### IN THE COURT OF APP EALS OF TENNESS EE AT NAS HVILLE A PR IL9, 200 3 S es sio n

DALE SUPPLY COMPANY v. YORK I NTERNATI ONAL CORP., ET AL



### .

Appeal f romthe Circ uit Court for Davidson County No. 02C432 Car ol Soloman, Judge

No. M2002- 01408-COA-R 3-CV - F iled October 9, 2003

The sole de terminative issue on a ppeal is whether an ag ree ment which mandates arbitration in the event of claims or disputes " arising out of or rela ting in any way to the rela tionship of the parties or this Agr eeme nt, or the bre ach the reof ," r equire s arbitration of tort claims including a cts arising afte r the parties’ contra ctual re lationship ended. We hold that arbitration of claims of tortious interfe renc e wi th c on tr a c ts o r b us ine ss re la tio ns is re qu ir e d un de r the te rm s of the pa rt ie s’ a g re e me nt andre ve rs e the jud g me nt o f the tr ia l c ou rt

.

Te nn. R . A pp. P .3 App e al a s o f Rig ht ; J udgm e nt of t he Ci r c uit

Co ur t R e ve r se d.

R U SS H EL DMAN , S P

. J
., delivere d the opinion of the court, in which B EN C A N T RE LL , P

. J ., M.S., and P A T R IC IA J . C O T T RE LL , J ., joined.

Ronald Georg e Ha

rris, Na shville, Tennessee , for the a ppellant, York Interna tional Corp. J ohn Anthony

Wolf, Baltimore, Mary land, for the appellant, Yor k I nterna tional Corp.

J o e l R a n d a l l H o o p e r , B r e n t w o o d
, T e n n e s s e e , f o r t h e ap p e l l e e , D a l e S u p p l y C o m p a n y.

OP IN ION

The sole de terminative iss ue on appea l is whether an agr eeme nt which mandates arbitration in the event of

claims or disputes " ar i s i n g o u t of or re lating in a ny way to the rela tionship of the pa rt ie s o r t h i s A g r e e m e n t , o r

t h e b r e a c h t h e r e o f
, " r e q u i r e s ar b i tr a t i o n o f

t o r tc l a i m s i n c l u d i n g a c ts arising afte r the pa

rties’ c ontrac tual relationship ende d. We hold that arbitration of claims of tortious interfe renc e with contracts or business rela tions is require d under the terms of the pa rties’ a g ree ment

a ndre ve rs e the jud g me nt o f the tr ia l c ou rt

.

Plaint if f- Ap pe lle e , D a leSup ply

Compan y (“Dal e S up pl y ”), i s a f

orm er di st ri bu to r of

pr oduc ts manufa cture d by

Def endant- A p p e ll an t, Y o r

k In tern a ti o n a l C o rporation (“York” ). F ollowing Yor k’s termination of the pa

rties’ Distributor S ales Agr eeme nt (the “A g ree ment”), D ale Supply filed a f ive-2-

count complaint i n Davidson C ounty Circuit Court and asserted claims ag ainst both York and Te am Air Distributing, I nc. (“Team Air”)
, the company that succe eded D ale Supply as York’ s distributor in Middle Tennessee

.

The fir st three c ounts named only York a s a def

endant. Da le Supply asserted that the termination was a

brea ch of the Ag ree ment and a violation of Tenn.Code. Ann 47- 25-1301, et seq. , t h at York w as liable for wrong ful termination of the A g ree ment and that Yor k was liable f

or mis re pr e se ntatio n be c a us e Yo rk a lle g e dly mis re pr e se nte d its int e nti on in c on tin uin g its re la tio ns hip with Dale Supply

under the Ag ree ment.

Cla ims in C ou nts I V a ndV a sse rt e d th a t Y or k an d Te a m Air tortio us ly int e rf e re d withDa le Sup ply ’s e xistin g c on tr a c ts w ith its c us tom e rs a ndwi th D a le Sup ply ’s bu si nes s re la tio ns wi th i ts customers a nd deale r. Specific ally , Dale Supply alleg ed that Yor

k did this byterminating the Ag ree ment with Dale Supply and by allowi n g T ea m Ai r to sell York produc ts in Dale Supply ’s fo rm e r d ist

ri bu tor sh ip t e rrito ry

to D a le Sup ply ’s fo rm e r c us tom e rs

. Rely ing on an arbitration clause in th e Agr eement, York re sponded to the Complaint on Marc h 20, 2002, by

filing a Motion To St ay

L itigation And To C o m p el Arbitration, Or I n The Al te rn a tiv e , T o D ism iss . T ha t mo tio n a sk e d th e tr ia l c ou rt to c omp e l arb itr a tio n o f a ll c la ims a g a ins t Yo rk a nd to stay a ll pr oc e e din g s. I n the a lte rn a tiv e , Yo rk so ug ht dis mis sa l of the Complaint a g a ins t it on the gr ound that the trial court lacked subje ct mat t er j u ri s d i cti on to adjudicate D ale Supply ’s claims ag ainst York bec ause of the ar bitration clause.

