The H onorab le San d ra D ay O ’ Co nnor, Assoc iat e J usti ce  ( R eti red) ofthe Un it ed Stat es Suprem e Court, si tt ing by desi gnat i on 

## In the 

# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 09

- 4051 L UM BERM EN S M UTUAL C ASU ALT Y C OMPAN Y, P la intif f-A pp ellee, v. B ROADSPI RE M ANAGEM ENT S ERVICES, I NC . an d P L A T I NU M E QUITY, LLC , D ef endants-A ppell ants
.
A pp eal from the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 07 C00386

—H arry D . L einenw eber, Judge .
A RG UE D M AY 19, 2010

— D ECI DE D O CT OB ER 13, 2010

B efore O ’C ON NO R, A ssoc ia te Ju stice, a nd W I L L I A MS  an d S YKES, C ircu it Judges . W I L L I A MS, Cir cu i tJudg e . Thi s a pp eali nvol ves a debat e ov er the arbi tr abi l i ty off our pu rchas e pr i ce di sputes ar i singo uto fa t r an sa ct i o n bet wee n Lumbe r m en s2 N o. 09

- 4051

W e u se the term “B ro ad sp ire” to inclu d e D efend an t-Ap p el- 1 l antP lati num Equi t y, LLC as wel l

. Pl at i num ’ s r ol e i n the t ra ns ac t i on i s no tdi s c us s ed b y the par t i es i n the i r bri ef s , but i tis c h a r a c t e r i z e d i n a d i st r i c tc o u r tp l e a d i n g a s B r o a d sp i r e ’s (co n tin u ed ...) M ut ua l C asu alty C om p an y (“L um berm en s”) a nd B road sp ire M an agem en t Services, I nc . ( “B road sp ire”). Lu m ber m ens s ol d Broadspi re an insur ance a dm i ni str ati o n b us i ne ss i n 2 00 3 pur su an t to a purc ha se a g r ee m en t w hi ch pro vi ded thatcer tai n ki n d s of pr i ce di sputes ste m m i ng fro m the tr ansact i on wo u ld b e refer re d to an acco unti ng o r apprai salfi rm f ora rb itr ati on. Fo ur s uch pr ice disputes ar ose , and Lum ber m ens s ought to re sol ve them under the purchase pri ce di spute pro cedure. Broadspi re r efused, as ser ti ng tha t Lum ber m ens had f ai l e d t o s a t i s fy c e r t a i n ne c e s s a r y p r e c o nd i t i o ns s e tf o rt h in the pu rch ase agreem en t; sp ecifi cally, that Lu m berm ens’ wri tten noti ces sta ti ng i ts disa gr eem ents w i th Broadspi re ’ s pri ce det er m i nati ons l acke d the r equi si te det ai l

. The i ss ue b ef o r e us i s whethe r the c o ur t o r the arbi tr at o r sh o ul d dec i de th i s que st i o n o f whethe r the necess ar y pr eco nd i ti ons to arbi tr ati on have bee n sat i sfi ed. The di str i ct c ourtco ncl ud ed thatthe questi on was f o r the a rbi tr at o r, a nd we ag r ee , b ecause the i ss ue ofwh ether L um ber m ens has adequatel y di sputed Broad spi re ’ s pri ce r epor ts i s a pro ceduralquesti on ab o u ta c o n d i t i o n p r e c e d e n tt o a rb i t r a t i o n . We a ffi r m.

I . B AC KGR OUND I n July 2 0 0 3 , Lu m berm en s sold B road sp ire an insu r- 1N o. 09

