Opinion ID: 698355
Heading Depth: 2
Heading Rank: 1

Heading: 1988 Agreement: Fraud and Rescission.

Text: 25 BSI's second claim (fraudulent obtaining of proprietary information) and its third claim (rescission) are pleaded in terms of the 1988 Agreement, and seem to seek relief in respect of that Agreement. C & A argues that the 1988 Agreement has no arbitration clause and therefore cannot be the subject of arbitration. BSI argues that the Agreement was simply a tool in C & A's scheme to deprive BSI of its benefits under the 1977 Contracts, and that the 1988 Agreement therefore aris[es] out of or relat[es] to the 1977 Contracts. 26 We have stated that a court should decide at the outset whether the arbitration agreement [is] broad or narrow. Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 63 (2d Cir.1983). If broad, then there is a presumption that the claims are arbitrable. See id. at 64. The clause in this case, submitting to arbitration [a]ny claim or controversy arising out of or relating to th[e] agreement, is the paradigm of a broad clause. See Threlkeld, 923 F.2d at 251. Thus, under Prudential Lines, these claims are presumptively arbitrable. 27 Of course, there can be no such presumption in respect of the 1988 Agreement, which has no arbitration clause. However, although claims two and three seek relief under the 1988 Agreement, our analysis is not controlled by the characterization of them in the pleading. Instead, we look to the conduct alleged and determine whether or not that conduct is within the reach of the 1977 arbitration clause: 28 In determining whether a particular claim falls within the scope of the parties' arbitration agreement, we focus on the allegations in the complaint rather than the legal causes of action asserted. If the allegations underlying the claims 'touch matters' covered by the parties' ... agreements, then those claims must be arbitrated, whatever the legal labels attached to them. 29 Genesco, 815 F.2d at 846 (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 622 n. 9, 624 n. 13, 105 S.Ct. 3346, 3351 n. 9, 3352 n. 13, 87 L.Ed.2d 444 (1985)) (emphasis added). 30 We must then view the second and third claims, notwithstanding the invocation of the 1988 Agreement, in terms of whether they implicate the 1977 Contracts. Our goal is always to enforce the agreement to arbitrate on its terms: 31 In construing arbitration clauses, courts have at times distinguished between 'broad' clauses that purport to refer all disputes arising out of a contract to arbitration and 'narrow' clauses that limit arbitration to specific types of disputes. If a court concludes that a clause is a broad one, then it will order arbitration and any subsequent construction of the contract and of the parties' rights and obligations under it are within the jurisdiction of the arbitrator. 32 McDonnell Douglas Fin. Corp. v. Pennsylvania Power & Light Co., 858 F.2d 825, 832 (2d Cir.1988) (citations omitted) (emphasis added). 33 The second and third claims can be read in different ways: as seeking relief under contractual rights created in 1988, or as an episode in a fraudulent scheme to deprive BSI of its rights under the 1977 Contracts. BSI is concerned that the district court judgment staying arbitration of these claims may be deemed to foreclose any showing at arbitration that the 1988 Agreement was an instrument for C & A's wrongful termination of the 1977 Contracts; and C & A is concerned that an order requiring the arbitration of these claims might authorize the grant of relief in respect of its 1988 undertakings. Both concerns arise from the pleading style of the Statement of Claims, which offers particulars of the claim for wrongful termination of the 1977 Contracts, but tries to characterize some or all of those particulars in terms of other causes of action. In this way, both parties have been drawn into a debate over labels. 34 The question is not whether the second and third claims arise under the 1988 Agreement, which has no arbitration clause; the question is whether these claims plead conduct that aris[es] out of or [is] related to the 1977 Contracts, which does have such a clause. To the extent that these claims (no matter how they are labeled) allege conduct that violated the 1977 Contracts, they would be arbitrable (even if they are not arbitrable as separate causes of action) in the sense that the allegations embedded within the claims have potential bearing on a claim for wrongful termination of the 1977 Contracts. BSI points to these embedded allegations, and claims the right to arbitrate. If there were no wrongful termination claim, the district court would be required to compel arbitration of these claims, after sorting out allegations and claims for relief that are cast in terms of claims arising under the 1988 Agreement. However, the determinative fact is that the district court judgement compels arbitration of the wrongful termination claim. The Statement of Claim alleges that the 1988 negotiations, the 1988 Agreement, and other ensuing events, were part of a course of conduct leading to the wrongful termination, and show why and how C & A breached its obligations under the 1977 Contracts. Having paved the way for arbitration of that capacious claim, the district court had no need to edit the second and third claims, and cast them in terms of BSI's rights under the 1977 Contracts, so that they could be arbitrated as separate counts rather than as particulars of the wrongful termination of contract claim already deemed arbitrable. 35