United States ex rel. Spirtas Worldwide, LLC v. SGLC Consulting LLC, No. 3:21-CV-00182-MAB, 2022 U.S. Dist. LEXIS 105589; 2022 WL 2116451 (S.D. Ill. June 13, 2022)

The U.S. District Court for the Southern District of Illinois recently enforced a partially executed agreement to arbitrate where the party that failed to countersign demonstrated assent through its acts and conduct.

Subcontractor Spirtas Worldwide LLC filed a Miller Act claim against contractor SGLC Consulting LLC to recover the cost of materials provided and labor performed on a project for the U.S. Fish and Wildlife Service in Marion, IL.

SGLC filed a motion to dismiss, or in the alternative, compel arbitration and stay the proceedings. It argued that dismissal was appropriate because the parties’ trade partners agreement (TPA) contained an agreement to arbitrate, and thus, venue in court was improper.

Spirtas countered that the TPA was not a valid and legally binding arbitration agreement because SGLC never countersigned it. Spirtas also argued that the TPA was unenforceable because its arbitration clause (providing for “arbitration in Edwards, CO”) was inconsistent with its separate venue selection clause (providing for “exclusive venue … in the State where [the] Project is located”), showing there was no “meeting of the minds” and thus no contract formation.

The court first considered whether it or an arbitrator should decide the dispute. Although well-established precedent provides that the validity and enforceability of a contract governed by the Federal Arbitration Act (FAA) is to be decided by an arbitrator, the formation of a contract is to be decided by a court.

The court then noted that whether the TPA was valid centered around whether SGLC’s signature was necessary to officially form a contract. In Illinois, a party may indicate its assent to a contract through its acts and conduct and become bound by its provisions even though it has not signed it.

The court found that SGLC’s repeated engagement with Spirtas after Spirtas signed the TPA indicated SGLC’s assent to the TPA. For example, the parties “met and engaged in many Pre-Bid actions,” including drafting asbestos removal and demolition plans, attending site visits, and preparing the bid. Additionally, SGLC introduced Spirtas to the government as its subcontractor and requested that Spirtas prepare certain documents that were ultimately incorporated into the prime contract.

For its part, Spirtas demonstrated assent to the TPA by signing the TPA. Spirtas could not subsequently “call into question the validity” of the TPA with evidence of its “own subjective thoughts and intentions” not to assent.

The court rejected Spirtas’ argument that the TPA’s inconsistent provisions regarding venue showed that there was no “meeting of the minds.” Spirtas did “not explain, beyond repeating conclusory contract-law buzzwords (e.g., mutual assent, negotiation, and meeting of the minds), how these inconsistencies show[ed] that the entire TPA is unenforceable.” Contracting “parties’ disagreement regarding how to interpret terms of a contract does not, in and of itself, mean the contract is … unenforceable.”

The court held that the TPA was a valid and enforceable contract such that the agreement to arbitrate stood. Dismissal, rather than a stay, was proper because under the FAA, a district court cannot compel arbitration outside the confines of its district, and the TPA provided for “arbitration in Edwards, CO.”

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