| Highland HC, LLC v Scott |
| 2014 NY Slip Op 00089 [113 AD3d 590] |
| January 8, 2014 |
| Appellate Division, Second Department |
| Highland HC, LLC, Respondent, v Peder Scott etal., Appellants. |
—[*1] Cuddy & Feder, LLP, White Plains, N.Y. (Andrew P. Schriever and Anthony P.Luisi of counsel), for respondent.
In an action, inter alia, to recover damages for professional malpractice, fraud, andbreach of contract, the defendants appeal, as limited by their brief, from stated portionsof an order of the Supreme Court, Putnam County (Lubell, J.), dated March 27, 2012,which, inter alia, denied that branch of their motion which was to compel the plaintiff tosubmit its claims against them to arbitration and stay all proceedings in the actionpending arbitration.
Ordered that the order is modified, on the law, by deleting the provision thereofdenying that branch of the defendants' motion which was to compel the plaintiff tosubmit its claims against them to arbitration and stay all proceedings in the actionpending arbitration, and substituting therefor a provision granting that branch of thedefendants' motion; as so modified, the order is affirmed insofar as appealed from, withcosts to the defendants.
In 2006, the plaintiff, Highland HC, LLC (hereinafter Highland), a Delaware limitedliability company with a business address in Connecticut, retained the defendant PWScott Engineering & Architecture, P.C. (hereinafter PW Scott), a New York professionalcorporation with its principal place of business in New York, to provide architectural andengineering services in connection with the renovation of an existing building and theconstruction of two new buildings in Connecticut. The individual defendants, PederScott and Melanie Ancin Scott, are principals of PW Scott and, at all relevant times,acted as officers and directors of PW Scott.
In furtherance of the project, Highland and PW Scott entered into three separatecontracts (hereinafter the primary contracts). Pursuant to the first contract, datedSeptember 12, 2006, PW Scott agreed to provide, among other things, drawings of theexisting architectural conditions, a design for the exterior facade, a parking site plan, andconstruction documents and plans for the proposed additions. In the second contract,dated July 8, 2007, PW Scott agreed to provide site plans and certain other architecturalservices. The third contract, dated December 20, 2007, required PW Scott to provideconstruction drawings, including architectural plans, structural designs, and plumbingand electrical systems. The penultimate paragraphs of both the first contract and the thirdcontract provide, in pertinent part: "If everything is acceptable to you, please sign allpages, including the General Conditions, and return them to our office along with yourdeposit. No [*2]work will begin on this project until thisoffice has received both the signed contract and the deposit." The "General Conditions"page, which is attached to both contracts, just after the signature page, includes, amongother clauses, an arbitration provision. That provision provides, in pertinent part: "Anyand all disputes between the parties to this contract shall be adjudicated by arbitrationunder the auspices of the American Arbitration Association."
The penultimate paragraph of the second contract provides, in pertinent part: "Theattached General Conditions are part of this proposal and include description ofreimbursables. If everything meets with your approval, please sign below and return theoriginal to this office along with the required releases and deposit." Again, the "GeneralConditions" page is attached to this contract just after the signature page.
The primary contracts, which were prepared by PW Scott, were executed byHighland on the signature page. Highland, however, did not sign or initial any of theattached "General Conditions" pages. Eighteen "Purchase Orders" and twelve "ChangeOrders," all prepared by PW Scott and signed by Highland, were exchanged on variousdates as the project progressed. Of these additional documents, only two made anyreference to a "General Conditions" page.
The relationship between the parties deteriorated prior to the completion of theproject. Highland commenced the instant action alleging, among other things, that itsustained damages due to the defendants' design flaws, substandard work, and grossinefficiencies. It also alleged that the defendants improperly billed for work that wasrequired to remediate their design flaws and incompetencies and that they engaged in ascheme to "defraud" Highland by overbilling. The amended complaint included causes ofaction alleging, inter alia, professional malpractice, fraud, and breach of contract. Thedefendants moved, among other things, to compel Highland to submit its claims againstthem to arbitration and to stay all proceedings in the action pending arbitration. In theorder appealed from, the Supreme Court, inter alia, denied that branch of the defendants'motion, determining that there was no mutual agreement to arbitrate.
As a threshold matter, the defendants are correct in asserting that this action isgoverned by the Federal Arbitration Act (hereinafter the FAA) (9 USC § 1 etseq.), which applies to any arbitration agreement evidencing a transaction involvinginterstate commerce (see 9 USC § 2). The United States Supreme Courthas "interpreted the term 'involving commerce' in the FAA as the functional equivalent ofthe more familiar term 'affecting commerce'—words of art that ordinarily signalthe broadest permissible exercise of Congress' Commerce Clause power" (CitizensBank v Alafabco, Inc., 539 US 52, 56 [2003]; see Allied-Bruce Terminix Cos. vDobson, 513 US 265 [1995]; see also N.J.R. Assoc. v Tausend, 19 NY3d 597, 601[2012]).
