The Honorable James M. Rosenbaum, United States District Judge for th e 1 District of Minnesota, sitting by designation. United States Court of Appeals FOR THE EIGHTH CIRCUIT

No. 96-4126

Fleet Tire Service of North Little * Rock, *
* Appeal from the Unite d States Appellee, * District Court for the
* Eastern District o f Arkansas.

v. *
* Oliver Rubber Company, *

Submitted: May 19, 1997 Filed: July 15, 1997

Before MURPHY and HEANEY, Circ uit Judges, and ROSENBAUM, 1 District Judge.

HEANEY, Circuit Judge.

Oliver Rubber Company (“Oliver”) appeals the distric t court’s denial of its motion to stay an actio n for breach of contract brought by Fleet Tire Service of North Little Rock (“Fleet Tire”) pending arbitration under the term s of the contact. We reverse.2 I.
In November 1990, Fl eet Tire entered into a contract (“19 90 Agreement”) with Oliver granting Fleet Tire a nonexclusi ve right to use Oliver’s “Tuff-Cure System” of retr eading tires. The 1990 Agreement contains a n arbitration clause that provides:

Any c ontroversy or claim arising out of o r relating to this Agreement or any breach of its term s shall be settled by arbitration i n accor dance with the rules of the America n Arbitration Association, and judgment upon th e award rendered by the arbitrator(s) may b e entered in any court having jurisdictio n thereof. The expense of such arbitration shall be di vided equally between the parties. Th e arbitration provided for in this Section 1 0 shall be the exclusive remedy for any disput e between Oliver and [Fleet Tire ], as a substitute for a ny and all legal remedies and proceeding s that would otherwise be available to them.
1990 Ag reement, § 10. The 1990 Agreement also contain s a pr ovision that requires any amendment or modificatio n to be made in writing and signed by both parties. 199 0 Agreement, § 9.5.

In February 1995, a sales representative for Olive r sign ed a letter (“1995 Letter”) prepared by Fleet Tir e gr anting Fleet Tire an exclusive market area for th e Tuff -Cure System within a fifty-mile radius of Littl e Rock and Russellville, Arkansas. Fleet Tire neve r coun tersigned the letter. Subsequent to Fleet Tire’ s receipt of the 1995 Letter, Oliver entered into a Tuff

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Cure System license agreement with another company tha t included the Little Rock area.

Fleet Tire filed a complaint alleging that Olive r violated Fleet Tire’s exclusive-market rights provided by the 1995 Letter. Oliver moved to stay the pr oceedings in dist rict court, asserting that Fleet Tire’s claim wa s subject to the 1990 Agreement’s arbitration clause. The dist rict court denied the motion, holding that Flee t Tire’s complaint arose under the 1995 Letter and that the provisions of that letter are4

“collateral” to the 1990 Agreement. Because the district
cour t misapplied the standard for determining when a coll ateral matter is subject to an arbitration clause , an d because the arbitration clause at issue is broa d enough to cover this dispute, we reverse.

II.

While we review the district court’s factual finding s for cl ear error, our review of the construction of th e arbi tration agreement is de novo. Nordin v

. Nutr i/System, Inc. , 897 F.2d 339, 344 (8th Cir. 1990)

. Althou gha court may not impose arbitration on a part y who has not agreed to be subject to it, Case Int’l Co. v. T.L. James & Co. , 907 F.2d 65, 66 (8th Cir. 1990) , federal policy favors arbitration. Moses H. Cone Mem’ l Hosp. v . Mercury Const. Corp. , 460 U.S. 1, 24-25 (1983 ) (que stions relating to the scope of arbitrable issue s “should be resolved in favor of arbitration”).

The district court found that a valid arbitratio n agreement between Oliver and Fleet Tire exists based o n the 199 0 Agreement but noted that “arbitration of [a ] disp ute cannot be compelled merely based upon th e existence of an arbitration clause in the mai n agreement” if the controversy is collateral to the agree ment. Dist. Ct. Op. at 6 (citing Wilson v. Subway Sandwiches Shops , Inc. , 823 F. Supp. 194, 199 (S.D.N.Y. 1993)). The court found that the 1995 Letter could not be a mod ification or
ame ndment to the 1990 Agreement in the absence o f signings by both parties and that the 1995 Agreement was speci ficallynonexclusive. Therefore, the court hel d that the 1995 Letter granting exclusivity did not aris e5

under the 1990 Agreement and is therefore collateral t o that agreement. We hold that the cou rt misapplied the rule governing whet her the arbitration clause applies to Fleet Tire’ s claim. While the rule established in Wilson prohibit s the application of an arbitration agreement t o collateral claims, it only does so when the arbitration agreement is
narrow . In Prudential Lines, Inc. v. Exxon Corp. , 70 4 F.2d 59, 63 (2d Cir. 1983), cited in Wilson , the Secon d Circuit sets out the two inquiries a courtThe contract in Collins & Aikmanprovided that “[a]ny claim or controvers y 2 arising ou t of or relating to this agreement shall be settled by arbitration . . . i n accordanc ewith the Rules then obtaining of the American Arbitration Association. ” Collins & Aikman Prods. Co. v. Building Sys., Inc. , 58 F.3d 16, 18 (2d Cir. 1995).
6 must make in determining whether an arbitration claus e applies: (1) whether the clause is broad or narrow; and (2) if the clause is narrow, whether the disp ute involves
an a greement collateral to the agreement containing th e arbitration clause. The district court faile d to conduct the first inquiry under Prudential ; that is, the cour t did not determine whether the arbitration cla use is broad
or narrow.

We believe that, as a matter of law, the arbitratio n cl ause in the 1990 Agreement is broad. The claus e provides that arbitration is the exclusive remed y avai lable to the parties to settle controversies o r claims that not only arise from the 1990 Agreement bu t also those “relating to” the contract. The Secon d Cir cuit considered language nearly identical to th e language here, calling it “the paradigm of a broa d clause. ” Collins & Aikman Prods. Co. v. Building Sys. , Inc. , 5 8 F.3d 16, 20 (2d Cir. 1995). Such a provisio n 2
con stitutes the broadest language the parties coul d reasonably

use to subject their disputes to that form of settlement , including collateral disputes that relate to the agreement containing the clause.
Having found that th e arbitration clause in the 1990 Agreement is broad, we turn to whether Fleet Tire’s claim relates to the subject of the 1990 Agreement. Where a broad arbi tration clause is in effect, even the question7

of w hether the controversy relates to the agreemen t contain ing the clause is subject to arbitration. Se e Prudential Lines , 704 F.2d at 63. The fact t hat the 1995 Letter pur portedly grants Fleet Tire an exclusive market for the Oliver retreading process originally conferred in the 1990 A greement clearly demonstrates that the present dispute relates to the 1990 Agreement. Neither party challenges the fact that each freel y ente red into the agreement that provides arbitration a s the exclusive remedy for disputes relating to th e agreement.8

Neithe r may now frustrate the purpose of the clause b y maki ng the court the first step in resolvin g controv ersies related to the 1990 Agreement. Such a n avoida nce can now be achieved only by bargaining for a new agreement that provides other remedies.

III.
Accordingly, we reverse the district court and reman d with in structions to grant Oliver’s motion for a sta y pending arbitration of Fleet Tire’s claim.

A true copy.

Attest.

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT

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