*

The Honorable Robert Holmes Bell, Chief United States District

Judge for the Western District of Michigan, sitting by designation. 

1

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2004 FED App. 0287P (6th Cir.)

File Name: 04a0287p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

MASCO CORPORATION,

Plaintiff-Appellee,

v.

ZURICH AMERICAN

INSURANCE COMPANY,

Defendant-Appellant,

NEAR NORTH INSURANCE

AGENCY, INC., et al.,

Defendants.

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No. 03-3071

Appeal from the United States District Court

for the Northern District of Ohio at Akron.

No. 02-00988—James S. Gallas, Magistrate Judge.

Argued: April 27, 2004

Decided and Filed: August 31, 2004 

Before: MARTIN and ROGERS, Circuit Judges; BELL,

Chief District Judge.*

2 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

_________________

COUNSEL

ARGUED: Joseph A. Hinkhouse, LORD, BISSELL &

BROOK, Chicago, Illinois, for Appellant. Marc A. Sanchez,

FRANTZ WARD, Cleveland, Ohio, for Appellee.

ON BRIEF: Damon N. Vocke, LORD, BISSELL &

BROOK, Chicago, Illinois, Hugh D. Berkson, HERMANN,

CAHN & SCHNEIDER, Cleveland, Ohio, for Appellant.

Marc A. Sanchez, FRANTZ WARD, Cleveland, Ohio, for

Appellee. 

ROGERS, J., delivered the opinion of the court, in which

BELL, D. J., joined. MARTIN, J. (pp. 12-18), delivered a

separate dissenting opinion.

_________________

OPINION

_________________

ROGERS, Circuit Judge. The district court in this case

refused to give effect to a broad arbitration clause in an

insurance policy, where the underlying dispute between the

parties revolved around policy coverage that neither party

intended, but that was imposed on the contract by law as

determined by subsequent Ohio Supreme Court opinions.

Because the dispute nonetheless falls within the ambit of the

arbitration agreement, we reverse.

Zurich American Insurance Company (“Zurich”), through

its agent, Near North Insurance Agency, Inc. (“Near North”),

sold to Masco Corporation (“Masco”) two commercial

automobile insurance policies, one effective June 30, 1997, to

June 30, 1998, and a second, renewal policy, effective June

30, 1998, to June 30, 1999. The two policies included a

deductible agreement, consisting of a basic agreement and a
No. 03-3071 Masco Corp. v. Zurich

Am. Ins. Co., et al.

3

1

The Ohio Supreme Court has since drastically reduced the scope of

Scott-Pontzer coverage. See Westfield Ins. Co. v. Galatis, 797 N.E.2d

1256 (Ohio 2003).

set of specifications. As part of the deductible agreement,

Zurich agreed to pay and handle the claims made under the

policies, and Masco agreed to pay Zurich a $500,000

deductible for claims made under the policies. The deductible

agreement included an arbitration clause reading, “Any

dispute arising out of the interpretation, performance or

alleged breach of this agreement, shall be submitted to

arbitration . . . .” 

In negotiating the purchase of automobile insurance, Masco

specifically instructed Near North that it wished to purchase

policies that contained no uninsured/underinsured-motorist

(“UM/UIM”) coverage. Near North and Zurich provided

Masco with forms that all parties thought rejected UM/UIM

coverage. At the time the polices were purchased and the

deductible agreement was entered into, both parties to this

appeal thought that their contract did not include UM/UIM

coverage.

Later events, however, rendered the parties’ rejection of

UM/UIM coverage ineffective. The Ohio Supreme Court in

Scott-Pontzer v. Liberty Mutual Fire Insurance Co., 710

N.E.2d 1116 (Ohio 1999), and Linko v. Indemnity Insurance

Co. of North America, 739 N.E.2d 338 (Ohio 2000),

interpreted § 3937.18 of the Ohio Revised Code to extend

UM/UIM coverage to almost all corporations buying

automobile insurance unless they expressly rejected the

coverage in a very precise way. Both Zurich and Masco agree

that the manner in which they rejected possible UM/UIM

coverage, although arguably valid at the time of contracting,

did not satisfy the Linko requirements. It is thus

uncontroverted that a new burden of coverage arose flowing

from Zurich to Masco and those affiliated with Masco.

