Hanover Insurance Company v. Bay Meadows Consulting LLC , 579 F. App'x 742 ( 2014 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 13-14482
Non-Argument Calendar
________________________
D.C. Docket No. 7:13-cv-00506-LSC
HANOVER INSURANCE COMPANY, THE,
Plaintiff-Appellee,
versus
ATLANTIS DRYWALL & FRAMING LLC, et al.,
Defendants,
BAY MEADOWS CONSULTING LLC,
MARILOURDES DEYO,
LAURENCE LAMPHERE,
CHRISTIN M. LAMPHERE,
Defendants-Appellants.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
________________________
(August 29, 2014)
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Before HULL, MARCUS and KRAVITCH, Circuit Judges.
PER CURIAM:
In this interlocutory appeal, we must determine whether the district court
properly denied Bay Meadows Consulting (Bay Meadows), Marilourdes Deyo, and
Laurence and Christin Lampheres’ motions to compel arbitration. For the reasons
that follow, we vacate and remand.
I.
In 2010, the University of Alabama North Bluff Residential Community
Project hired Brice Building Company (Brice) as the general contractor for
development of a student housing complex. In March 2011, Brice subcontracted
with Atlantis Drywall and Framing (Atlantis) for work on the North Bluff project.
The subcontract contained an arbitration clause requiring arbitration over any
dispute or claim “between the parties (i) arising out of or related or collateral to the
provisions and/or subject matter of this Subcontract or the breach thereof . . . .”
The clause further provided that “[t]he parties intend that the scope of this
arbitration clause shall be construed as broadly as possible so as to include, but not
be limited to, the enforcement of this arbitration provision, the arbitrability of a
particular claim or dispute . . . .”
In order to work on State of Alabama projects like the North Bluff complex,
Atlantis was required to obtain payment and performance bonds, which they
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secured from Hanover Insurance Company (Hanover). Before Hanover would
issue any bonds, however, it required indemnification by Atlantis, Bay Meadows,
Deyo, and the Lampheres.1 The Indemnification Agreement did not contain an
arbitration clause, nor did it expressly incorporate by reference any other
document. All parties entered into the Indemnification Agreement in May 2011.
On June 30, 2011, Hanover issued the payment and performance bonds. The
bonds specifically referenced and incorporated the subcontract between Brice and
Atlantis.
Atlantis later defaulted on the work, and Hanover made payments under the
bonds. Hanover then sought indemnification. When the parties failed to comply,
Hanover filed a complaint in the district court naming as defendants Bay
Meadows, Marilourdes Deyo, and Laurence and Christin Lamphere (collectively,
“the indemnitors”).2 Hanover sought indemnification, exoneration and quia timet,
specific performance, and damages for breach of contract. The indemnitors
moved to compel arbitration under the Federal Arbitration Act (FAA), 9 U.S.C. §
1, et seq.3
In the motions to compel, the indemnitors argued that Hanover was required
to arbitrate its claims under the arbitration clause in the subcontract. They further
1
Deyo and Laurence Lamphere are members of Atlantis and Bay Meadows.
2
The complaint also named Atlantis and Jeffrey Deyo, who are not parties to the appeal.
3
Laurence and Christin Lamphere filed a joint motion to compel. Although the remaining
defendants each filed separate motions, they adopted the Lampheres’ motion.
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argued that Hanover was bound by the arbitration clause because the
Indemnification Agreement incorporated the subcontract between Brice and
Atlantis.
The district court denied the motions to compel, finding that Hanover did not
agree to arbitrate, the Indemnification Agreement did not explicitly incorporate any
other contract because it did not “expressly refer to and sufficiently describe” the
bonds or subcontract, and the court could not view the three documents as a single
transaction because the parties differed. 4 Finally, the court explained that Hanover
could not be compelled to arbitrate because Hanover’s claims did not arise out of
the subcontract, as Hanover was not claiming a direct right or benefit under the
subcontract but was seeking only to enforce the terms of the Indemnification
Agreement. This interlocutory appeal under 9 U.S.C. § 16(a) followed.
