Preload, Inc. v. Hammond Water Works Department and Jeffrey Porter General Contractors, Inc. ( 2012 )

Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before
any court except for the purpose of
establishing the defense of res judicata,
collateral estoppel, or the law of the case.
FILED
Aug 06 2012, 9:03 am
ATTORNEYS FOR APPELLANT:
J. MICHAEL CAVOSIE CLERK
E. ROY RODABAUGH of the supreme court,
court of appeals and
tax court
Easter & Cavosie
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
PRELOAD, INC., )
)
Appellant-Third-Party Defendant )
)
vs. ) No. 45A05-1201-PL-22
)
HAMMOND WATER WORKS )
DEPARTMENT, )
)
and )
)
JEFFREY PORTER GENERAL )
CONTRACTORS, INC., )
Appellees-Plaintiffs. )
APPEAL FROM THE LAKE SUPERIOR COURT
The Honorable William E. Davis, Judge
Cause No. 45D05-1104-PL-42
August 6, 2012
MEMORANDUM DECISION - NOT FOR PUBLICATION
BAILEY, Judge
Case Summary
Preload, Inc. (“Preload”), appellant and third-party defendant, appeals from the trial
court’s order compelling it to engage in arbitration with Jeffrey Porter General Contractors,
Inc. (“Jeffrey Porter”), appellee and plaintiff, and the Hammond Water Works Department
(“Hammond Water”), appellee and defendant/third-party plaintiff.
We affirm in part, reverse in part, and remand.
Issue
Preload presents a single issue on appeal, which we restate as whether the trial court
erroneously ordered Preload joined into an arbitration between Jeffrey Porter and Hammond
Water based upon identical arbitration provisions in separate agreements.
Facts and Procedural History
On May 1, 2008, Preload contracted with Hammond Water to construct tanks on a
project named “Contract 1 – Two 6MG Prestressed Tanks” (“Contract 1”). (App. at 15.) On
July 23, 2008, Jeffrey Porter contracted with Hammond Water to perform excavation and
landscaping work on a project named “Contract 3 – Package Pumping Station Installation
and Yard Piping” (“Contract 3”). (App. at 3.)
Although the parties entered into separate contracts—one between Preload and
Hammond Water, the other between Jeffrey Porter and Hammond Water—governing
separate projects, both Contract 1 and Contract 3 incorporated by reference a common set of
general conditions. The general conditions included an arbitration clause:
All claims, disputes, and other matters in question arising out of, or relating to,
the Project Documents or the breach thereof, except for claims which have
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been waived by the making and acceptance of final payment as provided for
herein will be decided by arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association. This
agreement to arbitrate will be specifically enforceable under the prevailing
arbitration law. The award rendered by the arbitrators will be final, and
judgment may be entered upon it in any court having jurisdiction thereof.
(App. at 14.)
On April 19, 2011, Jeffrey Porter filed suit against Hammond Water.1 In the
complaint, Jeffrey Porter alleged that it “was to use the top soil on the site to fulfill its
obligations” to perform landscaping work under Contract 3 (App. at 1), but that Hammond
Water had improperly removed the top soil, forcing Jeffrey Porter to advance costs for
replacement top soil. Jeffrey Porter therefore sought damages in compensation for its costs.
On June 8, 2011, Hammond Water filed its Answer to Complaint, Affirmative
Defenses and Third-Party Complaint. In the third-party complaint portion of the pleading,
Hammond Water alleged that, pursuant to Contract 1, Preload was to perform work “on the
same project site” as Jeffrey Porter, that Preload’s contract responsibilities included
excavation and landscaping, and that Preload removed any of the top soil that was the subject
of Jeffrey Porter’s suit. Referencing a provision in the contract with Preload that required
Preload to indemnify Hammond Water for any liability arising from “the failure, omission or
neglect of Preload” in performance under Contract 1, Hammond Water sought
indemnification against Preload for Jeffrey Porter’s claim. (App. at 12.)
Preload filed its answer and affirmative defenses to Hammond Water’s third-party
1
The City of Hammond was also a named defendant in the complaint. On August 25, 2011, Jeffrey Porter
stipulated to the dismissal of the City of Hammond from the suit, and the trial court entered an order of
dismissal as to the City on August 26, 2011. The City of Hammond is thus no longer a party to this action.
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complaint on July 7, 2011. Among its affirmative defenses, Preload pled that Contract 1
included the above-cited arbitration clause and “this action should be stayed or dismissed
accordingly.” (App. at 23.)
