Opinion ID: 2782472
Heading Depth: 1
Heading Rank: 1

Heading: Who Decides Arbitrability

Text: Although the Supreme Court of the United States has recognized and enforced a liberal federal policy favoring arbitration agreements, it has made clear that there is an exception to this policy: The question whether the parties have submitted a particular dispute to arbitration, i.e., the “question of arbitrability,” is an issue for judicial determination [u]nless the parties clearly and unmistakably provide 4 Cite as 2015 Ark. 58 otherwise. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (internal citations omitted); see also HPD, LLC v. TETRA Techs., Inc., 2012 Ark. 408, at 6, 424 S.W.3d 304, 308 (stating that the court, rather than the arbitrator, decides the question of arbitrability unless the parties clearly and unmistakably delegate that question to the arbitrator). The relevant arbitration provisions are contained in Article 56 of the Alliance Agreement between Entergy and Siemens: 56.1 The parties, through their respective Project Managers, shall use all reasonable efforts to resolve any disputes that may arise between them under this Agreement. If a dispute is not resolved at the Project Manager level, a meeting shall be held promptly between the parties’ Alliance Directors. .... 56.2 If the Alliance fails to resolve the dispute . . . they shall . . . prepare and transmit a briefing package regarding the dispute to an assigned “Alliance Steering Committee” for review. .... 56.3 If the Steering Committee also fails to resolve the dispute . . . the Alliance Directors shall . . . submit the issue to an assigned “Advisory Committee” for final resolution. .... 56.4 If the parties are not successful in resolving the dispute, they may mutually agree to submit the dispute to non-binding third party mediation. . . . If the parties are not successful in resolving the dispute through mediation, or if the dispute otherwise remains unresolved . . . then either party may submit the dispute to binding arbitration as provided in 56.5 below, which shall be the exclusive method of resolving such disputes. Each party shall bear its own costs and expenses of any mediation or arbitration. 56.5 Any claim, dispute, or controversy arising out of or relating to this Agreement 5 Cite as 2015 Ark. 58 shall be submitted to binding arbitration by the American Arbitration Association for arbitration in Little Rock, Arkansas in accordance with the Commercial Arbitration Rules then in effect. There shall be three arbitrators, with each party selecting one; the third neutral arbitrator, who shall be the chairman of the panel, shall be elected by the two party-appointed arbitrators. The claimant shall name its arbitrator in the demand for arbitration and the responding party shall name its arbitrator within 30 days after the receipt of the demand for arbitration. The third arbitrator shall be named within 30 days after the appointment of the second arbitrator. The American Arbitration Association shall be empowered to appoint any arbitrator not named in accordance with the procedure herein. The arbitrators shall have no jurisdiction to consider (i) claims for consequential damages or damages beyond the limitations of liability contained in the Contract and (ii) any challenge to the limitation of the liability contained in the Contract. The decision of the arbitrators shall be final and binding upon the parties without the right of appeal to the courts. The award rendered by the arbitration shall be final and judgment thereon may be entered by any court having jurisdiction thereof. Each Party shall bear its own cost and expenses in connection with such arbitration. Provided, however, that nothing herein shall in any way be deemed or construed to limit or restrict either Party from seeking or obtaining injunctive relief to protect its patents, copyrights, trade secrets, or other intellectual property in any court of competent jurisdiction, and the arbitrators shall have no jurisdiction to consider any issue of intellectual property infringement or validity. (Emphasis added.) Assuming arguendo that there is clear and unmistakable evidence in the arbitration provisions that the parties to the Alliance Agreement—Entergy and Siemens—agreed to arbitrate arbitrability, there is no clear and unmistakable evidence in the arbitration provisions that Entergy and Bigge agreed to arbitrate the issue of whether their dispute is arbitrable. See Republic of Iraq v. ABB AG, 769 F. Supp. 2d 605, 610 (S.D.N.Y. 2011) (concluding that there was no clear and unmistakable evidence from the arbitration agreement that a signatory and a nonsignatory agreed to arbitrate the issue of whether their dispute was arbitrable for the simple reason that there was no contract between them). Nor can it be said that the Alliance Agreement between Entergy and Siemens clearly and unmistakably provides for 6 Cite