Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-01865/USCOURTS-ca8-06-01865-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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1

The Honorable Donald J. Stohr, United States District Judge for the Eastern

District of Missouri.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-1865

___________

Suburban Leisure Center, Inc., * 

*

Appellee, *

* Appeal from the United States

v. * District Court for the Eastern 

* District of Missouri.

AMF Bowling Products, Inc.; *

AMF Billiards & Games, LLC, * 

 *

Appellants. *

___________

Submitted: October 20, 2006

Filed: November 17, 2006

___________

Before MELLOY, BENTON and SHEPHERD, Circuit Judges.

___________

SHEPHERD, Circuit Judge.

AMF Bowling Products, Inc. and AMF Billiards & Games LLC (collectively

“AMF”) appeals from an order of the district court1

 denying its motion to dismiss or

in the alternative to compel arbitration and stay proceedings with regard to claims

brought by Suburban Leisure Center, Inc. (“Suburban”) after AMF terminated its oral

franchise agreement with Suburban. We possess jurisdiction of this appeal pursuant

to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 16(a)(1)(C), providing that “[a]n

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appeal may be taken from . . . an order . . . denying an application . . . to compel

arbitration . . . .” For the reasons discussed below, we affirm. 

I.

For the purpose of ruling on AMF’s motion to dismiss or in the alternative to

compel arbitration, the district court assumed the truth of the allegations in Suburban’s

complaint. With the limited purpose of reviewing the district court’s ruling, we, too,

view Suburban’s allegations as true. See Palcko v. Airborne Express, Inc., 372 F.3d

588, 597 (3d Cir. 2004) (stating that a motion to compel arbitration is generally

treated as a motion to dismiss for failure to state a claim upon which relief can be

granted); cf. Manion v. Nagin, 394 F.3d 1062, 1065 (8th Cir. 2005) (viewing factual

allegations as true for purposes of motion to dismiss). Accordingly, the following

facts are undisputed for purposes of this appeal. Suburban distributes indoor and

outdoor lawn and leisure equipment, and AMF manufactures pool tables and pool

table accessories. The parties entered into an oral franchise agreement, whereby they

agreed that Suburban would have the right use the AMF trade name, trademark, or

service mark in order to sell AMF’s line of pool tables and related accessories from

Suburban’s stores located in the St. Louis, Missouri region. Subsequently, the parties

executed a written E-Commerce Dealer Agreement (“e-commerce agreement”), in

which Suburban agreed to provide delivery and installation of AMF’s products sold

by AMF via its website to customers in Suburban’s specified areas. 

With regard to the e-commerce agreement, Section 14 provides that “[t]he

determination of any dispute or claim arising under the Agreement or any invoice or

agreement executed pursuant to this Agreement will be settled by binding arbitration

in Richmond, Virginia.” Further, Section 15 states that the e-commerce “[a]greement

constitutes the entire agreement between the parties and supercedes all prior

agreement[s], oral and written.” Finally, Section 15 goes on to state that the eAppellate Case: 06-1865 Page: 2 Date Filed: 11/17/2006 Entry ID: 2110535
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commerce agreement “will be construed in accordance with the laws of Virginia

without regard to their conflict of laws provisions.” 

On August 25, 2005, AMF sent a termination letter stating that Suburban would

be “required to cease promoting” AMF’s line of pool tables and accessories within

sixty days. The letter made no mention of the e-commerce agreement. Suburban filed

suit in Missouri state court alleging that it was entitled to damages from the

cancellation of the oral franchise agreement without the requisite notice pursuant to

Missouri Revised Statute section 407.405 as well as recoupment for improvements it

had made to its stores in reliance on the oral franchise agreement. See Mo. Ann. Stat.

§ 407.405 (West 2001). Pursuant to 28 U.S.C. § 1441, AMF removed the matter to

federal court. Upon removal, AMF filed a motion to dismiss or in the alternative to

compel arbitration and stay proceedings pursuant to the FAA, 9 U.S.C. § 3. Because

the district court found that the e-commerce agreement did not address Suburban’s

ability to promote or sell AMF’s products, it concluded that Suburban’s underlying

claims did not arise under the e-commerce agreement. Accordingly, the district court

denied AMF’s motion to compel arbitration of the dispute. AMF appeals the district

court’s order. 

II.

We review de novo the district court’s denial of a motion to compel arbitration

based on contract interpretation. Nitro Distrib., Inc. v. Alticor, Inc., 453 F.3d 995, 998

(8th Cir. 2006). As both Missouri and Virginia recognize the validity of the choice

of laws provision contained in the e-commerce agreement, we apply the law of

Virginia to resolve this appeal. See Paul Bus. Sys., Inc. v. Canon U.S.A., Inc., 397

S.E.2d 804, 807 (Va. 1990); Kagan v. Master Home Prods. Ltd., 193 S.W.3d 401, 407

(Mo. Ct. App. 2006). Resolution of this appeal is also governed by the FAA, 9 U.S.C.

§ 1 et seq., because the e-commerce agreement “involved interstate commerce.”

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Amchem Prods., Inc. v. Newport News Circuit Court Asbestos Cases, 563 S.E.2d 739,

743 (Va. 2002). 

 Pursuant to the FAA, we construe the arbitration clause resolving any doubts

in favor of arbitration. Am. Recovery Corp. v. Computerized Thermal Imaging, Inc.,

96 F.3d 88, 92 (4th Cir. 1996) (citing Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Co., 460 U.S. 1, 24-25 (1983)). “Thus, we may not deny a party’s request to

arbitrate an issue ‘unless it may be said with positive assurance that the arbitration

clause is not susceptible of an interpretation that covers the asserted dispute.’” Id.

(quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S.

574, 582-83 (1960)). However, a “party cannot be required to submit to arbitration

any dispute which he has not agreed so to submit.” Amchem Prods., Inc., 563 S.E.2d

at 743 (quoting United Steelworkers of Am., 363 U.S. at 582). When determining

whether a contractual dispute exists that is subject to arbitration, Virginia courts

examine the contract’s language and apply the commonwealth’s substantive contract

law. Id. 

On appeal, AMF contends that the e-commerce agreement’s merger clause

incorporates and subsumes the oral franchise agreement such that the e-commerce

agreement is the sole agreement between the parties necessitating arbitration of the

present dispute. “[A] ‘merger clause’ (sometimes an ‘integration’ or ‘entire

agreement’ clause) . . . ‘merges’ prior negotiations into the writing. A typical clause

includes a recital that the writing ‘contains the entire agreement of the parties.’” 2 E.

Allan Farnsworth, Farnsworth on Contracts § 7.3 (3d ed. 2004); see, e.g., Prospect

Dev. Co., Inc. v. Bershader, 515 S.E.2d 291, 296 (Va. 1999) (observing that a contract

contained an “integration clause” stating “that in the absence of an amendment in

writing, the contract contains the final and entire agreement between the parties”);

Spotsylvania County Sch. Bd. v. Seaboard Surety Co., 415 S.E.2d 120, 126 (Va.

1992) (noting that “a merger clause in the contract stated that the document

‘represent[ed] the entire and integrated agreement between the parties’”). 

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Merger clauses “purport to contractually require application of the parol

evidence rule to the parties’ agreement.” 11 Richard A. Lord, Williston on Contracts

§ 33:21 (4th ed. 1999). In Virginia, “parol evidence . . . is inadmissible to vary,

contradict, add to, or explain the terms of a complete, unambiguous, unconditional

written instrument.” Shevel’s Inc.-Chesterfield v. Se. Assocs., Inc., 320 S.E.2d 339,

343 (Va. 1984)). However, a merger “clause does not prohibit the admission of parol

evidence which does not contradict or vary the terms of the . . . contract . . . .”

Prospect Dev. Co., Inc., 515 S.E.2d at 296. In this case, as the district court found, the

e-commerce agreement does not address Suburban’s ability to promote or sell AMF’s

products, which is the subject of the prior oral franchise agreement. Accordingly, the

prior oral agreement necessarily does not seek to contradict or supplement the

subsequent e-commerce agreement that addresses a different subject, AMF’s selling

its own product from the AMF website. Thus, these facts do not implicate the parol

evidence rule. 

Further, the e-commerce agreement does not extinguish the prior oral franchise

agreement because it constitutes an independent agreement under the “collateral

contract doctrine.” Because “the parol evidence rule does not exclude parol proof of

a prior or contemporaneous oral agreement that is independent of, collateral to and not

inconsistent with the written contract, and which would not ordinarily be expected to

be embodied in the writing,” a merger clause gives rise to no more than a presumption

that all the parties’ prior agreements merged into the written agreement. Shevel’s, 320

S.E.2d at 343 (quoting Pierce v. Plogger, 286 S.E.2d 207, 209 (Va. 1982)). The

Virginia Supreme Court refers to this exception to the parol evidence rule as the

“collateral contract doctrine.” Id. The Shevel’s Court determined that this doctrine

required the admission of a prior oral agreement into evidence, despite a merger clause

in the parties’ subsequent written agreement, because the prior oral agreement was a

“different agreement” that did not seek “to vary or explain” the subsequent written

agreement. Id. In a later case, the Virginia Supreme Court discussed Shevel’s and

stated that its “focus then was on whether parol evidence was admissible in the face

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of a [contract] silent on the subject matter of an alleged separate agreement yet stating

that it was the complete agreement of the parties. We said such evidence was

admissible.” J.E. Robert Co. v. J. Robert Co., Inc. of Virginia, 343 S.E.2d 350, 353

(Va. 1986).

This case involves two distinct agreements between Suburban and AMF.

Suburban and AMF initially entered into the oral franchise agreement providing for

Suburban’s promotion and sale of AMF products from Suburban’s stores.

Subsequently, the parties executed the written e-commerce agreement, which required

Suburban to install and service AMF products sold by AMF through its website to its

customers. Therefore, the oral franchise agreement addresses a contractual

relationship between the parties that is not covered in any manner by the e-commerce

agreement. As a result, the oral franchise agreement is “independent of, collateral to,

and not inconsistent with” the e-commerce agreement within the meaning of Shevel’s.

See Shevel’s, 320 S.E.2d at 343. Thus, the parties did not intend for the e-commerce

agreement to be their sole agreement such that the merger clause does not subsume

the prior oral franchise agreement pursuant to Virginia’s “collateral contract

doctrine.” Because the agreements are independent of each other, the e-commerce

agreement’s arbitration language cannot be attributed to the oral franchise agreement,

even construing the language in favor of arbitration. Accordingly, Suburban has not

agreed to arbitrate its claims in the underlying suit.

III.

 

We conclude that the district court did not err in denying AMF’s motion to

dismiss or in the alternative to compel arbitration and stay proceedings, and affirm.

______________________________

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