I have often discussed alternate dispute resolution (ADR) here at Construction Law Musings.  In most of those posts, I’ve either discussed the advantages and/or disadvantages of arbitration or mediation.  In any of the other ADR-related posts, the assumption was that the question about the arbitrability of the claim (namely that the claim was either properly before the court or properly in arbitration).  A relatively recent case from the 4th Circuit Court of Appeals is an exception.  In Isernia. v. Danville Reg’l Med. Ctr., the Court was faced with deciding who decides the question of where the claim is to be resolved.

In Isernia, the court looked at an appeal from a district court order granting a motion to compel arbitration by third parties that were, critically, non-signatories to the contract containing the arbitration provision.  Further, that same arbitration provision gave the arbitrator the final say on whether the claim made was in fact one that was to be decided in arbitration (yes, such provisions are enforceable. . . mostly). 
The Fourth Circuit reversed and remanded the district court’s decision, holding that a court, not an arbitrator, must determine whether a non-signatory can enforce an arbitration agreement. Arbitration agreements are governed by contract law, so a party must establish its entitlement to enforce an agreement before invoking its provisions. Absent such a showing, an arbitrator has no authority to make any determinations in such matters. Because the Appellees were non-signatories to the Agreement, the district court was required to determine whether Appellees were entitled to enforce the Agreement under Virginia law before compelling arbitration.

In short, where a third party non-signatory seeks to enforce the arbitration provisions of a contract, it is the Court, and not the arbitrator that determines if and when that third party can enforce those provisions.  While this is not a published opinion and is not directly applicable to construction claims, per se, it does provide some insight into some of the basic issues presented by contractual arbitration provisions.

As always, I recommend that you consult with an experienced Virginia construction attorney when trying to answer the types of questions set out in this opinion.

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