Court Opinion

ID: 9797190
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:14:56.125939+00
Date Added: 2024-06-11T08:53:00.484124
License: Public Domain

JUSTICE RICE,
dissenting.
¶30 Courts in 48 states, including the First Judicial District Court for the State of Montana, have reviewed the issue in this case under their own state law, and have unanimously concluded that the Master Settlement Agreement (MSA) requires the issue to be submitted to arbitration. I do not agree with the Court that the uniqueness of Montana law requires a different conclusion. In my view, the Court has made analytical errors in both the application of the law and in the interpretation of the provisions of the MSA which has led to an erroneous decision.
¶31 I. Policies Favoring Arbitration.
*42¶32 The decision in this case should not be made without consideration of the federal and state policies favoring arbitration. Although the Court acknowledges in passing that the manufacturers (OPMs) contend “that the law favors arbitration,” the Court fails to consider the effect of this argument or the substantial body of law supporting it. The Court cites U.S. Supreme Court Cases for the standards and law relevant to deciding arbitration questions, but it ignores the parts of those same cases which concretely establish an approach strongly favoring arbitration. In Mitsubishi Motors, the U.S. Supreme Court stated that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration ....”473 U.S. at 626, 105 S. Ct. at 3353-54 (quotation omitted; emphasis added). In AT & T Technologies, the U.S. Supreme Court instructed that arbitration “should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” AT & T Technologies, 475 U.S. at 650, 106 S. Ct. at 1419 (quotation omitted; emphasis added). The fact that 48 jurisdictions, including 20 appellate courts, have determined that the arbitration clause here is “susceptible of an interpretation that covers the dispute” should give us pause.
¶33 Our Court has likewise recognized this policy in favor of arbitration. See Vukasin v. D.A. Davidson & Co., 241 Mont. 126, 785 P.2d 713 (1990); Topolski v. Helena Assn. of Realtors, Inc., 2000 MT 343, ¶ 9, 303 Mont. 224, 15 P.3d 414. Although the Court cites Kingston, ¶ 13, for the proposition that arbitration may not be ordered ‘if there is a substantial and bona fide dispute over whether there exists an agreement to arbitrate,” that statement should be taken in its contextwe held there that the district court erred in “not fully addressing whether a valid arbitration agreement exists” before looking to the policy favoring arbitration, which we nonetheless recognized. Kingston, ¶¶ 16, 20. Here, a valid arbitration agreement indisputably exists, and thus the policy favoring submission of this particular dispute to that arbitration agreement should be applied, and should form the backdrop of the interpretational issues raised herein.
¶34 II. Interpreting and Applying the Contract Language.
¶35 The parties dispute the Independent Auditor’s decision to presume “diligent enforcement” by the State of Montana in determining the amount of the NPM Adjustment and, consequently, the final payment amount. Section XI(c) of the MSA states, in pertinent part, as follows:
Resolution of Disputes. Any dispute, controversy, or claim arising out of or relating to calculations performed by, or any *43determinations made by, the Independent Auditor (including, without limitation, any dispute concerning the operation or application of any of the adjustments, reductions, offsets, carry-forwards and allocations described in subsection EX(j) or subsection XI(i)) shall be submitted to binding arbitration before a panel of three neutral arbitrators, each of whom shall be a former Article III federal judge.
¶36 I would first dispute the Court’s conclusion about what is incorporated within this provision. In rejecting the OPMs’ interpretation, the Court states that ‘it is important to note that while subsection IX(j) does mention the NPM Adjustment, it makes no mention of ‘diligent enforcement’ or the Settling States’ exemption from the NPM Adjustment.” Opinion, ¶ 23. This is incorrect. Subsection IX(j) provides that “the NPM Adjustment shall be applied ... pursuant to subsections IX(d)(l) and (d)(2),” and, in turn, subsection IX(d)(2) is the provision which establishes “diligent enforcement” and the Settling States’ exemption. Contrary to the Court’s view, the arbitration provision incorporates by reference the very provisions out of which the dispute in this case arises. Thus, the parenthetical phrase in the arbitration provision, which provides examples “without limitation” of disputes that should be arbitrated, specifically incorporates the “diligent enforcement” exception to the NPM Adjustment and the Settling States’ exemption from the NPM Adjustment, and clearly demonstrates that these are areas in which the arbitration provision was intended to operate.
¶37 The Court further unduly narrows the scope of the parenthetical phrase. It states that the phrase “simply lists examples and affirms that any calculations or determinations actually performed or made” are to be submitted to arbitration. Opinion, ¶ 23. However, the parenthetical provides examples, not merely of determinations, but of disputes concerning such determinations (‘Including, without limitation, any dispute concerning ... any of the adjustments”). The Court likewise fails to apply the “arising out of or relating to” language to this listing of disputes, to which I now turn.
