Question

CHAPTER 3 - C

ASE

S

YNOPSIS

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Cleveland Construction, Inc. v. Levco Construction, Inc.

Cleveland Construction, Inc. (CCI), was the general contractor on a project to build a grocery

store in Houston, Texas. CCI hired Levco Construction, Inc., as a subcontractor to perform

excavation and grading. The contract provided that any dispute would be resolved by arbitration in

Ohio. When a dispute arose, Levco filed a suit against CCI in a Texas state court. CCI sought to

compel arbitration in Ohio under the Federal Arbitration Act (FAA). Because a Texas statute allows a

party to void a contract provision that requires arbitration outside Texas, the court denied CCI’s

request. CCI appealed.

A state intermediate appellate court reversed. The parties had a valid arbitration agreement. If the

court applied the Texas statute, it would void the agreement. This, the court decided, “would

undermine the declared federal policy of rigorous enforcement of arbitration agreements.” And the

FAA, as a federal law, preempted the Texas statute under the supremacy clause.

Why do you think that Levco did not want its claim decided by arbitration?

Answer 1

According to the sub-contract between CCI and Levco Construction, in case of any dispute between the two parties the arbitration in Ohio shall resolve the dispute. Thus, filing of the suit by Levco in a Texas Court is against the agreement between the two parties. However, since the Texas statue allows a party to void a contract provision that requires arbitration outside Texas, Levco had to file the suit against CCI in a Texas court. Thus, in order to avoid cancellation of the contract by resolving the dispute outside Texas, Levco did not want its claim decided by arbitration in Ohio.