Court Opinion

ID: 9465382
Source: CourtListenerOpinion
Date Created: 2023-08-05 00:44:53.574617+00
Date Added: 2024-06-11T17:39:09.220223
License: Public Domain

GARTH, Circuit Judge,
dissenting:
I agree with the conclusions reached by the majority in all respects save one. In Part B. of its opinion, the majority holds that the First and Third issues as to which Arlen has demanded arbitration (see Maj. Op. at 1218) are arbitrable matters under section 2001 of the lease (the arbitration provision). In so holding, the majority, in my opinion, has strained the arbitration cause far beyond the contemplation and agreement of the parties to the lease.
Issues One and Three involve what has come to be known as “the supermarket defense.” Arlen contends that Bristol, as landlord, was obligated under the lease to maintain a supermarket on premises adjacent to Arlen’s, and that its failure to do so constituted a material breach of the lease.1 *1222Under the terms of the arbitration clause (see Maj. Op. at 1218), this matter is arbi-trable if it concerns
any dispute, difference or issue, . with respect to any obligation of the parties under this Lease,
Hence, only if the issue involves an obligation of a party under this lease may the arbitrator’s jurisdiction be invoked.
The majority acknowledges that nowhere in the lease is there any express requirement or obligation that Bristol maintain a supermarket in the shopping center.2 It notes, however, that section 1104(a)(1) of the lease (see Maj. Op. at 1218-1219 n.9) prohibits the tenant, Arlen, from using its premises for the operation of a supermarket. Although the majority recognizes that this provision of the lease, “by its terms,” relates solely to the obligations of Arlen as the tenant as distinct from any obligations of Bristol as the landlord,3 it nonetheless concludes that section 1104(a)(1) “is susceptible of the interpretation that the parties intended a corresponding obligation on Bristol to maintain a supermarket.”4 I cannot agree with this analysis, because it is the court’s responsibility to determine “whether the party seeking arbitration is making a claim which on its face is one governed by the agreement.”5
Whether a controversy is arbitrable is a question which the court must determine “on the basis of the contract entered into by the parties.”6 In cases analogous to the present one, this Court and the Court of Appeals for the Second Circuit have held that the courts must decide whether each issue submitted to arbitration is within the terms of the arbitration clause. In International Brotherhood of Teamsters, Local 249 v. Western Pennsylvania Motor Carriers Association, 574 F.2d 783 (3d Cir. 1978), the contract between the parties limited the jurisdiction of a labor-management committee to disputes involving “inadvertent or bona fide errors.” This Court held that whether such errors had occurred was a threshold issue for judicial determination. The Court then interpreted the contractual term “errors” to exclude from arbitration all claims based on economic impracticality or on longstanding industry practice, and therefore held that the dispute was not arbitrable. The Court’s conclusion that it must determine in each case whether the contractual predicate for arbitration has been satisfied is apposite to the present case:7
Since the jurisdiction of the arbitrator is contractually granted by the parties, the question as to whether a particular *1223dispute is arbitrable necessarily depends on “whether the parties agreed to submit the dispute to arbitration.” Ludwig Ho-nold Manufacturing Co. v. Fletcher, [405 F.2d 1123], supra, 405 F.2d at 1125 n.2. See Gateway Coal Co. v. United Mine Workers, 414 U.S. 368, 374, 94 S.Ct. 629, 38 L.Ed.2d 583 (1974). Thus a reviewing court must in the first instance examine the jurisdictional predicate (i. e., the contract provision) which purports to require the submission of a dispute to arbitration. The court does so to ascertain whether the parties intended that the controversy be included within the scope of the arbitration clause.
The Court of Appeals for the Second Circuit has adopted a similar view in Necchi S.p.A. v. Necchi Sewing Machine Sales Corp., 348 F.2d 693 (2d Cir. 1965), cert. denied, 383 U.S. 909, 86 S.Ct. 892, 15 L.Ed.2d 664 (1966), a case on which the majority has relied in its opinion. In that case, the court acknowledged that “ ‘the federal policy’ ” is to “ ‘construe liberally arbitration clauses.' ”8 Notwithstanding this policy, the court held that claims which “[were] not founded on any provision of the . agreement” were not arbitrable.9 The distributorship agreement in Necchi provided for arbitration of “matters, disputes or disagreements arising out of or in connection with” the agreement between the parties. The distributor demanded arbitration of its claims that Necchi had failed to meet various obligations under their contract. The court in an opinion by Judge (now Justice) Marshall held that claims which were not founded upon express provisions of the contract were not arbitrable. The Court concluded that
