United States Court of Appeals
For the First Circuit
No. 02-1955
HIM PORTLAND, LLC,
Plaintiff, Appellant,
v.
DEVITO BUILDERS, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge]
Before
Torruella, Circuit Judge,
Cyr and Stahl, Senior Circuit Judges.
Philip P. Mancini, with whom Paul M. Koziell and Drummond &
Drummond, LLP were on brief, for appellant.
Louis B. Butterfield, with whom Olafsen & Butterfield was on
brief, for appellee.
January 17, 2003
TORRUELLA, Circuit Judge. This case requires us to
decide whether a party to an arbitration agreement that is subject
to conditions precedent can, without satisfying those conditions,
compel arbitration under the Federal Arbitration Act. ("FAA"). HIM
Portland ("HIM") moved the district court, pursuant to an
arbitration agreement, to compel DeVito Builders ("DeVito") to
arbitrate a contract dispute between them. DeVito contends that
their agreement provided that a request for mediation was a
condition precedent to arbitration. Because the parties
intentionally conditioned arbitration upon either party's request
for mediation, we conclude that HIM Portland's failure to request
mediation precludes it from compelling arbitration under the FAA.
Therefore we affirm the district court's Order denying HIM's motion
to compel arbitration and stay matters pending the completion of
arbitration.
I. Background
HIM contracted with DeVito for the renovation of a Suisse
Chalet motel in Portland, Maine. On April 3, 2002, HIM filed a
complaint against DeVito in the District Court for the District of
Maine seeking to recover damages under claims for breach of
contract, slander of title and fraudulent misrepresentation. After
DeVito filed its answer to HIM's complaint, HIM moved to compel
arbitration and stay the proceedings in the district court until
the completion of arbitration, asserting that the contract
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contained an arbitration clause that required the parties to
arbitrate the dispute. The contract provides, in pertinent part:
9.10.1 Claims, disputes and other
matters in question arising out of or relating
to this Contract, including those alleging an
error or omission by the Architect but
excluding those arising under Paragraph 15.2
[Hazardous Materials], shall be referred
initially to the Architect for decision. Such
matters, except those relating to aesthetic
effect and except those waived as provided for
in Paragraph 9.11 [Consequential Damages] and
Subparagraphs 14.5.3 and 14.5.4 [making or
acceptance of final payment constitutes
waiver], shall, after initial decision by the
Architect, or 30 days after submission of the
matter to the Architect, be subject to
mediation as a condition precedent to
arbitration or the institution of legal or
equitable proceedings by either party.
9.10.3 The parties shall endeavor to
resolve their disputes by mediation which,
unless the parties mutually agree otherwise,
shall be in accordance with the Construction
Industry Mediation Rules of the American
Arbitration Association currently in effect .
. . . The request may be made concurrently
with the filing of a demand for arbitration,
but, in such event, mediation shall proceed in
advance of arbitration or legal or equitable
proceedings, which shall be stayed pending
mediation for a period of 60 days from the
date of filing, unless stayed for a longer
period by agreement of the parties or court
order.
9.10.4 Claims, disputes and other
matters in question arising out of or relating
to the Contract that are not resolved by
mediation, except matters relating to
aesthetic effect and except those waived as
provided for in Paragraph 9.11 and
Subparagraphs 14.5.3 and 14.5.4, shall be
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decided by arbitration which, unless the
parties mutually agree otherwise, shall be in
accordance with the Construction Industry
Arbitration Rules of the American Arbitration
Association currently in effect . . . . The
award rendered by the arbitrator or
arbitrators shall be final, and judgment may
be entered upon it in accordance with
applicable law in any court having
jurisdiction thereof. (Emphasis added).
On July 26, 2002, the district court issued a Memorandum
and Order denying HIM's motion to compel arbitration and to stay
proceedings until the completion of arbitration. The court
reasoned that the plain language of the contract manifested the
parties' clear intent to require mediation as a condition precedent
to arbitration. Accordingly, the court found that HIM's failure to
request mediation precluded enforcement of the contract's
arbitration clause. This timely appeal followed.
II. Discussion
Congress enacted the FAA in 1925 to place arbitration
agreements "upon the same footing as other contracts" and to render
them "valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any contract."