- 4051 3

(
. . . c on t i nu e d) 1 “f orm er own er. ” Plat inum s oug ht t o have it se lfdism is se d f rom the cas e bef ore the dis tr ic t c ourt, but the court r ej ect ed thatm otio n and he l d thatthe que s t i on ofwhethe r Pl at i num i s a pro per p ar t y i s f or the arbi t ra t or . Tha tas pec tofthe dist ri ctcourt’ s ruli ng w as not s pecific all y app eal ed, nor does Pl a t i nu m m a ke a ny s e pa r a t e a r gum ent s fr om t ho s e m a de by Broad spir e. an ce ad m inistration bu siness p u rsu an t to a w ritten P urch as e Ag r ee m en t ( th e “Agr ee m en t” )
. No c as h was e xchanged atthe ti m e o fthe cl osing. Instea d, the purchas e pr i ce was t o b e ba se d o n a s er i es o fa nnua l “ ea r no ut ” an d “l um p sum ” p ay m en ts to be m ade byBro adspir e o ver th e f o ur year s f o l l o wi ngthe t r an sa ct i o n, whi chthe pa rti es defined as the “e ar nout per i od. ” Ear nout paym ents w oul d be ba sed o n the fi nanci alper for m an ce o f th e pur ch as ed bus i ne ss e ac h y ea r dur ing th e ea r no ut p er iod . L u m p su m p ay m en ts w ou ld be m ad e if Br o ads pi r e so l d o ff an y pa r ts o fthe pur ch as ed co m pan y dur i ngthe e arno utpe r i o d, b as ed o n a n estimat e o fthe ex p ect ed per f o r m an ce o fthe s o l d a ss eto ve r the re m ai nd ero fthe f our yea rs . A rt icle III of th e A gr ee m en t, tit led “P u rc h as e P r i c e,” set forth th e m eth od o lo g y and proc ed ure s for d eterm i ni ngthe a m o unto fthe pa y m en ts due e ac h y ear. Br o ads pi r e ha d to ca l cul at e th e amoun ts ow ed pur su an t to a f o rm ula set forth in th e A greem en t, an d prep are an d d eliv er rep or ts to L u m b er m e n s s et tin g for th in “r eas onabl e deta i l ” the ca l cul ati ons and assum pti ons on w h ich its d e t e r m in at ion s w er e b as ed

. Seegene rallyA gr eem en t § 3. 3. U pon re cei vi ng a re portfro m Bro adspir e,4 N o. 09

- 4051 Lu m ber m ens had 90 days to re vi ew i t, d u ring wh i ch tim e Br o ads pi r e ha d t o make a va i l ab l e to Lumber m en s an y b oo ks an d r e c o rd s re lev an t t o th e re vie w . I f L um b erm en s d ecid ed that i t agreed w ith B road sp ire’ s deter m i nati on, i t would s end an “ A c ceptance N oti ce” so i ndicatin g, o r do no th i nga t al l, a nd the a m o unt Br o ads pi r e ha d s etf o r thw ou ld be co m e th e bindi ng paym ent a m ount f orthatye ar . But i fLum ber m en s di sag r ee d wi thBr o ads pi r e’ s det er m in at i o n, i t ha d t o s en d B ro ad sp ire a “ D isa gr ee m en t N ot ice ” s ay in g s o w ith in th e 90-d ay p eriod. A Disagree m en t N otice has to “set[] f or th i n re aso nable detai l the basi s forsuch di sag re em en t an d [ Lum be r m en s’ ] det er m i na ti o n o f th e pa ym en t re quir ed to be pai d to [ Lu m ber m ens] under thi s S ection 3.3. ” A greem en t § 3. 3(g).

A . Th e Purchase Pri ce Dispute Arbi t r at i on Cla use I fLumber m en s su bmi tt ed a ti m ely Di sagree m en t N o ti ce t o Br o ads pi r e i ndi ca tingdi sa g r ee m en t wi tha gi ven e ar nout o r l um p sum r epor t, the parti es fi rs t had 30 days to tr y a nd r eso l ve the di ffer ences them sel ves. Fai l i ng tha t, the dispu te w oul d be s ubm i tte d to an acco unt i ngo r a ppr ai sa l fi r m f o r a rbi tr at i o n: Pu r chase Pr i ce Disputes. I fa partydel i ver s a Di sa g r eem en t N o ti ce t o the o th erpa r tyi n a tim ely m an n er , th en B u ye r an d S e l l er sh all att em pt i n go od f ai th t o resol ve such dis pu te w it h i n 3 0 d ay s fro m th e d at e o f su c h n ot ice . I f Bu yerand Sel l ercannotr each a gr eem ent .
. . then the di spute shal l be prom ptl y r efer re d t o an i nd e-N o. 09

- 4051 5 pend ent a ccounti ng o r apprai salfi rm o fnati onal re pu t a t i o n mut ua l l y a c c e pt a b l e t o Buyer and Sel l er, o r i fthe p ar ties ar e unabl e t o agr ee on s uch a fi rm withi n 10 day s . . . to Pri cewaterho useCooper s LLP (the “Accounti ng/Appra i sa l F i r m ”) f o r b i ndi ngr es o l ut i o n. The A ccounti ng/A pp ra i salFi rm m ay conduct such proc eedi ngs a s th e A ccounti ng/A pp ra i sal Fi rm , i n i ts sol e di scr eti on , d eterm i nes wil l as si st i n re sol vi ng t he di spute and shal l, withi n 60 da ys . . . del i ver. . . a w ri tte n re portse tting f or th i ts de te r m i na ti o n o fa l l di spu ted amoun ts
. . . a nd i ts de te r m i na ti o ns wi l l b e co nc l us i ve an d b i ndi ng up on the par ti es. A gr eem ent § 3. 4.

