Opposition Brief — Active Erectors & Installers, Inc. v. Hoffman Construction Co.

| Supreme Court, U.S. |

FILED

JAN 7 1993

No. 92-869 OFFICE OF THE CLK |

In The

Supreme Court of the United States

October Term, 1992

.

ACTIVE ERECTORS & INSTALLERS, INC.,

a Washington Corporation,

Petitioner,

V.

HOFFMAN CONSTRUCTION COMPANY OF OREGON,

an Oregon Corporation,

Respondent.

*

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

¢

BRIEF IN OPPOSITION

¢

MicHaEL E. KREGER

Perkins Coie

1029 West Third Avenue

Suite 300

Anchorage, Alaska 99501

(907) 279-8561

COCKLE LAW BRIEF PRINTING CO, bo 225-6964

OR CALL COLLECT (402) 342-283

QUESTIONS PRESENTED

1. Whether the federal court may determine if a

waiver of an agreement to arbitrate has occurred.

2. Whether the Ninth Circuit Court of Appeals, on

the facts before it, properly determined that Active had

waived its right to arbitration of RICO claims against

Hoffman.

ii

LIST OF PARTIES

The caption of the case in this Court contains the

names of all parties. Hoffman Corporation is the parent

company of Respondent Hoffman Construction Company

of Oregon.

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ili

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .............-eeeeeeeeee iv

e. . 8. |. 06) nna nen 1

JURISDICTION .... 0... ccc ccc cece eee e teen eee e eee 1

reser rere eee Tee ee eee ee 1

Ec cake gee nec ns bees es aceesestenvananss 5

I. Reasons For Denying The Petition For Cer-

IE wa cea SAA Ned pak eccecernscesscssenacecess 5

A. The Ninth Circuit Court Of Appeals’ Deci-

sion Regarding Waiver Of The Right To

Arbitrate Is Not In Conflict With The Deci-

sions Of Other Courts Of Appeals ....... 5

B. There Is No Conflict With This Court's

Applicable Decisions ........-.--++++++++> 6

C. The Ninth Circuit Properly Decided A Fact-

Specific Issue .........--.- 2s eee eee eee 8

Cn ccc accu msec ncacscuessecesssccnes 12

iv

TABLE OF AUTHORITIES

Page

CAsES

Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693

F.2d 1023 (11th Cir. 1982)..........ccceee essences 5, 6

Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d

DD TUFF ia vane ko ccdcwcscscanetscansecesstsunseeses 11

Conticommodities Services v. Phillip & Lyon, 613 F.2d

bee Ee’ Foe) | rer Terre rere tre re errr 6

Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105

S.Ct. 1238, 84 L.Ed.2d 158 (1985)............----- 6, 7

Dickinson v. Heinold Securities, Inc., 661 F.2d 638

lls Cie, BOD n cca ince cecccsvewecsantesscessss 7

Fisher v. A. G. Becker Paribas, Inc., 791 F.2d 691 (9th

CO FO anne seece ce scanscnnsadsyucedecsssecsecs 5

General Atomic Company v. Felter, 436 U.S. 493, 98

S.Ct. 1939, 56 L.Ed.2d 480 (1978)........-..-----5-- 7

Hoffman Construction Company of Oregon v. Active

Erectors & Installers, Inc., 969 F.2d 796 (9th Cir.

Nak sine thd oss nkebed hanced skaeetaceenxerees 1, 8, 10

Hoxworth v. Blinder, Robinson & Co., Inc., __ F.2d

__, 1992 WL 356747 (3rd Cir. 1992) ...........---- 6

John Morrell & Company v. Local Union 304A of the

United Food & Commercial Workers AFL/CIO, 913

F.2d 544 (8th Cir. 1990)...........cccceeeeeeeeecees 8

Lou v. Belzberg, 834 F.2d 730 (9th Cir. 1987) .......--. 9

Miller Brewing Company v. Fort Worth Distributing

Company, 781 F.2d 494 (5th Cir. 1986)...........--. 7

Vv

TABLE OF AUTHORITIES - Continued

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444

(|) PP eeeererrr Tree te ee

Moses H. Cone Memorial Hospital v. Mercury Const.