1

4 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

Zurich has paid a pair of UM/UIM claims made against the

policies. On March 11, 1999, Natalie Ruska, the daughter of

an employee of a Masco subsidiary, was killed in an

automobile accident. Ms. Ruska’s estate sued Zurich in an

Ohio state court claiming entitlement to Scott-Pontzer

benefits. Zurich settled the suit, paying Ms. Ruska’s estate

approximately $700,000. Zurich then demanded payment of

the $500,000 deductible from Masco.

On April 7, 1999, Linda Collins was injured in an

automobile accident. At the time of the accident, Ms. Collins

was a passenger in a vehicle being driven by her daughter,

Rachael Collins, an employee of a Masco subsidiary. Collins

sued Zurich demanding Scott-Pontzer benefits. At oral

argument, Zurich admitted that it paid Ms. Collins at least

$140,000 in Scott-Pontzer benefits. Masco believes that

Zurich will demand payment of a deductible for the Collins

claim. 

Wishing to clarify its legal position, Masco filed a

complaint in the Ohio Court of Common Pleas against Zurich

and Near North seeking a declaration that: (a) it owed no

obligation to pay deductibles for UM/UIM claims brought

against Zurich, (b) if it is required to pay Zurich a deductible

then Near North should indemnify it, and (c) that the

deductible contained in the liability portion of the policies

does not apply to UM/UIM coverage imposed by operation of

law. Zurich removed the case to the federal district court, and

moved to stay and compel arbitration based on the arbitration

clause in the deductible agreement. The district court denied

the motion to stay, holding that the “the underlying disputes

in the complaint are beyond the scope” of the deductible

agreement because “Masco could never have agreed to pay a

deductible for coverage that would arise by operation of law

years later as a result of a deficiency in the policy or waiver

drafted by Zurich.” Masco Corp. v. Zurich Am. Ins. Co., No.

4:02 CV 0988, slip op. at 5 (N.D. Ohio Dec. 5, 2002). Zurich
No. 03-3071 Masco Corp. v. Zurich

Am. Ins. Co., et al.

5

timely appealed. The question of arbitrability is the sole issue

on appeal.

The Federal Arbitration Act (the “FAA”) manifests “a

liberal federal policy favoring arbitration agreements.” Moses

H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,

24 (1983). “To enforce this dictate, [the FAA] provides for

a stay of proceedings when an issue is referable to arbitration

and for orders compelling arbitration when one party has

failed or refused to comply with an arbitration agreement.”

Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir.

2003) (citing 9 U.S.C. §§ 3 & 4 ). This court reviews de novo

a district court’s decision whether to compel arbitration

pursuant to the FAA. Burden v. Check Into Cash of

Kentucky, LLC, 267 F.3d 483, 487 (6th Cir. 2001). 

Case law amply supports arbitrability of Masco’s claims

against Zurich in this case. “Before compelling an unwilling

party to arbitrate, the court must engage in a limited review to

determine whether the dispute is arbitrable; meaning that a

valid agreement to arbitrate exists between the parties and that

the specific dispute falls within the substantive scope of that

agreement.” Javitch, 315 F.3d at 624. “[A]s a matter of

federal law, any doubts concerning the scope of arbitrable

issues should be resolved in favor of arbitration.” Moses H.

Cone, 460 U.S. at 24-25 (1983). “[T]here is a general

presumption of arbitrability, and any doubts are to be resolved

in favor of arbitration ‘unless it may be said with positive

assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute.’” Highlands

Wellmont Health Network, Inc. v. John Deere Health Plan,

Inc., 350 F.3d 568, 576-77 (6th Cir. 2003) (quoting AT & T

Techs., Inc. v. Communications Workers of Am., 475 U.S.

643, 650 (1986)). Where, as here, the arbitration clause is

broad, “only an express provision excluding a specific

dispute, or ‘the most forceful evidence of a purpose to

exclude the claim from arbitration,’ will remove the dispute

from consideration by the arbitrators.” Id. at 577 (quoting AT

6 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

& T Techs., 475 U.S. at 650). Of course, “[w]hile ambiguities

in the language of the agreement should be resolved in favor

of arbitration, we do not override the clear intent of the

parties, or reach a result inconsistent with the plain text of the

contract, simply because the policy favoring arbitration is

implicated.” EEOC v. Waffle House, Inc., 534 U.S. 279, 294

(2002) (internal citations omitted). 

