In Guy Roofing, Inc. v. Angel Enterprises, LLC, the plaintiff, a roofing contractor, contracted with the owner of a shopping center to replace the roof. Shortly after beginning work on the project, the original owner sold the shopping center to a subsequent owner. The contract contained an arbitration clause requiring disputes between contractor and owner to be arbitrated. The roofing contractor was not paid for its work and filed suit to recover payment. When the roofing contractor moved to compel arbitration, the subsequent owner opposed its motion arguing lack of privity between the two parties.
The Court found two exceptions to the general rule against compelling arbitration: (1) where the non-signatory party assumes the rights and obligations of the contract; and (2) where the non-signatory party should be forced to arbitrate based on a theory of equitable estoppel. The contract between the roofing contractor and original owner contained a provision preventing assignment of rights and obligations under the contract to someone else without the roofing contractor’s consent. Despite the no-assignment clause, the Court found the subsequent owner was assigned warranty rights under the roofing contract and therefore was bound by the arbitration provision.
The Court further found that the roofing contractor had not waived its right to arbitration by filing suit. The roofing contractor included a demand for arbitration in its complaint and did not learn of the agreements between original and subsequent owner until discovery.
The holding should give roofing contractors a breath of fresh air knowing their arbitration rights are further cemented.
Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation. Regulations and laws may vary depending on your location. Consult with a licensed attorney in your area if you wish to obtain legal advice and/or counsel for a particular legal issue.