I n its response to the Motion To Compel Arbitration, Dale Supply conce ded that the F eder al Arb it r a ti o n A c t a

p p li e d to th e A g r e e me n t an d th a t th e f ir s t th r e e c o u n ts s h o u ldb e arbitrated. Neve rtheless, Da le Su p p l y as s erte d that the tort claims in Counts Four and F ive of the Complaint sh ou ld n ot b e arb itr a te d o n th e g ro un d th a t th os e c la ims didno t ari se ou t of the Ag re e me nt.

On May 8, 2002, the Davidson Count y C i rc u i t C o u rt grante d York’s motion in part and denied it in part. The trial court order ed Counts I and I I I to arbitration, but did not order a rbitration of the tortious interfe renc e cla ims assert ed in Counts I V and V, the trial court stating that the tort claims “shall proc eed in this court.” On J une 6, 2002, York a ppeale d the partial denial of its Motion To Compel Arbitration and f iled a Notice of Appe al pursuant to Te n n

. R

. Ap p

. P

. 3 , the Fe dera l Arbitration Act (“F AA”)
, 9 U.S.C. 16 (1999 & Supp. 2002), and the Te nnessee Uniform Ar bitration Act (“TU AA ”)
, Tenn. Code. Ann. 29- 5-319 (2001) . On appe al, York a sserts that the lower court

err e d in r e f

u s in g to c o mp e l ar

b it r a ti o n o f a ll c o u n ts o f th e Co mp lain t, in c lu d in g Co u n ts Four and Five.

Yo rk

is i n th e bu sin e ss o f m a nu fa c turing re sid e nti a l a ndc omm e rc ia l he a tin g a nda ir conditioning pr oducts. York’ s HVAC produc ts are some times distribut ed by independe nt dis tr ibu tor s, a n d D a l e S u p p l y w a s o n e s u c h d i s tr i b u t o r f o r Y o rk

. In Ja n u ar y

1 9 8 0
, D a l e S u p p ly
enter ed into its first contrac t w i t h York for the purc hase, sa le and distribution of reside ntial and

c omm e rc ia l Y or

k H VA C pr od uc ts, a s w e ll a s re la te d a c c e sso ri e s a ndpa rt s. Yo rk a ndDa le Sup ply-3-

enter ed into a subseque nt Distribut or Sales Ag ree ment on Dec ember 16, 1997. That contra ct superse ded any

earlier ag ree ment betwee n the parties and wa s in force at the time of e vents g iving ri se to D a le Sup ply ’s la ws uit

.

Th e Ag re e me nt g ov e rn e d the sa le by Yo rk a ndthe pu rc ha se a nddis tr ibu tio n b y Da le Sup ply of r e s id e n tia l and commer cial HVA C products and re lated ac cessories and pa rts in specified c ounties in Tennesse e. The Ag ree ment contained a broad dispute r esolution provision that required the pa rt ie s to arb itr a te a ll c la ims in the e ve nt o f d isp ute s, to- wi t:

All claims, disputes, and controve rsies arising out of or rela ting in any way to the rela tionship of the parties or this Ag ree ment, or the bre ach the reof , whether arising in tort, equity , contra ct or other wise, or unde r any law of the United States or

a ny state or mun ic ipa lit y , s ha ll, in l ie u o f c ou rt a c tio n, be su bmi tte d to arb itr a tio n in

acc ordanc e wit h the Commercial Ar bitration Rules of the American Ar bitration Association, and the a war d rende red by the ar bitrator(s) shall be fina l and binding on the parties and judg ment there on may be ente red in a ny

court of c ompetent jurisdiction. The site of the ar bitration shall be York, Pennsy lvania, unless anothe r sit e is m utu a lly

a g re e d b e tw e e n th e pa

rt ie s.

Th e dis tr ibu tor sh ip r e la tio ns hip be tw e e n Y or k a ndDa le Sup pl yc on tin ue d in e ff e c t un til terminated by York’s g iving Dale Supply six ty day s’ notice. The Ag ree ment expli citly provided that it could be terminated by either party
, without cause , upon six ty (60) day s’ not ice. York then e ntere d into a contra ct with Tea m Air to distribute Yor k products in the g eog raphic are a pre viouslyassig ned to Dale Supply

and the law suit followed.

