In construction law, contracts are at the heart of our business; contracts between: owners and architects; owners and general contractors; contractors and subcontractors; and subcontractors and sub-subcontractors. Contract language often determines the path of dispute resolution, with arbitration clauses playing a prominent role. In Dichele v. Goldsmith, 2014 Conn. Super. LEXIS 1889 (Conn. Super. Ct. July 30, 2014) the Connecticut Superior court has broadened the reach of arbitration clauses to allow certain defendants who are not parties to a contract the right to compel arbitration when their claims are related to the contract dispute. While this seems complicated, the court’s lessons can be explained through a simple illustration.
Let’s pretend for a moment that Snow White owned a diamond mine and had a contract with Grumpy. She had a contract with Grumpy that in exchange for her cooking and cleaning for him, he would mine diamonds for her. As part of the contract, they agreed to arbitrate any disputes. While things were going well initially, it wasn’t long before Snow White believed that Grumpy was selling her diamonds to Sneezy and Dopey. She got mad, and sued all three of them. Sneezy and Dopey didn’t want to go to court. They thought arbitration was a better idea, so they filed a motion claiming they had the same arbitration rights as Grumpy under his contract with Snow White. Snow White disagreed. After all, she wasn’t doing business with Sneezy and Dopey, she was doing business with Grumpy, so only Grumpy should have the right to arbitration under their contract. Sneezy and Dopey believed that their claims were intertwined with Snow White’s claims against Grumpy, so they should all share the right of arbitration.
The court agreed with Sneezy and Dopey. How could they decide if Sneezy and Dopey were guilty of possessing Snow White’s diamonds, without deciding if Grumpy took them to begin with? The issues were so related, that even though Sneezy and Dopey didn’t sign the contract with Snow White, it was as if they did for the purposes of arbitration. So, Sneezy and Dopey got their wish and the court allowed arbitration for all parties.
It is well established that Connecticut courts encourage arbitration; and when contract provisions for arbitration fall within the “grey area,” the scale often tips to the side favoring arbitration. See State v. Philip Morris, Inc., 279 Conn. 785, 796, 905 (Conn. 2006). The Dichele case in particular, illustrates that a court might even extend the use of arbitration when a party who might not otherwise be entitled to arbitrate, requests it. Notably, like the Snow White case, in Dichele, the court did not force anyone to arbitrate who had not already agreed to do so.
A Diamond in the Rough?
Prior to Dichele, arbitration may not have seemed like a viable option to a defendant who didn’t sign the disputed contract containing an arbitration clause. However, the Dichele ruling suggests that in some cases, a non party to an agreement to arbitrate may actually be holding a contractual diamond in the rough. If the non party can show that the causes of action to resolve the contract case are so related to its own claim, as to be considered “intertwined,” the non party may be entitled to benefit from the use of the contract’s arbitration clause and compel a party to the agreement to arbitrate.