Moses H. Cone Memorial Hospital v. Mercury Construction Corp.

Facts

In July 1975, Mercury Construction Corp. and Moses H. Cone Memorial Hospital entered into a contract for construction additions to the Hospital building. The contract contained a broad arbitration clause requiring arbitration of all disputes arising from the contract. During construction, Mercury agreed to delay presenting claims for impact costs until the work was substantially completed. In January 1980, after completion, Mercury submitted these claims to the project architect. After several months of discussions, the Hospital’s counsel abruptly informed Mercury that the Hospital would pay nothing and intended to file a declaratory judgment action in state court. The Hospital filed its state action on October 8, 1980, seeking declarations that Mercury had no right to arbitration and that the Hospital had no liability. The state court initially granted an ex parte injunction preventing Mercury from seeking arbitration, but dissolved it on October 27. Mercury immediately filed a federal diversity action to compel arbitration under §4 of the Federal Arbitration Act. The District Court stayed the federal action pending resolution of the identical state court proceeding, and Mercury appealed.