I n its tortious interfe renc e claims Dale Supply alleg ed that York and Tea m A ir (1) c ontacted Dale Supply ’s customers w ho had plac ed orders wi th Dale Supply and off ere d those customers dis c ou nts , r e ba te s, a dv e rt isi ng a ndoth e r i nc e nti ve s to ind uc e the m to end th eir e xistin g bu sin e ss dealing s with Dale Supply and take their business to Tea m A ir; (2) used D ale Supply ’s proprie tary inf or ma tio n to inv ite Da le Sup ply ’s c us tom e rs to a me e tin g du ri ng wh ic h the y int ro du c e d T e a m A ir as York’ s new distributor in the ar ea; a nd (3) of fer ed Da le Suppl y ’s dea lers and c ustomers substantial discounts, rebate s, advertising and othe r incentives (which we re more favor able than those offe red or

authorized by

York to Da le Supply ) to induce D ale Supply ’s dea lers and c ustomers to end their business re lationships with Dale Supply and ins tead place their order s with Team Air. Da le Sup ply

fu rthe r a lle g e d th at as a r e su lt o f Y or k’ s in c e nti ve s to Da le Sup ply ’s c us tom e rs , it suffe red a

substantial loss of sales and prof its t h at i t o t h erw ise would have rea liz ed under the Ag re e me nt.

The trial c o u r t s p li t th e r e s o lu ti o n o f th e d is p u te b e tw e e n D a le Su p p ly a n d Y o rk into two fo ru ms. Th e fo c us of

thi s Cou rt ’s inq uiry is wh e the r the tort c la ims in tho se tw o c ou nts fa ll w ith in the scope of the pa

rties’ a rbitration ag ree ment and ther efor e ar e to be a rbitrated pur suant to the g uiding principles of the F AA. This Court revie ws this question of law de novo
, wi tho ut a presumption of cor

rec tness. Pyburn v. B ill Heard Chevrolet
, 63 S.W .3d 351, 356 (Tenn.A pp.2001).-4-

Th is C ou rt

is of the op ini on that the F AA app lie s to the arb itr a tio n a g re e me nt c on ta ine d in the parties’ Distributor Sales Ag ree ment. The FAA applies in all case s where there is “[a] written provision in . . . a contra ct evidenc ing a transact i o n i n volving c ommerce to settle by arbitration a
controve rsy

there afte r arising out o f s u ch co n t ract . . . .” See 9 U .S. C. s e c tio n 2 ; se e als o Frizze ll Con str . Co . v . G atl inb ur

g , L .L .C., 9 S.W .3d 79, 83 (Tenn.1999) . Thus, the FA A g overns the enfor ceme nt of any ag ree ment to arbitrate i n contra cts that involve interstate c ommerce . This is an inc on te sta

ble pr op os iti on , e sta

bli sh e d b y

the Un ite d Stat e s Su pr e me Cou rt a nd fo llo we d b y

bo th fede ral and Tenne ssee state courts. Se e , e. g. , Ten ne sse e Ri v e r Pulp & Pa pe r Co. v. Ei c hle ay Cor

p ., 63 7 S. W.2 d 8 53 , 8 55 (T e nn . 1 98 2) ; Berkle y v. H & R Block E. Tax Se rvs., Inc ., 30 S.W .3d 341, 343 (T e nn .A pp . 2 00 0) ; se e als o V olt In fo. Sc ie nc e s, In c . V

. B d. Of Trs . O f Le lan d S tan

for d J r. Un iv ., 489 U

. S

. 4 6 8
, 4 7 6
, 1 0 3 S

. C t

. 1 2 4 8
, 1 2 5 4 ( 1 9 8 9 ) ( i n t e r s t a t e c o n s tru c t i o n c o ntr a c t) ; S o uthland Corp. v. Keating , 465 U. S. 1, 11, 10 4 S. Ct . 8 52 , 8 58 (1 98 4) (i nte rs ta te fr a nc his e a g re e me nt) ; Prima Paint Corp. v. Flood & Conklin Mfg. Co. , 3 88 U. S. 3 95 , 4 00 , 8 7 S. Ct. 18 01 , 1 80 4 ( 19 67 ) ( int e rs ta te ag ree ment involving manuf actur e and sa le of pa int).

The pa rties’ Ag ree ment plainly

involves interstate c o mmerce . Dale Supply is a Tenne ssee corpor ation incorporated in Delaw are and authorized to do business in Tenne ssee. The Ag ree ment

s p e c i f i c a l l y n o t e s t h a t Y o rk ’ s p r i n c i p a l p l a c e o f b u s i n e s s i s l o c a t e d i n Y o rk
, P e n n s yl v a n i a

. C l e ar l y, the Ag ree ment involved s ubstantial relianc e upon interstate transac tions, including the flow of g oods, service s, reports and pay ments betwee n Pennsy lvania and Tenne ssee. The Complaint m akes it c le ar tha t th e Ag re e me nt calle d for th e int e rs ta te sa le a ndsh ipm e nt o f g oo ds by Yo rk to D a le Supply , as we ll as the purcha se and distribution of York g oods by Dale Supply in a pre scribed Te nn e sse e te rrito ry . Si nc e the Ag re e me nt b e tw e e n Y or k a ndDa le Sup ply

inv olv e s in te rs ta te

c omm e rc e , c a se la w a

ri sin g un de r the F AA app lie s to inte rp re t the sc op e of the arb itr a tio n c laus e to determine whether

Dale Supply ’s tort claims in Counts Four and F ive ar e ar bitrable.