EEOC v. Waffle House, Inc., 534 U.S. 279, 288-89 (2002). To
facilitate arbitration agreements, the FAA provides that when a
federal court reviews an issue that is subject to an arbitration
agreement the court shall, on the motion of one of the parties,
stay its proceedings until "arbitration has been had in accordance
with the terms of the agreement." 9 U.S.C.A. § 3. The Supreme
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Court has held that "questions of arbitrability must be addressed
with a healthy regard for the federal policy favoring
arbitrations." Moses H. Cone Mem'l. Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24 (1983).
Nevertheless, arbitration is a matter of contract law and
consequently "a party cannot be required to submit to arbitration
any dispute which he has not agreed so to submit." AT&T Techs.,
Inc. v. Communications Workers of America., 475 U.S. 643, 648
(1986). The Court specified that "the FAA's proarbitration policy
does not operate without regard to the wishes of the contracting
parties." Mastrobuono v. Shearson Lehman Hutton, 514 U.S. 52, 57
(1995). Indeed, were a court to employ the FAA to frustrate the
clear intentions of parties that had contracted to arbitrate under
privately negotiated rules and procedures, the "result would be
quite inimical to the FAA's primary purpose of ensuring that
private agreements to arbitrate are enforced according to their
terms." Id.
When presented with a question of contract
interpretation, our "task is to ascertain the intentions of the
parties, consistent with state law principles and with due regard
for the federal policy favoring arbitration." De Mercurio v.
Sphere Drake Ins. PLC, 202 F.3d 71, 74 (1st Cir. 2000). The
district court's legal conclusion -- that the duty to arbitrate was
conditioned by the plain language of the agreement -- is subject to
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de novo review. Campos-Orrego v. Rivera, 175 F.3d 89, 96 (1st Cir.
1999).
The sole issue on appeal is whether the district court
erred in denying HIM's motion to compel arbitration and to stay
proceedings until the completion of arbitration. HIM claims that
because the contract requires arbitration but not mediation, the
court should have compelled arbitration in order to resolve the
parties' contractual dispute in favor of the "liberal federal
policy favoring arbitration provisions." Moses H. Cone, 460 U.S. at
24.
To reach this conclusion, HIM selectively concentrates on
language in the contract that, taken out of context, might "merely
make[] mediation a suggested, [but] not a required precursor to
arbitration." For instance, the contract states that the parties
"shall endeavor" to resolve their disputes by mediation. Whether
or not this language is, as HIM contends, merely "precatory" and
was inserted merely to urge the parties to make an "earnest
attempt" to resolve their differences through mediation is
irrelevant; other provisions of the contract state in the plainest
possible language that mediation is a condition precedent to
arbitration. Section 9.10.1 bears repeating because of its
remarkable clarity: "Claims, disputes and other matters in question
arising out of or relating to this Contract . . . shall . . . be
subject to mediation as a condition precedent to arbitration or the
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institution of legal or equitable proceedings by either party." It
is difficult to imagine language which more plainly states that the
parties intended to establish mediation as a condition precedent to
arbitration proceedings.1
Under the plain language of the contract, the arbitration
provision of the agreement is not triggered until one of the
parties requests mediation. See Kemiron Atl., Inc. v. Aguakem
Int'l Inc., 290 F.3d 1287, 1291 (11th Cir. 2002). In Kemiron, the
Eleventh Circuit faced a similar issue and held: "the parties
agreed to conditions precedent before arbitration can take place
and, by placing those conditions in the contract, the parties
clearly intended to make arbitration a dispute resolution mechanism
of last resort." Id. at 1291. Further, "[b]ecause neither party
requested mediation, the arbitration provision has not been
activated and the FAA does not apply." Id. Congress did not enact
the FAA to "operate without regard to the wishes of the contracting
parties" Mastrobuono, 514 U.S. at 57. Where contracting parties
condition an arbitration agreement upon the satisfaction of some
condition precedent, the failure to satisfy the specified condition
will preclude the parties from compelling arbitration and staying
1
The district court noted that Section 9.10.1 appears to
contemplate mediation as a condition precedent to both arbitration
and litigation. As the parties have only asked us to determine
whether this Section establishes mediation as a condition precedent
to arbitration, we do not reach the broader, more difficult
question of whether the Section also establishes a valid condition
precedent to the bringing of suit.
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proceedings under the FAA. Because neither HIM nor DeVito ever
attempted to mediate this dispute, neither party can be compelled
to submit to arbitration.
III. Conclusion
Here, there is no doubt that the parties intended that
the duty to arbitrate would not ripen until after the condition
precedent of mediation had been satisfied. The district court's
judgment is affirmed.
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