STATE OF MINNESOTA
IN COURT OF APPEALS
Ceres Environmental Services, Inc.,
Filed February 2, 1999
Hennepin County District Court
File No. 97-20383
Robert J. Huber, Leonard, Street and Deinard, P.A., 150 S. Fifth St., Ste. 2300, Minneapolis, MN 55402 (for respondent)
Gerald T. Laurie, Andrew E. Tanick, William S. Glew, Lapp, Laurie, Libra, Abramson & Thomson, Chartered, One Financial Plaza, 120 S. Sixth St., Ste. 2500, Minneapolis, MN 55402; and
Karl Dix, Jr., Smith, Currie & Hancock, 2600 Harris Tower - Peachtree Ctr., 233 Peachtree St. N.E., Atlanta, GA 30303-1530 (for appellant)
Considered and decided by Toussaint, Chief Judge, Klaphake, Judge, and Foley, Judge.
Ceres Environmental Services, Inc. (Ceres) appeals from the district court's refusal to compel arbitration and stay judicial proceedings in a breach of contract and conversion action brought against it by M.A.A.C., Inc. Because we conclude that the unambiguous language of the arbitration provision in the parties' agreement does not mandate arbitration, we affirm.
Unlike the U.S./Greenland contract, which, by law, could not contain an arbitration clause, both the Greenland/Ceres subcontract and the Ceres/M.A.A.C sub-subcontract contained arbitration clauses. The arbitration clause in the Ceres/M.A.A.C. sub-subcontract provided that "[a]ny dispute between the Contractor and the Sub-contractor under this sub-contract shall be settled by arbitration as provided in the General Contract, if any provision for arbitration exists." (Emphasis added.) The sub-subcontract defined "general contract" as the agreement between the contractor and the owner, consisting of
the contract, the proposal, the contract bond, the plans, the specifications, the special conditions, the general conditions, supplemental agreement, the invitation to bidders, the instructions to bidders, any documents referred to in any of the foregoing, and any addenda or amendments to any of the foregoing[.]
It was drafted on a standard printed form intended for first-tier subcontracts and it mistakenly identified Ceres as the general contractor for the Thule Air Force base project. Ceres, in fact, was a first-tier subcontractor.
Disputes arose between Ceres and M.A.A.C. after M.A.A.C. completed its obligations under the sub-subcontract and demanded payment. As a result, Ceres filed a demand for arbitration with the American Arbitration Association (AAA). In June 1997, M.A.A.C. appeared at arbitration to demand an early determination of the arbitrability of its claims against Ceres.
One month later, and before the AAA determined the arbitrability of M.A.A.C.'s claims, M.A.A.C. filed the present action against Ceres alleging breach of contract and conversion, and seeking a declaratory judgment that the parties did not agree to arbitrate their disputes. In response, the AAA placed the arbitration in abeyance pending resolution of M.A.A.C.'s claims against Ceres. Shortly after, Ceres initiated formal discovery.
In April 1998, two months after initiating discovery, Ceres moved to compel arbitration and stay judicial proceedings. Ceres argued that arbitration was mandated by the Ceres/M.A.A.C. arbitration provision. Ceres's argument rested entirely on the assertion that the "general contract" referred to in the Ceres/M.A.A.C. arbitration provision was the subcontract between Greenland and Ceres. Because that subcontract contained an arbitration provision mandating arbitration, Ceres claimed that M.A.A.C. was required to arbitrate its claims against Ceres.
The trial court denied Ceres's motion to compel arbitration. In so doing, the court rejected Ceres's argument that the Greenland/Ceres subcontract was the "general contract." Instead, it concluded that the initial contract between the United States Army Corps of Engineers, the owner, and Greenland, the general contractor, was the "general contract." The trial court reasoned that "by definition and trade usage in the construction industry [the general contract] is the contract awarded by the owner * * * to the contractor responsible for the performance and completion of the project in its' [sic] entirety." Because the U.S./Greenland contract did not contain an arbitration clause, the trial court held that the parties were not required to submit their claims to arbitration. This appeal from the trial court's refusal to compel arbitration followed.
Whether a party has agreed to arbitrate a particular dispute is a matter of contract interpretation, which this court reviews de novo. Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790, 795 (Minn. 1995). Notwithstanding a liberal policy favoring arbitration, a party cannot be compelled to arbitrate a dispute it has not contractually agreed to arbitrate. Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S. Ct. 1248, 1255 (1989). Although the reviewing court must resolve doubts as to scope of arbitrable claims in favor of arbitration, it may not twist the language of the contract to find an arbitrable claim. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 941 (1983). Arbitration is a matter of consent, not coercion. Volt, 489 U.S. at 478, 109 S. Ct. at 1255. The task of the reviewing court, therefore, is simply to determine whether the parties' agreement reflects an intention to arbitrate. Michael-Curry Co's., Inc. v. Knutson Shareholders Liquidating Trust, 449 N.W.2d 139, 141 (Minn. 1989); American Italian Pasta Co. v. Austin Co., 914 F.2d 1103,1104 (8th Cir. 1990).
Whether the parties' agreement in this case reflects an intention to arbitrate turns on the intended meaning of the term "general contract." The parties agree that the Ceres/M.A.A.C. sub-subcontract requires them to arbitrate Building 100 disputes "as provided in the General Contract." They also agree that the printed form they used to draft their agreement mistakenly identifies Ceres as the contractor for the Thule Air Force base project. They disagree, however, as to whether the "general contract" is the initial contract between the U.S. and Greenland or the subcontract between Greenland and Ceres.
