Opinion ID: 773499
Heading Depth: 1
Heading Rank: 1

Heading: which claims are subject to arbitration?

Text: 14 Arbitration is simply a matter of contract between the parties; it is a way to resolve the disputes--but only those disputes--that the parties have agreed to submit to arbitration. Coady v. Ashcraft & Gerel, 223 F.3d 1, 10 (1st Cir. 2000) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 131 L. Ed. 2d 985, 115 S. Ct. 1920 (1995)). [A] party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. AT&T Tech. v. Communications Workers, 475 U.S. 643, 648, 89 L. Ed. 2d 648, 106 S. Ct. 1415 (1986) (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 4 L. Ed. 2d 1409, 80 S. Ct. 1347 (1960)). 15 We agree with the district court that the EBITDA claim of misrepresentation in the companies' December 31, 1998, financial statement is not a claim the parties agreed to submit to arbitration. Article 2.6 of the Agreement represents that those statements fairly present[] the financial condition and results of operation of the [companies]. Article 10.1 provides that Pentzer shall indemnify, defend, and hold plaintiffs harmless from any loss arising from a breach by Pentzer of any representation or warranty. And Article 10.7 states that the provisions of this Article 10 shall be the sole and exclusive remedy . . . for all claims of breach . . . pursuant to this Agreement. . . . Thus, not only does the exclusive remedy provision govern the EBITDA claim relating to the December 31, 1998, statements, but the arbitration agreement, by its terms, also excludes them. Article 1.6, the arbitration provision, deals with Calculation of Final Closing Date Purchase Price. It concerns only disputes [over] any portion of [Pentzer's] calculation of any of the Purchase Price Financials. The Purchase Price Financials, in turn, consist of the financial statements of the companies as of the closing date (March 31, 1999, also the valuation date) with supporting calculations. 16 Pentzer argues that the EBITDA claim is a dispute over the Purchase Price Financials, because the factual allegations underlying plaintiffs' complaint could be resolved by an independent arbitrator reviewing the Purchase Price Financials. It is true, as Pentzer argues, that the closing date financial statements would reflect the historical financial record of the companies. However, it does not follow that if the closing date statements correctly reflect the results of operations as of March 31, 1999, those financial statements for the preceding periods were also correct. In other words, it would be fallacious to say that if there were no inventory overstatements as of March 31, 1999, none resided in the December 31, 1998, or earlier statements. 17 Plaintiffs' claim of net worth overstatement in the March 31, 1999, financial statements, on the other hand, falls squarely within the arbitration provision's scope. While a portion of the NWO claim may reflect the EBITDA shortfall during the prior periods, some $ 800,000 allegedly is attributable to insufficient net worth adjustments in the Purchase Price Financials. We agree with the district court that the NWO claim in the complaint is subject to arbitration. The only question that remains is whether Pentzer waived its right to send the NWO claim to arbitration. 18