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UNISTRUT SPACE FRAME SYS. v. ATLANTIC PLATE & WIND

December 31, 1996

UNISTRUT SPACE FRAME SYSTEMS, INC., Plaintiff,
v.
ATLANTIC PLATE & WINDOW GLASS, CO., INC., et al., Defendants.



The opinion of the court was delivered by: SULLIVAN

MEMORANDUM AND ORDER

 I. INTRODUCTION

 Plaintiff, Unistrut Space Frame Systems, Inc. ("Unistrut"), a space frame contractor in the construction industry, commenced this action against defendant, Atlantic Plate and Window Glass, Co., Inc. ("APG"), a subcontractor in the same industry, and its surety, Great American Insurance Co., for breach of a sub-subcontract for construction of a space frame system on the World Bank Main Complex Rehabilitation Project. ("World Bank Project"). APG has filed a third party complaint for damages against Firearm's Insurance Co. ("Fireman's"), the surety for Unistrut's performance bond, because of APG's contentions that Unistrut is in default of its contractual obligations. Fireman's contends that APG's Third-Party Complaint is defective for lack of both diversity jurisdiction under 28 U.S.C. § 1332 and supplemental jurisdiction under 28 U.S.C. § 1367.

 Unistrut and AGP are in agreement that arbitration is the remedial procedure to resolve their dispute; they disagree, however, on which arbitration procedure controls. Thus, the major substantive issue in this case is which of two arbitration provisions in two contracts controls: (1) World Bank's prime contract with the general contractor, The George Hyman Construction Company ("Hyman"); or (2) the subcontract between APG and Hyman. Unistrut contends that the dispute is subject to arbitration pursuant to the arbitration clause in the subcontract between APG and Hyman. APG argues that, although the APG-Unistrut sub-subcontract does not contain an arbitration clause per se, it incorporates by reference the arbitration provisions of the World Bank-Hyman prime contract.

 Before the Court is APG's Motion to Dismiss or Stay Proceedings Pending Arbitration and Fireman's Motion to Dismiss APG's Third Party Complaint. Upon consideration of these motions, the points and authorities in support of and in opposition thereto, and the oral arguments of counsel, APG's Motion to Stay the Proceedings is GRANTED and its Motion to Dismiss the Complaint is DENIED. Fireman's Motion to Dismiss the Third-Party Complaint is DENIED. Arbitration provisions shall be conducted in accordance with the dispute resolution provisions of the prime contract between the World Bank and Hyman.

 II. FACTS

 The World Bank Project began on April 13, 1992, when the Owner, the World Bank, and the general contractor, Hyman, entered into the prime contract. Significantly, the prime contract documents include (1) drawings and specifications which set forth the work to be performed and (2) the General Conditions to the prime contract. The prime contract contains an arbitration clause which subjects disputes to the UNCITRAL Arbitration Rules and requires that arbitration of disputes commence only "upon final completion" of the project.

 Hyman entered into a seven million dollar subcontract with Unistrut on May 26, 1992 for the supply and installation of a space frame system. On November 16, 1992, APG entered into a $ 850,000 sub-subcontract with Unistrut for the supply and installation of the space frame system. Unistrut alleges that APG has failed and refused to pay Unistrut money received by APG from Hyman for Unistrut's contractual performance. Unistrut has also claimed additional compensation from APG for what Unistrut contends to be the reasonable value of unpaid work, labor, material and services that it has provided in connection with the World Bank Project. According to APG, the present dispute also includes Unistrut's claim for additional costs incurred as a result of a design change to the contract documents made by the owner's architect and back charges assessed against APG by Hyman and the Owner for delays and defective work allegedly caused by Unistrut on the World Bank Project. *fn1" Currently, APG is still working on the World Bank Project.

 APG claims that the arbitration clause in the prime contract controls the procedures for resolving any disputes. Unistrut disagrees and argues that, while its revoked sub-subcontract with AGP does not have an arbitration clause per se, the Hyman-APG subcontract has an arbitration clause which controls in this case. *fn2" Under the arbitration provision of the Hyman-APG subcontract, arbitration may commence at any time and must abide by the AAA's Construction Industry Rules. However, pursuant to the arbitration provision of the World Bank/Hyman contract, arbitration can only be pursued after "Final Completion" of the project.

 III. Defendants' Joint Motion to Dismiss or Stay Proceedings Pending Arbitration

 A. Unistrut-APG Sub-subcontract, Article 10.1, and Prime Contract, Article 11

 In resolving defendant's motion to dismiss or to stay proceedings, the Court first must address the merits of APG's argument that the arbitration provisions of the prime contract control. APG argues that, while the sub-subcontract between APG and Unistrut does not have an arbitration provision, the arbitration provision applicable to the sub-subcontract is set forth in the prime contract and the prime contract's general provisions; according to APG, the sub-subcontract incorporates both by reference. Specifically, the Court must decide whether Article 10.1 of the sub-subcontract subjects the present dispute to the arbitration provisions of Article 11 of the prime contract.

 The Unistrut-APG sub-subcontract, Article 10.1, states that "any claim or dispute which arises . . . shall be governed by the Contract Documents." Plaintiff's Response to Defendant's Joint Motion, Exh. C, at 7. The Court is persuaded by APG's argument that the "Contract Documents" encompass the prime contract between the Owner and Hyman. Article 1 of the prime contract defines "Contract Documents," as "this Contract" [i.e. the contract between World Bank and Hyman] and "the General Conditions, the Drawings, the specifications, IFB No 92-213 and the Addenda . . . and all modifications issued after the execution of this Contract." Plaintiff's Response to Defendant's Joint Motion, Exh. A, at 2.

 Article 11 of the prime contract states that "all disputes arising out of the World Bank Project shall be settled by arbitration at final completion" of the project and are subject to the UNCITRAL Arbitration Rules. Plaintiff's Response to Defendant's Joint Motion, Exh. A, at 11. "Final completion" within the ...


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