Here, notwithstanding Masco’s argument to the contrary,

the arbitration clause in the deductible agreement was

patently broad enough to cover the dispute as to whether

Zurich can recover deductibles for the UM/UIM payments

made under the policies. The arbitration clause encompasses

“[a]ny dispute arising out of the interpretation, performance

or alleged breach of [the deductible agreement].” J.A. at 66.

Masco’s claims against Zurich, which pray for a declaration

that Masco has no obligation under the deductible agreement

to pay deductibles for UM/UIM coverage, plainly fall within

these spacious terms. The dispute “arises out of” the parties’

conflicting “interpretation” of Masco’s obligations under the

deductible agreement and Masco’s “alleged breach” of the

deductible agreement by failing to pay deductibles for

UM/UIM coverage. 

Masco argues that, because the parties did not contemplate

UM/UIM coverage, they could not possibly have contracted

to submit disputes arising out of this coverage to arbitration.

But, by its plain terms, the arbitration clause embraces any

dispute arising out of the deductible agreement whether or not

the parties anticipated the dispute at the time of contracting.

Our task, of course, is limited to enforcing the parties’

agreement as written, and we have no license to write a

“foreseeability” limitation into the arbitration agreement. As

the Seventh Circuit held in Deputy v. Lehman Bros., Inc., 345

F.3d 494, 513 (7th Cir. 2003), “[w]hether a claim is subject to

arbitration depends on the contractual language, and in this

case the arbitration clause did not limit its scope to reasonably
No. 03-3071 Masco Corp. v. Zurich

Am. Ins. Co., et al.

7

foreseeable claims.” See also Fazio v. Lehman Bros., Inc.,

340 F.3d 386, 395-96 (6th Cir. 2003).

Masco further argues that (1) the deductible, which applies

to “Masco Policies for Automobile Liability” (J.A. at 75),

does not apply to UM/UIM claims, and (2) Ohio law forbids

the imposition of a deductible on UM/UIM coverage created

by operation of law. These arguments address the substance

of the parties’ dispute, not whether the dispute falls with the

terms of the arbitration clause, and hence the arguments lie

within the province of the arbitrator. 

In essence, Masco attempts to recast its challenge to the

underlying contractual liability as a challenge to the

arbitrability of the dispute. While Masco denies that it is

obligated by the deductible agreement to reimburse Zurich for

deductible amounts that Zurich paid as a result of the

imposition of UM/UIM coverage, it has no argument for

making a particular challenge to the arbitration agreement.

Instead, Masco’s challenge is based squarely on the absence

of an underlying contractual obligation. Masco argues that it

never purchased UM/UIM coverage, that the deductibility

obligation accordingly did not apply to such coverage, and

that, in turn, it cannot be compelled to arbitrate a non-existent

obligation to pay UM/UIM deductibles.

Where challenges to an arbitration clause, like those in this

case, are based on disagreement regarding an underlying

contractual dispute, the Supreme Court’s holding in Prima

Paint Corporation v. Flood & Conklin Manufacturing

Company, 388 U.S. 395 (1967), makes clear that arbitration

is required. Under Prima Paint, a general arbitration clause

is enforceable even if it is contained in a contract that is

generally asserted to be voidable, unless the basis for

rescission applies specifically to the arbitration clause. 

It is true that a party opposing a motion to stay and compel

arbitration may argue that the arbitration clause is itself

8 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

invalid. “An arbitration agreement may be invalidated for the

same reasons for which any contract may be invalidated,

including forgery, unconscionability, and lack of

consideration.” Fazio, 340 F.3d at 393. In this case, Masco

argues that the arbitration clause fails because it cannot apply

to a contractual provision that Masco did not agree to. But,

by virtue of Ohio law, the extension of UM/UIM coverage

was legally deemed to be an obligation arising from the

contract, and it is an issue of contract interpretation whether

the deductible reimbursement requirement applied to the

UM/UIM obligation. One seeking to challenge an arbitration

clause must make an argument that is specific to the

arbitration clause, however, and that does not simply

challenge the contractual obligation to which the arbitration

clause applies. See Burden, 267 F.3d at 491.

The dissent concludes that Masco’s obligation to reimburse

Zurich for the UM/UIM deductibles arose from a mutual

mistake, and that the arbitration agreement with respect to

that dispute was infected by the same mutual mistake.

