Opinion ID: 2601911
Heading Depth: 1
Heading Rank: 7

Heading: Whether the MSA compels arbitration by its plain language

Text: Whether a dispute arising under a contract is arbitrable is a matter of contract interpretation, which is a question of law that we review de novo. Clark Co. Public Employees v. Pearson, 106 Nev. 587, 590, 798 P.2d 136, 137 (1990); Phillips v. Parker, 106 Nev. 415, 417, 794 P.2d 716, 718 (1990). In interpreting a contract, we construe a contract that is clear on its face from the written language, and it should be enforced as written. Canfora v. Coast Hotels & Casinos, Inc., 121 Nev. 771, 776, 121 P.3d 599, 603 (2005). A contract is ambiguous only when it is subject to more than one reasonable interpretation. Anvui, LLC v. G.L. Dragon, LLC, 123 Nev. 25, ___, 163 P.3d 405, 407 (2007). As a matter of public policy, Nevada courts encourage arbitration and liberally construe arbitration clauses in favor of granting arbitration. Phillips, 106 Nev. at 417, 794 P.2d at 718. With regard to the arbitrability of disputes concerning the independent auditor's decisions, section XI(c) of the MSA provides the following: Any dispute, controversy or claim arising out of or relating to calculations performed by, or any determinations made by, the Independent Auditor (including, without limitation, any dispute concerning the operation or application of any of the adjustments, reductions, offsets, carryforwards and allocations described in subsection IX(j) or subsection XI(i)) shall be submitted to binding arbitration before a panel of three neutral arbitrators, each of whom shall be a former Article III federal judge. Furthermore, subsection IX(j), referenced in that provision, details the order in which allocations, offsets, reductions, and adjustments, including the NPM adjustment and corresponding exception for a state's diligent enforcement of its qualifying statute, will apply. Subsection XI(i) details the remedy for miscalculated or disputed payments, including that failure to dispute the independent auditor's calculation is tantamount to agreement with the calculations. In its petition, the State argues that the issue of whether Nevada diligently enforced its qualifying statute as required to avoid an NPM adjustment under the MSA is not within the scope of the MSA's arbitration clause, and thus, the district court erred in granting the tobacco companies' motion to compel arbitration. According to the State, the MSA's arbitration clause is limited to review of calculations of the independent auditor, and the clause does not extend to the auditor's resolution of mixed questions of law and fact, such as the question of whether Nevada diligently enforced its qualifying statute. The tobacco companies contend that the MSA's plain language does not limit arbitrable issues only to those of specific calculations made by the independent auditor because subsection IX(j), referenced in the arbitration clause, specifically includes the NPM adjustment and the diligent enforcement exemption. Moreover, the tobacco companies argue that the State has not overcome the well-settled presumption in favor of arbitration. Here, section XI(c)'s language is plain with regard to whether it requires that a dispute over an independent auditor's decision concerning a state's enforcement of its qualifying statute be arbitrated. Indeed, the MSA's arbitration clause broadly provides that all disputes arising out of or relating to the independent auditor's determinations shall be submitted to arbitration. [5] Certainly, as the arbitration clause's reference to section IX(j) suggests, an independent auditor's decision regarding a state's enforcement of its qualifying statute relates to the independent auditor's determination whether to make an NPM adjustment to a tobacco company's annual payment amount and, if so, how much of an adjustment to make, as such a determination is fundamental to any NPM adjustment. And no language within the MSA's arbitration clause supports the State's contention that arbitration is limited to calculations by the independent auditor. Thus, under the arbitration clause's clear language, disputes regarding diligent enforcement are subject to arbitration because of the clause's broad language. Moreover, this conclusion is supported by the vast majority of jurisdictions that have addressed this issue, and in so doing concluded that the plain and unambiguous language of the MSA's arbitration provision requires arbitration of the parties' dispute concerning the NPM Adjustment, including the State's diligent enforcement defense. People v. Lorillard Tobacco Co., 372 Ill.App.3d 190, 310 Ill.Dec. 222, 865 N.E.2d 546, 554 (2007), appeal denied, 225 Ill.2d 657, 314 Ill.Dec. 832, 875 N.E.2d 1119 (2007): see also State v. Lorillard Tobacco Co., ___ So.2d ___, ___, 2008 WL 821054 at  (Ala.2008); State v. Philip Morris, Inc., 279 Conn. 785, 905 A.2d 42, 51 (2006); State, ex rel. Carter v. Philip Morris, 879 N.E.2d 1212, 1216 (Ind.Ct.App. 2008); Ieyoub v. Philip Morris, USA, Inc., 982 So.2d 296, 300 (La.Ct.App.2008), appeal denied, 992 So.2d 942 (La.2008); State v. Philip Morris Inc., 179 Md.App. 140, 944 A.2d 1167, 1182 (Ct.Spec.App.2008), cert. denied, 405 Md. 65, 949 A.2d 653 (2008); State ex rel., Bruning v. R.J. Reynolds, 275 Neb. 310, 746 N.W.2d 672, 680 (2008); State v. Philip Morris USA, Inc., 155 N.H. 598, 927 A.2d 503, 509 (2007); State ex rel. N.M. Attorney General v. American Tobacco Co., Inc., 145 N.M. 134, 194 P.3d 749, 754 (Ct. App.2008); State v. Philip Morris Inc., 30 A.D.3d 26, 813 N.Y.S.2d 71, 76 (2006), aff'd, 8 N.Y.3d 574, 838 N.Y.S.2d 460, 869 N.E.2d 636, 640 (2007); State v. Philip Morris USA, Inc., 666 S.E.2d 783, 792-93 (N.C.Ct.App. 2008); State v. Philip Morris, Inc., No. 06AP-1012, 2008 WL 2854536, at  (Ohio Ct.App., July 24, 2008); State v. Philip Morris USA Inc., 945 A.2d 887, 892 (Vt.2008).