Court Opinion

ID: 4103806
Source: CourtListenerOpinion
Date Created: 2016-12-01 18:01:13.33037+00
Date Added: 2024-06-11T07:45:40.782857
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 16a0642n.06

                                         No. 16-3520                                FILED
                                                                              Dec 01, 2016
                         UNITED STATES COURT OF APPEALS                   DEBORAH S. HUNT, Clerk
                              FOR THE SIXTH CIRCUIT

LINGLONG AMERICAS, INC., et al.,                       )
                                                       )
       Plaintiffs-Appellants,                          )
                                                       )
                                                              ON APPEAL FROM THE
v.                                                     )
                                                              UNITED STATES DISTRICT
                                                       )
                                                              COURT FOR THE
HORIZON TIRE, INC., et al.,                            )
                                                              NORTHERN DISTRICT OF
                                                       )
                                                              OHIO
       Defendants-Appellees.                           )
                                                       )
                                                       )

       Before: McKEAGUE, KETHLEDGE, and STRANCH, Circuit Judges.

       KETHLEDGE, Circuit Judge. In May 2015, Horizon Tire, Inc. filed two lawsuits in

California federal court against Linglong Americas, Inc. (“Linglong Americas”), Shandong

Linglong Tire Co. (“Linglong China”), and LLIT Co. (“Linglong Thailand”) (collectively,

“Linglong”). Linglong countersued in Ohio federal court, and Horizon responded by dismissing

its California suit and recasting its claims as counterclaims in the Ohio action. Linglong then

moved to compel arbitration of Horizon’s claims, arguing that an agreement between the parties

mandated arbitration even though the agreement had expired by its terms four years earlier. The

district court denied Linglong’s motion. We affirm.

                                              I.

       We recite the facts as pled by the non-moving party, namely Horizon. See Tackett v. M

& G Polymers, USA, LLC, 561 F.3d 478, 481 (6th Cir. 2009). In 2006, Horizon began working
No. 16-3520
Linglong Americas, Inc., et al. v. Horizon Tire, Inc., et al.

with Linglong China to develop a new brand of Chinese-made tires for the American market. In

December of that year, the companies entered into a “Collaboration Agreement,” under which

Linglong China would produce a line of light-truck tires, for which Horizon would be the “sole

distributor.” R. 38-1 ¶ 4. The Agreement, by its terms, would “remain valid for five years” if

not renewed. Id. ¶ 10. The Agreement also contained an arbitration clause providing that, “if no

settlement can be reached through negotiations,” the parties would arbitrate in China any

“disputes or claims arising out of this agreement.” Id. ¶ 9.

       By 2010, Horizon and Linglong had expanded their collaboration to include a wide range

of tires not covered by the Agreement, including tires for passenger cars, heavier trucks, off-

roading, and farming. When the Agreement expired in 2011, the companies did not renew it.

According to Horizon, however, the companies repeatedly affirmed in correspondence,

marketing materials, and other dealings that Horizon would be the exclusive U.S. distributor for

all the brands they had developed together, including a brand known as “Crosswind.”

       In 2014, Linglong began to undermine this exclusive relationship, even as the companies

continued to deepen their business ties. That year, a Linglong executive, Feng Wang, solicited a

large order of tires from Horizon. Feng also affirmed that Horizon was “the only company that

could sell Crosswind tires in the United States.” Feng asked Horizon for its confidential list of

retail customers, which Horizon agreed to share subject to certain conditions. In November

2014, Horizon finalized an order for 3 million Crosswind tires from Linglong Thailand. Feng

continued to describe Horizon as Linglong’s “lifelong partner” and “exclusive U.S. distributor.”

Around the same time, Feng asked Horizon to loan Linglong Thailand about $3.6 million.

Horizon agreed on the condition that the loan be repaid within a month.

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Linglong Americas, Inc., et al. v. Horizon Tire, Inc., et al.

          Over the next few months, the relationship between Horizon and Linglong began to

deteriorate. In December 2014, Horizon found evidence that one of its competitors in the U.S.

market was preparing to sell Crosswind tires. When Horizon confronted Linglong with that

evidence, Linglong promised to “protect Horizon’s exclusive distributorship for Crosswind[.]”

