| Opinion: | Choctaw Nation v. Robins & Morton Corp., 2022 OK CIV APP 22 |
| Subject matter: | Contracts |
| Date Decided: | September 30, 2021 |
| Trial Court: | District Court of Bryan County |
| Route to this Court: | Robins & Morton sought a review of the trial court’s denial of a Motion to Compel Mediation, Arbitration and Dismiss Litigation. |
| Facts: | In 2015 the Choctaw Nation contracted with R&M for a Construction Management Contract pursuant to which R&M was to provide the Nation construction management services associated with the construction of a medical center. The stated purpose of the contract was for the services of a Construction Manager to provide design consultation on the project among other procedural and managerial responsibilities for the construction project. The dispute clause of the contract stated that if disputes remain unresolved after good faith negotiations between the parties, then either party may initiate a dispute resolution conference. If the dispute cannot be resolved at the conference, then the dispute shall be submitted to the American Arbitration Association. The Nation argued in response to the motion to compel that the arbitration mandate in the Disputes Clause was void under 12 O.S. § 1855(D), which provides that the Uniform Arbitration Act shall not apply to contracts which reference insurance, except for those contracts between insurance companies. The Nation claimed that it would not have entered the contract had there been no insurance provisions in the contract, therefore the insurance provisions and related attachments were essential to the Contract. But the Acceptance of Offer clause did not specifically tie to the insurance provisions. |
| Standard of Review: | “As the party opposing the motion for arbitration, the [Nation] had the burden to ‘show that Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue; an intention discernible from the statute’s text or legislative history or an inherent conflict between arbitration and the statute’s underlying purpose.'” Sparks v. Old Republic Home Protection Co. Inc., 2020 OK 42, ¶ 14 (quoting Thompson v. Bar-S Foods Co., 2007 OK 75, ¶ 8). A trial court’s denial of a motion to compel arbitration is reviewed de novo. Id. |
| Analysis: | The overarching issue facing the Court was the issue of whether the mandatory arbitration clause in the Contract was void under 12 O.S. § 1855(D). The Court had to look at how 1855(D) interplays with the Federal Arbitration Act (FAA) and the McCarran-Ferguson Act, and how 1855(D) is to be interpreted because of them. The FAA preempts any state law limiting the enforcement of arbitration and the United States Supreme Court has emphasized a clear policy favoring arbitration. AT&T Mobility LLC v. Conception, 563 U.S. 33, 339 (2011). The Court determined that the FAA as federal law does preempt state law, but the McCarran-Ferguson Act created exceptions that enable state laws to reverse preempt federal law when the state regulation is about the business of insurance which are subject to the several States which relate to the regulation or taxation of those types of businesses. The case that both sides argued supported their claims was Sparks v. Old Republic Home Protection Co. Inc., 2020 OK 42. The Sparks court held that § 1855 of the FAA is a state law enacted for the purpose of regulating insurance and that the McCarran-Ferguson Act applied precluding the FAA from preempting state law. The Nation argued that the court’s holding supports the proposition that the mention of insurance in a contract results in voiding any arbitration act contained therein. The Court found that the Sparks Court held that, although the home warranty was not explicitly denominated an insurance contract, it was in fact a contract referencing insurance for purposes of Section 1855(D). The focus of the Sparks Court’s analysis was ineluctably to determine the nature of the contract at issue, not to assess whether the home warranty contract merely contained the word “insurance” or a section requiring insurance. The Court’s pursuit must be the same in order for Section 1855(D) to survive preemption. Here, the Court found that R&M’s contract was in its own terms, a contract for “Construction Management Services.” R&M’s duties in the contract made it clear that insurance was not a primary purpose for contracting. The Court held that the Disputes Clause to the contract was valid and enforceable. |
| Outcome: | The trial court’s order denying Robins & Morton Corporation’s motion to compel mediation/arbitration is Reversed, and this matter is Remanded for proceedings consistent with this Opinion. |
| Vote: | 3-0. Swinton, C.J., Bell, J. and Pemberton, P.J. (author) concur. |
| Other: | N/A |