II.
Indemnitors Bay Meadows, Deyo, and the Lampheres argue on appeal that
the district court erred by concluding that they could not enforce against Hanover
an arbitration clause contained in the subcontract between Brice and Atlantis. The
parties do not dispute that the payment and performance bonds Hanover issued to
4
In a separate action, the district court found that Hanover was required to arbitrate its claims
against Brice because Hanover was subject to the arbitration agreement after incorporating the
subcontract into the bonds. See Hanover Ins. Co. v. Brice, 7:13-cv-00547-LSC, doc. 21 (N.D.
Ala. May 31, 2013). The district court also granted a motion to compel Hanover to arbitrate its
claims against Atlantis. See Hanover Ins. Co. v. Lamphere, 7:13-cv-00506-LSC, doc. 41 (N.D.
Ala. Oct. 7, 2013).
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Atlantis and Brice incorporated by reference the subcontract. The indemnitors
contend that the subcontract was sufficiently incorporated by reference into the
Indemnification Agreement to require arbitration of Hanover’s claims against the
indemnitors.
“We review de novo the district court’s denial of a motion to compel
arbitration.” Lawson v. Life of the South Ins. Co., 648 F.3d 1166, 1170 (11th Cir.
2011) (citation omitted). The FAA establishes a “liberal federal policy favoring
arbitration agreements.” CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 668-69
(2012) (citations and internal quotations omitted). And “[c]ourts must rigorously
enforce agreements to arbitrate, even if doing so means piecemeal litigation.”
Nobles v. Rural Cmty. Ins. Servs., 122 F. Supp. 2d 1290, 1295 (M.D. Ala. 2000)
(citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218-20 (1985)).
“Because arbitration is a matter of contract, however, the FAA’s strong
proarbitration policy only applies to disputes that the parties have agreed to
arbitrate.” Klay v. All Defendants, 389 F.3d 1191, 1200 (11th Cir. 2004) (citation
omitted). Thus, where the parties have not agreed to arbitrate, a court cannot
compel them to arbitration. See id. An exception to this rule allows a nonparty to
“force arbitration ‘if the relevant state contract law allows him to enforce the
agreement’ to arbitrate.” See Lawson, 648 F.3d at 1170 (quoting Arthur Andersen
LLP v. Carlisle, 556 U.S. 624, 632 (2009)); see also McDougle v. Silvernell, 738
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So. 2d 806, 808 (Ala. 1999) (“Whether a contract to arbitrate exists must be
determined under general state-law contract principles”).
As an initial matter, there is little dispute that Hanover consented to arbitrate
claims arising out of the subcontract between Brice and Atlantis; the performance
and payment bonds incorporated by reference the subcontract, and the subcontract
contained the arbitration clause. See U. S. Fid.& Guar. Co. v. West Point Constr.
Co., 837 F.2d 1507, 1508 (11th Cir. 1988). At issue, is whether the indemnitors
can force Hanover to arbitrate Hanover’s claims against them under the arbitration
clause in the subcontract between Brice and Atlantis. Because the indemnitors
were not signatories on the subcontract, and the Indemnification Agreement does
not expressly contain an arbitration clause, the indemnitors can compel arbitration
in only limited circumstances.
First, the indemnitors can compel arbitration if the Indemnification
Agreement incorporated the subcontract. McDougle, 738 So. 2d at 808 (explaining
that a party may incorporate by reference another document containing an
arbitration provision). To incorporate another document, the writing must
“expressly refer[] to and sufficiently describe[]” the other document. Fid. &
Deposit Co. of Maryland v. Jefferson Cnty. Comm’n, 756 F. Supp. 2d 1329, 1337
(N.D. Ala. 2010).
