Opinion ID: 154727
Heading Depth: 1
Heading Rank: 2

Heading: applicability of the pda and efa arbitration provisions to plaintiffs' claims

Text: 15 CMS contends the district court erred when it ruled that plaintiffs' claims against CMS are not subject to arbitration. It points to the PDA and EFA arbitration clauses which broadly mandate arbitration of any claim related to or connect[ed] with those agreements. CMS believes that the claims in this action fall within that language and are thus subject to arbitration. CMS asserts that plaintiffs have deliberately attempted to avoid the arbitration clauses in the PDA and EFA by drafting their complaint to avoid pleading specific breaches of those agreements. 16 Plaintiffs respond that their claims are not arbitrable because they arise out of the Confidentiality Agreement and are separate from the PDA and EFA and the arbitration clauses contained therein. In support of their position, Plaintiffs note that (1) the Confidentiality Agreement is governed by Colorado law while the PDA and EFA are governed by New York law; (2) the Confidentiality Agreement is supported by separate consideration; (3) the parties to the PDA and EFA (Altresco Philippines, CMS, LPA and Miescor) are different from the parties to the Confidentiality Agreement (WRW, Altresco Philippines and CMS); (4) the Confidentiality Agreement authorizes redress in the court system; 3 (5) the Confidentiality Agreement expires under terms different from the PDA and EFA; and (6) CMS warranted in the PDA and EFA that those agreements did not contravene any other agreement by which it was bound. 17 This court reviews the arbitrability of a contract de novo. O'Connor v. R.F. Lafferty & Co., 965 F.2d 893, 901 (10th Cir.1992). The interpretation of the arbitration clause at issue is governed by the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. The FAA requires courts to stay judicial proceedings when a written agreement provides that the subject of the litigation is to be arbitrated. Id. § 3. There is a strong federal policy favoring arbitration for dispute resolution. Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514 (10th Cir.1995) (quoting Peterson v. Shearson/American Express, Inc., 849 F.2d 464, 465 (10th Cir.1988)). While a party may not be compelled to submit a dispute to arbitration unless it has agreed to do so, federal arbitration policy requires that any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Indeed, arbitration should be compelled unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960). The federal policy favoring arbitration is particularly strong in the context of international transactions. Coors, 51 F.3d at 1514. Any claim that has a reasonable factual connection to the [arbitration] contract is arbitrable. Coors, 51 F.3d at 1516. However, [a]n arbitration clause 'does not extend to all disputes of any sort ... but only to disputes touching specified provisions of the agreement.'  Id. at 1516 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 723 F.2d 155, 159 (1st Cir.1983), aff'd in part and rev'd in part, 473 U.S. 614 (1985)). 18 Because arbitration is a matter of contract, in evaluating whether a claim is subject to arbitration, the language of the arbitration clause dictates whether a particular claim is subject to arbitration. Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress Internat'l, Ltd., 1 F.3d 639, 643 (7th Cir.1993) ([C]ontracting parties control their own fate when it comes to deciding which disputes to consign to arbitration. On the one hand, they may delineate precisely those claims that are subject to arbitration or, on the other, they may employ general--even vague--language in their arbitration provisions.). The arbitration clauses in the PDA and EFA broadly provide that [a]ny dispute relating to or in connection with this Agreement must be arbitrated. We consider each claim in the complaint to see whether it falls within the scope of this language. 19 1. First Claim for Relief. 20 Plaintiffs first cause of action states a claim for breach of the restrictive covenant in the Confidentiality Agreement. It alleges that [b]y pursuing the Magellan project, CMS breached ... the confidentiality agreement ... [and as a] result of [such] breach ... LPA has been unable to develop the [Luzon] project and, therefore, plaintiffs have suffered damages for lost profits, loss of investment and other damages (emphasis added). The essence of this claim is that CMS's actions prevented the development of the Luzon project and that failure caused plaintiffs to suffer $85,000,000 in damages. A cause of action based on the failure to develop the project necessarily relates to and is connected with the development and funding agreements for that very project. 21 Although plaintiffs have not specifically pleaded breaches of the PDA or EFA, direct breaches of those agreements are not necessary to invoke the arbitration clauses contained therein. In re Oil Spill by the Amoco Cadiz Off the Coast of France March 16, 1978 (Amoco Transport Co. v. Bugsier Reederei and Bergungs, A.G.), 659 F.2d 789, 794 (7th Cir.1981) (Whether a particular claim is arbitrable depends not upon the characterization of the claim, but upon the relationship of the claim to the subject matter of the arbitration clause. Were the rule otherwise, a party could frustrate any agreement to arbitrate simply by the manner in which it framed its claims.). Instead, claims that fall within the scope of the agreement to arbitrate are arbitrable. 