United States ex rel. TGK Enterprises, Inc. v. Clayco, Inc.

978 F. Supp. 2d 540, 2013 WL 5348464, 2013 U.S. Dist. LEXIS 136721
CourtDistrict Court, E.D. North Carolina
DecidedSeptember 23, 2013
DocketNo. 7:12-CV-266-FL
StatusPublished
Cited by8 cases

This text of 978 F. Supp. 2d 540 (United States ex rel. TGK Enterprises, Inc. v. Clayco, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. TGK Enterprises, Inc. v. Clayco, Inc., 978 F. Supp. 2d 540, 2013 WL 5348464, 2013 U.S. Dist. LEXIS 136721 (E.D.N.C. 2013).

Opinion

ORDER

LOUISE W. FLANAGAN, District Judge.

This matter comes before the court on defendants’ motion to dismiss and, in the alternative, motion to stay and compel arbitration (DE 19). Plaintiff responded in opposition, and defendants replied. The court previously denied plaintiff’s motion for leave to file surreply, but allowed the parties to file two notices of recently decided authority. In this posture, the issues raised are ripe for ruling.

BACKGROUND

Plaintiff filed suit on September 12, 2012, asserting claims for damages against defendant Clayco, Inc. (“Clayco”) on the basis of breach of contract, N.C. Gen.Stat. § 22C-2 et seq., and unjust enrichment. Plaintiff also asserts a claim against defendant Travelers’ Casualty and Surety Company of America (“Travelers”) on the basis of a surety bond pursuant to the Miller Act, 40 U.S.C. § 3131 et seq.

Plaintiffs claims against Clayco arise out of the execution and performance of a subcontract agreement to provide services for a federal construction project in Camp Lejeune, North Carolina. Clayco was awarded a contract by the federal government to design and build a dining hall and barracks at the Naval Facilities Engineering Command and Marine Corps Base in Camp Lejeune, North Carolina (the “project”). In connection with this project, Clayco executed a subcontract agreement with plaintiff, which is attached as an exhibit to the complaint, wherein for the exchange of payment of $5,138,000.00, plaintiff would perform installation and design of the HVAC, electrical, and plumbing work for the project.

According to the complaint, plaintiff performed and completed the work for the project as required in the subcontract agreement, but plaintiff has not been fully paid by Clayco. Plaintiff claims Clayco has breached the subcontract agreement by asserting improper “back-charges,” fail[543]*543ing to make timely and required payments, improperly coordinating and scheduling, failing to work with plaintiff in good faith to timely accomplish installation and design required by the subcontract agreement, and interfering with plaintiffs performance. Plaintiff asserts that $458,234.02 is past due and owing under the subcontract agreement, and that is owed more than $800,000.00 in costs incurred.

Plaintiff asserts that in connection with the project, Clayco purchased a Miller Act payment bond issued by Travelers, and that Travelers is a surety in connection with the contract between Clayco and the federal government. Plaintiff contends that all of its claims are recoverable under the Miller Act, and, where plaintiff has performed all applicable conditions precedent, Travelers and Clayco are jointly and severally liable to plaintiff for the damages claimed. Plaintiff asserts that it attempted mediation with Clayco to resolve the dispute, and it has filed this lawsuit in order to protect its interests under the Miller Act.

On November 8, 2012, defendants filed a motion to dismiss and, in the alternative, to stay and compel arbitration, on the basis of an arbitration agreement in the subcontract, including the following provisions:

A. Mediation: Any Claim arising out of or related to the Agreement shall be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable or other binding dispute resolution proceedings by either party.
D. Arbitration: Claims which have not been resolved by mediation shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect at the time of the arbitration. The demand for arbitration shall be filed in writing with the other party to the Agreement and with the American Arbitration Association. The jurisdiction of the Arbitrator, and the arbitrability of any issue raised by the parties shall be decided by the Arbitrator.
K.....Any mechanic’s liens or payment bond claims filed with a Court shall be promptly stayed pending resolution of the dispute in accordance with these dispute resolution provisions.

(Motion to Dismiss ¶¶4, 6, 7, quoting Compl. Ex. B, sections XXVI.A, D, K).

Defendants assert that these provisions comprise an arbitration agreement which deprive the court of subject matter jurisdiction of the parties’ disputes, and that the complaint therefore should be dismissed. In the alternative, defendants assert that this court should stay the action in its entirety and compel arbitration pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. § 2 et seq.

COURT’S DISCUSSION

A. Standard of Review

Section 2 of the FAA provides that a written arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Under section 3 of the FAA, “a court must stay ‘any suit or proceeding’ pending arbitration of ‘any issue referable to arbitration under an agreement in writing for such arbitration.’ ” Hill v. Peoplesoft USA, Inc., 412 F.3d 540, 543 (4th Cir.2005) (quoting 9 U.S.C. § 3).

The FAA reflects “a liberal federal policy favoring arbitration agree[544]*544ments,” and “courts must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms.” AT & T Mobility LLC v. Concepcion, — U.S. -, 181 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011) (internal citations omitted). In determining whether the dispute at issue is one to be resolved through arbitration, the court must “engage in a limited review to ensure that the dispute is arbitrable — i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement.” Murray v. United Food & Commercial Workers Int’l Union, 289 F.3d 297, 302 (4th Cir.2002) (citations omitted).

B. Analysis

The parties in this case dispute both the validity and scope of the arbitration agreement in the subcontract. Plaintiff first contends that the arbitration agreement is unenforceable because it is unconscionable. Plaintiff next contends that the forum selection provisions contained in the arbitration agreement are in violation of North Carolina law, thus rendering the arbitration agreement void and unenforceable. With respect to the scope of the arbitration agreement, plaintiff argues that the state statutory claim and the Miller Act claim are not arbitrable and that plaintiff should be allowed to proceed on those claims in this case. By contrast, defendant argues that the arbitration agreement is valid and that the court must dismiss and compel arbitration of all of plaintiffs claims. The court will address these arguments in turn below.

1. Unconscionability

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Cite This Page — Counsel Stack

Bluebook (online)
978 F. Supp. 2d 540, 2013 WL 5348464, 2013 U.S. Dist. LEXIS 136721, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-tgk-enterprises-inc-v-clayco-inc-nced-2013.