Opinion ID: 709220
Heading Depth: 1
Heading Rank: 2

Heading: employment

Text: 15 (a) Employer hereby employs Employee as a consultant with responsibilities, rights, and privileges as set forth herein, subject to the additions to, or limitations upon his responsibilities and privileges as may reasonably be prescribed by Employer's Board of Directors, the President of Vanguard Meter Service, Inc., or the Asplundh Tree Expert Co. Sponsor of Vanguard Meter Service, Inc. (Employment Agreement, Record p. 205). 16 Paragraph 1(a) of the agreement restricts Bates from seeking investments or associations during the term of the contract which would be competitive with Asplundh. Paragraph 2(a) of the agreement requires Bates to furnish consulting services and advice upon the request of Asplundh. In Paragraph 3(a), Asplundh guarantees payment of Bates' salary and benefits. In Paragraph 5(a) of the agreement, Asplundh is given the power to determine the reasonableness of reimbursable employee expenses incurred by Bates in the performance of his duties under the agreement. Paragraph 5(b) contains similar provisions regarding reimbursement for automobile expenses. The agreement concludes with this language: 17 IN WITNESS WHEREOF, the parties have executed this agreement, and employer has caused its corporate seal to be affixed hereto as of the day and year first hereinabove written. 18 Immediately beneath this language are the signatures of Bates and of Jill N. Asplundh as vice president of Vanguard and as vice president of Asplundh. 19 The arbitration clause of the second employment agreement requires arbitration of all claims, disputes and other matters in question arising out of or relating to this agreement or the breach hereof. Section 2 of the Arbitration Act, 9 U.S.C. Sec. 2, is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration[.] Id. at 24, 25, 103 S.Ct. at 941, 941-942. 20 Bates' claim against Asplundh based upon its guarantee of the payment of his salary and benefits is a dispute arising out of or relating to the second employment agreement. While, as a general rule, a guarantor who is not a signatory to a contract containing an arbitration clause is not bound by the arbitration clause, see Swensen's Ice Cream Co. v. Corsair Corp., 942 F.2d 1307, 1310 (8th Cir.1991); Interocean Shipping Co. v. National Shipping & Trading Corp., 523 F.2d 527, 539 (2d Cir.1975), cert. denied, 423 U.S. 1054, 96 S.Ct. 785, 46 L.Ed.2d 643 (1976), here, Asplundh was a signatory. Furthermore, the arbitration clause was not limited to Vanguard's undertakings but by its broad language included Asplundh's guarantee. The cases relied on by Asplundh are distinguishable. In Morrie Mages & Shirlee Mages Foundation v. Thrifty Corp., 916 F.2d 402 (7th Cir.1990), the guarantee was a separate agreement which did not contain an arbitration clause and did not incorporate the arbitration provision of the underlying agreement. The decision in Continental Group, Inc. v. NPS Communications, Inc., 873 F.2d 613 (2d Cir.1989) turned on the scope of an order issued by a state court which applied New York law, not federal law, in determining what issues should be arbitrated. The case of In Matter of Arbitration Between Coastal Shipping, Ltd. and Southern Petroleum Tankers, Ltd., 812 F.Supp. 396 (S.D.N.Y.1993), did not involve the enforcement of an arbitration agreement against a guarantor but instead the issue of whether arbitration proceedings arising out of the alleged breach of the charters of two motor tankers, each covered under separate charter agreements, should be consolidated. The court held that in the absence of an express or implied agreement for consolidated arbitration, consolidation should not be ordered.II. APPLICABILITY OF THE ARBITRATION CLAUSE TO THE LETTER AGREEMENT 21 Although the district court did not specifically address the issue, we conclude that the arbitration clause of the second employment agreement does apply to the letter agreement. Paragraph 12(c) of the second employment agreement states: 22 This Agreement may not be amended, modified, extended, discharged, or terminated except by written agreement signed by the party against which or whom enforcement of such is sought. 23 The first sentence of the letter agreement states: 24 The purpose of this letter is to clarify additional items not covered by the employment agreement dated August 20, 1991. 25 The letter agreement may be fairly characterized as an amendment or modification of the second employment agreement. It specifically references that agreement. It contains additional provisions which are relevant to Bates' employment by Vanguard and it is signed by all of the parties, including Asplundh, as required by paragraph 12(c). Thus, the letter agreement is part of the second employment agreement which contains a valid arbitration clause. The undertakings expressed in the letter agreement are covered by that arbitration clause.