UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-30371
THE JEWISH FEDERATION OF GREATER NEW ORLEANS;
WOLDENBERG VILLAGE, INC.,
Plaintiffs-Counter Defendants-Appellees,
versus
FIDELITY & DEPOSIT COMPANY OF MARYLAND,
Defendant-Counter Claimant-Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
(053L-2: 00-CV-2368-S)
August 29, 2001
Before KING, Chief Judge, BARKSDALE, Circuit Judge, and NOWLIN,
District Judge.1
PER CURIAM:2
Primarily at issue is whether Appellant, the surety on a
construction contract, is required to arbitrate a time-bar defense
under its performance bond, pursuant to the bond’s incorporation of
the arbitration provision in the construction contract. AFFIRMED.
1
Chief Judge of the Western District of Texas, sitting by
designation.
2
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
I.
In December 1991, the Jewish Federation of Greater New Orleans
(Federation) entered into a contract with Goliath Construction
Company, Inc., for the construction of Woldenberg Village, an
assisted living facility in New Orleans, Louisiana. That contract
contains the following arbitration provision:
Any controversy or Claim arising out of or
related to the Contract, or the breach
thereof, shall be settled by arbitration in
accordance with the Construction Industry
Arbitration Rules of the American Arbitration
Association.
Fidelity and Deposit Company of Maryland (Fidelity) issued a
performance bond in connection with the project. The bond
incorporates the construction contract by reference.
In April 2000, Appellees, Federation and Woldenberg Village,
Inc., the corporation that purchased the project from Federation,
filed a demand for arbitration with the American Arbitration
Association, naming, inter alia, Fidelity, and claiming a breach of
the construction contract. Three months later, Appellees filed a
petition in state court seeking declaratory and injunctive relief
compelling Fidelity to arbitrate their claims. The action was
removed to federal court, and Fidelity counterclaimed for
declaratory and injunctive relief. Both sides moved for summary
judgment; Appellees’ motion was granted. Jewish Fed’n of Greater
New Orleans v. Fidelity & Deposit Co. of Md., No. 00-2368 (E.D. La.
6 Mar. 2001) (unpublished).
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II.
We review a summary judgment de novo, applying the same
standard applied by the district court. E.g., Dufrene v. Browning-
Ferris, Inc., 207 F.3d 264, 267 (5th Cir.), cert. denied, 531 U.S.
825 (2000). The judgment is proper if the summary judgment record,
viewed in the light most favorable to the non-movant, establishes:
there is no genuine issue of material fact; and the movant is
entitled to a judgment as a matter of law. FED. R. CIV. P. 56(c);
Dufrene, 207 F.3d at 267.
Fidelity contends the district court erred in compelling it to
arbitrate its defense that the performance bond has lapsed.
“Unless the parties clearly and unmistakably provide otherwise, the
question of whether the parties agreed to arbitrate is to be
decided by the court, not the arbitrator.” AT&T Techs., Inc. v.
Communications Workers of Am., 475 U.S. 643, 649 (1986). If a
contract contains an arbitration clause, there is a presumption of
arbitrability such that “[d]oubts should be resolved in favor of
coverage”. Id. at 650. This presumption is “particularly
applicable where the clause is ... broad”. Id.
As Fidelity conceded at oral argument, because its bond
incorporates by reference the construction contract’s arbitration
provision, that provision is binding on Fidelity. See J.S. & H.
Constr. Co. v. Richmond County Hosp. Auth., 473 F.2d 212, 216 (5th
Cir. 1973) (subcontractor bound by prime contract arbitration
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provision incorporated by reference in subcontract). As noted, the
arbitration provision provides in part: “Any controversy or Claim
arising out of or related to the Contract, or the breach thereof,
shall be settled by arbitration”.
Both the Supreme Court and this court have concluded that
similar arbitration clauses were broad and capable of expansive
reach. Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 139
F.3d 1061, 1067 (5th Cir. 1998) (citing Prima Paint Corp. v. Flood
& Conklin Mfg. Co., 388 U.S. 395 (1967)). Because the arbitration
provision is not limited to “Any controversy or Claim arising out
of ... the Contract”, but also applies to “Any controversy or Claim
... related to the [construction] Contract”, it is not necessary
that the dispute arise out of the construction contract to be
arbitrable, but only that the dispute “touch matters covered by
[the contract]”. Id. at 1068 (internal quotation marks omitted).
Mindful of the presumption of arbitrability, we conclude that
Appellant’s defense is a “controversy ... related to the Contract”,
and is, therefore, arbitrable under its “extremely broad”
arbitration provision. See id.
“Once it is determined ... that the parties are obligated to
submit the subject matter of a dispute to arbitration, ‘procedural’
questions which grow out of the dispute and bear on its final
disposition should be left to the arbitrator.” Del E. Webb Constr.
v. Richardson Hosp. Auth., 823 F.2d 145, 149 (5th Cir. 1987)
4
(quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557
(1964)). Limitations defenses, such as Fidelity’s, are procedural
issues that must be resolved by the arbitrator. Smith Barney
Shearson, Inc. v. Boone, 47 F.3d 750, 754 (5th Cir. 1995). See
also Glass v. Kidder Peabody & Co., 114 F.3d 446, 456 (4th Cir.