Masco’s complaint contains a claim for contract reformation

based on mutual mistake, but the theory was not otherwise

argued by the parties, and normally this court treats an issue

not raised by a party as waived. Rybarczyk v. TRW, Inc., 235

F.3d 975, 984 (6th Cir. 2000). In particular, the parties have

not addressed whether, under the relevant law, a party can

base a mutual mistake claim on a change in the law

subsequent to the formation of the contract, given the

requirement that the mistake exist at the time the contract was

made. The answer appears to be no. See In the Matter of the

Liquidation of the New York Agency and Other Assets of

Bank of Credit & Commerce Int’l, S.A., 683 N.E.2d 756, 764

(N.Y. 1997) (“The doctrine of mutual mistake requires that

the mistake exist at the time the contract is negotiated.”); cf.

Wheelabrator Envtl. Sys., Inc. v. Galante, 136 F. Supp. 2d 21,

33 (D. Conn. 2001) (holding that the defendant could not base

a defense of mutual mistake on a court decision rendered a

year after the contract was formed); Sheet Metal Workers
No. 03-3071 Masco Corp. v. Zurich

Am. Ins. Co., et al.

9

Local 137 v. Vic Constr. Corp., 825 F. Supp. 463, 467

(E.D.N.Y. 1993) (stating that a failure to determine or predict

a controlling interpretation of a statute does not constitute a

mistake); Krantz v. Univ. of Kansas, 21 P.3d 561, 567 (Kan.

2001) (“A subsequent change in the law will not justify

rescission of a settlement agreement or contract on the basis

of ‘mistake of the law.’”).

Even assuming that the mutual mistake theory might apply

in this case, the argument still amounts to an attack on the

underlying liability, and only derivatively on the obligation to

arbitrate. Therefore, under Prima Paint, the general

arbitration provision still applies. The existence of a mutual

mistake leads at most to the conclusion that the underlying

contract obligation was voidable, or subject to rescission.

Chastain v. The Robinson-Humphrey Co, Inc., 957 F.2d 851,

855 (11th Cir. 1992); Gould v. Bd. of Educ. of Sewanhaka

Cent. High Sch. Dist., 616 N.E.2d 142, 145 (N.Y. 1993);

Restatement (Second) of Contracts § 152 (1981). In a similar

situation, where the party objecting to arbitration claimed that

the entire contract was fraudulently induced, the Supreme

Court in Prima Paint nonetheless required arbitration where

the fraudulent inducement did not relate specifically to the

arbitration clause. The Court reasoned that a court may

consider only claims concerning the validity of the arbitration

clause itself, as opposed to challenges to the validity of the

contract as a whole, in determining whether a valid agreement

to arbitrate exists. Prima Paint, 388 U.S. at 402-06; see also

Great Earth Cos., Inc. v. Simons, 288 F.3d 878, 889-90 (6th

Cir. 2002). The reasoning clearly extends beyond the

fraudulent inducement context to cases involving other bases

for rescinding a contract in toto. As the First Circuit

reasoned:

Contrary to Beneficial’s assertion, the fact that its

attempt to rescind the entire agreement is based on the

grounds of frustration of purpose rather than on fraud in

the inducement does not change applicability of the

10 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

2

This is not like a case where, for instance, a contract is void for lack

of a valid signature. In such cases, courts have indicated that an

arbitration clause contained in the contract would not be binding. See,

e.g., Chastain v. The Robinson-Humphrey Co., Inc., 957 F.2d 851, 855

(11th Cir. 1992). Such cases involve the asserted total absence of any

expressed intent to arbitrate contractual issues. There is clearly no such

absence in this case, where at most the contract is voidable rather than

void ab initio. (We do not mean to suggest that Prima Paint cannot apply

in at least some cases of contracts that are allegedly void, only that Prima

Paint does apply where the contract is said to be voidable rather than

void.)

severability doctrine. The teaching of Prima Paint is that

a federal court must not remove from the arbitrators

consideration of a substantive challenge to a contract

unless there has been an independent challenge to the

making of the arbitration clause itself. The basis of the

underlying challenge to the contract does not alter the

severability principle. Thus, the Seventh Circuit,

applying Prima Paint to a case similar to the one before

us, held that a party could not avoid arbitration through

rescission of an entire agreement when it had made no

independent challenge to the arbitration clause. See,

Wilson Wear, Inc. v. United Merchants &

Manufacturers, Inc., 713 F.2d 324, 327-28 (7th Cir.

1983).

