Texas Supreme Court Agrees to Decide Whether Construction Dispute Should be Arbitrated

The Supreme Court of Texas has agreed to review whether an arbitration clause applies to a construction dispute between a developer, a builder, an architectural firm, and others.  In G.T. Leach Builders, L.L.C. v. Sapphire VP, LP, No. 13-0497, a condominium complex was destroyed by a hurricane while still under construction.  Prior to the hurricane, the builder, G.T. Leach, apparently allowed its insurance coverage to lapse.  As a result, the builder lacked sufficient funds to rebuild the condominium project or make the owner whole again.  In response, the developer, Sapphire, filed a lawsuit for breach of contract and negligence in Cameron County against the builder.

About two years later, Sapphire filed a separate negligence case against the architectural firm that designed the condo project.  The architectural firm then filed a motion to designate G.T. Leach and a number of other construction defendants as responsible third parties.  After the trial court granted the company’s motion, Sapphire amended its complaint to add the construction defendants as parties to the case.  Eventually, each party agreed to a discovery plan that included a deadline for alternative dispute resolution and amendments.

Later, the builder served Sapphire with a demand for arbitration based on a provision in G.T. Leach’s contract with the owner of the condo project.  The other defendants filed similar motions and sought to join the builder’s motion to compel arbitration in the dispute.  In response, the developer challenged the parties’ various motions by arguing the other defendants’ demand for arbitration should be denied.  According to Sapphire, it only agreed to arbitrate disputes with G.T. Leach.  In addition, the developer argued that the builder’s conduct in preparing for trial waived the company’s right to request arbitration.  Finally, the owner of the condo project claimed arbitration was not appropriate because a provision in the parties’ general contract stated neither company could demand arbitration after the statute of limitations expired.

In December 2011, the Cameron County court denied the parties’ motion to compel arbitration.  In response, the defendants filed an interlocutory appeal with Texas’ Thirteenth District Court of Appeals in Corpus Christi.  In May of last year, the appeals court affirmed the Cameron County court’s decision and the parties filed a petition for review with the Supreme Court of Texas.  On August 22nd, the high court agreed to hear the case.  Oral argument is currently set for November 5th at 9 a.m.

Please stay tuned to Disputing for future developments in this case.

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