New York Law Review

Tag: Consolidation of Arbitration

  • The John W. Cowper Co. v. Hires-Turner Glass Co., 49 N.Y.2d 939 (1980): Enforceability of Arbitration Clauses and Consolidation of Arbitration Proceedings

    The John W. Cowper Co. v. Hires-Turner Glass Co., 49 N.Y.2d 939 (1980)

    An arbitration clause in a subcontract, which incorporates terms of a general contract, does not automatically bind the subcontractor to arbitrate disputes under the general contract’s arbitration provision, but the subcontractor may be bound by the results of such arbitration if given the opportunity to participate; consolidation of separate arbitration proceedings is permissible when common issues of law or fact exist.

    Summary

    The John W. Cowper Co. (Cowper), the general contractor, sought to compel Hires-Turner Glass Co. (Hires-Turner), a subcontractor, to arbitrate a dispute. The contract between Cowper and Hires-Turner contained an arbitration clause and referenced the general conditions of the general contract between Cowper and the owner, Clintstone Properties, Inc. The Court of Appeals held that the reference to the general conditions was an exclusion, not an incorporation of the general contract’s arbitration provision. However, the Court found that the Cowper-Hires-Turner contract did contain an arbitration clause requiring arbitration between them. Since Cowper was entitled to arbitrate its indemnification claim against Hires-Turner and was obligated to arbitrate with Clintstone, the court affirmed the consolidation of the two proceedings.

    Facts

    Cowper, as the general contractor, entered into a contract with Clintstone for a construction project. Cowper then subcontracted with Hires-Turner for certain glass work. The subcontract between Cowper and Hires-Turner contained an arbitration clause covering disputes arising under their agreement. A dispute arose between Cowper and Clintstone, leading to arbitration. Cowper then sought to compel Hires-Turner to arbitrate, arguing that the subcontract incorporated the arbitration provision of the general contract.

    Procedural History

    The lower court initially addressed whether Hires-Turner was bound to arbitrate under the general contract’s arbitration clause. The Appellate Division ordered consolidation of the arbitration between Cowper and Clintstone with the arbitration between Cowper and Hires-Turner. Hires-Turner appealed, arguing it was not bound by the general contract’s arbitration agreement. The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    1. Whether the reference in the subcontract to the “general conditions of the general contract” incorporates the arbitration provision of the general contract, thereby binding the subcontractor to arbitrate disputes under that provision.

    2. Whether the court can consolidate separate arbitration proceedings involving common issues of law or fact.

    Holding

    1. No, because the reference in the subcontract to the “general conditions of the general contract” constitutes an exclusion from, rather than an incorporation of, the arbitration provision of the general contract; however the sub-contractor will be bound by the results of arbitration if given the opportunity to present its position to the arbitrators.

    2. Yes, because consolidation is within the court’s discretion when there are common issues of law or fact in the separate proceedings.

    Court’s Reasoning

    The Court of Appeals reasoned that the subcontract’s reference to the general conditions of the general contract was intended to exclude the general contract’s arbitration provision from the subcontract, not to incorporate it. Citing Matter of Fidelity & Deposit Co. of Md. v Parsons & Whittemore Contrs. Corp., (48 NY2d 127) and Matter of Perkins & Will Partnership (Syska & Hennessy), (41 NY2d 1045), the court clarified that while certain paragraphs in the Cowper-Hires-Turner contract incorporated terms by reference, those paragraphs did not constitute an agreement by Hires-Turner to arbitration under the Cowper-Clintstone contract provision. The court emphasized that Hires-Turner would be bound by the arbitration results between Cowper and Clintstone only if Hires-Turner was given the opportunity to present its position to the arbitrators. The court stated that Cowper’s contract with Hires-Turner contains language requiring arbitration between them concerning “interpretation of this agreement or * * * any matters arising under this agreement.” Further, the court held that consolidating the two arbitration proceedings was within the Appellate Division’s discretion, referencing Matter of Vigo S. S. Corp. [Marship Corp. of Monrovia], (26 NY2d 157) and County of Sullivan v Edward, L. Nezelek, Inc., (42 NY2d 123), noting the appropriateness of consolidation when common issues exist.