Unionmutual Stock Life Ins. Co. of Am. v. Beneficial Life Ins.

Co., 774 F.2d 524, 528-29 (1st Cir. 1985). The reasoning

applies a fortiori to a claim of mutual mistake.2 In the instant

case, Masco’s claims, including its mutual mistake claim, are

entirely unrelated to the arbitration clause. As Masco’s

complaint makes clear, its allegation of mutual mistake

concerns the coverage of the automobile liability policies, not

the arbitration clause itself. Prima Paint accordingly requires

reversal.
No. 03-3071 Masco Corp. v. Zurich

Am. Ins. Co., et al.

11

The judgment of the district court is REVERSED and

REMANDED for proceedings consistent with this opinion.

12 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

______________

DISSENT

______________

BOYCE F. MARTIN, JR., Circuit Judge, dissenting. This

is not a simple case. At its core, it asks whether a state-court

decision can trump the clear intent of the parties and bar

access to a declaration of rights in federal court. Because I

believe that Masco and Zurich did not agree to arbitrate this

dispute, I respectfully dissent. When we compel arbitration,

we should actualize the parties' intent. I do not believe that is

what the Court has done.

My principal difference with the Court, and the reason I

cannot join the opinion, is that I believe the arbitration

agreement, as applied to a dispute over

uninsured/underinsured-motorist coverage, is not binding on

the parties due to a mutual mistake. In other words, I believe

the parties did not intend for this dispute to go arbitration.

They did not intend for there to be uninsured/underinsuredmotorist coverage at all. 

The law is clear. "Before compelling an unwilling party to

arbitrate, [a] court must engage in a limited review to

determine whether the dispute is arbitrable; meaning that a

valid agreement to arbitrate exists between the parties and the

specific dispute falls within the substantive scope of that

agreement." Bratt Enters., Inc. v. Noble Intern., Ltd., 338

F.3d 609, 612 (6th Cir. 2003). "An arbitration agreement

may be invalidated for the same reasons for which any

contract may be invalidated, including forgery,

unconscionability, and lack of consideration." Fazio v.

Lehman Bros., Inc., 340 F.3d 386, 393 (6th Cir. 2003).

"'[O]rdinarily state-law principles that govern formation of

contracts' will apply to this analysis." Id. at 394 (quoting

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944

(1995)). One who challenges an arbitration clause must make
No. 03-3071 Masco Corp. v. Zurich

Am. Ins. Co., et al.

13

an argument that is specific to the arbitration clause and does

not challenge the contract as a whole. See Burden v. Check

into Cash of Kentucky, LLC, 267 F.3d 483, 491 (6th Cir.

2001).

There appears to be some dispute as to what state law

governs the validity of the arbitration agreement. Zurich

suggests that New York law applies. Masco is not willing to

concede that New York law applies, but it does not offer a

suggestion of what law applies, or which it would prefer to

apply. The deductibles agreement contains a New York

choice-of-law provision, and the District Court applied New

York law. I need not reach the issue in my reasoning,

however, as there is no conflict between Ohio and New York

state law as to the relevant issue. Both Ohio and New York

recognize that a defense of mutual mistake will generally

support the rescission or reformation of a contract. See

Reilley v. Richards, 69 Ohio St. 3d 352, 352-53, 632 N.E.2d

507, 509 (1994), and Morris v. New York City Employees'

Ret. Sys., 129 F. Supp. 2d 599, 605 (S.D.N.Y. 2001).

Under Ohio law, a "mistake is material when it is a mistake

as to a basic assumption on which the contract was made that

has a material effect on the agreed upon exchange of

promises." R.J. Wildner Contracting Co., Inc. v. Ohio Tpk.,

913 F. Supp. 1031, 1041 (N.D. Ohio 1996). "The mutual

mistake must . . . frustrate the intent of the parties." Ibid.

Similarly, "[u]nder New York law a remedy for mistake is

available only where a mistake of both parties at the time the

contract was made as to a basic assumption on which the

contract was made has a material effect on the agreed

exchange of performance." Emergent Capital Inv. Mgmt.,

LLC v. Stonepath, 165 F. Supp. 2d 615, 624 (S.D.N.Y. 2001)

(internal citations and quotations omitted). The mistake must

speak "to the very nature of the subject sold . . . for example,

where what both parties believed to be barren cow turns out

to be a calf." Ibid.

