FARMER, J.
We have a nonfinal order refusing to compel arbitration. The dispute arose from an aborted contract for the construction of a new $2 million facility at a private club. The contract between the owner of the club and the general contractor (GC) contained an alternative dispute resolution (ADR) provision that included arbitration. When the owner terminated the contract before completion, the GC commenced litigation and alleged that the owner's premature termination caused damages. The owner responded with a demand for arbitration. The trial judge found that the owner had forfeited any right to arbitration by its conduct leading up to the GC's suit. We affirm.
Like all contracts, each arbitration agreement is unique. Although it may employ some standard terms, the contract must be construed and understood in light of its whole text, context, structure and purpose. As with all contracts, the entire undertaking must be considered.
Some arbitration provisions are intended to operate as an irrevocable substitute for litigation in court. These survive full performance by one party, leaving only the other party's covenant for future dispute. For example, an arbitration provision in the purchase of a product, say an automobile, may be intended to apply even after the buyer has fully performed by payment and all that remains is the seller's warranty. In that instance arbitration may be intended as a complete alternative to proceedings in a court on warranty claims surviving the closing.
In other contracts, however, performance may involve many tasks over a long duration toward a single defined goal. One example is the construction of a commercial building. It is impossible to build anything substantial overnight or all alone. The complexity of a substantial commercial edifice requires multiple vendors completing an interrelated series of dependent tasks. The participation of many must be carefully coordinated, because the work of one hinges on the finished work of another. Yet there are a thousand ways in this relay of goods and services for time to be stolen. Here arbitration may have a different use: it may instead be intended as a means of postponing — even if not ultimately avoiding — litigation in court while the parties make progress toward their contractual goal. The issue is whether this case involves this latter kind instead of the former.
It is unlikely that many $2 million commercial construction projects have been finished without conflicts during progress. The owner of real property and a GC share two primary concerns. Time and money. Disputes arising during construction may result in lost time. They structure their contract so the whole job does not come crashing to a halt with every dispute. They aim to keep the project going and to avoid wasting time and money in litigation to resolve disputes about individual parts of the plan or the specific tasks. Litigation is ill-suited to resolve them because courts spend time in ways horrifying commercial parties. This is not a criticism, for we are deliberative institutions bound by procedures allowing parties to make their cases fully. So in a construction contract, the parties may choose an ADR system whose real purpose is for construction to continue through the dispute.
In a sense they are a single concern. Time is money. The owner will probably have a construction loan, the ultimate cost of which is tied to the duration of construction. The GC may also be working off an operating capital loan to advance the costs of material and labor. The more the GC pays in interest on the loan, the less its profit. Even without an operating capital loan, the longer the GC's money is tied up in material and labor, its earnings are diminished. Consequently their agreement seeks to reduce the cost of money.
The ADR provision in this agreement may be briefly outlined. It starts with an umpire of sorts, the architect and, if a party disagrees with his decision, then to mediation and, if nothing works to the satisfaction of all, to arbitration. Notably this ADR provision does not specify anywhere that arbitration, as such, is a condition precedent to litigation.
"Claims . . . shall be referred initially to the Architect for decision. An initial decision by the Architect shall be required as a condition precedent to mediation, arbitration or litigation of all Claims between the Contractor and Owner arising prior to the date final payment is due, unless 30 days have passed after the Claim has been referred to the Architect with no decision having been rendered by the Architect." Art. 4.4.1 (AIA form 1997).
"Any Claim arising out of or related to the Contract, except Claims relating to aesthetic effect and except those waived as provided for in Subparagraphs 4.3.10, 9.10.4 and 9.10.5, shall, after initial decision by the Architect or 30 days after submission of the Claim to the Architect, be subject to mediation as a condition precedent to arbitration or the institution of legal proceedings by either party." Art. 4.5.1.
"Any Claim arising out of or related to the Contract, except Claims relating to aesthetic effect and except those waived as provided for in Subparagraphs 4.3.10, 9.10.4 and 9.10.5, shall, after decision by the Architect or 30 days after submission of the Claim to the Architect, be subject to arbitration. Prior to arbitration the parties shall endeavor to resolve disputes by mediation in accordance with the provisions of Paragraph 4.5." Art. 4.6.1.
That this ADR provision was meant to function during the progress of the contract is seen in certain key provisions, all of which must be read as part of a single piece. One section requires any dispute to be initiated by notice to the architect within 21 days after it has occurred and, in any event, not later than 30 days before the final payment. This is obviously meant to insure that all disputes will be resolved before completion, or laid on the table when it comes time for the owner to make the final payment on the contract price, perhaps with an adjustment for any unresolved dispute. Another section emphasizes that "[p]ending final resolution of a claim . . . the Contractor shall proceed diligently with performance of the Contract and the Owner shall continue to make payments in accordance with the Contract documents." [e.s.] In short, the contract requires both sides to continue to perform through disputes, with the goal that most things will be resolved as they arise or with the final payment. Critically, another section of the contract expressly limits the grounds for either party terminating the entire contract before completion. Essentially the GC may terminate if the owner fails to make a draw payment certified as due by the architect. The owner may terminate if the GC and the subs fail to carry on construction diligently.