Ceres claims that the "general contract" is the subcontract between Greenland and Ceres. First, Ceres argues that the Ceres/M.A.A.C. sub-subcontract unambiguously defines "general contract" as the contract that obligates Ceres to complete work for the U.S. According to Ceres, the Greenland/Ceres subcontract is the only agreement that fits that definition. Second, Ceres argues that because the agreement's definition of "general contract" is unambiguous, the trial court erred in resorting to extrinsic evidence to ascertain the intention of the parties. Even if the trial court properly resorted to extrinsic evidence, Ceres claims that dictionary definitions are not evidence of industry usage. Ceres also argues that if the term "general contract" is in fact ambiguous, the trial court should have resolved the ambiguity in favor of compelling arbitration.
Ceres's arguments lack merit. First, as M.A.A.C. correctly points out, the printed form the parties used to memorialize their agreement unambiguously defines "general contract" as the contract between the owner and the general contractor. In relevant part, the form provides as follows:
WITNESSETH THAT: WHEREAS, the Contractor has heretofore entered into a contract with(Emphasis added.) The printed form unambiguously defines "general contract" as the contract between the contractor and the owner, consisting of specific documents normally associated only with the contract between a general contractor and an owner. The plain language of the form is not susceptible of more than one reasonable meaning. Thus, because the parties do not dispute that Greenland was the contractor and the U.S. government was the owner, we conclude that the trial court correctly determined that the U.S./Greenland contract was the general contract. The fact that the parties mistakenly identified Ceres as the contractor when they filled out the printed form does not change the plain language of the agreement and magically convert the Greenland/Ceres subcontract into the "general contract."
OWNER: U.S Air Force Space Command[,] Colorado Springs, CO.
to perform certain labor and furnish certain materials for the construction and completion of
PROJECT: MCAF Energy Improvements Building 100[,] Thule AFB, Greenland[,] GC-183 DACA51-95-C-0026
pursuant to plan[s] and specifications prepared by
ENGINEER: U.S. Army Corps of Engineers, New York District
which contract, consisting of the contract, the proposal, the contract bond, the plans, the specifications, the special conditions, the general conditions, supplemental agreement, the invitations to bidders, the instructions to bidders, any documents referred to in any of the foregoing, and any addenda or amendments to any of the foregoing, is hereinafter referred to as the "General Contract[.]"
Even if the term "general contract" was ambiguous, however, we conclude that the trial court interpreted it properly by resorting to extrinsic evidence to ascertain the intention of the parties. See Blattner v. Forster, 322 N.W.2d 319, 321 (Minn. 1982) (courts may resort to extrinsic evidence of intent to construe ambiguous contract term). Evidence of industry custom and usage, on which the trial court relied, is helpful in determining the intended meaning of ambiguous contract terms. E.g., Eric A. Carlstrom Constr. Co. v. Independent Sch. Dist. No. 77, 256 N.W.2d 479, 485 (Minn. 1977) (noting that court may rely on evidence of custom and usage when contract provision is not clear); Suburban Paving Co. v. Bo-Man Assocs., Inc., 292 Minn. 332, 334, 195 N.W.2d 816, 817 (1972) (holding that provision in construction contract was not so plain and unambiguous as to preclude evidence that it was customary for painters to paint walls and ceiling before carpet was laid).
The evidence of industry custom and usage in this case establishes that the "general contract" is the contract between the owner and the general contractor. E.g., J. Stewart Stein, Construction Glossary 755 (2d. ed. 1993) (defining "general contract" as the "[a]greement between the owner and a general contractor for the construction of a project, including all phases of the work"); Means Illustrated Construction Dictionary 251 (Kornelis Smit & Howard M. Chandler eds., 1991) (defining "general contract" in a single contract system as the "documented agreement between the owner and the general contractor for all the construction for the entire job"); Dictionary of Architecture and Construction 227 (Cyril M. Harris ed., 1975) (defining "general contract" in a single contract system as "the contract between the owner and the contractor for the entire work"). Ceres provides no authority in support of its argument that definitions from trade dictionaries are not evidence of industry usage. Thus, we conclude that, consistently with industry usage, the trial court correctly interpreted the term "general contract" to mean the contract between the owner and the general contractor -in this case, the U.S./Greenland contract.
Finally, although Ceres correctly points out that the reviewing court must resolve ambiguities in favor of compelling arbitration, it is well established that a reviewing court may not compel arbitration where the express language of the parties' agreement does not reflect their intent to consent to this review. Volt, 489 U.S. at 478, 109 S. Ct. at 1255; Moses, 460 U.S. at 24-25, 103 S. Ct. at 941; accord Piper Jaffray, 530 N.W.2d at 795 (noting that "[i]n evaluating whether the parties agreed to arbitrate the present dispute, we remain aware that we should resolve any doubts concerning the scope of arbitrable issues [rather than the arbitrability of issues in the first place] in favor of arbitration") (emphasis added) (internal citations omitted). Here, the express language of the arbitration clause in the Ceres/M.A.A.C. sub-subcontract does not reflect the parties' agreement to arbitrate because the U.S./Greenland contract, which determines whether arbitration will be required, does not contain an arbitration clause. The trial court, therefore, consistent with the rules of construction, properly refused to compel arbitration.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
 See 5 U.S.C. 575 (a)(3) (1996) ("An agency may not require any person to consent to arbitration as a condition of entering into a contract or obtaining a benefit.")
 The arbitration provision in the Greenland/Ceres subcontract read as follows:
ARTICLE 18 ARBITRATION
To be based on the rules issued by ICC (Internationale Chambre de Commerce).
Governing law to be US [sic] law.
Place of arbitration court [sic] to be at the east cost [sic] of the USA [sic] and specific court to be agreed upon.