B. Th e Gen er al A rbit r at i on Cla use I n additi on t o the § 3. 4 a rbi tr ati on pro cedure i ntended spe ci fi ca l l y f o r Art i cl e II Ipr i ce di spu te s, the Agr ee m en t als o c on ta in s a ca tc h -all a rb itr at ion p r o v i sio n for a ll othe r disputes

. I t pr ovi des: Di s put e Re s o l ut i o n. Except as othe rwis e pr ovi ded f ori n A rt i cl e I I I, the f ol l owing sh al l co nsti tute th e e x c lu siv e p ro c ed u re s a n d rem ed ies for a ll di s pu t e s a r i s i ng o ut o f o r r e l a t i ng t o thi s Agree

m ent. A gr eem ent § 14
. 11. S ecti on 1 4. 11 re quir es that the par ti es at te m pt i n g o o d f ai th to r es o l ve di spu te s ar i sing o uto fthe6 N o. 09

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O u r u se of the term “D isag reem en t N otice ” in re ferring to 2 Lum ber m en s ’ obj ec t i ons s hould n otbe t ake n a s r efl ec t i ng any c onc l us i on as t o the i r s uffi c i en c y. As we ex pl ain her ein, thati s a qu es tio n f or the § 3. 4 arbit rat or. Clearl y, how ever, L u m b e r m e ns m ean t f or them to b e D isag reem en t N otice s; the fir stobjec ti on w as obv iousl y d is pu ti ng B roadspire’ s D ece m b er 7, 2005 pric e re port and m ade referenc e t o A greem en t§ 3. 3( g) , an d ea c h o fthe l at t erthr ee ac t ual l y bor e the h ea d in g “D isa g re em en t N o tic e.” Agr ee m en t, b uti fthe y c an not , i t pr o vi des f o r b i ndi ng arbi tr ati on bya thre e- arbi tr ato r panel i n acco rd an ce w i th the Inter n atio nal Insti tute f orConfl i ct Pr eve nti on & R es olu tio n (“C P R ”) R u les for N on -A d m i n ist er ed A rb itr ati on, a n d go ver ned by the Fe deralA rbi tr ati on Act, 9 U.S
. C. § 1 et seq. (“FA A ”).

C. Th e FourPu r chase Pr i ce Disputes The fu ll hi sto ryo fthe tr ansact i on a nd di spute be tw een th e p ar tie s is so m ew h at co m p lex , bu t a ll of th os e d et ails a r e n o tn e c e s s a r y t o r e s o l v e qu e s t i o n b ef o r e u s . At i ssue h er e a re di sputes o verf our pri ce r epor ts

— thre e l um p sum r epor ts dated Decem b er7, 20 05, M ar ch 16, 2006 , an d Oc tober 16, 2006, and one earn ou t rep ort dated J une 22, 20 06

— that Broadspi re pro vi ded to Lum be r m en s unde r the abo ve - des cr ibe d pr o ce ss a nd Lum be r m en s th ent i m ely di spu te d. On ea cho cc asi o n, L um be r m en s se nta Di sa g r ee m en t N o ti ce r eg ar di ng B ro ad sp ire ’s p r i c e d et er m in at ion
. E ac h w as rela tiv ely 2 gener al

