DocketNumber: Supreme Court Nos. S-16785-16985
Citation Numbers: 440 P.3d 210
Judges: Bolger, Carney, Maassen, Stowers, Winfree
Filed Date: 4/12/2019
Status: Precedential
Modified Date: 7/19/2022
I. INTRODUCTION
The parties entered into a construction subcontract that contained a broad dispute resolution provision. When disputes arose, the parties engaged in mediation as their subcontract required, reaching a settlement agreement by which they each "absolutely release[d] the other of and from any and all claims, demands and obligations of any kind arising from [the subcontract]." The settlement agreement, unlike the subcontract, contained no dispute resolution provision.
Two weeks after settlement the subcontractor filed suit against the contractor in superior court, seeking damages and an order setting aside the settlement agreement on grounds that the contractor had concealed facts that made it difficult for the subcontractor to obtain releases essential to the settlement. The contractor moved to dismiss, arguing that the subcontractor's claims were subject to the subcontract's dispute resolution provision. The superior court granted the contractor's motion and awarded it attorney's fees. The subcontractor appealed.
We conclude that the case should not have been dismissed because the parties, by the express language of their settlement agreement, released each other from "any and all" obligation to engage in dispute resolution as required by the subcontract. We therefore reverse the superior court's judgment and remand for further proceedings.
II. FACTS AND PROCEEDINGS
A. Facts
The parties assumed the following facts to be true for purposes of the motion to dismiss giving rise to this appeal.
In early 2016 Jet Commercial Construction, LLC (Jet), an Oklahoma corporation, entered into a contract with Kona Grill, Inc., for the construction of a restaurant in Honolulu, Hawaii. In May Jet entered into a subcontract with SMJ General Construction, Inc. (SMJ), an Alaska corporation, "to supply the materials and labor for the construction of the building and other improvements." The subcontract contained a dispute resolution provision that required the parties to first mediate any dispute and then submit it to arbitration if mediation was unsuccessful. The subcontract also included a choice-of-law and venue provision designating Oklahoma law and the courts of Cleveland County, Oklahoma for any lawsuits "pertaining to the enforcement of the provisions of this Agreement."
*212The parties had a number of disputes during construction. SMJ alleged, among other things, that after it bid on the basis of one set of building plans Jet switched them for another; that Jet failed to give SMJ the money necessary to pay its sub-subcontractors and suppliers and paid some of them directly, without SMJ's knowledge and with money Jet owed to SMJ; and that Jet constantly revised the building plans and ignored the change-order process set out in the subcontract.
The parties mediated their disputes as required by the subcontract's dispute resolution provision. On January 5, 2017, with the assistance of a professional mediator, they reached the following three-paragraph, handwritten settlement agreement:
Parties agree as follows:
(1) Each party hereby absolutely releases the other of and from any and all claims, demands and obligations of any kind arising from contract of May 2016 regarding Kona Grill, Honolulu project. SMJ will execute and deliver Release of all claims and waiver of liens. Mr. Chang will sign same individually. Counsel for Jet to prepare release.
(2) Jet will pay to SMJ the sum of $150,000.00 if SMJ will deliver to Jet within 30 days of today's date a fully executed release of all claims and lien waiver from Dong Hwan Kim individually and Hyan [sic] Yang Construction, said release & waiver to be notarized and on the form prepared by Jet's counsel.
(3) This yellow memorandum reflects the essential & material terms of the parties' agreement and will be followed by a more formal memorialization of same, to be prepared by Jet's counsel.
Tyson Chang was SMJ's president, and Han Yang Construction, owned by Don Hwan Kim, was one of SMJ's sub-subcontractors on the project. Neither Jet nor SMJ asserts that "a more formal memorialization of" the handwritten agreement, as contemplated by paragraph 3, was ever prepared.
Soon after the agreement was reached, SMJ learned of conduct by Jet, preceding the mediation, that impaired SMJ's ability to obtain the release from its sub-subcontractor, Han Yang Construction, as required by paragraph 2 of the settlement agreement. According to SMJ, Jet falsely informed a city inspector that Han Yang Construction had contracted directly with Kona Grill. SMJ alleged that Jet created a fictitious agreement to show this contractual relationship, signed the fictitious agreement on behalf of Kona Grill as the "Owner's rep" when it lacked the authority to do so, and filed the fictitious agreement with the City of Honolulu. SMJ asserts that Jet "concealed material facts from SMJ [during the mediation], namely that its fraudulent actions rendered the condition precedent to the settlement impossible for SMJ to comply with."
B. Proceedings
Two weeks after the mediation, SMJ filed a complaint in superior court. The complaint alleged three causes of action: fraud and misrepresentation, breach of the covenant of good faith and fair dealing, and negligence. It sought a ruling that the settlement agreement was void and "[a] money judgment against [Jet] in the principal amount of $782,061.48."
SMJ had unusual difficulty effecting service of process on Jet in its home state of Oklahoma. But Jet, through counsel, eventually filed a motion to dismiss pursuant to Alaska Civil Rule 12(b)(3) (improper venue) and (6) (failure to state a claim), while asserting a right to contest personal jurisdiction later. Jet argued that SMJ's claims were not properly before the court because of the subcontract's dispute resolution provision and the requirement that suits be filed in Oklahoma. In opposition, SMJ argued that the parties could no longer rely on the subcontract's dispute resolution and forum selection provisions because the subcontract was entirely superseded by the settlement agreement.
The superior court granted Jet's motion to dismiss in a perfunctory order stating only that it had considered Jet's motion "and the arguments and briefs of the parties." The court entered final judgment in Jet's favor *213and awarded it attorney's fees as the prevailing party. SMJ appealed both the order of dismissal and the attorney's fees award.
