Contract Construction, Inc. v. Power Technology Center Ltd. Partnership

¹⁷⁷ WENNER, Judge. In this appeal, appellant is Contract Construction, Inc. (CCI). Appellees are Power Technology Center Limited Partnership (PTCLP), Cohen Power Corporation (Cohen), and Powertek Realty Corporation (PRC). Cohen and PRC are general partners of PTCLP.

For clarity’s sake, we will refer collectively to appellees as “Powertech.” In November of 1989, Powertech entered into a contract (the Contract) with CCI. CCI was to be general contractor for an office building and parking garage, known as Power Technology Center. Glen Andrew Fahy (Fahy), an employee of a subcontractor, was killed in an accident during construction of Power Technology Center. Fahy’s daughter and estate (the Fahys) filed a complaint against CCI, Powertech, and others alleging negligence and strict liability (the primary suit).

The complaint against CCI was dismissed because it was Fahy’s statutory employer and thus immune from suit under the Maryland Workers’ Compensation Act. Maryland Code (1991), § 9-509(a) of the Labor and Employment Article. Upon CCI’s dismissal, Powertech filed a third-party complaint against CCI claiming indemnification and breach of contract. In response, CCI moved to Compel Arbitration and Stay Powertech’s Third Party Complaint, contending that the Contract required arbitration.

This appeal followed the Circuit Court for Prince George’s County’s denial of CCI’s motion. The sole issue presented on appeal is whether the circuit court erred in holding that Powertech’s third party-claims were not covered by the Contract’s arbitration clause. Concluding that the circuit court erred, we shall reverse its decision and remand this case with instructions to order arbitration. 1 ¹⁷⁸ Discussion I. The Maryland Uniform Arbitration Act (the Act), Maryland Code (1973, 1989 Repl.Vol.), §§ 3-201 to 3-234 of the Courts and Judicial Proceedings Article (CJP), embodies Maryland’s policy of favoring arbitration. Crown Oil & Wax Co. v. Glen Construction Co., 320 Md. 546, 558 , 578 A.2d 1184 (1990); Gold Coast Mall v. Larmar Corp., 298 Md. 96, 103 , 468 A.2d 91 (1983); Bel Pre Medical Center, Inc. v. Frederick Contractors, Inc., 21 Md.App. 307, 320 , 320 A.2d 558 (1974), modified on other grounds, 274 Md. 307 , 334 A.2d 526 (1975).

Although the parties’ intention controls, the use of a broad, all encompassing arbitration clause ordinarily leads to the presumption that the parties intended the arbitration of all disputes. Crown Oil, 320 Md. at 558 , 578 A.2d 1184 . Hence, if the arbitration clause calls for the arbitration of any and all disputes arising out of the contract, all issues are arbitrable unless expressly excluded. Id. at 560 , 578 A.2d 1184 ; Gold Coast, 298 Md. at 104 , 468 A.2d 91 ; Bel Pre, 21 Md.App. at 321 , 320 A.2d 558 .

In suits to compel or stay arbitration, the circuit court is confined to resolve but one issue: “Is there an agreement to arbitrate the subject matter of a particular dispute.” Crown Oil, 320 Md. at 559 , 578 A.2d 1184 (quoting Gold Coast, 298 Md. at 103-04 , 468 A.2d 91 ). There are three categories of disputes involving the scope of an arbitration clause. Id. First, if the language of the arbitration clause is clear and the dispute in question falls clearly within the provision, arbitration must be compelled.

Id. at 560, 578 A.2d 1184 . Second, if the dispute sought to be arbitrated is clearly outside the scope of the arbitration clause, arbitration must be denied. Id. Third, if the language of the arbitration clause is unclear with respect to whether the dispute is within the scope of the arbitration clause, the issue of arbitrability is for the arbitrators to decide, and arbitration must be compelled.

Id. Thus, it is only when the matter in dispute is unequivocally outside the scope of the arbitration clause that a motion to ¹⁷⁹ compel arbitration may be denied and litigation be allowed to proceed.

II

Powertech’s third-party claims against CCI are derived from the Contract. The Contract is composed of the Agreement Between Owner and General Contractor (the Agreement); the General Conditions of the Contract for Construction, AIA Document A201, Fourteenth Edition, 1987 (the General Conditions); and various specifications and drawings (collectively, the Contract Documents). The General Conditions consist of a form document promulgated by the American Institute of Architects (AIA), containing standardized provisions designed to govern the construction process and the relationship between the Owner, Contractor, and Architect. According to Section 1.1 of the Agreement, the General Conditions “are as fully a part of the contract as if attached to this Agreement or repeated herein.” Subparagraph 1.2.3 of the General Conditions provides that “the Contract Documents are complementary, and what is required by one shall be as binding as if required by all.” On the other hand, Section 1.1 provides that if anything in the Contract Documents is inconsistent with the Agreement, the Agreement governs.

Article 10 of the General Conditions is captioned “Protection of Persons and Property.” Subparagraph 10.1.1 provides that “[t]he Contractor shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the Contract.” Subparagraph 10.2.1 requires the Contractor to “take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss” to “employees on the Work and other persons who may be affected thereby.” Indemnification clauses are contained in both the Agreement and the General Conditions. Section 16.7 of the Agreement provides: The Owner and the Contractor shall indemnify and hold harmless each other and their agents and employees from ¹⁸⁰ and against any and all claims, damages, losses and expenses, including attorney’s fees, in respect of any claims, damages, loss or expense attributable to bodily injury (including death) or property damage that is caused by a negligent act or omission of the other party or any of the other party’s agents, subcontractors or employees. Subparagraph 3.18.1 of the General Conditions provides: To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner, Architect, Architect’s consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, but only to the extent caused in whole or in part by negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 3.18.