Here, the transactions between the parties clearly involved interstate commerce, asthe architectural and engineering plans were created by a firm headquartered in NewYork, the party developing the property was a Delaware company with a Connecticutaddress, the property being developed was located in Connecticut, and many of theservices and materials for the project were provided by entities outside of Connecticut,including at least two Massachusetts companies (see Matter of Diamond Waterproofing Sys., Inc. v 55 LibertyOwners Corp., 4 NY3d 247, 252 [2005]).
Through the FAA, Congress has declared "a strong federal policy favoringarbitration as an alternative means of dispute resolution" (Oldroyd v Elmira Sav.Bank, FSB, 134 F3d 72, 76 [2d Cir 1998]; see Rodriguez de Quijas vShearson/American Express, Inc., 490 US 477, 480-481 [1989]). In accordance withthis policy, doubts as to the arbitrability of a claim are to be resolved in favor ofarbitrability (see Moses H. Cone Memorial Hospital v Mercury Constr. Corp.,460 US 1, 24-25 [1983]; Thomas James Assoc., Inc. v Jameson, 102 F3d 60, 65[2d Cir 1996]).
On the other hand, arbitration is "a matter of consent, not coercion" (VoltInformation Sciences, Inc. v Board of Trustees of Leland Stanford Junior Univ., 489US 468, 479 [1989]) and "a party cannot be required to submit to arbitration any disputewhich [it] has not agreed so to submit" (JLM Indus., Inc. v Stolt-Nielsen SA, 387F3d 163, 171 [2d Cir 2004] [internal quotation marks omitted]). Under the FAA, thedetermination as to whether the parties have entered into an agreement to arbitrate ismade [*3]by applying ordinary state law principlesgoverning the formation of contracts (see First Options of Chicago, Inc. vKaplan, 514 US 938, 944 [1995]; Perry v Thomas, 482 US 483, 492 [1987];Chelsea Sq. Textiles, Inc. v Bombay Dyeing & Mfg. Co., Ltd., 189 F3d 289, 295[2d Cir 1999]; Progressive Cas. Ins. Co. v C.A. Reaseguradora Nacional DeVenezuela, 991 F2d 42, 45 [2d Cir 1993]; Hayes v County Bank, 26 AD3d 465, 466 [2006]).
Under both New York and Connecticut law, the intent of the parties governs wheninterpreting a contract (compareGod's Battalion of Prayer Pentecostal Church, Inc. v Miele Assoc., LLP, 6 NY3d371, 374 [2006], American Express Bank v Uniroyal, Inc., 164 AD2d 275,277 [1990], and Sheets v Sheets, 22 AD2d 176, 180 [1964], with A. Dubreuil& Sons, Inc. v Town of Lisbon, 215 Conn 604, 608, 577 A2d 709, 712 [1990],and Hydro-Hercules Corp. v Gary Excavating, Inc., 166 Conn 647, 652, 353 A2d714, 717 [1974]). In both states, to create a binding contract, there must be a meeting ofthe minds (compare Matter of Express Indus. & Term. Corp. v New York State Dept.of Transp., 93 NY2d 584, 589 [1999], with Fortier v Newington Group, Inc.,30 Conn App 505, 510, 620 A2d 1321, 1323 [1999]). Here, the defendants met theirburden of demonstrating that the parties agreed to arbitrate.
The primary contracts reference the attached "General Conditions" page containingthe broad arbitration clause, and the second contract specifically incorporated that page(see Matter of Level Export Corp. [Wolz, Aiken & Co.], 305 NY 82, 87 [1953];Shah v Monpat Constr.,Inc., 65 AD3d 541, 544 [2009]). Although the "General Conditions" pages werenot independently signed, an arbitration agreement need not be signed so long as there isother proof that the parties intended to be bound by documents containing arbitrationobligations (see Flores v LowerE. Side Serv. Ctr., Inc., 4 NY3d 363, 370 [2005]; Matter of Helen Whiting,Inc. [Trojan Textile Corp.], 307 NY 360, 368 [1954]). Such proof is present here,since Highland executed the primary contracts on the signature page, did not object toany of the language therein, accepted services and made payments pursuant thereto, andhas now commenced an action alleging, among other things, breach of contract.
As the documents in the record evince an agreement to arbitrate, the Supreme Courtshould have granted that branch of the defendants' motion which was to compel theplaintiff to submit its claims against them to arbitration and stay all proceedings in thisaction pending arbitration (see Ernest J. Michel & Co. v Anabasis Trade, 50NY2d 951 [1980]; Matter of Level Export Corp. [Wolz, Aiken & Co.], 305 NY82 [1953]; Shah v Monpat Constr., Inc., 65 AD3d at 544; Matter of ISPO,Inc. v Clark-Schwebel Fiber Glass Corp., 140 AD2d 195 [1988]).
Moreover, contrary to Highland's contention, the individual defendants, as officersand directors of PW Scott, are entitled to enforce the arbitration clause to the extent thattheir alleged misconduct relates to their behavior as agents of the professionalcorporation (see Hirschfeld Prods. v Mirvish, 88 NY2d 1054, 1056 [1996]).
In light of our determination with respect to the agreement to arbitrate, we need notaddress the defendants' contention concerning the plaintiff's claims for punitive damages.Skelos, J.P., Balkin, Leventhal and Sgroi, JJ., concur. [Prior Case History: 2012 NYSlip Op 31225(U).]