In early 2015, however, Linglong began to sell Crosswind tires through Linglong Americas and

other distributors in the United States. Linglong also refused to repay the $3.6 million it had

borrowed from Horizon, and failed to deliver most of the tires Horizon had ordered.

          In May 2015, Horizon sued Linglong in California federal court, alleging that Linglong

had not repaid the loan, fulfilled the November 2014 order, or honored Horizon’s exclusive

distributorship rights. Linglong then sued Horizon in Ohio federal court, seeking, among other

things, a declaration that Horizon did not have an exclusive distributorship arrangement with

Linglong. Horizon dismissed its California suit, and filed an answer and counterclaims in Ohio.

Linglong amended its complaint, and Horizon then filed an answer and amended counterclaims

for declaratory relief, breach of contract, and misappropriation of trade secrets, among other

claims.

          Linglong filed a motion under Rule 12(b)(1) to dismiss or stay Horizon’s amended

counterclaims pending arbitration. The district court denied the motion, reasoning that Horizon’s

claims were not based on the Agreement, that the Agreement had expired, and that Linglong had

waived any right to arbitrate. Linglong now appeals.

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Linglong Americas, Inc., et al. v. Horizon Tire, Inc., et al.

                                                  II.

       We review de novo the district court’s refusal to compel arbitration. Huffman v. Hilltop

Cos., LLC, 747 F.3d 391, 394 (6th Cir. 2014).

       Linglong argues that the district court should have granted its motion to compel

arbitration because, in Linglong’s view, the Collaboration Agreement’s arbitration clause

survived the Agreement’s expiration in December 2011. An arbitration clause survives the

expiration of a contract only when the dispute at issue “arises under the contract.” S. Cent.

Power Co. v. Int’l Bhd. of Elec. Workers, Local Union 2359, 186 F.3d 733, 738-39 (6th Cir.

1999). Such a dispute arises in two circumstances relevant here.

       First, a dispute arises under the contract when a “majority of the material facts and

occurrences” giving rise to the dispute occurred before the contract expired. See id. at 738-39.

Horizon’s claims center on events that unfolded in 2014 and 2015, years after the Agreement

expired. In the span of those two years, Horizon alleges, Linglong refused to repay a loan,

misappropriated a customer list, failed to fulfill a large order for tires, and began interfering with

Horizon’s putative exclusive distributorship. Although some of these claims may depend in part

on agreements and dealings that predate December 2011, the vast majority of events described in

the amended counterclaims, including most of Linglong’s alleged statements about Horizon’s

exclusive distributorship, occurred well after that date. Linglong indeed does not even argue the

contrary.

       Second, a dispute arises under the contract when the contractual right at issue survives

the expiration of the contract itself. See id. Here, one might interpret Horizon’s counterclaims to

be based in part on a putatively permanent right of exclusive distributorship that in turn arises

from the Collaboration Agreement itself.        But Horizon—both in the district court and on

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appeal—has expressly waived that theory as a basis for its claims. See Thomas v. Miller, 489
F.3d 293, 303 n.8 (6th Cir. 2007). Specifically, in the district court, Horizon conceded that the

Agreement is “no longer enforceable” and that its claims “arise out of facts and circumstances

that occurred after the Collaboration Agreement expired.” R. 51 at PageID 783-84. And on

appeal Horizon has stated that, “to the extent that Horizon had a claim based on a continuing

obligation created by the Collaboration Agreement, Horizon has unequivocally and irrevocably

waived it.” Horizon Br. 33. Thus, Horizon’s claims—as actually presented by Horizon—are not

based on any rights created by the Collaboration Agreement. The Agreement’s arbitration clause

therefore does not apply to those claims. It remains only to note that Horizon is now judicially

estopped from any claim against Linglong based upon the Collaboration Agreement.             See

Pennycuff v. Fentress City Bd. of Educ., 404 F.3d 447, 452-53 (6th Cir. 2005).

       The district court’s May 6, 2016 order denying Linglong’s Rule 12(b)(1) motion is

affirmed.

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