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ORDER – 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

OTAN INVESTMENTS, LLC,

Plaintiff,

v.

TRANS PACIFIC TRADING, LTD,

Defendant.

CASE NO. C05-2135JLR

ORDER

I. INTRODUCTION

This matter comes before the court on a motion to compel arbitration by Otan

Investments, LLC (Dkt. # 11). The court has heard oral argument on the motion and has

considered the papers filed in support and in opposition thereof. For the reasons stated

below, the court GRANTS Otan’s motion and STAYS the action.

II. BACKGROUND

In September 2004, Plaintiff Otan Investments, LLC (“Otan”), a Washington

company, entered into an agreement with a Canadian company, Defendant Trans-Pacific

Trading, Ltd. (“Trans-Pacific”). The objective of the contract was “to set up joint activity

for forwarding, remanufacturing and marketing wood products from fiber originating

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ORDER – 2

from Russia.” Tyrer Aff., Exh. A (“First Agreement”). Specifically, Otan agreed to

provide the steady supply of product from its operations in Lesosibirsk, Russia, which

Trans-Pacific agreed to market in North America, Europe, China and Japan. First

Agreement ¶¶ 1, 2.

Just three months after the parties signed the First Agreement, the parties executed

a second contract, which states in its preamble that “the Seller [Otan] owns and operates a

sawmill in the Russian Federation . . . and wishes to retain the Agent [Trans-Pacific] for

the purpose of selling lumber, outside Russia, and for the purpose of collecting the

proceeds of sale.” Tyrer Aff., Exh. B (“Second Agreement”). The Second Agreement

identifies the sawmill as Otan’s operation in Lesosibirsk, Russian, Second Agreement

¶ 1.2(m), and provides that Trans-Pacific will use “all reasonable commercial efforts to

sell the total production of the Sawmill,” Second Agreement ¶ 3.1(x) (emphasis added). 

In addition to defining the duties of each party with respect to marketing and selling wood

products, the contract provides the following alternative dispute resolution (“ADR”)

clause: 

Where a dispute arises out of or in connection with this Agreement, or in

respect of any defined legal relationship associated with it or from it (the

“Dispute”), the parties will try to resolve the Dispute by participating in a

structured negotiation conference with a mediator under the Commercial

Mediation Rules of the British Columbia International Commercial

Arbitration Centre (the “Centre”). 

Where the parties are unable to resolve the Dispute in a structured

negotiation conference, the Dispute shall be determined by arbitration in

accordance with the UNCITRAL Arbitration Rules in effect [on] the date

of this contract . . . . 

Tyrer Aff., Exh. B (Second Agreement) ¶ 9.9. The Second Agreement does not expressly

reference the First Agreement. 

Otan sued Trans-Pacific in King County Superior Court for breach of contract

alleging that Trans-Pacific failed to market wood products originating in Russia as

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1

There is no dispute that the FAA applies to this matter. The relevant FAA provision

provides: “A written provision in . . . a contract evidencing a transaction involving commerce to

settle by arbitration a controversy thereafter arising out of such contract or transaction, or the

refusal to perform the whole or any part thereof, or an agreement in writing to submit to

arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be

valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the

revocation of any contract.” 9 U.S.C. § 2.

ORDER – 3

promised under the First Agreement. Compl. ¶¶ 5, 6. Trans-Pacific removed to this court

on the basis of diversity jurisdiction and pursuant to the Federal Arbitration Act, 9 U.S.C.

§ 1, et seq. Trans-Pacific now moves to compel arbitration over the dispute based on the

ADR provision in the Second Agreement. 

III. ANALYSIS

The Federal Arbitration Act (“FAA”)1

 reflects “Congress’ intent to provide for the

enforcement of arbitration agreements within the full reach of the Commerce Clause.” 

Nicaragua v. Standard Fruit Co., 937 F.2d 469, 475 (9th Cir. 1991) (quoting Perry v.

Thomas, 482 U.S. 483, 490 (1987)). Once the court determines that a valid arbitration

agreement exists and that it applies to the parties’ dispute, the inquiry ends and the court

must direct the parties to arbitrate. Id. at 475, 478; Dean Witter Reynolds, Inc. v. Byrd,

470 U.S. 213, 218 (1985) (the FAA “leaves no place for the exercise of discretion by a

district court, but instead mandates that district courts shall direct the parties to proceed

to arbitration . . . .”) (emphasis original). The court resolves any doubt as to the scope of

arbitrable issues in favor of arbitration. Id. at 478-79; Moses H. Cone Memorial Hospital

v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (“[Q]uestions of arbitrability must be

addressed with a healthy regard for the federal policy favoring arbitration.”). 

As a threshold matter, the court holds that the ADR clause is valid and evinces the

parties’ intent to arbitrate. Neither party claims a contractual defect that would render

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ORDER – 4

this agreement invalid; rather, the parties’ dispute goes to the scope of the agreement. 