The FAA cre ates a body of fede ral substantive law that is a pplicable in both state and f eder al
courts. Mo se s H

. Co ne Me m’ l H

os p. v . M e rc ur y Con st. Cor

p ., 460 U.S. 1, 25 n.32, 103 S. C t. 927, 942 n.32 (1983). Ac cording ly , once it is determined that a dispute involves interstate commer ce, the FAA applies re g ardle ss of whether the case i s pending in state or f eder al court. Id ,; se e als o P y bu rn , 63 S.W .3d at 356-57 (noting that since Cong ress did not want state an d fe d er al courts to reac h dif fe re nt out c ome s con c e rn ing the va lid ity of arb itr a tio n, wh e n the F AA app lie s, it p re e mpt s st a te la w) ; Te nn e sse e Ri ver P ulp , 637 S.W .2d at 858 (the F AA “ha s been he ld to be substantive rathe r than proc edura l and equa lly applicable in state and fe dera l courts.”)

I n d e c idi ng wh e the r a

g ive n d isp ute is w ith in t he sc op e of an a g re e me nt t o a rb itr a te , th is Cou rt mus t ta ke int o ac c ou nt the str on g po lic y fa vo ri ng arb itr a tio n, wh ic h r e qu ir e s th a t a ll d ou bts be re solved in favor

of ar bitration. See e .g., Moses H. Cone M em’ l Hosp., 460 U.S. at 24-25, 103 S.Ct . at 941; Daisy Mfg. CO.v. NCR Corp., 2 9 F. 3 d 3 8 9
, 3 9 6 (8 C i r. 1 9 9 4 )( ci t i n g Moses H. Cone th Me m’ l H os p ., 460 Y,S, at 25-26, 103 S. Ct. At 941). Arbitration is an attra ctive dispute re solution mecha nism “because it is a more e x peditious and final alternative to litigation.” Arnold v. Morgan Keegan & Co., Inc., 9 1 4 S

. W

. 2 d 4 4 5
, 4 4 9 T en n

. 1 9 9 6 )( ci t i n g Boy d v . D av is , 897 P.2d 1239, 1242-5-

(Wash.1995)). This Court rec og nizes that the “heavy presumption of ar

bitrabilityrequire s that when the scope of the a

rbitration clause is open to question, a court must de cide the question in favor of arbitration.” Py bu rn , 63 S.W . 3d at 357.

Whe n a c on tr a c t con ta ins a br oa d ar bit ratio n claus e , as he re , in “th e abs e nc e of a ny e xpre ss provision excluding a pa

rticular g rieva nce f

rom arbitration .

. . only

the most force ful evidenc e of a purpose to exclude the claim from a rbitration ca n preva il.” Ste e lwo rkers v . W ar rio r & Gu lf Navigation Co. , 363 U.S. 574, 584-85, 80 S. Ct. 1347, 1354 (1960). “I f the a lleg ations underly ing the claims ‘touch matters’ cover ed by the parties’ contra ct, then those claims must b e a rb i t rate d, whateve r the leg al labels a tt ached to them.” Tennessee Imports, Inc. v . Filippi , 745 Supp. 1314, 1 3 2 5 -2 6 (M

. D. T en n

. 1 9 9 0 )( ci t i n g Gene sco, Inc. v. T

. Kakiuchi & Co., Ltd.
, 815 F2d 840, 847 ( 2d Cir . 1 98 7) ; Mi tsu bu sh i M oto rs Cor p. v . S ole r Ch ry sle r- Pl

y mo uth , I nc., 473 U.S. 614, 622 b,9, 624 n.13m 105 S. C t. 3346, 3351 n.9, 3352 n. 13(1985).

Th e na tio na l poli c y fa vo ri ng arb itr a tio n tha t is re c og nize d b y bo th f e de ra l a ndstate la w a lso withdraws the pow er of

the states to require a judicial for um for the r esolution of claims which the
contra cting parties a g ree d to resolve by arbitration. Mastrobuono v. Shearson Lehman Hutton, Inc
., 5 1 4 U. S

. 5 2
, 5 6
, 1 1 5 S

. C t

. 1 2 1 2
, 1 2 1 6 (1 9 9 5 ) ( ci t i n g Southland , 465 U.S. A t 10, 104 S.Ct . At 858). Whe n the pa

rt ie s ag re e to ar

bit ratio n, the F AA e ns ur e s enf or c e me nt of the a g re e me nt, a ndthe c ou rt s

c a nn ot re qu ir e a jud ic ia l fo ru m fo r the re so lut ion of a c laim that th e pa

rt ie s c on tr a c tua lly

a g re e d to

ar b it r ate. Fr iz zell , 9 S.W .3d at 84. I ndeed, the very purpose of

the FA A is to ensure tha t the arbitration ag ree ment is enforc ed ac cording to its t erms. Id

