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Premier Paint & Drywall, Inc. v. Designed to Build, LLC

United States District Court, M.D. Alabama, Northern Division

June 6, 2018




         Plaintiff, Premier Paint & Drywall, Inc. (“Premier”), sued Defendant, Designed to Build, LLC, (“DTB”) in state court in a single-count complaint for breach of contract. (Doc. 1-1). DTB removed the case to this court. (Doc. 1). Premier alleges the parties contracted for Premier, acting as subcontractor, to source, provide, and install drywall for a project known as the “clubhouse” contract. (Doc. 1-1, ¶ 5). Premier sued to recover the “retainage, ” i.e. the amount of funds held back by DTB until completion of the project. Id., ¶ 6. Before the court is Defendant's Motion to Dismiss or Stay Proceedings and Compel Arbitration. (Doc. 6). Premier did not respond to the motion, but filed a Partial Objection to Removal. (Doc. 11). A hearing on the matter was held on May 22, 2018. It is the recommendation of the undersigned Magistrate Judge that the motion to stay the case and compel arbitration be granted and the motion to dismiss be denied.


         This court has diversity of citizenship subject matter jurisdiction pursuant to 28 U.S.C. § 1332(a) as to Plaintiff's cause of action.[1] The parties do not contest personal jurisdiction or venue, and the court finds sufficient information of record to support both. See 28 U.S.C. § 1391. On April 19, 2018, the above-styled matter was referred to the undersigned for recommendation on all pretrial matters by United States District Judge Myron H. Thompson. (Doc. 13) See 28 U.S.C. § 636(b); Rule 72, Fed. R. Civ. P.; United States v. Raddatz, 447 U.S. 667 (1980); Jeffrey S. v. State Bd. of Educ. of State of Ga., 896 F.2d 507 (11th Cir. 1990).


         “[A]rbitration is a matter of contract, ” United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960), and “arbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit their grievances to arbitration.” AT & T Tech., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648-49 (1986).

         The Eleventh Circuit applies a two-step inquiry when determining the propriety of a motion to compel arbitration pursuant to Section 4 of the Federal Arbitration Act (FAA). Klay v. All Defendants, 389 F.3d 1191, 1200 (11th Cir. 2004). The first step considers whether the parties agreed to arbitrate. Id. (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)). The second step involves deciding whether “legal constraints external to the parties' agreement foreclosed arbitration.” Id. (quoting Mitsubishi Motors Corp., 473 U.S. at 628). Federal law favors arbitration. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (U.S. 1983). Cases in this circuit and others have recognized that an agreement's incorporation by reference of the American Arbitration Association (“AAA”) rules “provide[s] clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.” Terminix Int'l Co., LP v. Palmer Ranch Ltd. P'ship, 432 F.3d 1327, 1332-33 (11th Cir. 2005) (collecting cases).


         DTB served as the general contractor for a construction project known as Wildwood of Baton Rouge located in Baton Rouge, Louisiana. As part of the construction project, Premier, as a subcontractor, entered into two contracts with DTB. See (Docs. 6-1, 6-2). The first contract (“the Drywall Contract”) consisted of a scope of work for drywall installation and the second contract consisted of a scope of work for painting (“the Painting Contract”).[2] Id. The Drywall Contract is the subject of Premier's Complaint here.

         The Drywall Contract contains a mandatory arbitration provision invoking the AAA rules:

Notwithstanding any dispute clause contained in the General Conditions or the Contract with the Owner, SUBCONTRACTOR agrees that, in the event of any dispute between the SUBCONTRACTOR and GENERAL CONTRACTOR, such dispute will be submitted to arbitration. Such arbitration shall be held in Athens, Georgia. The parties irrevocably (i) submit to the exclusive jurisdiction of the State of Georgia over any action or proceeding arising out of the Agreement, (ii) agree that all claims in respect of such action or proceeding may be heard and determined in arbitration, (iii) waive, to the fullest extent they may effectively do so, the defense of an inconvenient or inappropriate forum to the maintenance of such action or proceeding, and (iv) waive any defense based on lack of personal jurisdiction of any such purpose.
Arbitration shall be held in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association which are in effect at the time the demand for arbitration is filed. Demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association, and a copy shall be filed with the ARCHITECT and with the OWNER.
A demand for arbitration shall be made within a reasonable time after the claim has arisen, and in no event shall it be made after the date when institution of legal or equitable proceedings based on such claim would be barred by the applicable statute of limitations. The party on notice of demand for arbitration must assert in the demand all claims then known to that party on which arbitration is permitted to be demanded.
Should either party refuse or neglect to appear or participate in properly instituted arbitration proceedings, the arbitrator are empowered to decide the controversy in accordance with whatever evidence is presented. The arbitrators are authorized to award any party or parties such sums as such arbitrator shall ...

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