It is undoubtedly true that many of the matters referred to in items 1, 2, 3, 6, 7 and 9 [the claims held not to be arbitra-ble] would not have arisen if the exclusive distributorship arrangement had never existed between the Sales Corp. and Necchi. But this is not sufficient to render them arbitrable within the specific meaning of the arbitration clause of the 1961 agreement, which requires that the matter arise out of or in connection with that argeement [sic] rather than the working relationship between the parties.10
In applying the principles set out in Teamsters and Necchi to the present case, the starting point for our analysis must be the terms of the arbitration compact. Section 2001 of the lease triggers arbitration “if any dispute, difference or issue . shall at any time be raised with respect to any obligation of the parties under this Lease . . ..” Under Teamsters then, the threshold question which this Court must determine is whether the lease could reasonably be construed by the arbitrator to impose on Bristol the “obligation” to maintain a supermarket in the shopping center. The majority opinion, as it must, relies completely on section 1104(a)(1) of the lease in deciding this question in favor of Arlen. The majority acknowledges that, on its face, this provision creates obligations only for the Tenant, Arlen. Significantly, it also acknowledges that “[b]y its terms, . . , [it] places no explicit obligations on Bristol.” 11 Indeed, section 1104(a)(1) is entitled “Restrictions on Tenant” and makes no reference whatsoever to the duties of the landlord. Nonetheless, the majority concludes that the arbitrator could infer from the restriction on the tenant that the landlord had promised to maintain a supermarket.
This conclusion may result, in part, from a misapprehension of the terms of the arbitration agreement. On three occasions (see Maj. Op. at 1219, 1220, 1221), the majority concludes that an issue is arbitrable under section 2001 if it “arises under the lease agreement.” (Emphasis supplied). How*1224ever, section 2001 was drawn more narrowly than the majority implies. It does not provide for arbitration of all disputes “arising under” or “in connection with” the lease. It confines arbitration to those disputes which concern an “obligation . under this Lease.” If the intentions of the parties to this agreement are to be honored, this Court must scrutinize Arlen’s claim to determine whether it is founded upon an obligation of Bristol under the lease. This the majority has not done.
To me, it is evident that, no matter how the lease is construed, a restriction on Arlen cannot create an obligation for Bristol. I observe that Article XXV (see Maj. Op. at 1218 n.8) limits the obligations of the parties to those which have been set out in the writing. Because section 1104(a)(1) is limited “by its terms” to the obligations of the Tenant, any “corresponding obligation on the landlord” would necessarily be based on an oral understanding external to the written instrument. However, Article XXV expressly negates the effect of any such “oral statement or representation.” Hence, section 1104(a)(1) read together with Article XXV cannot support arbitral jurisdiction in this case.
The majority suggests, however, that section 1104(a)(1) should be interpreted by the arbitrator and not by this Court. I am in accord with this conclusion. But we are not dealing here with mere interpretation of a substantive provision of a contract as, for instance, we would be if the issue were whether a small convenience store constituted a “supermarket” within the meaning of section 1104(a)(1). By contrast, the dispute between Bristol and Arlen concerns the existence of an obligation to maintain a supermarket, and the arbitration clause requires us to determine whether Arlen’s claim is founded on any obligation of the landlord under the lease. International Brotherhood of Teamsters, Local 249 v. Western Pennsylvania Motor Carriers Association, 574 F.2d 783 (3d Cir. 1978). To my mind, our task has been rendered relatively simple by the parties. We can look only to what the parties have agreed to in the lease. We cannot look beyond the confines of the lease, because Article XXV precludes us from doing so. Looking only to the written instrument, it is impossible for any interpretation to be derived which would impose an obligation — express or implied— on Bristol to maintain a supermarket. This being so, it follows that the supermarket defense is not arbitrable.
I am mindful that if my views were to prevail, this dispute would necessarily be fragmented into judicial and arbitral fora. However, the Supreme Court has resolved that the policy favoring liberal construction of arbitration agreements does not extend to requiring a party “to submit to arbitration any dispute which he has not agreed so to submit.” 12 Accordingly, it is clear to me that where a party has agreed only to arbitrate disputes concerning obligations under the lease, and where his obligations are expressly limited to those set forth in the writing, he may not be required to arbitrate a claim which is predicated on an obligation which does not appear in the lease. In these circumstances, the arbitrator is without jurisdiction to resolve the dispute.
I would therefore reverse so much of the district court’s order as refuses to enjoin arbitration of Arlen’s “supermarket defense,” and I would remand for further proceedings before the district court.

