Opinion ID: 221861
Heading Depth: 3
Heading Rank: 2

Heading: Federal Arbitrability Law

Text: Applying federal arbitrability law, we conclude that this case is not arbitrable. The Agreement provides for arbitration of [a]ny dispute arising under this Agreement. Our interpretation of the phrase arising under is controlled by our prior decisions in Mediterranean and Tracer. In both of those cases, we held that the phrase arising under in an arbitration agreement should be interpreted narrowly. We first discuss the applicability of Mediterranean and Tracer to this case, and then discuss their actual application.
Mediterranean involved a construction contract providing that [a]ny disputes arising hereunder would be settled through binding arbitration. Mediterranean, 708 F.2d at 1461. One of the parties to the contract sued, claiming breach of contract, breach of fiduciary duty, conspiring to induce breach of contract, quantum meruit, and conversion. Id. The defendant moved to compel arbitration. One of the issues in the case was whether the language arising hereunder was meant to cover any disputes between the parties, or only disputes arising under the contract itself and . . . not . . . matters or claims independent of the contract or collateral thereto. Id. at 1463 (internal quotation marks omitted). We noted that the Second Circuit, in In re Kinoshita & Co., 287 F.2d 951 (2d Cir.1961), had narrowly construed the language arising under and arising out of. Mediterranean, 708 F.2d at 1463. We interpreted arising hereunder as synonymous with `arising under the Agreement.' Id. at 1464. We agreed with the Second Circuit that when parties intend to include a broad arbitration provision, they provide for arbitration arising out of or relating to the agreement. Id. Because of the absence of the relating to language in the arbitration provision, we had no difficulty finding that `arising hereunder' is intended to cover a much narrower scope of disputes, i.e., only those relating to the interpretation and performance of the contract itself. Id. Tracer involved a licensing agreement providing that [i]n the event any controversy or claim arising out of this Agreement cannot be settled by the parties [ ], such controversy or claim shall be settled by arbitration. Tracer, 42 F.3d at 1295 (alterations in original). The case involved, among other things, a tort claim for misappropriation of trade secrets based on defendants' continued use of trade secrets for which they no longer had a license. Id. at 1294-95. We noted that Mediterranean narrowly circumscribes the interpretation to be given [the arbitration] clause. Id. at 1295. We thus concluded that because the tort claim constituted an independent wrong from any breach of the licensing and nondisclosure agreements[,] . . . . it does not require interpretation of the contract and is not arbitrable under Mediterranean Enterprises.  Id. We also rejected the defendants' argument that the dispute was arbitrable because it would not have arisen but for the contract. The fact that the tort claim would not have arisen `but for' the parties' licensing agreement is not determinative. Id. The language discussed in these cases arising hereunder, arising under, and arising out ofis the same as that at issue in this case. The Agreement between Cape Flattery and Titan provides that [a]ny dispute arising under this Agreement shall be subject to arbitration. Titan argues that, notwithstanding the fact that the language in this case is the same as that in Mediterranean and Tracer, we should interpret arising under broadly. Titan argues that we should not follow Mediterranean and Tracer because those cases were decided before the Supreme Court's more recent decisions emphasizing the strength of the presumption in favor of arbitration. Titan is certainly correct that there is a presumption in favor of arbitrating the merits of a dispute. [A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability. Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. 927 (footnote omitted). Courts should thus construe ambiguities concerning the scope of arbitrability in favor of arbitration. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 66, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995). However, this presumption was established well before our decision in Mediterranean. Indeed, in Mediterranean we wrote that federal policy favors the enforcement of arbitration agreements, 708 F.2d at 1463, and in Tracer we noted the federal policy favoring [arbitration], 42 F.3d at 1294. A purportedly new federal policy in favor of arbitration therefore cannot be a basis for concluding that these decisions are no longer valid. Titan notes that other circuits have relied on the federal policy favoring arbitration to construe broadly language that is similar to the language in this case, disagreeing with our decisions in Mediterranean and Tracer, and