2013 UT App 28

_________________________________________________________



### T HE 

### U TAH 

### C OURT OF 

### A PPEALS

M ARIPOSA E XPRESS

, I NC .; C OLD S PRING I NVESTMENTS

, LLC;

C OLD S PRING I NVESTMENTS N O

. 1, LP; C OLD S PRING I NVESTMENTS

N O

. 2, LP; N EWBURYPORT C APITAL

, LLC; H ANNAH E NTERPRISES

,

I NC .; USS H OLDINGS

, LLC; USS C OLUMBIA

, LLC; M ETRO M AR

V ENTURES LLC; M ICHAEL J ONES

, LLC; S TIRLING LLC;

M ICHAELSON V ENTURES I NC .; USS O’B RIEN

, I NC .; USS H IGHLAND

P ARK

, I NC .; S HARON M C W ILLIAMS ; G EORGE A MMIRATO ; W ILLIAM

D EMET ; R OBERT H ARRIS ; M ICHAEL J ONES ; T ED M ICHAELSON ; J IM

O’B RIEN ; AND S TEFAN T RIANDAFILOU

,

Plaintiffs and Appellants,

v.

U NITED S HIPPING S OLUTIONS

, LLC; USS L OGISTICS

, LLC;

R OBERT R OSS ; C HARLES D ERR ; AND J ESSE M OORE

,

Defendants and Appellees.

Opinion

No. 20110829

‐ CA

Filed January 31, 2013

Third District, Salt Lake Department

The Honorable William W. Barrett

No. 110915908

Karthik Nadesan and Ivan W. Lependu, Attorneys for Appellants

David J. Jordan, Cameron L. Sabin, and Joseph W. Loosle, Attorneys for Appellees

J UDGE G REGORY K. O RME authored this Opinion,

in which J UDGE M ICHELE M. C HRISTIANSEN concurred.

J UDGE C AROLYN B. M C H UGH concurred in the result.Mariposa v. United Shipping

20110829

‐ CA 2013 UT App 28 2 ORME, Judge:

¶1 While many of the plaintiffs (collectively, the Mariposa

franchisees) have now settled, the remaining plaintiffs appeal from

a district court order dismissing their complaint and compelling

them to participate in arbitration with United Shipping Solutions,

LLC (USS). We affirm the district court’s basic ruling but remand

to the district court for further proceedings.

BACKGROUND

¶2 USS operates a franchising system in which franchisees

resell small parcel shipping services. USS and its affiliate USS

Logistics, LLC (USSL) (collectively, the USS parties) arranged for

shipping services primarily from DHL Express USA, Inc. (DHL).

DHL provided its services to the USS franchise system under a

reseller agreement, which required that each of the Mariposa

franchisees pay USS for DHL’s services and then USS would

provide an aggregate payment to DHL.

¶3 On November 10, 2008, DHL announced that it was

discontinuing its express and ground domestic shipping services

effective January 30, 2009—a breach of the reseller agreement. The

non

‐ compete provisions of the franchise agreements apparently

foreclosed the Mariposa franchisees from contracting with other

providers for replacement services or products. Following DHL’s

breach of the reseller agreement, the Mariposa franchisees stopped

paying USS for the DHL services still being utilized by their

customers. As a result, USS terminated the franchises of the

Mariposa franchisees.

¶4 On December 3, 2008, the Mariposa franchisees brought suit

against the USS parties in Utah state court (the Mariposa lawsuit),

seeking to avoid all obligations under their franchise agreements.

The USS parties counterclaimed, seeking enforcement of the

franchise obligations and payment for the freight and DHLMariposa v. United Shipping

20110829

‐ CA 2013 UT App 28 3 shipments provided to the Mariposa franchisees and their

customers through the USS franchise system. A couple of weeks

after the suit was filed, the district court entered a temporary

restraining order that required, inter alia, (1) that the Mariposa

franchisees stop soliciting employees of the USS parties; (2) that the

Mariposa franchisees not use or disclose any of the USS parties’

confidential or proprietary information in any way; and (3) that the

Mariposa franchisees discontinue all use of the USS parties’

trademarks and any claimed association with the USS franchise

system.

¶5 Later that same month, USSL—and through a later amended

complaint, USS and some of its franchisees—filed suit against DHL

in Utah state court (the DHL lawsuit). The DHL lawsuit alleged,

inter alia, that DHL breached the reseller agreement and thereby

caused significant damages to the USS franchise system. DHL

counterclaimed, asserting that USSL was liable for the unpaid

shipping services received by the Mariposa franchisees. The

Mariposa franchisees also filed their own lawsuit against DHL in

New York (the franchisee lawsuit) in March 2009, claiming that

DHL was liable to the Mariposa franchisees for DHL’s breach of

the reseller agreement.

