COA: Contract only requires one side in construction dispute to arbitrate

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The owners of a construction project will not be forced to take their complaint against their project’s general contractor to arbitration, but the contractor will need to arbitrate its counterclaims if the claims aren’t resolved, the Court of Appeals of Indiana has ruled.

The case is Khaldoun E. Haddad and Issa E. Haddad v. Properplates, Inc., Manjeet Singh Bhattal, and Jaipal Atwal, 21A-PL-2560, began when Khaldoun and Issa Haddad entered a construction contract with Properplates Inc., Manjeet Singh Bhattal and Jaipal Atwa.

When a dispute arose concerning the construction project, the Haddads filed a complaint against Properplates, asserting claims for breach of contract, breach of warranty, indemnification and negligence. Properplates denied the Haddads’ claims and filed counterclaims for breach of contract, fraud in the inducement of contract and tortious interference with a business relationship.

Properplates then moved to dismiss the Haddads’ complaint and compel arbitration of the parties’ claims under the terms of the construction contract.

The contract specifically provided, “The CONTRACTOR [Properplates] and the CLIENT [the Haddads] hereby mutually agree in advance that in the event that the CONTRACTOR has a dispute concerning this Contract, the CONTRACTOR must submit such dispute to either the American Arbitration Association or to such other private arbitration service which has been approved by the secretary of the Executive of Consumer Affairs and Business Regulations, and the consumer shall be required to submit to such arbitration as provided under current state and federal laws.”

The Haddads opposed Properplates’ motion, arguing the contract’s arbitration clause only applied to Properplates’ counterclaims and not to the claims asserted in the Haddads’ complaint.

The Lake Superior Court dismissed the case without prejudice, concluding, “The language of th[e] provision is clear and unambiguous: if the Contractor — i.e. Properplates — has a dispute concerning the Contract, the Contractor must submit the dispute to arbitration. Obviously, Properplates has a dispute under the Contract as they deny the allegations of [sic] Complaint and have filed a Counterclaim against Haddads. The matter must be submitted to arbitration.”

But at the Court of Appeals, judges concluded that the contract does not require arbitration of the Haddads’ claims. The appellate court ruled that Indiana Code § 34-57-2-3(f) allows the reversal of the trial court’s previous order and permits the trial court to determine whether to hear the Haddads’ dispute first before sending Properplates’ dispute to arbitration.

“Under the relevant statutes and the plain language of the contract, the trial court did not err in compelling arbitration of Properplates’ claims. However, the contract provision does not compel the Haddads’ claims to arbitration,” Judge Leanna Weissmann wrote. “We therefore reverse its submission of the Haddads’ claims to arbitration and dismissal of the case. We remand for the trial court to consider whether to delay arbitration pending the resolution of the Haddads’ claims.”

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