On October 20, 2011,2 Jeffrey Porter filed a motion with the trial court to compel
Preload’s joinder into arbitration proceedings between Jeffrey Porter and Hammond Water:
Jeffrey Porter and [Hammond Water] have agreed to arbitration of this
matter…. However, [Preload] refuses to participate in the arbitration.
Wherefore, the Plaintiff, Jeffrey Porter, by counsel, requests the Court to order
all three parties to arbitration for the purposes of trying to resolve this dispute
amicably and for the economy of justice.
(App. at 29.)
On October 25, 2011, Preload filed its response to the motion to compel arbitration.
In its response, Preload argued that it could not be joined in the arbitration because Preload
and Jeffrey Porter were not in privity with each other, Preload and Jeffrey Porter were not
working on the same contract, the arbitration clause at issue did not expressly provide for
joinder of arbitration parties, and Hammond Water had in any event not yet been found liable
for damages by the arbitrator and thus was not yet entitled to indemnification from Preload.
On December 28, 2011, the trial court conducted a hearing on Jeffrey Porter’s motion
to compel arbitration. The same day, the trial court granted the motion to compel Preload’s
participation in the arbitration between Jeffrey Porter and Hammond Water.
This appeal ensued.
2
This date appears in the chronological case summary (“CCS”). We remind counsel that in civil appeals,
our appellate rules provide that “the appellant’s Appendix shall contain … copies of the following
documents, if they exist: (a) the chronological case summary for the trial court or Administrative Agency.”
Ind. Appellate Rule 50(A)(2) (emphasis added). The CCS in this case was not provided by Preload in its
appellant’s Appendix, but rather by the clerk of the trial court along with the hearing record.
4
Discussion and Decision
On appeal, Preload argues that the trial court erred when it compelled Preload’s
joinder in the arbitration between Jeffrey Porter and Hammond Water.
Ordinarily, we review an order compelling arbitration de novo. TWH, Inc. v. Binford,
898 N.E.2d 451, 453 (Ind. Ct. App. 2008). However, neither Jeffrey Porter nor Hammond
Water has filed a responsive brief in this court. In such circumstances, we do not undertake
the burden of developing arguments for the appellee. Id. We review the trial court’s order
for prima facie error. Id. at 453 n.1. Prima facie error is error “‘at first sign, on first
appearance, or on the face of it.’” Id. (quoting Railing v. Hawkins, 746 N.E.2d 980, 982
(Ind. Ct. App. 2001)).
“A written agreement to submit to arbitration is valid, and enforceable, an existing
controversy or a controversy thereafter arising is valid and enforceable, except upon such
grounds as exist a law or in equity for the revocation of any contract.” Ind. Code § 34-57-2-
1(a). Thus, a party that seeks to compel arbitration must prove two elements. First, the party
must demonstrate that there is an enforceable agreement to arbitrate the dispute. Mislenkov
v. Accurate Metal Detinning, Inc., 743 N.E.2d 286, 289 (Ind. Ct. App. 2001). “Second, the
party must prove that the disputed matter is the type of claim that the parties agreed to
arbitrate.” Id.“Construction of the terms of a written arbitration contract is a pure question of law,
and we conduct a de novo review of the trial court’s conclusion in that regard.” Sanford v.
Castleton Health Care Center, LLC, 813 N.E.2d 411, 416-17 (Ind. Ct. App. 2004), reh’g
5
denied, trans. dismissed. We apply ordinary contract principles in construing the scope of an
arbitration agreement. Safety Nat’l Cas. Co. v. Cinergy Corp., 829 N.E.2d 986, 1000 (Ind.
Ct. App. 2005), trans. denied.
“Our paramount goal is to ascertain and give effect to the intent of the parties as
reasonably manifested by the language of the agreement.” Safety Nat’l Cas. Co., 829 N.E.2d
at 1010. Parties may only be bound to arbitrate issues where they have agreed to arbitration
“‘by clear language,’” and we may not extend the scope of an arbitration agreement “‘by
construction or implication.’” Norwood Promotional Prods., Inc. v. Roller, 867 N.E.2d 619,
624 (Ind. Ct. App. 2007) (quoting Mislenkov, 743 N.E.2d at 289), trans. denied. When
construing arbitration agreements, we resolve all doubts in favor of arbitration, and the
parties are bound to arbitrate all matters not explicitly excluded by the language of the
agreement that reasonably fit within the language used. Green Tree Servicing v. Brough, 930
N.E.2d 1238, 1241 (Ind. Ct. App. 2010). “Arbitration must be compelled unless it may be
said with positive assurance that the arbitration clause is not susceptible of an interpretation
that covers the asserted dispute.” Precision Homes of Ind., Inc. v. Pickford, 844 N.E.2d 126,
131 (Ind. Ct. App. 2006), trans. denied.