with the Second Circuit's decision in Kinoshita. See Highlands Wellmont Health Network, Inc. v. John Deere Health Plan, Inc., 350 F.3d 568, 577-78 (6th Cir.2003); Battaglia v. McKendry, 233 F.3d 720, 724-28 (3d Cir. 2000); Gregory v. Electro-Mech. Corp., 83 F.3d 382, 383-86 (11th Cir.1996); Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809, 813 (4th Cir.1989). Although Titan is correct that these circuits have disagreed with our reasoning in Mediterranean and Tracer, out-of-circuit cases provide no basis for us to ignore our own precedent. Titan also notes that both our court and the Second Circuit have significantly limited the application of Mediterranean, Tracer, and Kinoshita. See Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 720-21 (9th Cir.1999) (broadly interpreting the phrase arising in connection with in an arbitration agreement); ACE Capital Re Overseas Ltd. v. Central United Life Ins. Co., 307 F.3d 24, 26 (2d Cir.2002) (limiting application of Kinoshita to the precise language at issue in that case). However, it is one thing to limit the application of these cases to the specific language at issue. It is quite another to simply refuse to follow them. There is a good reason to indicate clearly to contracting parties what specific language will signify that the scope of their arbitration agreement is narrow. Once they know the specific language that is required, they can rely on that language to produce a result they jointly desire. The Second Circuit relied on this rationale in declining to overturn Kinoshita, reasoning that contracting parties may have (in theory at least) relied on [ Kinoshita ] in their formulation of an arbitration provision. S.A. Mineracao Da Trindade-Samitri v. Utah Intern., Inc., 745 F.2d 190, 194 (2d Cir.1984). Similarly, in this case, when Titan and Cape Flattery entered into the Agreement, Mediterranean and Tracer had both been decided. The Agreement concerned the salvage of a vessel that had run aground in the Ninth Circuit. There is no reason to believe that the experienced lawyers representing both parties intended that the language they chose would be interpreted differently than it had been in those cases. We conclude that because the language in the arbitration provisions in Mediterranean and Tracer is the same as the language in the Agreement, the narrow interpretation of arising under in those cases controls.
Applying Mediterranean and Tracer, we have no difficulty concluding that the present dispute is not arbitrable. The dispute in this case is based on the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq. Once the M/V Cape Flattery ran aground, Cape Flattery was responsible for removal costs and damages under 33 U.S.C. § 2702. Cape Flattery was also liable for all damage to natural resources resulting from the grounding. Id. §§ 2701(32)(A), 2702(a), 2702(b)(2)(A). Cape Flattery could bring a civil action for contribution against any other person who is liable or potentially liable for the damage under this Act or another law under § 2709. Because Titan was a party rendering care, assistance, or advice in removing the vessel, Cape Flattery can hold Titan contributorily liable if Titan was grossly negligent. Id. § 1321(c)(4). Cape Flattery alleged in its complaint that Titan was grossly negligent, in violation of both Hawaii and general maritime law, in deciding to use submerged, rather than floating, tow lines, and that the submerged lines caused damage to the coral reef. Mediterranean established that under an arbitration agreement covering disputes arising under the agreement, only those disputes relating to the interpretation and performance of the contract itself are arbitrable. Mediterranean, 708 F.2d at 1464. Tracer similarly held that when a tort claim constitutes an independent wrong from any breach of the contract it does not require interpretation of the contract and is not arbitrable. Tracer, 42 F.3d at 1295. Tracer further clarified that a tort claim is not arbitrable just because it would not have arisen but for the parties' agreement. Id. The present dispute does not turn on an interpretation of any clause in the contract. As the district court noted, [t]he parties point to no Agreement provision that Defendant allegedly breachedthe Agreement is silent regarding what tow lines Defendant must use, how precisely Defendant must salve the Vessel, and whether Defendant must take precautions to prevent harm to the coral reef. Cape Flattery, 607 F.Supp.2d at 1190 (footnote omitted). Nor does the dispute turn on Titan's performance under the contract. Instead the dispute involves a tort claim based on Hawaii and maritime tort law, incorporated as part of the Oil Pollution Act of 1990, and limited by that federal statute to grossly negligent acts. We therefore conclude that under the narrow interpretation of arising under in Mediterranean and Tracer, the present dispute is not arbitrable.