. The pivotal question for this Court is whether Dale Supply ’s claims for tortious interfer ence in Counts F o u r

a n d F iv e f

a ll w ith in th e s c o p e o f

th e ar b it r a ti o n c la u s e in th e D is trib u to r

Sa le s Ag ree ment, requiring them to be ar bitrated pursua nt to the pa rties’ Ag ree ment and the FAA

. The

answ e r t o th a t qu e sti on is “ y e s. ” Th e pa rt ie s a g re e d to arb itr a te “a ll c la im s , d is p u te s, and

c on tro v e rsi e s a ris ing ou t of or re lat ing in a ny way to t he re lat io ns hi

p of th e pa rti e s o r th is Agreem ent, or the br each thereof, whether ar ising in tort, equity, contract or otherwise . . . ” Th is Court interprets that lang uag e plainly : that lang uag e unequivoc ally includes the tortious interfe renc e claims asserted in Counts Four and F ive.

The fa ct t hat t here are claims sounding in tort rathe r t han contract does not remove them from the sc op e of

the arb itr a tio n c laus e . I n th e c laus e un de r s c ru tin y , to rt c la ims are sp e c if

ic a lly wi thi n the sc op e of the arb itr a tio n c laus e

. Ev e n wi tho ut l a ng ua g e in an a rb itr a tio n a g re e me nt s pe c if ic a lly including suc h clai ms , c o u r ts addressing the issue have universally found that expansive clause s, like the one be tween Y ork and D ale Supply , encompa ss tort claims. See e .g., American R ecov ery Corp. v. Computerized Thermal Im aging, Inc. , 96 F.3d 88 ( 4 C i r. 1 9 9 6 ). It is im materia l whether the th claims are couche d in terms of tort, rather than br eac h of contra ct. See, e .g., Sweet Dream s Unlimited, Inc. v. Dial-A-M attress Internat’l Ltd.
, 1 F.3d 639, 643 (7 Cir.1993). The United States th Court of Appea ls for the Six th Circuit has rec og nized that when langua g e of an arbitration ag ree ment is broad, all contr oversies, inc l u d i ng tort claims, are subject to arbitration. See F ederate d Dep’ t-6-

Stores, Inc. v . J.V.B. I

ndus., Inc. , 894 F.2d 862, 869 ( 6 Cir. 1990) (ar bitration clause in ag ree ment th was broa d enoug h to encompass a tort claim arising from an a lleg ed bre ach of contra ct).

Othe r s ta te c ou rt s a

pp ly ing bo th f

e de ra l a ndstate la w h a ve he ld that br oa d a rb itr a tio n c laus e s, such as the one in this case , include tort cla ims. For example, one F lorida court repe ated the “ axiom of fede ral andF lorida

la w” that arb itr a tio n c laus e s su c h a s th e on e he re “ are to b e g ive n b ro a de st possible interpretation to accomplish the salutary purpose of resolving controve rsies out of court.” Royal Caribbean Cruises, Ltd. v. Unive rsal Employment Age ncy , 6 64 So. 2d11 07 , 1 10 8 ( F la . D ist

. App.1995) (c itations omi tted). “I n common with a ppare ntly every other court whic h has interpr eted thi s la ng ua g e ,” the c ou rt

c on c lud e d th a t th e plaint if f’ s to rt c la ims (d e fama tio n, fr a ud , a ndbu sin e ss interfe renc e) w ere subject to ar b i t ration pursuant to the parties’ a g ree ment to arbitrate “any
controve rsy

or cla im arising out of

or re lating to this Agreement or the br eac h of any term of provision here of.” Id . at 1108-09. See also Pittsburgh Logist ics Systems, Inc. v. P r o f es s ional Transport ation & Logist ics, Inc., 803 A.2 d 7 7 6
, 7 7 9 (Pa. Super. Ct. 2002) (f inding tortious interfe renc e cla im within s cope of ag ree ment to arbitrate “all cla ims, disput es and othe r matters a nd qu e sti on s a

ri sin g ou t of

or re la tin g to thi s Ag re e me nt, or the br e a c h th e re of ” ); Bass v. SMG, I

nc. 765 N.E.2d 1079, 1091 (I ll. App.Ct. 2002) (following state and fede ral authority in f avor of arbitration and finding tortious interfer ence claims “e nmeshed in the he art of the agre ement” and there fore arbitra ble).

Dale Supply ’s tortious interfer ence claims arise from or r elate to the D istributor Sales Ag ree ment and ar e ther efor e ar bitrable. As long as the fac tual alleg ations underly ing D ale Supply ’s tortious interfer ence claims “touch upon” or have a signific ant rela tionship to the Ag ree ment, they fall within the scope of

the ar bitration clause in the A g ree ment. See e.g., Ame rican Rec overy, 96 F. 3d at 94 (“ the test for a n ar b i t ra t i o n clause of this brea dth is not whether a c laim arose unde r one ag ree ment or anothe r, but whethe r a sig nificant re lationship exis ts betwee n the claim and the ag ree ment containing the ar bitration clause” ). B eca

use all of Dale Supply ’s tort claims ag ainst York arise out of and rela te to the perf ormanc e, termination or brea ch of the Ag ree ment, they are subject to arbitration.