. Bro adspir e di sputed the s uffi ci ency ofthe Dis-N o. 09

- 4051 7 agr eem ent Noti ces, ar gui ng tha t the y d id not m eet § 3 .3(g )’s re q u ire m en t t h at th ey co n ta in(1) “r ea so n ab le detai l ” a nd ( 2) L um ber m ens a l ternati ve “deter m i nati on of t h e p ay m en t re q u ire d .” L u m b er m en s c laim ed t h a t it c ou l d not pro vi de the re quis i te l eve l o fdetai lcal l ed f orby§ 3. 3( g) , bec ause Broadspi re ’ s pri ce r epor ts w ere them sel ves lac k i n g in d et ails th at w ou ld en ab le Lu m ber m ens to d o so. Lum ber m ens a l so cl ai m ed i n i ts D isagreem en t N otic e s th at it had not bee n given suff i c i e n ta c c e s s t o th e b o o k s a n d r e c o r d s n e c e s s a r y t o p r o per l y e val uate Broadspi re ’ s dete rm i nati ons. Lu m ber m ens s ought ar b i tr ati on o fea ch ofthes e f our disputes under the Purchas e Pr i ce Di spu te proce dur e s s e t f o r th i n § 3
. 4 o f th e Ag r e e me n t, b ut Broadspi re r efused to arbi tr ate o n the basi s that Lum be r m en s had notmet th e pr ec o ndi ti o n o ffi l i ng ad eq ua te D isagreem en t N otices. I ns tead , Broa d s p ire soughtto co m m ence panel arbi tr at ion of the di sputes und erthe m or e g ener al§ 14. 11 proce du re s. Eventual l y, on Jan u ar y 1 9, 20 07, L u m b er m e n s file d a P et itio n in A id of A rbit r a t ion i n th e U nited States D istri ct C ou rt f orthe No r the r n Di s t r i c to fI l l i no i s , s e e k i ngt o c om pel arbi tr atio n und erthe § 3
. 4 pro vi si on a nd to co m pel Broadspi re to pro du ce c er ta i n docum ents and i nfo rm ati on t o w hi ch i t had notgi ven Lum ber m ens a cces s. The dis tr i c t courtr ule d i n f avo r ofLum ber m ens. W i th re gar d to w hi ch arbi tr ati on cl ause gov er ned the di spute, § 3. 4 o r the b r o ade r § 1 4. 11 , the di st r i ctj udg e co ncl ude d tha t “L um ber m en s i s cl ea r l y r i g ht ” an d tha t th e Art i cl e I I Ipur ch as e pr i ce di spu te pr o ce dur e appl i ed. The8 N o. 09

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At the t i m e, the par t i es wer e in § 3
. 4 a rbi t ra t i on re gar di ng 3 a fifth p rice d ispu te, ov er B ro ad sp ire’s 200 4 E a rn ou t R ep or t. T h a t r e p o r t i s n o t a t i s s u e i n th i s l i t i g a t i o n . We d o n o t e , h o weve r, thatBro ads pi re d id n ot c hal l en ge the arbi t rabi l i t y of that d isp ute, despit e the f actthatLu m berm ens’ D is agreeme n tNo t i c e f o r th atrepo r ta r g u a b l y h a d th e s a me fl a ws B ro ad sp ire fou nd in the later n otice s. c o u r tc o n c l u d e d th a tth e qu e s t i o n o fwhe th e r L u mber m ens’ Dis agr eem ent Noti ces w er e a dequ at e was “cer tai nl y within t h e pu rv i ew o fthe arbi tr ato r” and that th e que st i o n was o ne tha t was “ pec ul i ar l y wi thi n the co m pet en ce ” o fa n a cc o unt i ng/ app r ai sa l fi r m . The di st r i ct j udg e o r der ed th e par ti es t o a rbi tr at e th e d isp u te s u n d er th e § 3.4 p ro c ed u re s, an d to ea c h su b m it wi th i n t e n d a y s o fh i s r u l i n gth e n a me s o ft wo potenti alacc ounti ng o r apprai salfi rm s to actas arbi tr ato r to repla ce Pr i cewaterho useCooper s, wh i ch w as al re ady act i ng as an a rbi tr ato r i n an unrel ate d A rt i cl e I I Ipri ce di spute arbi tr ati on. The co urt al so 3 or dered B ro adspir e t o produce ce rt ai n docum ents. Br o a ds pi r e a pp e a l e d.

II. A N A L Y S IS The questi on b efo re us i s whether a co urt oran arbi tr at o r s ho ul d de ci de th e ques ti o n o fwhethe r the parti es’ di sputes a re arbi tr able und er§ 3. 4 o fthe A gr eem ent. Bro adspir e co ntends thatLum ber m en s di d not file val i d D i sag re em ent Noti ces and has thus f ai l ed to sa ti sfy a ne ce ss ar y precond iti on to b r i ng i ngtheN o. 09

