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A New Jersey state court held that a broad arbitration agreement between a general contractor and a homeowner requires the homeowner to also arbitrate disputes against subcontractors when the contract between the general contractor and subcontractor also contains a broad arbitration clause and the general contractor is an indispensable party to the action.
In Bruno v. Mark MaGrann Associates, Inc., No. L-2659-04, 2006 WL 3228596 (N.J. Super. Nov. 9, 2006), Bruno purchased a home from U.S. Homes, the general contractor. When Bruno became dissatisfied with the heating system, he brought suit against U.S. Homes.
The lawsuit against U.S. Homes was subsequently dismissed, and the parties were ordered to arbitrate pursuant to an arbitration clause in their contract. Bruno then brought a suit against two of the subcontractors that were involved with the design and installation of the heating system.
The subcontractors petitioned the Court to compel arbitration. Although there was no contract–and hence no arbitration agreement–directly between Bruno and the subcontractors, the Court compelled arbitration of the dispute.
The Court noted that the arbitration clause in the Bruno/U.S. Homes contract was sufficiently broad to cover Bruno’s complaints about the heating system, and the clause gave U.S. Homes the option to include subcontractors as parties to arbitration.
Additionally, the contracts between U.S. Homes and the subcontractors also contained arbitration clauses that required arbitration of all disputes. As a result, arbitration is the only forum where all three parties could resolve their dispute, and because U.S. Homes was an indispensable party to the lawsuit, the Court held that the dispute between Bruno and the subcontractors must be arbitrated.
Finally, the Court noted that because Bruno’s original complaint against MaGrann contained the same factual allegations as the complaint against the subcontractors, Bruno was estopped from avoiding arbitration.
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