as 2015 Ark. 58 arbitral resolution of arbitrability disputes with third parties. See id. The arbitration provisions in the Alliance Agreement contain no reference to Bigge or to third parties in general.3 To the contrary, the Alliance Agreement states that either party, that is, either Entergy or Siemens, “may submit [a] dispute to binding arbitration.” There is nothing in the arbitration provisions to suggest that Entergy and Siemens intended to afford anyone other than themselves the right to arbitrate arbitrability. In urging otherwise, Bigge relies on this court’s decision in HPD, 2012 Ark. 408, 424 S.W.3d 304, in which we observed that a majority of the courts that have considered the issue have held that, when a contract requires arbitration pursuant to rules that expressly delegate the question of arbitrability to the arbitrator, the contract clearly and unmistakably vests the arbitrator, and not the court, with the authority to decide which issues are subject to arbitration. In HPD, we concluded that the parties’ incorporation of the American Arbitration Rules into the arbitration agreement, along with other language in the agreement, constituted clear and unmistakable evidence of the parties’ intent to arbitrate the question of arbitrability. 2012 Ark. 408, at 11–12, 424 S.W.3d at 311. In the instant case, the Alliance Agreement incorporates the American Arbitration Association’s Commercial Arbitration Rules, and Rule R-7(a) of those Rules states that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim 3 The fact that the Alliance Agreement does not mention third-party beneficiaries does not, by itself, preclude Bigge from establishing that it is a third-party beneficiary. See Republic of Iraq v. ABB AG, 769 F. Supp. 2d 605, 610, n.1 (S.D.N.Y. 2011). 7 Cite as 2015 Ark. 58 or counterclaim.” Bigge claims, therefore, that the parties intended for an arbitrator to determine whether a dispute was arbitrable. In making this argument, Bigge overlooks a crucial distinction between the facts in this case and those in HDP. At issue in HDP was the arbitrability of a dispute between two signatories to an arbitration clause. Here, however, the issue is the arbitrability of a dispute between a nonsignatory, Bigge, and a signatory, Entergy. Evidence of intent to have an arbitrator determine its jurisdiction of disputes submitted by either party to an arbitration agreement does not clearly and unmistakably demonstrate the parties’ intent to have the arbitrator determine its jurisdiction with respect to any dispute raised by a nonparty. See Republic of Iraq v. BNP Paribas USA, 472 Fed. App’x 11, 13 (2d Cir. 2012); see also ABB AG, 769 F. Supp. 2d at 610–11 (“[S]imply because a party has agreed to arbitrate questions of arbitrability with its contractual counterpart does not mean that it must arbitrate with any non-signatory to the contract.”) (emphasis in original) (internal quotations omitted); QPro, Inc. v. RTD Qual. Servs. USA, Inc., 761 F. Supp. 2d 492, 497 (S.D. Tex. 2011) (“When, as here, the issue is whether a nonsignatory to an arbitration clause may enforce it against a signatory, the courts have viewed this as a matter for the courts to decide.”). Finally, Bigge cites Contec Corp. v. Remote Solution, Inc., 398 F.3d 205 (2d Cir. 2005), in which the United States Court of Appeals of the Second Circuit allowed a nonsignatory defendant to compel a signatory to arbitrate issues of arbitrability. Bigge’s reliance on Contec is misplaced. In Contec, the court concluded that Contec Corporation could compel arbitration of the arbitrability of a dispute arising under an agreement signed by its prior 8 Cite as 2015 Ark. 58 corporate form, Contec L.P., and defendant Remote Solution, even though the arbitration clause was limited to disputes between the “parties.” In a later case, the Second Circuit explained that two facts informed its conclusion in Contec: (1) the undisputed relationship between each corporate form of Contec and Remote Solution and (2) the parties continued to conduct themselves as subject to the agreement, regardless of the change in corporate form. BNP, 472 Fed. App’x 11, 13 (citing Contec, 398 F.3d at 209) (internal quotations omitted). Thus, in Contec, the court allowed the nonsignatory defendant to compel the signatory to arbitrate issues of arbitrability because the defendant was essentially equivalent to the original signatory to the arbitration agreement. Here, Bigge, the nonsignatory defendant, was a subcontractor to Siemens, the prime contractor who entered into the Alliance Agreement with Entergy. Bigge was not, however, essentially equivalent to a signatory. In sum, Bigge has failed to demonstrate that it is entitled to an arbitral resolution of arbitrability. Therefore, we hold that the circuit court did not err in concluding that, under the facts of this case, issues of arbitrability were matters for judicial determination.