¶6 In June 2009, the district court in the Mariposa

lawsuit—having been provided evidence indicating that certain

Mariposa franchisees had violated the temporary restraining

order—entered an order enjoining the Mariposa franchisees “from

using or charging shipments to USS’s accounts with its shipping

providers.” The court scheduled an evidentiary hearing to

determine whether those Mariposa franchisees should be held in

contempt.

¶7 The district court held the evidentiary hearing in September

2009 and ruled that those Mariposa franchisees had violated the

temporary restraining order. After granting the USS parties’

motion for contempt, the district court took the question of

appropriate sanctions under advisement and proceeded with aMariposa v. United Shipping

20110829

‐ CA 2013 UT App 28 4 multi

‐ day evidentiary hearing on the parties’ cross

‐ motions for a

preliminary injunction. Near the end of that hearing, the Mariposa

franchisees approached the USS parties about settling the Mariposa

lawsuit.

¶8 Two weeks later, the USS parties and the Mariposa

franchisees settled the Mariposa lawsuit by entering into a

settlement agreement in which the Mariposa franchisees agreed,

inter alia, to make three types of payments to the USS parties. The

Mariposa franchisees agreed (1) to pay the USS parties a settlement

payment, (2) to pay USS for all amounts owed for unpaid freight

shipments, and (3) to indemnify the USS parties against any

amounts that the USS parties were determined to owe DHL for

shipping services provided to the Mariposa franchisees or their

customers, regardless of whether the determination was made

through adjudication or settlement of the DHL lawsuit. All other

issues between the Mariposa franchisees and the USS parties were

resolved, and the Mariposa lawsuit was dismissed.

¶9 As part of the settlement agreement, the USS parties and the

Mariposa franchisees agreed that the USS parties would provide

the Mariposa franchisees with access to certain shipping data,

consistently referred to by the parties in the course of their dealing

as the CAMS data, as a means to determine the outstanding

amount owed for freight services. After the CAMS data was

disclosed, the Mariposa franchisees were to be given time to review

the data and indicate whether they disputed the amounts owed, in

accordance with procedures and deadlines set forth in the

settlement agreement. If there was a dispute regarding the amounts

due for freight, the parties agreed to resolve it through binding

arbitration. Paragraph 3 of the settlement agreement provides:

[T]he respective Mariposa Franchisees agree to

indemnify and hold USS harmless for any and all

amounts the USS Parties are determined to owe DHL

through judgment or settlement for DHL services

provided to the respective Mariposa FranchiseesMariposa v. United Shipping

20110829

‐ CA 2013 UT App 28 5 and/or their customers and which the respective

Mariposa Franchisees or their customers have not

already paid to USS or DHL (regardless of whether

that determination is by judgment or through

settlement, and regardless of whether the amount is

determined through set

‐ off amounts that may reduce

any judgment in favor of the USS Parties and against

DHL). The respective Mariposa Franchisees further

agree to pay to USS all royalties, Wasatch Billing fees,

and late fees charged by DHL resulting from non

‐

payment by the respective Mariposa Franchisees, on

the shipments the USS Parties are determined to owe

to DHL.

The parties agreed that the USS parties would “provide the

Mariposa Franchisees with access to the CAMS Data

. . . necessary

to show the DHL services provided to the Mariposa Franchisees

and/or their customers.” The agreement further states:

If the Mariposa Franchisees do not agree with the

amount identified by the USS Parties, the USS Parties

shall nevertheless have the right to proceed with the

settlement and any dispute between the USS Parties

and the Mariposa Franchisees concerning these

amounts shall be resolved in accordance with the

dispute resolution procedure set forth in Paragraph

1.c above. Likewise, if the USS Parties are determined

to owe DHL, through a judgment, any amount for

services provided to the Mariposa Franchisees and/or

their customers, any dispute between the USS Parties

and the Mariposa Franchisees concerning such

amounts shall be resolve[d] in accordance with the

dispute resolution procedure set forth in Paragraph

1.c above. In the event of such a dispute, the USS

Parties shall provide the Mariposa Franchisees with

access to the CAMS Data (of the same type and

nature set forth in Paragraph 1 above) necessary toMariposa v. United Shipping

20110829

‐ CA 2013 UT App 28 6 show the DHL Services provided to the Mariposa

Franchisees and/or their customers.

The “dispute resolution procedures” applicable to freight disputes

and disputes concerning the Mariposa franchisees’ indemnification

obligation were set forth in paragraph 1.c of the settlement

agreement. That provision required that “any dispute” be resolved

“exclusively by binding arbitration” on an expedited basis. While

paragraph 1.c itself referred to freight payments, paragraph 1.c was

also incorporated by reference into paragraph 3.a, which addressed

dispute resolution related to the indemnification provision.