Corp., 460 U.S. 1, 74 L.Ed.2d 765, 103 S.Ct. 927

1" RN i ress ee

Shearson/American Express, Inc. v. McMahan, 482

U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987)

Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d

Vid Ce Ce NO iiss cvkcticst ieee

Sparling v. Hoffman Construction Co., 864 F.2d 635

RT AN iain caraextayeenareeine eres:

Telephone Workers Union of New Jersey Local 827 v.

New Jersey Bell Telephone, 584 F.2d 31 (3d Cir.

OE LOONIE PEELE NLT AD

STATUTE

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Page

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OPINIONS BELOW

The opinion of the court of appeals (Pet. App. i-xxii)

is reported at Hoffman Const. v. Active Erectors & Installers,

969 F.2d 796 (9th Cir. 1992). The findings of fact, conclu-

sions of law and partial final judgment of the district

court (Pet. App. I-lx) are unreported.

a

JURISDICTION

The judgment of the court of appeals was entered on

July 8, 1992. A petition for rehearing was denied on

August 20, 1992. The petition for a writ of certiorari was

filed on November 11, 1992. The jurisdiction of this Court

is apparently invoked by Petitioner under 28 U.S.C.

1254(1).

STATEMENT

For its Statement, Respondent incorporates pertinent

portions of the decision of the court of appeals, 969 F.2d

796, at pages 797-798:

in October 1983, Hoffman and the Kenai

Peninsula Borough entered into a contract for

the construction of a high school in Homer,

Alaska. Hoffman then subcontracted the struc-

tural steel work to Active. The contract between

Hoffman and Active provided that disputes

between them that did not involve the conduct

of the property owner had to be arbitrated

unless they agreed otherwise.

A dispute subsequently arose among the

Borough, Hoffman, and Active concerning cost

overruns. In December 1984, Active sued Hoff-

man in federal court asserting, among others, a

RICO claim. In February 1985, Active demanded

arbitration against Hoffman. On April 15 of that

year, Active wrote a letter to Hoffman asserting

that Active was prepared to “bring[] all of the

monetary claims of Active against Hoffman”

arising out of the construction project in Alaska

state court. (Emphasis added). The letter, how-

ever, also stated that the RICO claim, along with

two other claims would remain in federal court.

Active further informed Hoffman that it would

dismiss its arbitration demand as soon as Hoff-

man assured Active that it would not change its

position “that all claims against it may be tried

[in state court].”

In May 1985, the district court dismissed the

federal suit on the ground that the claims

should have gone to arbitration instead of to

federal court. We subsequently affirmed the dis-

missal in Sparling v. Hoffman Construction Co.,

864 F.2d 635 (9th Cir. 1988).

In December 1985, Active brought its

Alaska state suit without any RICO claim. Thus,

as of the time the state suit was initiated, the

federal district court had dismissed the RICO

claim (along with all the other claims), and no

RICO claim had been asserted in any state court

proceeding. Then, when Hoffman responded to

the state suit and did not raise the issue of

arbitration, Active, in March 1986, withdrew its

arbitration request. The state court case was

tried in July and August of 1987, and in March

1988 the superior court entered judgment in

favor of Active.

We issued our opinion in Sparling in Decem-

ber 1988. We affirmed the district court on the

ground that Active had agreed to submit its

claims to arbitration. In January 1989, shortly

after this opinion was issued, Active filed a new

demand for arbitration of its RICO claim. Hoff-

man brought this suit in federal district court

seeking declaratory and injunctive relief to pre-

vent such an arbitration from proceeding. The

district court ruled in favor of Hoffman. The

court held that the RICO claim had always been

arbitrable under the agreement, and that by pro-

ceeding in state court without a RICO claim,

having waived arbitration to get into state court,

Active was precluded from adjudicating the

RICO claim in a new arbitration.

In its Statement, at page 9, Petitioner asserts that it

was “effectively enjoined” and “legally barred” from

arbitrating its claims as a result of a state court injunction

issued on April 15, 1985 (Pet. 9; see also Pet. 15). To correct

this inaccuracy, Hoffman sets out, verbatim, the pertinent

findings of fact made by the district court below as fol-

lows:

3. The subcontract between Hoffman and

Active created two categories of claims which

were potentially to be resolved in two different

forums. Claims “on account of acts or omissions

of the owner” were required to be litigated in

Alaska Superior Court. Claims directed against

Hoffman were subject to arbitration if a demand

for arbitration was filed within 30 days of Hoff-

man’s decision regarding a subcontractor’s

claim.

