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A Texas Court of Appeals has ruled that the conduct of a party involved in a construction dispute effectively implied an agreement to arbitrate, even though that party had not signed any agreement so to do.
In P. McGregor Enterprises, Inc. v. Denman Building Products, Ltd., No. 07-05-0385-CV, 2007 WL 1201545 (Tex. App. Apr. 24, 2007), P. McGregor Enterprises, Inc. (PME) had contracted with Denman Building Products, Ltd. (Denman) to provide a substantial portion of materials and labor for a hotel construction project. The hotel was built for Inn II, which was controlled by Angela McGregor, wife of PME owner, Paul.
Citing inflated costs, PME refused to pay $350,000 of the contract price to Denman. Invoking an arbitration clause in its contract with PME, Denman brought into arbitration not only PME, but also Paul and Angela McGregor individually, and Inn II.
The arbitrator found for Denman, awarding the outstanding contract balance, plus interest and attorneys fees. Because Denman held a lien, the hotel was ordered sold. After the trial court confirmed the award, the McGregors and Inn II sought to have it vacated, claiming that they had never signed and agreement to arbitrate.
In rejecting this argument, the Court noted that an agreement to resolve a dispute through arbitration can be implied through a party's conduct. Given that the McGregors and Inn II had fully participated in the arbitration process, and never objected to the arbitrator's jurisdiction, the Court found such an agreement effectively implied.
Though agreeing with PME that the award of post-arbitration attorney's fees was not allowed by the Federal Arbitration Act, the Court affirmed the judgment as modified.
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