GeoTek Alaska, Inc. v. Jacobs Engineering Group, Inc.

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THE SUPREME COURT OF THE STATE OF ALASKA
GEOTEK ALASKA, INC., )
) Supreme Court No. S-15449
Appellant, )
) Superior Court No. 3AN-12-05453 CI
v. )
) OPINION
JACOBS ENGINEERING GROUP, )
INC., and JACOBS FIELD ) No. 7031 - August 14, 2015
SERVICES NORTH AMERICA, )
INC., )
)
Appellees. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Erin B. Marston, Judge.
Appearances: Michael Jungreis and Jason Hartz, Davis
Wright Tremaine LLP, Anchorage, for Appellant. Robert J.
Dickson and Christopher J. Slottee, Atkinson, Conway &
Gagnon, Anchorage, for Appellees.
Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and
Bolger, Justices.
MAASSEN, Justice.
I. INTRODUCTION
An insolvent subcontractor failed to pay its sub-subcontractor for work
performed, and the sub-subcontractor sought payment directly from the general
contractor through a demand for arbitration. The general contractor declined to
participate. The arbitrator awarded damages to the sub-subcontractor, who filed an
action to confirm the award in superior court. The sub-subcontractor also brought a
negligence claim, contending that the general contractor knew of its subcontractor’s
financial instability and negligently failed to ensure that the sub-subcontractor would be
paid. The superior court granted summary judgment to the general contractor on both
the enforceability of the arbitration award and the viability of the negligence claim. The
sub-subcontractor appeals.
We affirm, concluding that whether the general contractor effectively
exercised its contractual right to decline arbitration is an issue of arbitrability, correctly
decided by the superior court, and that the general contractor had no extra-contractual
duty in tort to guarantee its subcontractor’s payment obligations.
II. FACTS AND PROCEEDINGS
A. Facts
Jacobs Engineering Group, Inc. was awarded a contract by the United
States Air Force for environmental remediation. While preparing to bid on the project,
Jacobs Engineering Group and its subsidiary Jacobs Field Services North America, Inc.
(collectively “Jacobs”) sent out a request for proposal (RFP) for soil sampling services
at a tank farm near Nome and at the Nikolski Radio Station on Umnak Island. Included
in the RFP was a requirement that the subcontractor have bonding to cover all its
payment and performance obligations. One of the recipients of Jacobs’s RFP was
Precision Sampling, Inc., doing business as Direct Sensing, Inc. (DSI). Ultimately
Jacobs awarded the subcontract to DSI. DSI entered into a second-tier subcontract with
GeoTek Alaska, Inc., to provide the required Ultra-Violet Optical Screening Tool
(UVOST) equipment.
DSI’s parent corporation in Canada was undergoing financial difficulties
at the time of the bidding process; the parties dispute what Jacobs knew or should have
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known about DSI’s situation. They also dispute the extent to which Jacobs’s award of
the subcontract to DSI was because of Jacobs’s desire to work with GeoTek. It is
undisputed, however, that DSI was unable to obtain the payment and performance bonds
required by the RFP and asked Jacobs to waive the requirement. Jacobs agreed to move
forward with the DSI subcontract, but it developed a risk management plan requiring that
15 percent of Jacobs’s payment to DSI be retained to assure the payment of DSI’s
second-tier subcontractors and that those second-tier subcontractors submit releases of
claims, certifying they had been paid.
Shortly before GeoTek deployed to the Nome project location, it learned
that Jacobs had waived its requirement that DSI be bonded. GeoTek nonetheless signed
its second-tier subcontract with DSI a few days later. According to its vice president’s
affidavit, “[a]t that point GeoTek was committed, and had no other work available on
short notice; and additionally was reassured by Jacobs’s policy of ensuring that its lower
tier subcontractors are paid.”
DSI and GeoTek satisfactorily completed the Nome project. Jacobs paid
DSI and DSI signed a release in September 2009, certifying that it had paid for all
services furnished in connection with the contract. Jacobs did not retain any amounts or
require a release from GeoTek, as contemplated by the risk management plan. In
September 2009, DSI and GeoTek attempted deployment to Nikolski but were delayed
in Dutch Harbor because of weather. The project was eventually put off until 2010 but,
for reasons not relevant to this appeal, DSI and GeoTek never reached Nikolski and
never did any work there.
DSI did not pay GeoTek for its work on the Nome project or for its 2009
mobilization for Nikolski.
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B. Proceedings
Jacobs’s contract with DSI included an arbitration provision that is central
to this appeal. The provision’s language will be dissected later in this opinion, but in
summary it gives Jacobs the unilateral right to accept or reject arbitration once a demand
has been made. Jacobs did not have a contract with GeoTek, but Jacobs’s contract with
DSI included a provision that required DSI to “ ‘flow down’ all terms and conditions of
the subcontract into any sub-subcontract.” The Jacobs-DSI contract also had a provision
on assignment, which provides:
Neither this Subcontract nor any interest therein including
any claim thereunder shall be assigned or transferred by the
Subcontractor to another entity, except as expressly
authorized in writing by the Subcontract Manager. The
Company reserves the exclusive right to assign this
Subcontract and all rights and interest therein.
