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South Street Theatre Co., Inc. v. McGowan Builders

June 26, 2008

SOUTH STREET THEATRE COMPANY, INC., PLAINTIFF-RESPONDENT,
v.
MCGOWAN BUILDERS, INC., DEFENDANT-APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1577-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted June 2, 2008

Before Judges Graves and Alvarez.

Defendant McGowan Builders, Inc. (McGowan), appeals from an order dated August 7, 2007, which permanently enjoined arbitration of McGowan's claims against plaintiff South Street Theatre Company, Inc. (the Theatre). On appeal, McGowan alleges the trial court improperly construed the parties' construction contract when it held the contract did not provide for arbitration as the exclusive means of dispute resolution. We affirm.

On January 3, 2006, McGowan and the Theatre entered into a construction contract (the Contract) for expansion of the Theatre's building located at 100 South Street in Morristown. Under the terms of the Contract, which was drafted by McGowan, McGowan was to be the general contractor on a project for improvements to the Theatre. Construction was to begin on April 3, 2006, and "substantial completion" was to be achieved by November 1, 2006. In exchange for its services, the Theatre was to pay McGowan $5,525,667. Paragraph 15 of the Contract provided as follows:

a. GENERAL PROVISIONS APPLICABLE TO ALL CLAIMS. Claims by the Contractor against the Community Theater shall be subject to the New Jersey Contractual Liability Act, N.J.S.A. 59:13-1, et seq. including the notice and time for suit provisions. . . . All claims shall also be subject to the terms of this contract including the general conditions, and the Contractor may not assert any claims for extra costs unless it maintains all the records of its estimated and actual costs as required by paragraph 9 and the general conditions. The Contractor also agrees that suits against the Community Theater must be pursued in the county where the project is located.

[(Emphasis added).]

The Contract also incorporated by reference "General Conditions of the Contract for Construction, AIA [American Institute of Architects] Document A201-1997" (the General Conditions). These General Conditions, which are promulgated by the AIA, were included in a two-volume Project Manual the Theatre issued to all bidding parties, including McGowan. Of relevance to this dispute are Paragraphs 4.4 through 4.6 of the General Conditions. According to Paragraph 4.4.1,

[c]laims, including those alleging an error or omission by the Architect but excluding those arising under Paragraphs 10.3 through 10.5, shall be referred initially to the Architect for [a] decision. An initial decision by the Architect shall be required as a condition precedent to mediation, arbitration or litigation of all Claims between the Contractor and Owner arising prior to the date final payment is due, unless 30 days have passed after the Claim has been referred to the Architect with no decision having been rendered by the Architect.

[(Emphasis added).]

Paragraph 4.5, entitled Mediation, states in part: "Any Claim arising out of or related to the Contract . . . shall, after initial decision by the Architect or 30 days after submission of the Claim to the Architect, be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable proceedings by either party."

Additionally, the pertinent part of Paragraph 4.6, entitled Arbitration, reads as follows:

4.6.1 Any claim arising out of or related to the Contract . . . shall, after decision by the Architect or 30 days after submission of the Claim to the Architect, be subject to arbitration. Prior to arbitration, the parties shall endeavor to resolve ...


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