¶10 After the execution of the settlement agreement, the USS

parties continued the DHL litigation. In September 2010, DHL

moved for partial summary judgment on its counterclaim that

USSL was liable to DHL for all amounts due for shipping,

including the amounts that had not been paid by the Mariposa

franchisees. The next month, the district court granted DHL’s

motion and ruled that USSL was liable to DHL for all unpaid

shipping services provided to the USS franchise system. The

district court did not, however, determine the amount owed to

DHL for those services.

¶11 After the district court’s ruling on DHL’s motion, DHL and

the USS parties entered into settlement negotiations and eventually

executed a settlement agreement resolving the DHL lawsuit (the

DHL settlement agreement). That settlement agreement specified

that the payment from DHL to the USS parties was to be offset by

the amount owed to DHL for unpaid shipping services, including

the amount resulting from the Mariposa franchisees’ failure to pay.

After entering the DHL settlement agreement, the USS parties

informed the Mariposa franchisees of the agreement in a letter

dated February 16, 2011. The letter informed the Mariposa

franchisees of their indemnification obligation and provided the

Mariposa franchisees, for their respective franchises, with the

CAMS data showing the amounts owed for unpaid DHL services,Mariposa v. United Shipping

20110829

‐ CA 2013 UT App 28 7 as the parties had previously done for resolving the issue of the

freight payments.

¶12 The Mariposa franchisees responded by letter in March 2011.

The letter asked that the USS parties “provide additional

information with which [the Mariposa franchisees] can evaluate the

claims made by USS relating to the settlement of the Mariposa

action.” Two days later, the USS parties sent a second letter, which

explained that “USS and USSL received payment in an amount that

was offset by the amounts owing to DHL for shipping services

provided to USS and its franchisees.” The USS parties’ letter also

stated:

Your letter does not constitute a “dispute”

under the Mariposa Settlement Agreement. Under

that agreement, if a Mariposa Franchisee disputes

any of the amounts set forth in the CAMS data

provided by USS, he or she was required to provide

notice of the dispute, together with documentation

showing the basis for the dispute, to USS within 20

days of my letter. As they have elected not to do so,

in accordance with the Mariposa Settlement

Agreement, they are deemed to have not disputed

the shipping amounts contained in the CAMS data

provided to them by USS, and USS will pursue its

rights under the Mariposa Settlement Agreement.

A number of the Mariposa franchisees then started making

payments to the USS parties to satisfy their indemnification

obligation. Counsel for the still noncompliant Mariposa franchisees

sent another letter to the USS parties. In early June 2011, the USS

parties sent a third letter to the noncompliant Mariposa franchisees,

identifying the specific amounts owed by each and requesting that

each indicate whether that amount was disputed.

¶13 After the third letter, a few more Mariposa franchisees

fulfilled their indemnification obligation by executing a promissoryMariposa v. United Shipping

20110829

‐ CA 2013 UT App 28 8 note, as required by the settlement agreement. The remaining

noncompliant franchisees did not respond. In July 2011, the USS

parties served the remaining Mariposa franchisees with “Disputed

Notices,” initiating the expedited arbitration proceedings set forth

in the settlement agreement. In anticipation of the notices, the

Mariposa franchisees filed the complaint commencing the lawsuit

now before us on appeal. The complaint disputed the amounts

owed, the accuracy of the information provided by the USS parties,

and the Mariposa franchisees’ indemnification obligation itself. The

complaint sought declaratory and injunctive relief. Ten days later,

the Mariposa franchisees sent a letter to the USS parties’ counsel,

stating that the Mariposa franchisees would not participate in

arbitration.

¶14 The USS parties moved to compel arbitration in early

August 2011, and the Mariposa franchisees opposed the motion.

The district court determined that, as a matter of law, the terms of

the settlement agreement required that the parties resolve their

disputes in accordance with the arbitration procedure set forth in

paragraph 1.c of the agreement. The district court then dismissed

the Mariposa franchisees’ complaint, and they appealed.

ISSUE AND STANDARD OF REVIEW

¶15 We must determine whether the district court erred in its

interpretation of the parties’ settlement agreement and its

subsequent grant of the USS parties’ motion to compel mandatory

arbitration. “A determination of which claims the parties intended

to be subject to arbitration requires that we interpret the arbitration

clause of the contract. This we do as a matter of law unless we find

ambiguity in the plain language of the agreement.” See Peterson

& Simpson v. IHC Health Servs., Inc.

, 2009 UT 54, ¶ 18, 217 P.3d 716.

“In evaluating whether the plain language is ambiguous, we

attempt to harmonize all of the contract’s provisions and all of its

terms.

. . . Accordingly, we first look to the plain language within

the four corners of the agreement to determine the intentions of theMariposa v. United Shipping

1. The Utah Arbitration Act was enacted in 2002, with an effective

date of May 15, 2003. See Utah Code Ann. §§ 78

‐ 31a

‐ 1 to

‐ 20

(LexisNexis 2002). The Act was renumbered in 2008. See id. §§ 78B

‐

11

‐ 101 to

‐ 131 (LexisNexis 2008).

