Obermiller Nelson Engineering, Inc. v. River Towers Association

Background

River Towers Association hired Langston Pearson Enterprises, Inc., doing business as Hayes Automation, to revitalize its HVAC system. Hayes hired Obermiller Nelson Engineering, Inc. as a subcontractor to design and plan the project. River Towers alleged that the project was seriously defective, requiring remedial work and removal of work performed by Hayes and Obermiller Nelson.

River Towers’ prime contract with Hayes required unresolved claims to go to arbitration under the American Arbitration Association’s Construction Industry Arbitration Rules. Hayes’s subcontract with Obermiller Nelson stated that, when an arbitration between River Towers and Hayes involved Obermiller Nelson’s work or alleged acts or omissions, Obermiller Nelson would join the arbitration if Hayes requested it. The subcontract also made the prime contract part of the subcontract.

River Towers filed an arbitration demand asserting six claims against Hayes and two claims against Obermiller Nelson: breach of contract as a third-party beneficiary and professional negligence. Hayes asked Obermiller Nelson to join the arbitration and asserted crossclaims against it.

Issues and analysis

Obermiller Nelson petitioned the court to dismiss River Towers’ claims against it or, alternatively, stay the arbitration concerning those claims. River Towers asked the court to dismiss the petition or compel Obermiller Nelson to arbitrate and stay the action.

The court held that the subcontract required Obermiller Nelson to join the arbitration because Hayes had requested its participation and the arbitration involved Obermiller Nelson’s work and alleged conduct. By agreeing to the subcontract, Obermiller Nelson also expressly consented to the arbitration proceeding’s jurisdiction.

The court further held that the prime contract’s incorporation of the American Arbitration Association rules clearly and unmistakably assigned threshold questions of arbitrability to the arbitrator. “Arbitrability” means whether particular claims must be decided in arbitration. Because the arbitrator, rather than the court, had to decide whether River Towers could assert direct claims against Obermiller Nelson, the court did not resolve that question.

Disposition

The court granted River Towers Association’s motion to dismiss in part. Specifically, it ordered Obermiller Nelson Engineering, Inc. to arbitrate River Towers’ claims against it in the pending arbitration and stayed the court action pending completion of that arbitration. The parties were ordered to notify the court when the arbitration concluded. The opinion does not state that the court dismissed the claims or the action.