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Stromberg Sheet Metal Works, Inc. v. Washington Gas Energy Systems

August 23, 2006

STROMBERG SHEET METAL WORKS, INC., PLAINTIFF,
v.
WASHINGTON GAS ENERGY SYSTEMS, INC., DEFENDANT,
WASHINGTON GAS & LIGHT CO., DEFENDANT AND THIRD-PARTY PLAINTIFF,
v.
THERMAL ENGINEERING GROUP, INC., THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge

Document No. 22

MEMORANDUM OPINION

GRANTING THE THIRD-PARTY PLAINTIFF'S MOTION TO COMPEL ARBITRATION

I. INTRODUCTION

This breach of contract dispute is before the court on Washington Gas and Light Company's ("WGL") motion to compel arbitration. WGL, a defendant and the third-party plaintiff in this case, seeks a court order requiring Thermal Engineering Group ("TEG"), the third-party defendant, to submit to arbitration with Stromberg Sheet Metal Works, Inc. ("Stromberg"), the plaintiff. At issue in WGL's motion is whether the arbitration clause in the contract between WGL and TEG is assignable. Because the arbitration clause is assignable and because the contract between defendant WGL and TEG states that all disputes are to be settled by arbitration, the court grants WGL's motion to compel arbitration.

II. BACKGROUND

A. Factual Background

In 1996, the federal government awarded a contract to design and build a heating and chilling facility ("the project") to WGL. Compl. ¶ 5. WGL entered into two subcontracts to complete the project, one with TEG to design the project, and one with defendant Washington Gas Energy Systems ("WGES") to serve as manager and general contractor for the project. Id. ¶ 19; Def. WGES' Counterclaim ¶ 4. As project manager, WGES subcontracted with Stromberg for construction and manufacturing services. Id.

In February 2003, WGES issued a work order for Stromberg to fabricate and install combustion air intake ducts and turbine exhaust ducts. Compl. ¶ 9. Stromberg alleges that WGES still owes $183,370 of the original $743,900 contract price. Id. ¶ 32. Stromberg also alleges that WGES requested changes to the work order with a total cost of $636,663. Id. According to Stromberg, the changes that WGES requested were necessary to fix TEG's design defect. Id. In addition, Stromberg estimates that the cost of refabrication due to the design defect was $284,655. Id. Consequently, Stromberg filed a complaint alleging that WGL and WGES owe it damages for unpaid work and for work that it was required to do as a result of TEG's alleged design defect. Id. ¶¶ 22, 34; see also WGES' Consent Mot. to Join WGL as Def. ¶ 2.

In response to Stromberg's suit, WGES filed a counterclaim asserting that TEG's design was not defective and that the additional costs incurred by Stromberg were a result of Stromberg's own failure to properly fabricate, man, manage, install, and correct its work. Def. WGES' Counterclaim ¶ 41. WGES alleges these failures caused a ten month delay. Id. ¶ 35. WGES' counterclaim seeks $1,016,255 for total damages due to the failures and subsequent ten-month delay. Id. ¶ 44.

Key to the motion before the court, WGES' co-defendant, WGL, filed a third-party complaint alleging that TEG is liable for the damages resulting from any design defects. WGL's Third-Party Compl. ¶ 16; see also Mem. of P. & A. in Supp. of Mot. to Stay Proceedings and Compel Arbitration ("WGL's Mot. to Compel") at 2. Because the subcontract between WGL and TEG contains a dispute resolution provision requiring mediation and arbitration instead of litigation, WGL now seeks to submit its claims against TEG to arbitration. Id.

B. Procedural Background

In September 2005, all parties submitted to a two-day mediation. WGL's Mot. to Compel at 2. Although unable to reach a global settlement, Stromberg, WGL, and WGES agreed to dismiss, without prejudice, their disputes against each other. Id. As a part of this dismissal, WGL assigned its claims against TEG to Stromberg. Id. WGL requests, "for the use and benefit of Stromberg," that this matter be ...


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