Subcontract Incorporated Some Of The Prime Contract---But Not Its Arbitration Terms

Wednesday, December 27, 2017 9:32 am
January 2018 - Volume 40 Number 1

Contracts --- Arbitration

Rorick’s Inc. v. Corporex Dev. & Constr. Mgmt., LLC, 2017 Ohio App. Lexis 5133 (Nov. 20, 2017)

A prime contract’s dispute resolution provision---a limited arbitration clause---did not apply to a subcontractor’s project dispute. Rather the subcontract’s unlimited arbitration clause did.

Corporex Development & Construction Management, LLC (Corporex) acted as the owner’s representative on a new hotel construction project in North Canton, Ohio. It hired and entered into a prime contract with Bennett Construction Management (BCM) to manage and direct the project. When BCM abandoned the job, Corporex stepped into its shoes. It directly negotiated with the drywall subcontractor that BCM had hired---Rorick’s Inc. (Rorick)---to stick with the project, and the two parties signed an Assignment and Assumption Agreement. Rorick continued its work, but a dispute arose over Corporex’s reduction of the sub’s scope of work.

Rorick filed a complaint for damages exceeding $100,000, alleging fraudulent inducement, breach of contract, violation of the prompt pay act, promissory estoppel, unjust enrichment, and defamation. Corporex countered with a motion to stay pending arbitration. A trial court denied Corporex’s motion, and this appeal followed.

Corporex’s argument was that Rorick agreed to arbitrate all claims. Rorick countered that, for disputes in excess of $100,000, it was entitled to sue. Figuring out which dispute resolution method applied meant unraveling the many contracts, terms, and incorporations by reference at issue here.

3 contracts, 2 arbitration clauses

First, there was the Prime Contract executed between Corporex and BCM, which contained a limited arbitr[..]