Schneider Electric Buildings Critical Systems, Inc. v. Western Surety Co.

A surety who issued a performance bond on a subcontract was not bound by that contract’s arbitration clause when the surety was jointly and severally liable for the “performance of” the subcontract and the entire subcontract was incorporated into the bond by reference.Petitioner entered into a contract with an electrical subcontractor pursuant to a master subcontract agreement that included a mandatory arbitration clause. Petitioner later entered into a subcontract with the electrical subcontractor to perform work on a project. The subcontract incorporated the entire master subcontract agreement by reference. The subcontractor obtained a performance bond from Respondent stating that Respondent was jointly and severally liable for the performance of the construction contract, which was incorporated into the bond by reference. Petitioner terminated the subcontract after a dispute with the electrical subcontractor and filed a demand for arbitration that included Respondent. Respondent requested a declaratory judgment that it was not bound by the arbitration clause. The circuit court granted partial summary judgment in favor of Respondent. The court of special appeals affirmed, ruling that Respondent could not be compelled to participate in the pending arbitration proceedings between Petitioner and the electrical subcontractor. The Court of Appeals affirmed for the reasons stated above. View "Schneider Electric Buildings Critical Systems, Inc. v. Western Surety Co." on Justia Law