Significantly the contract specifies that, after notice from the complaining party, an initial decision by the architect is a condition precedent "to mediation, arbitration or litigation of all Claims." [e.s.] If the parties meant for arbitration to supplant all litigation — even after a termination before full completion — they would not have inserted litigation, the emphasized word, because their intent then would have been to eliminate litigation entirely. Again, the arbitration clause does not state that it is a precondition to litigation. In fact, nothing in the contract specifies that the arbitration provision is irrevocable and replaces all litigation in court. Altogether, these specific provisions and omissions make clear that this ADR system was meant to function in place of the courts while progress was being made on the contract.
From this whole text, context and structure, the only reasonable construction is that the ADR provision was not meant to survive an absolute termination of the contract before completion. Any total termination of the contract before the clubhouse was built would obviously be the utter negation of the very purpose of the contract in the first place, and thus also the rationale behind an ADR provision designed to speed dispute resolutions during construction in order to bring about a successful completion of the contract. If either party terminated, all bets would be off and either could have its day in court.
The dispute that ended in the utter destruction of the agreement began with the GC's discovery of mold in part of the old clubhouse being rebuilt. As the contract requires, the GC gave notice to the architect and claimed that the presence of the mold should change the approved schedule and increase the contract price for successful completion of the clubhouse. The architect confirmed the mold and agreed that it had caused delays that could affect the price.
If the owner disagreed with the architect's decision on mold, the owner was required under the contract to initiate mediation and, that failing, an arbitration proceeding to resolve the issue while the whole project carried on. The contract also specified that arbitration must be initiated by filing the claim with the American Arbitration Association. But meanwhile the owner was barred by the contract from withholding any draw payments already certified as due.
The owner decided not to follow the contract's ADR provisions. It rolled out the ultimate weapon — a refusal to pay draws then certified as due by the architect and declared a termination of the whole deal. The owner refused further performance entirely, refused to make a draw payment of nearly a quarter of a million dollars then due, and "fired" the GC. Although several weeks later the owner wrote the GC that it wanted arbitration of the dispute, until this litigation was filed even later the owner had never initiated such proceedings in the manner prescribed by the contract.
The evidentiary record we have been given is limited to the proceedings on the motion to compel arbitration. Our decision relates only to the issue of arbitration. Nothing we say in resolving this appeal should be taken as the law of the case on any issue involved in the merits of the pending claims or defenses. Any collateral estoppel effects of facts established in the course of deciding the motion to compel arbitration are for the trial judge to decide in the first instance.
Obviously it is unreasonable to suppose that an arbitration provision meant to resolve disputes while work continues has any application to a termination of the entire contract before completion. In short, because of the owner's refusal to resort to the ADR and the owner's termination well short of any hope of completion, the ADR provision simply failed of its essential purpose. See Varner v. B.L. Lanier Fruit Co., Inc., 370 So.2d 61 (Fla. 2d DCA 1979) (where circumstances cause a remedy to fail of its essential purpose, remedy may be had as otherwise provided by law).
To be sure, the issue was framed in the trial court as one of waiver. The GC argued that the owner waived arbitration by refusing to follow the contract's ADR provision as to the mold issue. The trial court obviously accepted the GC's position that the owner's pre-lawsuit conduct barred it from claiming arbitration instead of court litigation. See Raymond James Fin. Servs., Inc. v. Saldukas, 896 So.2d 707 (Fla. 2005) (waiver of the right to arbitrate may consist of conduct implying a voluntary and intentional relinquishment of a known right).
The dissent argues that the GC has never contended that the owner's termination of the contract bars it from asserting the ADR provision. It is true that the GC has not used the words "terminated" or "repudiated", but it has definitely argued that before suit was filed the owner "engaged in conduct inconsistent with the exercise of the right to arbitrate . . . or properly preserve or exercise that contractual right." Appellee's Brief, at 12. The fact that the GC's brief does not specifically argue the theory of breach by anticipatory repudiation is inconsequential. A trial court's decision will be upheld on appeal if any legal theory supports it. Applegate v. Barnett Bank of Tallahassee, 377 So.2d 1150, 1152 (Fla. 1979). Applegate requires us to consider any theory on appeal that would sustain the trial court's decision, so long as it is consistent with the facts on which the decision was based. In this case, the trial court did not state the actual basis for its decision that the GC was not required to arbitrate the dispute in place of litigation. Waiver and contract repudiation are simply corresponding legal theories for similar conduct leading to the same outcome. There is nothing inconsistent about them in the context of this case.