22 The district court relied on United International Holdings, Inc. v. Wharf (Holdings) Ltd., No. 95-1184, 1996 WL 55657 (10th Cir. Feb. 9, 1996) cert. denied, 116 S.Ct. 2524 (1996) in concluding that none of plaintiffs' claims for relief were subject to arbitration. We note as a preliminary matter that Wharf is an unpublished case and is not binding on this court. More importantly, Wharf is wholly inapposite. 23 In Wharf, plaintiff United International Holdings, Inc. (UIHI) entered into a written agreement (the TCA) with Wharf Cable whereby UIHI was to provide to Wharf a variety of technical services for a Hong Kong cable television venture (Wharf Cable project). In return, UIHI would receive quarterly fees. UIHI had also expressed an interest in investing in the Wharf Cable project, thereby becoming an equity participant in the project. The parties disputed whether they had entered into an oral contract regarding UIHI's investment. When Wharf (and its newly formed parent, through which the investment was allegedly to have been made) refused to permit UIHI's investment, UIHI brought an action in federal district court. Wharf cable moved to compel arbitration of the action. 24 This court rejected Wharf Cable's argument that an arbitration clause in the TCA encompassed claims based on UIHI's alleged oral contract to invest in Wharf's parent. The court noted that the TCA was a narrow agreement regarding UIHI's provision of technical services to Wharf and that it specifically provided that UIHI was to have no right or interest in Wharf Cable. Id. at 4. This court concluded the claims brought against Wharf and its affiliates were too remote, in substance and in distance, from the TCA to compel their arbitration pursuant to that agreement. Id. at 5. 25 In stark contrast, the contracts at issue in this case are directly related to one another. The Confidentiality Agreement specifically contemplates that CMS may participate in financing, construction, and operation of the Luzon project, i.e., subjects finalized in the PDA and EFA. The two agreements are integrally connected and were essential to the development of the Luzon project. A claim alleging damages for failure to develop a project is not too remote in substance or in distance from the development and funding agreements for that very project to avoid arbitration. Because this court cannot conclude with positive assurance that the arbitration clauses in the EFA and PDA are not susceptible of an interpretation that covers [Claim 1], arbitration of this claim cannot be denied. See AT & T Technologies, Inc. V. Communications Workers of America, 475 U.S. 643, 650 (1986) (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960)). 26 2. Second Claim for Relief. 27 The second claim alleges that CMS breached its shareholder fiduciary duty to LPA by becoming involved in the Magellan project in the first instance and then later refusing to reduce its interest in LPA, despite repeated demands and warnings from Meralco that should CMS fail to reduce its interest, the LPA project would fail. Although this claim sounds in tort, the arbitration provisions in the PDA and EFA may compel its arbitration if it touches on matters covered by the PDA and EFA. Sweet Dreams, 1 F.3d at 643. 28 The EFA was the very instrument by which CMS became a shareholder of LPA. It is that shareholder status upon which plaintiffs premise their second claim for relief. As a consequence, that claim necessarily touches upon the EFA and is subject to arbitration. 29 3. Third Claim for Relief. 30 Plaintiffs' third cause of action is one for intentional interference with contract. Plaintiffs contend that CMS intentionally interfered with the power contract between LPA and Meralco by pursuing the Magellan project and refusing to reduce its holdings in LPA. This claim is not connected with the development and funding obligations of the Luzon project as set forth in the PDA and EFA. CMS's duty, if any, not to interfere with a contract between LPA and Meralco is unrelated to any obligation imposed by the PDA and EFA. Because this claim cannot be construed to be related to or connect[ed] with the PDA and EFA, it is not subject to arbitration. 31 4. Fourth Claim for Relief. 32 Plaintiffs' fourth claim is one for a breach of the implied covenant of good faith and fair dealing based on CMS's failure to assign a project engineer full time to the development of the Luzon project, and its participation in another power project involving Meralco. This claim is closely connected to the PDA because that agreement sets forth the parties' obligations relating to the development of the Luzon project. A claim that the project was not developed quickly enough is necessarily related to the PDA. Further, as set forth in the analysis of Claim One above, Plaintiffs' claims that the Luzon project failed because of CMS's involvement in the Magellan project are necessarily related to and connected with the PDA and EFA. This claim is therefore subject to arbitration. 33 5. Fifth Claim for Relief. 34 The Fifth Claim 4 is one for unfair competition based on CMS's misuse of the information obtained under the Confidentiality Agreement to pursue the Magellan project as well as its refusal to reduce its interest in the Luzon project. Unlike claims one, two and four, this claim stands independent of the PDA and EFA. The obligation of confidentiality under the Confidentiality Agreement is unrelated to the obligations in the PDA and EFA. Had CMS elected not to participate in the Luzon project but had used the information obtained under the Confidentiality Agreement to pursue another project, plaintiffs could still pursue this claim. We simply do not view this claim as being related to or connect[ed] with the PDA or EFA. 35