. Arlen claims that Bristol’s failure to maintain a supermarket on adjacent premises relieved it of its duty to pay rent and, in addition or in the alternative, entitled it to damages in the amount of the difference in the value of its leasehold with and without a supermarket operating in adjacent premises. For further de*1222lineation of issues One and Three; see Maj. Op. at 1217.

. Maj. Op. at 1219.

. Id. at 1219-1220.

. Id. at 1219.

. International Telephone & Telegraph Corp. v. Local 400, Int’l. Union of Elec. Workers, 286 F.2d 329, 330-31 (3d Cir. 1961). See also Butler Prods. Co. v. Unistrut Corp., 367 F.2d 733, 735 (7th Cir. 1966).

. Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241, 82 S.Ct. 1318, 1320, 8 L.Ed.2d 462 (1962); see also Int’l. Bhd. of Teamsters, Local 249 v. W. Pa. Motor Carriers Ass’n, 574 F.2d 783, 787 (3d Cir. 1978).

. Id. The Court relied in part on Bieski v. Eastern Automobile Forwarding Co., 396 F.2d 32 (3d Cir. 1968). That case was described in Teamsters as involving
“a dispute concerning the seniority to be granted transferred employees when one carrier purchased the real estate and operating equipment of another. The labor contract in that case conferred authority on a Joint Committee to decide the controversy ‘[in] the event that the Employer absorb[ed] the business of another . . . carrier.’ 396 F.2d at 34. The Joint Committee’s jurisdiction, therefore, hinged on whether there had been such an ‘absorption’ of business. On review this court did not defer to the Committee’s determination, but rather subjected the committee’s jurisdictional decision to ‘full, broad review.’ Id. at 38. See Humphrey v. Moore, 375 U.S. 335, 345 n.8, 84 S.Ct. 363, 11 L.Ed.2d 370 (1964).”
574 F.2d at 788 (footnotes omitted). Both Bie-ski and Teamsters involved judicial review of decisions by labor-management committees. However, this Court in Teamsters treated the issue of the committee’s jurisdiction as no different from a determination of arbitrability in a suit to compel or to enjoin an arbitration. 574 F.2d at 786-87.

. Necchi S.p.A. v. Necchi Sewing Mach. Sales Corp., 348 F.2d 693, 697 (2d Cir. 1965), quoting, Metro Industrial Painting Corp. v. Terminal Construction Co., 287 F.2d 382, 385 (2d Cir.), cert. denied, 368 U.S. 817, 82 S.Ct. 31, 7 L.Ed.2d 24 (1961).

. 348 F.2d at 698.

. Id.

. Maj. Op. at 1219.

. USW v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960).