CEI Engineering Associates, Inc. v. Elder Construction Co., No. CA 08-601.
In 2005, Elder Construction Company (“Elder”) contracted with CEI Engineering Associates, Inc. (“CEI”), to perform engineering services related to six construction projects. Under the contract, the parties agreed to settle all claims regarding “interpretation, application or enforcement” of the contract through binding arbitration.
In October 2007, Elder sued CEI, alleging negligence, fraud, and breach of contract. CEI filed a motion to compel arbitration under the parties’ agreement and the Arkansas Uniform Arbitration Act, which the trial court granted as to Elder’s breach-of-contract claims. Elder later filed an amended complaint that deleted all express references to claims for breach of contract and added a claim for breach of the Arkansas Deceptive Trade Practices Act (“ADTPA”). The trial court then noted that all of Elder’s claims related to negligence, fraud, or a violation of the ADTPA and, therefore, were not subject to arbitration.
On appeal, CEI argued that Elder’s new claim for a violation of the ADTPA was merely a restatement of its previous breach-of-contract claim. The Arkansas Court of Appeals stated the following:
[T]he basic distinction between an action in tort and an action in contract is that the purpose of the law of contract is to see that promises are performed, while the law of torts provides redress for various injuries.
The court further noted that a breach-of-contract action could not be treated as a tort if it consists of a failure to act (nonfeasance) instead of an affirmatively wrongful act (misfeasance). Tort liability for misfeasance can be extended whenever the conduct creates a foreseeable and unreasonable risk of harm to plaintiff’s interests. As to Elder’s claim for violation of the ADTPA, the court stated that the claim related to Elder’s assertions that CEI failed to comply with its obligations under the contract and did not come within the purview of the ADTPA. Consequently, the court held that the trial court erred in not compelling arbitration of the contract claims.
