Opinion ID: 4438150
Heading Depth: 2
Heading Rank: 2

Heading: The Scope of the Agreement’s Arbitration

Text: Clause When it comes to ascertaining the scope of an arbitration provision, New Jersey “[c]ourts have generally read the terms ‘arising out of’ or ‘relating to’ [in] a contract as 4 Indeed, it would not be practicable, as J&J posits, to apply state law when it comes to the enforceability or validity of an arbitration provision (i.e. at step one), but to exclusively apply federal law when it comes to interpreting the provision’s scope (i.e. step two), particularly given how easily arguments pertaining to scope can be repackaged in terms of enforceability. See Oral Argument at 33:52-34:41 (RDC arguing that, whether viewed as a question of enforceability or scope, “we end up in the same place” because “if this agreement is construed to cover our antitrust claims, it is unenforceable”). 5 The Agreement states only that “the arbitrator” (e.g., not the courts) “must interpret any dispute arising out of or relating to this agreement in accordance with the laws of New Jersey,” JA 188, and does not make explicit that the law of New Jersey governs interpretation of the contract generally. Nonetheless, as the parties proceed on that assumption, so do we. See Moon, 868 F.3d at 213 (assuming without deciding that the state law on which the parties agreed applied to the interpretation of an arbitration clause). 14 indicative of an ‘extremely broad’ agreement to arbitrate any dispute relating in any way to the contract.” Curtis v. Cellco P’ship, 992 A.2d 795, 802 (N.J. Super. Ct. App. Div. 2010) (alterations in original) (citations omitted). “Such broad clauses have been construed to require arbitration of any dispute between the contracting parties that is connected in any way with their contract.” Id. (citations omitted). Consistent with that approach, the New Jersey Appellate Division has held that the phrase “[a]ny other unresolved disputes arising out of this Agreement” encompasses antitrust claims challenging allegedly anticompetitive conduct that resulted in overcharges based on the underlying contract. EPIX Holdings Corp. v. Marsh & McLennan Cos., 982 A.2d 1194, 1199, 1204 (N.J. Super. Ct. App. Div. 2009), overruled in part on other grounds by Hirsch v. Amper Fin. Servs., 71 A.3d 849 (N.J. 2013). Relying on the Second Circuit’s similar reasoning in JLM Indus., Inc. v. Stolt– Nielsen, S.A., 387 F.3d 163, 178 (2d Cir. 2004), the Appellate Division explained that “the claims the . . . defendants seek to arbitrate not only ‘arise out of’, but are undeniably intertwined with the contract . . . since it is the fact of [plaintiff’s] entry into the contract containing the allegedly inflated price and other oppressive terms that gives rise to the claimed injury.” EPIX Holdings Corp., 982 A.2d at 1207. And on that basis, the court found it “difficult to conceive how plaintiff could maintain its claim for damages without reference to, and reliance upon, the underlying contract.” Id.; see Pop Test Cortisol, LLC v. Merck & Co., Inc., A-5403-12T4, 2014 WL 1660605, at ,  (N.J. Super. Ct. App. Div. Apr. 28, 2014) (applying EPIX and holding that an arbitration provision applying to “[a]ll disputes arising out of or relating to this Agreement” encompassed state statutory claims and federal RICO claims). 15 That reasoning applies equally here, where the gravamen of RDC’s complaint is that J&J’s anticompetitive Plan “enabled [it] to sell its branded Remicade infliximab product at artificially inflated prices,” JA 132, and the only “inflated price[]” that could have caused RDC’s injury was the price it paid J&J for Remicade, i.e., the WAC or list price provided in the Agreement, JA 172. Thus, RDC’s antitrust claims are “undeniably intertwined” with the Agreement because “it is the fact of [RDC’s] entry into the [Agreement] containing the allegedly inflated price . . . that gives rise to the claimed injury.”6 EPIX Holdings Corp., 982 A.2d at 1207; see also JLM Indus., Inc., 387 F.3d at 173, 176 (holding antitrust claims “aris[e] out of” contracts where the “central factual allegations of the complaint” involve “a core issue of the contracts between the parties—allegations that the price terms set forth in those contracts have been artificially inflated as a result of the [anticompetitive conduct]” of the defendants); S+L+H S.p.A. v. Miller–St. Nazianz, Inc., 988 F.2d 1518, 1524 6 J&J also argues that two later provisions in the “Dispute Resolution” section expand the universe of arbitrable issues beyond those “arising out of or related to” the Agreement: namely, portions of subsection (d) providing that “EACH PARTY IRREVOCABLY WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY,” and limiting an arbitrator’s award of enhanced damages, interest, or attorneys’ fees “EXCEPT AS MAY BE REQUIRED BY STATUTE.” J&J Br. 19 (quoting JA 188). The District Court rejected that argument, explaining that the structure of the “Dispute Resolution” section indicates that those provisions refer only to “claims otherwise encompassed by [subsection (a)],” In re Remicade Antitrust Litig., 2018 WL 5314775, at , and we agree. 