14 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

I am convinced that under either Ohio law or New York

law the parties' mutual mistake as to their repudiation of

uninsured/underinsured-motorist coverage was fundamental,

and significantly affected their agreed upon exchange of

promises. When Masco and Zurich agreed to arbitrate "any

dispute" arising out of the deductibles agreement, they knew

what the range of those disputes might be. They knew,

because they had just negotiated the substantive terms of the

contract. They both thought this contract was a barren cow,

with uninsured/underinsured-motorist coverage expressly

rejected, not a calf, with coverage aplenty. It is true that an

Ohio Supreme Court case changed the coverage from a barren

cow to a calf, but that does not change the nature of the

mistake. Nor does it change the time of the mistake. The

parties were mistaken as to a key fact – what was being sold

– at the time they agreed to arbitrate "any dispute." By

submitting this case to arbitration, I believe the Court ignores

a clear mutual mistake and judicially constructs intent to

arbitrate when the facts at the time the parties signed the

contract repudiate that construction. 

Arbitration is a creature of consent. Inland Bulk Transfer

v. Cummins Engine Co., 332 F.3d 1007, 1015 (6th Cir. 2002).

Consent, in turn, is a creature of intent. It is the parties' intent

and not ours that dictates whether a dispute should be

arbitrated. See Javitch v. First Union Sec., Inc., 315 F.3d 619,

624 (2003). Here the parties were clear as to their intended

coverage relationship, and derivatively clear, although in an

implied way, as to the limited scope of the arbitration

agreement. That the parties were mutually mistaken about the

scope of their uninsured/underinsured-motorist coverage, or

lack thereof, does not change their original limited intent as

to arbitration. To do so by judicial fiat, it seems, would

frustrate their original purpose. 

Relatedly, I don't find persuasive the Court's reading of

Prima Paint Corp. v. Flood & Conklin Manufacturing Co.,

388 U.S. 395 (1967). See also Burden 267 F.3d at 491. The
No. 03-3071 Masco Corp. v. Zurich

Am. Ins. Co., et al.

15

Prima Paint Court held that an argument that contests the

applicability of an arbitration agreement must be specific to

the arbitration agreement and not be a defense that invalidates

the whole contract. Prima Paint, 388 U.S. at 404. Stretched

to an extreme, the Prima Paint Court's instruction could bar

a lower court from looking at the rest of a contract when

analyzing the validity of an arbitration agreement. I do not

believe that was the intent of the Prima Paint Court –

especially in the context of a mutual-mistake defense. The

reasons for not applying an arbitration agreement must be

specific to the arbitration agreement, it is true, but the parties'

intent, as manifested in the whole agreement, certainly can

inform our understanding of the parties' intent as to the scope

of the arbitration agreement. Here, Masco and Zurich's

specific exclusion of uninsured/underinsured-motorist

coverage from their limited relationship suggests that they did

not intend their arbitration agreement to control claims based

on uninsured/underinsured-motorist coverage, or had at least

not expressly agreed to submit those claims to arbitration. It

is our duty to give some effect to that repudiation. 

My analysis is not premised on a question of forseeability.

Instead, it gives effect to the parties' contractual language.

See Deputy v. Lehman Bros. Inc., 345 F.3d 494, 513 (7th Cir.

2003). Put in abstract terms, arbitration agreements speak to

the parties' intent regarding how alleged breaches of duties are

to be resolved. If, at the time they agree to arbitrate alleged

breaches of duty A or B, parties to a contract expressly agree

that there is no duty C, I believe it is a logical construction of

the parties' manifested intent not to arbitrate any later alleged

breach of the expressly repudiated duty C. 

The Court rejects my view, arguing that my understanding

is a hidden ruling on the merits. I do not think it is. I

concede, as I must, that Masco can, and likely will, assert a

mutual-mistake defense in the substantive dispute. The facts

alleged will be the same, but the legal analysis will be

different. The arbitration analysis looks only at where the

16 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

1

The Majority distinguishes Chastain v. The Robinson-Humphrey

Co., Inc., 957 F.2d 851 (11th Cir. 1992) in a footnote. I, in turn, disagree

in a footnote. In the body of its opinion, the Majority argues that: "[t]he

[Prima Paint] Court reasoned that a court may consider only claims

considering the validity of the arbitration clause itself, as opposed to

challenges to the validity of the contract as a whole, in determining

whether a valid agreement exists." Ante at 9. In Chastain, the Eleventh

Circuit reasoned that the Supreme Court's holding in Prima Paint does not

compel the arbitration of "a purported contract which indisputably lacks

the formalities necessary to signal Chastain's ex ante assent to the

agreement as a whole." Id. at 855. While I believe that Masco's mutualmistake argument satisfies the Prima Paint doctrine, it is enough to note