Preload does not challenge the existence of the contracts between itself and Hammond
Water and between Jeffrey Porter and Hammond Water. In its pleadings, Preload invoked
the arbitration provision as a basis upon which to stay or dismiss the trial court proceedings.
Preload contends only that the arbitration clause does not provide for Preload’s joinder in the
arbitration proceedings between Jeffrey Porter and Hammond Water.
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The arbitration provision states, in relevant part, “[a]ll claims, disputes, and other
matters in question arising out of, or relating to, the Project Documents or the breach thereof
… will be decided by arbitration in accordance with the Construction Industry Arbitration
Rules of the American Arbitration Association.” (App. at 14.) Thus, the arbitration
provision is silent on whether the parties intended to join Preload as a third-party indemnitor
into an arbitration between Hammond Water and another party. The arbitration provision is
not, however, entirely silent as to the question of joinder or consolidation.3
The arbitration provision at issue here specifies the applicable rules governing any
underlying arbitrations: the Construction Industry Arbitration Rules of the American
Arbitration Association. To the best of our ability to discern from the record, none of the
parties in this case designated those rules in arguments to the trial court, Preload does not
address the rules in its brief before this Court, and Preload did not provide a copy of those
rules to this Court. Thus, we take judicial notice of these rules, the applicability of which all
parties to this action have already agreed.4 See American Arbitration Association,
3
Preload argues, based upon this Court’s holding in Slutzky-Peltz Plumbing & Heating Co. v. Vincennes
Community School Corp., 556 N.E.2d 344 (Ind. Ct. App. 1990), and cases from other jurisdictions, that
where an arbitration clause is silent as to the questions of joinder and consolidation, courts lack the
authority to order joinder or consolidation. Because we conclude that the arbitration provision here is not
silent on this point, we do not reach Preload’s argument on this point today.
4
Judicial notice may be taken at any stage in the proceedings, including on appeal, so long as the taking of
judicial notice complies with the requirements set forth by our Rules of Evidence. See Ind. Evidence Rule
201(a), (f); Mayo v. State, 681 N.E.2d 689, 693 (Ind. 1997). “A judicially-noticed fact must be one not
subject to reasonable dispute in that it is … capable of ready and accurate determination by resort to
sources whose accuracy cannot reasonably be questioned.” Evid. R. 201(a). The Construction Industry
Arbitration Rules of the American Arbitration Association are publicly available from the Association’s
website at http://www.adr.org, and other courts have referred to or taken judicial notice of the same or
similar rules. See, e.g., Harry Baker Smith Architects II, PLLC v. Sea Breeze I, LLC, 83 So. 3d 395 (Miss.
Ct. App. 2011) (interpreting an arbitration clause similar to the one at issue here, but also interpreting the
7
Construction Industry Arbitration Rules and Mediation Procedures: Including Procedures for
Large, Complex Construction Disputes [hereinafter, Arbitration Rules],
http://www.adr.org/aaa/ShowProperty?nodeId=/UCM/ADRSTG_004219&revision=latestrel
eased (October 1, 2009).
The Arbitration Rules provide for the resolution of disputes over consolidation or
joinder of parties in ongoing arbitrations:
If the parties are unable to agree to consolidate related arbitrations or to the
joinder of parties to an ongoing arbitration, the AAA shall directly appoint a
single arbitrator (hereinafter referred to as the R-7 arbitrator) for the limited
purpose of deciding whether related arbitrations should be consolidated or
parties joined.
Arbitration Rules at 31. The Arbitration Rules go on to provide for the procedural steps by
which parties may be joined or arbitrations consolidated. Id. at 31-32.
By agreeing to the arbitration provision, the parties in this case have agreed to the
application of the Arbitration Rules, and Preload has already invoked the arbitration
provision in its pleadings. We see nothing in the record that indicates that an arbitrator has
ordered Preload joined in the arbitration between Jeffrey Porter and Hammond Water, and
whether to join Preload or consolidate separate arbitrations is left to the arbitrator by the
terms of the arbitration provision and the Arbitration Rules. The trial court properly ordered
Preload into arbitration with Hammond Water. But to the extent that the trial court ordered
the arbitration between Preload and Hammond Water consolidated with that between Jeffrey
applicable arbitration rules), cert. denied, 82 So. 2d 620 (Miss. 2012); Doctor’s Assocs., Inc. v. Keating,
836 A.3d 412 (Conn. 2003) (taking judicial notice of the American Arbitration Association’s Commercial
Arbitration Rules for purposes of reviewing question of service of process under the Rules).