While the appeal was pending, SMJ filed a request for mediation with the American Arbitration Association (AAA). In October 2017 the AAA forwarded the mediation request to Jet and asked that the parties agree on a mediator. SMJ suggested several names to Jet and, alternatively, that the parties "re-convene telephonically with the mediator who did the first one in January." But the AAA received no response from Jet and later "put the matter on hold at SMJ's request."
SMJ then moved in superior court for relief from final judgment pursuant to Alaska Civil Rule 60(b), alleging that Jet's refusal to engage in mediation - after insisting on it as grounds for dismissing SMJ's lawsuit - constituted both newly discovered evidence and a change in circumstances that justified relief. Jet opposed the motion. It conceded that it had "not leaped at the chance to conduct another mediation with [SMJ]" but disputed that its failure to mediate constituted "new evidence" for purposes of Rule 60(b). It contended that SMJ could still demand arbitration and have the arbitrator determine whether mediation was mandatory, or, alternatively, that it could ask a judge in Oklahoma to decide whether Jet was required to mediate.
The superior court denied SMJ's Rule 60(b) motion, again without explanation, and SMJ filed a second appeal. We combined the two appeals. SMJ challenges the court's grant of Jet's motion to dismiss, its award of attorney's fees, and its denial of the Rule 60(b) motion. Because of our disposition of the first issue, we do not address the others.
III. STANDARD OF REVIEW
"We review grants of motions to dismiss under Civil Rule 12(b)(6) de novo, 'construing the complaint liberally and accepting as true all factual allegations.' "
"Whether [a] claim is arbitrable is a question of law subject to de novo review."
IV. DISCUSSION
The superior court granted Jet's motion to dismiss SMJ's complaint without explaining its reasoning; we assume the court adopted Jet's arguments for dismissal.
A. Arbitrability Is A Question For The Courts.
It is the task of the courts to decide whether the parties' two successive contracts - the subcontract and the settlement agreement - require SMJ to arbitrate its claims.
The subcontract, though requiring a specific dispute resolution procedure, does not mention arbitrability. However, the subcontract's dispute resolution provision does provide that disputes "shall be submitted to mediation ... pursuant to the Construction Industry Arbitration Rules and Mediation Procedures of the American Arbitration Association" and that the next step, arbitration, "shall be conducted pursuant to" the same AAA rules and procedures. The AAA rules allow the arbitrator to determine arbitrability.
B. The Settlement Agreement Released The Parties From Their Contractual Obligation To Arbitrate Disputes.
When parties have successive contracts addressing the same subject matter, "it is a well settled principle of law that the later contract supersedes the former contract as to inconsistent provisions."
Unlike the subcontract, the parties' settlement agreement makes no mention of dispute resolution. The first paragraph of the settlement agreement reads: "Each party hereby absolutely releases the other of and from any and all claims, demands and obligations of any kind arising from contract of May 2016 regarding Kona Grill, Honolulu project." We interpret a settlement agreement the way we would any other contract,
In Borough of Atlantic Highlands v. Eagle Enterprises, Inc. ,
The trial court held that the parties' settlement agreement did not abrogate the construction contract's arbitration clause, but the appellate court reversed.
*216The Oklahoma Supreme Court considered a similar situation in Shawnee Hospital Authority v. Dow Construction, Inc.
The language Jet and SMJ used to settle their differences was as direct and unambiguous as that in Borough of Atlantic Highlands and Shawnee Hospital Association : each party "absolutely release[d] the other of and from any and all claims, demands and obligations of any kind arising from" the subcontract. Like the New Jersey court in Borough of Atlantic Highlands , we cannot "interpret this unambiguous language to mean anything other than that the original construction contract was to be regarded as history."
The foregoing rationale also disposes of Jet's claim that the parties remain bound by the subcontract's choice-of-law and venue provisions. We note, however, that our decision today is based on the limited record presented on a motion to dismiss. We do not preclude the superior court's consideration on remand of extrinsic evidence that contradicts the plain meaning of the parties' settlement agreement, if any exists.
V. CONCLUSION
We REVERSE the judgment of the superior court and REMAND for further proceedings consistent with this opinion. The award of attorney's fees to Jet is VACATED.
Cornelison v. TIG Ins. ,
Geotek Alaska, Inc. v. Jacobs Eng'g Grp., Inc. ,
Mahan v. Mahan ,
Alaska Fur Gallery, Inc. v. Tok Hwang ,
See Alaska Wildlife Alliance v. State ,
Neither party argues that we should apply any law other than Alaska's to the questions of arbitrability and contract interpretation raised on this appeal.
AS 09.43.330(c) ; see also Classified Emps. Ass'n v. Matanuska-Susitna Borough Sch. Dist. ,
Geotek Alaska, Inc. v. Jacobs Eng'g Grp., Inc. ,
Id. at 376 (alteration in original) (quoting State v. Pub. Safety Emps. Ass'n ,
Am. Arbitration Ass'n, Construction Industry Arbitration Rules and Mediation Procedures R-9 (a) (2015), https://www.adr.org/sites/default/files/Construction_Arbitration_Rules_7May2018.pdf ("The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement.").
See Oracle Am., Inc. v. Myriad Grp. A.G. ,
Juneau Educ. Ass'n v. City & Borough of Juneau ,
Cf. Primex Int'l Corp. v. Wal-Mart Stores, Inc. ,
Gaston v. Gaston ,
Norville v. Carr-Gottstein Foods Co. ,
Id. at 408.
Id. at 408-09.
Id. at 409.
Id. at 408.
Id. at 409-10.
Id. at 410.
See Mahan v. Mahan ,
See Borough of Atl. Highlands ,