Citing a decision from the U.S. Supreme Court, the highest Massachusetts court has held that an arbitrator cannot decide the issue of arbitrability unless there is "clear and unmistakable evidence" that the parties intended the arbitrator to have this authority. Also, recognizing the distinction between (a) whether a dispute is subject to arbitration, and (b) who decides the issue of arbitrability, the court held that it will not treat a party's silence or ambiguity on this issue as consent to arbitrability or a waiver of the issue. Confused? The case is Massachusetts Highway Dept. v. Perini Corporation (Mass. Supreme Judicial Court, Jan. 17, 2013), available here (subscription required).
Perini, Kiewit and Cashman had a joint venture (PKC) for one of the Boston Central Artery/Tunnel project segments. The PKC contract was in 1995 and by 1999 several claims had arisen. The parties signed an agreement in 1999 that gave the existing disputes review board the authority to arbitrate a specified list of claims, called "exhibit 1." Otherwise, the DRB jurisdiction was to make non-binding decisions. Ultimately, PKC presented a host of claims beyond those on exhibit 1, arguing that some of them were related to the exhibit 1 list. The DRB issued a decision on all claims, and the CA/T awarding authority argued that the DRB was not entitled to decide whether the non-exhibit 1 items were arbitrable.
The Massachusetts court agreed with the CA/T authority. First, citing the U.S. Supreme Court decision, it stated that courts "should not assume that the parties agreed to arbitrate arbitrability" without "clear and convincing evidence" that they intended to do so. Second, even if the CA/T authority was not explicit in its position (and the court notes that its position was consistent throughout, that the DRB panel's authority was limited), "the law treats silence or ambiguity [about arbitrability] differently from the way it treats silence or ambiguity about . . . the scope of a valid arbitration agreement."
So a dispute lasting at least fourteen years is still not yet resolved. In response to the expected argument that a decision in favor of the CA/T authority would prolong the dispute, the court commented in a footnote: "the basic objective in this area is not to resolve disputes in the quickest manner possible, . . . but to ensure that commercial arbitration agreements, like other contracts, are enforced according to their terms and according to the intentions of the parties."
The lesson is that the issue of arbitrability remains for the courts unless the parties clearly provide to the contrary in the arbitration agreement.
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