Arbitration – Construction Subcontracts – Conflicting Provisions – Construed against Drafter

Listen to this article

In this litigation arising out of a subcontractor’s (defendant IES Commercial Inc.) alleged failure to pay for the work of a sub-subcontractor (plaintiff Greenwood Inc.), the dispute resolution clause in the contract between the parties, which was drafted by IES (the Greenwood subcontract) provides that, if either party refuses to arbitrate a dispute, then the matter can be resolved through litigation. However, the parties’ contract also contains a “flow-down clause,” purportedly incorporating by reference IES’s agreement with the general contractor (the master subcontract), and the master subcontract requires the arbitration of most disputes. This creates an ambiguity, which we construe against the drafter; consequently, we conclude that the parties did not agree to arbitrate their disputes.

We affirm the district court’s denial of IES’s motion to compel arbitration.

IES tries to harmonize the conflicting provisions, reasoning that the dispute resolution provision in the Greenwood subcontract permits arbitration if the parties agree to arbitrate, and the decision to incorporate the master subcontract’s arbitration clause—by way of the flow-down clause—reflects that the parties so agreed. But this interpretation would render much of the dispute resolution provision meaningless. Thus, we are unpersuaded by IES’s attempt to explain away the obvious conflict between these two provisions.

Affirmed.

Greenwood Inc. v. IES Commercial Inc. (Lawyers Weekly No. 003-009-23, 6 pp.) (Per Curiam) No. 22-1795. Appealed from USDC at Greenville, S.C. (Donald Coggins, J.) Andrew Bender for appellant; Kyle Dillard and Vanessa Garrido for appellees. 4^th Cir. Unpub.