Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Hartford Fire Insurance Company v. Henry Bros. Construction Management Services

August 10, 2011


The opinion of the court was delivered by: Judge Robert M. Dow, Jr.


Before the Court is Defendant's motion to dismiss Plaintiff's complaint in favor of arbitration pursuant to Federal Rule of Civil Procedure 12(b)(6) [16]. For the following reasons, Defendant's motion [16] is respectfully denied.

I. Background*fn1

The instant dispute arises out of a construction project at the Glenbrook South High School in Glenview, Illinois (the "Project"). The Project is owned by the Northfield Township High School District #225 (the "District"). Defendant performed construction management services on the project pursuant to a contract with the District. See Ex. A to Cmplt. (hereinafter the "CM Contract"). The only parties to the CM Contract were the District and Defendant.

Among other things, the CM Contract established certain of Defendant's duties and obligations during the project. ¶ 12. One of the duties that the CM Contract imposed on Defendant was to develop and implement procedures for reviewing and processing payment applications submitted by the various contractors and subcontractors. ¶ 14. In connection with this responsibility, Defendant had an "affirmative obligation to investigate the work performed by the contractors on the Project and make certifications to [the District] that the contractor requesting payment is entitled to payment in the amount certified under the contract documents." ¶ 15. Certifying payment meant that Defendant was certifying to the District that (1) the work in question had progressed to the point indicated in the payment request; (2) the quality of work was acceptable and in accordance with the contract documents; and (3) the contractor requesting payment was entitled to payment under the applicable contract documents. ¶ 16. The CM Contract also required Defendant to gather lien waivers and sworn statements listing subcontractors and materialmen before issuing payment certificates. ¶ 17. After receiving Defendant's certification, the District would pay the approved amounts to the contractors.

The CM Contract is a modified 1992 version of the standard form AIA B801-CMa agreement between an owner and a construction manager.*fn2 Article 8 of the agreement is titled "ARBITRATION" and contains a broad arbitration clause providing that all "[c]laims, disputes or other matters in question between the parties to this Agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration * * *." CM Contract at § 8.1; see generally id. at §§ 8.1-8.4. However, the CM Contract also contained a supplement (called the Supplementary Conditions), which is itself signed and appended at the back of the Contract. The first paragraph of the supplement provides that "[w]here any part of the aforementioned AIA Standard Form of Agreement is modified, deleted, added to or superseded by the Supplementary Conditions, the Supplementary Conditions shall control." On page three of the Supplementary Conditions, the following is found: "ARTICLE - ARBITRATION. Delete Article 8 in its entirety, including paragraphs 8.1, 8.2, 8.3, and 8.4."

However, the CM Contract arguably incorporates another document, which in turn contains an arbitration clause. The cover page of the CM Contract contains a snippet of text that reads: "This document is intended to be used in conjunction with the 1992 editions of AIA Documents B141/CMa, A101/CMa and A201/CMa." Further, § 2.3.2 of the CM Contract is found in the section governing "Scope of Construction Manager's Basic Services" and provides as follows:

"§ 2.3.2 The Construction Manager shall provide administration of the Contracts for Construction in cooperation with the Architect as set forth below and in the edition of AIA Document A201/CMAa, General Conditions of the Contract for Construction, Construction Manager-Adviser Edition, current as of the date of this Agreement."

The Supplementary Conditions, at page 1, delete the clause "current as of the date of this Agreement" and replaces it with "1992 edition."

Plaintiff did not attach the AIA Document A201/CMAa to its complaint. However, Defendant attached AIA Document A201/CMAa as an exhibit to its motion to dismiss, and directs the Court to § 4.9 of that document, which is a broad arbitration clause. See Def. Ex. 1 at § 4.9 ("Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration * * *.").*fn3

Grace Electrical Construction Corporation ("Grace") is a contractor that performed electrical work on the project under Defendant's supervision. Grace, too, contracted directly with the District. See Ex. B to Cmplt. (hereinafter the "Grace Contract"). The only parties to the Grace Contract were the District and Grace. The Grace Contract also was based on an AIA standard form-AIA Document A101/CMa, which was the "Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum." Unlike the CM Contract, the Grace Contract did not appear to explicitly include an arbitration provision. However, the front page of the Grace Contract contained the following text: "The 1992 Edition of AIA Document A201/CMa, General Conditions of the Contract for Construction, Construction Manager-Advisor Edition is adopted in this document by reference. Do not use with other general conditions unless this document is modified." As discussed above, § 4.9 of AIA Document A201/CMa contains a broad arbitration clause.

Illinois law required Grace to provide a performance and payment surety bond to secure its performance of the Grace Contract and its payment of certain subcontractors, laborers, and materialmen. On May 29, 2007, Plaintiff issued a bond on behalf of Grace for the project. See Ex. C to Cmplt. ("Performance Bond").*fn4 In exchange for the bond, Plaintiff required Grace to execute a general indemnity agreement.

During the course of performance of the Grace Contract, Grace submitted three payment applications to Defendant. Plaintiff alleges that Defendant certified work included in these payment applications which Grace either did not perform, performed defectively, and/or performed in an untimely manner. ¶ 39. In reliance on Defendant's certification of the payment applications, the District paid Grace a total of $731,880. ¶ 40.

On or about December 4, 2007, due to a financial hardship, Grace ceased work on the project and sent the District a letter terminating its rights under the Grace Contract. Grace had not achieved substantial completion of the Grace Contract at that time. Further, Grace had failed to pay numerous of its project vendors and had ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.