- 4051 9

A lthoug h it a rg u ed itbef ore the dis tr ic t c ourt, Broad spir e 4 do es not t ake the posit ion on appeal that the § 14. 11 arbit rat i onpr oc e dur e s ho ul d a ppl y i ns t e a d. dispute w i thi n the sco pe of§ 3. 4 a rbi tr ati on, and that a cour t, no t th e § 3. 4 arbi tr at o r, s ho ul d de te r m i ne whe the r thi s is i n f a c tthe c a s e . Lu mbe r men s r e s po nd s 4 that the § 3. 4 pro cedure encom p as ses al l di sputes re lat in g t o p u rc h as e p ric e, i nc l udi nga nydi s pu t e s o ver th e su ffi ci en cyo fDi sa g r ee m en t N o ti ce s th emse l ve s, a nd that i t i s forthe § 3. 4 a rbi tr ato r, nota cour t, to e v a l u a t e th e i r s u ffi c i e n c y . L i k e th e d i s t r i c tc o u r t, we ag r ee wi th Lumber m en s an d c o nc l ude t ha t th e suffi ci ency ofthe Disa gr ee m ent Noti ces i s a questi on t o be an sw ered by the § 3. 4 arbitrator. W e r evi ew a dist ri ct c ourt ’ s deci si on t o com pel arbi tr ation d e nov o, and any find ings of fa c t f or clear err or. Z uri ch Am . I ns. Co
. v. Watts Indus. , Inc. , 46 6 F
. 3d 577, 58 0 ( 7th Ci r . 2 00 6)
. “ W he the r o r no t [ a] c o m pan y [ i s] b o und to arb itr at e , a s w ell as w h at iss u es it m u st arb itr at e, is a m att erto be deter m i ned by the co urt o n the basi s o f the contr act enter ed i nto by the par ti es .” Jo hn Wiley & So ns, Inc . v. Li vi ngs t on, 37 6 U.S
. 54 3, 54 7 (1 964) ( ci tat i ons om i tte d)

. I n r ul i ng o n a m o ti o n to co m pelarbi tr at i o n, w e “ determ in e w hetherthe parti es’ gr i evance bel ongs i n a rbi tr at i o n, no t r ul e o n the po te nt i almer it s o fthe und er l yi ng di spute betw een the par ti es. ” Z uric h A m . Ins. C o ., 46 6 F
. 3d at 581.10 N o. 09

- 4051 A . Th e H ow sam F ram ew ork The S upr eme Co urt ’ s dec i si o n in Howsa m v. D e an Witter R eyn o lds, Inc ., 5 37U. S
. 7 9, 84 ( 20 02 ) , c l ar i fi ed th e d ivis io n of lab or be tw ee n arb itr at or s a n d j u d ge s in ca se s l i k e th i s o ne a nd pr o vi des the fr amewor kf o r o ur an al y si s. In Howsa m , the Court deter m i ned that the questi o n o fwhethe r a g r i ev an ce ha s be enb r o ug htwi th

i n a t i m e per iod s et by a N ati onalA sso ci ati on o f Se curi ti es Deal er s r ule i s a “g ate w ay proce du ra l di spute” f orthe arbi tr ato r, nota cour t, to deci de. 537 U.S

. at85
. The Court hel d th at “proc eduralquesti ons w hi ch gr ow o uto fthe di spu te a nd b ea r o n i ts fi na l di spo si ti o n are presum pti vel y notf or the j ud ge, bu t for an arbitrator, to d eci de. S o , t o o , the pr es um pti o n i s th atthe arbi tr ato r shoul d decide alleg ati ons ofwaive r, del ay, o r a l i ke defe nse t o arbi tr abi l i ty. ” Id. at84 -85 (em p h as is i n or i gi nal ) ( i nter nal ci tati ons and quotati ons om i tted)

. The Howsa m Cou rt noted that the R evised U niform Arb i tr at i o n A ct( “R UA A”) , whi ch“ i nc o r po r at e[ s] the hol dings o fthe vastm aj or i ty ofst ate co urts and t h e l aw th atha s dev elope d unde r the F AA ” su ppo r te d i ts c o nc lu sio n . Howsa m , 53 7 U.S
. at84

- 85 ( ci ti ng R U A A § 6( c) and com m ent 2). The RU A A pro vi des that“a n arbi tr at o r s ha l l de ci de whethe r a c ondi ti o n pr ec ede nt to ar b itrabi l i ty has be en fulfi l l ed. ” RU A A § 6( c)
. U nd er Howsa m , questi ons su c h as wh etherpre re quis i tes to arbi tr ati on have bee n m et, o r questi ons ofw aiver, del ay, or otherdefenses to arbi tr abi l i ty, sho uld be deter m i ned b y t h e a rb itr at or . Se e H o w s a m , 537 U
. S. at84

- 85; see a lso John Wi l ey, 37 6 U .S. at 5 57(arb itr a t o r , n o t c ou rt, sh ou ld de c i de wh e the r the p a r t y s e e k i nga rb i t r a t i o n ha dN o. 09

- 4051 11 proper l y c om ple ted gr i ev an c e pr oce du re thatwas prere q u isit e to arb itr at ion u n d er p ar tie s’a gr ee m en t); Mo s e s H. Cone M e m ’ l Hos p. v. M e r cu ry Cons t r . Corp. , 46 0 U.S
. 1, 24

