PUBLIC-SECTOR CONSTRUCTION: Interpretation of Ambiguous ADR Statute

Article excerpt

The Nevada Supreme Court construed an ambiguous Nevada law to requiring state political subdivisions to arbitrate disputes.

Clark County School District contracted with Harris Associates to build an addition to a high school. When the school district denied Harris's claims for additional compensation, Harris requested arbitration under the parties' contract, which stated that "[a]ny controversy ... shall be settled by arbitration, unless the Owner, at its sole option ... rejects arbitration by notifying the Contractor by certified mail, return receipt requested." When the school district refused to arbitrate, Harris filed an action to compel arbitration, arguing that Nev. Rev. Stat. § 338.150(1) requires the school district to arbitrate the dispute. This statute provides: "Any... political subdivision ... and any ... person charged with the drafting of specifications for the construction ... of public works, shall include in the specifications a clause permitting arbitration of a dispute...." The school district argued that this provision allows, but does not require, an arbitration clause in public construction contracts. The court sided with the school district and denied Harris's motion to compel.

The Nevada Supreme Court found that since both parties' interpretations of the statute were reasonable, the statute was ambiguous. …