6. Active also filed a demand for arbitra-

tion on February 4, 1985, in which it asserted

claims both against Hoffman directly, pursuant

to paragraph XV(d) of the subcontract, and

claims “on account of acts or omissions of

owner, or his representatives,” pursuant to para-

graph XV(b) of the subcontract.

7. Hoffman then filed a declaratory judg-

ment action in the Alaska Superior Court at

Kenai and moved to enjoin Active from pursu-

ing the paragraph XV(b) claims in arbitration.

8. By order dated April 11, 1985, the

Alaska Superior Court enjoined Active from

pursuing arbitration of claims arising under

paragraph XV(b) of the subcontract. A copy of

the April 11, 1985 order is attached as Exhibit C

to Bringman Aff. in Support of Preliminary

Injunction (“Bringman Aff.”)

9. The April 11, 1985 order did not, how-

ever, enjoin arbitration of claims against Hoff-

man under paragraph XV(d) of the contract,

based upon the alleged actions of Hoffman, and

Active remained free to pursue its paragraph

XV(d) claims in arbitration.

Appendix li-liii; see also Appendix xxix-xxxi.

The remainder of Petitioner’s Statement is argument.

To the extent a response is required, it will be addressed

in Respondent’s Argument.

¢

ARGUMENT

I. Reasons For Denying The Petition For Certiorari.

A. The Ninth Circuit Court Of Appeals’ Decision

Regarding Waiver Of The Right To Arbitrate Is

Not In Conflict With The Decisions Of Other

Courts Of Appeals

The court of appeals’ decision that Active waived its

right to demand arbitration does not conflict with the

decisions of any other circuit court regarding the court’s

adjudicative authority to determine that a party has

waived an agreement to arbitrate. Shearson Lehman Hut-

ton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir. 1991), cited by

Petitioner, at 24, supports the proposition that the court

may determine that a waiver has occurred. In Shearson,

the Second Circuit analyzed whether a party’s delay in

seeking arbitration and its use of discovery in other fed-

eral actions resulted in waiver. 944 F.2d at 122. In so

doing, the Second Circuit, like the Ninth Circuit in Fisher

v. A. G. Becker Paribas, Inc., 791 F.2d 691 (9th Cir. 1986),

and in this case below, implicitly concluded that it has the

adjudicative authority to make a determination of

whether there is an enforceable right to arbitrate.

Similarly, the Eleventh Circuit’s decision in Belke v.

Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023 (11th

Cir. 1982), is consistent with Fisher and with this case. In

Belke, the Eleventh Circuit carefully analyzed whether a

waiver had occurred. As in Shearson v. Wagoner, the deci-

sion confirms a court’s authority to determine whether a

waiver has occurred. See generally, Hoxworth v. Blinder,

Robinson & Co., Inc., __ F.2d __, __, 1992 WL 356747,

13-15 (3rd Cir. 1992) (citing cases). Stated in brief, the

assertion that the Ninth Circuit’s decision is in conflict

with rulings in other circuits is belied by the very cases

cited by Petitioner.

Conticommodities Services v. Phillip & Lyon, 619 F.2d

1222 (2d Cir. 1980), cited by Petitioner at 24, is also inapt.

This case involved an untimely demand for arbitration.

Untimeliness is a procedural defense. Untimeliness does

not go to the existence of an enforceable agreement to

arbitrate. See Belke v. Merrill Lynch, Pierce, Fenner & Smith,

693 F.2d at 1028.

B. There Is No Conflict With This Court’s Applica-

ble Decisions.

The suggestion that the court of appeals’ decision

conflicts with any decisions of this Court is also mistaken.

Petitioner first implies that the Ninth Circuit’s decision in

this case is inconsistent with this Court’s decision in Dean

Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238,

84 L.Ed.2d 158 (1985). Byrd resolved a conflict in the

circuits over whether arbitrable issues may be inter-

twined with nonarbitrable issues triable in federal court.

Id. The waiver of arbitration was not at issue in Byrd.

In Moses H. Cone Memorial Hospital v. Mercury Const.

Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), this

Court stated that a federal court properly determines

allegations of waiver, delay, or like defenses to arbitra-

bility. 460 U.S. at 26, 103 S.Ct. at 941. In Moses H. Cone,

this Court cited Dickinson v. Heinold Securities, Inc., 661

F.2d 638, 643 (7th Cir. 1981), as an illustration of a lower

court’s resolving doubts about arbitrability. See Moses H.

Cone, 460 U.S. at 26, n.31, 103 S.Ct. at 941, n.31. Notably,

in Dickinson, the Seventh Circuit addressed whether a

waiver of right to compel arbitration had occurred as a

result of acts inconsistent with the arbitration right. 661

F.2d at 641.

Further, in General Atomic Company v. Felter, 436 U.S.

493, 98 S.Ct. 1939, 56 L.Ed.2d 480 (1978) (per curiam), this

Court acknowledged a lower court’s discretion to make

findings concerning whether a party had waived. any

right to arbitrate. 436 U.S. at 497, 98 S.Ct. at 1940. In sum,

there is no conflict between the decision below and this

Court’s decisions regarding the federal court’s proper

determination of a wavier of the agreement to arbitrate.

See generally, Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, 473 U.S. 614, 626, 105 S.Ct. 3346, 3353-54, 87

L.Ed.2d 444 (1985) (a court determines the parties’ inten-

tions by applying the federal substantive law of arbitra-

bility).

Petitioner also implies that this Court’s decision in

Dean Witter Reynolds, Inc. v. Byrd precludes a court from

finding that the state court judgment had preclusive

effect on the arbitration of the RICO claim. Byrd has no

bearing on this issue and is not inconsistent with the

decisions of courts which have held that a prior state

court adjudication precludes re-litigation of claims in a

subsequent arbitration. See Miller Brewing Company v. Fort

Worth Distributing Company, 781 F.2d 494, 501 (5th Cir.

1986); Telephone Workers Union of New Jersey Local 827 v.

New Jersey Bell Telephone, 584 F.2d 31, 33-34 (3d Cir. 1978);

John Morrell & Company v. Local Union 304A of the United

Food & Commercial Workers AFL/CIO, 913 F.2d 554 (8th Cir.

1990).

C. The Ninth Circuit Properly Decided A Fact-

Specific Issue.

In its Sections 2, 3 and 4, pages 31-42, petitioner

disputes the Ninth Circuit’s application of the law of

waiver to this case. There is no suggestion that the Ninth

Circuit did not apply the correct law. Instead, Petitioner

takes issue with the Ninth Circuit’s view of the facts. The

Ninth Circuit’s interpretation of the facts and application

of the facts to the law is correct and does not raise an

important issue for review by this Court.

Active argues that the Ninth Circuit erred in conclud-

ing that Active had knowledge of the right to compel

arbitration (Pet. 32). The Ninth Circuit properly con-

cluded that Active had knowledge of the right to compel

arbitration of the RICO claim since both the subcontract

and a federal court had informed Active of the arbitra-

bility of its claim. See Hoffman Construction Company v.

Active Erectors & Installers, 969 F.2d at 798 (citing factual

record).

Apparently in reference to the April 11, 1985 injunc-

tive order, Active asserts “it knew it could not arbitrate”

the RICO claim between February 22, 1985 and March 10,

1988.1 The court of appeals’ opinion below did not

address the scope or the effect of the state court’s injunc-

tion, perhaps because Active did not argue in its briefs

below that the state court enjoined Active from arbitrat-

ing RICO claims against Hoffman. Active cannot raise an

argument not presented to or decided by the court of

appeals. Further, Active has misstated the effect of the

state court injunction. The federal district court below

analyzed the effect of the state court’s April 11, 1985

injunctive order. It found:

9. The April 11, 1985 order did not, how-

ever, enjoin arbitration of claims against Hoff-

man under paragraph XV(d) of the contract

based on the alleged actions of Hoffman, and

Active remained free to pursue its XV(d) claims

in arbitration.

Pet. App. liii. Active’s “knowledge” is contradicted by

the record.

