pursue remedies in another way, for instance, if the claims can be characterized as contract claims that may be arbitrated, it may not supplement its claims with allegations of negligence.
For instance, the Court in People's Express, while enunciating liberal tort law principles, backed up its holding by reference to policies. In arriving at its decision, the Court stated that "one objective [of tort law] is to ensure that innocent victims have avenues of legal redress, absent a contrary, overriding Public policy." People's Express at 255. Further, the Court noted that tort law should "not unnecessarily or arbitrarily foreclose redress based on formalism or technicalisms." Id. at 255 (emphasis added). In other words, underlying the Court's holding was its belief that "wronged persons should be compensated for their injuries and that those responsible for the wrong should bear the cost of their tortious conduct." Id. at 255. Ensuring an avenue to address a grievance is much different from ensuring that the avenue of tort law is always available. Lest anyone come away from the opinion thinking that the Court established an absolute right of tort recovery for economic loss, the Court stated in conclusion that:
We recognize that some cases will present circumstances that defy the categorization here devised to circumscribe a defendant's orbit of duty, limit otherwise boundless liability and define an identifiable class of plaintiffs that may recover. In these cases, the courts will be required to draw upon notions of fairness, common sense and morality to fix the line limiting liability as a matter of public policy, rather than an uncritical application of the principle of particular foreseeability.
Id. at 264 (citations omitted).
While the New Jersey Superior Court found in Conforti that lack of privity of contract does not bar a claim of negligence, it too tied its decision to an equitable policy: "To deny this plaintiff his day in court would, in effect, be condoning a design professional's right to do his job negligently but with impunity as far as innocent third parties who suffer economic loss." Conforti at 344. Like the Supreme Court in People's Express, the Law Division also was concerned with ensuring a avenue for the redress of legal grievances.
In light of the above discussion, I find that under New Jersey law, when a party has suffered economic loss because of the negligent actions of another, and the party has another means of redress against the alleged tortfeasor, that party may not assert the identical claims for identical damages under tort theories.
The question then becomes whether Dynalectric has another avenue of redress.
iii. The arbitration agreements
The question of whether the arbitration clauses in the contracts gives Dynalectric an alternative means of redress can best be answered by asking (1) whether Dynalectric was authorized or mandated to arbitrate the allegations in the instant complaint; and (2) whether those allegations are currently being arbitrated without objection.
In a series of cases over thirty years ago, the Supreme Court addressed the issue of arbitration over thirty years ago. The Court articulated several principles: (1) for a claim to be arbitrable, the parties must have agreed to submit to arbitration. Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960); see also Laborers' Intern. Union v. Foster Wheeler Corp., 868 F.2d 573, 576 (3d Cir. 1989). (2) the judge must determine whether there is a duty to arbitrate and what issues must go to arbitration. Warrior & Gulf at 582-83; Foster Wheeler at 576; (3) in determining whether a the parties have agreed to submit a grievance to arbitration, a court is not to rule on the merits of the claim. Steelworkers v. American Mfg. Co., 363 U.S. 564, 566 (1960); (4) where the contract contains an arbitration clause, there is a presumption of arbitrability, and this presumption applies with special force where the clause is broad. Warrior & Gulf at 584-85. See also AT&T Technologies v. Communications Workers, 475 U.S. 643, 650 (1986).
Dynalectric argues that it never agreed to have the claims in the instant case arbitrated. I disagree. I find that the issues raised in this case are arbitrable under the relevant contracts and that Dynalectric has a duty to submit the claims to arbitration.
Dynalectric contends that the language of the disputes clause in the Westinghouse/Dick contract, which is incorporated into the Dick/Dynalectric contract, "clearly limits arbitration to disputes concerning obligations between Westinghouse and Dick under their contract or disputes raising issues of interpretation of that contract." That is precisely what this case involves -- allegations involving breaches of Dynalectric's legitimate expectations concerning the parties' obligations under the various contracts. Other parts of the contracts confirm this interpretation. For example, the Dick/Dynalectric contract not only incorporates the entire Westinghouse/Dick contract, it also provides that
The disputes provision of the Prime Contract shall govern and [Dynalectric] shall be afforded the right to pursue all appropriate remedies available to [Dick] under its Prime Contract.
Further, the Dick/Dynalectric contract provides that "[Dynalectric] shall have the benefit of all rights, remedies, and redress against [Dick] which [Dick] has against [Westinghouse]." Finally, the Dynalectric/Dick contract contains a clause providing that:
If [Dynalectric] is delayed in the prosecution of its work due to the acts of (Westinghouse] and/or its agents and [Dynalectric] suffers delay damages therefrom, [Dick agrees to transmit to [Westinghouse] any claims submitted to it by [Dynalectric] . . . It is agreed that in no event will [Dick] be liable for [Dynalectric's] claims for delay, [Dick] under this paragraph merely acts as a conduit to provide [Dynalectric] access to [Westinghouse] to seek reimbursement for damages incurred for delays caused by [Westinghouse] and/or its agents.
