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Merrill Iron & Steel, Inc. v. Blaine Construction Corporation

United States District Court, W.D. Pennsylvania

April 24, 2015

MERRILL IRON & STEEL, INC., Plaintiff,
v.
BLAINE CONSTRUCTION CORPORATION, ZURICH AMERICAN INSURANCE COMPANY and its subsidiary FIDELITY & DEPOSIT COMPANY OF MARYLAND, TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, ALLEGHENY LUDLUM CORPORATION, on its own behalf and as merged into ALC MERGER, LLC, n/k/a ALLEGHENY LUDLUM, LLC a/k/a ATI ALLEGHENY LUDLUM, HOH ENGINEERS, INC., and CENTURY STEEL ERECTORS COMPANY, Defendants. and BLAINE CONSTRUCTION CORPORATION, Counterclaimant and Cross Claimant,
v.
MERRILL IRON & STEEL, INC., ALLEGHENY LUDLUM STEEL CORPORATION, on its own behalf and as merged into ALC MERGER, LLC, n/k/a ALLEGHENY LUDLUM, LLC a/k/a ATI ALLEGHENY LUDLUM, HOH ENGINEERS, INC., and CENTURY STEEL ERECTORS COMPANY, Defendants by Counterclaim and Crossclaim, and LIBERTY MUTUAL INSURANCE COMPANY, and GREAT AMERICAN INSURANCE COMPANY, Additional Defendants by Counterclaim and Crossclaim.

MEMORANDUM ORDER

ROBERT C. MITCHELL, Magistrate Judge.

On March 23, 2015, Defendant Century Steel Erectors Company, L.P. ("Century Steel") filed a motion to sever certain cross-claims of Century Steel against Defendant Blaine Construction Corporation ("Blaine") so that those claims would be resolved in arbitration per the agreement between Century Steel and Blaine. [ECF No. 121]. Because Century Steel's motion does not ask this Court to sever specific claims to be heard separately by this Court, but rather that certain claims be decided in arbitration pursuant to the contract between the parties, the Court will construe Century Steel's motion as a motion to compel arbitration under the applicable standard.

Because the Court writes primarily for the parties, only the facts relevant to this motion will be discussed. This case generally concerns a dispute regarding the construction of a $1.2 billion hot rolling and processing facility in Brackenridge, Pennsylvania. Blaine is the general contractor for this construction project and subcontracted with Century Steel to design and erect the structural steel necessary for the construction project. The subcontract between Century Steel and Blaine included an arbitration clause which provided:

All claims, disputes and matters in question arising out of, or relating to, this Agreement or the breach thereof, except for claims which have been waived by the making or acceptance of final payment, and the claims described in Paragraph 14.2, shall be decided in Arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect unless the parties mutually agree otherwise. Notwithstanding other provisions in the Agreement, this agreement to arbitrate shall be governed by the Federal Arbitration Act.

Century Steel Br. in Supp. of Mot. to Sever [ECF No. 122] at 4 (quoting Century Steel/Blaine Subcontract for Building Construction [ECF No. 122-1] at Art. 14.1). The subcontract also provided two exceptions to the arbitration clause:

The agreement to arbitrate shall not apply to any claim:

(a) of contribution or indemnity asserted by one party to this Agreement against the other party and arising out of an action brought in a state or federal court or in arbitration by a person who is under no obligation to arbitrate the subject matter of such action with either of the parties hereto or does not consent to such arbitration; or
(b) asserted by the Subcontractor against the Contractor, if the Contractor asserts said claim, either in whole or part against the Owner, or asserted by the Owner against the Contractor, when the contract between the Contractor and the Owner does not provide for binding arbitration, or does so provide but the two arbitration proceedings are not consolidated, or the Contractor and Owner have not subsequently agreed to arbitrate said claim. In either case, the parties hereto shall notify each other either before or after demand for arbitration is made.
In any dispute arising over the application of this Paragraph 14.2, the question of arbitrability shall be decided by the appropriate court and not by arbitration.

Id. (quoting Century Steel/Blaine Subcontract for Building Construction [ECF No. 122-1] at Art. 14.2).

Century Steel argues that none of the claims it has made against Blaine have been waived by a final payment, and that none of the claims are for contribution or indemnity, therefore any claims that Blaine is not asserting against the Owner, Allegheny Ludlum, LLC, should be bound by the arbitration clause.

Blaine responds that Century has waived its right to seek arbitration because it has participated in litigation in this Court for the past nine months and Blaine would be prejudiced if the arbitration clause was enforced at this point. Alternatively, Blaine responds that the claims asserted against it do not fall within the arbitration provision.

The Federal Arbitration Act ("FAA") establishes a "strong federal policy in favor of the resolution of disputes through arbitration." Puleo v. Chase Bank USA, N.A. , 605 F.3d 172, 178 (3d Cir. 2010) (citation omitted). Because there is a strong preference in federal courts to uphold arbitration provisions, waiver of the arbitration agreement "is not to be lightly inferred[.]" PaineWebber Inc. v. Faragalli , 61 F.3d 1063, 1068 (3d Cir. 1995). The district court "may refuse to enforce an arbitration agreement where, for example, the alleged defaulting party has acted inconsistently with the right to arbitrate, ... and we will not hesitate to hold that the right to arbitrate has been waived where a sufficient showing of prejudice has been made by the party seeking to avoid arbitration." Nino v. Jewelry Exch., Inc ., 609 F.3d 191, 208 (3d Cir. 2010) (internal citations and quotation marks omitted).

The Court of Appeals for the Third Circuit set forth a "nonexclusive" list of factors to consider in determining whether the party seeking to avoid arbitration would be prejudiced by an order compelling arbitration. Hoxworth v. Blinder, Robinson & Co. , 980 F.2d 912, 926-27 (3d Cir. 1992). The six Hoxworth factors are: (1) the timeliness or lack thereof of a motion to arbitrate; (2) the degree to which the party seeking to compel arbitration has contested the merits of its opponent's claims; (3) whether the party has informed its adversary of the intention to seek arbitration even if it has not yet filed a motion to stay the district court proceedings; (4) the extent of its non-merits motion practice; (5) its assent to the court's pretrial orders; (6) the extent to which both parties have engaged in discovery. Id. As this list is nonexclusive, "not all the factors need to be present to justify a finding of a waiver, and [t]he waiver determination must be based on the circumstances and context of the particular case.'" Nino , 609 F.3d at 208 (quoting Doctor's Associates, Inc. v. Stuart , 85 F.3d 975, 981 (2d Cir. 1996)). Our appeals court has consistently emphasized that "prejudice is the touchstone for determining whether the right to arbitrate has been waived by litigation conduct." Ehleiter v. Grapetree Shores, Inc. , 482 F.3d 207, 222 (3d Cir. 2007). A determination of prejudice "includes not only substantive prejudice to the legal position of the party claiming ...


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