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G-Boys Excavating, Inc. v. Choate Construction Company

A-1243-05T2 (N.J. Super. App. Div. 2006) (Unpublished)

AGREEMENTS; ARBITRATION; ATTORNEYS FEES—Just because a fee shifting provision in an agreement makes reference to law suits does not mean that law suits are an alternative to the provisions of a mandatory arbitration provision within the agreement.

A contract between a general contractor and its subcontractor contained an arbitration provision reading, in part: “Any claim, dispute or controversy between Contractor and Subcontractor, shall be conclusively resolved and settled as follows: Subcontractor shall be conclusively be bound by and abide by Contractor’s decision, unless Subcontractor shall timely commence arbitration proceedings… .” The contract also contained a provision dealing with “the payment of attorneys’ fees and litigation expenses to the ‘prevailing party’ in the event of arbitration proceeding or a lawsuit between the parties.” This provision stated, in part: “Should either party to this Agreement demand arbitration or institute a lawsuit to enforce any of the provisions hereof, to protect its interest in any matter arising under the Subcontract, to collect damages for the breach of the Subcontract, or to recover on a surety bond given by a party to the Subcontract, the prevailing party shall be entitled to recover, and the losing party agrees to pay, all reasonable attorneys’ fees, costs, charges, and expenses expended or incurred therein.”

The lower court “concluded that [the] arbitration provision was rendered ambiguous by [the attorneys’ fee provision].” On appeal, the Appellate Division concluded otherwise. In doing so, it found no reason to extend the coverage of the fee-shifting provision’s reference to “a lawsuit” to mean that litigation was an alternative to arbitration. According to the Court and to the Contractor, “there are various kinds of legal proceedings that could be brought by the parties to the contract that would not be subject to the mandatory arbitration provision ..., and therefore could be the subject of a ‘lawsuit,’ including an action by either party for confirmation or vacation of an arbitration award, [or] an action such as [this particular case] in which [the Subcontractor had] attempted to bypass the arbitration clause of the Contract… .”

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