LawGuru lawyers can usually give accurate and dependable answers to question involving legal issues, but furnishing opinions on questions of fact is a lot more difficult. Here, we have a factual dispute. If you were substantially complying with code, and not otherwise in breach of your contract with the owner, his replacing you and failing to pay you are his breaches of the contract. Also, if the contract contains an arbitration clause, he may have breached the contract by failing to abide by the clause and selecting a different route. On the other hand, the owner is acting as though he believes you are the breaching party. Who is right? We can't tell without listening to both stories, and maybe, having an expert look at the work.
Depending in part on how the arbitration clause is written and what it covers, your next step may be to demand arbitration yourself. Much also depends upon the dollar amount of the contract. If we're talking a few thousand, thoughts like "Small Claims" and "in pro. per." come to mind. If this is a $25k-plus dispute, you should at least have an initial consultation with a local lawyer with some construction-dispute experience, preferably in representing the contractor side.
Also, a lot will depend upon the strength of your convictions that you're in the right. Toward that end, have you received a punch list or other written claim from the owner as to what he claims was done improperly or not done? Maybe some negotiations would result in a voluntary settlement, or a better understanding of who is right and why, or at least the owner can be made aware that the dispute should have been arbitrated.
I hope this is helpful, but please understand that we at LawGuru are not well equipped to resolve factual disputes.