- 25 ( 19 83 ) ( “wai ve r, de l ay, o r a l i k e de fen se ” ar e que st i o ns for arbitrator). Ou r c i r c ui th a s f o l l o we d Howsa m i n di st i ng ui sh i ng between “s ubstanti ve” and “proce du ra l ” a rbi tr abi l i ty qu e s t i o ns , and i n ho l di ngtha tthe l a t t e r a r e p r e s umpti ve l y f o r a n a rbi tr at o r t o de ci de. In E m p lo yers Ins urance Co. of Wausau v. Ce nt ury Inde m ni ty Co. , 44 3 F
. 3d 573, 58 1 ( 7th C ir. 2006) , f orexam ple , we hel d that the questi on of w h et h er an arb itr at ion ag re em en t fo rb ad e c o n s olidated arbi tr ati on was a proce du ra l o ne f orthe arbi tr ato r t o answer, n o t i ngtha t“ [ t ] he S up r e me Co ur tma de c l e a r i n H o wsam tha tp r o c e du r a l i s s ue s a r e p r e s umpti ve l y f o r the a rbi tr at o r t o deci de. ” ( ci ta ti o n omi tt ed)

. And i n Zu r i ch Am e r i ca n Ins uranc eCo. , we f o und tha t que st i o ns about the pr ecl usi ve effect ofa C al i f or ni a s tat e j ud gm ent o n the sco pe ofthe p ar ties’ arbi tr abl e di sputes w er e s i m i l ar l y an is su e forthe arbi tr ato r. 46 6 F
. 3d at 581. W e co ncl ud ed that beca use the i ssue ofpre cl usi on was bei ng r ais ed by a partyas a defe nse t o arbi tr ati on, i t was a p roced ura l qu estion u n d er Howsa m tha t fel l t o the arb itr at or to d ec id e. Id.

B. Th e D i sagr eemen tN ot i ce Dispute I s a Q uesti on f ort he A rbit r at or J us t l i k e th e que st i o ns i n Howsa m , Zur i ch Am e r i ca n, or E m ployers Insurance, the adequa c y ofLum ber m ens’12 N o. 09

- 4051 Disa gr eem ent Noti ces i s a p ro ceduralquesti on about a co ndi ti o n pr ec ede ntt o a rbi tr at i o n un der§ 3
. 4 o fthe parti es’ ag reem ent a nd i s forthe arbi tr ato r to add re ss. Se eHowsa m , 53 7 U.S
. at84

- 85; Zur i ch Am
. Ins . Co. , 466 F
. 3d a t 58 1; E m plo yers Ins. , 4 4 3 F
. 3 d a t 5 7 7
. L u mb e r me n s’ a nd B ro ad sp ire ’s d isa gr ee m en ts ov er w h et h e r th e p re c on d iti ons have been m et gr ow o ut of the dis p u te betw een the par ti es and beardi re ctl y o n the arbi tr ato r’ s fi nal d i s p o sit ion of w h at th e p u rc h as e p ric e s h ou ld be

. See Jo hn Wiley, 376 U
. S. at 55 7 . I n d eterm ining w he th er a D isa gr ee m en t N ot ice co n ta in s s u fficie n t d et ail, th e § 3.4 arbi tr at o r wi l l b e ex ami ni ngthe s ame do cument s an d as sessi ngthe s ame i ss ue s r el ev an t to the a ctua l s ubs ta ntiv e re so l u t i o n of th e p ar tie s’ p ric e d isp u te . I t w ou ld b e s tr ange to divi de these l ar gel y o ver l apping tas ks betw ee n th e cou rt and the arb itrator. Se ei d. ( “I t would be a c u riou s ru le w h ich req u ire d th at int er tw in ed iss u es . . . g r o win go u to fa s i n g l e d i s p u t e a n d r a i s i ng th e s a me ques t i o ns o n the s a me f a c t s h a d t o b e c a r v e d u p b e tw een tw o different forum s, one de cid ing afte r the oth er. N ei th erl o g i c no r c o ns i der at i o ns o fpo l i cyc o m pels ucha resu lt. ”). T h is i s par ti cul ar l y t rue i n a c ase l i ke thi s o ne, when th e det er m i na tion be i ngmade i s o ne wi th i n the p ar tic u lar ex p er tis e o f th e a rb itr at or , no t a co u rt
. See Ho w sam , 537 U
. S. at85 ( l aw as sum es “expectat i on that ali gn s (1) de cisionm aker w ith (2) com p arative ex p ertise”); see also JP D , Inc. v. C hro nim ed H o ldi ng s, Inc ., 539 F. 3d 388, 393 ( 6th Ci r. 200 8) (acco unti ng fi rm “undoubtedl y pos ses s e s g r e a t e r e xp e r t i s e i n de t e r mi ning ho w muc h discl o su r e anEBI TDA a udi t r equi r es ”)
. In e va l ua ting whe the r Lu mbe r men s ’ Di s a g r e e men tNo t i c e s p ro v i deN o. 09

