Court Opinion

ID: 9000895
Source: CourtListenerOpinion
Date Created: 2022-11-27 13:02:37.726657+00
Date Added: 2024-06-11T17:11:09.736713
License: Public Domain

MAGILL, Circuit Judge,
dissenting.
I dissent from the majority’s conclusion that the forum selection clause in the Pipeline Affiliates Agreement supersedes the arbitration clause in the Gas Purchase Agreements and the Transportation Agreements.1 The Gas Purchase Agreements require each Pipeline to buy, and the partnership or its successors2 to sell, a certain quantity and quality of synthetic gas. These agreements contain numerous provisions governing this buyer-seller relationship, including an arbitration clause. The Transportation Agreements contain additional provisions governing the buyer-seller relationship, and also include an arbitration clause. The Pipeline Affiliates Agreement, on the other hand, relates to the Secretary of Energy’s guarantee of the loan made to the partnership. This agreement contains a number of covenants, representations, and warranties made by the Pipelines to the Secretary that decrease the Secretary's risk as guarantor. One covenant is that the Pipelines will reinstate the Gas Purchase Agreements with the Secretary as seller if the partnership defaults on its loan and the Secretary, as guarantor, takes over the coal gasification plant.3 This agreement also contains a forum selection clause which reads: “The parties hereto consent to the jurisdiction in any United States District Court located in the District of Columbia or North Dakota in connection with any suit to enforce the rights of the Secretary hereunder." J.A. at 45 (emphasis added).
The reference in the forum selection clause to “rights ... hereunder” arguably is ambiguous. In my opinion, the correct interpretation of this language is that the Secretary has the right to litigate in the specified federal courts those claims arising from the Pipelines’ breach of any covenant, representation, or warranty contained in the Pipeline Affiliates Agreement. For example, because this agreement contains a covenant that the Pipelines will reinstate the Gas Purchase Agreements, the Secretary can bring an action in federal court to enforce this promise. Once the Gas Purchase Agreements are reinstated, however, the parties must arbitrate any dispute regarding their rights and obligations under these agreements. See Transcontinental *737Gas Pipeline Corp. v. Dakota Gasification Co., 782 F.Supp. 336, 341-42 (S.D.Tex. 1991) (also interpreting these two agreements to require arbitration in a related matter). The majority, on the other hand, argues that because the Pipeline Affiliates Agreement is the vehicle through which the Secretary obtains rights under the Gas Purchase Agreements, the phrase “rights of the Secretary hereunder” includes its rights under the Gas Purchase Agreements. Under this interpretation, the arbitration clause in the Gas Purchase Agreements is superseded by the forum selection clause when the government becomes the seller.4
I believe the majority’s interpretation is incorrect for a number of reasons. First, the forum selection clause refers only to the “rights of the Secretary.” The clause makes no reference to the rights of the Pipelines. The Gas Purchase Agreements, however, give the Pipelines numerous rights. Thus, if this clause were applied to the Gas Purchase Agreements, courts either would have to allow the Pipelines to arbitrate their claims under these agreements or would have to read into the forum selection clause a reference to the rights of the Pipelines. The former choice creates a conflict between arbitration and litigation whenever both the Secretary and the Pipelines claim that the other has violated their rights under the Gas Purchase Agreements. The latter choice is an inappropriate judicial rewriting of the contract. • Neither of these problems would exist if, as I suggest, the forum selection clause were applied only to actions claiming a breach of a covenant, representation, or warranty contained in the Pipeline Affiliates Agreement. Under this interpretation, the failure of the forum selection clause to mention the Pipelines does not create a problem because the Pipeline Affiliates Agreement does not give the Pipelines any rights.
Second, in another provision of the Pipeline Affiliates Agreement, each Pipeline represents that there is no litigation pending that threatens its ability “to perform its obligations hereunder or under the Gas Purchase Agreement to which it is a party.” J.A. at 43 (emphasis added). This provision makes it clear that the Pipelines have certain obligations under the Pipeline Affiliates Agreement and certain obligations under the Gas Purchase Agreements. Likewise, the Secretary must have certain rights under each, and use of the term “hereunder” refers only to its rights under the Pipeline Affiliates Agreement.
Third, the clause in the Pipeline Affiliates Agreement that reinstates the Gas Purchase Agreements in no way qualifies this reinstatement. In fact, this clause provides that the Pipelines “will continue to take or pay for gas as provided [ junder [the Gas Purchase Agreements] on the same terms as were in effect prior to such termination and reinstatement____” The arbitration clause clearly was a term in effect prior to reinstatement.
Fourth, it seems highly unlikely that the Pipeline Affiliates Agreement would eliminate the arbitration clauses without even mentioning their existence. If the parties had intended such an outcome, they easily could have done so in a more straightforward manner.
This brings me to the fifth, and perhaps most compelling, reason why the majority’s interpretation of these agreements is wrong — the majority has ignored the federal policy favoring arbitration. The United States Supreme Court has articulated this policy as follows: *738Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983); see also, e.g., I.S. Joseph Co. v. Michigan Sugar Co., 803 F.2d 396, 399 (8th Cir.1986) (recognizing this federal policy). The Pipeline Affiliates Agreement does not, by any stretch of the imagination, clearly provide that, upon reinstatement of the Gas Purchase Agreements by the Secretary, the forum selection clause will replace the arbitration clause in these agreements.5 As noted, it is, at most, ambiguous. Thus, the federal policy favoring arbitration mandates that this ambiguity be resolved in favor of enforcing the arbitration clauses. See Patten Sec. Corp. v. Diamond Greyhound & Genetics, Inc., 819 F.2d 400, 406-07 (3d Cir.1987) (resolving a dispute between an arbitration clause and a forum selection clause in favor of arbitration even though the forum selection clause did not serve an independent purpose as it does in this case).
*737The Arbitration Act[, 9 U.S.C. §§ 1-208 (1988),] establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.
*738For the above reasons, I am convinced that the majority has erroneously concluded that the forum selection clause supersedes the arbitration clause contained in the Gas Purchase Agreements and Transportation Agreements. Because these agreements require arbitration, I would affirm the district court’s dismissal of the current litigation. See Dakota Gasification Co. v. ANR Pipeline Co., No. A1-90-227 (D.N.D. Jan. 11, 1991).

. The majority fails to note that the current dispute between the Pipelines and Dakota also includes issues arising under Synthetic Gas Transportation Agreements which each of the Pipelines and the partnership entered prior to foreclosure by the Secretary of Energy.

. Dakota is a successor to the partnership.

. Reinstatement of the Gas Purchase Agreements was by no means the only purpose served by the Pipeline Affiliates Agreement. The agreement contains numerous other substantive provisions including covenants that the Pipelines will use their best efforts to obtain regulatory approval and that they will not claim rights to any patents or technology resulting from their participation in the coal gasification process.

. The majority does not address the continued viability of the arbitration clause in the Transportation Agreements. I do not believe there is any way to interpret the forum selection clause in the Pipeline Affiliates Agreement as superseding these clauses. The Pipeline Affiliates Agreement was entered prior to the Transportation Agreements and makes absolutely no reference to them.

. The Secretary did not even assign its rights under the Pipeline Affiliates Agreement to Dakota. Rather, it assigned only the assets of the gasification facilities and its rights under the Gas Purchase Agreements and Transportation Agreements. This indicates that, until this dispute, the Secretary also did not view the forum selection clause as governing the relationship between the Pipelines and the seller of gas.