Maryland Federal Court Rules That An Arbitration Provision In A Construction Contract Giving Only One Party The Right To Select Arbitration Is Unenforceable

In a recent United States District Court for the District of Maryland decision, U.S. ex rel. Birckhead Electric, Inc. v. James W. Ancel, Inc., 2014 WL 2574529 (D. Md. June 5, 2014), the Court found that an arbitration provision in a construction contract that binds only one party is unenforceable. This means a party can be forced to litigate a dispute even though the contract contains an arbitration provision. Since such arbitration provisions are commonplace in the construction industry, this decision is bound to have significant implications for contractors, owners and sureties in drafting and enforcing their contracts.

The Facts

Birckhead Electric, Inc. ("Birckhead") entered into a subcontract with James W. Ancel, Inc. ("JWA"), the general contractor, for the installation of electrical systems at the Baltimore Army Reserve Center. The subcontract contained an arbitration provision which, in relevant part, provided that: All disputes between the Contractor and Subcontractor, not involving the Owner's act...