In Raymond James Financial Services, the supreme court explained the waiver of arbitration provisions thus:
"The right to arbitration, like any contract right, can be waived.
The [United States]
Supreme Court has made clear that the `strong federal policy in favor of enforcing arbitration agreements' is based upon the enforcement of contract, rather than a preference for arbitration as an alternative dispute resolution mechanism. Thus, the question of whether there has been waiver in the arbitration agreement context should be analyzed in much the same way as in any other contractual context. The essential question is whether, under the totality of the circumstances, the defaulting party has acted inconsistently with the arbitration right." [e.s., c.o.]
896 So.2d at 711;
see also E.E.O.C. v. Waffle House Inc., 534 U.S. 279, 289, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002) (purpose of federal arbitration statute was to place arbitration agreements on the same footing as any other contract);
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (same).
Thus arbitration provisions and their waiver must be construed and enforced no differently than all contracts are construed and enforced. We agree that, after the architect's initial mold decision, the owner's refusal to initiate mediation as a precondition to arbitration and to comply with the duty to make progress payments instead of terminating the contract could be deemed a voluntary and intentional relinquishment of the known right to arbitration. The trial court's decision fits well within the invocation of traditional contract law principles in Raymond James Financial Services.
According that decision the initial presumption of correctness, as we must, we think the trial court's decision — that the owner refused to follow the contract ADR after the architect's initial mold decision — could also be upheld under another legal theory, another standard contract principle aptly fitting the circumstances. It is settled contract law in Florida that a breach by anticipatory repudiation allows the nonbreaching party to terminate his own performance and bring litigation for damages. In Hospital Mortgage Group v. First Prudential Development Corp., 411 So.2d 181 (Fla. 1982), the supreme court adopted the RESTATEMENT position, saying "the nonbreaching party is relieved of its duty to tender performance and has an immediate cause of action against the breaching party." 411 So.2d at 182; RESTATEMENT (SECOND) OF CONTRACTS § 253 (1979); see also Poinsettia Dairy Prods., Inc. v. Wessel Co., 123 Fla. 120, 166 So. 306 (1936) (same). In this case, we should be clear in understanding that the owner's firing of the GC effectively ended the construction contract. Thus the owner "unequivocally terminated" the entire agreement. The owner's repudiation empowered the GC to forego his own performance of the contract's various provisions — including an ADR provision designed to ensure full performance by the owner — and sue for damages in court.
Waiver is certainly an apt characterization when a seller of an auto with a surviving warranty proceeds to defend on the merits after the buyer files suit for breach. But here before it terminated the contract entirely, the owner forswore complying with any of the contract's ADR provisions to allow successful completion. The owner rejected mediation, followed by arbitration, to resolve the architect's mold decision, improperly refused to make certified draw payments, and simply called a halt to the entire contract. The ADR provision is just one part of the contract's provisions leading to a successful completion, and it does not specify that it survives a premature termination. Without a survival clause, the ADR provision went down with the whole.
The dissent argues that the contract ADR still required the GC to seek arbitration of the mold dispute many months after the owner had fired the GC and terminated the entire contract. With respect, this is illogical. The GC had previously and timely submitted the mold dispute to the architect and was perfectly satisfied with his decision. It was the owner who was unsatisfied with the architect's decision. Under the contract the owner had the burden to initiate mediation and arbitration within 15 days after the architect's mold decision. Instead the owner refused payment due and fired the GC. Firing the GC was a termination of the contract. Many weeks later, the owner wrote the GC that it wanted arbitration, but by then it was long past contract time for initiating these procedures. There was nothing left for the GC but to file suit for damages to recover what it is owed. In effect the dissent would deny the GC's right of access to a court on account of the owner's failure to follow the contract ADR. The dissent does not explain why an ADR system whose essential purpose is only to keep the contract from being terminated before completion has any relevance after the contract has broken down entirely and years have now gone by.
The contract's ADR system was like the rifle shot before the nuclear bomb. If only rifles were being fired, final completion was still possible. But the owner chose the nuclear option of total war rather than the contract's system of less drastic, alternative resolution. Once the nuclear bomb was dropped, any resolution was not for this contract's ADR meant to avoid total war.
In repudiating the ADR, the owner should not be heard in litigation to claim the benefit of an ADR provision it had rejected so clearly and unequivocally. The owner's failure to initiate arbitration, its refusal to make payment due, and its cancellation of the whole agreement, all left the GC with no choice but to commence litigation to recover any damages caused by an improper nonpayment and repudiation.
Affirmed.
WARNER, J., concurs.
GUNTHER, J., dissents with opinion.