1997) (time-bar defenses subject to arbitration); Shearson Lehman
Hutton, Inc. v. Wagoner, 944 F.2d 114, 121 (2d Cir. 1991) (same).
For the same reason, we will not address Fidelity’s challenge to
the composition of the arbitration panel. See Boone, 47 F.3d at
753 (procedural issues relate to how parties agreed arbitration is
to be conducted).
III.
For the foregoing reasons, the judgment compelling arbitration
is
AFFIRMED.
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KING, Chief Judge, dissenting:
While I agree with my colleagues that Fidelity is bound to
arbitrate any claims demanding construction of the underlying
contract incorporated by reference into the performance bond, I
would not extend this arbitration requirement to Fidelity’s
personal defenses arising from the provisions of the bond itself.
There are two apparently contrary lines of cases addressing
the question whether a performance bond’s incorporation by
reference of an underlying construction contract containing an
arbitration provision requires a surety who was not a party to the
construction contract to arbitrate its personal defenses arising
out of the bond. The majority adopts the reasoning espoused by the
courts in Hoffman v. Fidelity & Deposit Co., 734 F. Supp. 192
(D.N.J. 1990), and Boys Club of San Fernando Valley, Inc. v.
Fidelity & Deposit Co., 8 Cal Rptr. 2d. 587 (Cal. Ct. App. 1992)
finding that an owner’s claims against a surety regarding
provisions of a performance bond are arbitrable when the
performance bond incorporates by reference an arbitration provision
in the construction contract. With all due respect to my
colleagues on the panel, I believe that the better-reasoned line of
cases is represented by Gloucester City Board of Education v.
American Arbitration Association, 755 A.2d 1256 (N.J. Super. Ct.
App. Div. 2000), and Fidelity & Deposit Co. v. Parsons & Whittemore
Contractors Corp., 397 N.E.2d 380 (N.Y. 1979). These cases hold
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that incorporation of an arbitration provision from an underlying
construction contract does not bind the surety company to arbitrate
with the contracting parties regarding disputes originating in the
provisions of the bond, but instead ensures that the surety company
participates in (or, at a minimum, is bound by the results of) an
arbitration between the contracting parties based on the underlying
contract. See Gloucester, 755 A.2d at 1262-63; Parsons, 397 N.E.2d
at 382.
The Gloucester/Parsons interpretation is consistent with this
court’s precedent in J. S. & H Construction Co. v. Richmond County
Hospital Authority, 473 F.2d 212 (5th Cir. 1973), cited by the
majority. J. S. & H. dealt primarily with the parties’ obligations
with respect to the underlying subcontract, holding that the
parties were required to arbitrate the action on the subcontract.
See id. at 216. However, with reference to the surety’s claims on
the bond itself, this court found only that “any action on the bond
cannot precede a determination of the contract debt [by
arbitration],” not that such an action on the bond would be subject
to arbitration. Id. at 217. This analysis is consistent with the
Parsons court’s reasoning that a surety would be bound by the
findings of an arbitration on the underlying contract, but not
necessarily bound to arbitrate personal defenses based on the
performance bond.
Moreover, contrary to the majority’s assertion, a dispute
regarding the enforceability of the terms of a performance bond
7
does not necessarily constitute a controversy or claim arising out
of or related to the underlying contract. This court’s analysis in
Pennzoil Exploration & Production Co. v. Ramco Energy, Ltd., 139
F.3d 1061 (5th Cir. 1998) does not dictate otherwise. Pennzoil
notes that language in an arbitration provision encompassing
controversies or claims “arising out of or in connection with or
relating to” an agreement (which is materially similar to the
arbitration provision at issue in the instant case) should be
construed broadly, to include claims beyond those that literally
arise under the contract. See id. at 1067. However, the
underlying contract in the instant case defines a “claim” as a
“demand or assertion by one of the parties seeking, as a matter of
right, adjustment or interpretation of Contract terms, payment of
money, extension of time or other relief with respect to the terms
of the Contract” or “other disputes and matters in question between
the Owner and Contractor arising out of or relating to the
contract.” As the performance bond is not included within the
definition of the “contract,”3 Fidelity’s claim does not require
construction of the contract and does not fall within the
contractual definition of a “claim.” Similarly, the dispute
between Fidelity and the Appellees based on the language of the
3
The underlying construction contract defines “the
contract documents” to include “this Agreement, Conditions of the
Contract . . . Drawings, Specifications, Addenda issued prior to
the execution of this Agreement, other documents listed in this
Agreement, and Modifications issued after the execution of this
Agreement; these form the Contract . . . .”
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bond cannot constitute a controversy “arising out of” or “related
to” the contract if the definition of the “contract” does not
encompass the provisions of the bond. Thus, the plain language of
the contract would not have put Fidelity on notice that, in
incorporating the contract into the performance bond, it was
agreeing to arbitrate disputes grounded in the language of the bond
itself.
Because I do not believe that incorporation of the underlying
construction contract’s arbitration provision into the performance
bond requires Fidelity to submit its personal defenses based on the
language of the bond agreement to arbitration, I respectfully
dissent.
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