While Dynalectric argues that this clause "cannot be read in any way to modify or expand any agreement by Westinghouse and Dick (or Dick and Dynalectric) to arbitrate their inter se contract claims", I find that when read in the context of the other provisions, the parties clearly contemplated that its procedure for dispute resolution would be followed by the parties for all claims arising out of the contracts. This approach also encourages efficiency and protects the interests of all parties.
Moreover, comparing Dynalectric's arbitration claim (the "claim") with its complaint in this court ("complaint") demonstrates that, at any rate, the allegations in the Complaint are already in arbitration, without objection, so Dynalectric is pursuing another means of redress.
Dynalectric argues, in both its complaint and indirectly through the Dick arbitration claim, that it reasonably developed certain expectations regarding the project, and that Westinghouse and Davy did not live up to those expectations.
The first set of breached expectations involves the subcontract documents. The claim states that "[Review of the subcontract documents] led Dynalectric to develop certain realistic and informed expectations concerning Dick's scope of work , the relative completeness of the detailed design at bid time, and the overall schedule for the Project." Claim at 5. Similarly, the complaint alleges that "relying on this Subcontract documents package, Dynalectric formulated realistic and justifiable expectations concerning (a) the scope of the Sub-Subcontract work, (b) the relative completeness of the detailed design at the time of its proposal, and (c) the overall schedule for construction of the Facility." Complaint at P 13.
Dynalectric quickly gained an understanding from these provisions that:
(1) Westinghouse would timely provide Dick with those drawings, specifications, and other information reasonably required for the execution of the Work required for the project; and
(2) The general Scope of Work was that scope "designated by Westinghouse in the Appendices or as reasonably inferred from the drawings, specifications and Appendices which constituted the Contract documents at bid time. . . .
Dynalectric personnel reasoned that Dick was legitimately entitled to be compensated for both the extra cost and time associated with design revisions and extra work, i.e., work which was not specifically depicted on the drawings, specifications and Appendices, or reasonably to be inferred therefrom.
Claim at 7-8; Complaint at P 15.
Regarding the time schedule, Dynalectric was "led to the legitimate contract expectations that (i) the bulk of the actual electrical construction activities would be performed in the 11-month period between April 1990 and March 1, 1991, (ii) "construction and pre-operational testing would commence in the fall of 1990 and would be substantially completed by March 1, 1991, and (iii) electrical work would be performed in accordance with completed CFC drawings issued prior to construction of the work depicted therein." Claim at 11; Complaint at P 19.
Both the Claim and the Complaint allege that Westinghouse and/or its agents breached these promises, causing damages to Dynalectric.
The second set of expectations involves the IPS. According to Dynalectric, the IPS was "the baseline upon which Dynalectric on-site personnel actually planned the performance of its electrical installation work." Claim at 13; Complaint at P 22. "Although the IPS clearly specified when the CFC drawings were to be completed and issued, all of the schedule dates were missed." Consequently, "late design delayed and extended the original electrical activities . . . ." Claim at 22. Additionally, mechanical and electrical equipment arrived late, Westinghouse or Davy kept revising its needs, and simultaneously accelerated the schedule for electrical work, thereby aggravating workflow conditions.
There is no question that the Claim and the Complaint allege that Westinghouse, by creating contractual expectations and then breaching them, caused damages to Dynalectric. The only substantive difference between the Claim and the Complaint that I can discern is that the language of the complaint occasionally uses such "tort" words like "foreseeability" and "negligently."
But using the analysis set forth by the New Jersey Supreme Court, I find that under all the relevant criteria, the allegations in Dynalectric's Complaint are currently in arbitration.
Thus, the claims alleged in Dynalectric's complaint may not at this juncture be actionable in tort. But I find that dismissal is too drastic a remedy. Instead I will stay the matter pending arbitration.
For the reasons detailed above, I deny defendants' motion to dismiss but grant defendants' motion to stay the matter pending arbitration.
ORDER - September 11, 1992, Filed
This matter having come before the Court upon a motion by defendants to dismiss the Complaint under Fed.R.Civ.P. 12(b)(7) for failure to name a necessary party; and under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted; and this court having considered the submitted briefs, oral arguments, and the record before it; and for the reasons expressed in an opinion issued this same day; and for good cause shown; IT IS ON THIS 10th day of September, 1992
ORDERED that Defendants' motions to dismiss under Fed.R.Civ.P. 12(b)(7) and Fed.R.Civ.P. 12(b)(6) are denied; and it is further
ORDERED that Defendants' motion to stay the proceedings pending arbitration is granted.
Harold A. Ackerman, U.S.D.J.