- 4051 13 the “ re aso nabl e deta i l ” requi re d by § 3
. 3( g) , the arbi tr ato r w i l l necess ar i l y be e n ga gin g in a fac t-inte nsi ve, sp ec ializ ed in q u i r y ve ry sim ilar to th e in q u iry it w ou ld unde r ta k e i n o r dert o a ctua l l y d et er m i ne whatthe properpurchase pri ce s houl d be.

“ I n c e r t a i n c o n t e x t s , i t i s a p p r o p r i a t e t o p r e s u me th a tp a r t i e s th a te n t e r i n t o a n a rb i t r a t i o n a g r e e me nt i m pli c itl y a uthor i ze the a rbi tr ato r to adopt such pro

cedures as ar e necessa ryto gi ve effect to the par ti es’ ag re em en t. St ol t

- N i e l s en S. A. v. Ani m al f e e ds Int ’ l Corp. , - - - U
. S. - -- -, 13 0 S
. Ct. 17 58, 17 75 ( 2010 ) ( ci ti ng Howsa m , 537 U
. S. at84 )
. The A gr eem ent he re pre sents o ne such conte xt . It i s a pp ro pri ate to pre sum e that the par ti es ha v e i mpl i c i t l y a utho r i z e d the § 3. 4 a rb i t r a t o r t o a do pt proce du re s nec ess ary to g i ve effect to thei r agr eem ent. S ec ti o n 3
. 4 i ts el fpr o vi des tha t th e arbitra to r may “c o ndu ct s uch proce edi ngs a s [i t]
. . . deter m i nes wil l as si st i n re sol vi ng the di spute.
. . . ” Deter m i ni ng the a dequ acy of Di sa g r ee m en t N o ti ce s l o g ic al l y f al l s wi th i n thi s g r an t o fa utho r i ty
. Inde ed, e va l ua tings uchdo cument s i s i ne xtr i c ab l y r e l a t e d t o the c o r e fun c t i o n tha tthe a rb i t r a tor per f o r m s unde r the Agr ee m en t

— re achi ng a con c lusi on as to “al l di sputed am ounts” at i ssue. A gr eem ent § 3. 4. A n anal ogo us cas e fro m the Si xth Cir cui t butt re sse s o urc o nc l us i o n h er e. In JP D , Inc. v. C hro nim e d H o ldi ng s, Inc ., th e p ar tie s s ign ed a p u rc h as e a gr ee m en t fo r th e s ale ofa pharm acy that i nvol ved a pri ce di spute arbi tr ati on p ro c es s n e a r l y i d e n tic al t o th e o n e s et fort h in A rt icle II I here

. 53 9 F. 3d at 392- 93. The purchase r, Chroni m ed, had to s en d a n e arni ng s be f o r e i nt er es t, t ax es , de pr ec i at i o n,14 N o. 09

