HIM Portland, LLC. v. DeVito Builders, Inc

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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