The Honorable James M. Rosenbaum, United States District Judge for the

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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 United

States

 Appellee, * District Court for the

* Eastern District of

Arkansas.

v. *

*

Oliver Rubber Company, *

 

Submitted: May 19, 1997

 Filed: July 15, 1997

 

Before MURPHY and HEANEY, Circuit Judges, and ROSENBAUM,1

District Judge.

 

HEANEY, Circuit Judge.

Oliver Rubber Company (“Oliver”) appeals the district

court’s denial of its motion to stay an action for breach

of contract brought by Fleet Tire Service of North Little

Rock (“Fleet Tire”) pending arbitration under the terms

of the contact. We reverse.
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I.

In November 1990, Fleet Tire entered into a contract

(“1990 Agreement”) with Oliver granting Fleet Tire a

nonexclusive right to use Oliver’s “Tuff-Cure System” of

retreading tires. The 1990 Agreement contains an

arbitration clause that provides:

Any controversy or claim arising out of or

relating to this Agreement or any breach of its

terms shall be settled by arbitration in

accordance with the rules of the American

Arbitration Association, and judgment upon the

award rendered by the arbitrator(s) may be

entered in any court having jurisdiction

thereof. The expense of such arbitration shall

be divided equally between the parties. The

arbitration provided for in this Section 10

shall be the exclusive remedy for any dispute

between Oliver and [Fleet Tire], as a substitute

for any and all legal remedies and proceedings

that would otherwise be available to them.

1990 Agreement, § 10. The 1990 Agreement also contains

a provision that requires any amendment or modification

to be made in writing and signed by both parties. 1990

Agreement, § 9.5.

In February 1995, a sales representative for Oliver

signed a letter (“1995 Letter”) prepared by Fleet Tire

granting Fleet Tire an exclusive market area for the

Tuff-Cure System within a fifty-mile radius of Little

Rock and Russellville, Arkansas. Fleet Tire never

countersigned 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 that

included the Little Rock area. 

Fleet Tire filed a complaint alleging that Oliver

violated Fleet Tire’s exclusive-market rights provided by

the 1995 Letter. Oliver moved to stay the proceedings in

district court, asserting that Fleet Tire’s claim was

subject to the 1990 Agreement’s arbitration clause. The

district court denied the motion, holding that Fleet

Tire’s complaint arose under the 1995 Letter and that the

provisions of that letter are 
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“collateral” to the 1990 Agreement. Because the district

court misapplied the standard for determining when a

collateral matter is subject to an arbitration clause,

and because the arbitration clause at issue is broad

enough to cover this dispute, we reverse.

II.

While we review the district court’s factual findings

for clear error, our review of the construction of the

arbitration agreement is de novo. Nordin v.

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

Although a court may not impose arbitration on a party

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)

(questions relating to the scope of arbitrable issues

“should be resolved in favor of arbitration”). 

The district court found that a valid arbitration

agreement between Oliver and Fleet Tire exists based on

the 1990 Agreement but noted that “arbitration of [a]

dispute cannot be compelled merely based upon the

existence of an arbitration clause in the main agreement”

if the controversy is collateral to the agreement. 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 modification or

amendment to the 1990 Agreement in the absence of

signings by both parties and that the 1995 Agreement was

specifically nonexclusive. Therefore, the court held

that the 1995 Letter granting exclusivity did not arise
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under the 1990 Agreement and is therefore collateral to

that agreement. 

We hold that the court misapplied the rule governing

whether the arbitration clause applies to Fleet Tire’s

claim. While the rule established in Wilson prohibits

the application of an arbitration agreement to collateral

claims, it only does so when the arbitration agreement is

narrow. In Prudential Lines, Inc. v. Exxon Corp., 704

F.2d 59, 63 (2d Cir. 1983), cited in Wilson, the Second

Circuit sets out the two inquiries a court 
The contract in Collins & Aikman provided that “[a]ny claim or controversy

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arising out of or relating to this agreement shall be settled by arbitration . . . in

accordance with 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).

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must make in determining whether an arbitration clause

applies: (1) whether the clause is broad or narrow; and

(2) if the clause is narrow, whether the dispute involves

an agreement collateral to the agreement containing the

arbitration clause. The district court failed to conduct

the first inquiry under Prudential; that is, the court

did not determine whether the arbitration clause is broad

or narrow. 

 We believe that, as a matter of law, the arbitration

clause in the 1990 Agreement is broad. The clause

provides that arbitration is the exclusive remedy

available to the parties to settle controversies or

claims that not only arise from the 1990 Agreement but

also those “relating to” the contract. The Second

Circuit considered language nearly identical to the

language here, calling it “the paradigm of a broad

clause.” Collins & Aikman Prods. Co. v. Building Sys.,

Inc., 58 F.3d 16, 20 (2d Cir. 1995). Such a provision

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constitutes the broadest language the parties could

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 the 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 arbitration clause is in effect, even the question
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of whether the controversy relates to the agreement

containing the clause is subject to arbitration. See

Prudential Lines, 704 F.2d at 63. The fact that the 1995

Letter purportedly grants Fleet Tire an exclusive market

for the Oliver retreading process originally conferred in

the 1990 Agreement clearly demonstrates that the present

dispute relates to the 1990 Agreement. 

Neither party challenges the fact that each freely

entered into the agreement that provides arbitration as

the exclusive remedy for disputes relating to the

agreement. 
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Neither may now frustrate the purpose of the clause by

making the court the first step in resolving

controversies related to the 1990 Agreement. Such an

avoidance can now be achieved only by bargaining for a

new agreement that provides other remedies. 

III.

Accordingly, we reverse the district court and remand

with instructions to grant Oliver’s motion for a stay

pending arbitration of Fleet Tire’s claim.

A true copy.

Attest.

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