Dale Supply ’s tort claims ar e fa ctually interwove n with, and ce rtainly relat e to, the Ag ree ment. Dale Supply alleg es that York interfer ed with its rela tionships wit h its customers and that York a ttempted to reduc e Dale Supply ’s business by offe ring its customers and dea ler ind uce me nts to c a nc e l th e ir e xistin g or de rs a ndthe n p la c e the m w ith its ne w d ist ri bu tor in D a le Sup ply ’s fo rm e r t e rrito ry . Tho se c la ims , D a le Sup ply ’s re la tio ns hip wi th Y or k, its status a s a distributor or York product s , t h e expiration of that relationship, and the tra nsfer of Da le Supply ’s sales territory to T eam Air, all have their g enesis in the Ag ree ment. See Swe et Dream s, 1 F. 3d at 643.

Funda mentally , the tortious interfer ence claims by Dale Supply

are premised on the al l ega t i o n t h at , d u ri n g t h e co u rs e o f wr ap p i n g u p i t s re l at i o n s h i p wi t h Da l e S u p p l y an d i n fi n d i n g a

ne w d ist ri bu tor to se ll its pr od uc ts, Yo rk int e rf e re d with Da le Sup ply ’s ri g ht to s e ll Y or k p ro du c ts to its customers. The alleg ed tortious interfe renc e is inext rica bly rela ted t o Yo rk’s noti ce of-7-

te rm inatio n o f Da le Sup ply a nd its e ng a g ing of Te a m Air a s the ne w dis tr ibu tor of Yo rk pr od uc ts. On J anuary

3, 2001, York g ave D ale Supply written six ty -day s’ notice of its volunt ary termination of the Distributor Sales Agree m en t wi t hout cause , eff ective Ma rch 4, 2001. D ale Supply did not

cea se its distributi on for Yor k under the Ag ree ment afte r receiving notice of te rmination. I nstead, Dale Supply

continued to marke t York produc ts and even “re ceive d order s for Yor k products to be delivere d to its customers and dea lers.”

The a lleg ed tortious conduct o ccur red w hile Dale Supply

continued to sell York pr oducts and du ri ng the pe ri odthat th e pa rt ie s w e re wi nd ing do wn the ir re la tio ns hip . In fac t, Dale S up ply

c omp la ins that Y or

k e nte re d in to an a g re e me nt w ith Te a m A ir , a s a su c c e sso r dis tr ib ut ors hip , to dis tr ibu te Yo rk

pr od uc ts i n M idd le a ndEa st Te nn e sse e on ly a we e k a ft e r D a le Sup ply wa s g ive n it s sixty -d a y no tic e of te rm inatio n. Mo re ov e r, Da le Sup ply c omp la ins that Y or

k a ndTe a m A ir

“ he ld discussions. .

. re gar d i n g a new Distributor Sales Ag ree ment for Middle Te nnessee ” during the fourth quarter of 2000, prior to York’s notice of termination. Da le Suppl y al s o complains of a meeting that alleg edly

occur red on F ebrua

ry 15, 2001, within the period of c ontinued perf ormanc e under the Ag ree ment, at which T eam Air was “introduc ed as D efe ndant York’ s new distributor.” I n actua lity , Dale Supply ’s Complaint is predicted on some conduc t o cc u rr i n g p ri or to the termination of the Ag ree ment. As noted, the Complaint plainly dates the alleg ed conduct both prior to the notice of te rmination and within the six ty -day notice period, befor e the eff ective date of the
te rm inatio n. Th e Compla int a lso is e xplic itly predic a te d o n “ c on fi de nti a l in fo rm a tio n” that D a le Supplyalleg es wa s obtained during the cour se of the pa rties’ re lationship.

A determination of whether York eng ag ed in any wrong ful conduct can only be dete rmined in the context of t h e Agr ee m en t which g ave D ale Supply a non-e x clusive rig ht to dist ribute York products and which expressly rese rved York’s rig ht to sell its products in Dale Supply ’s territory and to terminate D al e S u p p l y without cause. A court c annot determine whether York’ a ctions were improper without first considering and interpre ting pr ovisions in the Ag ree ment that g ave Y ork the rig ht to sell it s products to customers in Da le Supply ’s territory even during the term of the Ag ree ment.

Nor c an a c ourt resolv e Da le Supply ’s claim that its “conf idential information” wa s misappropriate d when Yor k transitioned the ter

ritory to Tea m Ai r wi thout interpreting the Ag ree ment to determine, a mong othe r thing s, whether the information was confide ntial and whether it (and the c ustome rs ) b elong ed to York or Dale Supply

. Se e e .g ., Mc Ma ho n v . RMS

El e c tro nic s, Inc., 618 F. Supp.189, 191 (S.D.N.Y. 1985) (“ when a tort claim is based in substantial part on the
contra ctual rig hts a nd responsibilities of the two parties, then it must be ar bitrated a s require d by

an arbitration clause” ).

