Hawaii District Court Compels Arbitration of Only Part of a Claim Where There Was a Clear Agreement to Arbitrate

In this matter, plaintiff Marisco Ltd. hired defendant GL Engineering & Construction (GL E&C) to construct and deliver a floating dry dock. Marisco alleged that GL E&C's principals misrepresented their experience and ability with respect to constructing dry docks, causing GL E&C to deliver the dry dock late, unfinished, and not according to specifications. GL E&C filed a counterclaim alleging that Marisco failed to pay the full amount due under their agreement and failed to pay for change orders. Marisco challenged the counterclaim by way of two motions, one for judgment on the pleadings and one for summary judgment, the latter of which sought to compel GL E&C to arbitrate the matters raised in the counterclaim.

Count I of GL E&C's counterclaim asserted breach of contract based on Marisco's failure to pay the $148,400 due on the final progress payment and failure to pay amounts owed on certain change orders. Count II of GL E&C's counterclaim (now part of Count I) asserted that Marisco breached the implied covenant of good faith and fair dealing by approving change orders but then failing to pay for the extra work covered by the change orders, and by pressuring GL E&C to complete the construction of the dry dock in spite of delayed payments. Count III of GL E&C's counterclaim asserted that Marisco was unjustly enriched by getting the dry dock without having paid for all of it.

In its first motion, Marisco sought judgment on the pleadings as to Counts II and III of the counterclaim, but the court only granted judgment on the pleadings as to Count II.

In its second motion, Marisco sought summary judgment, arguing that the counts in the counterclaim must be arbitrated, or that Marisco was entitled to judgment as a matter of law with respect to the counterclaim. The court found that to the extent Count I concerned the $148,000 allegedly due on the final progress payment, Marisco failed to show that the parties agreed to arbitrate that claim. The court analyzed the terms of the dry dock construction agreement and noted that with respect to progress payments, the parties appeared to have contemplated arbitration of disputes as to whether the state of construction triggered Marisco's progress payment obligations. However, because there was no dispute that GL E&C delivered the dry dock to Marisco, thereby triggering the obligation to pay the final progress payment, any claim arising out of nonpayment of the full amount of the last progress payment did not appear to involve the type of dispute of which the parties contemplated arbitration.

Conversely, the court found that both the Federal Arbitration Act and the terms of the dry dock agreement required the parties to arbitrate only GL E&C's breach of contract claim (Count I) arising out of Marisco's failure to pay invoices for the change orders. The court declined to order the parties to arbitrate the unjust enrichment claim (Count III).

As to the matters not referred to arbitration, the court denied summary judgment given the questions of fact as to which party was responsible for the delays.

Marisco, Ltd. v. GL Eng'g & Constr. Pte., Ltd., No. 1:18-cv-00211 (D. Haw. June 26, 2020).