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Alternatively, the subcontract may be incorporated by reference if it is part
of the same transaction, that is, if the bonds, Indemnification Agreement, and
subcontract are all part of a single transaction. Dan Wachtel Ford, Lincoln,
Mercury, Inc. v. Modas, 891 So. 2d 287, 290 (Ala. 2004). Generally, this involves
documents signed by the same parties at or near the same time. See, e.g., Lloyd
Noland Found., Inc. v. City of Fairfield Healthcare Auth., 837 So. 2d 253, 267
(Ala. 2002) (“two or more instruments executed contemporaneously by the same
parties in reference to the same subject matter constitute one contract and should
be read together in construing the contract” (internal citation omitted)); cf. Bailey
v. Hannibal & St. J.R. Co., 84 U.S. 96, 108 (1872) (“[I]t is well-settled law that
several writings executed between the same parties substantially at the same time
and relating to the same subject-matter may be read together as forming parts of
one transaction, nor is it necessary that the instruments should in terms refer to
each other if in point of fact they are parts of a single transaction”). But Alabama
law has never held that the parties must be the same. See Ex parte Harris, 837
So. 2d 283, 288 (Ala. 2002) (accepting that “two or more agreements may be
construed as one contract even though the parties to the agreements are not all the
same, such as where some of the documents are executed by parties who have no
part in executing the others, provided that the agreements in question relate to the
same subject matter”); see also Haddox v. First Ala. Bank of Montgomery, 449
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So. 2d 1226, 1229-30 (Ala. 1984) (reading as a single contract several documents
concerning the same subject matter but signed by different parties).
Lastly, under Alabama law, a nonsignatory can seek arbitration if (1) the
nonsignatory is a third-party beneficiary of the contract containing an arbitration
provision, and (2) the nonsignatory’s claims are “intertwined with” and “related
to” the contract. Cook’s Pest Control, Inc. v. Boykin, 807 So. 2d 524, 526-27 (Ala.
2001). Where the specific language of the arbitration clause limits its scope to
claims involving the parties, courts have been reluctant to compel nonsignators
into arbitration. See id. at 527.
The district court found none of these circumstances present here. We
disagree because we conclude that the Indemnification Agreement, bonds, and
subcontract should be viewed as a single transaction. Although the parties
involved in signing each document differed, and the documents were signed on
three separate occasions between March and June 2011, the contracts relate to the
same subject matter. See Ex parte Harris, 837 So. 2d at 288; see also Love v.
Fleetway Air Freight & Delivery Serv.,875 So.2d 285, 289 (Ala. 2003) (explaining
that the court would construe documents together even though they were not
executed contemporaneously, as long as the documents refer to one another);
K&C Dev. Corp. v. AmSouth Bank, 597 So. 2d 671, 674 (Ala. 1992) (considering
together documents that were signed more than six months apart). Moreover, the
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parties were aware that Hanover required the Indemnification Agreement before it
would issue the bonds, and thus the issuance of the bonds depended on the
indemnification. And Atlantis could not perform its work under the subcontract
without the bonds. See, e.g., Kandlis v. Houtari, 678 A.2d 41, 43 (Me. 1996)
(construing guaranties signed by different shareholders as one agreement because
the guaranties concerned the same subject matter and were signed “for the same
purpose”) (cited with approval in Ex parte Harris, 837 So. 2d at 287). The
Indemnification Agreement refers to bonds that Hanover may enter into, even
though it does not specifically identify the bonds at issue. And although the
Indemnification Agreement is not limited to the Atlantis-Brice subcontract and
bonds, there is no dispute that the parties entered into the Indemnification
Agreement with the Brice-Atlantis subcontract and the specific payment and
performance bonds in mind.
The district court’s conclusion that the documents were not related because
“at any of these stages the parties could have contracted with someone else without
destroying the contract” misses the point. The parties were interconnected and the
documents concerned the same subject matter. Thus, we cannot conclude that the
Indemnification Agreement pertains to a different subject matter than the
subcontract and bonds, and the district court erred when it declined to read the
three documents as a single transaction. See Ex parte Harris, 837 So. 2d at 288.
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We thus vacate and remand with instructions to the district court to compel
arbitration.
VACATED and REMANDED.
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