In a demand for arbitration dated April 28, 2010, GeoTek asserted a claim
against Jacobs for the amounts DSI had failed to pay it.1 The demand was apparently
forwarded to Jacobs by the American Arbitration Association (AAA). Jacobs responded
to GeoTek’s demand for arbitration on May 13, asserting in a letter to the AAA that
“Jacobs does not have a contract with Geo Tek and therefore, Geo Tek has no bona fide
contract claim against Jacobs and it would be inappropriate for Jacobs to engage
Geo Tek in an arbitration proceeding.” Jacobs stated that it “rejects Geo Tek’s demand
for arbitration and recommends that Geo Tek pursue its contractual rights and claims
against its customer, [DSI].”
GeoTek proceeded alone with arbitration under the aegis of the AAA. On
January 20, 2011, DSI and GeoTek executed an agreement in which they asserted that
1
GeoTek’s arbitration demand is not in the record, but neither party disputes
that it was made; its date is referenced in Jacobs’s response.
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“[n]either DSI [nor GeoTek has] been paid in full by Jacobs for the work done on the
West Nome or Nicolski [sic] Projects” and DSI assigned its claims against Jacobs to
GeoTek, retaining a right to 30 percent of any amounts collected. On GeoTek’s motion,
the arbitrator then ruled on the arbitrability of these claims, deciding that both GeoTek’s
original claims against Jacobs and DSI’s assigned claims were arbitrable. The arbitrator
allowed GeoTek to amend its demand for arbitration to include both sets of claims and
gave Jacobs 14 days to respond to the amended demand. The record shows no further
written response from Jacobs.
The arbitrator held an evidentiary hearing in August 2011, which was
attended only by representatives of GeoTek and DSI; the arbitrator’s findings of fact and
conclusions of law note that Jacobs was again contacted but declined to participate. The
arbitrator awarded GeoTek $257,687.62 “on behalf of work done by GeoTek Alaska and
[DSI],” with interest continuing to accrue at 10.5 percent per annum.
GeoTek filed a complaint in superior court seeking to confirm the
arbitration award and asserting several other theories of recovery against Jacobs,
including breach of contract, unjust enrichment, quantum meruit, and breach of the
covenant of good faith and fair dealing. Jacobs answered and moved for summary
judgment, arguing that it had no contract with GeoTek and, if it did, it had effectively
exercised its contractual right to refuse to arbitrate. GeoTek filed a cross-motion to
confirm the arbitration award. The superior court granted Jacobs’s summary judgment
motion, concluding that Jacobs “timely rejected GeoTek’s demand to arbitrate . . . [and
that] Jacobs was not legally obligated to participate in the arbitration.”
While the court’s decision of these motions was pending, GeoTek amended
its complaint to assert a negligence claim. Jacobs moved for summary judgment on that
claim as well, and the superior court granted summary judgment on the ground that
Jacobs did not owe GeoTek a duty of care in tort to ensure it was paid by DSI.
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On appeal GeoTek argues that the superior court erred in granting Jacobs’s
motions for summary judgment. GeoTek argues that (1) it had an agreement to arbitrate
with Jacobs, and it was up to the arbitrator to decide whether Jacobs had exercised its
right to reject arbitration; and (2) Jacobs had an actionable duty in tort to protect
GeoTek’s financial interests.
III. STANDARDS OF REVIEW
“A superior court’s decision reviewing an arbitration award is subject to
de novo review.”2 “Whether [a] claim is arbitrable is a question of law subject to de
novo review.”3 The existence and extent of a duty of care also presents a question of
law, which we review de novo.4
IV. DISCUSSION
A. The Superior Court Did Not Err In Granting Summary Judgment To
Jacobs On The Arbitrability Issue.
The superior court correctly decided that whether Jacobs had agreed to
arbitrate this dispute was a question for the court rather than the arbitrator. The superior
court then relied on the specific language of the arbitration provision at issue to conclude,
again correctly, that Jacobs did not agree to arbitrate this dispute and that the award
therefore could not be confirmed.
2
Johnson v. Aleut Corp., 307 P.3d 942, 947 (Alaska 2013).
3
Lexington Mktg. Grp., Inc. v. Goldbelt Eagle, LLC, 157 P.3d 470, 472
(Alaska 2007).
4
Hurn v. Greenway, 293 P.3d 480, 483 (Alaska 2013).
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For purposes of argument we assume, as the superior court apparently did,5
that the arbitration provision in the Jacobs’s contract with DSI “flowed down” and by
flowing down governed the relationship between Jacobs and GeoTek as well.
1. Whether Jacobs agreed to arbitrate the dispute was a question
for the court, not the arbitrator.
