pipe and Supply Company, Inc.; American Fire and Electrical Systems; Robert Irsay, division of Jupiter Mechanical Industries, Inc.; Economy Mechanical Industries, Inc. (Economy); Fischbach & Moore, Inc. (Fischbach); Egan Mechanical Contractors, Inc. (Egan); the Levy Company (Levy); A.A. Conte & Son, Inc. (Conte); Central Supply Company; Gibson Electric Company, Inc. (Gibson); Carroll E. Lane, d/b/a the Lane Company; Concept Plumbing, Inc. (Concept); Phoenix Air Control, Inc. (Phoenix); Midwest Insulation Contractors, Inc. (Midwest); Johnson Controls, Inc.; J.A. House, Inc. (House); and Jade Carpentry Contractors (Jade). The parties agree that the subcontracts are identical for all purposes relevant to this appeal. Each subcontract incorporates the provisions of the contract documents as to that subcontractor’s work.

Article 11 of the subcontracts provides, in part:

“b. In the case of any dispute between [Clark] and Subcontractor, in any way relating to or arising from any act or omission of [State Farm] or involving the Contract Documents, Subcontractor agrees to be bound to [Clark] to the same extent that [Clark] is bound to [State Farm], by the terms of the Contract Documents, and by any and all preliminary and final decisions or determinations made thereunder by the party, board or court so authorized in the Contract Documents or by law, whether or not Subcontractor is a party to such proceedings. ***
c. Any controversy between [Clark] and Subcontractor not relating to or arising from any action or inaction of [State Farm] and not involving the Contract Documents shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association [(AAA)]. *** If [Clark] notifies Subcontractor that [Clark] contends any arbitration brought under this Article ll.c. involves a controversy within the scope of Article ll.b., the arbitration shall be stayed until the procedures under Article ll.b. are completed and it is determined thereunder that the controversy does not fall within ll.b.”

During construction, several of the subcontractors and material suppliers asserted claims and filed mechanics liens against the subject property. In response, on November 13, 1995, State Farm filed suit against Clark and the subcontractors to foreclose the mechanics liens pursuant to section 30 of the Illinois Mechanics Lien Act (Lien Act) (770 ILCS 60/30 (West 1994)). In addition, State Farm sought damages in excess of $12.5 million for the late completion of the project and damages of over $20 million for various breaches of the prime contract. Clark and several of the subcontractors filed counterclaims against State Farm.

On November 15, 1996, Clark filed cross-claims against the subcontractors. These were “pass-through” contribution or indemnification claims for State Farm’s claims against Clark arising from the subcontractors’ breaches. Clark also sued the subcontractors’ sureties and sought indemnification for claims against it by other subcontractors. On November 27, 1996, Clark moved to foreclose its mechanics lien.

The subcontractors also filed cross-claims against Clark. Egan and House alleged State Farm and Clark were jointly and severally liable for tortious interference with the subcontracts, making unreasonable demands, failing to give reasonable time extensions, interfering with scheduling and staffing, and failing to respond to adverse site conditions. Economy, Egan and House alleged breaches of subcontract due to these actions. Concept, Economy, Levy, Egan, House, and Moran alleged Clark failed to coordinate and supervise work on the project, causing unnecessary work and extra costs. Concept, Egan, and House sought equitable reformation of the contract due to demands from Clark and State Farm amounting to cardinal changes.

Levy, Moran, Egan, Concept, and House alleged Clark wrongfully withheld monies paid to it by State Farm for work they performed. Conte, Egan, Moran, Concept, Gibson, Levy, and Economy sued Clark’s sureties for money owed to them under the subcontracts for materials and services rendered. Concept, Economy, Levy, Gibson, Conte, Egan, and Moran sued to foreclose mechanics liens. Concept, Economy, Levy, and Moran brought separate actions to hold Clark and State Farm jointly liable under section 28 of the Lien Act (770 ILCS 60/28 (West 1994)). Concept, Economy, and Gibson sought recovery under a quantum meruit theory for materials- and supplies they had provided to the project.

Clark’s answer to the cross-claims of Egan and House is not included in the appellate record. In Clark’s answers to the remaining subcontractors’ cross-claims, it asserted several affirmative defenses unrelated to its own cross-claims. The affirmative defenses against Gibson, Economy, Levy, Moran, and Concept also incorporated by reference Clark’s cross-claim against the subcontractors. They alleged these subcontractors breached the subcontracts and were estopped from asserting their claims for the reasons stated in Clark’s cross-claim. Clark alleged it was entitled to offset damages for breach of subcontract against the subcontractors’ claims or to recover such amounts in recoupment. The affirmative defenses against all of these subcontractors except Gibson alleged the subcontractors had not complied with all conditions precedent for their claims.

On February 24, 1997, Levy moved to dismiss Clark’s cross-claim against it, arguing, in part, the arbitration clause in the subcontract required this claim to be arbitrated.

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Bluebook (online)
715 N.E.2d 749, 306 Ill. App. 3d 874, 240 Ill. Dec. 62, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-farm-mutual-automobile-insurance-v-george-hyman-construction-co-illappct-1999.