Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-02572/USCOURTS-ca8-04-02572-0/pdf.json

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

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-2572

___________

MedCam, Inc., a Washington *

corporation, now known as *

OptiMEMS, Inc., *

*

Plaintiff - Appellee, *

*

v. *

*

MCNC, a North Carolina *

non-for-profit corporation, *

*

Defendants - Appellant, *

*

MCNC Endowment, a North Carolina * Appeal from the United States

non-for-profit corporation; MCNC * District Court for the

Enterprise Fund, L.P., a North Carolina * District of Minnesota.

limited partnership; MCNC Research *

and Development Institute, a North *

Carolina non-for-profit corporation; *

MCNC Ventures, LLC, a North *

Carolina limited liability corporation; *

JDS Uniphase, a Delaware corporation, *

as successor of Cronos Integrated *

Microsystems, Inc.; Cronos *

Microsystems, Inc., a Delaware *

corporation; Cronos MEMS, Inc., a *

North Carolina corporation; MCNC *

Cronos Equity Associates, LLC, a *

North Carolina limited corporation *

whose status is listed as dissolved, *

*

Defendants. *

Appellate Case: 04-2572 Page: 1 Date Filed: 07/18/2005 Entry ID: 1928988
1

The Honorable Paul A. Magnuson, United States District Judge for the District

of Minnesota.

2

For a more detailed factual summary, please refer to the District Court's order

from which MCNC appeals. Memorandum and Order of May 5, 2004 (compelling

Defendant MCNC to arbitration).

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___________

Submitted: February 16, 2005

Filed: July 18, 2005

___________

Before MORRIS SHEPPARD ARNOLD, BOWMAN, and GRUENDER, Circuit

Judges.

___________

BOWMAN, Circuit Judge.

MCNC appeals from the District Court's1

 order denying MCNC's motion to

dismiss certain claims asserted by MedCam, Inc. (MedCam) against MCNC

and granting MedCam's motion to compel arbitration of those claims. We affirm.

I.

The essential facts of this case can be stated briefly.2

 MedCam and MCNC

sought to develop medical imaging technology together, and they entered into a

contract (the Agreement) to govern the terms of their joint development. The

Agreement restricted the parties' ability to disclose or transfer the technology

developed under the Agreement. The Agreement also contained a clause that

restricted MCNC from competing with MedCam for a period of two years beyond the

termination of the Agreement. Specifically, the noncompete clause barred MCNC

from designing or producing devices in the "MedCam Field," which was an area of

imaging technology defined in the Agreement. Agreement ¶¶ 1.16, 6.5. Most

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importantly, the Agreement specified that "[a]ll disputes, controversies or differences

arising out of or in connection with this Agreement" would be finally settled by

binding arbitration. Id. ¶ 9.5.

After several years of jointly developing technology under the Agreement,

MCNC terminated the Agreement and began working with other companies to

develop optical technology. MedCam claimed that MCNC improperly transferred

technologies developed under the Agreement to other companies and that the

technologies MCNC developed with and through these other companies violated the

noncompete clause of the Agreement. MedCam asked the District Court to compel

arbitration of its claims against MCNC and several other companies under the Federal

Arbitration Act (FAA), 9 U.S.C. §§ 1–16 (2000). The District Court dismissed

MedCam's claims against the other companies, but entered an order denying MCNC's

motion to dismiss MedCam's claims against MCNC and granting MedCam's motion

to compel arbitration of those claims. MCNC appeals the order denying its motion

to dismiss and granting MedCam's motion to compel arbitration.

II.

When it enacted the FAA, Congress intended for parties who have agreed to

arbitrate disputes to do so in a speedy manner without delay or obstruction by the

courts. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967).

Accordingly, the FAA limits a district court's initial role in any challenge to an

arbitration agreement to deciding whether "the making of the agreement for

arbitration or the failure to comply therewith" is at issue. 9 U.S.C. § 4 (2000). As to

whether "the making of the agreement for arbitration" is in issue, id., our Circuit has

refined this inquiry to asking 1) whether the agreement for arbitration was validly

made and 2) whether the arbitration agreement applies to the dispute at hand, i.e.,

whether the dispute falls within the scope of the arbitration agreement. See Bob

Schultz Motors, Inc. v. Kawasaki Motors Corp., U.S.A., 334 F.3d 721, 726 (8th Cir.