The Federal Arbitration Act6 and Alaska’s Uniform and Revised Uniform
Arbitration Acts7 all reflect “a strong policy in favor of the arbitration of disputes.”8 Like
federal law, Alaska’s statutes provide that “[a]n arbitrator shall decide whether a
condition precedent to arbitrability has been fulfilled.”9 Alaska’s statutes also provide,
however, that “[t]he court shall decide whether an agreement to arbitrate exists or a
5
At oral argument on Jacobs’s first motion for summary judgment, the
superior court asked counsel for Jacobs whether it was “Jacobs’s position that even if
there was a flow-down, a forcible flow-down provision, . . . that it doesn’t really matter,
because within 30 days they have the sole right to accept or reject[,] [a]nd, in this case,
they unequivocally rejected the arbitration.” The court later asked counsel for GeoTek
whether it was his “position that even if there was an assignment or a flow down, that
doesn’t change the terms of the arbitration clause . . . that Jacobs would still have the
right to arbitrate or not, at their discretion.” Both counsel agreed with the court’s
characterizations of their clients’ positions.
6
9 U.S.C. § 1 et seq. (2012).
7
AS 09.43.010 – .180 (Uniform Arbitration Act); AS 09.43.300 – .595
(Revised Uniform Arbitration Act).
8
Gibson v. Nye Frontier Ford, Inc., 205 P.3d 1091, 1096 (Alaska 2009).
9
AS 09.43.330(d); see BG Grp., PLC v. Republic of Argentina, 134 S. Ct.
1198, 1207 (2014) (citations omitted) (explaining that “courts presume that the parties
intend arbitrators, not courts, to decide disputes about the meaning and application of
particular procedural preconditions for the use of arbitration”).
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controversy is subject to an agreement to arbitrate,”10 mirroring federal law “that courts
are the proper forum to determine whether a dispute is arbitrable.”11 “One reason for this
division of authority is [that] [b]ecause arbitrators have such broad discretion, it is often
problematic for them to decide their own jurisdiction, for if they are wrong, there may
be essentially no review” because of the “extreme deference [that a court will give] to
the arbitrator.”12
The first question we must answer in this case, therefore, is whether
Jacobs’s consent was necessary before a particular dispute could be “subject to [the]
agreement to arbitrate” — in which case the issue is one of arbitrability under
AS 09.43.330(c), and the question of consent was for the superior court to decide; or, on
the other hand, whether Jacobs’s consent was “a condition precedent to arbitrability” —
in which case the question of consent was up to the arbitrator under AS 09.43.330(d).
The United States Supreme Court recently described this dichotomy in terms of
“presumptions” that help courts determine parties’ intent “if the contract is silent on the
matter of who primarily is to decide ‘threshold’ questions about arbitration.”13
According to the Court, parties are presumed to intend that courts will decide
“arbitrability” issues “such as ‘whether the parties are bound by a given arbitration
clause,’ or ‘whether an arbitration clause in a concededly binding contract applies to a
10
AS 09.43.330(c).
11
Lexington Mktg. Grp., Inc. v. Goldbelt Eagle, LLC, 157 P.3d 470, 477
(Alaska 2007).
12
Classified Emps. Ass’n v. Matanuska-Susitna Borough Sch. Dist., 204 P.3d
347, 353 (Alaska 2009) (quoting Fairbanks Fire Fighters Ass’n, Local 1324 v. City of
Fairbanks, 48 P.3d 1165, 1169 (Alaska 2002)) (internal quotation marks omitted).
13
BG Grp., PLC, 134 S. Ct. at 1206.
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particular type of controversy.’ ”14 On the other hand, parties are presumed to intend that
arbitrators will decide disputes about “particular procedural preconditions for the use of
arbitration,” which may include whether “prerequisites such as time limits, notice, laches,
estoppel, and other conditions precedent to an obligation to arbitrate” have been
satisfied.15
We recognize that some conditions precedent can readily be recharacterized
as questions of arbitrability; a party could argue, for example, that it has agreed to
arbitrate only those disputes that are submitted to arbitration by a certain time, or on a
certain form, or at a certain address — raising issues of “arbitrability” that clearly hinge
on the determination of what are actually procedural preconditions. For a cogent
explanation of how to differentiate the two, Jacobs directs us to Rockland County v.
Primiano Construction Co.16 In that case the Court of Appeals of New York,
recognizing that “[w]hether the particular requirement falls within the jurisdiction of the
courts or of the arbitrators” could be reduced to a game of semantics, explained that the
real difference “depends on [the requirement’s] substance and the function it is properly
perceived as playing — whether it is in essence a prerequisite to entry into the arbitration
process or a procedural prescription for the management of that process.”17 The court
noted that the parties, by contract, “may have erected a prerequisite to the submission of
any dispute to arbitration, in effect a precondition to access to the arbitral forum,” and
14
Id. (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84
(2002)).
15
Id. at 1206-07 (internal footnotes, citations, and internal quotation marks
omitted).
16
409 N.E.2d 951 (N.Y. 1980).
17
Id. at 954.