that the Eleventh Circuit believed that an argument, which potentially

could invalidate the contract as a whole, could also defeat an attempt to

compel arbitration. In essence, the question to ask is whether the

purported invalidating cause can be asserted once or twice. If a party can

only argue that the contract is invalid, then Prima Paint instructs that the

case should be sent to arbitration. If the argument can be asserted twice

– i.e., (1) the lack of a signature invalidates the arbitration clause, and (2)

the lack of a signature also invalidates the contract as a whole – then

Prima Paint's separability doctrine is satisfied, and a district court is free

parties agreed to resolve a dispute. It is a question of contract

law and contract interpretation. Unlike the Court, I suspect

the resolution of the substantive issue will have very little to

do with Ohio contract law. The parties expressly excluded

uninsured/underinsured-motorist coverage from their

contractual relationship. My hunch is that the parties will be

tossing around arguments regarding: gratuitous payments,

failure to join, implied indemnities, and the like.

Consequently, the trier of the substantive issue will likely

resolve a question of equity and fairness, not a question of

contract law. Thus, I do not think my analysis is a ruling on

the merits. The mutual mistake certainly defeats the claim

that the parties should be compelled to resolve this dispute in

arbitration, but it does not necessarily resolve the merits

question. After reviewing the equities, the trier of the

substantive issue may or may not find in favor of Zurich.

Where to resolve the dispute and how to resolve the dispute

are separate questions.1
No. 03-3071 Masco Corp. v. Zurich

Am. Ins. Co., et al.

17

to move on to hearing the merits of the case. I believe my argument is

entirely consistent with this position. As I have explained, the mutualmistake defense can be asserted twice.

I admit I am not without some sympathy for Zurich's

argument. The parties agreed that disputes arising out of the

"interpretation, performance or alleged breach" of the

deductibles agreement would be submitted to arbitration. The

Court accepts this contention and believes this is a dispute

about deductibles. I believe that view is too narrow. To

reach the conclusion advanced, the Court has to read the

deductibles agreement and the arbitration clause in a vacuum.

This is actually a dispute about the deductibles agreement as

it relates to uninsured/underinsured-motorist coverage –

coverage that both parties thought at the time they agreed to

arbitrate deductibles disputes had been expressly rejected. At

best, Zurich can argue that the parties probably would have

wanted to submit this type of claim to arbitration, but

"probably" is not enough. Although there is a "liberal federal

policy favoring arbitration agreements," Moses H. Cone

Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24

(1983), and it is "a well established rule that any doubt

regarding arbitrability should be resolved in favor of

arbitration," Fazio, 340 F.3d at 392, "[t]he duty to arbitrate

a dispute derives from the parties' agreement and a party

cannot be required to submit to arbitration any dispute that the

party has not agreed to submit." Bratt Enters., 338 F.3d at

612. Evidence of what they might have done is different than

evidence of what they did. That the arbitration agreement can

be interpreted to cover Zurich's claim is a product of both

parties' mistake, and by submitting this claim to arbitration,

the Court extends the scope of the original agreement to an

extent I do not believe the parties agreed to or intended.

Lastly, I disagree with the Court's alternative holding that

Masco waived the mutual-mistake argument. It is true that

the Court in Rybarczyk v. TRW, Inc., 235 F.3d 975, 984 (6th

18 Masco Corp. v. Zurich

Am. Ins. Co., et al.

No. 03-3071

Cir. 2000), stated that "[f]ailure to raise an issue on appeal

would normally constitute a waiver." But, in the very next

sentence, the Court states: "[h]ere, however, we have a pure

question of law that cries out for resolution – and in such a

situation we are not foreclosed from considering the issue."

Ibid.; see also Hutcherson v. Lauderdale Cty., 326 F.3d 747,

756 (6th Cir. 2003) (holding an appellate court may reach

legal issue not raised by the parties to affirm the lower court).

While I think Masco sufficiently raised the mistake argument

to survive a waiver challenge, even if it hadn't, this is a purely

legal issue that cries out for resolution.

I respectfully dissent.