Opinion ID: 773520
Heading Depth: 3
Heading Rank: 1

Heading: Analysis of Arbitration Clause

Text: 22 To determine whether a particular dispute falls within the scope of an agreement's arbitration clause, a court should undertake a three-part inquiry. First, recognizing there is some range in the breadth of arbitration clauses, a court should classify the particular clause as either broad or narrow. See Mehler v. Terminix Int'l Co., 205 F.3d 44, 49 (2d Cir. 2000); Peerless Imps., Inc. v. Wine, Liquor & Distillery Workers Union Local One, 903 F.2d 924, 927 (2d Cir. 1990); McDonnell Douglas Fin. Corp. v. Pa. Power & Light Co., 858 F.2d 825, 832 (2d Cir. 1988). Next, if reviewing a narrow clause, the court must determine whether the dispute is over an issue that is on its face within the purview of the clause, or over a collateral issue that is somehow connected to the main agreement that contains the arbitration clause. Rochdale Vill., Inc. v. Pub. Serv. Employees Union, 605 F.2d 1290, 1295 (2d Cir. 1979); see also Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 64 (2d Cir. 1983). Where the arbitration clause is narrow, a collateral matter will generally be ruled beyond its purview. See Cornell Univ. v. UAW Local 2300, 942 F.2d 138, 140 (2d Cir. 1991). Where the arbitration clause is broad, there arises a presumption of arbitrability and arbitration of even a collateral matter will be ordered if the claim alleged implicates issues of contract construction or the parties' rights and obligations under it. Collins & Aikman Prods. Co. v. Bldg. Sys., Inc., 58 F.3d 16, 23 (2d Cir. 1995). 23 The district court failed to classify the charter's arbitration clause before holding that the letters of indemnity, as collateral agreements, were still within the scope of the arbitration clause. In doing so, it relied upon our decision in WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 75 (2d Cir. 1997), which, in turn, purportedly relied upon our holding in Collins. WorldCrisa, while distinguishing broad arbitration clauses from narrow ones, extended the language of Collins beyond the meaning originally intended. We held in Collins: 24 [I]f the arbitration clause is broad, there arises a presumption of arbitrability; if, however, the dispute is in respect of a matter that, on its face, is clearly collateral to the contract, then a court should test the presumption by reviewing the allegations underlying the dispute and by asking whether the claim alleged implicates issues of contract construction or the parties' rights and obligations under it. 25 Collins, 58 F.3d at 23 (emphasis added). 26 But in WorldCrisa we implied that this same test should apply to a narrowly worded arbitration clause, 129 F.3d at 74-75, despite precedent in which we consistently held that matters collateral to an agreement fall outside the scope of a narrow arbitration clause. See, e.g., Peerless Imps., 903 F.2d at 927; McDonnell Douglas Fin. Corp., 858 F.2d at 832; Prudential Lines, 704 F.2d at 63-64; McAllister Bros., Inc. v. A & S Transp. Co., 621 F.2d 519, 522 (2d Cir. 1980); Rochdale Vill., 605 F.2d at 1295. Yet, because we explicitly held in WorldCrisa that the arbitration clause at issue was broad enough to justify a presumption of arbitrability, 129 F.3d at 75, its language regarding narrow arbitration clauses is dicta, which we are not obliged to extend to the case at hand. See CFTC v. Dunn, 58 F.3d 50, 53-54 (2d Cir. 1995) (When a prior decision makes statements in a line of reasoning that are broader than necessary to the affirmance or reversal of a judgment, a later panel may confine the precedential effect to a narrower ground within the line of reasoning.), rev'd on other grounds, 519 U.S. 465 (1997). 27 We think making a distinction between broad and narrow arbitration clauses is necessary and sound, as the scope of an arbitration clause, like any contract provision, is a question of the intent of the parties. S.A. Mineracao da Trindade-Samitri v. Utah Int'l, Inc., 745 F.2d 190, 193 (2d Cir. 1984). When parties use expansive language in drafting an arbitration clause, presumably they intend all issues that touch matters within the main agreement to be arbitrated, Genesco, 815 F.2d at 846, while the intended scope of a narrow arbitration clause is obviously more limited.