¶38 A critical phrase within the arbitration clause is “arising out of or relating to.” Within the context of arbitration, this phrase is interpreted nationally as playing the important role of signifying the intent to broadly require arbitration concerning the subject matter specified. In Fleet Tire Serv. of N. Little Rock v. Oliver Rubber Co., 118 F.3d 619, 621 (8th Cir. 1997), the court held that the term “relating to” in an agreement “constitutes the broadest language the parties could reasonably use to subject their disputes to that form of settlement, *44including collateral disputes.” See also Collins & Aikman Prods. Co. v. Building Sys., Inc., 58 F.3d 16, 20 (2d Cir. 1995) (an agreement requiring arbitration for “any claim or controversy arising out of or relating to the agreement,’ is the paradigm of a broad clause”); Mitsubishi Motors, 473 U.S. at 625, 105 S. Ct. at 3353, n. 13 (TT]he exclusion of some areas of possible dispute from the scope of an arbitration clause does not serve to restrict the reach of an otherwise broad clause in the areas in which it was intended to operate.”). Thus, when interpreting the arbitration provision, the broad application which the law has given to “arising out of or relating to” should properly be considered.
¶39 Therefore, based upon a reading of the MSA as a whole, arbitration is required for (1) any dispute, controversy or claim, (2) arising out of or relating to (3) calculations performed by, or any determinations made by, the Independent Auditor (4) including, without limitation, disputes concerning the operation or application of any of the adjustments, including the NPM Adjustment, diligent enforcement, or the Settling States’ exemption from the NPM Adjustment. Here, the Independent Auditor decided to presume “diligent enforcement” by the Settling States in determining the NPM Adjustment and the final payment. This decision resulted in a financial calculation which is more than one billion dollars different than had the Auditor decided to apply the NPM Adjustment without presuming “diligent enforcement.” Given the law’s policy favoring arbitration, and given the MSA’s broad directive to arbitrate matters “relating to” calculations made by and “any determinations made by” the Auditor, including those “concerning” the operation or application of adjustments, specifically, the NPM Adjustment, I would conclude that whether Montana diligently enforced its statute, which impacts the amount of the NPM Adjustment, is a dispute which must be arbitrated under the MSA.
¶40 I believe the Court has made interpretational errors in reaching the opposite conclusion, in addition to those discussed above. The Court’s decision hangs on two propositions which are, in my view, extremely narrow and contrived interpretations of the MSA. First, the Court concludes that the Auditor did not actually make a “determination” regarding the NPM Adjustment, but, rather, merely made a “presumption” about the Adjustment. Distinguishing between dictionary definitions of “determine” and “presume,” the Court concludes that the Auditor’s action (which resulted in a billion dollar difference in the final payment calculation) was merely a presumption which fell outside of the arbitration provision. However, given that all *45controversies “related to” the Auditor’s “calculations” or “determinations” are to be arbitrated, and are to be broadly interpreted, I must disagree with this narrow approach.
¶41 Secondly, the Court reasons that the Auditor, instead of making a calculation, actually “refused to conduct” any calculation or investigation here, and therefore, this dispute is not subject to arbitration because the MSA requires arbitration of only those calculations “that the Independent Auditor actually performed or made.”Opinion, ¶¶ 20,21. However, the Auditor had the responsibility of applying the NPM Adjustment and to do so, was forced to make a decision on diligent enforcement. It is undisputed that the Auditor did not fail to act-4t acted by making the decision to presume diligent enforcement. Again, under the policies favoring arbitration, I view the Court’s approach to be a hyper-technical reading of the MSA.
¶42 The Court’s approach does not truly ask whether the dispute arises out of or relates to an Auditor’s determination, but, rather, narrowly asks whether a dispute consists of an Auditor’s determination. The Court offers that the Auditor’s market-share analysis ‘has not been challenged.” Opinion, ¶ 21. Here, the Court has made an assumption that the Auditor is merely a glorified calculator, and that the MSA requires arbitration only of the Auditor’s numerical calculations. I believe this is a significant narrowing of the plain language of the arbitration provision. Had the parties intended arbitration to be limited to the Auditor’s calculations, I suspect the arbitration panel would have consisted of accountants instead of federal judges. In reality, the Auditor could not have “calculated” the final payment without making determinations concerning the NPM Adjustment and diligent enforcement.