20110829

‐ CA 2013 UT App 28 9 parties, and we attempt to harmonize the provisions

. . . of the

agreement. ” Central Fla. Invs., Inc. v. Parkwest Assocs.

, 2002 UT 3,

¶ 12, 40 P.3d 599 (internal citations and quotation marks omitted).

ANALYSIS

I. The District Court Correctly Construed the Arbitration

Provision.

A. Utah Favors Arbitration.

¶16 We begin our analysis with the Utah Uniform Arbitration

Act. See Utah Code Ann. §§ 78B

‐ 11

‐ 101 to

‐ 131 (LexisNexis 2012). 1

The Act provides that in the event of a disagreement about whether

there is an applicable agreement to arbitrate a dispute, “the court

shall proceed summarily to decide the issue and order the parties

to arbitrate unless it finds that there is no enforceable agreement to

arbitrate.” See id. § 78B

‐ 11

‐ 108(1)(b).

¶17 Utah courts have consistently recognized Utah’s policy

favoring arbitration.

[I]f there is any question as to whether the parties

agreed to resolve their disputes through arbitration

or litigation, i.e., through the filing of a complaint

and recording of a lis pendens

, we interpret the

agreement keeping in mind our policy of

encouraging arbitration. It is the policy of the law in

Utah to interpret contracts in favor of arbitration, in

keeping with our policy of encouraging extrajudicialMariposa v. United Shipping

2. We note that section 78B

‐ 11

‐ 107(3) of the Utah Arbitration Act

states: “An arbitrator shall decide whether a condition precedent

(continued...)

20110829

‐ CA 2013 UT App 28 10 resolution of disputes when the parties have agreed

not to litigate.

Parkwest Assocs., 2002 UT 3, ¶ 16 (citations and internal quotation

marks omitted). In short, if the settlement agreement’s arbitration

clause supports an interpretation favoring arbitration, the district

court ruled correctly in interpreting the provision as governing the

dispute between the USS parties and the Mariposa franchisees.

B. Scope of The Settlement Agreement’s Arbitration Clause

¶18 At the time of the settlement between the Mariposa

franchisees and the USS parties, all outstanding issues had been

resolved except for two amounts that they left for resolution at a

future date: (1) the amount that the USS parties were owed for

unpaid freight and (2) the amount that the Mariposa franchisees

were obligated to pay to indemnify the USS parties for unpaid

DHL shipments. In paragraphs 1.c and 3.a of the agreement, the

parties clearly indicated their intention that “any dispute” be

resolved through the binding arbitration procedure set out in

paragraph 1.c. Reading the agreement in its entirety in an attempt

to harmonize all provisions, see Parkwest Assocs.

, 2002 UT 3, ¶ 12, it

is logical to conclude that the parties intended for the settlement

agreement to resolve all the issues that could be resolved at that

time and to leave the two remaining issues to be addressed at a

later date, with ultimate resolution through arbitration in the event

of a dispute. Because the district court in the DHL lawsuit found

that the USS parties were liable for the DHL shipments resold by

the Mariposa franchisees and for which payment had not been

made, it was clear that the indemnification provision of the

settlement agreement had already been triggered. Therefore, any

dispute that the Mariposa franchisees had regarding that

indemnification amount was to be resolved by arbitration. 2Mariposa v. United Shipping

2. (...continued)

to arbitrability has been fulfilled and whether a contract containing

a valid agreement to arbitrate is enforceable.” Utah Code Ann.

§ 78B

‐ 11

‐ 107(3) (LexisNexis 2012).

3. We were advised at oral argument that the arbitration has now

been completed. It may well be that confirmation of the arbitration

award is now in order.

20110829

‐ CA 2013 UT App 28 11 II. The District Court Erred in Dismissing the Mariposa

Franchisees’ Complaint When It Compelled Arbitration.

¶19 The Utah Arbitration Act requires that when a district court

orders arbitration, the court should stay the underlying lawsuit

rather than dismiss it. See Utah Code Ann. § 78B

‐ 11

‐ 108(7) (“If the

court orders arbitration, the court on just terms shall stay any

judicial proceeding that involves a claim subject to the

arbitration.”). Therefore, the district court should have stayed the

action rather than dismiss the Mariposa franchisees’ complaint

after it ordered the parties to arbitrate their dispute.

CONCLUSION

¶20 The district court correctly ordered the parties into

arbitration to resolve their dispute relating to the amounts owed

for DHL shipments. We affirm that ruling. We reverse the

dismissal of the underlying complaint and remand with

instructions to reinstate the action, which may then be dealt with,

as appropriate, following arbitration. 3