Opinion ID: 180299
Heading Depth: 2
Heading Rank: 2

Heading: Dismissal of Caribbean's Breach of Contract Claims

Text: Caribbean's complaint included a separate cause of action for breach of contract and breach of the implied covenant of good faith and fair dealing. The district court dismissed this claim, finding that the arbitration clauses included in each of the promotional agreements required the parties to arbitrate the claim. [10] In relevant part, the arbitration clauses included in the promotional agreements stated that [a]ny controversy or claim arising out of or relating to this Agreement or the breach thereof shall be finally settled by arbitration in Louisville, Kentucky administered by the American Arbitration Association.... On appeal, Caribbean claims that its breach of contract claim is not subject to arbitration because it arises out of the terms of the oral sales representation agreements. Viewing the oral sales representation contracts as separate and independent agreements, Caribbean contends that the arbitration clauses included in the promotional agreements do not cover claims arising out of the oral agreements. Caribbean's claim requires us to examine the scope of the arbitration clause. This is a legal issue that we review de novo. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 723 F.2d 155, 159 (1st Cir.1983), rev'd in part on other grounds, 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). In evaluating the scope of the arbitration clauses, we are mindful that all doubts are resolved in favor of arbitration; arbitration will be ordered unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Id. (internal quotation marks omitted). Although Caribbean argues that its breach of contract claim arises out of separate and independent verbal sales representation agreements, its complaint makes it clear that the breach of contract claim arises out of Brown Forman's decision to terminate the commercial relationship between the parties. The complaint also shows that the commercial relationship between the parties is governed by the promotional agreements that include a mandatory arbitration clause. By Caribbean's own admissions, the oral sales representation contracts depend on, and are closely interrelated to, the promotional agreements regarding key contractual terms. For example, Caribbean readily admits that the compensation it received for its alleged sales efforts was governed by the terms of the promotional agreements. Consequently, even if we draw the inference that the sales representation agreements are independent agreements, they would still be part of the commercial relationship and would therefore be covered under the arbitration clause. Under these circumstances, we find that the arbitration clauses can be reasonably interpreted to cover Caribbean's claim that Brown Forman breached the commercial relationship between the parties in bad faith. The district court properly referred the breach of contract claim to arbitration. [11]