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The Florida District Court of Appeal held that a building contractor waived its right to demand arbitration of a counterclaim by commencing the underlying litigation. In the case, the contractor demanded arbitration of the owner’s counterclaim, which arose under a “Project Completion Agreement” (PCA), while simultaneously attempting to litigate its claims under the construction contract.
In Twin Oaks at Southwood, LLC v. Summit Constructors, Inc., No. 1D06-3913, 2006 WL 3371495 (Fla. Dist. Ct. App. Nov. 22, 2006), Summit Constructors, Inc. (Summit), the contractor, sued Twin Oaks, the owner, seeking payment for a construction project. The parties had initially entered into a construction contract and later entered into the PCA, which incorporated the terms of the construction contract.
When Twin Oaks brought a counterclaim under the PCA, Summit filed a motion to compel arbitration. In opposing the motion, Twin Oaks argued that Summit waived its right to demand arbitration by bringing suit under the construction contract. Summit argued there was no waiver because the construction contract and PCA were separate agreements. The trial court agreed and granted the motion to compel arbitration.
On appeal, the Court reversed the trial court and held that Summit had waived its right to demand arbitration. The Court found that the construction contract and PCA were not separate agreements because the PCA could not stand on its own. In reaching its holding, the Court noted “Florida’s strong public policy preference for arbitration” and the inefficiency of resolving the claim and counterclaim in two separate forums.
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