16 (7th Cir. 1993) (observing that a claim “that draws its very essence from the fact of and performance under the [Agreement] in question . . . necessarily is a claim that arises out of and relates to the Agreement” (first alteration in original) (internal quotation marks omitted)). RDC contends that ascertaining the scope of the arbitration clause by considering whether “the claim[s] would not exist” except for the Agreement, RDC. Br. 36, contravenes this Court’s recent admonition against “equat[ing] the meaning of ‘arising out of’ with the concept of but-for causation,” Reading Health Sys. v. Bear Stearns & Co., 900 F.3d 87, 100 n.59 (3d Cir. 2018) (quoting Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600, 602 (7th Cir. 1994) (“‘Arising out of’ and ‘arising under’ are familiar phrases, and courts have resisted the siren call of collapsing them to but-for causation.”)). But we are not swayed by the fact that RDC’s antitrust claims could not exist but-for the Agreement; what is dispositive is that they cannot be adjudicated without “reference to, and reliance upon,” it.7 EPIX Holdings Corp., 982 A.2d at 1207. 7 By contrast, many of the cases on which RDC relies (none of which are binding on this Court) involve antitrust claims that the court could “resolve . . . without reference to the agreement containing the arbitration clause.” NCR Corp. v. Korala Assocs., Ltd., 512 F.3d 807, 814 (6th Cir. 2008) (emphasis added); see also AlliedSignal, Inc. v. B.F. Goodrich Co., 183 F.3d 568, 573 (7th Cir. 1999) (holding that antitrust claims alleging supracompetitive prices were not arbitrable because the underlying contract, “though it d[id] provide for shared information and cooperation, d[id] not regulate the price [defendant] may charge”). In any event, to the extent there 17 And even if RDC’s inevitable reliance on the Agreement to prove injury were not enough to render its claims “arising out of” the Agreement, they need only “relat[e] in any way to the [Agreement]” to be “related to” it. Curtis, 992 A.2d at 802 (citation omitted). “An arbitration provision covering claims ‘relating to’ a contract is broader than one which covers claims merely arising out of a contract.” Yale Materials Handling Corp. v. White Storage & Retrieval Sys., Inc., 573 A.2d 484, 486 (N.J. Super. Ct. App. Div. 1990) (citation omitted). New Jersey courts have interpreted the term “relating to” in the arbitration clause context to be “extremely broad,” Angrisani v. Fin. Tech. Ventures, L.P., 952 A.2d 1140, 1146 (N.J. Super. Ct. App. Div. 2008), which we understand to mean—as we have held in the forum selection clause context—that a claim need only have “some ‘logical or causal connection’” to the agreement to be related to it, John Wyeth & Bro. Ltd v. Cigna Int’l Corp., 119 F.3d 1070, 1074 (3d Cir. 1997) (quoting Webster’s Third New International Dictionary 1916 (1971)). Here, we have no difficulty finding that RDC’s antitrust claims “relate to” the Agreement, which sets the drug prices and governs the commercial relationship between the parties. RDC argues, in the alternative, that even if the arbitration provision is broad enough to encompass RDC’s antitrust claims, the claims are nonetheless outside the scope of the Agreement because the provision fails to comply with New Jersey’s rule of contractual interpretation requiring waivers of constitutional or statutory rights to be stated “clearly and unambiguously.” Atalese v. U.S. Legal Servs. Grp., 99 may be tension between those holdings and that of the Second Circuit in JLM, New Jersey courts to date have embraced the latter. See EPIX Holdings Corp., 982 A.2d at 1207. 18 A.3d 306, 309 (N.J. 2014). Underlying New Jersey’s rule is the notion that agreements to arbitrate, “like any other contract, must be the product of mutual assent,” id. at 312–13 (internal quotation marks and citation omitted), and because “an average member of the public may not know—without some explanatory comment—that arbitration is a substitute for the right to have one’s claim adjudicated in a court of law,” id. at 313, arbitration clauses will not be construed to encompass constitutional or statutory rights absent some “concrete manifestation” of the intention to do so, Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 773 A.2d 665, 672 (N.J. 2001); see Moon, 868 F.3d at 214–15 (interpreting the rule as