Aetna Bridge Co. v. State Department of Transportation – Case Brief Summary (Rhode Island)

In Aetna Bridge Co. v. State Department of Transportation, 795 A.2d 517, 523 n.11 (R.I. 2002), Aetna, the general contractor, entered a contract with the State Department of Transportation ("DOT") for reconstruction of part of Route 95 in Pawtucket, Rhode Island. 795 A.2d at 518.

Aetna, the general contractor, then subcontracted with several companies to perform other parts of the project, one of these companies being L.B. Foster ("Foster"). Id.

In providing a list of its subcontractors to DOT, Aetna failed to include Foster on the list and, therefore, DOT was not aware of Aetna's subcontract with Foster. Id. at 519.

After a dispute arose between Aetna and DOT, Aetna claimed that it had no liability to Foster because of their "lump-sum" payment agreement, but agreed to present Foster's claim to DOT which was later termed a "pass-through" claim. Id.

DOT refused to pay, however, on the basis that it had paid Aetna in full under their contract and that it was not aware of nor privy to the relationship between Aetna and Foster. Id.

The parties submitted their dispute to arbitration and after an award was rendered in favor of Aetna and confirmed by the Superior Court, DOT appealed to the Supreme Court on the basis that Aetna's claims were not arbitrable under the Severin doctrine. Id. at 519-20.

On appeal, the Supreme Court explained that if, indeed, Aetna's claim against DOT was found to be a "pass-through" claim - namely, a claim against DOT for one of the project's subcontractors to whom Aetna had no liability and with whom DOT had no privity - then it would not be arbitrable under the Severin doctrine. 795 A.2d at 520, 524.

Instead, if Aetna could demonstrate that it was liable to its subcontractor for the damages that the subcontractor sustained, then this claim would be arbitrable. Id. at 524 n.13.

Consequently, it was Aetna's liability to its subcontractor that was relevant to the determination of whether its claim was arbitrable -- an issue the Superior Court was asked to determine on remand -- and not the relationship between the subcontractor and DOT.

The Court found no fault with the arbitrator's two-sentence decision, explaining that "arbitrators are under no obligation to set out reasons for their award, their findings of fact or their conclusions of law on which an award is premised."

In Aetna Bridge Co., DOT argued that it did not learn of the relationship between Aetna and Foster until the final day of arbitration.

On that day, DOT asserted that it learned from the testimony of Aetna's Vice President that Aetna's claim was a "pass-through" claim on behalf of Foster. Id. at 522.

He testified that "Aetna had paid Foster the agreed upon 'lump-sum' amount and had no outstanding liabilities with Foster." Id. He further stated that Aetna had "no pending liabilities or debts associated with its general bridge project contract with DOT." Id.

These facts suggest that if, in fact, Aetna had no pending liabilities or debts with respect to the project, as its vice president testified, there would be less incentive for Aetna to disclose its relationship with Foster to DOT. Instead, if there were any claims still open and unliquidated, it is reasonable to infer that Aetna would have made it a point to inform DOT of its obligations to Foster.