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CHAPTER 3 - C ASE S YNOPSIS Cleveland Construction, Inc. v. Levco Construction, Inc....

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Accounting

CHAPTER 3 - C

ASE

S

YNOPSIS

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 CCIs

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?

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