Active also asserts the Ninth Circuit erred in finding

that Active had knowledge of an existing right to compel

arbitration because the Ninth Circuit had not affirma-

tively held that the statutory cause of action in RICO was

arbitrable until Lou v. Belzberg, 834 F.2d 730, 735-736 (9th

Cir. 1987). Prior to Lou v. Belzberg, there was, as the Ninth

Circuit stated, no precedential barrier to bringing the

claim. The fact that the Supreme Court had not yet

definitively affirmed the arbitrability of RICO claims did

not vitiate the conclusion that Active was aware its claim

was arbitrable. 969 F.2d at 798, citing Shearson/American

1 February 22, 1985 is the date that the motion for prelimi-

nary injunction in state court was filed. See Pet. at 6.

10

Express, Inc. v. McMahan, 482 U.S. 220, 238-242, 107 S.Ct.

2332, 2343-46, 96 L.Ed.2d 185 (1987). Equally important,

the status of the law was resolved well prior to Active’s

final judgment in the state court. 969 F.2d at 799.

Although Active now asserts that uncertainty over the

state of the law explains its election of claims against

Hoffman in state court, other facts explain the decision as

well. Cf. Transcript, Pet. App. xxxiv-xxxv (addressing

Active’s potential trial strategy).

Active now asserts that it “withheld its RICO claims”

from the state court action without any objection by

Hoffman. Pet. 35. Hoffman never acquiesced to Active’s

splitting of its claims against it. To the contrary, Hoffman

told Active that all of Active’s claims could be brought in

the Alaska state court action. 969 F.2d at 798. See also Pet.

App. liv (“11. In a series of letters, Hoffman and Active

agreed to permit Active to bring all of its claims against

Hoffman under the subcontract on the Alaska Superior

Court action, rather than assert paragraph XV(b) claims

in one forum and paragraph XV(d) claims in another.”).

Based on that assurance, Active told Hoffman that it

would prepare pleadings to bring “all of its monetary

claims of Active against Hoffman in the Alaska state

court.” Id.; see also Appendix liv, { 12. Active further

informed Hoffman that it would dismiss its arbitration

demand as soon as Hoffman assured Active that it would

not change its position that “all claims against it may be

tried in state court.” Id. Active then, in December of 1985,

brought its claims in state court and later withdrew its

demand for arbitration. By the time it brought its claims

in state court, Active’s federal court action had been

dismissed for nearly six months. See 969 F.2d at 798.

11

Hoffman had no reason nor obligation to believe that

Active had not then brought all of its claims in the Alaska

state court.

Active asserts that the Ninth Circuit incorrectly

decided that Hoffman was prejudiced because Active did

not receive all of the monetary judgment against Hoff-

man, some portion going instead to pay Active’s lawyers

and experts. It was not inappropriate for the court of

appeals to consider the final judgment in determining

whether Hoffman had been prejudiced. As Active con-

cedes, both sides spent enormous funds in the state court

litigation. The court need not evaluate how successful

Active was in its state court litigation to find that litiga-

tion of arbitrable issues to final judgment was prejudicial

to Hoffman.

The further suggestion that Hoffman was not preju-

diced since its subcontract with Active envisioned bifur-

cated litigation is inaccurate. The subcontract required

subcontractor claims against the owner to be made

according to the owner’s dispute resolution procedures in

the Hoffman/Owner contract, namely, litigation. Sub-

contract, XV(b) (Pet. App. cx); see also Pet. App. li. The

subcontract provides that claims by Active against Hoff-

man were arbitrable. Id. Hoffman did not agree to defend

claims against it in separate proceedings. Quite the con-

trary, Hoffman limited remedies against it to one forum.

See 969 F.2d at 799.

Finally, Active asserts that the Ninth Circuit’s result

is contrary to the decision in Conley v. Gibson, 355 U.S. 41,

48, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Liberal rules of

pleading are not at issue in this case. Active was told by

12

the district court it had a right to arbitrate RICO claims

against Hoffman. Active agreed to bring all of its arbitra-

ble claims against Hoffman in state court litigation.

Active sued both Hoffman and the owner’s architects in

state court. The Ninth Circuit Court of Appeals correctly

determined that Active waived its right to demand arbi-

tration in favor of litigation in the state court.

As the foregoing discussion illustrates, this case

involves the construction of an agreement by the parties

to join all of the subcontractor’s claims in one forum. The

- decision is the correct interpretation of the facts of that

agreement. No important federal questions are raised by

the decision.

’

CONCLUSION

The petition for a writ of certiorari should be denied.

January 8, 1993.

Respectively submitted,

MICHAEL E. KREGER

Respondent's Attorney