Otan contends that the court should not compel arbitration for two primary reasons: (1)

the parties’ dispute arises under a separate contract (the First Agreement) from the

contract containing the ADR clause (the Second Agreement) and (2) the ADR clause does

not survive the termination of the Second Agreement – i.e., its scope is temporally

limited. 

First, the court concludes that the subject matter of the parties’ dispute falls within

the scope of the ADR clause. Otan contends that its breach of contract claim arises solely

under the First Agreement and thus, the ADR clause in the Second Agreement does not

apply. In support of its argument, Otan cites a line of cases in which courts have refused

to apply an arbitration provision in one contract to a dispute arising under a wholly

separate contract. See, e.g., Seabord Coast Line R.R. v. Trailer Train Co., 690 F.2d

1343, 1352 (11th Cir. 1982); Security Watch, Inc. v. Sentinel Systems, Inc., 176 F.3d

369, 372 (6th Cir. 1999); In re Hops Antitrust Litigation, 655 F. Supp. 169, 172 (E.D.

Mo. 1987). Setting aside the non-binding nature of this line of authority, the court notes

that the key inquiry underlying each decision is whether the two contracts at issue are

either “interrelated,” In re Hops, 655 F. Supp. at 172, or “separate and distinct,”

Seaboard, 690 F. 2d at 1351. 

The rationale cited above is the same in this circuit. In a decision cited by neither

party, Int’l Ambassador Programs, Inc. v. Archexpo, the Ninth Circuit considered

whether an arbitration clause in a prior agreement applied to a dispute arising under a

subsequent contract. 68 F.3d 337, 339-40 (9th Cir. 1995). As in the cases cited by Otan,

the Ninth Circuit considered whether the two agreements at issue were “discreet” or

“merely interrelated contracts.” Id. at 340. Because the agreements concerned “two

separate types of tours and completely different groups of tourists,” the court held that the

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ORDER – 5

arbitration clause did not apply. Id.; see also Hinson v. Jusco, 868 F. Supp. 145, 148

(D.S.C. 1994) (holding that the dispute arose under one or “some mixture of the two”

related contracts and thus, fell within the arbitration clause contained in the earlier

agreement). 

Here, based on the terms of the contracts themselves, the court considers the two

agreements entirely interrelated and thus, distinguishable from the discreet contracts in

Archpexo and those at issue in the remaining out-of-circuit authority cited by Otan. The

Second Agreement, which covers Trans-Pacific’s obligations as to “the total production”

from the Lesosibirsk sawmill, is related, if not wholly intertwined, with the First

Agreement that directs Trans-Pacific to market products from the very same facility. At

oral argument, Otan conceded that it did not have any evidence that the parties even

conducted business in the three months between execution of the First and Second

Agreements, while there is no dispute that at least some of the facts giving rise to the

instant dispute occurred after the parties signed the Second Agreement. To compel

arbitration, Otan’s factual allegations need only “touch matters” covered by the Second

Agreement with all doubts resolved in favor of arbitrability. Simula, Inc. v. Autolive,

Inc., 175 F.3d 716, 721 (9th Cir. 1999). In this instance, Otan’s factual allegations could

not be more plain: according to Otan, Trans-Pacific failed to effectively market wood

products originating from its mill in Russia. Compl. ¶¶ 5-8. The court need not address

the competing declarations that address whether the parties intended the Second

Agreement to supercede the First. Rather, the court concludes that the two contracts are

interrelated and that Otan’s allegations certainly “touch matters” concerning the Second

Agreement. Simula, 175 F.3d at 721; cf. Hinson, 868 F. Supp. at 148. Accordingly, the

parties’ dispute falls within the breadth of the Second Agreement’s ADR clause.

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The Second Agreement has the following sunset clause: “The term of this Agreement

will commence on 1 Jan 2005 and will end on 30 June 2005 2000 [sic], and will continue

thereafter only if agreed in writing by the parties.” Second Agreement ¶ 2.4. The parties do

not dispute that they did not renew the contract upon expiration in June 2005.

ORDER – 6

Lastly, Otan contends that the ADR clause does not apply because it is contained

in the Second Agreement, which expired in June 2005.2

 In general, the arbitration

provision in a contract survives termination of the contract unless there is clear evidence

that the parties intended to override such a presumption. Nolde Bros., Inc. v. Local No.

358 Bakery and Confectionery Workers Union, 430 U.S. 243, 255 (1977). The same

presumption applies even if the facts giving rise to the dispute take place after the

contract expires. See Riley Mfg. Co., Inc. v. Anchor Glass Container Corp., 157 F.3d

775, 779 (10th Cir. 1998). Accordingly, the court concludes that the ADR clause

survives termination of the Second Agreement. 

IV. CONCLUSION

 For the foregoing reasons, the court GRANTS Trans-Pacific’s motion (Dkt. #

11). The court directs the parties to pursue alternative dispute resolution consistent with

the procedure outlined in the Second Agreement, ¶ 9.9. In the interim, the court STAYS

the proceeding. 

Dated this 20th day of April, 2006.

A 

JAMES L. ROBART

United States District Judge

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