8
Porter and Hammond Water, or ordered Preload joined in the arbitration between Jeffrey
Porter and Hammond Water, the order improperly construes the arbitration provisions and is
therefore in error.
Under the facts of this case, the determination as to joinder or consolidation of Preload
into the other parties’ arbitration rests with the arbitrator, not with the courts, and even then
only when Preload has submitted to or has been ordered to participate in an arbitration with
Hammond Water. Thus, to the extent that the trial court’s order that Preload enter arbitration
orders that Preload be joined as a party in the arbitration between Jeffrey Porter and
Hammond water, we reverse the trial court’s order and remand for further proceedings
consistent with our decision today.
Affirmed in part, reversed in part, and remanded.
ROBB, C.J., concurs.
MATHIAS, J., concurs in result with opinion.
9
IN THE
COURT OF APPEALS OF INDIANA
PRELOAD, INC., )
)
Appellant-Third-Party Defendant, )
)
vs. )
)
HAMMON WATER WORKS DEPARTMENT, ) No. 45A05-1201-PL-22
)
and )
)
JEFFREY PORTER GENERAL )
CONTRACTORS, INC., )
)
Appellees-Plaintiffs. )
MATHIAS, Judge, concurring in result
While I concur in the ultimate result reached by my colleagues, I write separately to
express my discomfort with taking judicial notice of the American Arbitration
Association Rules (“AAA Rules”) at this stage of the proceedings without notice to either
party. Indiana Evidence Rule 201(a) provides that a court may, with or without a request
10
by either party, take judicial notice of a fact that is “capable of accurate and ready
determination by resort to sources whose accuracy cannot be reasonably questioned.”
The rule provides further that judicial notice “may be taken at any stage of the
proceeding.” Evid. R. 201(f). This court has interpreted this provision to allow judicial
notice to be taken for the first time on appeal. See Mayo v. State, 681 N.E.2d 689, 693
(Ind. Ct. App. 1997).
While I do not doubt that judicial notice may be properly taken of the AAA Rules, or
that judicial notice may under some circumstances be taken on appeal, I question the
propriety of taking judicial notice of the AAA Rules for the first time on appeal without
notice to the parties in this case, where neither party made reference to the AAA Rules either
at trial or on appeal.
Evidence Rule 201(e) provides that a party is entitled upon request to an opportunity
to be heard with respect to the propriety of taking judicial notice. It is unclear to me how this
portion of the rule is to be fulfilled where an appellate court sua sponte takes judicial notice
of matter of which neither party has formally expressed any awareness.
Nevertheless, this court interprets unambiguous contracts de novo, and I agree with
the majority’s conclusion that under the contracts at issue here, this dispute is governed by
the AAA Rules, which in turn provide a clear and unambiguous resolution for Preload’s
arguments on appeal. Even if given an opportunity to be heard on the matter, I do not believe
that either party would be able to set forth a convincing argument that the AAA Rules are not
a proper subject of judicial notice. See Robbins v. B and B Lines, Inc., 830 F.2d 648, 651
11
n.6 (7th Cir. 1987) (taking judicial notice of AAA Rules pursuant to Federal Rule of
Evidence 201); Fed. R. Evid. 201 (providing, in language nearly identical to Indiana
Evidence Rule 201, that a federal court may take judicial notice of a fact that “is not subject
to reasonable dispute because it . . . can be accurately and readily determined from sources
whose accuracy cannot reasonably be questioned”).
Finally, it would seem that any of the parties might be able to seek an opportunity to
be heard concerning the propriety of this court’s decision to take judicial notice by way of a
petition for rehearing. See Evid. R. 201(e) (providing that, “[i]n the absence of prior
notification, the request [for an opportunity to be heard] may be made after judicial notice has
been taken”); but see Strong v. Jackson, 781 N.E.2d 770, 772 (Ind. Ct. App. 2003) (a party
generally may not raise an argument for the first time in a petition for rehearing, except
“when a state court acts in an unanticipated way to deprive a party of the opportunity to make
an argument or present a valid defense based on the Federal Constitution”). However,
whether or not the judicial notice taken in this opinion is a proper ground for a petition for
rehearing, as set forth above, it is difficult for me to imagine a successful argument against
judicial notice of the AAA Rules at issue.
For all of these reasons, and in the interest of judicial economy, I concur in result in
result with my colleagues’ resolution of this appeal.
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