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that “[i]n such event the reluctant party may be forced to arbitration only if the court
determines that this portion of the agreement has been complied with.”18 It cited another
case with parallels to this one: Opan Realty Corp. v. Pedrone, in which a partnership
agreement stipulated that any dispute would be decided by the American Arbitration
Association “but that a dispute shall not be determined to exist thereunder until the
matter is first submitted for determination to the partnership,” which could resolve the
matter by an 80 percent vote.19 The court in Opan Realty held that whether this condition
had been fulfilled was “a question at least initially for the court, not the arbitrator.”20
And the court in Rockland County concluded: “Beyond that it is to be remembered that
inasmuch as the entire arbitration process is a creature of contract, the parties by explicit
provision of their agreement have the ability to place any particular requirement in one
category or the other.”21
The United States Supreme Court undertook a similar analysis in Howsam
v. Dean Witter Reynolds, Inc., in which it categorized all threshold questions as
“gateway” questions that can be sorted into questions of arbitrability decided by the court
and procedural questions decided by the arbitrator.22 Like the court in Rockland County,
the Supreme Court recognized that the semantic difficulty in drawing the boundary
between the two types of gateway questions is best resolved by determining whether the
18
Id. (footnote omitted).
19
335 N.E.2d 854, 855 (N.Y. 1975).
20
Id.
21
409 N.E.2d at 955. Notably, the New York Court of Appeals used an
earlier formulation of the relevant dichotomy, in which questions of arbitrability, rather
than procedural preconditions, were termed “conditions precedent.” Id. at 954-55.
22
537 U.S. 79, 83-85 (2002).
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particular question at issue is of a type that the parties would likely expect to be decided
by an arbitrator or a judge:
The Court has found the phrase [“question of arbitrability”]
applicable in the kind of narrow circumstance where
contracting parties would likely have expected a court to have
decided the gateway matter, where they are not likely to have
thought that they had agreed that an arbitrator would do so,
and, consequently, where reference of the gateway dispute to
the court avoids the risk of forcing parties to arbitrate a
matter that they may well not have agreed to arbitrate.
....
At the same time the Court has found the phrase
“question of arbitrability” not applicable in other kinds of
general circumstance where the parties would likely expect
that an arbitrator would decide the gateway matter. Thus
“ ‘procedural’ questions which grow out of the dispute and
bear on its final disposition” are presumptively not for the
judge, but for an arbitrator, to decide.[23]
Within this general framework we seek to determine what the parties to the
Jacobs-DSI contract could reasonably have expected from the specific language they
used to describe the arbitration option. We resolve ambiguities “in favor of arbitrability
where such construction is not obviously contrary to the parties’ intent.”24 But
“[b]ecause arbitration is a creature of contract, parties can only be compelled to arbitrate
a matter when they have agreed to do so.”25 “Accordingly, if a dispute is not, under a
plausible interpretation, covered under the arbitration clause of a[n] . . . agreement, it
23
Id. at 83-84 (emphasis in original) (internal footnotes and citations omitted).
24
Lexington Mktg. Grp., Inc. v. Goldbelt Eagle, LLC, 157 P.3d 470, 476
(Alaska 2007) (quoting Univ. of Alaska v. Modern Constr., Inc., 522 P.2d 1132, 1138
(Alaska 1974)).
25
Id. at 477.
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should not be arbitrated because ‘a party cannot be required to submit to arbitration any
dispute which he had not agreed so to submit.’ ”26 We are therefore required to vacate
an arbitration award if we find that “there was not an agreement to arbitrate.”27
The “Disputes on Claims” section of the Jacobs-DSI contract begins with
the subcontractor’s agreement “to first submit any claim or dispute arising under, related
to or in connection with the Work, this Subcontract, or the Project, to Company in
writing prior to initiating any legal or other dispute procedure.” A few paragraphs later
the arbitration provision reads, in relevant part:
All claims, disputes and other matters in question
between Subcontractor and Company arising out of or related
to the Work, this Subcontract or the Project . . . shall, at the
sole option of the Company, be decided by arbitration. In the
event the Company elects to have the matter resolved through
arbitration, then at Company’s direction, Subcontractor shall
submit the matter to the American Arbitration Association for
processing under the appropriate Industry Rules of the
American Arbitration Association then in effect. If a claim
is made, or a demand for arbitration is filed, by
Subcontractor, Company will advise Subcontractor within
thirty 30 days [sic] after the receipt of such a demand for
arbitration . . . , if Company exercises the option to arbitrate
or rejects arbitration; such election, once made, shall be
binding.[28]
We conclude that this provision is unambiguous. The only claims Jacobs has agreed to
arbitrate are those it elects, on a case-by-case basis, to have decided by arbitration.
26
Classified Emps. Ass’n v. Matanuska-Susitna Borough Sch. Dist., 204 P.3d
347, 353 (Alaska 2009) (quoting AT & T Techs., Inc. v. Commc’ns Workers of Am., 475
U.S. 643, 648 (1986)).
27
AS 09.43.500(a)(5).
28
Emphasis added.