Paragraphs 4.3 and 4.4 of the General Conditions govern claims, disputes, and their resolution. The provisions contained in paragraphs 4.3 and 4.4 pertinent to the resolution of the matter sub judice are: 4.3.1 A Claim is a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms, payment of money, extension of time or other relief with respect to the terms of the Contract. The term “Claim” also includes other disputes and matters in question between the Owner and Contractor arising out of or relating to the Contract. Claims must be made by ¹⁸¹ written notice.

The responsibility to substantiate Claims shall rest with the party making the Claim. 4.3.2 Claims, including those alleging an error or omission by the Architect, shall be referred initially to the Architect for action as provided in Paragraph 4.4. A decision by the Architect, as provided in Subparagraph 4.4.4 shall be required as a condition precedent to arbitration or litigation of a Claim between the Contractor and Owner as to all such matters arising prior to the date final payment is due, regardless of (1) whether such matters relate to execution and progress of the Work or (2) the extent to which the Work has been completed. The decision by the Architect in response to a Claim shall not be a condition precedent to arbitration or litigation in the event (1) the position of the Architect is vacant, (2) the Architect has not received evidence or has failed to render a decision within agreed time limits, (3) the Architect has failed to take action required under Subparagraph 4.4.4 within 30 days after the Claim is made, (4) 45 days have passed after the Claim has been referred to the Architect or (5) the claim relates to a mechanic’s lien. 4.3.3 Claims by either party must be made within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later. Claims must be made by written notice.... 4.3.5 The making of final payment shall constitute a waiver of Claims by the Owner except those arising from: .1 liens, Claims, security interests or encumbrances arising out of the Contract and unsettled; .2 failure of the Work to comply with the requirements of the Contract Documents; or .3 terms of special warranties required by the Contract Documents. 4.4.4 If a Claim has not been resolved after consideration of the foregoing and of further evidence presented by the parties or requested by the Architect, the Architect will ¹⁸² notify the parties in writing that the Architect’s decision will be made within seven days, which decision shall be final and binding on the parties but subject to arbitration.

Upon expiration of such time period, the Architect will render to the parties the Architect’s written decision relative to the Claim, including any change in the Contract Sum or Contract Time or both. If there is a surety and there appears to be a possibility of a Contractor’s default, the Architect may, but is not obligated to, notify the surety and request the surety’s assistance in resolving the controversy. Paragraph 4.5 governs arbitration, and subparagraph 4.5.1 establishes when arbitration is required: Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof, except controversies or Claims relating to aesthetic effect and except those waived as provided for in Subparagraph 4.3.5. Such controversies or Claims upon which the Architect has given notice and rendered a decision as provided in Subparagraph 4.4.4 shall be subject to arbitration upon written demand of either party.

Arbitration may be commenced when 45 days have passed after a Claim has been referred to the Architect as provided in Paragraph 4.3 and no decision has been rendered.

III

Since subparagraph 4.5.1 is “a broad, all encompassing arbitration clause,” 2 we must presume that “all issues are arbitrable unless expressly and specifically excluded.” Crown Oil, supra, 320 Md. at 560 , 578 A.2d 1184 . Powertech’s third- ¹⁸³ party claims for indemnification and breach of contract clearly “aris[e] out of’ and are “related to” the “Contract, or the breach thereof.” After labeling its claims “Breach of Contract” and “Contractual Indemnification,” Powertech cites Section 16.7 of the Agreement as the basis of its claim for indemnification, and Section 10.2 of the Agreement as the basis of its claim for breach of contract. Even if Powertech’s claim for indemnification were tort-based rather than contract-based, see, e.g., Council of Co-Owners Atlantis Condominium v. Whitting-Turner Contracting Co., 308 Md. 18, 41 , 517 A.2d 336 (1986); Board of Trustees of Baltimore County Community College v. RTKL Associates, 80 Md.App. 45, 55-56 , 559 A.2d 805 , cert. granted, 317 Md. 609 , 565 A.2d 1033 (1989), cert. dismissed, 319 Md. 274 , 572 A.2d 167 (1990), it would be based upon CCI’s failure to keep the worksite safe, and thus have arisen from Powertech’s relationship with CCI, created by the Contract. See Petroleum Helicopters, Inc. v. Boeing-Vertol Co., 478 F.Supp. 84, 85-86 (E.D.La.) (“[P]rovisions [to the effect that claims “arising out of or relating to” an agreement are to be arbitrated] do not require that the specific legal rights being asserted be created by the Agreements, but rather simply that those legal rights relate to the underlying relationships between the parties established by the Agreements.”), affd, 606 F.2d 114 (5th Cir.1979).

Powertech does not direct us to, nor have we found any provision in the contract expressly excluding from arbitration a claim for indemnification. To the contrary, Powertech contends that this case “falls squarely within the parameters of Jackson v. Atlantic City Electric Co., 144 F.Supp. 551 (D.N.J. 1956),” and urges us to follow the Jackson court’s determination that “a suit grounded in tort alleging common law negligence against the business invitor, owner of the property, by the