¶43 I believe the Court has applied an overly narrow interpretation of the terms of the MSA and has failed to consider the policies favoring arbitration. I dissent and would affirm the District Court.
ORDER
Issued September 9, 2009.
We rendered our Opinion in the above-entitled action on August 5, 2009. State ex rel. Bullock v. Philip Morris, Inc., 2009 MT 261. The PMs have filed a petition for rehearing, and the State as filed its response to the petition. This Court will consider a petition for rehearing presented only upon the following grounds:
i. That it overlooked some fact material to the decision;
ii. That it overlooked some question presented by counsel that would have proven decisive to the case; or
*45aiii. That its decision conflicts with a statute or controlling decision not addressed by the supreme court.
M. R. App. P. 20(l)a. The PMs have failed to demonstrate any of these grounds for rehearing.
First, many of the PMs’ arguments in their petition are devoted to challenging the State’s interpretation of the MSA. For instance, the PMs contend that “[t]he State’s interpretation overlooks critical language,” that Tt]he State’s interpretation would render the ‘arising out of or relating to’ language meaningless,” that “[t]he State’s interpretation also violates basic rules of grammar,” and that “[t]he entire premise for the State’s argument... is refuted by the record.” However, the State presented its interpretations and arguments regarding the MSA in its opening brief on appeal, and the PMs then had the opportunity to respond-and did respond-to the State in their response brief. This Court, in turn, considered the parties’ respective interpretations of the MSA when rendering its decision, and the PMs have not shown that we overlooked some decisive question raised by counsel. A petition for rehearing is not a forum in which to rehash arguments made in the briefs and considered by the Court. M. R. App. P. 20(l)a.
Second, the PMs assert that this Court was the last to decide the issue of whether a Settling State’s diligent enforcement efforts must be arbitrated, but that the parties’ briefing on which we relied was outdated and “did not reflect the analysis and holdings” of subsequent decisions of other state courts. As the PMs acknowledge, however, they provided us with the subsequent state-court decisions through nine separate notices of supplemental authority. We considered the reasoning of those decisions but were not persuaded by it. Moreover, as noted in ¶¶ 15 and 27 of the Opinion, we are applying Montana’s contract law to determine whether the parties agreed to arbitrate the present dispute. The PMs have not shown that we overlooked any controlling factual or legal matter contained in the post-briefing state-court decisions.
Lastly, the PMs urge that as a factual matter, we have misunderstood the “dispute” in this case. The PMs assert that the dispute is not simply whether Montana diligently enforced the provisions of §§16-11-401 to -404, MCA; rather, the PMs claim that ‘it includes numerous issues arising out of and relating to the Auditor’s determination not to apply the NPM Adjustment, including whether the Auditor properly denied the PMs’ request to apply the adjustment.” The PMs contend that our decision “simply ignores these and other issues relating to the 2003 NPM Adjustment dispute.” It appears, *45bhowever, that the PMs are again attempting to confuse the narrow dispute raised by the State in the present litigation. The State has sought a declaration that Montana diligently enforced the provisions of §§ 16-11-401 to -404, MCA, during 2003mothing more. As noted in ¶ 21 of the Opinion, the State filed its motion for declaratory order after the Independent Auditor determined that the PMs had lost the requisite percentage of market share in 2003 and after the economists determined that the disadvantages imposed by the MSA were a significant factor contributing to that loss. However, the State might just as well have filed its motion on January 2, 2004, long before those determinations were made. Any dispute over whether the State of Montana, as a factual and legal matter, actually met the standards for “diligent enforcement” of a Qualifying Statute in 2003 does not arise out of or relate to the Independent Auditor’s market-share analysis, to the Independent Auditor’s decision to apply an interim presumption of diligent enforcement, or to the enforcement efforts of the other Settling States. In short, the State’s request for a declaration of diligent enforcement simply does not “aris[e] out of or relat[e] to calculations performed by, or any determinations made by, the Independent Auditor”4he PMs’ continuing protests notwithstanding.
The PMs have not shown that this Court overlooked some fact material to its decision or some question presented by counsel that would have proven decisive to the case, or that our decision conflicts with a statute or controlling decision not addressed by the Court. Accordingly,
IT IS HEREBY ORDERED that the Participating Manufacturers’ Petition for Rehearing is DENIED.
IT IS FURTHER ORDERED that the Clerk of this Court give notice of this Order by mail to the Attorney General and to the Participating Manufactures at their last known addresses.
DATED this 9th day of September, 2009.
JUSTICES NELSON, COTTER, LEAPHART and MORRIS concur.
JUSTICE RICE would grant the Petition for Rehearing.