requiring an arbitration clause to contain three components: “First, it must identify the general substantive area that the arbitration clause covers”; “Second, it must reference the types of claims waived by the provision”; “Third, it must explain the difference between arbitration and litigation”). While the New Jersey Supreme Court has not definitively resolved the scope of the rule, it has applied it thus far only in the context of employment and consumer contracts. See Kernahan v. Home Warranty Adm’r of Fla., Inc., 199 A.3d 766, 784 (N.J. 2019) (consumer); Atalese, 99 A.3d at 312–13 (N.J. 2014) (consumer); Martindale v. Sandvik, Inc., 800 A.2d 872, 883 (N.J. 2002) (employment); Garfinkel, 773 A.2d at 665 (employment); see also Moon, 868 F.3d at 214–15 (employment). Moreover, in its most recent discussion of the rule, the New Jersey Supreme Court emphasized that “the consumer context of the contract [in Atalese] mattered,” Kernahan, 199 A.3d at 777, and that the “twin concerns” animating its application of the rule there were that (1) “a consumer is not necessarily versed in the meaning of law- 19 imbued terminology about procedures tucked into form contracts” (as opposed to “individually negotiated” ones), and that (2) “plain language explanations of consequences had been required in contract cases in numerous other settings where a person would not be presumed to understand that what was being agreed to constituted a waiver of a constitutional or statutory right,” id. Neither concern applies to J&J and RDC’s Agreement. Even before Kernahan’s strong intimation that the rule applies only where the parties have unequal bargaining power and levels of sophistication—as in the employment and consumer contexts—the New Jersey Appellate Division has held on several occasions that the rule “d[oes] not extend . . . to commercial contracts,” i.e., contracts that resulted “from a lengthy negotiation process” and where no party was an “average member[] of the public.”8 Victory Entm’t, Inc. v. Schibell, No. A-3388-16T2, 2018 WL 3059696, at  (N.J. Super. Ct. App. Div. June 21, 2018) (citation omitted); see also Columbus Circle N.J., LLC v. Island Constr. Co., No. A-190715T1, 2017 WL 958489, at  (N.J. Super. Ct. App. Div. Mar. 13, 2017) (rejecting application of Atalese to the contract at issue, which was not “a consumer contract of adhesion where [one party] . . . possessed superior bargaining power and was the more sophisticated party” (alteration in original) (citation omitted)); Gastelu v. Martin, No. A-0049-14T2, 2014 WL 10044913, at  & n.4 (N.J. Super. Ct. App. Div. July 9, 2015) 8 Where an unanswered question of New Jersey law requires us to “predict how the Supreme Court of [New Jersey] would decide the question,” we give “due regard” to decisions of the intermediate appellate courts. Specialty Surfaces Int’l, Inc. v. Cont’l Cas. Co., 609 F.3d 223, 237 (3d Cir. 2010) (citation omitted). 20 (“Parties to a commercial contract can express their intention to arbitrate their disputes rather than litigate them in court, without employing any special language . . . . In the present case . . . we are dealing with commercial business transaction [sic] and, therefore, the standard is not as stringent [as the one put forward in Atalese].”). Here, there is no dispute that the Agreement is a commercial contract or that both J&J and RDC are “highly sophisticated participant[s] in the pharmaceutical market,” J&J Br. 27, as opposed to “average member[s] of the public,” Atalese, 99 A.3d at 312. Taking into account the illustrative statements in Kernahan, and affording “due regard” to the decisions of the intermediate appellate courts declining to extend the rule to commercial contracts, Specialty Surfaces, 609 F.3d at 237, we conclude that the rule does not apply to the Agreement between J&J and RDC in any event, and thus does not narrow the scope of the arbitration provision. Because we conclude that the rule does not apply here, we need not address whether the Agreement’s arbitration clause satisfies it or, if it does not, whether notwithstanding the New Jersey Supreme Court’s statement in Atalese that the rule is “not specific to arbitration provisions,” 99 A.3d at 313, it would be preempted—either because it is “too tailor-made to arbitration agreements . . . to survive the FAA’s edict against singling out those contracts for disfavored treatment,” Kindred Nursing Ctrs., 137 S. Ct. at 1427, or because it “interferes with fundamental attributes of arbitration,” Lamps Plus, 139 S. Ct. at 1418.9 9 We note that the New Jersey Supreme Court may address this issue in Skuse v. Pfizer, Inc., 202 A.3d 1 (N.J. 21 Accordingly, because RDC’s antitrust claims “aris[e] out of or relate[] to” the Agreement, they must be arbitrated.