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A.C. Dellovade, Inc. v. Walsh Federal/Alberici Joint Venture

United States District Court, W.D. Oklahoma

July 3, 2019

A.C. DELLOVADE, INC., Plaintiff,



         Now before the Court is Defendants' Motion to Stay Litigation Pending Arbitration (Dkt. No. 24). Plaintiff has filed its Response (Dkt. No. 27), and Defendants have submitted their Reply (Dkt. No. 28). Both parties have submitted additional briefing as well. (Dkt Nos. 33, 36.) The motion is now at issue.

         I. Background

         On September 14, 2017, Plaintiff and Defendants agreed to a subcontract regarding a construction project on Tinker Air Force Base in Oklahoma City. (Dkt. No. 1, pp. 2-3.) The subcontract required Plaintiff to “furnish and install certain metal wall panels, fabricated panel assemblies, roof systems and related items for the Project in exchange for payment from” Defendants. (Id. at 3.) According to Plaintiff, it has fully performed its work as required under the subcontract and has properly billed Defendants for this work, but has yet to receive payment from Defendants. (Id. at 3.) As a result, Plaintiff seeks relief from this Court, alleging, inter alia, that Defendants breached the subcontract. (Id. at 4-9.)

         Defendants now move the Court to stay this case and submit it for arbitration proceedings. In support, it relies on the arbitration provision within the subcontract:

11.2 Arbitration. Any controversy or claim of Contractor against Subcontractor or Subcontractor against Contractor or its surety pertaining to the Project, shall, at the option of Contractor or Contractor's surety and at any time, be resolved by arbitration pursuant to rules determined by Contractor. The Contractor and Subcontractor agree to equally split the administrative costs, fees, and other similar expenses charged by the arbitrator or arbitration agency. Subcontractor irrevocably submits to the jurisdiction of the federal, state, or United States territory courts located in the state or United States territory of the Project for the purpose of proceedings with respect to the arbitration. At the Contractor's or its surety's option, the arbitration may be consolidated with any arbitration between the Contractor and Owner or other entity associated with the Project. Subcontractor waives to the fullest extent permitted by law any objection that they may now or may hereafter have to having arbitration proceedings conducted in the state or United States territory in which the Project is located, including any claim that it is an inconvenient forum for such arbitration or court proceedings. The award rendered by the arbitrator(s) shall be conclusive and binding upon the parties and shall be enforceable in any court of competent jurisdiction of any Contracting State pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (330 UNTS 3; 9 U.S.C. 201, et seq.).

(Dkt. No. 24-1, p. 15) (emphasis added).

         Plaintiff objects to binding arbitration. In its view, this provision grants Defendants excessive authority regarding the arbitration proceedings-rendering the provision therefor unenforceable against Plaintiff. Defendants maintain that the provision mirrors other arbitration agreements that have been upheld by courts.

         II. Standard

         When a contract contains an arbitration clause, there generally is a “strong presumption” that the dispute is arbitrable. In re: Cox Enters., Inc. Set-top Cable Television Box Antitrust Litigation, 835 F.3d 1195, 1201 (10th Cir. 2016). This presumption, however, disappears where there is a dispute over whether a valid arbitration agreement exists. See Dumais v. Am. Golf Corp., 299 F.3d 1216, 1219 (10th Cir. 2002). At that point, the Court views the facts and all reasonable inferences in the light most favorable to the party opposing arbitration. See Ragab v. Howard, 841 F.3d 1134, 1139 (10th Cir. 2016).

         When a party to an arbitration agreement challenges its validity, “the federal court must consider the challenge before ordering compliance with that agreement.” Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 71 (2010). In resolving such a challenge, federal courts may apply state law principles that govern the validity, revocability, and enforceability of contracts. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87 (1996).

         The Tenth Circuit has held “that an arbitration agreement allowing one party the unfettered right to alter the arbitration agreement's existence or its scope is illusory.” Dumais, 299 F.3d at 1219. If there are sufficient restrictions on a party's right to modify or cancel the arbitration agreement, however, the agreement is not illusory and is enforceable. See Hardin v. First Cash Fin. Servs., Inc., 465 F.3d 470, 479 (10th Cir. 2006); see also Thompson v. Bar-S Foods Co., 2007 OK 75, 174 P.3d 567, 575 (arbitration agreement in personnel policy that the employer could unilaterally change without notice lacked consideration and was illusory; citing Hardin “approvingly” as an accurate statement of Oklahoma law).

         III. Analysis

         In opposing arbitration, Plaintiff contends that (1) the arbitration provision here is unsupported by consideration and therefore illusory, (2) the arbitration provision is fundamentally unfair and unconscionable, and (3) Defendants are necessary parties to separate litigation before this Court. (See Dkt. No. 27; see also Dkt. No. 33, pp. 5-6.) Plaintiff therefore does not dispute the existence of the arbitration provision or the provision's applicability to its claims-it only challenges the provision's ...

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