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2003) (citing Houlihan v. Offerman & Co., 31 F.3d 692, 694–95 (8th Cir. 1994)),

cert. denied, 540 U.S. 1149 (2004); Twin City Monorail, Inc. v. Robbins & Myers,

Inc., 728 F.2d 1069, 1072 (8th Cir. 1984) (stating that arbitration is a matter of

contract law and that, absent an arbitration agreement regarding the particular dispute,

a party may not be required to submit the dispute to arbitration) (citing United

Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)). Here,

the dispute is centered on whether MedCam's claims fall within the scope of the

arbitration clause contained in the Agreement.

The scope of an arbitration agreement is given a liberal interpretation, with any

doubts resolved in favor of arbitration. Lyster v. Ryan's Family Steak Houses, Inc.,

239 F.3d 943, 945 (8th Cir. 2001). An order compelling arbitration "should not be

denied unless it may be said with positive assurance that the arbitration clause is not

susceptible of an interpretation that covers the asserted dispute." Id. at 945 (quoting

AT&T Techs., Inc. v. Comm. Workers of Am., 475 U.S. 643, 650 (1986) (quoting

Warrior & Gulf Navigation Co., 363 U.S. at 582–83)). Moreover, the question of

scope asks only whether the parties have agreed to arbitrate a particular claim and

does not reach the potential merits of the claim. Kansas City S. Transp. Co. v.

Teamsters Local 41, 126 F.3d 1059, 1067 (8th Cir. 1997) (quoting AT&T Techs., 475

U.S. at 649). Regardless of the scope of the arbitration agreement, the district court's

initial inquiry under 9 U.S.C. § 4 remains "an expeditious and summary hearing, with

only restricted inquiry into factual issues." Moses H. Cone Mem'l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 22 (1983) (emphasis added). We review de novo the

District Court's order compelling arbitration. Lyster, 239 F.3d at 945.

We hold, as did the District Court, that the arbitration clause contained in the

Agreement is susceptible to an interpretation that encompasses MedCam's claims.

The arbitration clause applies to "[a]ll disputes, controversies or differences arising

out of or in connection with this Agreement or the making thereof." Agreement ¶ 9.5

(emphasis added). This broadly worded arbitration clause applies to all disputes

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Twin City Monorail, which reversed an order compelling arbitration, is not

controlling here because Twin City Monorail confined its holding to narrowly drawn

arbitration clauses covering only particular disputes. 728 F.2d at 1072–74.

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regarding the Agreement.3

 MedCam asserts that MCNC breached and violated duties

created by the Agreement. Any determination of MedCam's claims will require,

among other findings, a technical interpretation of the "MedCam Field" as defined

in the Agreement and, if MCNC's disputed actions are found to fall within the

"MedCam Field," a determination of whether those actions took place within the twoyear noncompete period specified by the Agreement. Thus, MedCam's claims

necessarily arise from the Agreement because they depend upon an interpretation of

the Agreement in light of the disputed facts. The arbitration clause therefore applies

to MedCam's claims.

MCNC argues that material issues of fact are in dispute, that the District Court

therefore erred in denying MCNC's motion to dismiss and granting MedCam's motion

to compel arbitration, and that this Court should reverse and remand the case for

resolution of those factual issues through trial by jury. According to MCNC, the

factual questions concern the same two issues that we have mentioned in the

preceding paragraph: 1) whether the disputed technology is outside the scope of the

"MedCam Field" and 2) whether the expiration of the Agreement and the two-year

noncompete period terminated MedCam's rights under the Agreement.

We reject MCNC's arguments because they treat factual questions that are

material only to the merits of MedCam's claims in arbitration as though they were

material to the question of whether the arbitration clause requires those claims to be

submitted to arbitration. We return to the standard announced by the Supreme Court:

an order compelling arbitration "should not be denied unless it may be said with

positive assurance that the arbitration clause is not susceptible of an interpretation

that covers the asserted dispute." Warrior & Gulf Navigation Co., 363 U.S. at

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582–83. For the reasons stated earlier in this opinion, the arbitration clause in the

Agreement includes within its broad scope the claims MedCam is asserting against

MCNC. Moreover, we are unable to discern any material fact issues that would alter

that conclusion. MCNC's arguments that the technology at issue is outside the scope

of the "MedCam Field" and that the noncompete clause expired before MCNC took

its disputed actions do not mean that the agreement to arbitrate cannot be enforced.

Instead, such arguments simply go to the merits of MedCam's claims and can be

asserted by MCNC in the arbitration.

III.

In summary, MedCam claims MCNC violated the Agreement in various

respects. The Agreement contains a broadly worded arbitration clause covering all

disputes arising from the Agreement. Because MedCam's claims arise from the

Agreement, they are subject to binding arbitration under the arbitration clause. We

affirm the order of the District Court.

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