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FAA Overruled State Law In Arbitration Clause Dispute

Tuesday, July 03, 2018 10:55 am


Contract Breach --- Arbitration

U.S. ex rel. Red Hawk Contr., Inc. v. MSK Constr., 2018 U.S. Dist. Lexis 80019 (M.D. N.C. May 8, 2018)

The court ruled that an arbitration clause between a South Carolina general contractor and a North Carolina sub was enforceable based on federal statutes.

MSK Construction, Inc. (MSK) was the general contractor on a Department of Veterans Affairs (VA) construction project in Durham, North Carolina. MSK entered into a $400,000 subcontract with Red Hawk Contracting, Inc. (Red Hawk) for services including demolition, earthwork, and sewerage and drainage installation.

After performing its work on the project, Red Hawk filed a contract claim against MSK for contract breach (or, alternatively, unjust enrichment) for "failing to fully pay for materials, equipment and labor," as well as demanding that the sub work outside the subcontract's scope, failing to maintain the project schedule, asserting wrongful back charges, and wrongfully terminating the subcontract. Red Hawk sought $80,000.

MSK responded by filing a motion to dismiss or stay Red Hawk's claim because the subcontract contained an arbitration clause. The court granted MSK's motion to stay until arbitration but denied its motion to dismiss completely.

'Diversity of citizenship' not enough to invoke arbitration act

MSK argued that the subcontract's arbitration clause, which was premised on South Carolina's Uniform Arbitration Act (S.C. Code Ann. 15-48-10), deprived the North Carolina court of subject matter jurisdiction.


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