Dale Supply

and Yor k ag ree d to submit to a

rbitration all claims, disputes and controve rsies arising out of or re lating to the A g ree ment, the re lationship of the parties, or the bre ach the reof . The broad sc o pe of the Ag ree ment to arbitrate encompa sses all of Da le Supply ’s tort claims, and the re fo re Cou nts F ou r andF ive of the Complaint mus t be arb itr a te d. Th e ins truc tio n b y the c ou rt s of this state and the f

eder al courts that any

doubts must be r esolved in f avor of arbitration mandates-8-

su c h a re su lt. F or

ins ta nc e , in Te nn e sse e Im po rts , I nc . v . F ili

pp i, 745 F. Supp. 1314 (M.D. Te nn .1 99 0) , a

dis tr ibu tor

br ou g ht c la ims fo r b re a c h o f c on tr a c t a ndtortio us int e rf e re nc e wi th
contra ct ag ainst the I talian manufa cture r (w i t h whom it had a distribution ag ree ment) and the manufa cture r’s re prese ntative. Finding that the court “should focus on the fa ctual alleg ations in the complaint rathe r than the le g al causes a s s er t ed
, ” t he court held the claim wa s arbitra ble if the alleg ations underly ing the claims “touch ma tters’ c overe d by the parties’ contra ct, whate ver the “leg al l abels’ attache d to the claims. Id. at 1325-26. Apply ing this princ iple, the court found that the dis tr ibu tor ’s br e a c h of c on tr a c t a nd tortio us I nte rf e re nc e c la ims “ tou c he d up on ” th e par ties ’ ag ree ment in some way

and held that the c laims theref ore w ere arbitra

ble. Id. a t 1326. See also, Howell v. NHC Healthcare -Fort Sanders, Inc

. , 1 09 S.W. 3d73 1, 73 3 ( Te nn .A pp .2 00 3) : “ [C]ourts

are require d to give an ar

bitration ag ree ment ‘as br oad a construction as the words and intentions of the parties will allow. . . .’ ”

Simi larly , in Pennzoil Co. v. Arnold Oil Co., 30 S.W .3d 4 9 4 (T ex

. Ap p.2000), tortious i n t e r f e r e n c e c l a i m s ar i s i n g o u t o f t h e t e r m i n a t i o n o f a d i s tr i b u t o r s h i p w e r e h e l d t o b e ar b i tr ab l e

. In that case Pennzoil and Arnold Oil (“A rnold”) had entered int o a nonexclusive distributor ag ree ment

un de r w hic h A rn oldwas given c e rt a in rig hts to d ist ri bu te Pe nn zoil ’s pr od uc ts i n s ou th T e xas. Pe nn zoil g a ve Arno ld no tic e of te rm inatio n of the c on tr a c t wi thi n sixty da y s a nd the n c on tr a c te d w ith another distributor to serve a s its authoriz ed distri b u t o r i n the ar ea. F ollowing the te rmination, Arno ld s ue d b othPe nn zoil a ndthe su c c e sso r d ist ri bu tor , c la imi ng tor

t i o u s i n t e rf

e r e n c ew ith c on tr a c t,

c on sp ir a c y

a ndtortio us int e rf

e re nc e wi th p rospe c tiv e bu sin e ss r e la tio ns hip s. Pe nn zoil mov e d to compel ar bitration.

The a lleg ations by

Arnold we re very simil ar to those asserted by Dale Supply . Arnold alleg ed that while its contrac t with Pennz oil was still i n eff ec t , P en n zoil and Arnold’s succe ssor worke d tog e the r t o in du c e Arno ld’ s c us tom e rs to s tart bu y ing fr om the su c c e sso r, ins te a d of Arno ld an d to underc ut Arnold’s sales w ithin it s territory

. Id . at 49 9. Arno ld a lso a lle g e d th a t th e de fe nd a nts eng ag ed in this conduct to provide just ification for Pennzoil to canc el the contr act with Arnold and repla ce it with the succ essor. Id

. The a rbitration ag ree ment betwee n Pennzoil and Arnold provided that th e pa

rt ie s mu st a

rb itr a te “ a ny

c on tr ov e rs y

or c la im a ri sin g ou t of

or re la tin g to this Ag re e me nt, its performa nce or

the bre ach the reo f. ” I d. at 498-99. The arbitration clause in the Ag ree ment betwee n York and Dale Supply appea rs at least as broad as the la ng uag e in the Pe nn zo il a g re e me nt.