- 4051

an d am ortization (“EB I T D A ” ) c alculation to th e sell er, DiCel l o, f orthe pu rpos es ofdeter m i ni ng an “add itio n al pu rchas e pr i ce pay m ent” to b e m ade to DiCel l o after the t ra nsacti on ba sed o n the pharm acy’ s 2 006 ear ni ngs. Id. a t 39 0. I fDi Cel l o di sa g r ee d wi ththe c al cul at i o n, he had to file an o bj ecti on s ett i ng f or th i n “r eas onabl e detai l ” the bas i s forhi s di sag re em ent, and i fthe parti es coul d n o ts e t t l e the di s pu t e i n g o o d f a i th, i two ul d b e re fer re d to an acc ounti ng fi rm f orr eso l uti on j ust as inth e c as e b efo re u s. Se ei d. DiCel l o did obj ect to Ch ro ni m ed’s EBIT DA c a l c ul ati on, but i nstea d of p u r s u i n ga rb i t r a t i o n, s u e d f o r a n a c c o u n t i n ga n d d a mag es . Id. C hro ni m ed m o ve d t o s ta y the s ui t an d com pel arbi tr ati on, wh i ch t he di str i ct c ourtdeni ed on a w aiv er th eo ry . Id. On app eal, DiCel l o ar gued that arbi tr ati on be f or e the acc ounti ng fi rm was not proper be ca us e Chr o ni m ed ha d f ai l ed to s uffi ci en tly do cument i ts EB I TD A cal cul ati on, thus wai vi ng i ts ri ght t o ar bi tr ate the dispute und erthe pu rchas e a gr eem ent. Id. at 391- 92. A pp l yi ng Howsa m , the Si xth Cir cui t v ac ate d th e d ist ric t c ou rt ’s ru lin g, co n c lu d in g, inte r alia , tha t th e que st i o n o fwhethe r Chr o ni m ed ha d s uffi ci en tl y do cumen t e d the p ha rm acy’ s fi na nc e s wa s “ e xa c t l y the ty pe ofco nd i ti on [ ] pre cedent t o an o bl i gat ion t o arbi tr ate that H o w s am p re su m p tiv ely alloc at ed to th e a rb itr at or .” Id. a t 39 2- 93 ( i nt erna l quo ta ti o n o m itted )
. The s ame c o ncl us i o n i s appr o pr i at e he r e. J us t as que st i o ns o ve r the su ffi ci en cyo fan E B I TDA c al cul at i o n wer e i ss ue s ab o ut a c on d itio n p r e c ed en t a lloc at ed to th e a rb itr at or in JPD , questi ons ove r the s uffi ci ency ofL u m ber m ens’ Disa gr eem ent N oti ces

— si m i l ar l y a c o ndi ti o n pr ec ede ntN o. 09

- 4051 15 to pri ce di spute arbi tr ati on

— ar e q u e s t ion s fo r th e § 3.4 arb itr at or h er e. See id .; s e eals o D e al e rC om put e rSe r vs . , Inc
. v. O ld Colon y M otors, Inc. , 588 F
. 3d 884, 88 7 ( 5th Ci r. 20 09) ( paymen to ffe e s i s que s t i o n o fp r o c e du r a l c o nd i t i on preced en t to arbi tr ati on that i s forarbi tr ato r, nota cour t, to d ecid e). Br o ads pi r e ci te s o urd eci si o n in R
. J. Co rm an D erailm e ntSe r vi ces , L LC v. Int e r nat i onalU ni on of O pe r at i ng E ng ineers, 422 F. 3d 522, 52 8 ( 7th Cir. 2 005), i n supp or t o f i t s a r g ume ntt o the c o nt r a r y, b uttha tc a s e i s i na pp o s i te. I n C o r m an , the parti es disputed wh ethera gr i evance w as ti m el y under the t er m s o fan e xpir ed col l ecti ve ba r g aini nga g r eem ent
. 4 22 F
. 3d at5 27
. The di spu te i nvo l ve d a que st i o n o f“ whethe r the r e was a n a g reem ent to arbitrate thi s s et ofgr i evance s a t a l l, ” a fund am ental questi on o farbi tr abi l i ty proper l y a nsw er ed by a court
. Id. ; see H o w s am , 53 7 U.S
. at84
. The di spute i n thi s ca se i s di ffer ent, and f al l s o n the oth er s id e ofthe Howsa m divi de f ora key r ea so n. H er e, ther e i s no di spute as to the e xi s t e nc e o fa n a g r e e men tt o a rb i t r a t e i tse l f

. Ins t e a d, thi s i s a pro ceduraldi spute o verprec ond i ti ons t o that arb itr at ion
. See E m plo yers Ins. , 44 3 F.3d a t 577 ( proce du ra l q u es tio n of arb itr ab ili t y w as for a rb itr at or be c au se it “d oes no t inv olve w he th er W au sau and Ce nt ury are bound b y an arbi tr ati on cl ause orwh etherthe arbi tr atio n cla u se co ve rs th e A q u a- C h em p olic ies .”); see also D e a ler, 5 88 F
. 3d at8 87
. F o r us t o a cc eptBr o ads pi re’s ar gu m en t “ w o u l d r eq u ire a c ou rtto d elv e t oo d ee p ly i n t o qu e s t i o n s o fth e p a r t i e s ’ c o mp l i a n c e w i th th e t e r ms of the agreem en t, w hic h a re m ore prop erly for th e arbi tr ato r. ” C o rm a n, 422 F. 3d at 528.16 N o. 09

- 4051 I I I . C ONC L US I ON The dis tr i ct c ourt ’ s r uling i s A FFI RMED .

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