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Arbitration of any claim will occur at Jacobs’s “sole option,” which Jacobs will exercise
within 30 days of receiving a demand. Jacobs’s election, once made, is binding. And
it is only “[i]n the event [that] [Jacobs] elects to have the matter resolved through
arbitration” that the matter will “then” be referred to the American Arbitration
Association for processing under the AAA rules.
Jacobs’s consent to arbitrate any particular dispute is not a mere procedural
precondition to arbitrability, “such as time limits, notice, laches, estoppel, and other
conditions precedent to an obligation to arbitrate.”29 Jacobs agreed to arbitrate a limited
category of disputes: those it identified, on a case-by-case basis, as disputes it was
willing to submit to arbitration. The issue of Jacobs’s consent therefore presented a
question of arbitrability — “whether [the] controversy is subject to [the] agreement to
arbitrate” — and was properly for the court to decide.30
2. The superior court correctly held that Jacobs did not agree to
arbitrate GeoTek’s claim.
GeoTek apparently demanded arbitration on April 28, 2010.31 Although
it is not apparent from the record when Jacobs received GeoTek’s demand, Jacobs
responded on May 13, 2010, well within 30 days of the demand’s date. Jacobs’s
response was unequivocal: “Jacobs rejects Geo Tek’s demand for arbitration and
recommends that Geo Tek pursue it[s] contractual rights and claims against its customer,
[DSI].” Jacobs’s response could not reasonably have been misunderstood. Its clear and
29
See BG Grp., PLC v. Republic of Argentina, 134 S. Ct. 1198, 1207 (2014)
(internal quotation marks and citation omitted).
30
AS 09.43.330(c).
31
As noted above, Jacobs’s response to the American Arbitration Association
referenced the Association’s May 5, 2010 letter and GeoTek’s April 28, 2010 demand.
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unequivocal decision not to arbitrate was, according to the contract, binding on the
parties.
3. GeoTek’s arguments are unpersuasive.
GeoTek contends that the requirement of Jacobs’s consent to arbitration is
not a determinant of arbitrability but rather a condition precedent to arbitration, like the
others — time limits, notice, laches, and estoppel — that courts have left for the
arbitrator’s determination. GeoTek also asserts that the superior court “failed to engage
in the limited arbitrability inquiry allowed under Alaska law” because the court’s
decision was not limited to whether the parties had an arbitration agreement or whether
it covered the parties’ dispute. GeoTek argues that “Jacobs’s letter [rejecting arbitration]
did not absolve it of any obligation to participate in the arbitration” because it was
“necessary for Jacobs to participate in the arbitration to the extent it objected to the
arbitrator’s exercise of jurisdiction.” Finally, GeoTek argues that even if Jacobs’s
rejection presented an issue of arbitrability, the superior court should not have addressed
it because the parties had explicitly delegated arbitrability determinations to the arbitrator
through their incorporation of the AAA Industry Rules.
As explained above, discerning the parties’ intent is our paramount concern
when we are deciding whether consent to arbitration presents a question of arbitrability
or a procedural condition precedent.32 We have repeatedly recognized that “[b]ecause
arbitration is a matter of contract, parties can only be compelled to arbitrate a matter
where they have agreed to do so.”33 Thus, “if there are terms in a contract that either
exclude arbitration or indicate that an issue should not be subject to arbitration, then
32
Lexington Mktg. Grp., Inc. v. Goldbelt Eagle, LLC, 157 P.3d 470, 478
(Alaska 2007) (providing for arbitration when it “is consistent with the parties’ intent”).
33
Id. at 477.
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requiring that the matter be sent to arbitration would be inappropriate.”34 In this case we
are convinced that the plain language of the arbitration provision demonstrates the
parties’ intent that Jacobs decide unilaterally whether any given dispute will be
arbitrated; that is, a dispute’s arbitrability is determined by whether Jacobs agrees to
arbitrate it. We respect the parties’ choice of language. To adopt GeoTek’s position
instead would be to hold that a party that has bargained for the contractual right to avoid
arbitration at its sole option must in fact arbitrate in order to vindicate that right — with
no prospect of de novo judicial review.
GeoTek also argues that the parties’ arbitration provision expressly
provides that disputes shall be resolved according to “the appropriate Industry Rules of
the American Arbitration Association” and that these rules give the arbitrator “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.”35 We need not decide what
the AAA Industry Rules would require in this case, because we disagree with GeoTek’s
assertion that they govern the procedure the parties have adopted for the initiation of
arbitration.
The presumption that arbitrability is a question for the courts can only be
rebutted if the parties have “clearly and unmistakably provide[d] otherwise.”36 The
arbitration provision at issue here plainly states that a matter shall be “submitted to the
American Arbitration Association for processing under the appropriate Industry Rules
34
Classified Emps. Ass’n v. Matanuska-Susitna Borough Sch. Dist., 204 P.3d
347, 353 (Alaska 2009).
35
See Am. Arbitration Ass’n, Comm. Arbitration Rule 7(a) (2013).
36
State v. Pub. Safety Emps. Ass’n, 798 P.2d 1281, 1285 (Alaska 1990)
(quoting AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649 (1986)).
