Opinion ID: 29604
Heading Depth: 5
Heading Rank: 1

Heading: Whether there is a valid agreement to

Text: arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement. When deciding whether the parties agreed to arbitrate the dispute in question, “courts generally ...should apply ordinary state-law principles that govern the formation of contracts.” In applying state law, however, “due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of 22 the arbitration clause itself must be resolved in favor of arbitration.” The second step is to determine “whether legal constraints external to the parties’ agreement foreclosed the arbitration of those claims.”19 It is axiomatic that, unless an arbitration agreement expressly provides otherwise, the arbitrator is empowered to rule on his own jurisdiction.20 This includes subject matter jurisdiction, i.e., which issues are subject to arbitration and which are outside its scope; and personal jurisdiction, i.e., who is or is not bound to arbitrate. Here, none challenge the jurisdiction of the arbitrator to decide the basic contractual issues submitted by the Plaintiffs, but the Defendants continue to challenge the arbitrator’s jurisdiction to decide the liability of Bettis Group and TransAtlantic as guarantors of any award against those whose obligations they have guaranteed under the Agreement. Likewise, none challenge the existence or validity of the Agreement or the arbitration provisions in it, but do challenge the susceptibility of the two guarantors to mandatory arbitration, relying on the express limitations of their joinder in the Agreement to eschew amenability to arbitration. The Agreement contains no express statement that the 19 Webb v. Investacorp., Inc., 89 F.3d 252, 257-58 (5th Cir. 1996)(internal citations omitted). 20 See American Arbitration Association, International Arbitration Rules art. 15 (“The tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.”); see also Tex. Civ. Prac. & Rem. § 172.082(a). 23 guarantors are bound to arbitrate; but neither does it contain an express statement that the guarantors are exempt from arbitration. Thus, in applying the rules and maxims of contract interpretation, the arbitrator was bound to consider all facially applicable provisions in the context of the Agreement as a whole when determining whether subject matter jurisdiction included the power to decide personal jurisdiction over the guarantors and subject matter jurisdiction over their liability as guarantors to the claimants on any amount awarded against those whose obligations are guaranteed. In this case, the arbitrator went the extra mile by looking beyond the four corners of the Agreement and hearing extrinsic evidence affecting the jurisdictional issues. Our examination of the Agreement as a whole, the preliminary ruling by the arbitrator and his award, and other matters in the record, satisfies us that the arbitrator was empowered to determine his own jurisdiction (including jurisdiction over the guarantors), that he exercised discretion in making those determinations, and that his determinations are supported by the Agreement as a whole and the circumstances of its execution.21 We have already noted that TransAtlantic and Bettis Group are signatories to the Agreement, and that they expressly guarantee the 21 The instant situation is significantly different from that in Grundstad v. Ritt, 106 F.3d 201 (7th Cir. 1997), in which neither the guarantee nor the guarantor was mentioned in the agreement and the arbitration clause expressly referred to the two principals. 24 obligations undertaken by other parties to the Agreement, which parties and objections are indisputably subject to arbitration. Structurally, Article XVII of the Agreement addressing applicable law and dispute resolution, first designates substantive law of Texas as applicable and then, in the first sentence of § 17.2.2, states unequivocally and unconditionally that “[a]ny and all disputes or differences relating to, arising out of or in connection with this Agreement...shall be finally settled by arbitration pursuant to this Section 17.2.2” (emphasis added). Although it is true, as strenuously insisted by TransAtlantic, that the subsequent sentences of that paragraph and the remaining paragraphs of Section 17.2.2 contain multiple references to “the Shareholders” and none to the guarantors, the above-quoted first sentence contains no limitation —— no reference to shareholders, or to guarantors, or to anything other than unqualified applicability to any and all disputes. Indeed, rather than supporting the inference that the commitment to settle “any and all disputes or differences relating to, arising out of or in connection with” the Agreement should not apply to the guarantors, the omission of the limiting reference to shareholders from the initial sentence of Section 17.2.2 provides support for the arbitrator’s determination that the guarantors are subject to arbitration: Inclusio unius est exclusio alterius. And, like the position of the guarantors as signatories to the Agreement, the statement appearing on page 2, immediately preceding “RECITALS,” confirms that the guarantors “are 25 entering into this Agreement,” albeit for the limited purpose of guaranteeing certain obligations. Irrespective, then, of our standard of review —— whether, pursuant to FAA, one that is extremely deferential to the arbitrator, or completely de novo,22 or somewhere in between (such as abuse of discretion) —— we ultimately agree with the arbitrator’s conclusion that (1) he has the power to determine his own jurisdiction, including the substantive question of the responsibility of the guarantor for any award in arbitration against those whose commitments were guaranteed, and the in personam amenability of the guarantors to arbitration; (2) that, when the Agreement is read as a whole, both guarantors are bound to arbitrate; and (3) as guarantor, TransAtlantic is bound jointly and severally with those shareholders of Tarpon-Benin against whom the award in arbitration was rendered. These conclusions comport with the frequently repeated maxims that (1) “[W]here the parties include a broad arbitration provision in an agreement that is ‘essential’ to the overall transaction, we will presume that they intended the clause to reach all aspects of the transaction”23 and 22 See generally First Options, 514 U.S. 938 (1995); Kona Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595 (5th Cir. 2000). 23 See Personal Security & Safety Systems Inc. v. Motorola Inc., 297 F.3d 388, 394 (5th Cir. 2002); see also Neal v. Hardee’s Sys., Inc., 918 F.2d 34, 38 (5th Cir. 1990)(“We hold that when the parties included a broad arbitration clause in the essential [contracts] covering ‘any and all disputes,’ they intended the clause to reach all aspects of the parties’ relationship....”). 26 (2) that arbitration clauses are to be liberally read to implement congressional policy expressed in the Federal Arbitration Act.24 Given the totally broad form arbitration provision of the Agreement, the recognition of the guarantors as parties to the Agreement for the limited purpose of guaranteeing obligations created in the Agreement, and the joinder of the guarantors as signatories to the Agreement, we are convinced that the arbitrator had and correctly exercised the power to determine his jurisdiction over TransAtlantic as guarantor and over the extent of TransAtlantic’s obligation as guarantor. But even if our review is de novo, we would agree with the arbitrator’s jurisdictional ruling. The fact that TransAtlantic boycotted the arbitration proceedings after the arbitrator ruled preliminarily that TransAtlantic was subject to arbitration is of no moment. The arbitrator restricted his award vis-à-vis TransAtlantic to its role as guarantor, so TransAtlantic has no basis for complaining that the arbitrator exceeded his authority in that regard. And, inasmuch as we have concluded earlier that the district court’s vacatur of the arbitrator’s award against the TransAtlantic Affiliates must be reversed and the award enforced, our conclusion that the arbitrator was correct in holding TransAtlantic subject to arbitration not only requires reversal of the district court’s jurisdictional ruling to the contrary, but also requires reversal 24 See, e.g., Penzoil Exploration and Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1068 (5th Cir. 1998). 27 of that court’s vacatur of the award against TransAtlantic as guarantor.