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A federal court in North Carolina construed an arbitration clause in a construction contract as not requiring arbitration unless the parties agreed to mediate their dispute.
In Perdue Farms, Inc. v. Design Build Contracting Corp., No. 3:06CV245, 2007 WL 87667 (W.D.N.C. Jan. 9, 2007), Perdue and Design entered into a construction contract. The parties made modifications to the arbitration and mediation provisions in the preprinted contract. When Perdue sued for breach of contract, Design moved to compel arbitration.
In modifying the preprinted contract, the parties eliminated a broad arbitration clause. However, one remaining section of the agreement stated that "[c]laims not resolved by mediation shall be decided by arbitration." Another section stated that mediation must me mutually agreed to by the parties.
The Court construed the modified contract as requiring arbitration only if the parties mutually agreed to mediation. Since there was no agreement to mediate, the Court denied Design's motion to compel arbitration.
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