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of the American Arbitration Association then in effect” only “[i]n the event [Jacobs]
elects to have the matter resolved through arbitration;” if Jacobs so elects, “then” the
matter will be submitted to the AAA “at [Jacobs’s] direction.”37 Under the contract’s
explicit language, the AAA rules come into play only after Jacobs has agreed to submit
a claim to arbitration — which in this case it refused to do.38 The parties did not “clearly
and unmistakably” provide that the arbitrator determine questions of arbitrability, but
rather the opposite.39
B. The Superior Court Did Not Err In Granting Summary Judgment To
Jacobs On GeoTek’s Negligence Claims.
GeoTek also appeals from the superior court’s grant of summary judgment
to Jacobs on GeoTek’s negligence claims. GeoTek alleged in its amended complaint that
Jacobs was responsible for DSI’s payments to GeoTek because of Jacobs’s negligent
failure (1) to require DSI to post a performance bond to ensure the payment of its
subcontractors, as required by Jacobs’s form contract; (2) to follow the provisions of its
proposed risk management plan regarding a 15 percent retainage and signed releases
from DSI’s second-tier subcontractors; and (3) to inform GeoTek that it had not taken
these steps. The superior court found no support in the contract, in statutes, or in the
37
Emphasis added.
38
See Opan Realty Corp. v. Pedrone, 335 N.E.2d 854, 855 (N.Y. 1975)
(holding that where partnership agreement stated that any dispute would be decided by
the American Arbitration Association but must first be submitted to the partnership for
consideration, whether this precondition had been satisfied was a matter for the court).
39
We necessarily reject GeoTek’s additional argument that the claims
assigned to it by DSI were separately arbitrable. Arbitrability depended on Jacobs’s
election to arbitrate, which it never made with regard to any of the claims at issue,
whether direct or assigned.
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common law for the imposition of a negligence duty on Jacobs. We conclude that the
superior court did not err.
1. The superior court correctly held that Jacobs did not have an
extra-contractual duty to protect GeoTek against the risk of
nonpayment by DSI.
To determine whether a defendant owes a plaintiff a duty of reasonable
care, “we first determine whether a duty is imposed by statute, regulation, contract,
undertaking, the parties’ preexisting relationship, or existing case law.”40 “If these
sources do not resolve the issue, we apply the multi-factor approach discussed in
D.S.W. . . . to determine whether an actionable duty exists.”41 The so-called “D.S.W.
factors” are seven public policy considerations we use to determine whether we should
recognize a negligence duty not otherwise defined by law.42
40
McGrew v. State, Dep’t of Health & Soc. Servs., Div. of Family & Youth
Servs., 106 P.3d 319, 322 (Alaska 2005) (footnote omitted).
41
Id. (citing D.S.W. v. Fairbanks N. Star Borough Sch. Dist., 628 P.2d 554,
555 (Alaska 1981)).
42
The D.S.W. factors are:
The foreseeability of harm to the plaintiff, the degree of
certainty that the plaintiff suffered injury, the closeness of the
connection between the defendant’s conduct and the injury
suffered, the moral blame attached to the defendant’s
conduct, the policy of preventing future harm, the extent of
the burden to the defendant and consequences to the
community of imposing a duty to exercise care with resulting
liability for breach, and the availability, cost and prevalence
of insurance for the risk involved.
D.S.W., 628 P.2d at 555 (quoting Peter W. v. San Francisco Unified Sch. Dist., 131 Cal.
Rptr. 854, 859-60 (Cal. App. 1976)).
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For its imposition of a duty in this case, GeoTek relies on Mattingly v.
Sheldon Jackson College.43 In Mattingly we held that “a defendant owes a duty of care
to take reasonable measures to avoid the risk of causing economic damages, aside from
physical injury [or property damage], to particular plaintiffs or plaintiffs comprising an
identifiable class [of persons who] defendant knows or has reason to know are likely to
suffer such damages from its conduct.”44 GeoTek contends that “[i]n accord with
Mattingly, . . . Jacobs’s awareness of GeoTek combined with its knowledge that GeoTek
could suffer [the] economic harm of not being paid by DSI is what gave rise to a duty.”
But GeoTek misinterprets our holding in Mattingly. Mattingly did not
create a new duty in tort, let alone one so broad as to provide a negligence cause of
action for any foreseeable economic harm caused by another’s lack of due care.
Mattingly simply expanded liability in tort to include purely economic losses; this
marked a significant departure from the long-standing “virtually per se rule barring
recovery for economic loss unless the negligent conduct also caused physical harm.”45
After Mattingly we have never held that foreseeable economic harm to an
identifiable plaintiff is all that is required to establish a duty of care.46 For example, in
Mesiar v. Heckman we considered whether the Alaska Department of Fish and Game
43
743 P.2d 356 (Alaska 1987).
44
Id. at 360 (quoting People Express Airlines, Inc. v. Consol. Rail Corp., 495
A.2d 107, 116 (N.J. 1985)) (first alteration in Mattingly; second alteration added).
