Arbitrability: Who Decides Who Gets To Decide?

Arbitration has become a popular alternative to traditional courtroom litigation for construction contract disputes; however, arbitration is a creature of contract.  No one can be forced to arbitrate an issue that they have not agreed to arbitrate.  The problem is that the parties sometimes disagree over what issues they have agreed to arbitrate.  In those instances, the issue is whether the court or the arbitrator(s) get to decide whether any specific dispute is subject to the contract’s arbitration clause.  The Superior Court addressed this issue most recently in Montowese Industrial Park, LLC v. The Thomas W. Golden Realty Company.

In Montowese, the Court started with the general rule, which states that it is for the Court to decide whether a specific dispute is arbitrable based upon the Court’s authority to interpret contracts.  The Court then went on to state that the parties had the authority to transfer that authority to the arbitrator(s) if they chose to do so.  In other words, the parties could, by contract, allow the arbitrator(s) to decide whether a particular dispute was within the subject agreement’s arbitration clause.

The Court then went on to state that the Court could imply that the parties had intended to leave the issue of arbitrability up to the arbitrator(s).  Specifically, a broad arbitration clause that pertains to “any and all claims or disputes arising out of or related to the agreement” by virtue of its scope would be interpreted as granting to the arbitrator(s) the authority to determine whether a specific matter was arbitrable – even in the absence of express contract language granting such authority.

Standard arbitration clauses in most construction contracts are very broad.  The standard AIA arbitration clause pertains to any and all claims arising out of the subject agreement.  Thus, anyone using a standard AIA agreement that would like the issue of arbitrability determined by a court must revise the standard agreement to expressly state that which would otherwise be considered the general rule.

Who determines what issues are subject to an arbitration clause is as important as who determines the outcome of the dispute.  If you should have any questions about what is right for you, please give me a call at (203) 640-8825.

Scott Orenstein