L ooking at the alleg ations and the parties’ arbitration a g ree ment, the court held in Pe nn zo il that all claims wer e ar

bitrable. Among other thing s, the court spe cifica lly determined that Arnold’s claim of the tortious interf ere nce w ith future business wa s based on its alleg at ion that Pennzoi l’s termination of the c ontrac t cause d Arnold to lose future business from its exi sting c ustomers. 30 S.W . 3d at 499. Acc ording ly , the court found that the cl ai m wa s “fac tually interwove n with and relates to the contra ct and its perf ormanc e,” and the court ordere d arbitration of the claims. Id

.-9-

The fa ct that Dale Supplyhas asse rted re lated tort cla ims ag ainst York’s c o-def endant, Te am Air, does not aff

ect the ag ree ment betwee n York a nd Dale Supply to arbitrate those claims. United Sta te s Su preme Co urt pr e c e de nt m ake s it c le ar that th e arb itr a tio n c laus e be tw e e n Y or k a ndDa le Supplymust be enfor ced, notwithstanding the fa ct that common counts ar e asse rted a g ainst York and Tea m Air, and that ordering arbitration means that the tortious interfe renc e cla ims ag ainst York and Tea m Air would be re solved in separ ate pr ocee dings. Se e Mo se s H. Cone Me m’ l H os p ., 46 0 U .S.

a t 10 3 S. Ct. At

92 7; De an W

itt e r R ey no lds , I

nc . v . B y rd , 470 U.S. 213, 105 S. C t. 1238 (1985).

I n Mo se s H

. Co ne Me m’ l H

os p , a hospital hired a

contra ctor a nd an ar chitect to construc t additions to the hospital. The hospital’s ag ree ment with the contra ctor had an arbitration clause, but its ag ree ment with the arc h i t ec t d i d n ot. 460 U.S. at 5-6, 103 S. Ct. at 931. W hen the c ontrac tor claimed that it had be en dama g ed by virtue of c erta in delay s in the project, the hospital a sserted, among other thi ng s, that any delay was the fault of the ar chitect who w ould be liable to the hospital in indemnity . Since the dispute with the ar ch i t ec t co u l d n ot be sent to arbitration without t he

arc hitect’s conse nt, g iven t he absence of an arbitration clause, the hospital ar g ued that it should not be re quired to ar

bitrate with the co n t ra ctor. Instead, the hospital aske d to have a ll of the related claims adjudicat ed in court, arg uing that it was improper for the hospital to “be for ced to r esolve these re lated disputes in differ ent forums.” 460 U.S. at 20, 103 S. Ct. at 939. The Supreme Court fl a tly re je c te d th a t arg ume nt, a ndhe ld that mu lti ple a c tio ns we re to p ro c e e d in dif fe re nt f or ums :

I t is true . . . that if [the contra ctor] obtains an arbitration order f or its dispute, the Hospital will be forc ed to re solve these r elated disputes in diffe rent forums. That mis fo rtune, ho we ve r, is n ot the re su lt o f any c ho ic e be tw e e n th e fe de ra l a ndstate courts; it oc curs be cause the re levant fe dera l law requires piece meal re solution when

nece ssary to give eff

ect to an arbitration ag ree ment. Under the Arbitration Act, an arbitration ag ree ment must be enfor ced notwithstanding the prese nce of other pe rson who ar e parties to the underly ing dispute but not to the arbitration ag ree ment. I f the dispute betwee n [t he contr actor ] and the Hospital is arbitrable unde r the Act, then the Hospital’s two disputes will be resolved se parately -one in a rbitration, and the othe r (if at a ll) in state-court liti g ation.

Id. , 460 U.S. 20, 103 S.Ct

. 939. The United St ates Supreme Court rea ffirme d this principle in Dean W itt e r wher e the Court held that “the A rbitration Act r equire s district courts to compel ar bitration of pe nd e nt a

rb itr able c la ims wh e n on e of the pa rt ie s f ile s a mot ion to c omp e l, e ve n w he re the re su lt would be the possibly ineffic ient maintenanc e of se parate proc eeding s in differe nt forums.” Dean W itter , 470 U.S. at 217, 105 S.Ct . At 1241; see a lso W ojcik v. A etna Life Insurance & Annuity Co.
, 901 F. Supp. 1283 (N.D . I ll.1995).

Dale Supply

is not relieved of

its dutyto arbitrate with York simply beca u s e i t h as re lated claims ag ainst another en t i t y wi t h whom it has no arbitration ag ree ment. The trial c ourt

un ne c e ssa

ri ly div ide d r e so lut ion of

the dis pu te be tw e e n D a le Sup pl y and York in to t wo fo ru ms, when those pa

rties ag ree d to only

one.-10-

Th e jud g me nt o f the tr ia l c ou rt be low of Ma y 8, 20 02
, wh e re in is or de re d that the tort c la ims “shall proc eed” in the trial court, is r ever sed, the motion for arbitration of all claims is gr anted a nd the c a se is st a y e d p e nd ing arb itr a tio n in a c c or da nc e wi th the pa rt ie s’ Ag re e me nt. Th is c a us e is

re ma nd e d f

or pr oc e e din g s c on sis te nt w ith thi s o pin ion . Co sts ta xed to app ell a nt, Da le Sup ply C o m p a n y, a n d i t s s u r e t y, f o r w h i c h e x e c u t i o n m a y i s s u e i f n e c e s s ar y.



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