45
Id. at 359 (quoting People Express, 495 A.2d at 109).
46
A federal court recognized this in U.S. ex rel. N. Star Terminal & Stevedore
Co. v. Nugget Constr., Inc., 445 F. Supp. 2d 1063, 1076 n.42 (D. Alaska 2006)
(“Mattingly . . . stands for the proposition that a party that is only economically injured
can nonetheless sue for negligence, so long as a duty exists. It defines the parameters of
an existing duty and does not, as Plaintiffs imply, impose a new duty where there
otherwise would be none.”) (emphasis added).
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could be liable on claims it had negligently miscounted a salmon run, thereby causing
unnecessary restrictions on certain Yukon River fisheries and economic harm to the
plaintiffs.47 To determine whether “an actionable duty of care exist[ed]” we turned to the
D.S.W. factors.48 In our discussion of the first D.S.W. factor — the foreseeability of
harm — we cited Mattingly for the proposition that “for purely economic harm, the
identifiable class of plaintiffs must be particularly foreseeable in number, type, and
economic expectations.”49 We agreed with the plaintiffs that the Department’s “closure
decisions predictably and specifically harmed users [including the plaintiffs].”50 But
noting that any fisheries-management action that harms one user group may favor others,
we concluded that “the foreseeability of harm to [the plaintiffs] is not a dispositive
factor” in determining the existence of a tort duty and went on to weigh the remaining
D.S.W. factors.51 We ultimately concluded that the Department owed no actionable duty
to the plaintiffs — a conclusion we would not have reached if all that is required under
Mattingly for a duty to exist is the foreseeability of economic harm to an identifiable
plaintiff.52
47
964 P.2d 445, 448-49 (Alaska 1998).
48
Id. at 450 (citing D.S.W. v. Fairbanks N. Star Borough Sch. Dist., 628 P.2d
554, 555 (Alaska 1981)).
49
Id.
50
Id.
51
Id.
52
Id. at 452; see also Lynden Inc. v. Walker, 30 P.3d 609, 614 (Alaska 2001)
(summarizing Mesiar and noting that in that case, “[d]espite the foreseeability of
economic injury to fishermen if data was improperly collected, we found that [other
D.S.W.] factors argued against imposing a duty”).
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We followed the same course in Stephens v. State, Department of Revenue,
decided just a few months after Mattingly.53 A taxpayer sued the State, alleging that the
Department of Revenue had negligently and maliciously attempted to collect on a
judgment for unpaid taxes after the debt had been discharged in bankruptcy.54 To
determine “whether the defendant owed the plaintiff a duty of care under the
circumstances,” we reviewed the D.S.W. factors.55 We observed initially that “[i]nnocent
defendants or those not liable to a plaintiff will foreseeably suffer harm as a direct result
of a negligently brought prosecution or lawsuit,” but again the foreseeability of economic
harm to an identifiable plaintiff was not sufficient to establish a duty: we analyzed the
remaining public policy considerations from D.S.W. and concluded that no duty existed.56
Notably, the New Jersey case we followed in Mattingly, People Express
Airlines v. Consolidated Rail Corp.,57 recognized the limits of looking to foreseeability
alone to determine whether a duty in tort exists. Reflecting our own reliance on public
policy concerns as identified in D.S.W., the New Jersey Supreme Court in People
Express observed that courts “will be required to draw upon notions of fairness, common
sense and morality to fix the line limiting liability as a matter of public policy, rather than
an uncritical application of particular foreseeability.”58 New Jersey courts since People
53
746 P.2d 908 (Alaska 1987).
54
Id. at 909.
55
Id. at 910.
56
Id. at 911.
57
495 A.2d 107 (N.J. 1985).
58
Id. at 116.
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Express have held that foreseeability alone is insufficient to show the existence of a duty
in a negligence case claiming economic harm.59
In sum, while we have labeled foreseeability “the single most important
criterion for imposing a duty of care,”60 it is clear that Alaska’s courts must still consider
the full panoply of D.S.W. factors when deciding whether an actionable duty of care
exists. We reject GeoTek’s argument that, under Mattingly, Jacobs’s knowledge of
DSI’s financial situation and its knowledge that GeoTek would be harmed if DSI did not
pay its subcontractors would be enough, without more, to establish a duty of care
actionable in tort.61
59
See, e.g., Carter Lincoln-Mercury, Inc., Leasing Div. v. EMAR Grp., Inc.,
638 A.2d 1288, 1294 (N.J. 1994) (“Ability to foresee injury to a potential plaintiff does
not in itself establish the existence of a duty . . . . Once the foreseeability of an injured
party is established, we must decide whether considerations of fairness and policy
warrant the imposition of a duty.” (citations omitted)).
60
R.E. v. State, 878 P.2d 1341, 1346 (Alaska 1994); see also State v.
Sandsness, 72 P.3d 299, 305-06 (Alaska 2003) (“While the most important single D.S.W.
factor is foreseeability,” it is not dispositive.).
61
GeoTek also contends that, independent of Mattingly, Jacobs’s
development of a risk management plan was a voluntary undertaking that extended its
liability beyond what was otherwise required by law, citing Guerrero v. Alaska Hous.
Fin. Corp., 6 P.3d 250, 258 (Alaska 2000). GeoTek does not develop this argument
further. In Guerrero we reviewed the dismissal of a complaint under the lenient
standards of Alaska Civil Rule 12(b)(6) and held that the allegations of the complaint did
not necessarily rule out the possibility that the defendant landlord had voluntarily
expanded the scope of its duty of care. But we noted that “our ruling on the impropriety
of a dismissal under Rule 12(b)(6) does not necessarily preclude the superior court from
deciding disputed issues of duty on summary judgment,” id. at 258 n.33, as happened
in this case.
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2. GeoTek does not identify other D.S.W. factors that could
support the recognition of a duty in this case.
“In the absence of any other source of a duty of care,” we weigh the seven
D.S.W. factors to determine whether a common law duty of care exists.62 Hinging its
argument on foreseeability alone under Mattingly, GeoTek does not address the other
D.S.W. factors. The superior court did not address them either, finding that the question
of duty was controlled by our decision in Municipality of Anchorage v. Tatco, Inc.63 The
plaintiffs in Tatco had supplied materials to the contractor on a municipal landfill
project.64 When the contractor failed to pay, the suppliers sued the Municipality for its
failure to require the contractor to post a payment bond or to certify, before being paid,
that it had paid all its laborers and suppliers.65 We held that the Municipality was entitled
to summary judgment because a payment bond for the benefit of subcontractors was not
required either by statute66 or by the contract between the Municipality and the
contractor.67 We do not consider Tatco controlling in this case, however, as the suppliers
62
See Parnell v. Peak Oilfield Serv. Co., 174 P.3d 757, 767 (Alaska 2007)
(quoting Bolieu v. Sisters of Providence in Wa., 953 P.2d 1233, 1235 (Alaska 1998))
(internal quotation marks omitted).
63
774 P.2d 207 (Alaska 1989).
64
Id. at 208.
65
Id.
66
We determined that the contract at issue was not covered by the “Little
Miller Act,” AS 36.25.010 – .025, and specifically its requirement that public entities
require public-works contractors to post bonds for the payment of laborers and suppliers,
AS 36.25.010(a). Id. at 211.
67
Id. at 210-12.
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in Tatco apparently did not ask the court to decide whether the Municipality had
breached a duty in tort independent of statute and contract.
Because GeoTek does not analyze the D.S.W. factors in its briefing before
us, we need not decide whether they require us to recognize an actionable duty in tort.68
We do note, however, that most factors militate against it. First, as contrasted to
negligence creating a risk of death or physical injury, “we have ascribed little
blameworthiness to ordinary negligence that merely causes economic . . . harm.”69 This
is particularly true when parties are in a position to have contracted around the risk;
GeoTek’s injury would not have occurred absent its own decision to enter into a contract
with DSI, knowing, as it did, that DSI had failed to secure bonding. The policy of
preventing future harm also does not require recognition of a novel duty in tort, as other
contracting parties have the ability to protect themselves either by refusing to enter into
relationships they consider financially fraught or by negotiating for more protective
provisions in their contracts before signing them.70 Imposing a duty in cases like this one
would subject contractors to the added burden of protecting the purely economic interests
of parties with whom they have no privity;71 it would also enhance their risk of having
68
See Glover v. Ranney, 314 P.3d 535, 545 (Alaska 2013) (“[W]here a point
is given only a cursory statement in the argument portion of a brief, the point will not be
considered on appeal.”) (internal quotation marks omitted).
69
See Mesiar v. Heckman, 964 P.2d 445, 451 (Alaska 1998).
70
See Alaska Pac. Assurance Co. v. Collins, 794 P.2d 936, 946 (Alaska 1990)
(noting that “[p]romises set forth in a contract must be enforced by an action on that
contract”).
71
See Imperial Mfg. Ice Cold Coolers, Inc. v. Shannon, 101 P.3d 627, 630
(Alaska 2004) (explaining that the Little Miller Act is based on the premise that the
government cannot “be charged by those with whom the government has no contractual
(continued...)
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to pay twice for the same labor or materials.72 And finally, GeoTek does not provide
public-policy support from other jurisdictions; it does not cite any cases in which courts
imposed an extra-contractual duty on contractors to answer for the debts of their
subcontractors in circumstances like those presented here.
V. CONCLUSION
The superior court’s grants of summary judgment are AFFIRMED.73
71
(...continued)
relationship”).
72
See id. (holding that the Little Miller Act does not provide a private
negligence cause of action against a government entity for its failure to require a payment
bond in part because “if the legislature had intended to impose government liability —
in effect . . . to require public entities ‘to pay twice for a public project’ — this intention
would have been expressed because it is a significant variation from the existing norm”).
73
Because we affirm the superior court’s judgment, we necessarily reject
GeoTek’s argument that it should be considered the prevailing party for purposes of an
attorney’s fees award.
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